Document of The World Bank Report No. 14939-PE STAFF APPRAISAL REPORT PERU RURAL ROAD REHABILITATION AND MAINTENANCE PROJECT NOVEMBER 6, 1995 Infrastructure and Operations Division Country Department III Latin America and the Caribbean Regional Office CURRENCY EQUIVALENTS (as of October 23, 1995) Exchange rate used in this study: Current Unit = Nuevo Sol (S/.) US$ 1 = S/. 2.26 FISCAL YEAR OF GOVERNMENT OF PERU January 1 - December 31 ACRONYMS and ABBREVIATIONS CORPAC Peruvian Airport and Commercial Aviation Corporation (Corporacion Peruana de A eropuertos y A viaci6n Commercial) CTAR Regional Temporary Administrative Council (Consejo Transitorio Administrativo Regional) DGC General Directorate of Roads (Direcci6n General de Caminos) ENAFER National Railway Company (Empresa Nacional de Ferrocarriles) FONCODES Social Development and Compensation Fund (Fondo Nacional de Compensacion y Desarrollo Social) FCM Fondo Compensaci6n Municipal GDP Gross Domestic Product ICB International Competitive Bidding fDB Inter-American Development Bank IERR Internal Economic Rate of Return INADE National Institute of Development (Instituto Nacional de Desarrollo) NCB National Competitive Bidding MEF Ministry of Economy and Finance (Ministerio de Economiay Fin2anzas) MTC Ministry of Transport, Communications, Housing and Construction (Ministerio de Transporfes, Comunicaciones, Vivienda y Construcci6n) NGO Non-Governmental Organization NMT Non-Motorized Transport PERT-PCR Project Implementation Unit (Proyecto Especial Rehabilitaci6n Transporte-Programa Caminos Rurales) PERT Project Coordination Unit for Ln.3717-PE (Proyecto Especial de Rehabilitaci6n de Infraestructura de Transporte) SIMAC National Highway Maintenance System (Sistema Nacional de Mantenimiento de Carreteras) SOE Statement of Expenditures CAPECO Peruvian Chamber of Construction (Camara Peruana de la Construcci6n) PERU RURAL ROAD REHABILITATION AND MAINTENANCE PROJECT Table of Contents 1. RURAL DEVELOPMENT AND THE TRANSPORT SECTOR .....................................................1 A. THE ECONOMIC SETTrNG ..............1.......................... B. RuRAL DEVELOPMENT AND POVERTY IN PERUh ............................................1.............................................. .... 1 C. GOVERNMENT STRATEGY FOR RURAL DEVELOPMENT AND POVERTY ERADICATION ............... ............................... 3 D. TRANSPORT SECTOR OVERVIEW ...........................................................4.............................. 4 E. THE ROAD TRANSPORT SECTOR ...... 5 F. RURAL ROAD SECTOR ISSUES ...... 11 G. PREvious BANK INVOLVEMENT IN THE TRANSPORT SECTOR .16 2. THE PROJECT.17 A. ORIGIN OF THE PROJECT .17 B. RATIONALE FOR BANK INVOLVEMENT .17 C. PROJECT OBJECTIVES .18 D. PROJECT DESCRIPTION .18 E. ENVIRONMENTAL AsSESSMENT .27 F. PROJECT COSTS AND FINANCING ...7................................. 27 G. PROJECT BENEFITS ...........................................28.......................................................................................... 28 3. PROJECT IMPLEMENTATION .31 A. PROJECT ORGANIZATION AND MANAGEMENT .31 B. SELECTION AND PROGRAMMING OF INVESTMENTS ................................................................................... 34 C. IMPLEMENTATION STRATEGY .37 D. MONITORING, REPORTING AND BANK SUPERVISION .41 E. PROCUREMENT.45 F. DISBURSEMENTS, ACCOUNTING AND AUDITS ................48................................................................................... 48 . PROJECT RISKS AND SAFEGUARDS .51 4. AGREEMENTS TO BE REACHED AND RECOMMENDATION .52 This report is based on the findings of a joint IDB-IBRD appraisal mission that visited Perd from May 25 to June 9, 1995. The World Bank team comprised Messrs. /Mmes Jose Luis Irigoyen (Task Manager), Aurelio Menendez, Sally Burningham (all of LA31N), Janet Entwistle (LA3C1), Juan Quintero (LATEN), Paul Guitink (TWUTD), Oswaldo Patifio (Resident Mission), Nora Femenia and Eduardo Beteta (Consultants). The IDB team comprised Messrs. Rodolfo Huici (Task Manager), Hernan Welsh (RE3FI3) and Felix Leyton (Resident Mission), and Jacob Greenstein (RE3FI3) and Ricardo Bellver (Consultant) in a follow-up mission. Mr. Peter Ludwig is the responsible Division Chief. Messrs. Henri Beenhakker and John Riverson are peer reviewers. The Projects Advisor is Mr. Robert Crown. Mr. Yoshiaki Abe was the Department Director until Octojer 1, 1995. Mr. Paul Isenman is the present Department Director. i PERU RURAL ROAD REEIABILITATION AND MAINTENANCE PROJECT LOAN AND PROJECT SUMMARY Borrower: Republic of Peru Implementing Agency: Ministry of Transport, Communications, Housing and Construction Poverty Category: Program of Targeted Interventions. The project's intends to: (a) improve access of rural areas to markets and services, encompassing about 2.7 million people living in the initial six departments, and about 4.5 million or 20 percent of the population of Peru once the project is expanded to 12 departments; (b) form and strengthen small and medium size enterprises and community groups that will be involved in the execution of works financed by the project, and spur the creation of more than 250 micro- enterprises participating in routine maintenance contracts; and (c) bring benefits to about 100 provincial municipalities as a consequence of the investment and institutional strengthening components included in the project. About 35,000 one-year equivalent of non-skilled seasonal jobs would be generated by road rehabilitation works and more than 4,000 of non-skilled permanent jobs would be generated by road maintenance works contracted out to micro-enterprises. Loan Amount: US$90 million equivalent, including up to US$9 million in retroactive financing. Terms: LIBOR-based floating rate single currency loan in US dollars, payable in 17 years, including five years of grace. The loan will be amortized in level payments of principal. Commitment Fee: 0.75 percent on undisbursed loan balances, beginning 60 days after signing, less any waiver. Net Present Value: All sub-projects will meet eligibility criteria that assess institutional, environmental and technical factors (including the sustainability of the investments) as well as social and economic benefits. Social criteria based solely on prevailing poverty indicators would be applied to sub-projects with costs below a certain threshold. The economic criterion establishes a benchmark minimum rate of return of 10 percent, based on a net increase in agricultural and livestock output. The economic analyses of 76 percent of ii the road rehabilitation sub-projects in terms of kilometers (70 percent in terns of costs) under the pilot yields a net present value of almost US$25 million and a prorated internal economic rate of return of 44 percent. Financing Plan: See Paragraph 2.36 Environmental Classification: B Staff Appraisal Report: 14939-PE Map: IBRD No. 27276 - 1 - PERU RURAL ROADS REHABILiTATION AND MAINTENANCE PROJECT 1. RURAL DEVELOPMENT AND THE TRANSPORT SECTOR A. The Economic Setting 1.1 Peri has undergone a remarkable recovery since the inauguration of the Fujimori administration in July 1990 which saw the implementation of the most comprehensive program of economic reforms in the history of the country. While Peru has a generous supply of minerals, fish and hydrocarbons, the country had seen vast fluctuations in its economy in its previous 40 years and poverty has been a long-standing problem. The reforms aimed at reducing inflation, stabilizing the economy and radically changing the state-dominated economy into a market- orientated one. The reforms were in large part embodied in the Constitution ratified by a close margin in an October 1993 popular referendum. There has been a steady drop in the rate of inflation (from 7,600 percent in 1990 to 15 percent in 1994); the economy has recovered strongly growing by 10% in 1994; and there has been enormous progress in reducing terrorism and establishing public order. 1.2 The economic recovery has resulted in welfare increases for the vast majority of Peruvians. In the short term, however, the benefits have not reached the poor to a sufficient degree. Government priorities have increasingly shifted towards enhancing the access of poor communities to mainstream economic activities by reversing the deterioration of basic infrastructure after years of neglect. The Government is rehabilitating basic infrastructure concentrating on areas with the highest prevalence of extreme poverty, the rural sierra and the urban pueblos j6venes. B. Rural Development and Poverty in Peru 1.3 After several years of slow agricultural growth, including negative growth from 1990- 1992, real agricultural GDP grew by over 6 percent in 1993 and by 13 percent in the first half of 1994. Better climatic conditions and increased rural security seem to be underlying factors for the recovery. However, although production recovered in 1993 the levels of production were still below average for 1986-1989 for most crops. In 1993, agriculture represented 12.3 percent of GDP and industry (including fishing, mining and manufacturing) represented 34.1 percent of GDP. About 40 percent of the economically active population work in the agricultural sector. This percentage is higher in departments of the rural sierra like Huancavelica where about 60 percent work in the agricultural sector. GDP growth in the sector has been uneven while the productivity of agricultural labor has also remained poor, improving only marginally during the last three decades. On average, there was zero annual growth in the rate of food production per capita between 1979 and 1992. Agricultural profitability declined with the removal of subsidies and price control mechanisms and the decrease in world prices for many crops. - 2 - 1.4 Although the majority of Peru's population has traditionally been employed in the agricultural sector, Peru6 is not an intrinsically agricultural economy. The per-capita availability of cultivable land is only 0.13 hectares, which is less than one third the Latin American average of 0.44 and lower than the 0.18 average for Asia. Nevertheless, food products and non-elaborated agricultural products contributed to about one third of Peru6's exports in 1993. Commercial farming is concentrated in the costa in heavily irrigated areas where rainfall is limited and this production accounts for 60% of agricultural GDP. The sierra, with only 18% of cultivable land, has 36% of the country's population and relies largely on subsistence farming. The scope for a large increase in agricultural productivity of the sierra is limited since this mountainous region does not have a favorable natural environment for agriculture. On the other hand, the prospects for growth of livestock farming (vacuno and alpaca) are encouraging as the price of livestock and its byproducts has been rising. In addition, non-farm activities are important in the sierra, in particular the production of handicrafts. The non-farm sector has also good prospects for growth and should increasingly play a larger role in improving the standards of the rural poor. 1.5 Almost 30 percent of Perfu's population live in rural areas. The prevalence of poverty is highest in the rural mountainous areas, where two thirds of the households are poor and 47 percent fall into the extreme poverty category. In the mountains less than half the population has access to a public water system, and only 8 percent have access to public sewerage removal services. The indigenous populations are much poorer than the rest of the population: they account for 40 percent of the extremely poor and 25 percent of the poor. In health, the situation has been worse in some rural areas, due to long-standing regional and ethnic inequalities. Infant mortality rates are three times higher in rural areas than in metropolitan Lima. For example, while the infant mortality rate averaged 58 per 1,000 births for the whole country, in the department of Huancavelica, in the rural sierra, the rates were 107 deaths per 1,000 births in 1993. In nutrition, in 1993, while 48 % of primary school children were defined as being chronically malnourished, this was concentrated in the rural areas where 64% were chronically malnourished as compared to 34% in urban areas. In 1991, malnutrition affected as much as 73 percent of children under the age of 5 in some rural areas (compared to 13 percent for the whole country). In education, in 1991, about 29 percent of the rural population was illiterate (compared to 15 percent for the whole country), and 44 percent of rural women could not read or write. 1.6 Against this background, the enhanced macroeconomic conditions have laid the ground for improvements in poverty indicators. A July 1994 survey stated that total poverty in Peru declined from 54% in 1991 to 46% in 1994, and extreme poverty declined from 22% to 18% over the same period. This decline in poverty levels has been attributed to the recovery of the economy together with the implementation of various social programs in the last few years. Nonetheless, the prevalence of both poverty and extreme poverty remains high in the rural sierra with levels of 66 percent and 44 percent, respectively (Table 1). The rural sierra is estimated to contain the largest number of extremely poor (about 1.6 million people) while, because of its size, metropolitan Lima contains the largest number of poor (about 2.5 million people). The more modest impact on poverty reduction to date in the rural sierra, reflects the depth and intransigence of economic stagnation in rural Peru. Decades of uneven distribution of the benefits of development, and the difficulty of expanding small scale improvements in economic and social - 3 - infrastructure and delivering services outside the cities, has contributed to a slower pace of recovery and reform in rural Peru. Table 1. Poverty by region, 1991 and 1994 (percentage of population) Poverty (1) Extreme poverty (2) Region 1991 1994 1991 1994 Rural Sierra 68% 66% 47% 44% Urban Sierra n/a n/a 19% 15% Metropolitan Limna 49% 33% 10% 4% Costa Urban 55% 44% 22% 13% Peru (total) 54% 46% 22% 18% (1) Poverty = insufficient income to purchase the equivalent of a food basket which would meet energy and protein requirements and satisfy other basic non-food requirements. (2) Extreme poverty = insufficient income to purchase only the equivalent of the food basket Source: FONCODES C. Government Strategy for Rural Development and Poverty Eradication 1.7 In the face of overwhelming problems in the social sectors, particularly for the indigenous community, the Government established in 1990 a social emergency program to provide direct food and health assistance to the poor. This program was replaced in August 1991 by FONCODES, the National Fund for Social Compensation and Development, a mechanism for channeling government and external resources to labor-intensive projects. FONCODES, which is centrally administered, encourages close involvement of community representatives, and responds to demands from poor communities for rehabilitating social and economic infrastructure, and improving access to basic social services. 1.8 In early 1993, the Government prepared its first poverty alleviation strategy. This strategy focused on the promotion of broad based economic growth and the improvement in the living conditions of the extreme poor through FONCODES as well as through food assistance, health, and education programs coordinated through the Ministries of Health and Education. It concentrated on targeting programs to the rural areas, particularly the rural sierra, where the extreme poor are concentrated. This strategy has already begun to show results as indicated by a decline in the percentage of those living in extreme poverty, detailed in the previous section. 1.9 Recognizing that the absolute numbers of poor are still high, among the highest in Latin America, the Government, with the goal of poverty eradication in mind, has been broadening its efforts at poverty reduction beyond FONCODES and centrally administered and funded programs in the social sectors. These programs circumvent local governments, and while many are effective in getting things done, their sustainability is uncertain. The Government has, (1) started extensive programs, with local government involvement, to rehabilitate and maintain long neglected basic infrastructure starting with roads and water supply and sanitation networks, (2) initiated a program to rationalize social sector expenditure, (3) instituted a series of integrated rural development projects implemented through FONCODES, (4) established a pilot program of - 4 - decentralization of responsibility and funding for primary education in two school districts, (5) decentralized responsibility for FONCODES project approval to select qualified local offices, and (6) made initial efforts at improved central coordination of programs. 1.10 To consolidate and solidify these various efforts, the Government has initiated efforts to rethink its poverty strategy. It is now developing a strategy with a longer term view toward social integration and efficiency in service delivery. This strategy, which is under preparation to be presented at the third Consultative Group, planned for October 1995, will continue to recognize that the promotion of broad-based growth is key to poverty reduction efforts. Other essential elements include increasing the efficiency of public sector service provision through: (1) decentralization of infrastructure and social services which will require strengthening of local governments and funding to match responsibility, (2) coordination of programs within central government and with local governments, (3) clarification of the role of FONCODES, FONAVI vis a vis other programs, (4) recasting and strengthening of central government functions complementary to decentralization, and (5) further rationalization of expenditures. Further, the strategy should ensure that programs are environmentally sustainable, and reach the indigenous population and the large informal sector. In addition, it should clarify the role of the private sector in infrastructure and social service provision. D. Transport Sector Overview 1.11 The Peruvian transport system comprises: i) a classified road network of nearly 70,000 kin, of which about 11 percent is paved; ii) a system of 24 maritime and river ports; iii) a railway network (about 2,000 km) made up of seven separate systems, with little physical or operational integration; iv) 300 airports and landing strips, only 16 of which have paved runways; and v) a system of pipelines, the most important of which is the 900 km North Peruvian pipeline from the oil fields in the selva to the coast at Bayovar. Similar to trends in most other countries, the road sector has increasingly predominated in the transport of passengers and freight across Peru6 (Table 2). In 1992, roads carried 71% of freight tons, followed by river and (mainly) coastal shipping with 25%. Railways have decreased their participation to 4%, though they play an important role along particular corridors (Callao-Huancayo and Matarani-Puno). Air freight transport hardly reaches 0.1%. Passenger traffic largely moves by road, with the railways playing a critical role along specific corridors that lack adequate access roads. Table 2. Modal Distribution of Domestic Freight Traffic (percentage distribution of tonnage) Year Road Shipping Railways Air 1983 33 59 8 0.31 1988 36 57 6 0.20 1992 71 25 4 0.06 Source: AMTC 1.12 Transport infrastructure provision and operations have been concentrated in the hands of public sector enterprises. Recent reforms aim at commercializing operations, transferring services to the private sector, and reducing the level of public involvement in the construction and - 5 - operations of the various transport infrastructure. One of the initial actions in this respect was the privatization of the national airline carrier--Aeroperu--and the transfer of port operations to the private sector. On-going efforts include the privatization of the railway company--ENAFER--and the creation of a road authority that would increase the financial autonomy for the maintenance of the national road network. These efforts are being supported by Loan 3717-PE. Annex 1 summarizes the main characteristics of the transport sub-sectors and details government actions on each of them. E. The Road Transport Sector 1.13 The Road Sector. Road transport is the dominant mode of domestic transport in Peru, carrying about 70 percent of domestic freight traffic and 80 percent of inter-urban passenger traffic. Yet PeruI has the lowest endowment in road infrastructure especially in terms of paved roads compared to peer countries in Latin America. The condition of the road system in Perui is not satisfactory to support national economic and social goals. From 1986 to 1991, investments in the road sector were very limited. Reflecting a dramatic declining trend, the percentage of government expenditures dedicated to the transport sector decreased from 6.1 percent in 1981 to 2.5 percent in 1990. Since 1991, investments have grown incrementally, reaching a level of US$370 million in 1994, largely fueled by the multilateral and bilateral-financed programs of road reconstruction and rehabilitation (Table 3). Analyses performed by the Planning Office of the Ministry of Transport, Communications, Housing and Construction (MTC) indicate that the level of investment would have to reach about US$600 million per year in order to bring the road network to satisfactory standards. Table 3. Public Expenditures in the Road Transport Sector (US$'000) Programs 1990 1991 1992 1993 1994 Central Administration and Management 13,270 16,419 21,499 23,908 18,781 DGC Rehabilitation Program 28,850 27,380 84,028 72,938 96,964 IDB-Highways Project - - 18,820 79,734 166,090 World Bank - Transport Rehab. Project - - - 227 6,023 SINMAC-Road Maintenance Program - - - 2,593 23,015 Subtotal: Central Government 42,120 43,799 124,347 179,400 310,873 Subtotal: Regional Governments 12,886 20,042 14,132 33,323 46,971 Decentralized Agencies (1) 1,270 7,553 8,842 4,916 13,137 Total Transport 56,276 71,394 147,321 217,639 370,981 Total Government Expenditure (2) 3,908,157 3,883,406 4,626,353 4,470,241 5,610,609 Transport Exp. / Total Gov. Exp. (%) 2.52 2.97 5.87 8.88 12.15 As a percentage of GDP 0.4% 0.4% 0.5% 0.6% 0.8% (') Only expenditure in transport by INADE (2) External debt service not included Source: DGPP-MEF - 6 - 1.14 Road Network. The Peruvian road network comprises about 70,000 km of roads of which about 11 percent are paved roads, about 19 percent are gravel roads, while the remaining 70 percent are earth and non-engineered roads. This road network is organized into three tiers consisting of(1) about 16,000 km of national roads, (2) about 14,000 km of secondary or departmental roads, and (3) about 40,000 km of rural roads (see Table 4). The road system deteriorated badly in the 80s due to mismanagement, severe financial constraints and deferred maintenance practices. Government's emphasis on the strategic rehabilitation of the existing infrastructure is reversing this trend. While the condition of the national network has improved since 1990 as a result of on-going rehabilitation and maintenance programs supported by IDB, the Bank and other donors, conditions on the secondary and rural networks remain critical. The poor reliability of these roads also negatively affects the cost of road usage. The lack of all weather roads coupled with poor maintenance practices and adverse topographical and climatic conditions, render large segments of the rural road network impassable or very costly to users. This has impeded development and contributed to the isolation of poor rural communities, particularly in the mountainous sierra, where 66 percent of the population is poor and about 1.6 million inhabitants live in extreme poverty. Table 4. Road Network by Function Class and Surface Type (km) Road Network Total by type of surface (km) Functional Total Non-engineered Classification Km. Paved Gravel Earth roads National or Primary Roads 15,692 5,635 7,020 2,594 442 Departmental or Sec. Roads 14,473 1,057 4,136 6,039 3,242 Rural Roads 39,805 766 2,420 7,228 29,390 Total 69,970 7,458 13,576 15,861 33,074 Source: Planning Office-MTC 1.15 Institutional Set-up. Administration of roads in Peru has gone through fundamental changes in the last decade, in part due to a protracted decentralization process which is still far from being settled. Historically, MTC's General Directorate of Highways (DGC) had overall responsibility for the planning, design, construction, and maintenance of the entire road system. The Regionalization Law (1984) transferred all roads to the newly established regional governments. This mandate was partially reversed in 1991, when MTC was reassigned the responsibility for managing the national road network, while departmental and rural roads remained under the control of regional and local governments. Departmental and rural roads receive insufficient attention from the various agencies falling under the jurisdiction of regional and local governments. A weak institutional base, ill-defined responsibilities, and strong dependence on central government budgetary allocations have prevented regional governments from delivering more responsive services and coordinating development programs. Presently, the future of Regional Governments is uncertain under the government's decentralization agenda. 1.16 The Municipal Law (Ley Organica de Municipalidades) passed in 1984 made provincial and district municipalities responsible for rural roads planning, construction and maintenance, responsibility that is shared with regional governments in the absence of sufficient resources. The Law establishes a distinction between provincial and district municipalities. However, functional assignments between them are ambiguous in as much as both types of municipalities are given largely the same set of responsibilities (though the legislation gives more prominence to the role of the provincial municipalities). Such responsibilities, however, are not commensurate with the institutional and financial capacity of those municipalities. This, compounded with ambiguities and overlaps in the roles of the different levels of government and inherited dependency from central government, results in a generalized avoidance of accountability in the sector. In response to the weaknesses of local governments, community-based organizations have intervened in an attempt to fill the gap and cope with the most compelling needs, but these efforts have been isolated and unsustained. The result is a very large rehabilitation backlog and the poor serviceability of the departmental and rural road network. 1.17 Road Financing. Currently, road users are charged taxes on the consumption of automotive fuels, license registration fees, and tolls on thirteen major national roads (as of end 1994). Taxes on automotive fuels vary between 40 and 55 percent at the pump depending on the type of gasoline or diesel. In 1993, these taxes (both the value-added tax--representing 30 percent of the revenues--and a selective consumption tax) generated about US$650 million or 16 percent of the total central government revenues. Revenues collected through tolls amounted to about US$16 million in 1994 while license registration fees, mostly collected by municipal governments, are negligible. With an annual budget of about US$370 million for road transport projects, user charges (net of the general value-added tax) would cover the maintenance and rehabilitation costs of existing infrastructure. However, tax revenues are incorporated into the general central treasury (or municipal treasury in the case of registration taxes) and only toll revenues are directly collected and managed by MTC. As most of the revenues are collected by the central government, local entities depend on transfers to be able to finance their responsibilities in road transport. These responsibilities already translate into budgets in which public transport projects--including the construction and rehabilitation of roads--constitute the largest percentage of the investments (about 26 and 30 percent for provincial and district municipalities, respectively). 1.18 For most municipalities, a principal source of revenue is the intergovernmental transfer channeled through the Municipal Compensation Fund (MCF). The MCF is financed from a 2 percent surcharge (equal to about 10 percent of the receipts) on the national Value Added Tax, along with an 8 percent share of the gasoline tax and with two other minor revenue sources. There is a high degree of variation among the municipalities in terms of their dependence on these transfers which are 80 percent earmarked for expenditures on capital investments. While the 12 largest municipalities outside Lima depend upon the transfers for only 12 percent of their revenues, the 51 poorest municipalities depend upon the transfers for 80 percent of their revenues. The latter clearly lack the capacity to raise funds locally to any meaningful extent. The fiscal autonomy of municipal governments is very limited. They cannot impose taxes or determine tax rates - these are determined at central level, and the same tax rate structure applies to all municipalities. Municipalities can generally update tax bases, except for property tax (the main municipal tax) which is updated by the National Council of Assessments. Overall, a lack of transparency in the allocation of responsibilities and in the assignment of resources to the different levels of government does not render a level and a structure of user charges that are both - 8 - sufficient to cover the maintenance and rehabilitation needs of the road network and equitable in charging users in accordance with their contribution to road damage (and other externalities). Progress on this matter is being monitored in connection with Loan 3713-PE, and will be further developed for the particular case of the rural road network under a study that will be carried out under this project. 1.19 Road Infrastructure and Transport Services. The importance of rural infrastructure and transport services is reflected in the results of a 204-household indicative survey of rural communities' access to transport, markets, input supply systems and social services. Table 5 disaggregates the average distance from sample households to various services by department. The table suggests that access to motorized transport is lowest in the sierra departments, where the project would be initiated. Table 6 shows the percentage distribution of distances between a random set of 204 households and motorized transport, markets, schools, health posts, and other facilities. Though a large percentage of households appear to have access to motorized transport, access to important services such as health and secondary schools, markets, and technical assistance entail travel over relatively large distances. The table also reflects the centrality of transport infrastructure for technical assistance in agriculture. Table 5. Average Distances to Services by Department (km) No. Post Market Mot. Bank Public Primary Second. Techn. obsv. Office Transp. Agency Phone School School Assist. Sierra Ancash 19 8.3 3.0 1.0 10.7 13.9 0.1 2.3 9.6 Apurimac 4 9.5 10.0 0.3 9.5 16.3 1.1 4.8 16.3 Ayacucho 4 14.5 8.0 1.3 15.3 15.3 0.1 7.8 15.3 Cajamarca 25 6.7 8.2 2.0 5.4 12.7 0.8 2.5 13.1 Cuzco 22 5.6 5.8 2.0 6.3 7.2 0.9 5.8 7.4 Huancavelica 4 3.2 3.2 3.0 3.3 19.0 0.5 3.3 17.8 Huanuco 6 11.5 6.0 2.0 13.7 14.2 0.5 2.0 14.2 Junin 9 3.1 2.8 0.1 2.4 2.9 0.1 3.0 4.3 Pasco 8 10.8 9.6 0.0 10.8 11.1 0.4 5.0 10.8 Puno 14 3.3 3.5 0.4 3.9 20.7 0.2 1.8 9.1 SanMartin 9 15.4 17.1 0.8 17.1 17.6 0.0 16.8 12.1 Selva Amazonas 5 41.6 41.6 0.0 54.9 41.6 2.3 19.1 30.8 Loreto 12 17.6 9.1 0.1 9.0 33.1 0.0 5.9 15.9 Madre de Dios 2 16.0 16.0 0.0 16.0 22.0 0.0 16.0 7.0 Ucayali 2 20.0 20.0 na 20.0 27.0 0.0 0.0 30.0 Costa Arequipa 4 9.5 2.5 0.0 7.8 9.5 0.0 3.1 20.5 Ica 2 3.3 3.3 0.0 3.3 3.3 0.0 2.3 15.0 La Libertad 18 4.4 3.1 1.6 4.9 8.2 0.9 3.8 9.9 Lambayeque 6 6.7 6.8 1.2 6.7 8.1 0.6 4.1 5.2 Lima 11 7.3 4.6 1.4 8.3 8.1 2.0 3.7 9.4 Moquegua 4 2.5 41.3 0.0 2.5 41.3 0.3 0.9 0.2 Piura 14 12.1 6.0 0.6 6.5 7.1 0.6 2.5 10.9 Source: Own calculations based on May-July 1994 Survey of 204 Households, Cuanto Institute et~~~~~~~~~~~c 4 Z ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~o t)~~~~~~~~- C.~~~~~~~~~~~~~~~C cu ~ ~~~~~~ aAE J5,~~~~ n g.0~~~flg. -a.&Z Qn LAO C~~~~~0-- -j C, ~~~ tn -~~~~~~~~6 c CD ~~.. ~ ~ ~ ~ ~ ~~~ - ~ C We-' .O . . .0. . . . O,~~~~~~~ C) 0~ ~~~~U r 7 0 rA 0~0~ 40 PO- - P t:~~ nI~~. 0 -~~~~~~~~~~~ O~ 0 ~N-& u'O ooA FLC.r C.~~~~~~~~~~~~~~~~~~~~~~~~~ir - 10- 1.20 Boxes 1, 2 and 3 illustrate how transport availability affects economic development and poverty in Cajamarca and Cuzco. In the first case (Box 1), poor roads have resulted in high production and service costs and risks, and have led to inappropriate technical choices. The second case (Box 2) shows how a municipal government and the local transport organization worked together to provide transport along an unprofitable route by cross-subsidization from high-volume routes. Road rehabilitation and maintenance would decrease the overall vehicle and managerial costs, increase the reliability of services, and reduce the costs to all the passengers and transport operators. In the third case (Box 3), high transport costs along the poorly-maintained roads surrounding the town of Ccorca and connecting it to Cuzco detract the commercial margins of rural potato producers. To accommodate the high transport costs and the deficient road conditions farmers are forced to use less-efficient means of transport. Box 2 Passenger transport enterprise of "Santisima Cruz de Motupe" Santisimna Cruz de Motupe (SCM) is a local transport organization that manages a fleet of 60 smal vans servicing the periphery iof Cajamarca. This case shows how the regulatory powers of the municipality combined with the managerial economies of scale at the private local transport organization converged to provide service of acceptable cost:and frequency to low income, sparsely populated peripheral areas. The municipality negotiated with and granted to SCM operation rights lover a combination of high-profit and deficitary routes, :so transport service providers could operate profitably whilekservicing the low-revenue routes. Incentives and Mregulationsi had to complement proper route mixtures and scheduling to deter the relatively autonomous operators from concentrating on the profitable routes and neglecting the peripheral routes. To provide operators with Ian incentive to serve:the deficitary routes, the municipal government (a) limited entry to the profitable routes by non-affiliated transport operators, (b) reduced the cost and red tape needed to renew opeiration permits, and (c) used its influence to prevent graft at the contracted routes. SCM, in turn, (a) agreed to pay and supervise four controllers to monitor schedule and route compliance by all operators, and (b) negotiated preferential group insurance rates for all affiliates. Box 3: The Comuneros of Ccorca Ccorca is a rural town of 4000 people located about 25 km from Cuzco. For centuries, sma11 farmers in Ccorca have planted potatoes for household consumption and trading; Market pricesfor potatoes have a high transport content, because potatoes are bulky and heavy. Fann-gate prices for.a sack of potatoes in Ccorca, for instance, are about US$ 1.50, while market prices in Cuzco are close US$ 3.00. The price differential results: mostly from transport costs, as there are no further processing. storage or packaging charges,:and:the potato marets in Cuzco are: fairly competitve. When transport conditions deteriorate, prices and marketing margins ate affected..: Faced withmincreasing:transport costs, some farners use back porterage :and pack animals, but those less: able tocay heavy loads or keepgporterage animals endure smaller incomes. 1.21 Box 4 summarizes some of the comments made by rural people who assisted to four beneficiary-participant workshops during the appraisal mission (May-June 1995). The summary highlights the benefits from road rehabilitation as perceived by the beneficiaries themselves. The workshops appear to be a powerful means for mobilizing the public around transport issues and creating ownership for project implementation. Overall, the field experiences validated the approach taken for defining the project's objectives and performance indicators (summarized in the logical framework given in Annex 3), the structure of its demand-driven approach (para. 3.8), and the development of its social and economic justification (para. 3.10). - 11 - Box 4: Te View from the Beneficiawy Communities During the appraisal mission (May-June 1995), four workshops were organized with the direct participation of beneficiaries. TIwo involved community leaders (e.g., mayors) and heads of base organizations (e.g., NGOs) in Cusco and Huancavelica; the other two involved open discussion with whole conunuities in one- day meetings in the towns of Ccorca (Ctuzco) and Izcuchaca (Huancavelica). The following is a summary of the participants' views on road transportation issues: * the road is too steep, too narrow, with too many curves; and bridges will not support average truck weight, liniiting the supply of transport services and increasing transport costs * high transport costs affect negatively not only prices and the timely delivery of market products but also the cost of products imported into villages * the road becomes slippery when it rains, making it impossible for trucks to pass; the community is then deprived of selling its products and obtaining the necessary production inputs * during the winter, there is no traffic due to potholes and the rains that flood the roads; the community is isolated and cut from critical health and education services; all year-round, health providers and teachers do not visit the village because of bad road conditions * with limited production and limited health and education services, people are emigrating and those who stay are becoming poorer and poorer * bad road conditions limit the frequency and quality of transport services; with limited services, operators have the prerogative to accept passengers and the type of products to be transported, better road conditions will bring more and better transport services and increased competition * with poor access, the quality of health and education services in the communities declines markedly because professional doctors and teachers do not want to serve those communities, even when the basic facilities are in place * well-maintained roads would allow improved transport services and commerce with neighboring communities and progressive substitution of animal by vehicular transport * there should be a permanent public information campaign to make communities aware of their dependency on roads in good condition for their well-being and development * important to reach a multi-sector agreement (among transport experts, comuneros, transport operators, etc.) to ensure future support and execution of road maintenance 1.22 Road Construction Industry. There are about 1,300 construction firms registered in CONSULCOP (Consejo Superior de Licitacionesy Contratos de 0bras Piblicas). Only 40 are specialized in road construction, and their capacity is presently overburdened by the major road construction programs that are currently taking place at a national level after a long period of inactivity. A survey undertaken in 6 departments in connection with the preparation of the proposed project showed that there is a large number of medium and small size contractors that operate at the regional and local levels; out of the 285 firms surveyed, Ill have sufficient capacity to undertake road rehabilitation contracts ranging from US$200,000-US$250,000. Some of them are established informally due to the high cost of registration in CONSULCOP and the occasional nature of their activities. The lack of financial resources at regional and local levels has prevented these contractors from prospering and benefiting from a steady workload. F. Rural Road Sector Issues 1.23 The broad national issue of administrative decentralization to local governments has a major bearing on the solutions to sector issues. Government decision-making is highly centralized, and the government has yet to define and implement its decentralization agenda. As presently envisaged, the agenda aims at strengthening the role of municipalities, especially district municipalities, vis-a-vis regional governments. So far it is neither clear whether the Regions will continue in the present form nor the functions that will be assigned --if any-- to the adopted - 12 - intermediary level of govemment. Specific issues in this respect refer to institutional organization, inter-agency coordination, planning and maintenance, funding of road expenditures. 1.24 Institutional Organization. As with other sectors of the economy, the allocation of responsibilities to regional and local governments in the road sector is far from settled. Responsibility for construction, improvement and maintenance of roads other than the national highways is not clearly defined and those outlined in the existing legislation have never been matched by the resources and authority necessary to fulfill the designated functions (see para. 1.17). Furthermore, the present circumstances are characterized by ambiguity and overlap in roles and responsibilities between all levels and by inter-government fiscal and financial arrangements that encourage dependency, conflict and the avoidance of accountability. 1.25 While it is recognized that it will take time to address the variety of issues arising from the incipient decentralization process, the proposed project would provide a venue for sustained dialogue on the key policies in the rural roads sector. It will help MTC review the current functional classification of roads and clarify the responsibilities of the organizations in charge of the different road links in each network, taking into account their constitutional and legal responsibilities as well as capacity to assume these responsibilities (see para. 1.32). 1.26 Inter-agency Coordination. A recent study in several departments in the sierra found that MTC, the CTARs through their sector secretariats, provincial and district municipalities, and seven deconcentrated units of the central government are involved in road construction and maintenance (Table 7). This has added more confusion to the institutional organization. Because of their inherent weakness, the CTARs have been unable to plan rural development and coordinate these initiatives. 1.27 The proposed project would foster development of coordinated strategies at the provincial and departmental level. The Project Implementation Unit (see para. 3.1) will provide a strong focal point for overall coordination during project implementation. In addition, staff of MTC's Planning Office will also be trained as part of the project to, among other functions, coordinate investments with other sector ministries who have development and poverty alleviation programs targeting the same provinces. MEF will ensure consistency of the overall budget allocations. But more importantly, better coordination in the programming and execution of investments will be achieved among the deconcentrated units of those institutions through the criteria adopted for selection of sub-projects. The increased access to basic social and economic infrastructure by the rural poor may not fully materialize in the absence of a coordinated effort where road improvements are followed by other investments intended to increase economic productivity and coverage of basic needs. 1.28 Rural Road Planning and Maintenance. An area with clear scope for improvement at all levels is that of rural road planning and maintenance. The issue of sustainable maintenance in Peru is very complex because it entails institutional and financial reforms, and cannot be addressed without clarifying responsibilities, setting a basic institutional framework, and progressively. - 13 - Table 7. Institutions with Involvement in the Road Sector Central Level Ministry of Transport, through DGC- Ministry of Presidency, through Ministries Direcci6n General de Carreteras, and Deconcentrated PERT-Proyecto Especial FONCODES-Fondo Compensacion y Desarrollo or autonomous Rehabilitacion Transporte Social (including PREDES-Programa Acciones de agencies SINMAC-Sistema Nacional Emergencia Desarrollo Region Inca) Mantenimiento Carreteras INADE-Instituto Nacional de Desarrollo through: ---PAR-Proyecto Apoyo Repoblaci6n (Apurimac, Ayacucho, Huancavelica, and Junin) ---PGEAGL-Programa Generacion Empleo y Apoyo Gobiernos Locales (Ancash, Apurimac, Ayacucho, Junin, San Martin, Loreto, Ucayali) ---PESCS-Proyecto Especial Sierra Centro Sur (Apurimac, Ayacucho. Cuzco, Huancavelica) COOPOP - Cooperacion Popular Regional Level CTARs - Consejo Transitorio Administraci6n Regional (Eleven regions, with subregional offices) through their sectoral secretariats Local Level Provincial Municipalities (a total of 176) District Municipalities Centros Poblados and Anexos through niucleos ejecutores (FONCODES program) Private Mining companies building MTC and local governments' capacity to deliver day-to-day maintenance throughout the entire road network. The deteriorated condition of the secondary and rural road networks calls for a two-part strategy: i) an extensive rehabilitation program to bring roads up to a condition where they can be maintained; and ii) a maintenance program, which will cover the "core" improved road network and progressively extend to other road links until the entire road system is subject to routine maintenance. To maximize the impact of the former, investment planning and programmning needs to be improved by setting prioritization criteria with economic and social factors clearly incorporated into them. For the latter to succeed, its implementation arrangements must be tailored to the capacity of the implementing agencies. The project supports this strategy. Another important step would be to complete an inventory of roads, on which basis the needs of each administrative level and individual jurisdiction can be identified and the resources required made available (see para. 1.32). Emphasis will be given to coordinating transport activities between provincial municipalities and their districts, with the former taking the lead as they present better prospects for success due to their stronger capacity as well as economies of scale that derive from their larger size. 1.29 Rural Roads Funding. The resources available to local governments are very limited. While at the national level, revenues from road users (gasoline taxes, taxes on vehicle imports and ownership) have historically exceeded government expenditure on roads, local governments have no similar buoyant source of local revenue, and largely depend on a centrally controlled property tax and on intergovernmental transfers. Most of these transfers are allocated through the FCM, which gives roughly US$300 millions per year to provincial and district municipalities on the basis of population and infant mortality (see para. 1.17). About 80 percent of these funds are earmarked for capital investments. In the absence of a decentralization of responsibilities over the - 14 - secondary network (or an adequate source of local revenue to cope with its maintenance needs), maintenance of the secondary network may be severely underfunded. Similarly, rural roads will remain poorly maintained as long as the local governments have no appropriate revenue sources. The issue of securing the flow of funds for maintenance is being addressed in the context of the reorganization of the sector. Government Strategy 1.30 Since January 1995, Government has embarked on a long-term effort to restructure road sector management to improve its efficiency and effectiveness, in a process that involves consultation with key government officials, representatives of the private sector, as well as IDB, the Bank and GTZ. This started with a policy workshop to review the roles of the various levels of government and the private sector in road sector administration and development. The Government's strategy is designed to arrest the deterioration of the road network by (a) defining a decentralization agenda that would clarify responsibilities over the three-tier road network and resources to attend those responsibilities; (b) strengthening road administration, promoting private sector participation, and building up capacity at the local level; (c) increasing budgetary allocations for road rehabilitation and maintenance; and (d) focusing investments on areas with high levels of poverty and emphasizing labor-based construction methods as a means to generate employment in those areas. Box 5: Main Tenets of Government's Road Transport Sector Strategy * redirect the role of government (central and local) in the provision of road infrastructure * strengthen first the deconcentration then the decentralization of the sector administration * continue strategic rehabilitation of key networks and removal of bottlenecks to reduce vehicle operating costs * ensure the necessary mechanisms to attend emergencies and disasters * allocate resources to address the chronic lag of road infrastructure,provision, especially to the poor of rural and:marginal urban areas * generate employment through programs of rehabilitation and maintenance of main roads and rural roads * promote private sector investments in the sector through the application of Law Decree No. 758 . promote transport technological developments and better services in urban areas. Source: Planning Office of MTC - October 1994 : 1.31 This strategy translates into priorities in the rehabilitation of the three-tier road system, investments along the intermodal corridors that connect the coast and the inlands, and the facilitation of private sector participation in railways, airports and ports (see Box 5). Within the rural roads sub-sector, the government aims at implementing a wide-ranging program of road rehabilitation in order to improve the quality of life of rural areas, enhance the accessibility of rural areas to markets, promote the return of the peasant population to the rural areas, and, in all, activate the rural economy. The long term goal is to progressively rehabilitate the whole of the 40,000 km. of the rural network. To start with, Government has designed a six-year rural road program (1995-2000) that targets more than 30 percent of the rural road network, with priorities established on the basis of: (1) the percentage of rural population; (2) the poverty indicators; (3) the existence of parallel programs of social stabilization, and (4) the commitment of the local population. - 15 - 1.32 At an operational level, Government is taking steps to: (a) refocus MTC's mission on policy-making, investment planning, coordination among transport modes, road usage regulation, and monitoring transport system performance. To ensure that this mission is consistently carried out in the rural road sector, key staff in the Planning Office will be trained under of the proposed project (para. 3.1); (b) clarify the roles and responsibilities for road administration at the various levels of government, in line with Government's decentralization agenda. Government has decided that responsibility over rural roads falls under local government, with financial and institutional support from MTC (initially channeled through the proposed project). Responsibility over national and departmental roads, the latter on a temporary basis until the agenda for political and administrative decentralization is defined, falls under central government. In June 1995, MTC revised the functional classification of all public roads (Decree 09-95), and is now undertaking the inventory of the roads under responsibility of central government. The inventory of the rural road network will be gradually carried out under the proposed project; (c) establish a road agency, with technical, administrative and financial autonomy to manage the national road network (and temporarily the departmental road network with assistance from the proposed project). Key features of the proposed legislation include (1) contracting out most of the work to the private sector, including ample use of road concessions and Build-Operate-Transfer schemes, and (2) operating under private sector labor regime, which will enable attracting qualified staff MTC plans to submit to Congress legislation in this regard and complete a study to define the organizational details; and (d) ensure the sustained funding of road maintenance at the central level and develop mechanisms for financing maintenance of rural roads, consistent with the evolution of Government's decentralization agenda. The latter is part of a broader policy dialogue that aims at allocating revenue raising and administrative responsibilities among the various levels of government in Peru. A study to propose more appropriate mechanisms for financing maintenance of rural roads will be undertaken under the proposed project (see para. 2.25). 1.33 IDB and the Bank have been involved in the definition and implementation of the Government strategy in the road sector, and would continue doing so, in the context of the supervision of their on-going highway projects (Bank's Ln. 3717-PE and IDB's 65 1-OC-PE and 836-OC-PE). - 16 - G. Previous Bank Involvement in the Transport Sector 1.34 Previous Bank experience. Since 1952, the Bank has made 18 loans to Pernu in the transport sector totaling US$641 million. However, only 52 percent (or two-thirds if the most recent Transport Rehabilitation Project is not considered) have been disbursed. Of the total, 46 percent has been for highways, 17 percent for urban projects (a large part of which had urban transport components), 12 percent for multi-modal projects, 12 percent for aviation, 9 percent for railways, and 3 percent for ports. In the rural infrastructure sector, the Bank has also an on-going US$100 million loan to support FONCODES, which includes funding for labor-intensive projects in poor rural areas (about one third of the project consists of developing economic infrastructure in rural areas). 1.35 Other donors are also active in the transport sector in Perui. Notably, IDB has approved two road rehabilitation loans totaling US$462 million, and is participating in this project with US$90 million. CAF (Corporaci6n Andina de Fomento) approved a US$50 million loan to contribute toward the cost of the first IDB road rehabilitation project, and is expected to approve very soon another loan for about US$75-100 million to develop the Ilo-Desaguadero Corridor. Government has also obtained US$30 million from the US, and grants from Japan for studies, rehabilitation of locomotives and acquisition of road maintenance equipment. As part of the cofinancing arrangements for the Bank's Transport Rehabilitation Project, the OPEC Fund for Development and KfW are participating with US$5 million and about US$38 million loans respectively, the latter not yet approved. Annex 2 provides more details on Bank, IDB and other donor lending in the Transport sector in Peruz. 1.36 Lessons learned. Aside from the macroeconomic conditions which beset the country in 1983 and led to the default on the Government's debt service payments to the Bank and hence to the suspension of disbursements, lack of counterpart funds and institutional weakness have often been the main reasons for the unsatisfactory performance of delays in transport projects. Besides, implementation of these projects has been difficult due to the technical problems caused by extreme physical conditions, inadequate engineering designs, and weak project management aggravated by low salary levels of professionals in the executing agencies. The creation of the PERT as the unit which is implementing the Transport Rehabilitation Project as well as the IDB projects has attempted to address those shortcomings. 1.37 Road components were included in eight Bank loans to Peru which supported overall highway development, transport corridor improvements, rural development, and reconstruction after a major disaster. Experience exists with free-standing feeder road projects elsewhere, especially in Africa and Asia. The principal problems in achieving sustainable results have been (1) institutional weaknesses and inadequate coordination, leading to delays in implementation and incomplete execution of the works; (2) inadequate monitoring of results. 1.38 Bank-wide experience has resulted in the following advice for designing a successful rural roads project: i) there should be a strong government commitment and beneficiary participation in defining priorities and funding for maintenance to ensure the sustainability of services and infrastructure; ii) a central focal point should be established for formulating and reviewing rural - 17- roads policy, for project planning and execution, and for coordination between the ministries of agriculture, interior and transport; iii) a strong and dedicated project management team should be created to assure timely implementation and adequate monitoring of the project; and iv) the capacity for labor-based methods and intermediate means of transport should be developed. These lessons have been incorporated in the design of the present project. 2. THE PROJECT A. Origin of the Project 2.1 Peru's badly deteriorated infrastructure limits its capacity to compete abroad and inhibits economic growth. Transport infrastructure suffered from years of neglect and mismanagement. To reverse this trend, Government has embarked on major institutional and policy reforms aimed at improving efficiency in the delivery of transport services, and on strategic rehabilitation of key road, railway and airport facilities. Rehabilitation of more than 6,000 km of main highways is underway with the support ofthe Bank, IDB and other donors (see para.1.35). Yet the needs for improved transport services and access in rural areas are staggering. This is quite evident in the rural sierra, where poor access has led to isolation and contributed to extreme poverty. Perceived as a prerequisite for distribution of improved living conditions, economic wealth and social balance, in May 1994 Government requested both the Bank and IDB to support the proposed project to address the needs for alleviating poverty and raising the living standards of the rural poor by improving access to agricultural zones through rehabilitation and maintenance of the rural road network. B. Rationale for Bank Involvement 2.2 The Bank has been assisting the Government implement its poverty eradication efforts. Initial efforts focused on the design and implementation of the stabilization and structural reform program, key to the resurgence of growth. Under the Structural Adjustment Loan, the Bank supported the Government's efforts to design the first poverty alleviation strategy. Following the 1993 clearance of arrears accumulated to the Bank since 1987, the Bank reinitiated investment lending by offering a $100 million loan to the Government to support FONCODES. Loans for basic health and nutrition, primary education, transportation rehabilitation and water rehabilitation and management have followed. Additional loans are under preparation for irrigation rehabilitation and rural electrification. 2.3 This project, the Rural Roads Rehabilitation and Maintenance project, following the Government's longer-term vision, is focused on local government service delivery and maintenance. It is consistent with the Country Assistance Strategy presented to the Board on November 22, 1994, which has poverty reduction as its central objective, and concentrates on (1) infrastructure development, (2) social sector development, (3) institution building, and (4) macroeconomic sustainability. 2.4 The project would bolster infrastructure development by supporting a comprehensive road rehabilitation and maintenance program to arrest deterioration of the existing road system in the - 18 - rural sierra, safeguarding key social and economic links, and providing a framework for further assistance to the rural road subsector. Bank's experience on free-standing feeder road projects elsewhere, especially in Africa and Asia, has been incorporated into the design of the project. Dialogue between the Government and the Bank during preparation resulted in stricter definition of sub-project eligibility criteria, in-depth elaboration of community participatory mechanisms, and stronger emphasis on institutional development matters. The project will have a positive demonstration effect, and should be considered as a complement to the on-going Transport Rehabilitation Project towards broader Bank assistance in the transport sector, in particular towards facilitating the integration of poor rural communities into the mainstream economy and the expansion of markets for agriculture and other non-farm products. The joint IDB-World Bank collaboration further strengthens IDB's and the Bank's dialogue with the country and the effectiveness of both banks' involvement in the sector. C. Project Objectives 2.5 The overall purpose of the proposed project is to provide a well-integrated and reliable rural road system through rehabilitation and maintenance of rural roads and key links connecting to the primary road system. This will help alleviate rural poverty and raise living standards of rural communities through increased access to basic social and economic and income-generating activities, the goal of the Government's strategy. The specific objectives are to: (a) reduce transport costs and raise the reliability of vehicular access to expand markets for agricultural and non-farm products; (b) integrate poorly accessible zones with regional economic centers; (c) improve transport conditions in rural villages; (d) generate employment through the rehabilitation and maintenance of rural roads to mitigate rural poverty; and (e) build up institutional capacity at local government level and develop small and medium enterprises to manage and carry out, on a sustainable basis, the maintenance and upgrading of rural roads. D. Project Description 2.6 The proposed project is being prepared jointly by Government and IDB and Bank staff. The project would support the first phase of the Government's six-year program designed to improve transport conditions between rural communities and production and consumption centers (see para. 1.31). Government, IDB and the Bank would finance jointly the investments planned under the project under the same project conditions. 2.7 The project emphasizes the connection of the benefited rural communities with a well- integrated and reliable road system through rehabilitation and maintenance of a "core" road network composed of rural roads and connecting primary and secondary roads. Several advantages are foreseen from this strategy. First, it will remove the bottlenecks constraining transport services in rural areas, maximize the population benefited, and, overall, have a greater social and economic impact than in the case of isolated road improvements. Second, through improved road access the project would permit easier coordination among other rural development programs. Third, it introduces local governments to the principle of "network" management (including the informal network of non-motorized tracks), which is key to improving transport services. However, it will take time and substantial efforts in technical assistance for this principle to take root among local governments, since this is a major change from the current - 19- practice where municipalities are mostly limited to occasional road emergency works. Thus, while building an intense road investment program, the proposed project also supports a strong institutional development component. The program will support MTC's policy to emphasize rehabilitation and maintenance over new construction. 2.8 In view of the large size of the program and the history of inactivity in the rural roads subsector, MTC is carrying out a Pilot which would be financed retroactively by the project. This Pilot has established the technical, administrative, socio-economic and cost information needed to design the project (see para. 3.17). Though implementation of the pilot is still underway, the experience gained so far has confirmed the validity of the assumptions and data used for project design. 2.9 As presently designed by Government, the rural roads program entails rehabilitating in a six-year time frame about 30 percent of the rural road network in 12 departments out of a total of 24. The proposed project would finance the first phase of the program which includes investments started in 1995 in six departments under the Pilot, and investments from 1996 to 1998 which would progressively expand to cover the total of 12 departments. The second phase of the program would be carried out under a follow-up project, to be supported by IDB and Bank loans to finance additional investments in the same 12 departments starting in 1999 and on. This follow on operation is tentatively planned for approval by end 1998 to ensure the continuity of the financial plan. However, the actual scope of this second phase, as well as the amount of the loans and appropriate time to process them, would be adjusted based on the performance achieved during implementation of the proposed project. The project remains viable even if only the first phase of the program is completed. In addition, phasing the financing will facilitate accommodating changes in the project environment--i.e., progress in the decentralization agenda --, reduce project risks and give more incentives (and leverage to IDB and the Bank) for better performance. The decision to start preparation of the follow up operation would be undertaken at the project third annual review which constitutes the mid-term review of the program (see para.3.31 ). 2.10 The project would start in the six departments in the sierra region chosen for the Pilot, which rank highest in terms of rural poverty, namely Ancash, Apurimac, Ayacucho, Cajamarca, Cusco and Huancavelica. In 1997, the project would be expanded to also cover another six departments, the next ones in terms of rural poverty: Huanuco, Junin, Pasco, Puno, San Martin and Madre de Dios (with start-up of works in the two latter scheduled for 1998). This staged- approach will give an opportunity to immediately apply lessons learned from the Pilot and during the first year of project implementation to the additional departments incorporated into the project. The 12 departments selected, out of a total of 24, account for about 61 percent of the rural road network in Peru. They cover most of the sierra region, and some departments, also areas of piedmont (Ceja de Selva) where road improvements can support alternative development programs in coca producing areas. 2.11 The strategies used in the definition of the proposed project build directly from the Bank's experience in other projects in Per6 (mainly the Social Development and Compensation Fund Project), as well as experience in other countries and regions. The rehabilitation of critical - 20 - sections, the promotion of small and medium contractors, and the development of micro- enterprises systems for rural road maintenance, were pioneered in other Bank projects in Latin America and Africa, and are consistent with the Bank's overall strategy for rural roads. The five components of the proposed project are described below. The logical framework of the project as well as the program it supports, with key indicators and physical targets by component, is given in Annex 3. The performance indicators and physical targets were agreed at negotiations. Rehabilitation of Rural Roads 2.12 This component would finance rehabilitation of about 7,500 km (out of the 12,500 km planned under the program) of the rural road network to improve accessibility and help reduce the overall deterioration of that network. Though poorly engineered, these one-lane roads have geometric standards reasonably adapted to the terrain and the traffic they serve (from a few vehicles a day up to 15-20 vehicles on peak market days, mostly micro-buses and 3 tons trucks). The proposed works would concentrate on eliminating critical sections and spot improvements to ensure adequate transitability and a level of access tailored to the specific transport needs of the local communities. Through spot rehabilitation access is substantially improved at a low cost, in terms of transport time required and accessibility during the rainy season. This would entail correcting the surfaces with limited regraveling to provide a more durable running surface over poor soils and on steep gradients, removing landslides, and constructing retaining walls and additional drainage and erosion control structures. To obtain long-term benefits, spot improvements would be followed by an effective road maintenance program. 2.13 Because of the simple nature of these rehabilitation works, they can be carried out through labor-based methods without compromising quality and cost-effectiveness. Most of the works will be contracted out to small local contractors, who will make use of the labor force available from the benefited communities. The opening of a regular market for simple mechanized rehabilitation works would also assist in strengthening the local construction industry. Other works in remote areas or where heavy machinery is not needed, will be handled directly by the communities, engaged through ad hoc agreements or conv'tenios. Use of local labor would increase farm incomes during periods of reduced agriculture activity, notably between March and September in the sierra, which is the dry season when most of the works will be carried out. The experience of the on-going pilot program, as well as that of FONCODES, shows that the commitment to, and direct participation of the population in these community-based arrangements is possible. Rehabilitation of Connecting Primary and Secondary Roads 2.14 This component would finance rehabilitation of primary and secondary roads that are directly connected and give access to the feeder r oads systems under rehabilitation. These are unpaved roads carrying traffic in the range of 50 to 200 vehicles per day, and that after many years without any maintenance are in a deplorable condition. About 2,200 km (out of the 3,200 km envisaged under the program) of primary and mostly secondary roads will be rehabilitated through the project. The: rehabilitation works envisaged for the main roads aim at restoring year- round trafficability and will include such works as regraveling, grading, bridge replacing, slope - 21 - protection and drainage system repairs. Paving, widening or realignment are not envisaged, to avoid unnecessary high standards that affect both cost and program output over time. This component will be coordinated with works being undertaken by DGC (or its successor) on an annual basis. Agreement was reached at negotiations that DGC will furnish to IDB and the Bank by July 31 each year, starting in 1996, the rehabilitation and maintenance programs to be undertaken with its own resources during the upcoming year. Routine Maintenance of Rural Roads 2.15 This component aims at setting up a routine maintenance system. Innovative cost- effective schemes based on contracting out labor-intensive works to micro-enterprises or local cooperatives, and equipment-intensive works to small and medium contractors, would be introduced. Present capacity of the public sector is limited. Involving communities and developing small local contractors would increase capacity and build pressure over local governments for continuous road maintenance. The strategy pursued under the project is that the rural road network in most of the sierra region first must receive rehabilitation on critical sections (spot improvements) before maintenance activities begin. Subsequent routine road maintenance would consist of simple works regularly performed throughout the year to maintain the drainage systems (ditches, culverts, vegetation) and the running surface (filling potholes and ruts, maintaining the surface camber). The project would basically finance routine maintenance of those roads rehabilitated through the project, but other roads could be included if local governments commit themselves to supporting these activities. Maintenance of roads built or rehabilitated by other rural development programs (e.g. FONCODES, INADE) would also be eligible for project support, provided they are linked with, or in the vicinities of road sub-projects being implemented under the project. This would entail maintaining from about 1,500 km of roads at the beginning of the project to about 7,500 km at the project end. 2.16 The rationale for funding routine maintenance is that little or no maintenance has been done in the past. Thus, it becomes necessary to demonstrate the long-term benefits of simple day- to-day maintenance through the structured learning exercise that the project would provide. It is of the essence that adequate funding be available not only for developing the proposed maintenance schemes but also for sustaining their effectiveness through implementation. Experience in other countries has shown that despite putting in place favorable co-financing arrangements, it is very difficult and demands substantial efforts in technical assistance to mobilize local governments to carry out routine maintenance. 2.17 The IDB and the Bank loans would finance maintenance on a declining basis, while Government contribution would increase accordingly throughout project execution. Government is reviewing the mechanisms for road funding, including the option of setting a Road Maintenance Fund to secure a steady flow of funds for road maintenance at the various levels of administration. However, a Fund would finance only a fraction of rural road maintenance costs, requiring municipalities to mobilize their own resources to match this contribution, a burden well above their current possibilities. A study financed under the project will help define a strategy to address this issue (see para. 2.25) within the context of the Government's decentralization agenda. - 22 - Improvement of Village Streets 2.18 Villages and small towns with populations up to about 2,000 inhabitants do not classify as "urban" and often are neglected in "rural" transport programs. The road infrastructure in such villages, despite servicing a high number of beneficiaries, is rarely planned for, and is developed many times in an ad-hoc manner. Furthermore, construction of secondary and rural roads that go through villages often neglects the impact on village amenities, such as street drainage. Investments in village roads and streets have the potential to improve the welfare of village residents through better access to village centers of activity (e.g., market, hospital, school, cemetery) and improved health as a result of better drainage of runoff from roads and streets. 2.19 This component would finance street improvements in small rural communities to enhance environmental conditions and raise living standards by upgrading or paving the section of the rural road crossing a village. It is anticipated that about 220 km of village streets will be improved under the six-year program, with the potential to benefit about 300 villages; about 140 km are planned for execution under the project. The works will remain simple and appropriate for labor- based construction methods, including: i) laying new stone pavements and/or resetting existing stone pavements empedrados. Stone quarries are abundant in the sierra region and there is a long tradition in the use of these materials that goes back to the early Incas; ii) paving with adoquines of interlocking concrete blocks; and iii) paving with concrete slabs. The initial investment cost of the two latter options are higher than asphalt surface treatments, but more cost-effective if maintenance costs are brought into a life cycle cost analysis, and much less costly in terms of foreign exchange. 2.20 The designs will emphasize improving drainage and safety conditions, and ensuring sustainable maintenance. The community's capacity to maintain the improved streets will be a key factor for choosing the appropriate technology. The project in general would finance empedrados. The terms of reference for preparation of engineering studies require consultants to provide detailed justification (and approval by PERT-PCR) for any departure from this standard solution. Criteria in this aspect include comparative cost (based on life cycle cost analysis), type of service to be provided, prevailing condition of other existing road infrastructure in the village and capacity for future maintenance. Improvement of Non-Motorized Rural Transport 2.21 Transport and mobility of goods and people in rural areas relies on the existence of adequate infrastructure and on the access to means of transport. Improvement of accessibility and mobility of rural areas must also take account of the unclassified network of tracks and footpaths that service the transport needs of the rural poorest, and poor women in particular. Mobility needs in rural areas are often met by non-motorized transport (NMT) modes, even on classified roads. Widespread use of non-motorized vehicles (bicycles, tricycles) and animals is both hampered by the poor condition of rural transport infrastructure (compounded with difficult terrain conditions), and also by their high acquisition price which is above the cash income earning capacity of most households. Field visits undertaken during project preparation showed that poor inhabitants of small villages utilize a variety of intermediate- and non-motorized modes. Certain - 23 - remote anexos and caserios are not serviced by the classified rural road network but by tracks and paths that connect them to the closest village or municipal district. 2.22 The non-motorized rural transport component would provide local governments and communities with a tool to help them formulate coherent programs for the management and maintenance of village level infrastructure and improvement of transport technology. To this end, this component will finance (1) technical assistance for village-level infrastructure management, and (2) physical works aimed at removing unsafe spots and other bottlenecks constraining the use of the intermediate means of transport. The project will not directly address the issue of improving affordability to more efficient means of NMT. It is anticipated, however, that the project would have positive indirect impact by (1) raising awareness of the importance of transport services over the unclassified village network through this component, (2) helping design ad-hoc local programs to mobilize additional financial aid for this purpose, and (3) generating supplemental income through implementation of the road components. The project would finance 80 percent of the total cost estimated by PERT-PCR for the proposed works based on standard designs and unit costs. This would fully cover the cost of materials, equipment and skilled labor, while most of the unskilled labor would be contributed by the community. Annex 4 describes in more detail the design and implementation arrangements for this component. The community will be determinant in the selection, planning, implementation and financing of the proposed works. Institutional Development 2.23 This component would consist of: i) technical assistance to improve planning and management of rural roads at the national and local levels. This technical assistance will be supported by two policy and institutional studies on local road management practices and rural road financing; ii) technical assistance to develop micro-enterprises for execution of routine maintenance using work methods tailored to the institutional and financial capacity of rural municipalities; and iii) a package of technical assistance and training services to strengthen the local road construction industry, to be offered on a voluntary basis to local contractors and micro- enterprises who will be awarded contracts under the road rehabilitation components, and on-the- job training to local engineering firms and beneficiaries on the preparation of feasibility studies and technical project proposals. The project would also finance training in Peru and abroad for key staff from MTC, PERT-PCR and local governments participating in project activities. 2.24 Technical Assistance to Improve Planning and Management of Rural Roads. The terms of reference for this assignment are given in Annex 5. Recruitment of consultants will start prior to loan effectiveness to ensure that the consultant services can be developed from the beginning of the project (see para 3.22). The program will be organized into three streams: (a) Technical assistance to strengthen MTC's capacity for formulating and reviewing rural roads policy, programming investments in coordination with other Ministries, and monitoring compliance with investment programs and performance of the rural transport system. Staff within MTC's Planning Office will be trained for this purpose. - 24 - (b) Technical advice to PERT-PCR, during project execution. This would include reviewing the adequacy of investment programs and quality of studies produced by consultants, ensuring consistent application of the Project Operational Manual (see para. 3.7), upgrading procedures defined in the Manual based on feedback from project implementation (including preparation of an Environmental Manual for environmental management of rural roads), assisting PERT-PCR's management in evaluating performance of PERT-PCR's deconcentrated units and developing the institutional strengthening components; and (c) Technical assistance to municipal provinces and distficts to strengthen their capacity to plan and carry out rural roads maintenance. This would be a three-part effort. First, exposing municipalities to the organizational shortcuts, the simple planning and budgeting systems, and the extensive use of labor-based methods and contract arrangements promoted under the project. Second, setting in place a simple road performance evaluation system and establishing maintenance capability and a coordinated strategy at the provincial level. This strategy should emphasize coordination between municipal provinces and their districts, and between districts and their villages. Third, fostefing grassroot environmental awareness among rural communities and involving road users and other stakeholders in the road management process to increase municipalities' accountability. The technical assistance will put in place effective local participation mechanisms to improve selection and execution of rural road projects and regularly assess progress in achieving the project development objectives. Municipalities in the project area will be required to participate in the technical assistance program, but the program will also be available to other interested municipalities. The program will be tailored to the size, structure and complexity of the different municipalities. 2.25 This package will be complemented by the two studies outlined below, whose final terms of reference will be prepared by end-September 1996 to reflect the development of the Government's decentralization policy. The design of sustainable mechanisms for the financing of rural roads maintenance and the streamlining of road admiinistration practices at the local level, as well as appropriate action plans to implement them in reasonable time, are foreseen as key outcomes of the project (see Annex 3). These mechanisms and action plans will be thoroughly discussed and agreed upon at the third annual review of the project (mid-term program review). (a) Study on Local Road Management Practices. Assessments on the institutional, administrative and financial capacity of local governments undertaken as part of project preparation have shown that cumbersome regulations and procedures used for budgeting, procurement and administration of road works, and excessive reliance on inefficient force account arrangements, constitute bottlenecks that coupled with a weak financial base, seriously inhibit the capacity of local governments to manage their rural roads networks in an efficient manner. The proposed study would examine existing procurement legislation and practices to uncover bottlenecks impeding project implementation and design system improvements. It will also look at possible shortfalls constraining further - 25 - development of the local construction industry, as needed to shift to a policy of increased usage of private contractors. This would include factors such as affordability of, and access to bank credit to finance equipment, and working capital, legal and registration requirements, policy and employment conditions which may influence a choice against labor-intensive methods, as well as the need for further government support for promoting plant pools for equipment rental. (b) Study on Rural Road Financing. With support from IDB's Highways I project (Loan 65 I-OC-PE), MTC has undertaken a study to analyze and propose financing mechanisms to assure the adequate flow of funds for maintenance of the national road network. The rural road network, by its own physical and traffic characteristics requires a different perspective towards securing and channeling the necessary maintenance funds. In any municipality rural road maintenance is but one service among many competing for scarce resources (and likely less visible than others). There are no ready made solutions to the central problem of mobilizing local resources for maintenance of rural roads. Early involvement of local government in planning seems to be beneficial in building up awareness, but in the long term they must have some reliable means to raise funds themselves for this purpose. The project would finance a study to analyze this issue. The study would include an estimate of the maintenance needs for the rural road network and the institutional mechanisms to meet those needs, including funding responsibilities, by looking at a representative sample of district and provincial municipalities and proposing practical and feasible ways of raising maintenance revenues from the beneficiaries of the road infrastructure. The study would conclude with specific recommendations regarding (1) the extent of financial participation of higher levels of government; (2) the revenue-raising prospects and mechanisms at the local level (municipalities and users) for rural road expenditures; and (3) a feasible structure of revenues for road maintenance that would observe a close relationship with road usage. 2.26 Technical Assistance to Develop micro-enterprises formed by groups of beneficiaries for road maintenance. The difficulties of ensuring central-government maintenance of a myriad of scattered rural roads, and the failure of traditional municipal force account works, suggest private-sector involvement in the form of municipal contracts with small local engineering firms and road maintenance micro-enterprises. The proposed component contemplates developing micro-enterprises to undertake routine and emergency maintenance of rural roads (with possibly larger firms supplying specialized equipment and know-how for more complex works). This approach has been successfully introduced in Peru for some urban services (e.g., waste collection) and specifically for road maintenance in Colombia. In addition, the use of micro-enterprises has some comparative advantages for further developing rural areas: they may act as catalysts for other local development initiatives, become contact points for extension services, and even mobilize untapped local resources for local community ventures. This in turn may encourage local governments to utilize the micro-enterprises. The technical assistance will guide the transition towards locally supported use of the maintenance schemes developed under the project. - 26 - 2.27 Typically, microenterprises will be made up of 8 to 14 people living close to the road, to carry out manual routine maintenance activities on approximately 15 to 50 km. The project would finance all activities related to (1) promoting the development of microenterprises among leaders of the communities and base organizations, (2) assisting microenterprises throughout their constitution, including legal and technical advice, (3) contracting out maintenance of more than 10,000 km to micro-enterprises, (4) putting in place adequate contract arrangements and payment systems, (5) providing supervision and monitoring to ensure smooth implementation of the program, and (6) supporting a dissemination campaign among local governments to sensitize them about the benefits of the micro-enterprise program. Preparation of this component builds on the recommendations of the Pilot Maintenance Study undertaken with support of the on-going Transport Rehabilitation Project (Ln. 3717-PE). MTC through PERT-PCR will recruit consultants for developing the first group of microenterprises by March 31, 1996 under the terms of reference shown in Annex 5. 2.28 Technical Assistance and Training Services to Strengthen the Local Road Construction Industry. This technical assistance package will aim at increasing the technical and managerial capacity of small- and medium-scale local firms engaged in road construction and maintenance. The rationale behind this component is that most firms in the target group are expected to show weaknesses, in terms of management, work organization, and technical skills, which might jeopardize the successful implementation of the sub-projects that they will be commissioned to carry out. The provision of some technical assistance to contractors is deemed an effective way of addressing this risk and provide a basis for long-term development of the local construction industry. MTC through PERT-PCR will submit to IDB and the Bank the assistance program, outlining the training services that will be offered as well as the strategies for their delivery, proposed for the upcoming year, not later than July 31 each year, starting in 1996. 2.29 Three subprograms will be offered under this component, namely (1) a business adrninistration and financial management program intended for entrepreneurs and their administrative staff, (2) a work organization program primarily designed for foremen, and (3) various technical training courses to improve the skills of basic workers. These subprograms would have a practical orientation and take the form of on-the-job assistance training. Potential beneficiaries will be free to accept or refuse this form of assistance, except in cases where technical assistance is deemed indispensable for successful implementation of the sub-project and therefore a condition for contract award. 2.30 This technical assistance component also includes support to local consultants to prepare feasibility studies and technical project proposals that would be submitted to PERT-PCR for funding. Training courses will be provided to ensure that the terms of reference and methodologies developed for the project are well understood and correctly applied. Perhaps more importantly, local consultants will be exposed to on-the-job training during the formal review and approval of the studies submitted to PERT-PCR for financing under the project. - 27 - E. Environmental Assessment 2.31 The project has been rated "B", as no major environmental issues are foreseen. The project supports rehabilitation and maintenance of existing unpaved rural and departmental roads. Since these are in general existing roads, the risk of additional indirect negative impact linked with human activities (i.e., colonization, deforestation) is limited and the proposed project activities are unlikely to harm the ecological and social environment. The greatest environmental damages associated with the existing targeted road network is erosion and flooding of farmlands and road surfaces. By its very nature, the spot rehabilitation and maintenance strategy adopted has positive impacts on the environment because of its strong focus on identifying and offsetting erosion problems. Annex 6 presents an overall environmental assessment of the project works and provisions included in the project to build environmental management capacity. Nevertheless, performance audits (see para. 3.29 ) will include an assessment on the compliance with the environmental guidelines agreed under the project. 2.32 Furthermore, the project would assist MTC and local governments in developing and implementing a sound strategy for environmental management of rural road projects. The Project Operational Manual will set environmental guidelines to adequately address the following issues: i) procedures for environmental screening of projects at their preliminary identification. Simple but effective guidelines will help assess potential risks and categorize the projects on account of the actions recommended; ii) guidelines for identification of environmental damages and design of corrective or mitigation measures, with emphasis on preparation of Environmental Management Plans; iii) technical specifications for work execution, with clear provisions to ensure that work methods are environmentally sound. These procedures will also be consolidated in an Environmental Manual for rural roads to facilitate their application by local and regional entities under and beyond the implementation of the project. 2.33 As noted in para. 2.24, the technical assistance program includes actions to institutionalize these environmental practices. The Government's capacity to address environmental issues related to road and transport services is weak. The overall responsibility for environmental management in the transport sector rests with MTC. An Environmental Unit has been established within MTC and technical assistance is being provided under the on-going Transport Rehabilitation Project (Ln. 3717-PE). Through the technical assistance component, further attention is given under the proposed project to foster (1) grassroot environmental awareness among rural communities, (2) environmental planning and preparation of mitigation plans, and (3) inter-institutional arrangements for implementation of environmental management plans. F. Project Costs and Financing 2.34 Project Costs. The total project cost is estimated at US$250 million, with a foreign exchange component of about US$83 million (33 percent). Base costs are in January 1995 prices. Physical contingencies were calculated at 10 percent of base costs. Price contingencies were calculated at an annual rate of 2.7 percent. This escalation rate was applied to both local and international prices, which implies that the exchange rate is periodically adjusted to reflect the difference between internal inflation and the evolution of world prices. Project costs are shown in the attached summary, altogether with the costs estimated for the second phase of the program - 28 - (1999-2000) and the totals for the entire six-year program (1995-2000). Annex 7 details the cost estimates on a year-by-year basis. 2.35 The costs of civil works are based on work quantities determined from field surveys and engineering designs prepared by local consultants for the Pilot (see para. 3.17), entailing about 1,506 km of roads. The unit prices used in the project are slightly higher than those calculated by the consultants and obtained from bids already received under the Pilot, in anticipation of a possible increase of unit costs with the acceleration of construction activity in the project area. 2.36 Project Financing. The proposed Bank loan of US$90 million would finance about 36 percent of the total cost of the project. IDB would provide joint cofinancing through a loan of US$90 million. Together, the two loans would cover all foreign costs and about 58 percent of local costs. The loans will be made to the Republic of Perui. Government requested this joint financing as opposed to parallel cofinancing to simplify project administration. This is feasible in view that (1) both Banks are financing the same components under the same implementation arrangements, and (2) no international procurement is envisaged as the small size of the contracts is unlikely to attract contractors from outside the region. Government will provide about US$70.3 million for Phase I of project implementation, of which about US$38.2 million are taxes. A summary of the financial plan is attached below. A detail financial plan by component, covering the proposed project (or phase I) and phase II of the program, is given in Annex 7. G. Project Benefits Intended Benericiaries 2.37 The project's intended beneficiaries are divided into three groups. First, there is the population at large benefiting from better access in rural areas. In particular this will benefit the poorest rural communities located in the sierra region, since sub-project selection criteria give priority to these areas. The potential number of beneficiaries is the 2.7 million rural population living in the first six departments targeted under the project. Further expansion of the project to include a total of 12 departments will benefit an additional potential 1.8 million rural population. All in all, this represents about 70 percent of the rural population of Peru and about 20 percent of the total. In these rural communities women constitute a major beneficiary group for road and track improvements. They are the largest group involved in taking products to the markets and improved road reliability should increase their income earning capacity. Better access to social services, such as hospitals and schools, would offer greater proportionate benefit to women. Scope for involvement of women directly in road work activities is yet to be assessed. 2.38 Second, there are the small enterprises and community groups that will be formed or strengthened as a result of their involvement in the execution of the works financed by the project. This will improve the individual skills of the workers who will be employed, and the corporate competitiveness of the small firms that will carry out the works so as to develop their capacity to respond to increased opportunities for sustained employment after project completion. Since most of the contractors have been working on sporadic informal basis, the project will contribute to helping them achieve a transition from the informal to the formal sector. The project also - 29 - PERU RURAL ROADS REHABIUTATION AND MANTFNANCE PROJECT SUMIMARY Of PROGRAM AND PROJECT COSTS (US$'000) PROJECT (tPH8E a PHASEII TOTAL PROGRAM PROJECT COMPONENTS Cot (US*OO0) Coat (US$000) Co t (1S*000) Locsa For ian Eo. Totl Local For,gn Eo Total Loca orIigo E. Total CFVIL WORKS 90,448 600148 150,896 71.370 38,330 109.700 161,818 85A478 260.256 RohabI,taon of RuralRod. 45,000 30,000 75.000 30,000 20,000 50.0D0 75,000 50,000 125,000 Rahablitaion of Conn.cting Mina-y aod S.condary Roads 15,400 19,400 38.800 9.000 9,000 18.000 28,400 28,400 56.80O Routin. Maintanno. of Road. 11,500 2,300 1X800 22,500 4.500 27.000 34,000 6,800 40Q000 lrnjcronrnant of Villa.Q Strata 12,298 B,198 20A9t' 6,720 4,400 11,200 19,018 12,678 3t1966 Inwov--ont of ViII.g Uncl-nifwd Notwoika 2,250 2S0 2.500 3,150 350 3.500 5,400 600 6.O00 CONSULTANT SERVICES 11.270 1,514 18.784 8.145 3,A30 8,576 16,A16 10.944 27.320 P-I-ln vnn Studi 6,206 4,136 10,344 1,434 956 213S1 7,641 5,094 12.S35 Suproition of Civil Work. 4,518 3,012 7,630 3,291 2.194 SA,S 7,809 5,206 i3,01 PNrfom,an. Audit (7Tohnioa), Onv,ron,ntal, Procor-nrant 546 364 S10 420 280 700 966 644 1,6SO and Mange. nnt Aud,t) WSTfTUTIONAL DEVELOPMENT 2760 6,140 7,900 1440 2,760 4.200 4.200 7.900 12,100 Tahonioal Aatano. for Rural Road Mannng and Maaga gi. 1,200 2.800 4,000 720 1,680 2,400 1.920 4,480 6,800 Toh. A_it. forD D-xp.ng Maiotano. M -cro.nt.rpr.i.. 840 9e0 1.600 350 540 SOD 1.000 1,500 2,500 Tnch. A.aa. ior D-veloping th. Lo-a) Con trucitn Indu try 240 360 6o0 160 240 400 400 600 1,000 Taoh. Aa.t. for Non-Mtcoriand Rurl Tranoport Coxnpo..nt 2b0 420 700 120 190 300 400 600 1.000 Stud... on Rural Road FPnnScing and Local Adnn-t-ctbion 280 420 700 00 00 00 280 420 700 Training Paru and Abroad 120 150 300 80 120 200 200 300 500 TOTAL BASELINE COST 104,478 72.S02 177.280 77.955 t4520 122.476 182,433 117,322 2899755 Phycal Contin-ni 9,045 6.015 1500w 7,137 3,833 10,970 16,182 9,84 26,020 Priot Contignnci.. 5,872 4,077 B,94S 10,831 6,155 16.985 16,420 10,514 26.9!S Projact Man..oannt Coat. 9,800 00 9,800 7,500 00 7,600 1 7,300 00 17,300 TOTAL PROJECT NET COST 123,194 982,93 212,068 103423 54.508 167,931 232.335 137.684 370,019 T.." and Dutia 38,176 00 36,170 28.428 00 294,25 66,603 00 e6,003 GRAND TOTAL 167,370 82.893 250.264 131.851 54,508 186.36 2988938 137,884 436.622 Financing Plan (US$'000) Local Foreign Ex. Project Taxes Total Cost As % of As % of Cost Cost Cost (IGV) inc. Taxes Project Cost Total Cost PROPOSED PROJECT (PHASE I, 1995-1998) o IBRD 48,553 41,447 90,000 0 90,000 42.4% 36.0% o IDB 48,553 41,447 90,000 0 90,000 42.4% 36.0% o GOP 32,088 0 32,088 38,176 70,264 15.1% 28.1% TOTAL PROJECT 129,194 82,893 212,088 38,176 250,264 100.0% 100.0% PHASE 11(1999-2000) a IBRD 32,772 27,254 60,026 60,026 38.0% 32.2% IDB 32,772 27,254 60,026 60,026 38.0% 32.2% o GOP 37,880 0 37,880 28,428 66,307 24.0% 35.6% TOTAL PHASE II 103,423 54,508 157,931 28,428 186,3S8 100.0% 100.0% SIX-YEAR PROGRAM (1995-2000) o IBRD 81,184 68,842 150,025 150,025 40.5% 34.4% IDB 81,184 68,842 150,025 150,025 40.5% 34.4% o GOP 69,968 0 69,968 66,603 136,571 18.9% 31.3% TOTAL SIX-YEAR PROGRAM 232,335 137,684 370,019 66,603 436,622 100.0% 100.0% - 30 - benefits local consultants and NGOs that will be engaged in the preparation of engineering designs and supervision of works, providing expanded opportunities for their development under practices that provide the necessary motivation for quality and efficiency. Access to opportunities will break the conundrum of "no work-no experience-no qualification". 2.39 A third group of beneficiaries is constituted by a large number of municipalities that will benefit from investment and institutional strengthening from the project. The 71 provincial municipalities in the initial six departments are targeted under the project. This number could increase to about 100 provincial municipalities, out of a total of 176 in the country as a whole, once the project is expanded to cover 12 departments. However, other municipalities are potential beneficiaries should they have interest in participating in the technical assistance component of the project. Economic Justification 2.40 Eligibility criteria were used early in the project preparation stage to screen investments and identify rural roads selected for rehabilitation under the pilot and first-year programs of the project. These programs include roads which were selected on the basis of geographic (provincial) poverty indicators (infant mortality rates and unsatisfied basic needs). Thirty two provinces, located in the six poorest departments, were targeted for intervention within the pilot and first-year programs. The economic analyses (that take into consideration the expected agricultural and livestock production) of 76% of the kilometers of the pilot yielded a net present value of around US$25 million and a combined economic rate of return of 44.1%. No costs or benefits have been quantified for the village-level investments and non-motorized improvements (about 13 percent of the cost of physical investments), and institutional development, training and technical assistance activities representing about 15 percent of the total base cost. Annex 11 details the methodology and results of the economic analysis. 2.41 For the second- to fifth-year programs, the eligibility criteria include institutional, technical, environmental, social and economic factors whose application would follow a structured process that would permit screening the level of social purpose of a particular project and the prospects for its sustainability (see para 3.12). The Project Operational Manual would detail the definition of the four eligibility criteria in order to ensure the application of uniform yardsticks to the approval of projects across the different provinces. Their application, with the assistance of a consultant firm (see para. 2.24), will help single out road projects with, first, a strong social purpose and the adequate technical and environmental specifications and institutional capacity and, second, for those of a larger scale (in terms of total cost and cost per kilometer), a proven economic worthiness to the potential increase in the agricultural development of their area of influence. At project negotiations, assurances were given that all sub-projects considered for financing under the project will comply with the specified eligibility criteria, as defined in the Project Operational Manual. - 31 - 3. PROJECT IMPLEMENTATION A. Project Organization and Management 3.1 Operational Set-up. MTC will have overall responsibility for project coordination and implementation. MTC lacks the capacity to directly manage a large rural roads project, and it would involve a costly and lengthy process to rebuild the capacity. Actual implementation will be delegated to a specialized unit, the Proyecto Especial de Rehabilitaci6n del Transporte - Programa de Caminos Rurales (PERT-PCR), which was created in July 1995 by Ministerial decree. With staff and budget separated from the rest of the Ministry, the unit enjoys ample technical, administrative and financial autonomy. Its limited personnel is engaged at private- sector salaries and paid from local counterpart funds. Most of the tasks will be undertaken by consultants engaged under the project. The unit is led by an Executive Director who reports directly to the Vice-Minister of Transport. Implementing the project within the proposed time frame will demand strong skills to manage hundreds of road links spread over difficult remote rural areas. This will require setting deconcentrated units in those departments with active programs to manage the works, a strategy that is consistent with Government's agenda for decentralization. The Operational Plan for the final establishment of PERT-PCR and its initial deconcentrated units is shown in Annex 8. Due to the special nature of the statutes of PERT- PCR, its duration is initially limited to the execution of the proposed project. At the third annual review, Government jointly with IDB and the Bank will review the need to continue with PERT- PCR after project completion, taking account of the progress made in the decentralization agenda. 3.2 The project operational set-up would have a three-layer organization that would attempt to efficiently achieve an adequate monitoring of project execution, the decentralization of responsibilities, and the participation of municipalities and communities, as follows (Chart 1): (a) PERT-PCR's central unit in Lima would be responsible for general project management. This would entail (1) establishing indicative budgetary allocations and investment programs, (2) designing and coordinating the institutional strengthening component, (3) issuing implementation guidelines (through the Operational Manual and further reviews of it), (4) channeling project funds to the deconcentrated units, (5) putting in place and upkeeping the project ex-post monitoring system, (6) auditing performance of deconcentrated units (para.3.29), and (7) preparing progress reports, processing disbursement requests, and managing the Special Account (para.3.46). (b) The deconcentrated executing units (UEDs) of the PERT-PCR, located in the project areas (likely one per department or region participating in the project), would be responsible for managing the work programs. This would entail (1) promoting the project among, and entering into agreements (convenios) with municipalities and communities, (2) coordinating with other decentralized agencies their rural development and poverty alleviation programs, (3) defining and programming investments in consultation with the municipalities, (4) engaging consultants and NGOs for engineering studies, supervision of works and delivery of institutional components, (5) tendering contracts for works, (6) administering - 32 - contracts and convenios (including payments), and (7) monitoring and reporting implementation of the various project components. (c) Municipalities and communities at the local level. Though the project funds will not be channeled to the municipalities, municipalities would participate in (1) identifying sub-projects and coordinating with UEDs the investment programs, (2) contributing to the cost of the works for community-managed components and directly executing small works through convenios; (3) undertaking the institutional action programs agreed under the project; and (4) overseeing through Road Committees the delivery of programs and reporting any difficulties in the implementation of the project. 3.3 Each UED will be established according to one of the following three possible options: (1) contracting out management services to a private firm, (2) establishing an ad-hoc unit with staff appointed by PERT-PCR, and (3) delegating the management functions to an existing decentralized or local government agency restructured to meet the project requirements. It is envisaged that nine units will be needed to efficiently manage the work programs in the 12 departments selected under the project. The location and phasing in the creation of these units have been determined taking into account (1) the volume of work in each department or geographic area, (2) potential gains to be realized through the proposed location, in terms of improved accessibility to work sites (some rural areas are better reached from contiguous departments rather than from their own department) and to the existing market of local contractors and consultants, and (3) institutional and operational capacity available locally. The size of the UJEDs will vary in line with the volume and nature of the work planned, but in general will consist of 6 to 8 staff organized in three areas: (1) project development (planning, promotion of subprojects and institutional building, (2) engineering (review of studies, procurement and contract supervision), and (3) accounting and administration. The managers of the UEDs will report directly to the Executive Director of PERT-PCR. 3.4 MTC through PERT-PCR will enter into inter-administrative 'participation agreements' with municipalities with jurisdiction over project areas (though the agreements will generally be structured on the basis of provinces, all districts within the province will be required to sign in). The agreements, whose key features are described in Annex 8, will most notably spell out future obligations and undertakings assumed by both parties with regard to the execution of the project. The project will avoid further investments in those provinces where compliance with the agreements and the institutional action programs has not been satisfactory. Also, with assistance from PERT-PCR, provincial municipalities are expected to prepare, in consultation with their districts, transport plans documenting the actions agreed to improve transport conditions in their jurisdiction, as required under the Municipal Law. 3.5 Coordination with other development initiatives. At the central level, MTC will be responsible for coordinating with MEF and the Ministries of Presidency (FONCODES, INADE) and Agriculture all aspects regarding the Government's poverty alleviation strategy and the allocation of funds to other programs to support it. MTC has initiated preliminary 'cooperation agreements' with FONCODES and INADE, which control the largest rural infrastructure programs, to define mechanisms for sharing socio-economic and sub-project generation data, and - 33 - coordinating implementation of investment programs within common targeted areas. Key features of these agreements are shown in Annex 8. In addition, staff within MTC's Planning Office will be trained as part of the project to strengthen the Office's capacity to set rural roads policy, coordinate investments with other agencies who have developed rural development projects, and monitor investments and transport performance on a continuous basis. Chart 1 Institutional Set Up of the Project Coordination of: _ Poverty Alleviation Strategy . .. ..... .. MTC :0 *Allocation of fumds to prograns M DGC Techrical Assistance ^ MEP, Foncodes, Inade Rural Roads Unit Auditing Services . Ministry ofAgridcut re Q ... PERT-PCR : - Coordination of:., i! Priority areas and actions ............... ... ..... ...... *Identifiction of transport needs .....SX .. t! *Evaluation of prograrns .. Esl 2t . .: ~~~~~~~~~~PERT-C' 9 . 8 ..... ~~~~~~~~deconcentr td UnRbI _ J . S ~~~~~~~~~~~~~~~~Contracts I . _ / ~~~~~~~Contracts Coordination of _/ Agreements zu ~~~~~~~Municipality _/Consultants between province./ eg and distrncrs ---- Transport Plan |/Cnrco l l I Corntnun~~~~~~~~~~~~~ities involved in project selection Districts and work execution _ ~~~~~~~Municipalities _ Iinter adrinirstrative agrnemem l ~~~~~Admrdxib-ae Units to be crated urider proprowd cviodoamnsrcndgda l ~~~~~~projed .. congisd driLrio lea | | EJa~~F-sbr4 Admir":trative Umuts .............. . .... . CoorcUutor 3.6 To ensure the coordination of efforts with other governmental programs in specific regions or departments, the UJEDs would promote the establishment of regional inter-institutional committees that would be responsible for further promoting the project, reviewing the list of proposed subprojects, and providing information about other programs/projects in the vicinities of the proposed subprojects. The inter-institutional committees would include representatives from the communities (including women groups) in the vicinities of the projects being considered for analysis. These conmmittees should meet as a minimum once a month and though they would not - 34 - Box 6 Content of the Project Operational Manual Indicatively, the manual would include: * descnption of background, objectives, and components of the project; . institutional framework and responsibilities: of the PERT-PCR and the UEDs, including the list of indiaors to assess the performance of each unit and the methodology for calculating these indicators on a:six-month basis, procedures for project administration and flow of funds; * minimum qualifications and regulation for the employment of staff, and restrictions that would apply to thea staff to avoid conflict of interest; * procedures for the generation, selection (eligibility criteria), and approval of project proposals; * environmental guidelines to be followed in the execution of project works and to mitigate any adverse impacts which may be generated by the rehabilitation of rural roads; * procurement procedures for works and consultant services, including guidelines for the pre-qualification of firns, evaluation of proposals/bids, and awarding of contracts; and * obligations of the PERT-PCR and UEDs in implementation and monitoring, including the update of the. database information system and the upkeep of accounting and disbursement records. * a set of model documents for items such as (I) agreements (convenios) with local institutions; (2) road. rehabilitation and maintenance standards, including technical specifications for both traditional and labor- based methods of construction; (3) terms of reference for preparation of sub-project eligibihty and engineening studies, and supervision works; (4) standard bidding documents and contracts for works; (5) letters of. invitation, and contracts for consultant services; (6) terms of reference for performance audits; and (7) format and content of database information system. have any approval responsibility (which is fully vested upon the chief of the respective UEDs), they would have the strong possibility of informing the UEDs of the advantages and disadvantages of undertaking particular sub-projects and of carrying particular actions (such as methods of construction, procurement, micro-enterprise development). A detailed list of current rural development programs that need to be coordinated at the local level is given in Annex 8. 3.7 The Project Operational Manual. In order to ensure consistency in the implementation of the project's various components across departments, PERT-PCR will use a Project Operational Manual that will clearly define the guidelines and procedures to be followed by the IJEDs when discharging their responsibilities in the execution of the project. MTC assisted by consultants is finalizing the manual. The format and content of the manual was agreed at negotiations (see Box 6 and Annex 9), and its adoption by PERT-PCR is a condition of loan effectiveness. Adherence to the manual will be assessed every six months by external auditors engaged for the performance audit of PERT-PCR and its UIEDs. B. Selection and Programming of Investments 3.8 Participatory Process in Sub-project Generation. To achieve the intended objectives of alleviating poverty and building up local institutional capacity for sustainable maintenance, the project makes the beneficiaries participate in the various phases of subproject generation, design, implementation and maintenance. While the whole project design is built on this participatory approach, it relies on the systematic use of participatory workshops especially designed to ensure that community participation is undertaken in a systematic and organized manner. Specific objectives of these workshops are to: i) assess transport needs at the community level, ensuring that the needs of the rural poor are taken into account; ii) confirm with the beneficiaries the priority of the proposed road rehabilitation subprojects and the commitment of the conmmunity to their maintenance; iii) validate the design of the selected subprojects to include local solutions; iv) - 35 - mobilize support for road maintenance through increasing ownership of the project and promoting micro-enterprises formation; and v) provide local communities with necessary information about the project and their role in the project. 3.9 As described in Box 7, several exercises were undertaken during project preparation to develop the participatory mechanisms that would be applied throughout project implementation to achieve the above mentioned objectives. These exercises confirmed the potential benefits and viability of the participatory approach proposed under the project. Some adjustments to the initial methodology proposed were introduced on the basis of the experience gained in the field. A full description of the Participatory Process is given in Annex 10. Also included in the Annex are the Operational Guidelines developed in the field in conjunction with PERT-PCR for application of the participatory process and organization of workshops with beneficiary communities and municipalities. The Guidelines are intended for use by local consultants, municipalities and PERT-PCR staff in applying participatory mechanisms during project development and implementation. Their use throughout project implementation will also expose municipalities to participatory approaches and provide on-the-job training to community leaders and local authorities involved. Box 7 : The Participatory Approach during project preparation * Rationale. The Peruvian government is implementing general policies aimed at integrating the rural poor into the mainstream of national economy and culture. In the rural roads sector, regardless of how well constructed or rehabilitated roads are, without maintenance the trafficability of roads is compromised, and with it, a wide array of services that directly impact in the livelihood of towns and villages. If changes of community attitudes towards maintenance are necessary, then the people whose behavior has to change must see their own interests linked with the change and commit themselves to it. The value of community participation in ensuring the sustainability of projects is well documented. * Objectives. Validation of a participatory approach during project preparation. At project appraisal special emphasis was given to developing a proven methodology that could be replicated by local facilitator teams from MWC for enhancing commnunity participation in project implementation. * Approach taken Villages were selected for methodology testing and evaluation contingent upon poverty evaluation, by which only extremely poor communities in isolated regions were included. The approach was implemented at two levels. At the first level, the Community Participatory Workshops were held with community leaders (alcaldes, gobernadores and such) and heads of base organizations that are representatives of the intended beneficiaries, or heads of NGOs working with the poor in a similar way to the government body, FONCODES. These meetings in the cities of Cusco and Huancavelica lasted 5 to 6 hours. At the second level, the Community Participatory Workshops were designed around a broad open invitation to whole communities, to gather in one-day meetings. This participatory design was applied to two rural communities, one was Ccorca, in the Cusco Department and the second was Izcuchaca, in the Huancavelica Department. Communities within walking distance were also included. * Selection ofstakeholders. Mayors (alcaldes) were the first resource used in selecting leaders from the rural communities and gave detailed information about the basic structure of the community and its organizations. Spontaneous mobilization happened: when local leaders knew about the meetings, they invited thernselves. One group attended the Cusco meeting after hearing about it by the local radio news. Among those leaders, representatives of women's groups like the Mother's Clubs were very important to provide a description of social needs (education; health-care) related to road rehabilitation and maintenance. Also, in the case of the Huancavelica meeting, they provided community women's view concerning their readiness for future road maintenance works. * Conclusions. Community participatory workshops are a powerfiu way for mobilizing public involvement and a sense of ownership of a development project. The role of the RRPM project concerning poverty alleviation is more than a purpose declaration: it now becomes a shared objective that connects international funding institutions, the government of Per& and the high sierra comuneros. - 36 - 3.10 Subprojects of the pilot and first-year programs were selected on the basis of poverty criteria among candidate roads located in the poorest provinces of the six poorest departments, after consultation with local authorities. Subsequent subprojects would be identified on the basis of the requests of communities, municipalities, and other public and non-governmental entities submitted to PERT-PCR and, in particular, its UEDs. The UEDs are charged with promoting and preparing subprojects using the participatory mechanisms described in Annex 10; they would disseminate the objectives and components of the project through municipalities and local NGOs and a radio campaign. The UEDs would organize participatory workshops with the various communities involved, to finalize the identification of the main characteristics and components of the requested subprojects. Local consultants will then be engaged to collect the information necessary for assessing the eligibility of the requested subprojects and defining their technical specifications. Upon approval of a subproject, the pertinent works would be procured with the contracting of local construction companies or organized communities (particularly for smaller scale maintenance works) under the rules specified in the Project Operational Manual (para.3.7). 3.11 Eligibility Criteria. In Peru, with two thirds of the rural population being poor or extremely poor, investments in rural roads have a strong social policy purpose. Accordingly, the Project emphasizes social factors for those project with costs below certain thresholds--in terms of both total value and cost per kilometer. For investments with costs above those thresholds, their economic worth would be evaluated on the basis of expected agricultural yields and livestock production. The eligibility methodology of the Project Operational Manual (detailed in Annex I 1) requires to assess the institutional and technical factors (including the sustainability of the investments and their possible environmental impacts) of a proposed project as well as both the social and agricultural-production feasibility. Non-quantified project benefits include increased access to health and education services, accident reduction, and improved institutional capacities at the local level. Non-quantified costs include the possible adverse environmental impact of the execution of particular road works--for which mitigation measures and methodologies are included for their application in the Project Operational Manual. 3.12 Four criteria constitute the vertebras for the eligibility assessment of projects. The institutional criteria refer to the level of identification the communities in the area of influence would have with a particular road project, including the degree of commitment to the future maintenance of those roads. This commitment takes place initially as part of the effort of the community in requesting a sub-project or participating in its preparation and design, and second by assessing the level of (a) priority of the sub-project as expressed by the communities through the participatory workshops; (b) coordination with other rural programs in the area of influence of the project; and (c) capacity for organizing the future maintenance of the rehabilitated project, including the formation of micro-enterprises. 3.13 The technical criteria refer to the construction characteristics of the proposed sub- projects, the soundness of their environmental mitigation measures, and their functionality within the road network in the pertinent province or department. The construction (or technological) characteristics aim at implementing works that (a) can be adequately maintained; (b) can maximize the use of local labor; (c) their costs keep relation with the expected benefits of the road, and (d) do not cause or adequately minimize environmental impacts. Furthermore, the proposed sub- - 37 - projects would be analyzed within the context of the broader transport network and, in particular, of the connection of the road to market and/or production centers of the province or department, with the objective of defining connected "trees" of rural roads and, when necessary, of departmental roads that would ultimately maximize the economic and transport benefits of the investments. Both the institutional and technical criteria are of a narrative nature, and the results of the evaluation would be documented by the pertinent analyst. 3.14 The social criteria, based on two readily-available poverty indicators (infant mortality rate and unsatisfied basic needs) would be applied when the total cost and the cost per kilometer of a sub-project fall under US$200,000 and US$8,500, respectively. Under these circumstances, a sub-project would become eligible if the infant mortality rate is higher than 80 and the indicator for the unsatisfied basic needs is higher than 70 percent (as described and documented by the 1993 Census of Population). Furthermore, to ensure the sub-project benefits a reasonable number of people, it will also be required than the number of beneficiaries per kilometer is higher than 100. The thresholds for these indicators have been determined on the basis ofthe analysis ofthe pilot sub-projects. 3.15 When a project surpasses the cost threshold for the solely application of the social criteria or when it does not comply with these criteria, it would be subjected to economic criteria whereby the rehabilitation and maintenance costs of the sub-project would be compared to the benefits it would bring about in terms of the increase of the net agricultural and livestock production (net of the local consumption and of production costs) in the area of influence of the sub-project, without causing environmental encroachment into natural forests or protected areas. On the basis of this information, the internal economic rate of return (IERR) of the sub-project would be calculated and when the IERR is higher than 10% the project would become eligible. The 10% benchmark has been selected considering that, first, the projects have a strong social focus and, second, not all the benefits would be quantified (for instance, to simplify the economic analysis, calculations would be performed on the production possibilities of the five major agricultural, livestock products or other by-products in the area, leaving out a few others that may also contribute to the benefits of the project). 3.16 The above-mentioned eligibility criteria should generate a program of projects that is evenly distributed among the different departments of Peru and among the various project components (e.g., between investments on village streets and on the rehabilitation and maintenance of rural roads). To avert a skewed distribution at project completion, at each annual review, an examination of the distribution would be performed and the necessary adjustments would be incorporated to both the participatory process of project generation and the eligibility methodology. C. Implementation Strategy 3.17 The Pilot Program. In view of the large size of the project and the history of inactivity in the rural road sector, Government decided to undertake a pilot prior to implementing the project. The main objective of the pilot was to establish the basic technical, administrative, socio- economic and cost information necessary to design the project (see Box 8). The 'Pilot Program' - 38 - Box 8: Objectives of the Pilot Obtain information and generate experience about:- * the availabilit and capacity of local consultants (who reside in the project areas) to undertake the studies,; adequacy of the terms of reference and the costs, quality and consistency of the studies; * the nature of the works recommended, including their costs, duration and scheduling; X the capacity of the local contractors (who reside in the project areas) to undertake the works; * the socio-economic parameters in the project areas and the means of obtaining them; recommended methods for the execution of the works, including specific proposals for the use of labor- intensive methodologies; * the distribution of the needs and works among road networks in order to adequately dimension the project. encompasses about 1,485 km of road rehabilitation and 21 km of paving of village streets, with an estimated cost of US$33.1 million. These works are located in 19 provinces within six departments of Perui ranking highest in terms of poverty (Ancash, Apurimac, Ayacucho, Cajamarca, Cusco, Huancavelica). One university and 21 local consultants were engaged to collect socio-economic data and prepare the engineering designs for the roads. The studies showed that the average number of direct beneficiaries is about 210 per km of road. The designs are consistent with the spot improvement guidelines discussed in para. 2.12. The works are limited to those necessary to reestablish trafficability and are suitable for labor-intensive construction methods. The average estimated cost for rehabilitation of rural roads is slightly less than US$10,000 per km; higher costs are associated with road sections with major landslides. Cost estimates for improving village streets average about US$140,000 per km (these subprojects rarely exceed 0.8 km in length), ranging from about US$58,100 (simple empedrados) to about US$230,000 in one case (concrete pavements involving major additional works in drainage and sidewalks). The works are being contracted out to small contractors. Contract amounts are below US$250,000 and provide for the rehabilitation of an entire road section, typically extending eight to 20 km. Consultants are retained to supervise all the works in a project area. An ad-hoc Rural Roads Unit, established within PERT to assist in the preparation of the proposed project, has been responsible for developing and implementing the Pilot Program. Since July 1995, the Unit has become part of PERT-PCR. The progress and preliminary experience on the Pilot was assessed during the appraisal mission to incorporate refinements to project design and implementation. A more detailed description of the Pilot Program and its accomplishments to date is given in Annex 12. 3.18 Though implementation of the Pilot is still underway, the experience gained to date has generally confirmed the validity of the assumptions and data used for project design: i) the local consultants (who reside in the project areas) demonstrated capacity to produce suitable designs in a timely manner, including adequate economic and technical assessments, at an acceptable cost. Feedback from initial reviews allowed to improve the terms of reference for the studies; ii) the solutions proposed have been consistent with the type of road encountered, as a function of its traffic characteristics and the population served. Consultants' cost estimates are on average about US$10,000 per km (net of taxes). This figure has been used for financial planning of the project in spite of the fact that so far contractor bids are 10 to 20 percent less than the consultants determined values, given that contractors have been inactive in this sector for a long period of time; iii) the small local contractors have shown so far sufficient capacity to undertake the works under contracts in the range of US$200,000 to US$250,000. They were able to produce bids, and where construction has already begun, to undertake the works in an efficient manner. One of the aims of the project is the development of the local construction industry and there are - 39 - indications that the project would address this objective; iv) the socio-economic criteria proposed for the project were found to be workable and the data readily accessible by consultants for their designs. v) the objective of using labor-based methods is being met in terms of the cost percentage given to manual labor in the road rehabilitation component. PERT-PCR will monitor this aspect more closely on the paving of village streets component to see that local material as well as local labor is being used to the greatest extent possible; vi) the targets proposed for the rehabilitation of primary and secondary roads were revised to take into account DGC's current accomplishments in rehabilitating those networks. This experience has highlighted the need for continuous coordination in the field. 3.19 In general, the findings from the Pilot to date are positive and, where necessary, improvements have been incorporated. The incremental nature of the project and the number of sub-projects allows for changes and updates to be readily incorporated. 3.20 Overview of Implementation Arrangements. As noted in paras.2.9 and 2.10, the project would be carried out in twelve departments: Ancash, Apurimac, Ayacucho, Cajamarca, Cusco, Huancavelica, Huanuco, Junin, Pasco, Puno, San Martin, and Madre de Dios (see Annex 8). Though not presently envisaged, other departments could be included in the project area in addition to, or in substitution of these departments. However, prior to including a new department, IDB and the Bank must be satisfied with (1) the adequacy and relevance of the project objectives and implementation approach in the said department, (2) the organizational structure proposed for the respective implementation unit, and (3) the indicators to assess performance of such unit. Recognizing the recurrent issue related to the availability of government counterpart funds, the planning of the project will be brought into the phase with the Government's budget cycle. PERT-PCR will furnish to IDB and the Bank for review and approval, not later than July 31 of each year of project execution, starting in 1996, the proposed annual investment plan providing for the activities in each project area, the respective justifications and implementation schedules, and proposed budget for each component of the project during the upcoming year. Independents consultants, financed under the project, will conduct biannual performance audits, to assess the quality of the works, the compliance with environmental and procurement procedures set forth in the Project Operational Manual (see para. 3.29). 3.21 Road and Street Works Components. The Project Operational Manual establishes guidelines, technical specifications and terms of reference for design and supervision of spot improvement and rehabilitation works. The guidelines emphasize on-site designs for rural roads, to keep engineering cost at an acceptable proportion of the total construction cost, and more detailed engineering studies for primary and secondary roads. The use of the Manual will ensure consistency in the solutions proposed. Annex 12 includes the list of road sections being considered for the Pilot and the first year of project implementation. Contractors and communities, the latter engaged through convenios, will carry out the works using labor-based methods. Though the exception, it is possible that in some remote areas it could be difficult to attract contractors with the machinery required. When not possible, PERT-PCR will contract government-owned equipment fleets from either MTC or the subnational governments to undertake equipment-intensive activities under the project. - 40 - Box 9 : C:riteria for SelectingFive Pilot Areas for NMTIComponent iCriteria Ibrselecting thpilot areas would include but not be limitedto: * location in areas where project road components&are executed to. ensure integrated§oral action; * d; ivei;rse existence and use of non-motorized transport modes in order to test a variety of interventio istd :r0ael patters that indicate suppressed tranport and mobility needs; * high degreeofvillage interest and existence of organized farmers or community development groups to ensurie: i ommunity paticipation;: * commitment of local leadership through designating a local project manger responsible fWor iating contacts. with thetconcerned communities. 3.22 Local consultants will carry out the engineering and supervision of the road works, grouped taking into account geographic considerations. The quality of the designs produced so far for the Pilot has been good and the costs have been kept below the estimated cost of the works. Microenterprises developed through the project will undertake the labor-based routine maintenance activities financed by the project. Other maintenance activities that require intensive use of equipment will be contracted out to private contractors or carried out through convenios with municipalities and MTC. 3.23 Non-Motorized Rural Transport. The component will be first implemented in five pilot sites located in Huancavelica and Cusco. PERT-PCR, the implementing agency will determine the location of these sites based on criteria set out in Box 9, and based on the willingness of communities to actively participate in the sub-projects. The size of these "sub-projects" are often such that feasibility studies become prohibitively expensive. Many of the intangible benefits of village level infrastructure improvements are hard to quantify in monetary terms. Expected benefits include extended life for the means of transport, safer transport conditions for people and "acemilas", time savings through less detours, and improved load carrying capacity. 3.24 It is crucial that all aspects of the program are closely monitored and evaluated both to determine whether it is worthwhile expanding and, if so, highlight any modifications, adjustments or changes that may be necessary. A base line survey would be conducted in the five pilot areas to choose the variables that would drive the expansion and design of the program. Variables to explore include difficulty in reaching health and educational services, the main forms of inter- village transport and the routes chosen, the amount of human porterage, the constraints for the use of non-motorized modes, and the distances covered. In 1997, the coverage of this component will be expanded on the basis of results from the monitoring of the Pilot. Staff trained in this methodology will be assigned to the program to coordinate training in all districts. 3.25 Institutional Development Component. Implementation of the institutional development component will be governed by the program of actions outline in Table 8. The program entails certain actions that go beyond the scope of the project but are necessary to enhance the institutional and financial framework for road sector management in Peru. The program also lists the actions needed to carry out the project's institutional development component and achieve its development objectives. The technical assistance in rural roads planning and maintenance will be provided by an experienced consultant firm, with access to international experts. Implementation of the technical assistance to develop microenterprises will - 41 - be done through NGOs with actual experience in developing micro-enterprises for infrastructure maintenance. In this approach, the NGOs will have a high stake in the quality of the service provided by the micro-enterprises because of their interest in replicating the model elsewhere. The microenterprises, in turn, will benefit from the experience and know-how the NGOs have accumulated from similar experiences elsewhere. PERT-PCR, in turn, will assure through the maintenance component of the project that there is sufficient demand for services of the microenterprises. Municipalities will be exposed to the program, and their capacity to monitor results strengthened through performance evaluations carried out jointly with PERT-PCR. The establishment of an effective technical and management assistance operation to the small and medium firms involved in project execution will be contracted out to outside entities (e.g., local representations of the Colegio de Ingenieros, CAPECO, and regional universities). D. Monitoring, Reporting and Bank Supervision 3.26 Monitoring. The monitoring of project implementation encompasses two levels. One consists of the reviews of project performance and annual plans that will be undertaken by PERT- PCR on a continuous basis; the other consists of performance audit exercises that would be carried out by an independent firm on a six-month basis. PERT-PCR will select performance monitoring indicators to measure the efficiency and effectiveness of the UEDs in discharging the project. Annex 8 gives details of the indicators proposed for this purpose as well as the design and application of the Project Information and Monitoring System that would allow PERT-PCR and the Banks to ascertain the progress in the implementation of each sub-project and the degree of achievement of the project development objectives (as measured by the outcome of the Logical Framework). 3.27 The project would use an information system for monitoring the implementation of the large number of sub-projects scattered across the departments of Peru. The development of the system entails the creation of a data base and the procedures for capturing key technical, financial and social information for each sub-project. The database system would serve several purposes, mainly: i) as decision- and monitoring-support system for the UEDs to know the main characteristics of the sub-projects presented to them, record the approval procedures, and, by consolidating the information for all the sub-projects under their jurisdiction, monitor overall project performance in their department; ii) as monitoring-support system for the PERT-PCR central office, which through the consolidation of the data from the UEDs, would have up-to-date information on the progress and performance of the overall project; iii) as a supervision-support tool for the lending agencies which at annual reviews would count on readily-available information and a base for incorporating adjustments to the implementation variables of the project; and iv) as an evaluation tool, the database will consolidate the information needed to update the project indicators defined in Annex 3 in order to assess progress in achieving the objectives of the project. - 42 - Table 8. Action Program for Institutional Development Purpose Who? What? When? Enhance the MTC complete the inventory of (1) national and (2) departmental roads (1) by March 31 institutional under direct responsibility of central government, and update if 1996, and (2) framework necessary the functional classification of public roads in Peru. November 30, 1996 Enhance MTC with coordinate implementation of investment programs with throughout inter-agency PERT-PCR FONCODES, INADE, and any other governmental agency involved project coordination in rural development programs in the project area, in accordance execution with the Project Operational Manual establish PERT-PCR's deconcentrated units to provide a focal point In accordance for coordination with other agencies involved in rural development w/ Operational at departmental and local levels; Plan MTC's (1) prepare, in coordination wlith PERT-PCR, its road rehabilitation by July 31, each DGC and maintenance programs in the project area for the upcoming year year, starting in to ensure complementarity between such programs and the project, 1996 (2) furnish to IDB and the Bank such programs for review, and as for information on other road programs in the project area being or to be implemented by other entities, and (3) carry out MTC's program in the project area and the project's annual investment program ensuring at all times complementarity between them; Build up PERT-PCR recruit consultants to implement the technical assistance in rural by March 31, institutional under MTC road planning and management 1996 and financial supervision complete the training of key staff within MTC's Planning Office to by December capacity at strengthen its capacity to set rural roads policy and monitor rural 31, 1996 local level transport performance select consultants to carry out the studies on Local Road by December Management Practices and Rural Roads Financing; 31, 1996 (1) submit to IDB and the Bank an action plan for implementation at third annual of suitable mechanisms for financing rural road maintenance and for review streamlining local road management practices, and (2) implement (program mid- such action plans in a manner and under a timetable satisfactory to term review) IDB and the Bank; retain consultants to assist in developing micro-enterprises for road by March 31, maintenance; 1996 contract out to mnicroenterprises and/or community associations the through project labor-based routine maintenance works under the project; implementation enter into participation agreements with the municipalities involved through project in the annual project implementation plans; execution; draw up together with each respective provincial municipality and within six present to the banks an action program to develop the municipality's months of the capacity to assume within a reasonable time, full responsibility for respective managing the maintenance of the respective rural road network; agreement review compliance with such action programs, and based on such at project review, determine the eligibility of municipalities for conmmitting annual reviews further project investments in their jurisdiction;- approve an Environmental Manual for design and execution of rural by September road maintenance and rehabilitation works, and require all 30, 1996 contractors executing works under the project to use such manual; PERT-PCR complete the inventory of all rural roads in the jurisdiction and put within six through its into effect with the respective municipalities in the area, the months of UEDs functional-jurisdictional road classification adopted by MTC. signing the respective participation agreement - 43 - 3.28 The maintenance of the data base would be the responsibility of each UED; the PERT- PCR, upon receiving the information from the UEDs, on at least a monthly basis, would check the consistency of the information and compel the daily maintenance of the database by the UEDs. The project information and monitoring system would be installed in PERT-PCR's central office and in each deconcentrated unit, and maintained throughout project execution. 3.29 Every six months, auditors acceptable to IDB and the Bank will conduct a performance audit of the implementation of the project by examining a sample a sub-projects under execution by the UEDs. The terms of reference, including criteria for establishing the scope and size of the sample, are included in Annex 8. The audit will focus on the execution of the project physical components (quality and cost of works), procurement procedures, and compliance with the guidelines of the Project Operational Manual and the performance indicators agreed between PERT-PCR and each UED. Through the audit, cost comparisons will be made available and reviewed to identify procurement problems or other factors contributing to variations among the different regions; the sample of work sites included in the audit will be expanded according to these findings. Agreement was reached at negotiations that MTC through PERT-PCR will (1) engage independent consultants acceptable to IDB and the Bank to undertake bi-annual audits, starting with the semester January-June 1996, on the performance of PERT-PCR and its UEDs in the implementation of the project, including achievement of physical targets, quality and cost of the works, compliance with eligibility criteria, procurement, and environmental procedures set forth in the Project Operational Manual, and achievement of the performance indicators for each UED, and (2) furnish to 1DB and the Bank within 90 days after each semester the report of such auditors. 3.30 Reporting. PERT-PCR will prepare quarterly progress reports for all components of the project. These will be sent to the Bank within one month after the end of each quarter and will describe (1) progress achieved during the previous quarter in the implementation and in the achievement of the objectives of the project based on the performance indicators, (2) an assessment of the problems and issues derived from the implementation of the project, (3) updated implementation and disbursement schedules for the following two quarters, and (4) status of compliance with the legal covenants contained in the Loan Agreement. The reports will provide timely and updated information on project implementation, highlighting issues and problem areas, recommending actions and commenting on progress in executing previous recommendations. The format and contents of the progress reports, including key monitoring indicators will be agreed at negotiations. 3.31 Annual Reviews. During the second quarter each year, the Bank, IDB and the Government will conduct a formal joint review of the progress made in reaching the project objectives and in implementing the project components. Participants will include key representatives from the operating UEDs, pertinent consultants and NGOs involved in the technical assistance component, MTC, MEF, decentralized agencies involved in rural development programs, and of a sample of beneficiaries. 3.32 The annual reviews will provide an opportunity to assess (1) progress in project implementation and achievement of the project objectives on the basis of agreed performance - 44 - indicators and targets, (2) the performance of PERT-PCR and each of its UEDs, (3) the effectiveness of the work programs in terms of community and local government involvement, local contractors response, coordination with other development programs, and achievement of project objectives, (4) progress in implementing the institutional development components, including compliance of participating municipalities with the Institutional Action Programs, (5) the adequacy of the procedures stated in the Project Operational Manual, (6) progress in restructuring and strengthening road maintenance administration and finance, and (7) the justification of the investment and institutional proposals for implementation during the subsequent year. The project implementation schedule and monitoring indicators will be updated during the annual review. PERT-PCR would furnish to IDB and the Bank at least two weeks before departure of the annual review mission, a "review report" containing the agenda for the meeting, the current status with regard to the topics listed above and the annual plan proposed for the prospective year. The format and content of these reviews would be agreed upon at negotiations. Agreement was reached at negotiations that MTC and the Government will conduct annual project reviews with IDB and the Bank to cover the above mentioned topics, and that in the event of unsatisfactory progress, Government will prepare remedial action plans satisfactory to IDB and the Bank within two months of the review. 3.33 Mid-Term Review. The third annual review will constitute a Mid-Term Review of the six-year program and provide an opportunity for a more comprehensive assessment of the achievements of the project to date, and of the prospects for successful project completion. Prior to this review, PERT-PCR will conduct a performance survey in a sample of provinces participating in the project to assess the progress in achieving the objectives of the project, as defined by the set of agreed indicators. In addition to covering the topics listed above, this review will examine the progress made by Government with regard to (1) its agenda for administrative decentralization and the need to adjust the operational set up of the project accordingly, (2) the establishment of a strategy for rural roads funding and, (3) the improvement of inter-agency coordination, and (4) the participation of municipalities in project activities, including the possibility that certain municipalities became direct executing agencies under PERT-PCR. The review will consider proposals for restructuring or reorienting the program, taking account of all relevant sector and project issues. At this stage, government, IDB and the Bank will discuss specific arrangements for financing the second phase of the program including decisions on the need to start preparation of the follow-on loans to support its execution, the amount of financing required, the need to extend the program to cover more departments than the 12 presently selected, and other adjustments considered necessary to enhance the development impact of the program. Subject to actual performance in project implementation, the comprehensive nature of this review is expected to provide sufficient information to appraise Phase II of the program. 3.34 Project Supervision. Building on the experience gained during project preparation, IDB and the Bank will supervise the project through a shared project team. The respective task managers will coordinate the timing and composition of field missions. Their frequency will be guided by the progress and special requirements of project implementation. The missions are expected to supervise the project twice a year. However, the supervision plan calls for a greater involvement of the Resident Missions. The field offices will play an active role in (I) reviewing sub-project eligibility and procurement. (2) monitoring the monthly update of the project - 45 - information system, (3) visiting work sites and municipalities involved in the technical assistance program, and (4) providing follow-up and problem-resolution support. Overall, it is estimated that the supervision effort will entail about 154 staff weeks for the duration of the project, with the Bank's share estimated at about 77 staff-weeks (out of which 30 staff-weeks or 38 percent correspond to staff stationed in the Bank's Resident Mission in Peru or local consultants). This would result on an average of 20 to 23 staff-weeks during the first three years of project implementation, an estimate that reflects synergies expected from sharing project supervision with IDB and delegating responsibilities to the Resident Mission. The Bank-IDB Supervision Plan is included in Annex 13. E. Procurement 3.35 All project components financed under the proposed Bank loan would be procured in accordance with the Bank's guidelines for Procurement (January 1995). All procurement arrangements were confirmed at loan negotiations to ensure that they are in compliance with both Bank and IDB guidelines. Civil works are estimated to account for about 82 percent of total project costs, consultant services about 13 percent, and project management about 5 percent. Table 9 shows the estimated project cost breakdown by procurement method. Table 10 summarizes the limits on types of procurement and prior review thresholds. 3.36 Civil Works. Procurement of small works estimated to cost less than US$50,000 up to an aggregate of US$40 million may be done through direct contracting with (1) nuicleos ejecutores (which is a recognized entity formed by members of a community to support implementation of a specific investment in their area), and (2) micro-enterprises for road maintenance developed under the project. This procurement modality would allow for: i) implementation of works that would not attract local contractors because of their small size and remote location; ii) poor rural communities to directly manage small investments and to make the required 20 percent contribution to the work through partial donation of unskilled labor (non- motorized rural transport component); and iii) local communities to take an active role in maintaining their road infrastructure. The contracting of each work to a nuicleo ejecutor would be supported by a technical proposal with its budget (expediente tcnico). PERT-PCR will establish a system of standard regional unit prices to guide both the budgeting of the works and review of contracts under direct contracting. PERT-PCR's inspectors or the consultants engaged to supervise the work programs in a project area will provide monthly certificates and a final certificate at completion of the works (actas mensuales-acta de recepci6n), which will specify the works done and expenditure incurred, as a proof of successful execution of the work and justification for reimbursement by the Special Account. Model agreements will be incorporated into the Project Operational Manual. Subject to approval by IDB and the Bank, works (1) estimated to cost less than US$50,000 equivalent and US$4,500,000 equivalent or less in the aggregate, (2) of an equipment-intensive nature, and (3) to be carried out in areas where no contractors with the required equipment are available, may be procured through force account procedures satisfactory to the banks. Under the force account arrangements, the Bank loan will finance 45 percent of the total expenditure incurred in respect of each force account package ("convenio"). In the approval of each convenio, the Bank will ensure that its 45 percent financing share only includes the variable cost of equipment. The total cost of these force account packages will be determined on the basis of pre-agreed schedules of costs per activity. - 46 - 3.37 Works estimated to cost US$250,000 equivalent or less per contract would be procured under fixed price contracts awarded on the basis of quotations obtained from at least three qualified domestic contractors in response to a written invitation. The invitation would include a detailed description of the works, including basic specifications, the required completion date, a basic form of agreement acceptable to IDB and the Bank, and relevant drawings when necessary. All bids received will be opened in public on a predetermined date to be stated in the bidding document. The award would be made to the contractor who offers the lowest price quotation for the required work, and who has the experience and resources to successfully complete the contract. Standard bidding documents and standard contract forms would be agreed during negotiations and included in the Project Operational Manual. The combined aggregate amount of contracts awarded under the above mentioned procedure and direct contracting (para. 3.34) would not exceed US$153 million. Table 9. Procurement Arrangements (a) (US$ million) Non-Bank Category NCB Other Financed TOTAL Civil Works: Rehabilitation of roads and 53 134 (b) 187 improvement of village streets and (20) (51) (71) non-motorized transport networks Maintenance of Roads 19 (c) 19 (5) (5) Consulting Services 33 33 (14) (14) Project Management 12 12 Total 53 186 12 250 (20) (70) (90) Notes: (a) Figures in parenthesis are the respective amounts financed by the Bank loan, including contingencies. IDB cofinancing will apply to all Bank procurement by equal amounts in each component (b) Direct contracting with nudeos ejecutores, fixed unit price contracts awarded on the basis of quotations obtained from at least three qualified contractors in response to a written invitation, and force account packages. (c) Direct contracting to microenterprises for road maintenance 3.38 National Competitive Bidding (NCB) procedures acceptable to the Bank would be used for work contracts above US$250,000. It is anticipated that about US$53 million will be procured under NCB procedures, with contracts ranging from US$300,000 to US$2 million. The use of standard bidding documents and standard contract forms satisfactory to the Bank was - 47 - agreed during negotiations. No International Competitive Bidding (ICB) is expected because of the rather small size of the works financed under the project. However, ICB would be required for any contract exceeding US$3 million equivalent. Participation of contractors from countries outside the region in NCB and ICB is very unlikely. However, the procurement advertisements and the bidding documents, will clearly state that participation of foreign firms from any country eligible under the Bank guidelines is not precluded, and that the financing will be secured by the Bank loan. In the event that the bidder who has submitted the lowest evaluated bid is from a country not eligible under IDB, the Bank will authorize an increase in the pari-passu established under the respective loan category in order to cover IDB's portion and meet the expenditures incurred in respect of that contract. IDB will authorize a similar increase in respect of other contracts eligible under IDB guidelines until the balance is reestablished. 3.39 Consultant Services. Consultants will be hired following the procedures established in the Project Operational Manual. The services include studies, engineering designs, construction supervision, technical assistance, training courses and auditing services. By and large, they will be provided by local firms and individuals. The procedures already applied to recruit consultants for the Pilot Program consistent with the "Guidelines for the Use of Consultants by the World Bank and by the World Bank as ani Executing Agency", dated August 1981, and conforming to IDB guidelines. 3.40 Procurement Review. For civil works, all bidding packages of US$ 1.0 million or higher will be subject to prior review of advertising, bidding documents, bid evaluation and contract award; they will be handled directly by PERT-PCR's central office. The first NCB bidding packages prepared by each deconcentrated executing agency of PERT-PCR and all force account packages, irrespective of the amount, will also be subject to prior review. For consulting firms, services estimated to cost US$100,000, as well as all single-source assignments, will be subject to prior review of contracts, terms of reference, and selection procedures; for individual consultants, services of US$50,000 or higher will be subject to prior review. For consultant services under the above limits only the terms of reference will be subject to prior review. 3.41 Although the level of prior review would be low (about 15 percent for civil works and about 58 percent for consultant services), it would be compensated for in several ways: i) external auditors will conduct performance audits every six months (covering technical, environmental, procurement and management aspects) on a sample of sub-projects satisfactory to the Bank and I:DB (para. 3.29); ii) the project information and monitoring system, would be used to compare costs of similar sub-projects within an executing unit and among units in order to detect possible discrepancies which might indicate procurement problems and the need for further analysis. Accuracy of the data in the project information system will be checked through the audits; and iii) Bank and IDB supervision missions will conduct random reviews, including frequent field visits and reviews of procurement documentation. It is anticipated that both the IDB and Bank Resident Missions will play a key role in this regard. 3.42 Advance Procurement Action and Retroactive Financing. The loan would finance retroactively expenditures incurred under the Pilot Program not more than a year before loan signing (see para. 3.17). Implementation of this pilot is being done in consultation with IDB and - 48 - the Bank, including a review by the Bank of procurement actions. It is estimated that total payments made in respect of the contracts for civil works and consultants services would be around US$18 million. The amount to be financed retroactively out of the proceeds of the Bank loan will not exceed 10 percent of the loan amount. Table 10. Limits on Types of Procurement and Prior Review Thresholds fUS$'000) Description Type of Prior Review Limit Contract Value Procurernent (US$'000 equiv.) (US$'000 equiv.) Civil Works ICB All > 3,000 NCB All contracts > 1,000 > 250 up to 3,000 First contract each Unit Three quotations None 250 or less Direct contracting None 50 or less Force account All 50 or less Consultant services Local and foreign firms All contracts > 100 All single source Local and foreign All contracts > 50 individuals F. Disbursements, Accounting and Audits 3.43 Disbursements. The Project Completion date is June 30, 1999. The proposed loan is expected to be fully disbursed by December 31, 1999, the closing date. The disbursement schedule by the Bank fiscal year is shown in Table 11. It deviates from the standard disbursement profile for Bank projects in Perui to take account of (1) the expenditure incurred under the Pilot Program carried out in 1995, which would be financed retroactively, and (2) the slower pace for subsequent disbursement, which is typical of projects financing a large number of small investments. Disbursement estimates by quarters are given in Annex 14. Table 11. Estimated Loan Disbursments by Fiscal Year (USSmillion) Fiscal Year FY96°2 FY97 FY98 FY99 FYOO Annual disbursements 15.7 20.3 26.6 25.3 2.1 Cumulative disbursements 15.7 36.0 62.6 87.9 90.0 Percentage 17.5% 40.0% 69.6% 97.7% 100.0% ') The project covers investments made between 1995 and 1998. Loan Closing Date: December 31, 1999 ° Including initial deposit into Special Account of US$6 million and retroactive financing. - 49 - Chart 2 Flow of Funds Annual FinancialAuioPoec Accounts, S a S Special AcCOunt Ipeciai ... ..... .si0000; . '>fl ... ...l * " . ..w... CENTRL OFICE 3.44 Paymnts from oan proceds will b adminisered nneui byw 6ET-C mronthSpcaAcon (sepra34blw.ibremneqetiep ctf civ iworks contracts.over.US$1 m illion, .....................al ea c consultant cU..........s. jsttisdnvucn ctsnwillabejfully docum ented. S the case of contracts awarded to conotroac j1tor oIs fromountries not lgbl nerIB)i hc (espectte Bank.4 blw).l Disbursemento reqeststa ins reset of civil works eontrInacts ovher Uas$1.0 disbursements will be made against statements of expenditure (SOEs). All SOEs would be transmitted through PERT-PCR administrative unit in Lima. Documentation supporting the - 50 - SOEs will be retained at PERT-PCR headquarters and made available for examination by Bank staff during review missions (see Chart 2 and Annex 8). In addition, other technical and economic information regarding the sub-projects included in any disbursement request will also be readily available from the project data base (see para. 3.27). 3.45 Table 12 shows the basis of loan disbursements. Bank loan proceeds would be disbursed against the following percentages of eligible expenditures (net of IGV tax): i) 45 percent for civil works under the road rehabilitation and village components (90% in the case of contracts awarded under NCB procedures to bidders from countries not eligible under IDB procurement guidelines); ii) 45 percent of expenditure for works under force account procedures; iii) 30 percent of expenditure incurred before January 1, 1999 in respect of civil works under the road maintenance component and 20% there after; iv) 50 percent for consultant services related to feasibility and engineering design studies, supervision of works and performance audits; and v) 50 percent for technical assistance and training under the institutional development component of the project. Loan proceeds under the IDB loan would be disbursed against same categories and disbursement percentages under joint cofinancing, except for force account works (expenditure under this category though not directly funded out of the IDB loan would be considered by IDB as government counterpart funds to the project). Retroactive financing not exceeding US$9 million (Bank loan) would be provided for eligible expenditures incurred in respect of civil works and consultant services under the Pilot Program. Table 12 - Allocation of Loan Proceeds Amount of Loan Category Allocated Disbursement Rate (US$million equiv.) Civil Works (1) Rehabilitation of roads and improvement of 60 45% of expenditure (a) street villages and non-motorized transport (2) Works under force account procedures 2 45% of expenditure (3) Maintenance of roads 4 30% of expenditure incurred before January 1, 1999 and 20% thereafter Consultants and training (4) Consultant services for preinvestment studi 9 50% of expenditure supervision of works and performance audits (5) Consultant services for technical assistance 4 50% of expenditure and training Unallocated 11 TOTAL 90 3.46 Special Account. A Special Account will be opened and maintained in US Dollars, in a commercial Bank acceptable to the World Bank. The authorized allocation, sufficient for about four months' of financeable expenditures, will be US$6 million. The Bank will replenish the Special Account upon receipt of disbursement requests from the Borrower. PERT-PCR will - 51 - control the use of the Special Account and be responsible for preparing the disbursement requests on behalf of the Borrower. These requests should be submitted every month, or when the special account has been drawn down by a third of its initial deposit, whichever comes first. The establishment and operating arrangements for the Special Account were confirmed at negotiations. 3.47 Local Currency Account. In addition to the Special Account in US Dollars, PERT-PCR will use a local currency account. Agreement was reached at project negotiations that the Government will deposit counterpart funds into the PERT-PCR's local currency account at the beginning of each month to cover the counterpart funds need for all payments anticipated for that month. All project accounts will be managed in accordance with generally accepted international accounting standards. The local currency account was established in July 1995 to speed up the processing of payments in respect of the Pilot. 3.48 Audits. At loan negotiations, agreement was reached that Government will appoint independent auditors acceptable to IDB and the Bank to audit project expenditures, the Special Accounts, the project accounts, and the SOEs, starting with the audit for 1995, in accordance with terms of reference acceptable to both banks. Certified copies of the audit reports will be furnished to the Bank within six months after the close of the Government's fiscal year. The audit report will include a separate opinion by the auditor on disbursements against certified SOEs. G. Project Risks and Safeguards 3.49 The achievement of the project goal assumes that Government will continue its support to the poverty eradication policy and the project throughout its implementation. Specific project risks and safeguards are described below. 3.50 Uncertainty in the development of the decentralization agenda. Project efforts to clarify responsibilities in the road sector (see para. 1.32) and to build up capacity at the local level through technical assistance will not have the intended impact --that is to mobilize local governments to effectively assume their mandate to maintain rural roads-- in the absence of adequate sources of funding to support these obligations. It is of the essence that Government completes its decentralization agenda, with clear definition of roles and balanced distribution of responsibilities and funding for sustainable road maintenance. The project supports a study to develop a road-funding strategy that would secure funds for maintenance, and introduces maintenance schemes well adapted to the institutional capacity of local governments, in an effort to encourage municipalities to adopt a "maintenance culture". At the third annual review, the role of local governments and departments (if any) will be carefully reviewed vis a vis the adopted decentralization strategy and, if necessary, the project will be restructured to make it consistent with the new institutional and financial set up. 3.51 Weak Institutional Base at the Local Level. The weakness of municipalities could hinder permeation of the institutional strengthening component of the project. Factors that may contribute to this risk include lack of leadership, shifting priorities and high turn over of public officials at the local level. In order to finance investments in any province, the project would require municipalities to enter into agreements which will clearly set the undertakings to be - 52 - assumed by them (e.g., commitments to maintain the roads, join the technical assistance program, and prepare a transport plan). Satisfactory compliance with these agreements will be prerequisites for further financing of works in the province. It is intended that the participatory approach built into the project design will help develop "ownership" of the project by local governments and communities, who will better link the purpose of the project to their own progress. 3.52 Inexperienced Project Management. The lack of institutional history and experience with the project activities in Periu may result in delays in selecting sub-projects, completing pre- investment studies and procurement of works, and administering the contracts. To arrest this risk, the project implementation unit is organized around three key elements: strengthening management skills, deconcentrating decision making, and putting in place performance monitoring systems. By constitution, the executing agency will enjoy technical, administrative and financial autonomy, and it will be conveniently supported by consultants. A similar scheme adopted for implementation of the IDB-Highways I Project has proved successful. The Pilot is bringing out experience on how to best handle the work programs. 3.53 Insufficient Absorptive Capacity of the Domestic Construction Industry. The road construction industry is experiencing some difficulty in catching up with the increased demands of the massive rehabilitation programs which are underway at the national level. The project targets small and medium enterprises who may adapt more easily to the working environment of municipalities, and provides technical assistance to further strengthen their managerial and technical skills. The works are simple by nature and demand little machinery, but yet making this equipment available to the contractors could be difficult in some areas (in which case MTC could undertake equipment-intensive activities through special agreements). A study supported by the project will further explore possible options to address this issue. 3.54 Inadequate Provision of Counterpart Funds for Project Implementation. This was a recurrent problem in past Bank projects. It is assumed that the existing macro-economic conditions will remain throughout project implementation. Nevertheless, the project would realign its investment program to be in phase with the Government's budget. In addition, it would require advance deposit of counterpart funds into the project account, similar to the procedures successfully being employed in the on-going Bank Transport Rehabilitation Project. 3.55 Resurgence of Guerrilla Activity. The resurgence of guerrilla activity could hamper execution of the project components in the affected areas. In the event that this happens, the activities in those areas would be postponed until safe execution and supervision is possible. However, it is expected that the very nature of the project and its reliance on communities and local contractors and consultants for implementation will minimize the possibility of becoming the target of guerrilla activity. 4. AGREEMENTS REACHED AND RECOMMENDATION 4.1 Agreement was reached during negotiations that: a) MTC through PERT-PCR, will furnish to the Bank for review and approval, (1) not later than July 31 of each year of project execution, starting in 1996, the proposed - 53 - annual implementation plan providing for the activities in each project area, the respective justifications and implementation schedules, and proposed budget for each component of the project during the upcoming year (para. 3.20), and (2) quarterly progress reports, including key monitoring indicators, within one month from the end of the quarter (para. 3.30); b) MTC through PERT-PCR will engage independent consultants acceptable to the Bank, to undertake bi-annual technical audits, starting with the semester January-June 1996, on the performance of PERT-PCR and its UEDs in the implementation of the project, including achievement of physical targets, quality and cost of the works, compliance with eligibility criteria, procurement, disbursement, and environmental procedures set forth in the Project Operational Manual, and achievement of the performance indicators for each UED, and furnish to the Bank within 90 days after each semester the report of such auditors (para. 3.29); c) MTC and the Government will conduct annual project reviews with the Bank during the second quarter of each year, covering the topics of (1) progress in project implementation and achievement of project objectives on the basis of agreed performance indicators and targets, (2) the performance of the implementing agency, (3) the effectiveness of the work programs, in terms of community and local governments involvement, local contractors response, coordination with other development programs, and achievement of project objectives, (4) progress in implementing the institutional development component, including compliance of participating municipalities with the Institutional Action Programs, (5) the adequacy of the procedures stated in the Project Operational Manual, (6) progress in restructuring and strengthening road maintenance administration and finance, and (7) justification of the investments and institutional proposals for implementation during the subsequent year; and that in the event of unsatisfactory progress, Government will take remedial action satisfactory to the Bank (para. 3.31). In respect of the third annual review, the Government and the Bank will evaluate the following additional items: (1) its agenda for administrative decentralization and the need to adjust the operational set up of the project accordingly, (2) the establishment of mechanisms for the financing of rural roads and streamlining of local road administration practices, (3) the participation of municipalities in project activities and the future of PERT-PCR after project completion, (4) proposals for the restructuring of the program and specific arrangements for financing the second phase of the program (para 3.33); d) MTC will carry out the action program set forth in Table 8 of the SAR; e) Government will appoint independent auditors, acceptable to the Bank to audit project expenditures, the Special Account, Project Accounts and the SOEs starting with the audit for 1995, in accordance with terms of reference acceptable to both banks; certified copies of the such report will be sent to the Bank within six months after the close of the Government's fiscal year (para.3.48). - 54 - 4.2 As condition of loan effectiveness, the Executive Committee of PERT will formally approve and put into effect, in a manner satisfactory to IDB and the Bank, the Project Operational Manual that will guide project implementation; such manual to be modified from time to time in consultation with IDB and the Bank as needed to take account of the experience gained during project execution (para. 3.7); 4.3 As condition of disbursement in respect of expenditures in the jurisdiction of, or for the benefit of a provincial municipality, that the respective municipality has signed a Participation Agreement. 4.4 As an event of default, the Bank will have the right to suspend disbursements in case (a) the IDB loan does not become effective within six months of Bank loan effectiveness, or (b) the IDB loan is suspended, canceled or terminated; unless the Government shows that such events were not caused by its non-performance and that adequate funds from other sources are available for the project. 4.5 Recommendation. With the above agreements, the project is suitable for a Bank Single Currency Loan of US$90 million in US dollars, payable in 17 years, including five years of grace, at the standard interest rate for LIBOR-based US dollar single currency loans. -55 - ANNEXES PAGE 1. Transport Sector Overview ................................................................... 57 2. Previous Bank and other Donors Experience in the Transport Sector .................................... 63 3. Logical Framework and Rural Roads Six-Year Program Indicators ....................................... 69 4. Non-Motorized Rural Transport Component .................................................................. 73 Attachment 1. Draft Terms of Reference for Technical Assistance ....................................... 76 5. Institutional Development Component .................................................................. 81 Attachment 1. Esquema de Terminos de Referencia para Asistencia Tecnica en Planeaci6n y Gesti6n de Caminos Rurales .................................................................. 82 Attachment 2. Esquema de Terminos de Referencia para Desarrollar Microempresas para Mantenimiento Rutinario de Caminos Rurales en Peru6 .................................................. 90 6. Environmental Assessment .................................................................. 97 7. Summary Of Program And Project Costs .................................................................. 101 8. Institutional Set-Up and Project Organization ................................................................... 107 Attachment 1. Content of Project Information and Monitoring System Database (SISP) .... 118 Attachment 2. Indicators to be calculated with the SISP Database ..................................... 121 Attachment 3. Esquema de Terminos de Referencia para Evaluaciones de Cumplimiento ... 123 9. The Project Operational Manual .................................................................. 127 10. Participatory Planning Component ................................................................... 131 Attachment 1. Operational Guidelines for the application of the participatory process ....... 141 11. Economic Evaluation And Eligibility Criteria ................................................................... 151 12. Pilot and 1996 Programs ................................................................... 161 13. Joint Bank-IDB Supervision Plan ................................................................... 175 14. Estimated Schedule of Bank Loan Disbursement ....................................... 179 15. Selected Documents and Data Available in the Project File ............................... 181 - 57 - ANNEX 1 PERU RURAL ROADS REHABILITATION AND MAINTENANCE PROJECT Transport Sector Overview 1. The Peruvian transport system comprises: (i) a classified road network of nearly 70,000 km., of which about 11 percent is paved; (ii) a system of 24 maritime and river ports; (iii) a railway network (about 2,000 km.) made up of seven separate systems, with little physical or operational integration; (iv) 300 airports and landing strips, only 16 of which have paved runways; and (v) a system of pipelines, the most important of which is the 900 km North Peruvian pipeline from the oil fields in the selva to the coast at Bayovar. This system crosses the four distinct transport zones of Perii: (i) the central corridor (Callao-Lima-La Oroya-Huancayo); (ii) the southern corridor (Matarani-Arequipa-Juliaca-Puno); (iii) the coastal region from Talara in the north to lo in the south; and (iv) the Amazonic selva. Rail and trucking carry about equal shares of the mineral and concentrate cargo in the central corridor while trucking has a larger share of all other products. In the southern corridors, where product markets are more varied, rail and trucking are equally important. Within these corridors, there are segments that rely solely on rail (e.g., Huancayo-Huancavelica). The coastal region involves some competition between trucking and coastal shipping for long- and short-haul cargo. The Pan-American Highway carries passengers and freight along the coast and serves as a conduit for export traffic to Peru's Pacific coast ports. The Amazonic selva is served by a system of river ports with access to the Atlantic. Due to Peru's rugged terrain, airports serve the important function of integrating the four zones. 2. Similar to trends in most other countries, the road sector predominates in the transport of passengers and freight across Peru. In 1992, the road carried 71% of freight tons, followed by river and (mainly) coastal shipping with 25%. Railways have decreased their participation to 4%, thought they play an important role along particular corridors--such as Callao-Huancayo with 779,000 tons transported in 1992, and Matarani-Puno, with about 550,000 tons transported in 1992. Air freight transport reaches hardly 0.1%. Passenger traffic largely moves by road, with the railways playing a critical role along specific corridors--Huancayo-Huancavelica, Matarani- Cusco, and Cusco-Machu Pichu-Quillabamba--with about 550,000 passengers transported in 1992 on each of those lines--that lack adequate access roads. 3. Transport infrastructure provision and operations have been concentrated in the hands of public sector enterprises. Recent reforms aim at commercializing operations, transferring services to the private sector, and reducing the level of public involvement in the construction and operations of the various transport infrastructure. One of the initial actions in this respect was the privatization of the national airline carrier--Aeroperu--and the transfer of port operations to the private sector. On-going efforts include the privatization of the railway company--ENAFER--and the creation of a road authority that would increase financial autonomy for the maintenance of the national road network. 4. Road Sector. Road transport is the dominant mode of domestic transport in Peru, carrying about 70 percent of domestic freight traffic and 80 percent of inter-urban passenger - 58 - traffic. Yet Peru has the lowest endowment in road infrastructure compared to peer countries in Latin America. The condition of the road system in Perui is not satisfactory to support national economic and social goals. From 1986 to 1991, investments in the road sector were very limited. Reflecting a dramatic declining trend, the percentage of government expenditures dedicated to the transport sector decreased from 6.1 percent in 1981 to 2.5 percent in 1990. Since 1991, investments have grown incrementally, reaching a level of US$370 million in 1994, largely fueled by the multilateral and bilateral-financed programs of road reconstruction and rehabilitation. Analyses performed by the Planning Office of the Ministry of Transport, Communications, Housing and Construction (MTC) indicate that the level of investment would have to reach about US$600 million per year in order to bring the road network to satisfactory standards. 5. The Peruvian road system comprises almost 70,000 km of roads, of which 11 percent are paved roads, 19 percent are gravel roads, while the remaining 70 percent are earth roads and trails. This road network is organized into three tiers (Table 1): i) a primary road system of about 15,692 km of roads or 22 percent of the total network, also known as national roads. Around 36 percent of these roads are paved. Approximately 70 percent of the freight traffic and 80 percent of the passenger traffic takes place over the primary road network; ii) a secondary road system of about 14,473 km of roads or 21 percent of the total network. These roads, also known as departmental roads because they serve regional or departmental interests, are mostly poorly engineered and unpaved; and iii) a rural road system of about 39,805 km. Most of this system consists of short roads and tracks located in the sierra region at altitudes ranging between 1,500 and 4,600 meters above sea level. 6. Administration of roads in Peru has gone through fundamental changes in the last decade, in part due to a protracted decentralization process which is still far from being settled. Reform measures instituted by the Government in recent years to improve the organization of the sector have yielded mixed results. Historically, the General Directorate of Roads (DGC - Direccion General de Caminos) within MTC had overall responsibility for the planning, design, construction and maintenance of the entire road system, working through the central office in Lima and 24 deconcentrated Departmental Directorates. In 1982, the Regionalization Law transferred to the new regional governments the jurisdiction over all roads, including the departmental directorates, their equipment and staff. This mandate was partially reversed in 1991, when MTC was reassigned the responsibility for managing the national road network, while the secondary and rural roads networks remained respectively under the control of regions and local governments. DGC accomplishes its activities through quasi-force account arrangements (Programa de Acci6n Civica), military brigades, and to a lesser extent private contractors. Four district offices have been recreated under DGC, but with very limited resources and an unclear mandate. 7. DGC is too debilitated even to manage the national road network on its own. In 1992, a special executing unit, PERT-Proyecto Especial de Rehabilitaci6n del Transporte, was established to undertake implementation of multilateral-funded road rehabilitation projects. PERT enjoys a special legal status, which provides for more financial autonomy and employment conditions close to those prevailing in the private sector. This scheme has allowed improved efficiency in project implementation. Later, in 1993, Government created S1NMAC-Sistema Nacional de Mantenimiento de Carreteras to administer toll road collection and develop road concessions and Build-Operate-Transfer schemes to bring the private sector in to manage and finance road maintenance and rehabilitation. Results in this respect have been very limited so far. - 59 - Table 1. Road Network by Department (km.) Department Total National Departmental Rural Amazonas 1,608 703 331 573 Ancash (1) 4,429 1,221 1,028 2,179 Apurimac (1) 2,766 559 544 1,663 Arequipa 5,943 977 1,527 3,438 Ayacucho (1) 3,546 491 861 2,193 Cajamarca (1) 4,567 812 738 3,016 Cusco (1) 4,783 807 1,661 2,314 Huancavelica (1) 3,372 509 737 2,125 Huanuco (2) 2,607 655 397 1,553 Ica 2,274 745 317 1,210 Junin (2) 6,128 842 670 4,615 La Libertad 3,576 698 784 2,093 Lambayeque 2,100 774 103 1,222 Lima 4,619 1,085 740 2,792 Loreto 320 44 231 44 Madre de Dios (2) 651 428 45 177 Moquegua 1,566 380 330 855 Pasco (2) 2,103 340 560 1,201 Piura 3,283 783 669 1,830 Puno (2) 4,983 1,128 1,256 2,598 San Martin (2) 1,506 622 85 798 Tacna 1,858 491 530 835 Tumbes 835 199 317 318 Ucayali 537 385 - 152 Total 69,971 15,692 14,473 39,805 (1) Six departments selected for pilot and first year programs. (2) Additional departments planned for expansion of the project. Source: Ministry of Transport (Direcci6n General de Caminos) 8. Departmental and rural roads receive insufficient attention from the various agencies falling under the jurisdiction of regional and local governments. A weak institutional base, ill- defined responsibilities, and strong dependence on central government budgetary allocations have prevented the 11 Regional Temporary Administrative Councils (CTAR-Consejo Transitorio Administrativo Regional) from coordinating regional development programs among the large number of actors involved. Their interventions in the road sector have been limited to occasional works, mostly carried out under unproductive force account arrangements. The "regionalization" effort to place organizations closer to the regions did not increase their accountability and capacity to deliver more responsive services. - 60 - 9. The Municipal Law (Ley Orgdnica de Municipalidades) passed in 1984 made provincial and district municipalities responsible for rural roads investment planning and maintenance, but such responsibilities are not commensurate with the institutional and financial capacity of those municipalities. This, compounded with ambiguities and overlaps in the roles of the different levels of government and inherited dependency from central govemment, results in a generalized avoidance of accountability in the sector. In response to the weaknesses of local governments, community-based organizations have intervened in an attempt to fill the gap and cope with the most compelling needs, but these efforts have been isolated and unsustainable. The result is a very large rehabilitation backlog and the resulting poor serviceability of the departmental and rural road network. 10. Vehicle Fleet. The vehicle fleet has grown an average of 2.8 percent per annum from 1988 to 1993 (Table 2). The largest growth percentages pertain to rural vehicles and buses (12.5 and 8.2 percent, respectively). This is a consequence of the initial low levels of motorization in rural areas and the rapid increase over the period as a consequence of growth in the rural areas. Vehicle ownership remains rather skewed and while in Lima there is one vehicle for every 15 persons, fourteen departments have one vehicle for every 100 people or less. With the deregulation of imports in 1991, the number of vehicle imports has grown substantially since then (up to 24,000 units), after a period with low numbers (annual average imports of less than 2,500 units from 1986 to 1990) when restrictions on the import of vehicles limited the purchase of new vehicles from the high cost domestic plants. The recent increases have helped reduce the average age of the total vehicle fleet (in spite of the fact that the increase has mostly been made up of second-hand vehicles). Vehicle operating costs are high and particularly important for the growing number of vehicles operating on the secondary and tertiary networks, due to the bad condition of these networks. Traffic densities remain low, and less than 4 percent of the kilometers of the national network have traffic volumes of more than 1,000 vehicles per day. As one reflection of the deteriorated condition of the network, traffic safety remains a compelling issue in the road sector (and particularly in urban areas). Statistical data show more than 53 annual deaths per 10,000 vehicles, ranking Peru among the developing countries with very high fatality rates. An on-going study financed under Loan 3717-PE will address this issue and propose specific actions to improve road safety in Peru. Table 2. Composition of vehicle fleet, 1988-1993 (thousands) Other Annual Pick-up Rural Medium Growth Year Autos Trucks Vehicle Trucks Trucks Buses Total (%) 1988 376.8 100.0 30.9 8.9 79.3 20.6 616.5 1989 372.8 100.4 31.0 8.7 78.8 20.6 612.3 -0.7% 1990 368.1 99.7 30.7 8.6 77.8 20.6 605.5 -1.1% 1991 379.0 102.8 33.5 8.7 78.4 21.2 623.6 3.0% 1992 402.3 106.6 47.1 9.1 80.3 27.2 672.6 7.9% 1993 418.7 111.0 55.6 9.5 82.0 30.6 707.4 5.2% Annual avg. growth (%) 2.1% 2.1% 12.5% 1.3% 0.7% 8.2% 2.8% Source: MTC - Planning Office - 61 - 11. Railways. A six-member Board of Directors, all appointed by the Ministry of Transport, oversees the railway company and appoints its manager. In light of deteriorating traffic, finances, track infrastructure, and rolling stock and inefficient operating practices (some worsened by difficult topography) the government is undertaking an action plan to increase ENAFER's autonomy and accountability by delineating management responsibilities, reimbursing the company for the provision of public service obligations (or alternatively, allowing the closing of uneconomic services), and supporting measures--payment of a labor redundancy program, resolution of financial obligations, organizational restructuring into three self-contained operating units, and undertaking only critical emergency investments--to permit, ultimately, the privatization of the entity. The form of this privatization has yet to be defined, but the likely approach would consist of a combination of concessions and outright sale of specific branches which are directly link to mining operations (e.g., Callao-Huancayo) or tourist attractions (e.g., Cusco-Machu Pichu). Developments in this respect (including financial support to a rehabilitation program and key emergency investments) are being pursued and monitored under Loan 3717-PE of the Transport Rehabilitation Project. 12. Aviation. The aviation sector plays, as the railways do, a crucial role in communicating areas of the country that, mainly due to topography, lack any other means of transport. Furthermore, the success of recent trade liberalization efforts depends on the proper functioning of aviation not to undermine the competitive edge of emerging export- oriented activities such as fresh flowers and fruits and value-added textile manufacturing. Management and operation of 59 public airports and landing strips as well as the air traffic control and en-route navigation systems are carried out by the Corporaci6n Peruana de AeropuertosyAviaci6n Comercial (CORPAC) which is overseen by MTC. Another set of 133 airports and landing strips are privately owned, while 113 more are under the control of Peru's municipalities and the Ministry of Defense. Most of all these airports, however, basic navigational aids, radio contracts, or night lack time landing equipment. None has more than one runway. This situation is particularly critical at the Lima international airport whose runway and taxiway are badly in need of rehabilitation (the rehabilitation is being financially supported by Loan 3713-PE.) CORPAC has improved its operating results since 1989, particularly since the sale of Aeroperu--which owed CORPAC large debts for services rendered as far back as 1985--and is proceeding with a program of privatization, to contract out some of its airport services, and of labor redundancy. Similarly, in January 1993, Aeroperu, the national carrier was sold to a private consortium, fuirther reducing the burden on government finances. In general, the aviation sector reforms have reduced paperwork and liberalized charges and fees and the provision of airport landside services. 13. Waterborne Transport. Ocean freight transport accounts for 95 percent of all Peruvian international trade and for 25 percent of domestic freight. In the past, prior to recent implementation of deregulation procedures, the Empresa Nacional de Puertos de Perui (ENAPU) managed and operated about 16 of the 27 Peruvian ports (the rest being privately operated or held by public industrial companies). In addition, there was a national shipping line operating under a series of protective rules and regulations, and - 62 - stevedoring services were in the hands of a public monopoly. This framework created a port system that, except for the independently-held ports (mainly handling export bulk materials, petroleum and petroleum products), performed poorly. The framework encouraged ill-conceived investments and inefficient operations mainly caused by the lack of competition (e.g., port facilities at Paita and Salaverry were under-utilized). Since 1991, a series of decrees (Legislative Decree Nos. 644 and 688, and Supreme Decree No. 20-91-TC) (a) greatly simplify vessel registration requirements and procedures, (b) eliminated all previous restrictions on export and import of cargo, including the payment of fees when foreign vessels were used and the cargo reservation rules that favored the recently-liquidated national shipping line; (c) phased out all administrative restrictions on coastal shipping routes; and (d) permitted the introduction of private entities into ENAPU port operations. As a result of these measures several international routes have been reactivated and port tariffs (now set to account for ENAPU's real costs) have decreased by between 30 and 50 percent. There still exist some distortions of subsidizing domestic tariffs by levying higher tariffs on importers and exporters (to better compete with road transport), and, though there is no immediate pressure for expanding infrastructure facilities, there exist a great need for maintenance and modernization to be able to realize the corresponding efficiency gains in port operations. These arguments also applied at a smaller scale to the lake port of Puno, and the river ports of Iquitos, Yurimaguas, Pucallpa, Puerto Maldonado, some of which suffer hydro-morphologic changes making the facilities inaccessible for a significant part of the year. - 63 - ANNEX 2 PERU RURAL ROADS REHABILITATION AND MAINTENANCE PROJECT Previous Bank and other Donors Experience in the Transport Sector Overview of World Bank Experience 1. Since 1952, the Bank has made 18 loans to Perfu in the transport sector totaling US$641 million. However, only 52 percent (or two-thirds if the most recent Transport Rehabilitation Project is not considered) have been disbursed. Of the total, 46 percent was for highway projects, 17 percent for urban projects (a large part of which had urban transport components), 12 percent for multi-modal projects, 12 percent for aviation, 9 percent for railways, and 3 percent for ports. The Bank suspended loan disbursements for all projects in Perfu in May 1987, at which time the Bank had made a total of 17 loans to Peru[ in the transport sector totaling US$491 million of which US$169 million was later canceled. In the 1990s the Bank and other donors resumed lending operations to Pert! and in 1994, the Bank made a loan in the transport sector of US$150 million for the Transport Rehabilitation project with possible cofinancing of US$38 million from KfW, the German bilateral agency. In the rural infrastructure sector, the Bank also has an on- going US$100 million loan to support FONCODES, which includes funding for labor-intensive projects in poor rural areas (about one third of the project consists of developing economic infrastructure in rural areas). Table 1 lists all the Bank projects in the Transport sector. Table 1. Bank loans to Peru in the Transport Sector (US$ millions) Sector Year Loan Amount Project description Highways 1955 0127-PE 5 Road maintenance 1961 0300-PE 10 Road maintenance 1970 0706-PE 30 Reconstruction after earthquake of May 1970 1960 0271-PE 5.5 La Oroya-Pucallpa road; Aguaytia-Pucallpa section 1965 0425-PE 33 La Oroya-Pucallpa road; La Oroya-Aguaytia section 1974 1025-PE 26 La Oroya-Pucallpa road 1982 2091-PE 93 Highway Rehabilitation US$50.4m canceled. 1994 3717-PE 150 Transport Rehabilitation Urban 1976 1283-PE 21.6 Access roads component of the project canceled 1984 2451-PE 82.5 Metropolitan Lima including paving to low-income areas US$57.8m canceled Multi-modal 1975 1196-PE 76.5 Lima-Amazonas Transport Corridor highways & river ports Aviation 1981 1963-PE 58 Regional airports development US$38.75m canceled Railway 1958 0190-PE 15 Canceled US$15m 1963 0334 13.25 Loan made to private owner of railways - successful Ports 1952 057-PE 2.5 Expansion of Port of Callao 1958 0208-PE 6.58 Expansion of Port of Callao 1964 0373-PE 3.10 Port of Paita 1966 0446-PE 9.10 Port of Pisco TOTAL 641 US$169m canceled - 64 - 2. The Transport Rehabilitation project consists of five components, the most important concerning road rehabilitation. Six roads totaling 725 km would be rehabilitated under the project. In addition, this component includes (i) a bridge program involving the acquisition and recovery of Bailey bridges and the reconstruction of derelict old bridges; (ii) a pilot maintenance program focusing on 620 km of road in a specified corridor, and (iii) a traffic safety program. In parallel, the project would support government efforts to rebuild an institutional structure capable of maintaining the road system. The other components include help to privatize and rehabilitate the railway; rehabilitation of Lima's airport runway; a pilot project for non-motorized transport in Lima to test methods of promoting the use of bicycles by low-income residents; and technical assistance and training which would (i) strengthen the institutional capacity for managing roads and bridges, and to support the creation and fostering of an autonomous agency responsible for planning, operating, financing, and administering the highway network; (ii) build capacity in the MTCC to manage environmental issues; and (iii) assist the railway in its privatization and improving its management. 3. The Rural Roads Rehabilitation and Maintenance RRRMP project under review in this SAR will be the second in the Transport sector since the resumption of lending operations with a proposed loan of $90 million. Other Multi- and Bilateral Donors 4. The following discussion of other donors in the Transport sector does not cover all the donors, but provides an insight into other participants in the sector. The IDB is the main funding counterpart to the World Bank and the other donors largely act as parallel cofinanciers on the various projects. The World Bank works in close collaboration with the IDB and on this RRRMP project both agencies are acting as equal joint cofinanciers, rather than as parallel cofinanciers which is usually the case. 5. Inter-American Development Bank E1)B. In the period 1961 to 1989 the IDB had loaned US$150 million in the Transport and Communications sector. In the 1990's IDB approved two road rehabilitation loans totaling US$462 million. The first, in 1991, is a loan of US$210 million for the Highway Repair and Maintenance project (Loan 651-OC-PE). The total project cost is US$300 million with parallel cofinancing of US$50 million from CAF (Corporaci6n Andina de Fomento), possible cofinancing of US$30 million from EIB, and grants from Japan for studies, rehabilitation of locomotives and acquisition of road maintenance equipment. The executing agency for the project is MTC Ministry of Transportation and Communications. The project involves i) repair of about 1,400 km of the Pan American and Central Highways as well as the repair of bridges and other structures; ii) periodic maintenance of about 2,000 km of pavement, made up of 1,744 km of the Pan American Highway and 256 km of the Central Highways between Lima and Huanuco; iii) administration and supervision; iv) subsector reorganization. The project will fund studies to help the Government formulate policies in the sector. 6. The second, in 1994, is a loan of US$252 million for the Highway Rehabilitation and Improvement program, Phase II (Loan 836-OC-PE). The total project cost is US$420 million - 65 - with the remainder being financed by the Government (no cofinanciers). This project is intended to continue the work ofthe 1991 loan. In 1995, the IDB will be approving financing for the Rural Roads Rehabilitation and Maintenance Project with an amount of US$90 million. This is joint cofinancing with the World Bank. The two Banks have worked closely on the development of the RRRMIP project. Table 2. Transport sector loans by the Bank, IDB and other donors in the 1990's (US$ millions Year Pro ect Bank IDB KfW CAF Other GOP Project cost 1991 Highway Rehabilitation and 210 50 30 10 300 _____ Improvement, Phase I _ 1994 Transport Rehabilitation 150 38 5 49 242 1994 Highway Rehabilitation and 252 168 420 Improvement, Phase II TOTAL 240 552 38 50 35 297 1,212 Note: Proposedfunding for RRRMP 7. Kreditanstalt fur Wiederaufbau KfW. In the 1990s, the German bilateral agency has provided about US$5.8 million in funding for general Technical Assistance in all sectors, US$36 million for Structural Assistance, and is considering a US$38 million loan in parallel cofinancing to the World Bank funded Transport Rehabilitation Project with a possible follow-up operation to complete rehabilitation of a main road corridor (Olmos-Corral Quemado). It is also anticipated that KfW will contribute US$90 million in 1995 to the Alternative Development program focusing on irrigation. The World Bank is coordinating with GtZ, a German bilateral agency engaged only in technical assistance, in its work in road maintenance and institutional building programs. 8. Overseas Economic Cooperation Fund OECF - Japanese ODA. In 1991, OECF provided the equivalent of US$616 million for Trade Sector Adjustment and in 1992 the equivalent of US$143 million for Financial Sector Adjustment. Japan has contributed significantly to project development. Under the IDB financed 1991 HIighway Repair and Maintenance Phase I project, grants were given by Japan for studies, rehabilitation of locomotives and acquisition of road maintenance equipment. The studies for the Bank's Transport Rehabilitation project were funded by Japanese grants. A US$1.1 million Japanese Policy and Human Resources Grant was used for the preparation of this RRRMP project as well as a second planned Transport Rehabilitation project. The OECF is interested in cofinancing of the Government's commitment of the ongoing World Bank funded 1994 Transport Rehabilitation project. 9. OPEC Fund for International Development. The OPEC Fund contributed US$5 million to the Government's commitment of the Lima airport component of the ongoing World Bank funded 1994 Transport Rehabilitation project. 10. United States Agency for International Development USAID. USAID involvement in Peruz aims at promoting democracy and civil society, countering the threat of the narcotics trade, expanding microenterprises and small business development, expanding access to the use of basic - 66 - health and family planning services, and protecting the environment. It has a proposed budget of approximately US$100 million for FY1996. Two projects are particularly related to the proposed RRRMP project, i) the Development of Local Government program (PGEAGL) in conjunction with INADE in the Ministry of the Presidency and ii) the 'Alternative Development Program' (PDA) also under INADE. USAID will through PERT-PCR coordinate its projects with the Bank's RRRMP project since both are aimed at the development of institutional capacity at local level and rural development. The US Government will provide US$30 million over a five-year period for the Alternative Development Program. Rehabilitation of feeder roads located within the watershed where the alternative development program will be implemented is considered crucial to the success of the PDA. The alternative development program is located in specific small areas of the six departments of Ucayali, Huanuco, Pasco, San Martin, Ayacucho and Cusco of which the latter five are departments selected for the RRRMP. Huanuco, Pasco, San Martin are included in the second phase expansion of the RRRMP project to 12 Departments in 1997. DGC has executed road rehabilitation in 1994 in the areas targeted by the USAID program in Ayacucho and Cusco. Lessons learned from previous projects 11. Aside from the macroeconomic conditions which beset the country in 1983 and led to the default on the Government's debt service payments to the Bank and hence to the suspension of disbursements, lack of counterpart funds and institutional weaknesses have often been the main reasons for the unsatisfactory performance or delays in transport projects. Besides, implementation of these projects has been difficult due to the technical problems caused by extreme physical conditions, inadequate engineering designs, and weak project management aggravated by low salary levels of professionals in the executing agencies. The creation of PERT as the unit which is implementing the Transport Rehabilitation project as well as the IDB projects has attempted to address these shortcomings. 12. Feeder road components were included in eight Bank loans to Peru which supported overall highway development, transport corridor improvements, rural development, and reconstruction after a major disaster. Experience exists with free-standing feeder road projects elsewhere, especially in Africa and Asia. The principal problems in achieving sustainable results have been (1) institutional weaknesses and inadequate coordination, leading to delays in implementation and incomplete execution of the works; (2) inadequate monitoring of results. 13. Bank-wide experience has resulted in the following advise for designing a successful rural road projects: i) there should be strong government commitment and beneficiary participation to ensure the sustainability of service and infrastructure; ii) a central focal point should be established for formulating and reviewing rural roads policy, for project planning and execution, and for co- ordination between the ministries of agriculture, interior and transport ; iii) a strong and dedicated project management team should be created to assure timely implementation and adequate monitoring of the project; and iv) the capacity for labor-based methods and intermediate means of transport should be developed. - 67 - 14. Relevant to the road maintenance component of the RRRMMP, are the lessons learned from the Peru Road Reconstruction project (Loan 706-PE, US$30 million, 1970), which included technical assistance for road maintenance. The Project Performance Audit report indicates that the major obstacles to the efficient implementation of an adequate maintenance program were identified as i) the lack of a reporting system which would provide MTC in Lima with adequate and timely information; ii) inadequate mechanisms for work planning and control; iii) insufficient time devoted to highway maintenance in the regions, where MTC's advisory staff carried joint responsibility for vehicle registration and other traffic operational duties; iv) SEM's inability to supply and maintain highway maintenance equipment adequately while discharging obligations to construction work forces and some other Government agencies; v) a poorly conceived SEM/MTC interrelation which lacked incentives for SEM to maximize equipment availability; and vi) the lack of necessary equipment and funds for maintenance operations. 15. The lessons learned from this project report are recognized and the RRRMP has been developed accordingly. Primarily, the difficulties experienced in ensuring central-government Lima-based maintenance of a myriad scattered rural roads and the failure of traditional municipal force account works, are acknowledged. In line with the decentralization process in the country, the responsibilities for rural road maintenance will be decentralized. A management system is being developed for the RRRMP project for co-ordination with the decentralized units for the project. Technical assistance would be provided to develop micro-enterprises formed by groups of beneficiaries for road maintenance on the recommendation that the private sector be more involved in the form of municipal contracts with small local engineering firms and road maintenance micro-enterprises. Micro-enterprises have been successfully developed for road maintenance projects in Colombia and the Government of Perui has shown a strong interest in this approach. The question of road funding will be addressed in the studies funded under the RRRMP project, .................................................................................................................................. ........................................................................................................................... ........................................................................... 4. (U -. I 0 0 0 ri OD ca 43 0 I - co 0 ol 0 .................................................................................................................................. ............................................................................................................................ .......................................................................... qj U ca Os 04 ................................... .............................................................................................. ........................................................................................................................... . ................................................................. rA oi Vu OD Fg 'o j cd to eq ,le 0 - -a 0 -T 00 io.1 4 - 45 -.Uj ZO wi i0i cci as tm 87, O ro- -i ej It-M 1 c, O C:) u 5 'O > O 0 co M I en 0 ei u r- .................... ...................................................................................................... ........................................................................................................................... .............. ........................................................... 00 O OD 0 =0 ou -0 :s 00 'u) to rA rn UO -O -0 P P4 "O-, - 70 - d 5,000 an of connecting roads are brought up to "good" napprai of PERT- condiaon.ce PCR's e C * 17,000 km of roads are routinely maintained and kept in deconcentrated units pre-detcrmined condition. by MTC, IDB and FvPERT-PCR's deconcentrated units arfu fully operational in tc the Bank. .9 departmcnts and iplementing the project in ............ ce ...... . ...................................... ...................... .................................................. ............................................ Village . At mid-term program review .............* Certification of work *Communities willing to Components~~~ . 0o kin of streets improved in not less than 140 villages . .......... completed in participate and comrnit located in project area. . accordance with resources. .*Five pilot NMT projects successfully implemented. . technical *Coordination with other * Imnprovement At program completion... specifications set in programs enhance of Streets . * 220 km of streets improved in not less than 300 villages the Project financial access to * Improvement , located in project area. Operational Manual, intermediate means of of Non- . * 20% of the "integrated" road projects carry a NMT i by supervisor. transport Motorized 5 component. Transror ~~~~~~...... ................................................................ .................................; ;........ ......................... Institutional At mid-term program review ... . Satisfactory * Government is Development Rural Roads Unit is operating within DGC with appraisal of the committed to satisfactory capacity to plan and monitor investments and Rural Roads Unit by empowering ComPonent transport performance. IDB and the Bank. municipalities. The revised functional and jurisdictional classification of * Project Monitoring * Municipalities eager to Techmical . roads and the inventory of all public roads in Peru are Database actively join the assistance for: . implemented administered by technical assistance * Planning and * 60 provincial municipalities (out of a total of 71 in the six I PERT-PCR. program management of departments) have adopted institutional programs * Registration of * System of inter- Rural Roads at, designed under the project. micro-enterprises, governmental transfers MTC, PERT- ,* 100 microenterprises and SMEs are participating in contractors, and and local revenue PCR and local routine maintenance contracts. consultants sources in place as a governments. ., * more than 150 local contractors and consultants are (Consulcop and result of the * Developing . participating in training programs developed under the project registers decentralization agenda. micro- project. administered by enterprises and, *Studies on Local Road Contracting Practices and Rural PERT-PCR). SMEs for rural Roads Funding Strategies completed in a satisfactory * Performance Audit road , manner. of Institutional maintenance . At program completion... Development Developing the . * more than 300 local contractors and consultants are Components local . registered with PERT-PCR and participating in project performed by construction *. activities. independent industry .*250 microenterprises and SMEs are participating in consultant. Studies: routine maintenance contracts. Local Road, .*100 provincial municipalities (out of a total of 117 in 12 Admini.ustration; departments) have adopted institutional programns Practices Rural Roads ii designed under the project. 15 municipalities meet criteria for execution of project Funding. j; components. Procurement procedures under local governments streamlined in accordance with the Plan of Action ; developed under the study on Local Road Administration i Practices. ; Mechanism to secure funds for rural maintenance agreed between central and local govemment and is being implemented in accordance with the Plan of Action i delped on Rural Road Fundin. . ~~~~~~~~~~~~~~~~~~~~~~~~....................................... ; & ......................... ........................................... ........................................................................... - 71 - PERU RURAL ROADS REHABIUTATION AND MAINTENANCE PROJECT PHYSICAL TARGETS UNDER SIX-YEAR RURAL ROADS INVESTMENT PROGRAM Totals Project Six-Year COMPONENT Performance Physical Targets by Year (Phase I) Phase II ROGRA (Civil Works) Indicators 1995 1996 1997 1998 1999 2000 995-199 999-200 995-200 Rehabilitation of Rural Roads Km 1,400 1,600 2,000 2,500 2,500 2,500 7,500 5,000 12,500 Rehabilitation of Connecting Primary and Secondary Roads Km 100 500 800 800 600 400 2,200 1,000 3,200 Routine Maintenance of Rural Roads Km 1,400 3,000 5,000 7,500 10,000 9,400 17,500 26,900 Routine Maintenance of Connecting Primary and Sec. Roads Km 100 600 1,400 2,200 2,800 2,100 5,000 7,100 Improvement of Village Streets Km 21 40 40 40 40 40 141 80 221 Improvement of Village Unclassified Networks No.project areas w/NMT 5 5 15 15 20 25 35 60 Key Features of Rural Roads Investment Program * Proposed Project: First phase of the Rural Roads Program Includes investments started in 6 departments under the Pilot (1995), and investments from 1996 to 1998 to progressively cover a total of 12 department * Second Phase: As presently designed, includes additional investments in the same 12 departments to be undertaken from 1999 to 2000. * The 12 departments under the program were selected on the basis of poverty criteria. These departments cover most of the sierra region, and some of them also piedmont areas - 72 - Project Performance and Indicators _~~ - I-- 1. Key Development Indicators * Beneficiaries in the project areas interlinked Cum No. 250,000 500,000 1.0 million 1.5 million by a reliable and affordable transportation system * Communities in project area interlinked by a Percentage 80 % of communities in the project areas where reliable and affordable transportation system road subprojects were carried out the previous year * Reduction in the freight and passenger tariffs Percentage 30 % for road subprojects reported in the socio-economic studies completed the previous year * Increase in commercial traffic reported in Percentage 30 % for road subprojects the socio-economic studies completed two years before * One-year equivalent seasonal unskilled jobs Cum No. 7,000 14,000 21,000 25,000 generated by road rehabilitation works * One-year equivalent permanent unskilled Cum No. 800 1,500 2,400 2,800 jobs generated by road maintenance * Small and medium size contractors and Cum No. 120 200 300 300 consultants involved in project activities * Micro-enterprises or community-based Cum No. 30 60 90 100 organizations formed under the project to carry out road maintenance works . Villages benefited with street improvements Cum No. 85 140 200 200 * Villages benefited with non-motorized Cum No. 5 10 25 25 transport improvements * Municipalities that have adopted Cum No. 20 40 60 60 institutional programs designed under the project * Local contractors/consultants participating Cum No. 40 80 120 150 in the road construction industry strengthening program * Road subprojects identified through Cum km 1,200 3,000 5,200 5,200 participatory workshops with beneficiaries 2. Project Physical Indicators * Rural roads rehabilitated Cum km 3,000 5,000 7,500 7,500 * Primary and secondary connecting roads Cum km 600 1,400 2,200 2,200 rehabilitated . Rural roads maintained Cum km 1,400 3,000 5,000 7,500 * Primary and secondary connecting roads Cum km 100 600 1,400 2,200 maintained * Village streets improved Cum km 60 100 140 140 3. Project Management Indicators (a) * Departments where project is active Cum. No. 6 10 12 12 * Decentralized Units (UEDs) managing work Cum. No. 5 8 9 9 programs ( Other management indicators will be agreed annually together with the annual programs for the coming year. The list of indicators is shown in Annex 8 to the SAR. - 73 - ANNEX 4 PERU RURAL ROADS REHABILITATION AND MAINTENANCE PROJECT Non-Motorized Rural Transport Component Sub-project sites and selection criteria 1. The Non-Motorized Transport NMT component will first be implemented in five pilot sites, two sites in the Department of Cusco and three sites in the Department of Huancavelica. Given the intention to create a continuous, integrated 'farm-to-market' network of rural infrastructure, project sites for the NMT component and road improvements under the 'main' project must connect. By end-1995 PERT-PCR will have determined the location of the five pilot sites and development of the pilot of the component will start in 1996. Selection of the pilot sites will be based on the criteria set out in the Box I and using available information, such as data on population, agricultural production, terrain characteristics, current transport patterns, and the village-level infrastructure inventory for the Department of Huancavelica prepared by consultants (Final Report Study for Formulation of a Rural Road Program). Furthermore, selection of pilot sites will depend on commitment of local leadership (Alcaldes) and willingness of communities to participate actively in the sub-projects. 2. In 1997, the coverage of the component will be expanded to the 12 Departments of the 'main' project, using selection criteria and successful methodologies developed in the pilot experiences. Again, selection criteria will include the condition that selected project sites must connect with road improvements under the 'main' project. The technical assistance services needed to expand coverage of this component will be procured by PERT-PCR by end- 1996 to avoid delays in implementation. Box i: Criteria for selecting five pilot sites for NMT Component Criteria for selecting the pilot sites would include but not be limited to: * location in areas where project road components are executed to ensure, integrated sectoral action; * diverse existence and use of non-motorized transport modes in order to test a variety of interventions; current travel patterns that indicate suppressed transport and mobility needs; * high degree of village interest and existence of organized farmers or community development groups to ensure community participation; 0 commitment of local leadership through designating a local project manager responsible for initiating contacts with the concened coimunities Evaluation of sub-project proposals 3. The size of the sub-projects are often such that feasibility studies become prohibitively expensive. Many of the intangible benefits of village level infrastructure improvements are hard to quantify in monetary terms. Expected benefits include increased safety and reliability and time savings through less detours. PERT-PCR's deconcentrated Units (UEDs) will evaluate the project proposals submitted by the communities, based on the following guidelines: that i) the - 74 - selected works connect with roads being rehabilitated under the project; ii) the community has determined its priorities and is committed to undertaking the works; iii) the proposed works are consistent with the typical designs and standard costs expected under the NMT component. Technical assistance to communities 4. In the pilot, technical assistance will be provided to the communities to assist them identify and prioritize the interventions and implement the sub-projects. Technical assistance will also be provided to the involved communities to develop sustainable institutional capacity at community level to prepare, implement and manage similar projects. This approach is intended to create a sense of ownership at community level and therefore technical assistance should be provided by an organization, experienced in working with rural communities and familiar with participatory methodologies. Furthermore, technical assistance staff attached to the project must be located close to the project sites to observe perceptions and attitudes of the participating communities. Given these requirements, it is recommended that PERT-PCR identifies a suitable NGO to provide the technical assistance for pilot of the NMT component by end-1995. Draft terms of reference for the technical assistance to be provided are given in Attachment 1. 5. The technical assistance provided to the communities will include development of training programs for the community organization, to i) familiarize them with commercial practices required to manage and use allocated funds; ii) identify priority interventions, and iii) ensure project sustainability. The training programs will be developed in close collaboration with PERT- PCR and must be sensitive to and build on existing capacities and practices of communities, with special focus on increased participation of women in project activities. Implementation 6. Development of the component will start in 1996 and cover a time span of 18 months to ensure adequate preparation, implementation and monitoring. The consultant engaged for the supervision of road rehabilitation works will also be responsible for steering and facilitating implementation of the NMT projects. The project itself however should be implemented on the ground by the participating community. The deconcentrated units of PERT-PCR will be extensively involved in the development of the NMT component. The nature and type of works to be executed is demand driven and will be determined during project implementation. Cost estimates of procurement will be based on standard designs and standard unit prices for various types of improvements (structures, drainage, etc.). As spelled out in the attached terms of reference, the consultant providing technical assistance in the pilot of the component, will prepare a design manual that includes these data. The contracts for works are small and in remote and scattered areas. PERT-PCR will disburse against certification of completion of each stage of the works by the Rural Roads Supervision Consultant. This procedure intends to establish an effective disbursement practice that focuses on the results of the work, i.e. the physical verification that the structure has been built (and meets specified quality standards). Procurement of goods and materials will meet requirements of economy and efficiency; the attached sample contract provides options that are acceptable to the Banks. - 75 - 7. To ensure accountability for the use of funds, the participating communities will open a Bank account in the name of the sub-project to be operated only upon terms and conditions specified in the contract between PERT-PCR and the community group. A sample contract for these kind of activities is in the Project Files. After a reasonable advance to initiate works, disbursements will be made in tranches by PERT-PCR upon certification of the supervision consultant that the works have been satisfactorily completed. 8. Community contribution can increase community commitment to the project; this includes making communities responsible for maintenance of improved facilities. The project would finance 80 percent of the total cost estimated by PERT-PCR for the proposed works based on standard designs and unit costs. This would fully cover the cost of materials, equipment and skilled labor, while most of the unskilled labor would be contributed by the community. PERT- PCR will approve the wages for skilled masons to be funded under the project. Contractual Issues 9. Advance payments to initiate the activities must stipulate the purpose for which such advances are to be used in the contract between the PERT-PCR and the communities. The contract should also include adequate accounting guarantees. Performance guarantees will be difficult to comply with for the targeted small community groups and should be waived against a well defined program. These considerations are reflected in the sample contract. 10. The selected consultant for the pilot may wish to sub-contract technical assistance services it cannot perform itself. In this case, it must inform PERT-PCR timely and in writing of its decision to do so and PERT-PCR has to approve the method and process through which the subcontracting may be achieved. PERT-PCR will have a final say in the selection of such subcontractors. Expansion of the component 11. The NMT component will be expanded based on the findings from the pilot. For expansion within the pilot areas, communities will only be eligible for follow-up projects if they demonstrate a proven track record in providing adequate routine and periodic maintenance of the improved infrastructure. - 76 - ANNEX 4 Attachment 1 PERU RURAL ROADS REHABILITATION AND MAINTENANCE PROJECT Non-Motorized Rural Transport Component Draft Terms of Reference for Technical Assistance Background 1. Transport and mobility of goods and people in rural areas relies on the existence of adequate infrastructure and availability of appropriate and efficient transport modes. An unclassified network of tracks and footpaths services a substantial part of the transport needs of the rural poorest, women in particular, for whom the majority of transport movements are unrelated to the rural road network. Physical barriers, e.g. river crossings, and poor condition, e.g. lack of drainage, of the tracks and paths hamper efficient use of traditional transport modes, such as mules. Furthermore, the lack of common roadside storage facilities are a major constraint for the development of an efficient intermodal transport system that combines farm-roadside non- motorized transport with roadside-market motorized transport. 2. Non-Motorized Transport (NMT) represents an innovative approach in the transport sector. It is very important to create awareness about the sentiments behind it so that participants attach to it the importance it requires to make it successful and to create a sense of ownership at community level. If a project is believed to be Government property, people loose the motivation to participate actively in the belief that operation and maintenance is Government's responsibility. This approach will require technical assistance to strengthen the institutional capacity at village level to implement the pilot and to start sustainable management of village level infrastructure. Technical assistance should be provided by an organization, experienced in working with rural communities and familiar with participatory methodologies. Its staff, attached to the pilot, must locate close to the project sites and their academic background must be such that they are able to observe perceptions and attitudes of the participating communities. 3. The Non-Motorized Transport NMT project is a component of the Rural Roads Rehabilitation and Maintenance Project (RRRMP) which is being implemented through the offices of PERT-PCR in the Ministerio de Transportes, Comunicaciones, Vivienda y Construcci6n MTC. Initially the RRRMP is being implemented as a pilot program in six Departments of Peru6 (Ancash, Apurimac, Ayacucho, Cajamarca, Cusco, Huancavelica). The RRRMP is supported by funding from the World Bank and the Inter-American Development Bank. Objectives of Consultant Services 4. The objective of the consultant services is to assist local communities in the five pilot areas in identifying priorities in village-level NMT infrastructure improvements and in developing - 77 - mechanisms for sustainable management and maintenance of improved NMT infrastructure. The developed procedures must support the creation of institutional capacity at community level to implement and manage village-level infrastructure, and should promote a sense of ownership by the beneficiaries. Scope of Work 5. The services to be provided will include, but not be limited to the following: (a) present the NMT objectives and possible components to all (including women's groups) members of the selected communities; (b) determine existing institutional capacity and where lacking assist communities in the set- up of organizational and administrative structures that enable them to implement the NMT component, especially in regard to the right to administer resources and conclude contracts, related to the sub-projects. To ensure sustainability, the consultant will assist in the formation of formal Committees and the drafting of by-laws for the Committee's functioning and the functioning of elected office bearers, including, inter alia, (i) the composition, duties and powers of office bearers, (ii) arrangements for use of income and income sharing, (iii) establishment of overall goals and policies of the Committee, (iv) establishment of processes for regular reporting on financial and physical progress of the project, (v) establishment of internal control procedures that ensure proper accounting and use of the funds, (vi) development of regular meeting schedules for the entire Committee, and (vii) a list of key decisions for which the office bearers need the authorization of the entire committee; (c) assist and advise communities during the project identification process and provide options for various types and costs of possible interventions, ranging from the construction of footbridges to the construction of simple roadside storage facilities; (d) assist communities in the prioritization of proposed interventions, emphasizing the importance of involving all interested community members, and assist in preparation of project proposals; (e) assist the community organization in the organization and operation of Bank accounts related to the sub-project(s); (f) provide to the communities the services of qualified personnel through all stages of the activities carried out under the sub-project(s); (g) procedures described in the Project Operational Manual to be obtained from PERT-PCR. When subcontracting of works by the community organization is required, the consultant assists in selecting contractors that are appropriately licensed. However, in the case of subcontracting for a specified portion of the work, e.g. masonry, plastering, carpentry, - 78 - skilled laborers can be contracted even if they do not have the license but meet the requirements of PERT-PCR; (h) in project planning, implementation, monitoring and accountability; (i) collect quantitative and qualitative data throughout the life of the pilot. Continuation and expansion of the project depends on the findings in the pilot and accurate data collection is therefore essential to be used in deciding on the future of the project. In the pilot areas a base line survey must be conducted to highlight current transport patterns and infrastructure condition. Other forms of data needs would be identified as the project progresses; (j) develop of monitoring indicators, monitoring of the sub-projects and provision of monthly progress reports. Indicators must not only determine the performance of the sub-projects, but should include indicators that determine the impact of sub-projects on beneficiaries. This will enable assessors to analyze adequacy of coverage, project selection criteria, supervision procedures, and other aspects relating to the efficiency and effectiveness of sub-projects; (k) in close collaboration with PERT-PCR, develop a manual on the construction methods, quality control procedures and standards of materials and application, based on locally available materials and labor intensive techniques. It should provide methodologies for assessment of conditions on the ground and associated standard designs that have been developed in consultation with the communities, and propose reference prices with some straightforward explanations about its calculations (unit prices and quantities). The manual should also include precise and well defined rules for the selection of sub-projects which have not been selected ex-ante, and provide project specific standardized contracts for the procurement of goods and services, or if not feasible, provide guidance in establishing such contracts. The manual should be brief, preferably not exceeding 20 pages, and must provide clear, step by step flow charts for preparation of project proposals illustrated by pictograms, etc., and intended for use by communities in the field; (1) assist PERT-PCR in developing of training programs that build requisite skills within the community necessary for project related activities; and (m) inform PERT-PCR in writing of its decision to sub-contract services it cannot perform itself PERT-PCR has to approve the method and process through which the subcontracting may be achieved and will have a final say in the selection of such subcontractors. Implementation 6. The consultant is responsible for steering and facilitating implementation of the projects. The project itself however should be implemented on the ground by the participating community. - 79 - The following is suggested as a guide to streamline the start-up process; from here however the consultant is encouraged to use the most efficient process as identified by the consultant itself (a) meet with PERT-PCR to receive information on the geographic location of the 'main' RRRMP pilot projects; responsible engineers in the Department of Cusco - Ing. A. Guerra and in the Department of Huancavelica - Ing. A. Rodriguez, (b) review the relevant information from consultants (Final Report Study for Formulation of a Rural Road Program) on the NMT component which gives an inventory of potential NMT paths in the Department of Huancavelica; (c) determine in conjunction with PERT-PCR possible candidate communities within the five selected pilot areas, (d) travel to identified candidate communities; use universally acceptable participatory approaches to present the project to the communities ensuring full participation; identify at this stage the potential community committees or other bodies for project implementation. In terms of institutional organization, in general there are two levels of authority: i)at the District level; the Alcalde; ii) at the community level, the presidente of each community who reports to the alcalde. It is envisaged that participation and implementation occur at the Community level as identified above. The Alcalde of the District should be involved, but decision making should take preferably place at the Community level; (e) request the community to prioritize its needs in NMT and to indicate its commitment in terms of labor; and (f) determine the communities institutional capacity for project implementation, and where lacking, develop such capacity with applicable technical assistance. Prioritization of sub-projects 7. The communities will be responsible for prioritizing their own needs and putting forward proposals for funding. A certain amount of funding will be made available (possibly on the basis of population) to communities for NMT improvements and the communities will prioritize their needs within this framework. The consultant will assist the communities determine possible options and their related costs. An efficient application of funds should be ensured through this or a similar methodology. Contract with a Community Group 8. A sample contract "Contract with a Community Group" is available from PERT-PCR. The project would finance 80 percent of the total cost estimated by PERT-PCR for the proposed works based on standard designs and unit costs. This would fully cover the cost of materials, equipment and skilled labor, while most of the unskilled labor would be contributed by the community. - 80 - Estimated Consultant's Inputs 9. The services of the consultant will be required for pilot of the project with a duration of 18 (eighteen) months. It is envisaged that the following professional inputs are provided by a 'core team': - an engineer (6 person/months) - a sociologist (6 person/months) - a promoter (12 person/months) The same 'core team' of consultants should be responsible for all five NMT pilot projects. The reason for this is to allow for consistency and to facilitate the drawing of conclusions for the pilot as a whole. It will also give opportunity to determine issues that arise differently in different sub- project areas. Furthermore, this 'core team' would be supported by a field worker in each of the five pilot sites, organizing community assemblies, collecting data, etc. (5x18 manmonths). Reporting Requirements 10. In order to track and monitor the progress of the pilot project, the consultant will submit the following reports to the PERT-PCR. (a) Inception Report - This report must be submitted within 30 days after the starting date of the assignment. The report should outline the details of the methodology and strategy to be adopted to achieve the scope of work together with a list of key personnel and their work program. (b) Interim Report - This report must be submitted 6 months after the starting date for review by PERT-PCR containing: (i) the results of initial activities with preliminary conclusions and recommendations; (ii) details of work program for the immediate twelve months; (iii) details of key issues that need to be resolved to ensure smooth running of the project; (iv) the standard design manual to be included in the Project Operational Manual. (c) Quarterly Reports - These reports to be issued one month after the end of each quarter will contain a summary of the activities performed during the quarter together with the conclusions and guidelines for the next quarter. (d) Draft Final Report - A Draft Final Report will be submitted 17 months after the starting date giving a summary of all the works performed and presenting all findings, conclusions and recommendations as are related to the objectives and scope of work defined for this project. PERT-PCR will discuss the project with the consultant and make amendments and additions where necessary, including the observations submitted by the Banks. (e) Final Report - The Final Report will be submitted within six weeks of the conclusion of the discussions with PERT-PCR and submission of the comments of the Banks, incorporating necessary modifications to the Draft Final Report covering all aspects of the project. - 81 - ANNEX 5 PERU RURAL ROADS REHABILITATION AND MAINTENANCE PROJECT Institutional Development Component 1. This component consists of: i) technical assistance to improve planning and management of rural roads at the national and local levels. This technical assistance will be supported by two policy and institutional studies on local road administration practices and rural road financing; ii) technical assistance to develop micro-enterprises for execution of routine maintenance using work methods tailored to the institutional and financial capacity of rural municipalities; and iii) a package of technical assistance and training services to strengthen the local road construction industry, to be offered on a voluntary basis to local contractors and micro-enterprises who will be awarded contracts under the road rehabilitation components, and on-the-job training to local engineering firms and beneficiaries on the preparation of feasibility studies and technical project proposals. The project would also finance training in Peru and abroad for key staff from MTC, PERT-PCR and local governments participating in project activities. 2. Attachments 1 and 2 include the terms of reference for the technical assistance in rural road planning and management and for the development of microenterprises for rural roads maintenance, respectively. Selection of the consultants will start in September 1995, to ensure the consultant services can be deployed from the beginning of project implementation. 3 . PERT-PCR will prepare final terms of reference for the two studies on Local Road Administration Practices and Rural Road Financing by end-September 1996, to take into account the development of the Government's decentralization policy, which at this stage is not clearly defined. The consultants will be engaged by end-December 1996, for about six to eight months to complete the studies and discuss their recommendations with Government. The design of sustainable mechanisms for the financing of rural roads maintenance and the streamlining of contract administration practices at the local level, are foreseen as major outcomes of the project. The studies will provide the basic recommendations for Government to formulate the strategies needed in a manner consistent with its decentralization agenda, and prepare the action plans to implement these strategies in reasonable time. The strategies and action plans will be thoroughly discussed and agreed upon with IDB and the Bank at the project third annual review. At that time, the review will determine the degree of success in achieving the project development objectives, and subject to actual performance, decide whether to move ahead with the second phase of the six-year program. - 82 - ANNEX 5 Attachment 1 PERU RURAL ROADS REHABILITATION AND MAINTENANCE PROJECT Esquema de Terminos de Referencia para Asistencia T&enica en Planeaci6n y Gesti6n de Caminos Rurales Antecedentes 1. La red de carreteras departamentales y vecinales del Perfi alcanza una longitud cercana a los 57,000 km., de los cuales 3% son caminos pavimentados, 12% son caminos de grava, 25% caminos de tierra y 60% son trochas carrozables. Todos ellos se caracterizan por el alto deterioro producto de la falta de mantenimiento. Desde 1991 a la fecha el gobierno ha iniciado la progresiva recuperaci6n del sistema vial del Perui. Habiendo completado la rehabilitaci6n de las dos columnas vertebrales de dicho sistema --las carreteras Panamericana y Central-- existe un marcado interes por parte del gobierno por consolidar el sistema de transporte integrando la red vial nacional con las vias departamentales y vecinales que sirven a las zonas mas deprimidas y necesitadas de infraestructura basica que propicie su desarrollo. 2. Con este fin, el gobierno ha preparado el Proyecto de Rehabilitaci6n y Mantenimiento de Caminos Rurales (PRMCR), que contara con financiamiento conjunto del Banco Mundial y del Banco Interamericano de Desarrollo. El proyecto cubrira los departamentos de Ancash, Apurimac, Ayacucho, Cajamarca, Cusco y Huancavelica inicialmente, para extenderse a los departamentos de Huanuco, Junin, Madre de Dios, Pasco, Puno y San Martin, a partir de 1997. Este proyecto busca rehabilitar redes de caminos secundarios y rurales en la sierra del Peru, de manera de restablecer las condiciones de transitabilidad y acceso a las zonas rurales mas deprimidas. Las obras de rehabilitaci6n contempladas permiten emplear metodos de uso intensivo de mano de obra en condiciones econ6micas y sin afectar la calidad o durabilidad de las mismas, lo que permitira generar empleo durante los periodos de escasa actividad agricola. Asimismo, a fin de que el impacto del programa sea mayor, los caminos seleccionados constituiran "proyectos integrados", es decir, estaran agrupados en redes que aseguren una adecuada comunicaci6n de las comunidades rurales con los centros de actividad econ6mica. Por ende, el programa incluira tambien la rehabilitaci6n de los caminos departamentales --y nacionales si fuera el caso-- necesarios para proporcionar esta vinculaci6n. Se espera que esta estrategia tendra un mayor impacto en el desarrollo de la regi6n que la rehabilitaci6n de caminos en forma aislada. 3. Los municipios son responsables por la gesti6n de los caminos rurales. Sin embargo, la debilidad institucional y falta de recursos que padece gran parte de los municipios de los departamentos arriba mencionados, ha impedido que en la prActica desarrollen estas responsabilidades. Es dificil para el gobierno nacional atender en forma directa estas redes y en particular el mantenimiento de los caminos rurales alejados, y de cantidad indefinida, que constituyen la red vial que sirve de soporte al desarrollo rural. El proyecto por consiguiente, - 83 - juntamente con la ejecuci6n de las obras canalizara recursos de asistencia tecnica dirigidos a los municipios provinciales y distritales, con el fin de prepararlos para que en un tiempo razonable puedan Ilevar a cabo con exito la gesti6n de las redes viales que les competen. 4. PERT-PCR desea contratar servicios de consultoria y asistencia tecnica para la ejecuci6n de este proyecto. La consultoria proporcionara apoyo tecnico al PERT-PCR, capacitaci6n para el personal de la Oficina de Planeaci6n del MTC en la planificaci6n de politicas para el desarrollo del transporte rural, y asistencia tecnica para desarrollo institucional de los municipios. Se anexa a estos terminos de referencia el Informe de Evaluaci6n del Proyecto preparado por PERT-PCR conjuntamente con el Banco Mundial y el BID, el cual describe con detalle los objetivos, componentes, alcances y lineamientos para la ejecuci6n del proyecto. Objetivos 5. La presente asistencia tecnica esta estructurada alrededor de cuatro objetivos claves para el exito del Proyecto de Rehabilitaci6n y Mantenimiento de Caminos Rurales: (a) Proporcionar apoyo tecnico a la unidad ejecutora del proyecto, el Proyecto Especial de Rehabilitaci6n del Transporte-Programa de Caminos Rurales (PERT-PCR) durante la ejecuci6n del proyecto. Esto implica asegurar que los proyectos de inversi6n y la calidad de los estudios elaborados por los consultores reflejen una correcta aplicaci6n del Manual de Operaciones, actualizar y mejorar las normas de disefio, especificaciones tecnicas y metodos de construcci6n y otros procedimientos establecidos en el Manual de Operaci6n de acuerdo con la informaci6n obtenida en la implementaci6n del proyecto, y asistir a la Gerencia del PCR en la evaluaci6n del desempefno de las unidades desconcentradas y desarrollo del componente de desarrollo institucional. La documentaci6n elaborada durante la ejecuci6n del proyecto trascenderA el ambito del mismo, dado que los diversos manuales tecnicos, los procedimientos de contrataci6n y gesti6n, etc. seran traspasados a los municipios, gobiernos regionales eventualmente, en definitiva, a quienes deban asumir la gesti6n de los caminos rurales; (b) Capacitar personal clave de la Oficina de Planeaci6n del MTC para fortalecer su capacidad para formular politicas de caminos rurales, planificar inversiones en el largo plazo en coordinaci6n con otros Ministerios, y dar seguimiento al comportamiento del sistema de transporte en areas rurales. Esto implica tambien desarrollar sistemas para el seguimiento de las politicas y del desempefio del subsector desde la perspectiva global del Ministerio de Transporte; (c) Desarrollar un programa de fortalecimiento para la pequenla y mediana industria de la construcci6n; y (d) Desarrollar y llevar a cabo un programa de fortalecimiento institucional para municipalidades provinciales y distritales involucradas en el proyecto, que permita en el mediano plazo mejorar su capacidad de gesti6n del mantenimiento de los caminos rurales, promover su organizaci6n, establecer sistemas de presupuestos, planeamiento, evaluaci6n - 84 - y control de la gesti6n vial, contratar en forma eficiente la rehabilitaci6n y mantenimiento de los caminos con uso intensivo de mano de obra, formular planes viales para coordinar las necesidades de transporte entre municipalidades provinciales y sus distritos, crear conciencia sobre el medio-ambiente en las comunidades rurales, y comprometer a los usuarios y a otros interesados dentro del proceso de administraci6n de carreteras; estableciendo mecanismos de participaci6n en la seleccion y ejecuci6n de los proyectos y en la evaluaci6n del cumplimiento de los objetivos del Proyecto de Rehabilitacion y Mantenimiento de Caminos Rurales. Alcance de los Trabajos 6. La firma consultora seleccionada desempeniara su labor en estrecha colaboraci6n con las unidades de organizaci6n del PERT-PCR (central y unidades desconcentradas), la Oficina de Planeaci6n del MTC, y las municipalidades provinciales y distritales involucradas en el proyecto a traves de los Convenios Marco de Participaci6n. El alcance de los trabajos de consultoria en las tres areas principales arriba indicadas, incluira pero no se limitara a lo siguiente: Area apoyo institucional, tecnico y administrativo al PERT-PCR (a) Revisar la clasificaci6n funcional e inventario de caminos rurales del Perui, proponer las mejoras necesarias para su actualizaci6n, y asistir a PERT-PCR en su puesta en operaci6n en los departamentos en los que actuara el proyecto, de acuerdo con el plan operacional acordado. (b) Asistir a PERT-PCR en los aspectos tecnicos relativos a la coordinaci6n con los organismos de gobierno central (OPLA y DGC en el MTC, FONCODES, INADE, Regiones si fuera el caso). (c) Preparar t6rminos de referencia y asistir a PERT-PCR y al MTC en la supervisi6n de los estudios sobre "Practicas Locales para la Administraci6n de Caminos" y "Financiamiento de Caminos Rurales". Completado el estudio, el consultor asistira al MTC en la elaboraci6n de un plan de acci6n para implementar las recomendaciones de dichos estudios. (d) Revisar la calidad y consistencia de los estudios de preinversi6n realizados por otros consultores. En particular, los consultores verificaran la consistencia de los costos de las soluciones propuestas y su adherencia al Manual de Operaciones del Proyecto (MOP), el uso de mano de obra y la compensaci6n prevista para la misma, el cumplimiento de las guias ambientales y el grado de adecuaci6n de los planes de mitigaci6n toda vez que estos sean necesarios. (e) Revisar los expedientes tecnicos que se emplearan para llevar a cabo trabajos por administraci6n directa, verificando que esta opci6n excepcional se encuentra justificada desde un punto de vista tecnico y economico, que se han aplicado los estandares tecnicos - 85 - y de costo vigentes para el tipo de obra, y que los arreglos para la supervisi6n de los trabajos son adecuados. (f) Verificar la consistencia y calidad de los informes de supervisi6n de obra elaborados por los consultores contratados para tal fin. (g) Asistir a PERT-PCR y sus UEDs en el mejoramiento de los registros de contratistas y consultores locales calificados bajo el proyecto. El consultor revisara y adecuara los criterios de calificaci6n e invitaci6n teniendo en cuenta la experiencia que se va obteniendo en la ejecuci6n del proyecto. (h) Revisar la adecuaci6n de los procedimientos, terminos de referencia y documentos tecnicos del MOP y formular propuestas para actualizar los mismos con base en la experiencia obtenida durante la ejecuci6n del proyecto. El consultor preparara las modificaciones y documentaci6n necesarias para actualizar el MOP. (i) Completar dentro de los 6 meses de iniciado su contrato, un Manual de Procedimientos Ambientales para el disefio, rehabilitaci6n y conservaci6n de los caminos vecinales y explotaci6n de las areas contiguas, que adapte a las condiciones rurales (1) las guias ambientales contenidas en los terminos de referencia y especificaciones tecnicas del MOP, (2) las recomendaciones para disefio y practicas constructivas del Manual Ambiental elaborado para el MTC, (3) la experiencia en la implementaci6n del Plan Piloto de manera de cubrir los casos tipicos que se observan en los caminos vecinales de a sierra asi como la aplicaci6n de metodos de construcci6n con uso intensivo de mano de obra. El manual incluira, entre otros, (1) medidas para el control de estabilidad de taludes y erosi6n (utilizando tecnicas sencillas preferentemente vegetativas), (2) guias para la selecci6n y manejo de botaderos, (3) guias para desbroce y manejo de vegetaci6n, (4) tecnicas de revegetaci6n y reforestaci6n a lo largo de los caminos, (5) manejo y recuperaci6n de canteras y zonas de prestamo, (6) cuidados y prohibiciones, y su importancia, en zonas de sensibilidad ambiental o cultural (ej., fauna y flora nativas, sitios arqueol6gicos, quebradas, fuientes de agua de consumo humano, canales de riego, etc.). En su presentaci6n, lenguaje y formato, el manual debera adecuarse para que pueda ser utilizado por los municipios, comunidades rurales y pequehos contratistas. Con este fin, el consultor seleccionara una muestra representativa (condiciones sociales y ambientales tipicas) de no menos de 5 caminos y llevara a cabo un taller con las respectivas comunidades rurales para validar las recomendaciones del Manual, su lenguaje y factibilidad de implementaci6n. (j) Revisar la documentaci6n tecnica disponible, la experiencia obtenida en la ejecuci6n del Plan Piloto, el estado del arte y las practicas locales de construcci6n de caminos rurales. Con base en esta revisi6n, el consultor desarrollara (o actualizara cuando sea el caso), dentro de los 12 meses de iniciado el contrato, los siguientes elementos: (1) normas de disefio para la construcci6n y rehabilitaci6n de caminos rurales segun clasificaci6n funcional de los mismos; (2) disefios tipicos/estandar para caminos vecinales, obras de drenaje y obras complementarias, que puedan ser empleadas uniformemente por el proyecto como por otros organismos involucrados en la construcci6n, rehabilitaci6n y - 86 - mantenimiento de caminos rurales, (3) especificaciones tecnicas para construcci6n, uniformizando las especificaciones empleadas por los diversos consultores contratados para realizar estudios de pre-inversi6n, que sean apropiadas para metodos de construcci6n con uso intensivo de mano de obra; (4) normas para control de calidad de los trabajos, convenientemente adaptadas a los medios de construcci6n; (5) instructivos tecnicos para la selecci6n y tratamiento de suelos y materiales a utilizar en caminos de grava o de tierra; y (6) instructivos tecnicos para el tratamiento y estabilizaci6n de taludes, empleando tecnologias viables para caminos rurales. (k) Mantener actualizado el SISP Sistema de Informaci6n y Seguimiento Proyecto, y sus indicadores de desarrollo. El consultor informara mensualmente a la gerencia del PERT- PCR acerca de la evoluci6n de los subproyectos, contratos, las metas alcanzadas y dificultades encontradas, efectuando recomendaciones para mejorar la ejecuci6n de los mismos. (I) Elaborar los indicadores del programa a nivel metas y objetivos de corto, mediano y largo plazo, propuestos en el marco l6gico del proyecto. Previo a cada Revisi6n Anual del proyecto, el consultor elaborara informes consolidados que serviran de base para la revisi6n, los cuales cubriran (1) el progreso en la ejecuci6n del proyecto y el logro de sus objetivos de desarrollo, (2) la gesti6n de las unidades desconcentradas de PERT-PCRs, (3) el desempefio de los municipios e instituciones con las que se han firmado convenios de ejecuci6n, y (4) las propuestas de ajuste a la programaci6n del proyecto. Preparar los informes de progreso trimestrales para su presentaci6n a los bancos cofinanciadores. Area capacitaci6n al MTC en caminos rurales (a) Asistir al MTC en la puesta en funcionamiento de un grupo calificado de profesionales dentro de su Oficina de Planeaci6n, que tendra a su cargo la formulaci6n de politicas y planes de largo plazo para el subsector. El consultor recomendara los perfiles de los especialistas y las funciones que deberan desempefiar, proporcionando terminos de referencia para la contrataci6n de los mismos si fuera el caso. (b) Desarrollar sistemas de informaci6n para el seguimiento de las politicas y del desempefio del caminos rurales. El consultor pondra en funcionamiento este sistema dentro de los 12 meses de iniciados los servicios de consultoria. (c) Capacitar el grupo seleccionado en la formulaci6n de politicas para los caminos rurales, planificaci6n de inversiones en el largo plazo en coordinaci6n con otros Ministerios, y en el seguimiento del comportamiento del sistema de transporte en areas rurales. Area fortalecimiento a la pequeuia y mediana industria de la construcci6n local (a) Tomar conocimiento de la disponibilidad y capacidad de contratistas disponibles localmente, aspecto clave para desarrollar modelos de organizaci6n basados en la - 87 - contrataci6n de los servicios, (2) formular recomendaciones para mejorar la industria de la construcci6n local, y el acceso de los pequefios contratistas al credito, alquiler o lease de equipos, etc., y (3) recomendar, cuando sea el caso, la realizaci6n de estudios adicionales especializados sobre capacidad institucional y absortiva en el medio rural, bajo terminos de referencia elaborados por el consultor. (b) Preparar los programas de capacitaci6n y entrenamiento dirigidos a fortalecer la industria de la construcci6n. El consultor elaborara los programas anuales identificando las necesidades de capacitaci6n, las distintas formas en que esta se llevara a cabo, la audiencia a la cual estan dirigidas, los indicadores que se emplearan para el seguimiento del programa, asi como las universidades y centros especializados (CAPECO, Sensico, Colegio de Ingenieros, otras) que seran contratados para realizar algunas de las actividades. Las propuestas se ajustaran a las necesidades especificas de cada uno de los departamentos. Las propuestas seran convenientemente documentadas y enviadas para consideraci6n del Banco Mundial y del BID antes del 30 de septiembre del anio precedente comenzando en 1996. (c) Evaluar peri6dicamente el cumplimiento de las metas y objetivos del programa de capacitaci6n de la industria local. El consultor recomendarA las acciones pertinentes para mejorar la efectividad de este componente. Area fortalecimiento institucional de los gobiernos municipales (a) Supervisar la realizaci6n de los talleres de participaci6n comunitaria contemplados en el MOP. El consultor asistira a las unidades desconcentradas de PERT-PCR en la formulaci6n de los planes para lievar a cabo estos talleres, capacitara al personal que estara involucrado en dichas actividades, supervisara que la metodologia se aplica en forma consistente. (b) Evaluar peri6dicamente los resultados obtenidos en los talleres de participaci6n comunitaria. En particular, efectuarA una cuidadosa revisi6n de la evaluaci6n de necesidades de transporte percibidas por los beneficiarios, la cual serA un valioso insumo para la formulaci6n de planes de transporte a nivel de provincia. (c) Efectuar diagn6sticos sobre la capacidad institucional, tecnica y financiera de los municipios provinciales en la areas en las que se desarrolla el proyecto y su capacidad de coordinaci6n e integraci6n con los municipios distritales que integran la jurisdicci6n provincial. Este diagn6stico permitira elaborar el perfil institucional de la provincia, clasificar los municipios seguin su potencial capacidad de gesti6n y determinar sus necesidades de organizaci6n, de capacitacion tecnica y de vinculaci6n institucional. (d) Con base en las tareas anteriores, desarrollar modelos de organizaci6n, programas de fortalecimiento institucional y de capacitaci6n tecnica, adecuados para los diversos tipos de municipios cubiertos bajo el proyecto. - 88 - (e) Preparar los Planes de Acci6n Institucional a ser acordados entre PERT-PCR y los municipios provinciales participantes en el proyecto. Estos planes incluiran los objetivos concretos propuestos, las acciones a lievar a cabo por el municipio, por PERT-PCR y por otros organismos de capacitaci6n con financiamiento del proyecto, y los tiempos en que se concretarin las mismas, de manera de permitir un adecuado seguimiento. Los planes contemplarin tambien la adopci6n de los diversos elementos de gesti6n y tecnicos que se indican mas abajo por parte de los municipios, y que seran desarrollados en el transcurso de la asistencia tecnica. El seguimiento directo de estos planes estara a cargo de las UEDs, pero el consultor efectuara una evaluaci6n de control cada tres meses. (f) Preparar lineamientos y trmninos de referencia para la formulaci6n de planes viales provinciales. Estos planes promoveran (i) la participaci6n de los municipios distritales para la concepci6n de proyectos integrados, (2) el empleo sistematico de los mecanismos de consulta y evaluaci6n de las comunidades y (3) la adopci6n de una estrategia a nivel de provincia para el mantenimiento permanente de los caminos bajo su jurisdicci6n. (g) Desarrollar un sistema de inventario y seguimiento de la red de caminos rurales acorde con la capacidad institucional de los municipios provinciales que deberan implementarlo. El disefno del sistema y los instructivos elaborados por el consultor tendran en cuenta que los mismos seran empleados por los municipios por lo que deberan adecuarse a los medios tecnicos y financieros de los mismos. (h) Desarrollar sistemas de presupuestaci6n, costos y seguimiento de obras viales para su implementaci6n en los municipios. El sistema de costos permitira dar cuenta de los costos de todos los componentes, y en particular efectuar una cuidadosa evaluaci6n de los costos reales de la administraci6n directa. Los sistemas de gesti6n del PERT-PCR se ajustaran para su presentaci6n y utilizaci6n por parte de los organismos municipales. Perfil de la empresa a ser contratada, cronograma e informes 7. La empresa a ser contratada debera ser una consultora especializada en ingenieria vial (planificaci6n, proyectos, supervisi6n y gerencia de obras) con experiencia en el disefio, construcci6n y supervisi6n de caminos rurales y en desarrollo institucional. La empresa debera ser capaz de actuar a nivel nacional, en forma simultAnea en doce departamentos para lo cual podra emplear su infraestructura, desarrollar equipos locales autosuficientes o consorciarse con firmas especializadas que garanticen la realizaci6n de los objetivos del Programa y la eficiencia de la ejecuci6n del Proyecto. 8. Para cumplir a plenitud con los encargos materia de los presentes terminos de referencia se estima seran necesarios alrededor de 8 profesionales/mes por ano, durante los 36 meses estimados para la duraci6n del servicio. El consultor deberA proporcionar un cuadro de profesionales calificados en las areas que se detallan a continuaci6n: i) gerente de proyecto; ii) dos ingenieros de caminos (c/amnplia experiencia en rehabilitaci6n y conservaci6n de caminos rurales); iv) economista de transporte con experiencia en planificaci6n de caminos rurales; v) dos especialistas - 89 - en desarrollo institucional; ix) especialista ambiental; x) especialistas en suelos, materiales, puentes, taludes y drenajes (a tiempo parcial) 9. Los consultores desempeiiaran sus actividades en la oficina central del PERT-PCR. En el ejercicio de sus funciones los consultores viajaran con frecuencia al sitio de las obras y a los municipios involucrados en el proyecto. La propuesta del consultor debera considerar los costos administrativos y logisticos necesarios para cumplir con los T&rminos de Referencia. 10. Los postores al momento de la adjudicaci6n del contrato no deberan tener vigente con el Programa de Caminos Rurales ningun tipo de contrato de consultoria, supervisi6n u obra. En caso de tenerlos debe comprometerse a resolverlo en un plazo perentorio una vez seleccionado y llegado a un acuerdo econ6mico con el proyecto. Esta incompatibilidad mantendra su vigencia durante la duraci6n del presente contrato. 11. El consultor elaborara los siguientes informes: i) un informe a los 45 dias de iniciados los servicios, en el cual detallara el programa ajustado de actividades; ii) informes trimestrales, resumiendo las actividades realizadas, el avance en la ejecuci6n del proyecto, y los datos tecnicos que deben ser incorporados en los informes de progreso del proyecto; iii) informes de evaluaci6n, preparados con anterioridad a las revisiones anuales del proyecto programadas para el primer semestre de cada afio. Estos informes resumiran los logros del proyecto, problemas encontrados, aspectos institucionales y todo t6pico que amerite su discusi6n durante la revisi6n anual conjunta entre el Gobiemo, el Banco Mundial y el BID; iv) los manuales tecnicos e instructivos especificos mencionados en estos terminos de referencia, dentro de los 12 meses (6 meses en el caso del Manual de Procedimientos Ambientales) de iniciado el proyecto. - 90 - ANNEX 5 Attachment 2 PERU RURAL ROADS REHABILITATION AND MAINTENANCE PROJECT Esquema de Terminos de Referencia para Desarrollar Microempresas para Mantenimiento Rutinario de Caminos Rurales en Peru Antecedentes 1. La red de carreteras departamentales y vecinales del Peru alcanza una longitud cercana a los 57,000 km., de los cuales 3% son caminos pavimentados, 12% son caminos de grava, 25% caminos de tierra y 60% son trochas carrozables. Todos ellos se caracterizan por el alto deterioro producto de la falta de mantenimiento. Desde 1991 a la fecha el gobiemo ha iniciado la progresiva recuperaci6n del sistema vial del Peruf. Habiendo completado la rehabilitaci6n de las dos columnas vertebrales de dicho sistema --las carreteras Panamericana y Central-- existe un marcado interes por parte del gobierno por consolidar el sistema de transporte integrando la red vial nacional con las vias departamentales y vecinales que sirven a las zonas mas deprimidas y necesitadas de infraestructura basica que propicie su desarrollo. Central a todos estos esfuerzos, es el establecer los mecanismos que permitan el mantenimiento permanente de las vias rehabilitadas, de manera que los beneficios derivados de las inversiones realizadas sean sostenibles a largo plazo. Con este fin, el gobierno ha preparado el Proyecto de Rehabilitaci6n y Mantenimiento de Caminos Rurales (PRMCR) que contara con financiamiento conjunto del Banco Mundial y del Banco Interamericano de Desarrollo. 2. Es dificil para el gobierno nacional atender en forma directa el mantenimiento de los caminos rurales alejados, y de cantidad indefinida, que constituyen la red vial que sirve de soporte al desarrollo rural. Asimismo, en general las soluciones tradicionales aplicadas por los gobiernos municipales han tenido poco exito para atender en forma eficiente y oportuna el mantenimiento de dichos caminos. Esto ha llevado a recomendar una mayor participaci6n del sector privado, en la forma de contratos de mantenimiento y, en particular, a traves de la conformaci6n de microempresas y/o comites de mantenimiento constituidos por los propios beneficiarios de los caminos. Existe en la sierra peruana una larga tradici6n de participaci6n comunitaria y se espera que el involucramiento directo de las comunidades contribuira a arraigar una "cultura de mantenimiento". Por otro lado, la creaci6n de microempresas para atender servicios piblicos, en el marco de una estrategia de privatizaci6n social de algunos servicios que actualmente brinda el Estado, es una iniciativa que se viene ejecutando en Peru6, asi como en otros paises de la regi6n, en forma exitosa y con la ventaja de generar empleo estable entre la poblaci6n mAs deprimida. 3. Precisamente, uno de los componentes del Proyecto de Rehabilitaci6n y Mantenimiento de Caminos Rurales contempla el desarrollo de microempresas y la organizaci6n de comit6s de mantenimiento a fin de proporcionar un mantenimiento rutinario y de emergencia a los caminos rehabilitados bajo el proyecto. Frente a otros esquemas, el uso de las microempresas tiene algunas ventajas comparativas para el desarrollo posterior de las Areas rurales: las microempresas - 91 - pueden actuar de catalizadores para otras iniciativas de desarrollo local, como puntos de contacto para la extensi6n de servicios, y pueden movilizar recursos auin sin explotar para las operaciones de las comunidades locales. Esto, a su vez, puede alentar a los gobiernos locales a hacer uso de las microempresas. Son objetivos especificos de este componente del proyecto: (a) Establecer microempresas que puedan atender en forma eficiente, oportuna y permanente las tareas de mantenimiento rutinario de los caminos vecinales y departamentales rehabilitados bajo el proyecto (o rehabilitados por la DGC u otras instituciones en las mismas areas donde actua el proyecto); (b) Generar nuevos puestos de trabajo y destrezas entre los habitantes de bajos ingresos del area rural del pais, contribuyendo a disminuir el desempleo; (c) Conformar grupos con mentalidad socio-empresarial, brindando la oportunidad a los miembros directos de las microempresas de que sean artifices de su propio progreso econ6mico y al mismo tiempo, por su efecto multiplicador, puedan convertirse en un elemento dinamico para el desarrollo local y regional; y (d) Promover la participaci6n comunitaria en la identificaci6n y analisis de problemas viales y en la implementaci6n de sus soluciones, vinculando la comunidad al desarrollo local y regional de tal forma que se tome consciencia de que las vias han sido construidas para beneficio comuin y deben ser conservadas por la comunidad con apoyo de los gobiemos locales. Objetivos 4. El prop6sito de la presente asistencia tecnica es desarrollar los procedimientos y mecanismos para conformar y emplear microempresas y/o comites organizados para el mantenimiento rutinario de los caminos vecinales y departamentales, y poner en funcionamiento un cierto numero de ellas para atender los carninos y redes viales seleccionados por el MTC para la fase inicial. Estos trabajos en el campo permitiran validar las recomendaciones antes de extenderlas a otras areas del proyecto. Las microempresas y/o comites organizados seran contratados en forma directa por el MTC (con financiamniento del PRMCR) para llevar a cabo los programas de mantenimiento rutinario en el contexto del proyecto, hasta tanto tales contrataciones entren en funcionarniento normal y puedan ser transferidas para su administraci6n por parte de los gobiemos municipales. Basicamente, se esperan cinco productos de la consultoria: (a) Definici6n de las bases legales, administrativas y financieras bajo las cuales deberan conformarse las microempresas o los comites organizados de mantenimiento vial, teniendo en cuenta las distintas alternativas juridicas que existen en el pais para el reconocimiento de las mismas, y sus ventajas y desventajas segun las condiciones sociales, econ6micas o geograficas de las areas donde seran implementadas bajo el programa. (b) Disenio de los procedimientos tecnicos y administrativos para la programaci6n, ejecuci6n, supervisi6n y gesti6n de los trabajos de mantenimiento rutinario a contratar con microempresas - 92 - y/o comites organizados para mantenimiento, proporcionando todos los manuales tecnicos y operativos, modelos de contrato, etc., necesarios para la implementaci6n del sistema. (c) Creaci6n y puesta en funcionamiento de las microempresas necesarias para atender las necesidades de mantenimiento de la red de caminos vecinales y/o departamentales piloto seleccionada por el MTC, con el fin de evaluar la factibilidad del esquema y procedimnientos propuestos. (d) Formulaci6n del sistema de seguimiento y control del programa de microempresas, identificando el arreglo institucional mas adecuado para llevar a cabo la gesti6n-seguimiento del programa (incluyendo indicadores de gesti6n), su posterior traspaso a los gobiernos municipales, asi como la capacitaci6n y asistencia tecnica que en forma continua ha de proporcionarse para apoyar esta iniciativa en el largo plazo. (e) Formulaci6n de la estrategia para extender el desarrollo de los esquemas y sistemas propuestos al resto de las areas geograficas cubiertas por el proyecto, incluyendo la metodologia y terminos de referencia para promotores o entidades a emplear para flevar a cabo la conformaci6n de las microempresas. Alcance de la Asistencia 5. Con el fin de alcanzar los objetivos arriba indicados, el consultor llevara a cabo las siguientes tareas en coordinaci6n con la unidad ejecutora del PRMCR: (a) Identificar las distintas alternativas juridicas y administrativas que existen en el pais para el reconocimiento de las microempresas, estableciendo sus ventajas y desventajas y las pautas socio-econ6micas (disponibilidad de mano de obra, periodos de interferencia con actividad agricola, idiosincracia propia de las comunidades de la regi6n, etc.) que pueden condicionar la viabilidad de las mismas. Las recomendaciones seran validadas en el campo con base en un diagn6stico participativo de los problemas viales distritales y comunales, y su interes en la formaci6n de microempresas de mantenimiento, de acuerdo con la metodologia para analisis participativo incluida en el Manual de Operaciones del PRCMR. Donde se vea necesario, el consultor propondra arreglos organizacionales altemativos (empresas comunales o multicomunales, comites locales, consejos de desarrollo distrital, etc.) para el mantenimiento de los caminos rehabilitados bajo el PRMCR. (b) Con base en la tarea anterior, definir el marco legal, administrativo y financiero bajo el cual operaran los esquemas propuestos, preparar la documentaci6n de apoyo necesaria para constituir las microempresas u otras organizaciones altemativas recomendadas, y determinar que entidades con presencia nacional o regional estan en condiciones de desarrollar actividades de financiamniento de capital inicial, capacitaci6n, asesoria y asistencia tecnica en forma continua, con el fin de apoyar esta iniciativa en el largo plazo. El consultor recomendara las politicas en materia de salarios y distribuci6n de excedentes, gesti6n de personal, puestos y funciones, y manejo contable de las nuevas organizaciones, y explorara la conveniencia de implementar un fondo rotativo operado por una entidad financiera reconocida en el contexto - 93 - de los programas del gobiemo para apoyo a microempresas, u otros mecanismos de canalizaci6n de recursos, que permitan financiar el capital de trabajo inicial y los activos fijos minimos necesarios para la operaci6n de las microempresas. De ser necesario, el consultor propondra las condiciones financieras (tasas de inter6s, periodo de repago, periodo de gracia, requerimientos de colateral) de acuerdo a las leyes y a la experiencia del pais con programas similares. El consultor propondra tambien los mecanismos de participaci6n y coordinaci6n entre los agentes involucrados, incluyendo PERT-PCR como delegado del MTC, los gobiernos locales, y agentes pu.blicos y privados involucrados en el programa. (c) Disefiar los t6rminos para la contrataci6n directa de microempresas y/o comites organizados de mantenimiento, definiendo las actividades tipicas a ejecutar, costos unitarios y recursos necesarios para su ejecuci6n, los procedimientos para la programaci6n, ejecuci6n, supervisi6n y valoraci6n de los trabajos de mantenimiento, asi como la distribuci6n de responsabilidades en la ejecuci6n de las actividades mencionadas. El consultor analizara informaci6n existente en Peru y obtenida de experiencias con programas similares realizadas en otros paises, con el fin de desarrollar todos los instrumentos necesarios para la puesta en marcha y operaci6n del programa de mantenimiento con microempresas u organizaciones similares, incluyendo el disefio de las operaciones de mantenimiento, las especificaciones tecnicas, la organizaci6n y el analisis de costos y tiempos de ejecuci6n de los trabajos. (d) Preparar normas de ejecuci6n, de cantidad y calidad, modelos de contrato, y manuales tecnicos y operativos necesarios para apoyar la gesti6n del programa. El consultor establecera las normas correspondientes a las actividades a incluir en los contratos teniendo en cuenta (1) las condiciones prevalecientes (uso, disefio y topografia de la via) en los tramos de caminos rurales rehabilitados por el PRMCR, sin que esto signifique Ilegar al nivel de detalle de un expediente tecnico, (2) las recomendaciones de estudios similares realizados en el pais (e.g., Plan Piloto de Mantenimiento Rutinario financiado con el Proyecto de Rehabilitaci6n de Transporte, estudios y programas realizados por ONGs), y (3) la experiencia de personal de mantenimiento del MTC. En la preparaci6n de los manuales para uso de las microempresas u organizaciones alternativas se pondrA especial enfasis en los aspectos didacticos, haciendo uso de graficos y lenguaje apropiado para las comunidades a las que estan dirigidos, proponiendo formas sencillas de preparar los materiales, ejecutar y controlar la calidad de los trabajos con base en practicas convenientemente adaptadas al medio local. Los manuales se ajustaran a los criterios y estandares ambientales incorporados en el Manual de Operaciones del PRMCR. (e) Promover la formaci6n de microempresas o arreglos organizacionales altemativos en las areas encomendadas por el MTC para la presente consultoria, teniendo en cuenta los resultados del diagn6stico participativo y analisis socio-econ6nico realizado bajo la tarea (a) y las propuestas formuladas bajo las tareas subsiguientes. Esta tarea comenzarA con el acercamiento a las comunidades, diagn6stico de sus potencialidades, detecci6n de posibles interesados, definici6n de los criterios para selecci6n de los candidatos que integraran las microempresas y, a traves de la guia proporcionada por los promotores seleccionados o empleados por el consultor, desarrollo de un proceso de integraci6n que culminara con la conformaci6n de la nueva organizaci6n. - 94 - (f3 Asegurar el establecimiento de las microempresas u organizaciones altemativas asegurando su puesta en funcionamiento. A tal efecto, seleccionara en concertaci6n con los participantes de la microempresa u organizaci6n de mantenimiento, la forma de constituci6n legal mas apropriada para cada organizaci6n de mantenimiento, y concertara en representacion del MTC la aprobaci6n/reconocimiento respectivo por parte de las instancias comunales, municipales y nacionales si fuera necesario. Para los tramos de carninos encomendados por PERT-PCR, el consultor presentara (1) el arreglo organizacional recomendado y caracteristicas de la organizaci6n que se harA cargo del mantenimiento rutinario, (2) una definici6n de las tareas a realizar, (3) un detalle del programa a ejecutar, los costos de mantenimiento por kil6metro y de inversi6n inicial en las microempresas, (4) una proforma del contrato anual entre la organizaci6n y PERT, y (5) una estimaci6n de las necesidades de capacitaci6n. (g) Asistir en la consolidaci6n de las microempresas u organizaciones altemativas formadas de manera que estas puedan desenvolverse con autonomia. En esta fase, que se prolongara entre 6 y 9 meses, el consultor actuara sobre pedido, cuando los grupos directivos de las nmicroempresas, los entidades comunales o municipales, o el propio PERT-PCR requieran de sus servicios especificos. En este sentido, el consultor proporcionara capacitaci6n tecnica y administrativa a las microempresas u organizaciones altemativas constituidas y asistira por lo menos por un periodo de seis meses en la puesta en marcha, administraci6n y gesti6n de las mismas bajo el programa de mantenimiento. (h) Establecer un sistema de seguimiento y evaluaci6n de la gesti6n del programa de mantenimiento vial con microempresas que permita (a) revisar peri6dicamente el progreso del componente, (b) medir los impactos en empleo, destrezas y nivel de vida de los socios de las micro-empresas u otras organizaciones de mantenirniento, y (c) evaluar la efectividad de las rnicroempresas u otras organizaciones en llevar a cabo los trabajos de mantenimiento. El sistema debera disefiarse teniendo en cuenta su fiutura utilizaci6n por los organismos municipales. (i) Preparar un plan para difusi6n y promoci6n del programa y sus objetivos entre las organizaciones comunales, locales, regionales y otras instituciones publicas y privadas involucradas en la gesti6n vial. El consultor elaborara trmrinos de referencia para el alistamiento de promotores, ONGs u otros organismos con ventajas comparativas, a contratar para la constituci6n de microempresas de mantenimiento en otras areas del pais. Asimismo, propondra recomendaciones respecto a la estructura institucional e inter-administrativa para la futura gesti6n del programa por los gobiemos municipales. Finalmente, el consultor desarrollarA manuales para capacitaci6n de (1) promotores, y (2) microempresas u organizaciones alternativas. Agencia Ejecutora 6. El Proyecto Especial de Rehabilitaci6n de Transporte-Programa de Carninos Rurales (PERT- PCR) sera la unidad ejecutora que contratara el estudio en representaci6n del Ministerio de Transporte (MTC). El consultor coordinarA con el personal especializado de la unidad -- o los consultores contratados como apoyo tecnico por la unidad-- el desarrollo de la consultoria. - 95 - Requerimientos de Personal, Cronograma e Informes 7. Se estimna que la consultoria requerira la participaci6n de un equipo de personal interdisciplinario que cubra los aspectos de promoci6n y participaci6n de la comunidad, mantenimniento vial, legislaci6n laboral, sistemas administrativos y contables, y capacitaci6n. El plazo para la consultoria se estima en 15 meses distribuidos tentativamnente seguin sigue: i) a los 2 meses, completar el diagn6stico participativo y las bases legales, administrativas y financieras para la conformaci6n de las microempresas; ii) a los 5 meses, completar el disefio del sistema de gesti6n del mantenimiento con base en microempresas; iii) a los 9 meses, completar el establecimiento de las microempresas en las areas encomendadas; y iv) hasta los 15 meses, suministrar asistencia tecnica especifica y completar la documentaci6n relativa a la difusi6n del sistema. Los plazos son contados a partir de la fecha de firma del contrato. 8. Para poder acompafiar el avance y desarrollo de este componente, el consultor sometera informes a consideraci6n y aprobaci6n de PERT-PCR al termino de cada una de las etapas arriba mencionadas. Un mes antes de la terminaci6n del contrato, el consultor presentari un borrador de Informe Final para revisi6n y aprobaci6n final de PERT-PCR, e incorporari los comentarios de este organismo en el Informe Final que presentara al termninar el contrato. El informe final contendra un resumen de los indicadores de monitoreo de todas las microempresas y tramos mantenidos con apoyo del programa, lecciones aprendidas, sugerencias para modificaci6n en el diseflo del programa y un resumen de impactos en empleo, ingreso y medio amnbiente del trabajo desarrollado. Dicho informe sera acompaiando por un Resumen Ejecutivo. - 97 - ANNEX 6 PERU RURAL ROADS REHABELIATION AND MAINTENANCE PROJECT Environmental Assessment Key Issues 1. There are no major or significant environmental issues associated with the proposed project. As the project entails mainly rehabilitation and maintenance, of existing roads the direct impact of project works on natural ecosystems and right of ways are of less importance. Proposed roads to be rehabilitated are already in consolidated areas in which indirect impacts have already being exerted for many decades; therefore, additional pressures on surrounding natural areas are expected to be negligible. 2. However, there is evidence of important negative environmental impacts along existing rural roads such as increased erosion, slope stability and drainage obstruction. These problems will be addressed in the present project and the appropriate mitigation measures identified for the design of the rehabilitation works, which will include all opportunities for environmental enhancement along the corridors and the population settled in the area. Environmental and Social Setting 3. Most of the rural roads included in the Project are located between elevations of 1,100 to 3,700 meters above sea level. The terrain presents typical conditions of the high Andes with rocky and gravel formations and annual precipitation under 1,000 mm, with some areas going as high as 2,000 mm. 4. Most rural roads were built without adequate design standards. Road surface grades are made directly on natural terrain cuts, with inadequate treatment of lateral slopes and insufficient or non-existent drainage systems. Inadequate construction techniques and the absence of maintenance practices have led to increasingly deteriorating conditions of the rural road network. 5. An environmental survey of 17 typical rural roads included in the Pilot Program (covering approximately 252 km) concluded that: i) about 47% of the roads do not have lateral drains or intercepting ditches and the existing ones are either silted and obstructed or inoperative; ii) about 76% of surveyed roads present flooding or groundwater table problems; and iii) about 64% of roads present slope and embankment instability. 6. These problems are further exacerbated by improper cultivation practices, slash and burn techniques in steep slopes, and a lack of environmental awareness in the rural population. This situation in turn exerts negative impacts on the existing rural road network causing frequent landslides and obstructions in specific areas thus increasing maintenance problems. - 98 - 7. The project is located in the rural area of the Peruvian Andes, where about 30 percent of the country's population lives. About 67% of the sierra population is poor and more than 50% is extremely poor. Around 25% of the rural poor and 40% of the extremely poor belong to indigenous groups. The main economic activity in the area of influence of most rural roads is agriculture, with migratory patterns in specific areas; many of the production systems are unsustainable which has caused a great deal of deforestation and soil degradation in those areas. 8. Due to the violence of guerrilla warfare during the last two decades, the rural population was displaced to the urban centers (mainly Lima); however, as security conditions are improving in rural areas, the rural poor and indigenous groups have been returning to their previous lands. The proposed project would initially cover six departments that rank highest in rural poverty. The project investments aim to improve access of the existing communities to a well-integrated rural road network to support poverty alleviation and rural development. Institutional Aspects 9. MTC's capacity to address environmental issues associated with road projects is still weak, in spite of major efforts carried out under the Transport Rehabilitation project. The Environmental Unit in MTC has not been consolidated and there is a need for greater commitment from the Ministry to reorganize and strengthen this unit. Most environmental activities for road projects are undertaken by an ad-hoc environmental unit working within PERT-PRT. The strengthening of the institutional set up and of the environmental unit in particular is being supported by the Bank on-going Transport Rehabilitation Project and the two IDB funded road projects. With regard to the rural road sector, the project finances technical assistance for PERT- PCR in, among other areas, environmental practices. Table 1 below shows the various environmental aspects cover under the institutional development component of the project. More details on the scope of the technical assistance programs are given in the terms of reference outlined in Annex 5. Project Environmental Components 10. Environmental issues and concerns have been integrated in the design of the project. Instead of devising an independent environmental component, all project sub-components and activities will introduce appropriate environmental language or terms of reference to: (i) carry out environmental screening of proposed sub-projects; (ii) carry out environmental diagnosis and identification of environmental enhancement opportunities along existing roads to be rehabilitated; (iii) supervise the compliance with environmental requirements for project design and construction. Environmental guidelines for rural road rehabilitation and maintenance will be part of all bidding documents and contracts. These manuals will be designed and tested with community participation in order to ensure appropriate language and applicability of proposed environmental measures. 11. The project will provide technical assistance to all the different actors involved in project design and implementation. This includes environmental management of roads and construction of critical environmental mitigation measures. Finally, the project will finance an environmental - 99 - awareness program in the communities benefiting from the project. Table I summarizes the enviromnental design of the project. 12. The community participation strategy adopted for the project will further enhance the positive environmental and social impacts of the project such as: (i) providing better access to basic economic and health services for the rural poor; (ii) generating sustainable employrnent activities through the support to community based microenterprises; and (iii) improving environmental conditions in the rural communities. Table 1 Integration of Environmental Issues into Project Design and Implementation Subton _onenttAc"ivty Environmental Aspets Project Eligibility Screening of all proposals according to environmental criteria. Environmental diagnosis will identify opportunities for environmental enhancement. Project Design TORs for technical design include environmental aspects according to results of initial screening and diagnosis. Rehabilitation/Maintenance Works Environmental guidelines for rehabilitation and maintenance contractors are part of bidding documents and contracts. An Environmental Manual, specifically designed for rural roads and with participation of communities will be completed and approved by September 30, 1996 Supervision and Performance Audits Terms of reference for supervision of works include specific requirements as to compliance with environmental specifications. Bi-annual technical and performance audits include assessing compliance with environmental guidelines and specifications. Institutional Development: Includes (1) defining environmental policies and procedures, (2) * Technical assistance for rural road assisting PERT-PCR in screening and supervising subprojects, (3) planning and management preparating an Environmental Manual for rural roads (see above), and (4) designing and implementing an environmental awareness program in beneficiary communities * Technical assistance for developing Includes (1) preparating a manual for sustainable road maintenance micro-enterprises and community- (which will include environmental guidelines), and (2) training based organizations for routine microenterprises and rural communities in the use of the maintenance environmental guidelines. * Technical assistance for developing the Includes (1) training and on-the-job training to consultants and local road construction industry small and medium size contractors in the design, construction, and supervision of environmental mitigation measures (slope stabilization, drainage, plantings, etc.), and (2) training on environmental requirements of road rehabilitation. - 101 - ANNEX 7 PERU RURAL ROAD REHABILIBATION AN MAINTENANCE PROJECT Summary Of Program And Project Costs tPROJECT ih1Ai 1 P1HASE 11 TOTAL PROGRAM PROJECT C lOMPOTS Coal tIUS0001 Cost (Ua S$0001 Local Forai0E TOW Local ForsignEs Total Local ora.sn Es Total CIVIL WORKS P.446 60.144 10."6 71.370 38.330 t0S.70 161.819 w.476 25a,29J Rhahb litatim of Rural Roads 4*,Q0 3Q,000 7Q0 30,000 20,0JQ 50.000 75,00 50,000 125.000 Reheltaktton of Conctlng Pdmry and Scondwry Roadis 194J #,S400 9,0CQ 9,00) 18t00Q 28.400 26,400 56.900 Routh,e Malnyantece of Roads 1tO.600 2J30 12U0 22.510 4.500 27.0C0 34,0t0 6.900 40.800 Impromant of Vilag Surets 12,356 61t111 20,496 6e,72 4,490 1 P00 19.019 12.678 31.6W9 Improvem, nt of Vilage Unctlified Natoks 2.20 250 2. 3.150 350 SAWQ 5.400 6am 6a.oo CONSULTANT SERVICES 111270 7J114 18,754 6.146 3S430 .6.76 19.416 10.944 27,359 Prahvnamuaent Studis 4r20 4,12 10,344 1,434 950 2.391 7,641 6,094 12.736 Suparriion of Civil Weks 4.616 3,012 7.530 3,291 2.194 65,46 7,590 5.200 13.01b P:rlormanca Audito (Tacaic, Brnlonmental. Proeneamunt - 46 364 S10 420 290 700 93e 64 1.810 sd Manwpment Ausit DtSTfTftJtCAL DEYIEOPMET 2,74 6.i40 7,it00 1.440 2,760 4,200 4,200 7.900 12.100 Technrcal Asistance for Moral Road Planir and M asgam 1; 2,aoo 4.000 720 1,690 2.400 1,92 4,400 6.400 Tea. Assst, for Devloping Maintsance Micantaepdass 6 S0 1,80 380 540 - 9D0 1500 1,50) 2.500 Tach. Asist, for Derelopmng the Local Cotnuctlon lndisry ' 240 360 - )o 160 240 400 400 6OD 1,000 Tech. Asist. for Non-Motorazed Rual Transport Componant *60 420 700 120 160 300 400 600 1.000 Studi on MoRul Rood Fbancing nd Loal Adoilhutrntlon 2t0 40 700 00 00 00 260 420 700 Training in Pan and Abroad 120 1O 3001 e0 120 100 200 300 t00 TOTAL 6ASSEL ECOST 104,478 72,602 177.280 77.965 44.520 122A476 182.433 117.322 299,75b Physical Contingancss 9.04$ eDt5- 16.060 7.137 3.633 10,170 16,182 9,846 26.030 Price Contingnci.s 5.4n7 44077' 1.94 10,831 6.155 ¶3,S96 16.420 10,514 26g34 Prject Maemat Costs 9l.800 0 6 .80 7,500 00 7.500 17.300 00 17.300 TOTAL PROJECT NET COST 12$,1$4 636il 212, 103.423 54.508 1197931 232.335 137.684 370,0tS Tans snd Duties 36.174 00 36.175 28,428 00 23.420 66.603 00 66.603 GRAOND TOTAL 147.370 626,e3 250.264 131.861 54.506 166.30* 296.938 137,684 4368.27 INANCIAL PLAN Local Foreign Ex. Project Taxes Total Cost As % of As % of Cost Cost Cost (IGV) inc. Taxes Project Cost Total Cost PROPOSED PROJECT (PHASE 1,1995-1998) o IBRD 48,553 41,447 90,000 0 90,000 42.4% 36.0% * IDB 48,553 41,447 90,000 0 90,000 42.4% 36.0% * GOP 32,088 0 32,088 38,176 70,264 15.1% 28.1% TOTAL PROJECT 129.194 12.0,93 212,008 36176 260,264 100.0% 100.0% PHASE 11(1999-2000) o IBRD 32,772 27,254 60,026 60,026 38.0% 32.2% o IDB 32,772 27,254 60.026 60,026 38.0% 32.2% * GOP 37,880 0 37.880 28,428 66,307 24.0% 35.6% TOTAL PHASEII 143423- -54508 157831 28428 18683.6 100.0% 100.0% SIX-YEAR PROGRAM (1995-2000) * IBRD 81,184 68,842 150,025 150,026 40.5% 34.4% I IDB 81,184 68,842 150,025 150,026 40.5% 34.4% * GOP 69.968 0 69,968 66,603 136,571 18.9% 31.3% TOTAL SIX-YEAR PROGRAM 232.330 137.064 370,010 OG,4OS 43622 100.48 IQ0% - 102 - PERU RURAL ROADS REHABILITATION AND MAINTENANCE PROJECT SIX-YEAR RURAL ROADS PROGRAM COSTS BY YEAR (US$'000) PROJECT COMPONENTS Coat (US$S000) Progran Coat by year (USs'000) (PhMse I) Phase II Local Foreign Ex. Total 1996"' 1996 1997 1998 1999 2000 .ti19954 1999-0 CVIL WORKS 161.818 98.478 80.2296 18.696 32.900 44,820 54,180 54,540 55.1600: 150.596 109.700 Rehabilitation of Rural Roads 75,000 50,000 125,000 14,000 16,000 20,000 25,000 25,000 25,000 75.0W0 50,000 Rehabilitation of Connecting Primary and Secondary Roads 28,400 28,400 56,80 1,000 9,000 14,400 14,400 10,8W 7,200 38,300 18,W00 Routine Maintenance of Roads 34,000 6,800 40,800 00 1,800 4,320 7,680 11,640 15,360 I3A800 27,000 Improvement of Village Streets 19,018 12,678 31,696 3,696 5,600 5,600 5,600 5,600 5,600 20,496 11,200 Improvement oD Village Unclassified Networks 5,400 60 6,.00 00 500 500 1,500 1,5W 2,0W0 2,500 3,500 CONSULTANT SERVICES 18,416 10,944 27,369 2,856 4,536 5,622 5.770 5.468 3.108 18,784 8.576 Pre-lnvestment Studies 7,641 5,094 12,735 1,921 2,681 3,031 2,711 2,391 00 10,344 2,391 Supervision of Civil Works 7,809 5,206 13915O 935 1,645 2,241 2,709 2,727 2,758 7,530 5,485 Performance Audits (Technical, Environmental, Procurement 966 644 TS,10 00 210 350 350 350 350 910 700 and Management Audits) INSTITUTIONAL DEVELOPMENT 4.200 .7.90 12.100 2 250 2.880 2.950 2.250 2.100 2.100 7.900 4.200 Technical Asistance for Rural Road Planning and Manageme 1,920 4,480::::. 6,400 250 1,250 1,250 1,250 1,200 1,200 4,000 2,400 Tech. Assist. for Developing Maintenance Microenterprises 1,000 1,500 ..... 2,500 00 600 500 500 450 450 1,800 900 Tech. Assist. for Developing the Local Construction Industry 400 600 1,000 00 200 200 200 200 200 6f0 400 Tech. Assist. for Non-Motorized Rural Transport Component 400 600 :1 t,000 00 300 200 200 150 150 700 300 Studies on Rural Road Financing and Local Adminsitration 280 420 O 00 400 300 00 00 00 700 00 Trainigin Peru mnd Abroad 200 300 S 00 100 100 100 100 100 300 200 TOTAL BASELINE COST 182A33 117.322 290,755 21.802 40,286 52.992 62.200 62,108 60.368 177.280 122,76 Physical Contingencies 16,182 9,848 28,030 1,870 3,290 4,482 5,418 5,454 5,516 15,060 10,970 Price Contingencies 16,392 10,542 26,934 1,177 3,146 5,626 7,598 9.388 9948 16,985 Project Managment Costs 17,300 00 17,300 700 2,100 3,250 3,750 3,750 3,750... 9,8D0 7,500 TOTAL PROGRAM NET COST 232.307 137,712 1 370.019 24.371 46,853 63.870 76,994 78,909 79.022 212,088 157,931 TaxesandDuties 66,603 00 66,603 4,387 8,433 11,497 13,859 14,204 14,224 38,176 28,428 GRANDTOTAL 298,910 137,712 436,622 28.758 55,286 75,366 90,853 93,113 93.248 250,264 186,358 - 103 - PERU RURAL ROADS REHABILITATION AND MAINTENANCE PROJECT DETAILED FINANCIAL PLAN (US OOO) PROJECT (PHASE I - 1996-1998) PHASE 11 (1999-2000) TOTAL PROGRAM (1996-2000) PROJECT COMPONENTS IBRD IDB GOP Tdal (%) Base IBRD IDB GOP Total (%) Base IBRD IDB GOP Total Cost Cost CIVIL WORKS 66.698 66.69$ 19.200 150.596 84.9% 42,615 42,615 24,470 109.700 89.6% 108,313 108.313 43,670 260,296 Rehabilitation of Rural Roads 33,750 33,750 7,500 75,000 42.3% 22,500 22,500 5,000 50,000 40.8% 56,250 56,250 12,500 125.000 Rehabilitation of Connecting Primary and Secondary Roads 17,460 17,460 3,880 38,800 21.9% 8,100 8,100 1,800 18,000 14.7% 25,560 25,560 5,680 58,800 Routine Maintenance of Roads 4,140 4,140 5,520 13,800 7.8% 5,400 5,400 16,200 27,000 22.0% 9,540 9,540 21,720 40,800 Improvementof VillageStreets 9,223 9,223 2,050 20,496 11.6% 5,040 5,040 1,120 11,200 9.1% 14,263 14,263 3,170 31,696 Improvement of Village Unclassified Networks 1,125 1,125 250 2,500 1.4% 1,575 1,575 350 3,500 2.9% 2,700 2,700 600 6,000 CONSULTANT SERVICES 9,392 9,392 0 18,784 10.6% 4,288 4,288 0 8,576 7.0% 13,680 13,680 0 27,359 Pre-investment Studies 5,172 5,172 0 10,344 5.8% 1,195 1,195 0 2,391 2.0% 6,367 6,367 0 12,735 Supervision of Civil Works 3,765 3,765 0 7,530 4.2% 2,743 2,743 0 5,485 4.5% 6,507 6,507 0 13,015 Performance Audits ITechnical, Environmental, Procurement 455 455 0 910 0.5% 350 350 0 700 0.6% 805 805 0 1,610 and Management Audit) INSTITUTIONAL DEVELOPMENT 3,950 3,950 0 7,900 4.5% 2,100 2,100 0 4,200 3.4% 6.050 6,050 0 12,100 Technical Asistance for Rural Road Planning and Manageme 2,000 2,000 0 4,000 2.3% 1,200 1,200 0 2,400 2.0% 3,200 3,200 0 6.400 Tech. Assist. for Developing Maintenance Microenterprises 800 800 0 1,600 0.9% 450 450 0 900 0.7% 1,250 1,250 0 2.500 Tech. Assist. for Developing the Local Construction Industry 300 300 0 600 0.3% 200 200 0 400 0.3% 500 500 0 1,000 Tech. Assist. for Non-Motorized Rural Transport Component 350 350 0 700 0.4% 150 150 0 300 0.2% 500 500 0 1,000 Studies on Rural Road Financing and Local Adminsitration 350 350 0 700 0.4% 0 0 0 0 0.0% 350 350 0 700 Training in Peru and Abroad 150 150 0 300 0.2% 100 100 0 200 0.2% 250 250 0 500 TOTAL BASELINE COST 79.040 79,040 19,200 177,280 100.0% 49.003 49,003 24,470 122,476 100.0% 128,043 128,043 43,670 299,755 Physical Contingencies 6,570 6,570 1,920 15,060 4,262 4,262 2,447 10,970 10,831 10,831 4,367 26,030 Price Contingencies 4,390 4,390 1,168 9,948 6,761 6,761 3,463 16,985 11,151 11,151 4,631 26,934 Project Managment Costs 0 0 9,800 9,800 0 0 7,500 7,500 0 0 17,300 17,300 TOTAL PROJECT NET COST 90.000 90,000 32.088 212,088 60,026 60,026 37,880 157,931 150,025 150,025 69,968 370,019 Taxes and Duties 0 0 38,176 38,176 0 0 28,428 28,428 0 0 66,603 66,603 GRAND TOTAL 90,000 90,000 70,264 250,264 60,026 60,026 66.307 186,358 150,025 150.025 136,571 436,622 36.0% 36.0% 28.1% 100.0% 32.2% 32.2% 35.6% 100.0% 34.4% 34.4% 31.3% 100.0% - 104 - PROJECT TOTAL PROJECT COMPONENTS Oovwmment Contdbudon by year (US$'000) (Phemel) Phase It SIX-YEAR 1995's 1996 1997 1999 1999 2000 19S5; 1999-0 PROGRAM CIVIL WORKS 1,870 3.830 5.779 7,722 11.274 13,196 ltQ200 24,470 43.670 Rehabilitation of Rural Roads 1,400 1,600 2,000 2.500 2.500 2,500 7, 5,000 12,500 Rehabilitation of Connecting Primary and Secondary Roads 100 900 1.440 1,440 1,080 720 3,880 1.800 5,680 Routine Maintenanca of Roads 00 720 1,728 3,072 6,984 9,216 S,t620 16.200 21,720 Improvement of Village Streeta 370 560 560 560 560 560 2,050 1,120 3,170 Improvement of Village Undassified Networks 00 50 50 150 150 200 280 350 600 CONSULTANT SERVICES 00 00 00 00 00 00. 00 00 00 Pre-Investment Studies 00 00 00 00 00 00 00 00 00 Supervision of Civil Works 00 00 00 00 00 00 00do 00 00 Performance Audits (Technical, Environmental, Procurament, 00 00 00 00 00 00 o 0 00 00 end Management Audit) .. .. :. .... ::... INSTITUTIONAL DEVELOPMENT . .00.. 00t 00) 00 : O 0oo 00 00 00 Technical Asistance for Rural Road Planning and Management 00 00 00 00 00 00 00 00 00 Tech. Assist. for Developing Maintenance Microenterprises 00 00 00 00 00 00 00 00 00 Tech. Assist. for Developing the Local Construction Industry 00 00 00 00 00 00 . 00 00 00 Tech. Assist. for Non-Motorized Rural Transport Component 00 0 00 00 00 00 0 00 00 Studies on Rural Road Financng and Local Adminsitration 00 00 00 00 00 00 00 00 00 Training in Peru and Abroad 00 00 00 00 DO 00 (00 00 00 TOTALBASELINECOST 1.870 3.830 5,778 7,722 11.274 13,196 19,200 24,470 43.670 Physical Contingencies 187 383 578 772 1,127 1,320 1,920 2.447 4,367 Price Contingences 114 348 707 1.395 2.068:: 1,168 3,463 4,631 Project Managment Costs 700 2.100 3,250 3,750 3.750 3,750 9,800 7,5'00 17,300 TOTAL PROGRAM NET COST 2.757 6.427 9.954 12.951 17.546 20,334 32,088 37.880 69.968 Taxes and Duties 4.387 8,433 11,497 13.859 14,204 14.224 38.176 28,428 66,603 GRAND TOTAL 7.143 14.860 21.450 26,810 31.750 34.558 70264 66.307 136,571 Pilot program - 105 - PROJECT TOTAL PROJECT COMPONENTS Joint IBRD end IDB Contribution by year (US$'000) (Phase)) Phase ) SIX-YEAR 1995"' 1996 1997 1998 1999 2000 1995-8 1999-0 PROGRAM CIVIL WORS 16,826 29,070 39,042 46,459 43.266 41,964 131,396 85,230 216,626 Rehabilitation of Rural Roads 12,600 14,400 18.000 22,500 22,500 22,500 67,500 45,000 112,500 Rehabilitation of Connecting Primary and Secondary Roads 900 8,100 12,960 12,960 9,720 6,480 34.920 16,200 51,120 Routine Maintenance of Roads 00 1,080 2,592 4,608 4,656 6,144 8,280 10,800 19,080 Improvement of Village Streets 3,326 5.040 5,040 5,040 5,040 5,040 15,446 10,080 28.526 Improvement of Village Unclassified Networks 00 450 450 1,350 1,350 1,800 2.250 3.150 5.400 CONSULTANT SERVICES 2,856 4,536 5.622 5.770 5,468 3.108 1B.784 8,576 27,359 Pre-lnvestment Studies 1,921 2,681 3.031 2,711 2,391 00 10.344 2.391 12,735 Supervisjon of Civil Works 935 1,645 2,241 2,709 2.727 2,758 7,530 5,485 13,015 Performance Audits (Technical, Environmental, Procurement 00 210 350 350 350 350 910 700 1,610 and Management Auditl INSTITUTIONAL DEVELOPMENT 250 2.850 2.550 2.250 2,100 2.100 7.900 4,200 12,100 Technical Asistance for RLrel Road Planning and Management 250 1,250 1,250 1.250 1,200 1,200 4.0010 2,400 6.400 Tech. Assist. for Developing Maintenance Microenterpnses 00 600 500 500 450 450 1,600 900 2,500 Tech. Assist. for Oeveloping the Local Construction Industry 00 200 200 200 200 200 600 400 1.000 Tech. Assist. for NonMAotorized Rural Transport Component 00 300 200 200 150 150 700 300 1,000 Studies on Rural Road Rnancing and Local Adminsitration 00 400 300 00 00 D0 700 00 700 Training in Peru and Abroad 00 100 100 100 100 10 300 200 500 TOTAL BASELINE COST 19,932 36,456 47,214 54,478 50.834 47.172 158.B00 98,006 256.086 Physical Contingendes 1,683 2,907 3,904 4,646 4,327 4,196 13.140 8,523 21,663 Price Contingencies 1,063 2.798 4,919 6,203 7,319 8.780 13,522 22.302 Project Managment Costs 00 00 00 00 00 00 00 00 00 TOTALPROOtRAM NETCOST 21.615 40.426 53.916 64.043 61.363 58.688 160,000 120,051 300.051 Texes end Duties 00 00 00 00 00 00 00 00 00 GRAND TOTAL 21.615 40.426 53.916 64.043 61.363 58,688 180.000 120,051 300,051 S Pilot program - 107 - ANNEX 8 PERU RURAL ROADS REHABILITATION AND MAINTENANCE PROJECT Institutional Set-Up and Project Organization Legal Status and Organizational Structure of PERT-PCR 1. MTC will have overall responsibility for project coordination and implementation. Actual implementation will be assigned to a specialized unit, the Proyecto Especial de Rehabilitaci6n de Transporte-Programa Caminos Rurales (PERT-PCR), created by Ministerial Decree No. 315-95 of July 19, 1995. PERT is presently implementing both IDB and World Bank projects under the Transport Rehabilitation Program (Programa Rehabilitaci6n Transporte, PRT). The decree establishes the two programs with the same status, each one led by one Executive Director who directly reports to the Viceminister of Transport, and staffed according to the specific skills mix required for project implementation. The PRT portion of PERT with responsibilities in the rehabilitation of the national road network, will be transferred to the Superintendency of National Transport Infrastructure once this new organization is established. The PCR portion, however, will continue under PERT to fully implement the proposed project and carry out the rural road program until municipalities develop the institutional and financial capacity to manage their rural road networks. Due to the special nature of the statutes of PERT-PCR, its duration is initially limited to the execution of the proposed project, but at mid-term program review, the Government jointly with IDB and the Bank will decide whether there is a need to continue with PERT-PCR after project completion. 2. The overall institutional set up for project execution is described in paras. 3.1 to 3.3 of this SAR (see the chart therein). The organizational structure of PERT-PCR is shown in Chart 1 below. With staff and budget separated from the rest of the Ministry, as well as from PRT, the unit enjoys ample technical, administrative and financial autonomy. Its limited personnel is recruited at private sector salaries and paid from local counterpart funds. Most of the tasks will be undertaken by external consultants engaged under the project. Jobs descriptions and terms of reference for each assignment are included in the Project Operational Manual. Operational Plan for establishing PERT-PCR's Deconcentrated Units 3. Implementing the project within the proposed time-frame will demand strong skills to manage hundreds of road links spread over difficult remote rural areas. This will require setting some "deconcentrated" field offices (Unidades Ejecutoras Desconcentradas, UEDs), conveniently located in those departments with active programs, to contract and manage pre- investment studies, works and institutional building program. The functions assigned to the UJEDs are summarized in Box 1. 4. Each UED will be established according to one of the following three possible options: (1) contracting out management services to a private firm, (2) establishing an ad-hoc unit with - 108 - staff appointed by PERT-PCR, and (3) delegating the management functions to an existing decentralized or local government agency restructured to meet the project requirements. Chart 2 shows the proposed Operational Plan for setting the deconcentrated units. It is envisaged that nine units will be needed to efficiently manage the work programs in the 12 departments selected under the project. The location and phasing in the creation of these units have been determined taking into account (1) the volume of work in each department or geographic area, (2) potential gains to be realized through the proposed location, in terms of improved accessibility to work sites (some rural areas are better reached from contiguous departments rather than from their own department) and to the existing market of local contractors and consultants, and (3) institutional and operational capacity available locally. The size of the UEDs will vary in line with the volume and nature of the work planned, but in general will consist of 6 to 8 staff organized in three areas: (1) project development (planning, promotion of subprojects and institutional building), (2) engineering (review of studies, procurement and contract supervision), and (3) accounting and administration. The managers of the UEDs will report directly to the Executive Director of PERT-PCR. CHART 1 PERT - PROYECTO ESPECIAL REHABIITACION INFRAESTRUCTURA DE TRANSPORTES ORGANIZATIONAL STRUCTURE MTC L Vice-Mirister ofTransport PERT - P,roytcft EspecialRehxbiitaci6x Infr-esb.cwtur de Tran-p Executive Comtrittee Vice Mirister ofTrarsport Eeccutve Director PRT and PCR PRT - Progoa. Rehabditacw6n de Transportes ..-.~ ~~~~,.. d.Cn uaj .. .. Executive Director |~~~~~~~~~~~~~~~~~~~~~D Projerrcrt tton Unit I-B>D Projec- 1--n-I-:-S-tatio--n Project 0 | Fir ceUmtcl -.. .d.......-...s..t ..... < : - :.i. Dewconcentrada l............ ........................ .......: : ..... : ... -: Mar t ter l t 0 0 :; ........ i.... ,:..,:, '.,....:.,..t:.,.:.:..N:. :' :E-.' '.: .i'. R.....E::EE. ............... ,~~~~~~~~~.. ,.. ... :::: P ct t:::::::::::::::::: ,:,: ,,,,.. ...:: :::::::::::::1 . : - D e elor t ......................................... |- - . ...| i t a b r : E ::: : .::::.::::::::::,:::,.::, ..::,s .. . ....... .....Ei:..:: . Ai:, ir tcn, .; x,:-.,:,,: , . i ,,, ,,,5f ,, f ., --: f ~FnanceUt,-E -f--i- :::. :: ::: :: ::n:: :: ::::::::: :::::: ::.:::..::.::.::...:::.:. -.::..::-:::T ::::::: - 109 - Box 1: Functions assigned to UEDs The operational procedures approved through Decree MTC-3 15-95 entrust the following functions to the UEDs: * Sub-projects Promotion and Development: (1) identifying road subprojects in the unit's area community through the participatory mechanisms defined in the Project Operational Manual; (2) conducting economic and social evaluation of proposed subprojects in accordance with methodologies set forth in the Project Operational Manual; (3) promoting the participation of municipalities, contractors, and public and private organizations in road maintenance activities; (4) coordinating with other institutions active in the area the scheduling and execution of rural development programs; and (5) formulating Annual Investment Plans. * Work Program Management: (1) reviewing engineering studies; (2) monitoring and reporting implementation of the various project components; and (3) upkeeping the Project Management Information System and Database. * Procurement and Contract Administration: (1) preparing bidding documents; (2) selecting consultants and contractors in accordance with the guidelines agreed under the Project Operational Manual; (3) reporting procurement progress; (4) upkeeping the register of contractors and consultants qualified for project activities; (5) reviewing/approving work certificates and consultant invoices; (6) processing payments to contractors and consultants; (7) ensuring consistent application of cost and quality control practices in contract execution. * Institutional Building: (1) supporting implementation of the technical assistance program designed under the project for municipalities and rural communities; (2) promoting development and training of microenterprises for road maintenance; (3) coordinating with municipalities and other institutions involved in the design and execution of work programs; (4) reviewing progress reports and studies on the development of road management capacity among municipalities located in the project area. CHART 2 Proposed Operational Plan for establishing PERT-PCR Year 1995 1996 1997 1998 1999 2000 Departments involved: Group 1: Ancash; Apurimac; Ayacucho, Cajamarca; Cusco; Huancavelica Group 2: Huanuco; Junin; Pasco; Puno Group 3: Madre de Dios; San Martin Total number of departments active by year end 6 6 10 12 Deconcentrated Units(*) Group A: Ancash; Cajamarca; Cusco (covers part of _ Apurimac and Madre de Dios) Group B: Ayacucho (covers part of Apurimac) Huancavelica Group C: Junin; Huanuco (covers Pasco); Puno Group D: San Martin Total No. of deconcentrated units active by year end 3 5 8 9 (*) Note: (1) Works began under the Pilot Program are being managed by PERT-PCR central office until the deconcentrated unit is established in the respective department. (2) Project implementation encompasses investments made in 1995 (the Pilot Program) and from 1996 to 1998. The activities planned under the program for 1999 and on would be carried out through a follow-up project. - 110- Table 1. Performance Indicators for UEDs Area Performance indicators Physical Targets Km of road subprojects identified through participatory workshops Km of roads (streets) with complete socio-economic and engineering studies Km of roads (streets) rehabilitated (improved) Km of roads under routine maintenance program Cumulated No. of villages where streets were improved Cumulated No. of villages participating in NMT component No. of road subprojects that carry NMT components Work Management No. and Cumulated amount of contracts signed (design, supervision, works) No. of contracts completed Percentage of contracts completed in time Percentage of contracts completed on budget Average time for processing contracts (days between bid opening and award) Percentage of payments within 30 days of invoice receipt No. of local contractors registered and participating in project activities Average per km cost of road rehabilitation (street improvement) subprojects Institutional No. of participatory agreements entered with provincial municipalities Development Percentage of municipalities participating in the technical assistance program No. of microenterprises developed and participating in maintenance program Cumulated No. of person/months receiving training (local contractors) l_________________ Cumulated No. of person/months receiving training (municipal officials) 5. Performance of each deconcentrated unit will be monitored annually on the basis of the indicators shown in Table 1. The annual targets to be accomplished by each unit will be defined taking into account their share of PERT-PCR's annual program, so as to ensure that the overall project targets planned for that year are achieved. The proposed targets for the coming year will be agreed on with IDB and the Bank by October 30, each year. The project database (see Attachments 1 and 2) provides the basis for calculating most of these indicators. In addition, the performance indicators for project development impact will be monitored at the project third annual review (program mid-term review) and at the end of the program through surveys conducted in the context of the performance audits. These audits will verify every six months the accuracy of the data in the project information system. An outline of the terms of reference for the biannual performance audits is given in Attachment 3. Participation Agreements with Municipalities 6. MTC through PERT-PCR will enter into inter-administrative "participation agreements" with provincial municipalities with jurisdiction over the project areas. The agreements will most notably spell out future obligations and undertakings assumed by both parties with regard to the execution of the project. Box 2 shows the key features of the participatory agreements. The project will avoid further investments in those provinces where compliance with the agreements and action programs has not been satisfactory. 7. Municipalities, since at this stage lack the necessary institutional capacity, will leave to PERT-PCR complete administration of contracts and convenios involved in project execution. Box 2: Key features of Participation Agreements The Project Operational Manual includes a standard "Participatory Agreement" to be used during project implementation. Key features of the standard agreement are: * LegalAspects. The agreement is between MTC (represented through PERT-PCR) and the provincial municipality, but all district municipalities within the province must also sign in. Responsibility for administering contracts and managing project activities is vested in PERT-PCR. The authority of Municipalities to manage rural roads and to promote construction, rehabilitation and maintenance of rural roads is reaffirmed. . Coordination. Coordination between municipalities and PERT-PCR is mandatory for selecting roads, identifying and evaluating subprojects and carrying out studies and works related to these sub-projects. Municipalities may also participate in the execution of project works provided they comply with the requirements and procedures set forth in the Project Operational Manual. * Commitments undertaken by Municipalities. Municipalities are required to (1) enter into the institutional strengthening program and carry out the action plans drawn up together with PERT-PCR, (2) support development of microenterprises and community-based maintenance committees for road maintenance, and (3) allocate funds to maintain roads rehabilitated under the project upon finalization of the agreement. * Commitments undertaken by A4TC. MTC is required to (1) keep municipalities filly informed of all project activities, (2) provide technical assistance for institutional strengthening in rural road management, (3) evaluate together with municipalities the results of project activities, and (4) establish a financial mechanism to allow municipalities continue funding maintenance of the roads rehabilitated under the project upon finalization of the participation. This will enable PERT-PCR demonstrate to the Municipalities the advantages of contracting out works and services to the private sector, removing the tendering and supervision processes from existing bureaucratic constraints, and developing microenterprises and other beneficiary-based organizations to maintain the rural road networks. The participation agreements would reaffirm local government responsibilities over rural roads and require their long-term commitment to maintaining those roads rehabilitated under the project once the agreement has ended. This, in turn, is expected to strengthen "ownership" on the part of municipalities. 8. Though the agreements are generally structured on the basis of provinces, all districts within a provincial municipality are required to sign in. This will enhance coordination among districts and between districts and their provincial municipalities. Furthermore, with assistance from the UEDs, provincial municipalities are expected to prepare in consultation with their districts, transport plans documenting the actions agreed to improve transport conditions in their jurisdictions, as required under the Municipal Organic Law. While the law establishes a distinction between provincial and district municipalities, functional assignments between them are rather ambiguous inasmuch as both types of municipalities are given largely the same set of responsibilities, including those for the provision of local public services. Thus, the transport plans will help clarify the distribution of responsibilities for rural roads management between the two levels, enhance the impact of the plans by coordinating transport needs at a provincial level, and increase efficiency in the delivery of maintenance services by taking advantage of possible economies of scale derived from a coordinated approach. Coordination with other Rural Development and Poverty Alleviation Programs 9. There are several programs sponsored by other Ministries -- some of them with external funding -- which support rural development and poverty alleviation initiatives in the same areas -112 - fBox 3:Key.Features. Interadminfsratie Cooperation Agreements The* Coeration Agreements are npt of the Project Operational: Mnual to ensure that their dispositions are carried out by these organizations and their executing units.: Key features include: f ObOectives. :(1) definecompetencies and terms of cooperation between MfC and FONCODES/INADE for i-irmplementation of road projects.to benefit the poor, (2) appraise together the fanctionality and development vimact of troadtprojects undertaken through FONCODES/INADE poverty alleviation programs. The agreements ae Mbetween MTC and FONCODES/INADE. MTC has functional responsibility for the development an&dregulation of:standards for construction, rehabilitation, maintenance and use of roads in Penfi.SPe 7PERT-PCrerePr0se:nts iC. hs fInteitnsiutional Coordination. (1) designate coordinators in their respective organizations, (2)hold m: nthly m eetings to exchnge dat (3 share information on demand of road projeCts sumnitted to:: FONCODES (identified by INADE), (4) enforce design, oDnstruction and maintenancestandards establish : -: :by TC (priorf approvalbyMWC necessa&y), and (5) to the extent possible, coordinate through their respetive locl nits implementation of investment programs within common targeted areas. *-:f t;CoItmnients byTC@ . (1): inform FONCODES/INADE on regulations and standards'applicable to rural road proects, (2) review and approve road projects presented for financing through FONCODESJINADE, ::::(3) keep updated FONCODESAINADE about implementation of road subprojects under the RRP, (4) provide technical advise ion road regulations, (5)through the RRRMP, carry out road rehabilitation works tand surt maintenance of those projects submitted for financing to, or recently carriedf out by FONCODES/INADE which are linked to:"road systems" being rehabilitated under the RR:3. I *i; t Conmntm¢tents by FONCODFS/NAI)E. (l) provide MTC information on development projects being l .i dentified or undertaken through FONCODES/INADE by public institutions, n,6c1eos ejecutores, NWOs or othier private initi ons, (2) :ensure that all road subprojects are approved byl MTC prior to their : l impLementation, (3) pass on to the RRRMP for implementation those road subprojects that qualify under (5) where the project activities will be undertaken. The overall development impact can be significantly enhanced if the programs are coordinated as to complement their activities whenever possible and avoid duplication of efforts. By targeting common areas and sequencing the respective programs, the project actions on rural roads could be complemented with the productive projects sponsored by other programs, with greater development impact on the benefited communities. Furthermore, some of these programs include small investments in roads. These decentralized organizations outside MTC typically deliver their "road projects" upon completion, either to MTC or local governments, as appropriate. Therefore, measures must be taken during the development stage of these road projects to ensure that they are technically sound and that provisions are made for their future maintenance. 10. Table 2 provides a list of rural development programs "active" in the departments selected for project implementation, their sponsors, and the kind of coordination that is needed. At the central level, MTC will coordinate with MEF and the Ministries of Presidency (FONCODES, INADE) and Agriculture all aspects regarding the Government's poverty alleviation strategy and the allocation of funds to the various programs that support them. MTC signed a "Cooperation Agreement" with FONCODES and is discussing a similar agreement with INADE (which together control the largest rural infrastructure programs outside MTC). Key features of these agreements are summarized in Box 3. In addition, to further strengthen its functional authority MTC will train staff within its Planning Office to set rural roads policy, coordinate investments with other agencies that are implementing developing programs, and monitor investments and transport performance on a continuous basis. - 113 - Table 2. Coordination with other rural development progams Sponsor Agency- Program Program Size Coordination Purpose of Program Ambit MFundine Mechanisms coordination MTC-DGC Countrywide: national Large (Gov.) CCC Road programs (Directorate of & departmental roads Roads) _ FONCODES Countrywide Large (Gov., CCC LCC CA Rural development IDB IBRD, Road programs Others) _I. INADE Junin. Ayacucho, Medium (AID CCC LCC CA Rural development PAR-Proyecto Apurimac, $5m, Kfw $12m) Road programs Apoyo Repoblaci6n Huancavelica PGEAGL-Programa Junin, Ayacucho, San Medium (AID, M Rural development Generaci6n Empleo Martin, Apurimac, $15m) Support institution y Apoyo Gobiernos Ancash, Loreto, building (targeted Locales Ucayali municipalities) PESCS-Proyecto Ayacucho, Apurimac, Medium (Gov., LCC Road programs in Especial Sierra Huancavelica, Cusco S/3.5m in roads common areas Centro Sur in 1994) PDA-Proyecto Ayacucho, Huanuco, Medium (AID M Support alternative Desarrollo Pasco, San Martin, US$30m) development in Alternativo Ucayali targeted municip. COOPOP- Countrywide Small (Gov., LCC Road programs Cooperaci6n S/4m in roads in Popular 1994) . Min. Agriculture Countrywide Large (Gov. CCC LCC Complement PROMANACH-Soil $50m annually) investments in & water mangmnt. common areas CTARs I IlRegions. Small (Gov.) = LCC Road programs Municipalities Local Small(Municipal PA Road programs (Provincial and Compensation and institutional districts) | Fund building Notes: CCC: Central Coordination Committee (coordination through MTC and PERT-PCR) LCC: Local Coordination Committees (coordination through PERT's UEDs) CA: Cooperation Agreement (with MTC-PERT) PA: Participation Agreement (with MTC-PERT) M: Municipalities involved in program activities 11. To improve coordination at the implementation stage, the UEDs would promote the establishment of interinstitutional committees that would be responsible for further promoting the project, sharing information about development initiatives in the vicinities of the proposed road sub-projects, and reviewing implementation schedules to enhance complementarity or integration with other poverty alleviation programs in common areas or departments. The interinstitutional committee would include at least the chiefs of the regional PERT-PCR, FONCODES, INADE and Agriculture Ministry's offices, the head of the department's road directorate, the mayor of the capital, a representative of the Chamber of Commerce of the department and three representatives from the communities (including women groups) in the vicinities of the projects being considered for analysis. These committees should meet as a minimum once a month and although they will not have any specific approval responsibility (which is fully vested upon the chief of the respective -114- Box 4: Purpose of the SISP database and Operational Requirements Ppsos. The SISPwill serve different purposes, namely: a as a decision- and monitoring-support system for. UEDs, in order to (1) know the main characteristics of the. sub-projects presented by the communities to: the UEDs, (2) register the procedures for their approval, (3) consolidate the information for all sub-projects under the UED' s jurisdiction; and (4) monitoring the implementation of the said sub-projects; * as a decision- and monitoring-support system for the PERT-PCR central office to control the performance of each individual UED and, through the consolidation of the information of the UEDs, continuously monitor the; progress in the implementation of the project; - as a support tool for the World Bank and the Inter-American Development Bank in carrying out their supervisory tasks; and * as a support tool for the subsequent post-evaluation of the project and the measurement of the degree of achievement of its objectives, as established by the indicators developed through the logical framework. Operational Requirements. The SISP should allow its use at the UED level and the consolidation of information at PERT-PCR central-office level. It would have to include a system of authorizations to ensure that the information is managed and used by the pertinent staff, limiting and recording the access and update by the authorized people. It would also have to include back-up systems to ensure that the accumulated information can be fully recover in the case of a hardware failure. UED), they would have the unique opportunity of informing the UEDs of the advantages and disadvantages of undertaking particular subprojects and of carrying particular actions (such as methods of construction, procurement, microenterprise development, project development impact). This cooperation would also allow the UEDs to involve key base organizations presently working in other programs in the identification of road subprojects and delivery of relevant institutional components. Though very limited in terms of geographical coverage, the District Development Committees established through the PREDES program (supported by FONCODES in the department of Cusco) constitute a remarkable example of an institutional mechanism for determining priorities and identifying subprojects in a coordinated manner at the local level. Project Monitoring Information System and Database 12. Supervision of project implementation will rely on an information and monitoring system (SISP) that would allow to ascertain on a daily basis the progress in the implementation of each sub-project (from its preparation phase to its execution, including maintenance activities after completion of the corresponding rehabilitation works) and, consequently, the degree of achievement of the project objectives (as measured by the outcome of the Logical Framework). Furthermore, the SISP will help control de deconcentrated units and assess the efficiency, effectiveness and quality of their performance. The SISP will also constitute a source of information for the semi-annual performance audits and for the Banks' supervision missions; it should also help prepare the reports that will have to be submitted quarterly to the Banks. Box 4 summarizes the intended uses of the SISP and key operational requirements to achieve them. 13. The SISP will be the key mechanism to monitor the progress in the implementation of a large number of sub-projects scattered over the various Peruvian departments. The installation of the SISP entails: (i) the definition of the structure of a database; (ii) the definition of the procedures to capture, update and analyze the collected data (mainly technical, financial and social data) for each sub-project under preparation or implementation, or already completed; and (iii) the - 115- purchase and installation of the pertinent computing hardware and software as well as the data transmission equipment. 14. The SISP's database values would be inputted incrementally at every step of the project implementation. Upon a community's request for, or preliminary identification of a candidate sub-project, the corresponding record will be opened in the database. Consequently, upon completion of the field surveys, the socio-economic and technical data will be incorporated into the record; subsequently, through the pertinent programs and models, the summary social, economic and engineering indicators will be obtained. Attachment I includes the list of variables that would be filled for each record of the database (and that constitute the bases of the data to be collected by consultants on their field visits). Attachment 2 includes the performance indicators that would be obtained from the database. The description of the socio-economic evaluation model and the associated template are given in Annex 11. 15. The PERT-PCR has engaged the services of a specialized information systems firm to develop the hardware and software of the SISP, including the input, update and backup processes and the communication links to the UEDs. The SISP shall be fully developed and tested as part of the Project Operational Manual (whose adoption is a condition for loan effectiveness). The initial structure and system processes of the SISP will be reviewed every six months and adapted as necessary to attend the demands of the project management and the quarterly performance audits. 16. In principle, the structure of the database would resemble a distributed system whereby the maintenance of the database would be the responsibility of each UEDs, but access to it and the use of its analysis tools can be undertaken from any of the user-end computers. The information generated by each UED would be downloaded at least every other day to the PERT-PCR's central offices. The system would have the mechanisms to check the consistency and integrity of the information, flagging out any deviations from expected values (such as agricultural yields or costs of particular rehabilitation activities). These mechanisms would partly be facilitated by linking the SISP to the statistical information of the National Statistical Institute (INEI). The INEI has information on socio-economic values ("Censo Nacional de Poblaci6n y Vivienda de 1994"), existing infrastructure and institutions involved ("Encuesta de Infraestructura Distrital de 1994"), economic activities ("Censo de Actividad Econ6mica Provincial de 1993"), and district agricultural and livestock productions ("Tercera Encuesta Agro-Pecuaria Nacional de 1995). The INEI has also developed an ARC-INFO geographic information system of the entire country. This system however lacks information on roads. An opportunity exists to establish an exchange of information between the PERT-PCR and the INEI, whereby the former provides INEI with information on rural and departmental roads as they are rehabilitated and the latter provides PERT-PCR with the socio-economic information listed above. 17. To ensure the adequate functioning of the SISP, the PERT-PCR would hire a full-time information systems specialist that would be entrusted with the management of the SISP. Each UED will have staff fully trained in the operation of the system. - 116- Internal Control and Flow of Project Funds 18. The Internal Control and Financial Unit established within PERT-PCR will (1) issue implementation guidelines and perform financial accounting procedures to account for all transactions between the PERT-PCR and the UEDs; and (2) monitor all flow of funds, including but not limited to, transfers, payments and disbursements between the special accounts (IDB, IBRD, and the Government), the Bridge Account (where all of the funds transferred from special accounts will be deposited to make payments and transfers to UEDs) and the accounts at the UEDs. This Internal Control and Financial Unit within the PERT-PCR will also prepare financial accounting reports on a monthly, quarterly and yearly basis, as specified in the Operational Manual. 19. Based on a review of the financial information and accounting system currently in operation at PERT, and after discussions with financial and administrative personnel, it has been determined that the flow of funds and investments involved in this Rural Roads Rehabilitation and Maintenance Project (under the PERT-PCR unit) should be accounted for by using the following financial system and configuration mode. (a) Three separate special accounts will be opened to account for each of the funds commitments from each of the respective organizations involved in the Project, namely the Inter-American Development Bank (IDB), the World Bank (IBRD), and the Government of Perui (GP). For instance, the IBRD's account will be opened with a private banking institution in Lima. The GP's special account specifying that such a condition is necessary to properly implement without delays and bureaucratic complications the investment commitments under this Project. The Ministry of Economic and Finance (MEF) has indicated his support for such a separate account if such clause is included in the international loan agreement. Precedent exists for such a procedure based on an existing arrangement with an on-going loan disbursement operation by the World Bank where a separate account has been maintained. These separate and special accounts will be controlled by the PERT-PCR unit and will be in the same banking institution for ease in the transfer and administration of project funds to another Bridge and Rotary Account as discussed below. (b) The Transit Account (TA), controlled by the PERT-PCR unit and residing at the same banking institution, will be used to extract the required funds for the execution of the Project's Disbursements and Transfers based on the prescribed "contra-partidd' for this Project. This account will be maintained in local currency. This means that conversion of the designated currency from each of the Bank's special accounts, namely the IDB and the IBRD, will be made at the date of transfer to the TA for subsequent use in the Project. This TA will need to have some excess funds, and as such will operate as a revolving bank account. This feature is required in order to account for the transfer of funds to the UEDs for advances and disbursements. (c) The TA will be used by the PERT-PCR unit to feed each of the UEDs' depository accounts in the bank's branch system serving the respective UEDs. Since it is - 117- recommended the use of a private banking institution with bank offices in each department or municipalities, such a banking arrangement will improve the transfer and availability of funds to each of the UEDs. The UEDs' depository accounts will be maintained at a zero balance at all times. This means that UEDs must make the request for funds known to the PERT-PCR for review and approval before disbursement or transfer of funds can be initiated. There will be an automatic transfer from the TA to the depository account at the UED in the same date due to the fact that the same bank branch system serves all of the UEDs and municipalities involved in the Project. (d) All payments for contracts, consulting services and agreements will be made by the UEDs and/or municipalities. All of the pertinent information, including contracts, agreements, invoices, bills of sale, etc., will be send to the PERT-PCR unit for processing and final approval and payments. Essentially, all of the financial accounting for transactions incurred during the Project's execution and disbursements of funds will be controlled at the PERT-PCR unit in Lima. Similarly, all of cash and flow of funds, including reconciliation of bank accounts in the entire system, will be centrally controlled and performed at the PERT-PCR unit in Lima. 20. The internal control and financial unit within the PERT-PCR, described above, will be subject to an external and independent audit by CPAs. At loan negotiations, agreement will be reached that Government will appoint a firm of independent public accountants (external auditors) acceptable to the IDB and the World Bank on this joint-financing Program. Such a firm will audit project expenditures, the special accounts, the TA at the PERT-PCR unit, the UEDs and project accounts, as well as the entire information and accounting system used by the PERT-PCR unit in the execution of this Program. The first audit will start in 1995 with terms of reference acceptable to both Banks. Certified copies of the annual audit reports will be furnished to both Banks within six months after the close of the Government's fiscal year. The audit report will include a separate opinion by the auditor on disbursements against certified SOEs. - 118- ANNEX 8 Attachment 1 PERU RURAL ROADS REHABILITATION AND MAINTENANCE PROJECT Content of Project Information and Monitoring System Database (SISP) Subject NVaable Values Men Smowte Project location Department Name of department and characteristics Province(s) Name of province or provinces trasversed by the projected road of area of influence District(s) Name of district or districts trasversed by the projected road Communities Names of communities trasversed by the projected road Maps and project information from Regional location North, center, south; 'costa", 'sierra", "selva" Ministry of Transport Average aftitude Meters Sketch of project and area of influence Sketch Characteristics of Population of the area of influence Number of inhabitants, by district 1993 National Census of Populatio the population in the Number of families in the area of influence Number of families/households, by district and Housing, and analysis of m area of Influence Number of women/men Number of women/men, by district lncr./reduction of pop. between censuses Percentage increase/reduction, by district 1981 and 1993 National Censuses and Housing Unsatisfied basic needs Percentage of households with unsatisfied basic needs, by 1994 Household Survey of Unsatis district Needs Infant mortality rate Number of deaths per?? births, by district Economically active population (PEA) Number of people actively employed, by district Employed pop. (PEA) by economic activity Number of people employed by economic activity 1993 National Census of Populatio (agriculture, Housing manufacturing, industry, services), by district Institutional Most important institulions involved in Names of those institutions characteristics of development projects the area of Influence Type of projects/activities undertaken by Relation of projects/activities Field surveys, interviews with local institutions (NGOs, those institutions communities, municipalities) Community organizations Number of existing community organizations Activities/scope of those com. organizations Relation of activities/scope Description of Agricultural production (5/6 main products) production Productive area Hectares activities Agricultural yields Tonslhedlare Field surveys and Production costs Soles/hectare Third National Agricultural Census Percentage of prod. for auto- Percent consumption Farm-gate price Soles/ton Livestock production (2/3 main caitle) Number of heads Number Kilograms of meat per head Kilograms Field surveys and Production cost Soles/livestock head Third National Agricultural Census Percent commercialized (traded) Percent Price per ton of meat Soles/ton Other production (milk, wool, crafts) Total production Number of units (liters, etc.) Production costs Soles/unit Field surveys and Percent commercialized (traded) Percent Third National Agricuhtural Census Farm-gate price Soles/unit - 119- Subjec: VarHable Values Mten Source Description of Description and location of market and transport services social activity centers Narrative (for each one of the Average daily traffic (by type of vehicles) Number of vehicles per day road treeW branches Passenger transport frequency Number of buses per day Field surveys and longest trip) Passenger transport tariffs Soles/passenger Freight transport frequency Number of trucks per day Freight rates Soles/ton Percentage of communities in project area Percentage of communities in the region within the area of interlinked by road 'tree" network influence of road trees" Average transport time to main center Minutes (by car) Project description Physical conditions of existing road Type of soil Name of predominant soil type Topography Flat, rolling, mountainous Predominant slopes Percent Technical field surveys Smallest curvature degree Meters of radius or degrees of curvature Length of road Kilometers Average width Meters Brief description of project Narrative Cost of studies (socio-ec., and engineering) Soles Number of studies Number UED Date of contract signing Date Date of completion of studies Date Total cost of road rehabilitation (final) Soles Materials Soles Equipment and tools Soles Labor Soles Skilled, capataz Number, daily salary (soles), duration (days), total (soles) Skilled, operador Number, daily salary (soles), duration (days), total (soles) Skilled, oficial Number, daily salary (soles), duration (days), total (soles) Unskilled, peon Number, daily salary (soles), duration (days), total (soles) Location of sources of materials, quarries Name, distance from road Technical field surveys and UED Number of links up to bidding/invitation Number Dates of bid opening and award Dates For each link, contractor's name, experience, list of projects under execution, dates of contract and Contractors name, experience and list of projects, dates, expected completion, contract value and contract value (in soles) Date of completion of works Date Supervision costs of rehab. works Soles Total duration of works Days Cost of village street rehabilitation Soles Materials Soles Equipment and tools Soles Labor Soles Skilled, capataz Number, daily salary (soles), duration (days), total (soles) Skilled, operador Number, daily salary (soles), duration (days), total (soles) Technical field surveys and UED Skilled, oficial Number, daily salary (soles), duration (days), total (soles) Unskilled, peon Number, daily salary (soles), duration (days), total (soles) Location of sources of materials, quarries Name, distance from road Contractor's name, experience and list of projects under execution, dates of contract and expected completion, Contractor's name, experience and list of projects, dates, contract value and contract value (in soles) Date of completion of works Date Description of NMT component Narrative Number of beneficiaries of NMT component Number of beneficiaries Technical field surveys Cost of NMT component Soles Future cost of maintenance works Soles Materials Soles Equipment and tools Soles -120- Labor Number, daily salary (soles), duration (days), total (soles) Technical field surveys Maintenance supervision costs Soleslyear Training costs for maintenance Solesayear Mechanisms to canry out maintenance Community, microenterprise, contracting out Future estimates as Agricultural production a consequence of Increase in production area Percent (one time increase) road rehabliltatIon Increase in agricultural yields Percent (one time increase) Reduction in production costs Percent (one time decrease) Changes in farm-gate prices Percent (one time change) Reduction in freight rates Percent (one time reduction) Assessment of potentialities for pr gains: comparison with rural areas in the proximities with better Livestock production access, estimates of agricultural e Increase in number of livestock heads Percent (one time increase) Reduction in production costs Percent (one time decrease) Changes in livestock prices Percent (one time change) For freight rates, comparison with neighboring areas with Reduction in freight rates Percent (one time reduclion) better road access, or on the basis reduction in vehicle operating costs Other products (milk, wook, crafts) Increase In production Percent (one time increase) Reduction in production costs Percent (one time decrease) Changes in sale prices Percent (one time change) Reduction in freight rates Percent (one time reduction) - 121 - ANNEX 8 Attachment 2 PERU RURAL ROADS REHABILITATION AND MAINTENANCE PROJECT Indicators to be calculated with the SISP Database Sub-Project Data | Socio-economic | Rehabilitation cost per kilometer (without including village street component, if it exists) Data Number of beneficiaries per kilometer Infant mortality rate (prorated for area of influence of roads) Unsatisfied basic needs (prorated for area of influence of roads) Net Present Value (if applicable) without social benefits Internal Economic Rate of Return (if applicable) without social benefits |Works-related | Rehabilitation cost per kilometer (without including village street component, if it exists) Data Rehabilitation cost per kilometer of village street component (if it exists) Maintenance cost per kilometer Daily labor cost for "capataz" Daily labor cost for "operador" Daily labor cost for "oficial" Daily labor cost for "peon" Total number of people employed in rehabilitation and village street works Time to complete rehabilitation works per kilometer One year after project Production Before project completion Data Agricultural production (hectares) Agricultural yields (tonsthectare) Production costs (soles/hectare) Livestock production (number of heads) Production cost (soles/head) Production of other dairy, wool or craft products Production costs of these other products One year after project Transport Service Before project completion Data Average daily traffic (prorated considering Passenger transport frequency length of each link) Passenger transport tariff Freight transport frequency Freight rates Time to travel to school (sample, minutes) Time to travel to health post (sample, minutes) Number of visits to health post (sample, number per month) Time to reach main economic center Percentage of communities within a certain time of main economic center - 122 - Project Indicators Monitoring Number and km of road sub-projects identified through participatory workshops Indicators Number of participatory workshops carried out (by UED/Department Number and kms of roads with complete socio-economic and engineering studies & for entire project) Number and km of projects completed Number and km of projects under implementation Number of microenterprises/maintenance committees established Number of contracts for rehabilitation works completed Number of contracts for rehabilitation works underway Percentage of contracts completed on time Percentage of contracts completed on budget Average time for processing contracts (days between bid opening and award) Percentage of payments within 30 days of invoice receipt Number of NMT sub-projects completed Number of NMT sub-project under implementation Number and kilometers of village street sub-projects completed Number and kilometers of village street sub-projects under implementation Number of local contractors registered and participating in project activities Number of participatory agreements entered with municipalities Number of municipalities participating in technical assistance program Cumulative number of local contractors who have received training Cumulative number of municipal officials who have received training Number of professional staff at the UED Last-year executed budget by the UED Consolidation of Cost of projects completed Sub-project Data Cost of projects under implementation (by UED/Department Monthly cost of maintenance works under execution & for entire project) Cost of NMT sub-projects completed Cost of NMT sub-projects under implementation Cost of village street sub-projects completed Cost of village street sub-projects under implementation Number of beneficiaries for projects completed Number of beneficiaries for projects under implementation Number of people employed for projects completed Number of people employed for projects under implementation Prorated (according to cost) net present value for projects completed Prorated (according to cost) internal econ. rate of return for projects completed Prorated (according to cost) net present value for projects under implementation Prorated (according to cost) internal econ. rate of return for projects under implementation Reduction in passenger transport tariffs (prorated by kms of sub-projects) Reduction in freight rates (prorated by kms of sub-projects) Reduction in time to reach main economic center (prorated by kms of sub-projects) Reduction in travel time to reach school (prorated by kms of sub-projects) Reduction in travel time to health post (prorated by kms of sub-projects) Increase in number of visits to health posts (prorated by kms of sub-projects) Percentage of communities in region interlinked by road project (by department) - 123 - ANNEX 8 Attachment 3 PERU RURAL ROADS REHABILITATION AND MAINTENANCE PROJECT Esquema de Terminos de Referencia para Evaluaciones de Cumplimiento 1. El Ministerio de Transporte (MTC) a traves del Proyecto Especial de Rehabilitaci6n de Transporte-Programa de Caminos Rurales (PERT-PCR) requiere contratar servicios de consultoria para evaluar el cumplimiento de las disposiciones tecnicas, ambientales, de adquisiciones y de gesti6n contenidas en el Manual de Operaciones del Proyecto. La firma contratada reportara al Comite Directivo del PERT. 2. La firma a ser contratada efectuara una evaluaci6n ex-post de las actividades realizadas para implementar el proyecto. Esto incluira (1) una revisi6n tecnica de las obras realizadas (cumplimiento especificaciones tecnicas y ambientales, control de calidad y costo de las obras) de acuerdo a practicas aceptadas de ingenieria y los procedimientos establecidos en el Manual de Operaciones del Proyecto (MOP), (2) la revisi6n de los procedimientos seguidos para la adquisici6n de contratos de obra y de consultoria, incluyendo el cumplimiento con las normas a tal fin contenidas en el MOP y la comparaci6n de los resultados obtenidos en las distintas regiones del pais a traves de las diversas modalidades empleadas, (3) la evaluaci6n de la gesti6n realizada por las Unidades Ejecutoras Desconcentradas (UEDs), incluyendo el cumplimiento con los indicadores de gesti6n y de desarrollo institucional acordados, y (4) la evaluaci6n del manejo del sistema de informaci6n y seguimiento del proyecto, y de la aplicaci6n de los procedimientos contables. Alcances de los servicios a contratar 3. Los consultores deberan basar su opini6n en una revisi6n detallada que comprenda (1) los trabajos de campo de una muestra representativa de al menos 20% de los contratos de obra en ejecuci6n y/o terminados durante el semestre o areas geograficas, (2) el cumplimiento con las guias de adquisiciones del MOP para adjudicar no menos del 85% de los contratos de obra y de consultoria, y (3) el progreso en el fortalecimiento institucional de una muestra representativa de al menos 20% de los municipios involucrados en el proyecto. Los servicios materia de contrataci6n comprenderan, pero no necesariamente se limitaran, a lo siguiente: Area tecnica y ambiental (a) Revisar la ejecuci6n de los trabajos realizados por los contratistas segin calendario y especificaciones tecnicas contractuales, analizando los informes presentados por contratistas y supervisores y verificando su conformidad en el terreno y cumplimiento con los terminos de referencia establecidos en los expedientes tecnicos sobre una muestra representativa de subproyectos adecuadamente seleccionada en cada jurisdicci6n. - 124- (b) Evaluar la calidad de la inspecci6n y seguimiento realizados por la supervisi6n contratada y la respectiva UED, con relaci6n al cumplimiento de los plazos contractuales, uso de mano de obra local, y control de costos y calidad de las obras, incluyendo el analisis y monitoreo de las 6rdenes de cambio y reclamos presentados por los contratistas. (c) Evaluar la calidad y adecuaci6n de los expedientes tecnicos empleados para la contrataci6n de las obras, en particular la validez de las soluciones y metodos de construcci6n propuestos, y la utilidad de la documentaci6n aportada por el ingeniero proyectista. (d) Verificar (1) el cumplimiento de los procedimientos ambientales contenidas en el MOP, (2) el cumplimiento de los requerimientos ambientales tanto en disenio de las obras como en su ejecuci6n, y (3) la medida en que la aplicaci6n de estos requerimientos es exigida por la supervisi6n de las obras. Area Adquisiciones (a) Verificar que en las convocatorias a concurso para la contrataci6n de estudios y supervisi6n de obra, en las licitaciones publicas nacionales o por invitaci6n, y en las contrataciones directas o por convenio con municipios u otras entidades cuando fuera el caso, se hayan cumplido las normas establecidas en el MOP. (b) Verificar que los registros de contratistas y consultores se Ilevan adecuadamente, son actualizados peri6dicamente segun los procedimientos establecidos, y que los procedimientos se aplican de manera de dar oportunidad de participar en las licitaciones de obras por invitaci6n y en los concursos de merito a todos los contratistas o consultores calificados, respectivamente, de acuerdo con las guias de contrataci6n del MOP. (c) Verificar que no haya incompatibilidad entre las firmas supervisoras, consultoras eiecutoras de estudios y constructoras contratadas para la ejecuci6n de obras y la adecuaci6n de los registros de contratistas y consultores empleados por la unidad ejecutora. (d) Comparar los costos de los contratos con los costos finales de obra, y analizar las variaciones entre costos promedio para obras similares experimentadas en las distintas regiones en funci6n de los diversos procedimientos de adquisiciones establecidos en el MOP. Area Gesti6n y Evaluaci6n de Resultados (a) Verificar el cumplimiento de los indicadores de desempeno y metas anuales acordadas con las UEDs. La evaluaci6n cubrira diversos aspectos cuantificados por los indicadores de gesti6n acordados con la unidad respectiva, tales como porcentaje de contratos concluidos en termino y presupuesto previsto, nuimero de contratistas que participan en las licitaciones por invitaci6n y/o nacionales, nuimero de municipalidades involucradas en el - 125 - programa, participaci6n de beneficiarios en la formulaci6n de subproyectos y en la ejecuci6n de las obras, desarrollo y puesta en funcionamiento de microempresas de mantenimiento, capacitaci6n de contratistas y consultores, etc. (b) Evaluar (1) el cumplimiento de los Planes de Acci6n Institucional acordados entre PERT- PCR y municipios provinciales, y (2) el progreso y resultados obtenidos con relaci6n a los indicadores de desempefio y metas acordadas para el proyecto, cuantificando en que medida se han logrado los mismos y formulando recomendaciones para mejorar el desempefio en aquellos areas donde los resultados no sean satisfactorios. (c) Comprobar que el Sistema de Informaci6n y Seguimiento del Proyecto se mantiene actualizado, que los datos introducidos en el mismo son razonablemente confiables, y que la documentaci6n del proyecto es Ilevada de acuerdo con los procedimientos del MOP. Requisitos, informes y duraci6n de los servicios contratados 4. Los trabajos de esta consultoria se desarrollaran mayormente en las unidades localizadas en los departamentos donde se estan llevando a cabo las obras asi como en el terreno, a traves de la evaluaci6n de una muestra apropiada de caminos y obras en ejecuci6n o terminados durante el semestre. La muestra de caminos evaluada sera claramente identificada. El consultor sefnalara aquellos departamentos donde se hayan observado variaciones significativas del promedio, en cuanto a costos, adquisiciones o calidad de las obras, con el fin de ampliar el numero de subproyectos evaluados en la jurisdicci6n en cuesti6n. La evaluaci6n de los resultados requerira la realizaci6n de entrevistas a las comunidades beneficiadas. 5. Los servicios de evaluaci6n de cumplimiento se contrataran por un periodo de 12 meses. El consultor presentara al Comite Directivo del PERT-PCR los inforrnes semestrales dentro de los 45 dias siguientes al semestre considerado. Las recomendaciones serAn analizadas con ayuda del Consultor en las Revisiones Anuales del proyecto que llevaran a cabo conjuntamente el MTC, el BID y el Banco Mundial. Perfil de la empresa a ser contratada 6. La empresa debera ser una firma o asociaci6n especializada en auditoria de gesti6n con experiencia en el campo de las obras viales y en el examen de instituciones del estado que trabajan con cooperaci6n tecnica intemacional. Para cumplir a plenitud con los encargos materia de los presentes terminos de referencia el consultor debera contar con un equipo profesional que pueda cubrir las siguientes areas: i) ingenieria vial y administraci6n de contratos; ii) auditoria de gesti6n; y iii) desarrollo institucional. 7. En caso de que se observen problemas tecnicos, econ6micos, financieros, o legales que requieran interpretaci6n muy especializada, el consultor lo hara notar inmediatamente al Comit6 Directivo del PERT con el fin de que este pueda obtener la asistencia especializada necesaria. - 127 - ANNEX 9 PERU RURAL ROADS REHABILITATION AND MAINTENANCE PROJECT The Project Operational Manual 1. In order to ensure consistency in the implementation of the project's various components across departments, PERT-PCR will use a Project Operational Manual (Manual de Operaciones del Proyecto-MOP) that will clearly define the guidelines and procedures to be followed by all implementing units when discharging their responsibilities in the execution of the project. The MOP is a self-content organized compilation of all documents needed to support project implementation, from a summary of the project objectives, scope and guiding principles which will be used when communicating the project to local governments and other potential beneficiaries, to the project eligibility criteria and participatory mechanisms that will be applied in the selection of project investments and assessment of transport needs at the local level, to a set of technical guidelines and standards for design and management of rural roads, to the procurement and contract administration procedures that will be followed to ensure compliance with the guidelines agreed with IDB and the Bank. 2. The format and content of the manual was reviewed during the appraisal mission; the project preparation unit, assisted by consultants, is finalizing its preparation incorporating comments made by the appraisal mission. The attached table shows an indicative table of contents. However, the most relevant parts of the manual are discussed in detail in other annexes of the Staff Appraisal Report. In particular, Annex 8 summarizes the organizational arrangements an institutional set up for project execution, Annex 10 the methodology agreed for participatory assessments, and Annex 11 the eligibility criteria for selection of subprojects. 3. While some of the documents in the manual will remain unchanged throughout project implementation, others --especially on the technical side-- are expected to evolve based on feedback from implementation and know how obtained through the technical assistance program. As an example, the procedures to create and contract out microenterprises for road maintenance, schedule, supervise and compensate for the works will be developed by consultants engaged under the technical assistance program, and upon approval incorporated into the manual. Hence, the MOP will be modified from time to time in consultation with IDB and the Bank, to take account of the experience gained during project implementation. The Executive Committee of PERT-PCR will approve and put into effect the MOP prior to loan effectiveness. At negotiations, assurances will be given that all the project components would be carried out in accordance with the procedures set forth in the Project Operational Manual. Adherence to the manual will be assessed every six months by external auditors engaged for the performance audit of PCR and its UEDs. - 128 - Table 1. Content of the Project Operational Manual Description Volume I - Project Management and Organization 1. Project Description Project objectives and performance indicators (as shown in Logical Framework) Project components and six-year rural roads program Project implementation strategy and geographic ambit Project and Six-Year Program costs 2. Project Components Rehabilitation of rural roads Rehabilitation of primary and secondary connecting roads Road maintenance Improvement of village streets Improvement of non-motorized transport Institutional Development (technical assistance and training) 3. Project Institutional Set-Up Establishment of PERT-PCR Relationship and coordinating mechanisms between PERT-PCR and (1) the Planning Office and Directorate of ROADS of MTC, (2) the Ministry of Economy and Finance (budgetary implications), (3) regional governments and provincial and district municipalities (participation agreements), and (4) other central government decentralized agencies involved in poverty alleviation and rural development programs (convenios de cooperaci6n with FONCODES, INADE, others). Relationship between PERT-PCR and the Banks cofinancing the project: (1) progress reports, (2) annual reviews, (3) mid-term program review, (4) project supervision by the Banks, (5) procurement, and (6) disbursements Legal aspects regarding the jurisdiction over rural roads and functional classification of roads. 4. Policies and Government strategy Country economic framework Government poverty eradication and rural development strategy 5. Organizational Structure of PERT-PCR Mission and responsibilities assigned to PERT and its deconcentrated executing units (UEDs). Organizational structure and staffing. Operational Plan for the establishment of the UEDs. List of indicators to assess the performance of each implementing unit and the methodology to calculate these indicators on a six-month basis. Annexes Model Participation Agreement to be entered with municipalities (convenios marco participaci6n) Cooperation agreements entered with FONCODES and INADE (convenios marco cooperaci6n). Functional classification of the road system in Peru Terms of reference for technical assistance to support PERT-PCR in rural roads planning and management.(b) Terms of reference for technical assistance to develop microenterprises for road maintenance.(c) Manual ofjob descriptions and functions; minimal qualifications and regulations for the employment of staff, and restrictions that would apply to staff to avoid conflict of interest Volume II - Project Implementation 1. Overview of the cycle of investment subprojects Type of subprojects Steps for generating, selecting and approving investment subprojects and annual programs Steps for minor subprojects undertaken by beneficiaries Mechanisms for interinstitutional coordination with municipalities, communities and other local agencies Mechanisms for community participation in identifying and implementing subprojects - 129 - Description (a) 2. Eligibility criteria for selection of investment subprojects. Eligibility criteria Procedures for application of eligibility criteria Templates for socio-economic evaluation of subprojects Environmental guidelines for screening of road subprojects 3. Overview of Procurement Guidelines Overview of procedures for procurement of works and selection of consultants, and review of procurement actions by the Banks Procedures for selection of consultants for pre-investment studies and work supervision Procedures for procurement of civil works for contracts not to exceed US$250,000. Procurement of civil works under National Competitive Bidding procedures. Procedures for direct contracting of works to "nucleos ejecutores" estimated to cost less than US$50,000. Procedures for force account arrangements with DGC, regional governments or municipalities 4. Monitoring and Evaluation of Subprojects Operation of the Project Information and Monitoring System. Procedures for monitoring progress in project execution and performance of PERT-PCR Format and content of quarterly reports. Preparation, format and content of the project annual reviews. Annexes Procedures for organizing participatory workshops to identify investment subprojects and assess transport needs with the beneficiaries Project Guidelines for minor subprojects undertaken by beneficiaries Environmental Manual (to be developed by September 30, 1996). Technical specifications for rehabilitation of (1) rural roads using labor-intensive methods, and (2) connecting roads (primary/secondary). Model letter of invitation, terms of reference (for rural roads and for primary/secondary roads) and contract to select consultants for pre-investment studies. Model letter of invitation, terms of reference and contract to select consultants for supervision of works. Register of local contractors prequalified for works estimated to cost less than US$250,000 Model bidding document and contract for procurement of fixed unit price contracts for civil works estimated to cost less than US$250,000 Model bidding document and contract for civil works procured under NCB Model convenio for direct contracting of civil works to nucleos ejecutores. Model convenio and standard unit prices for force equipment intensive activities under force account. Operational Manual for the Project Information System and database Terms of reference for bi-annual performance audits Volume m - Project Administration and Finance Administration of project accounts and flow of funds Formulation of annual budgets Guidelines for internal control of procurement Guidelines for internal control of flow of funds Financial Reporting World Bank Disbursement procedures ( The list below is not intended to be a reproduction of the Table of Contents of the Project Operational Manual, but rather a description of its content. ( The consultant will produce several guidelines that will become part of the MOP, including those for (1) analyzing institutional capacity in municipalities, (2) preparing simple transport plans at a provincial level. (3) implementing a road inventory and a maintenance management system among provincial municipalities. (c) The consultant will produce several manuals that will become part of the MOP, including those for (1) creating microenterprises, (2) contracting out road maintenance activities to microenterprises, (3) programming, supervising and administering contracts for road maintenance. - 131 - ANNEX 10 PERU RURAL ROADS REHABILITATION AND MAINTENANCE PROJECT Participatory Planning Component Background 1. It is intended that sub-projects in the Rural Roads Rehabilitation and Maintenance project be generated or prioritized by the communities themselves upon request to their Municipalities or the UEDs of PERT-PCR. In order to develop a mechanism for effective community participation, the project appraisal mission of May 1995 included two consultants skilled in the application of participatory techniques and beneficiary assessment. The PERT-PCR in Peru provided excellent support, especially through Messrs. R. Acco (sociologist) and Rodriguez (Rural Road Engineer), both seasoned staff in the field of community participation in Perui who actively participated in the various workshops and in defining the operational methodology that will be used throughout project implementation. 2. The project team considered that if early involvement of beneficiaries was achieved, it could play a key role in ensuring sustainability of the road maintenance strategy pursued under the project. The objectives of the May 1995 appraisal mission in this regard were basically to: (a) apply the LogFrame methodology to communicate the project to beneficiaries in the field, test the validity of the project approach and better assess transport needs at the local level; (b) assess the capacity of Peruvian NGO's for involvement in the project and the applicability of existing community participation practices employed by local agencies; (c) develop a methodology tailored to the culture of the sierra population to routinely carry out community participatory workshops; (d) train local staff in the application of the agreed methodology; and (e) prepare terms of reference for developing micro-enterprises and maintenance committees, composed of beneficiaries, for the road maintenance component of the project. 3. The participatory exercises carried out confirmed the potential benefits and viability of the participatory approach proposed under the project. As noted, some adjustments to the initial methodology were introduced on the basis of the experience gained in the field. The project team was highly impressed with the interest shown by the sample of communities involved, the candid and clear way they used to describe their transport needs, and the priority they give to the proposed project as well as to their future involvement in road maintenance. 4. This annex includes, as Attachment 1, the Operational Guidelines for the application of the participatory process, which will be part of the Project Operational Manual. The guidelines were developed in the field and are the main output of the participatory process. They are intended to be used by local consultants in applying participatory mechanisms during project development and implementation. The Operational Guidelines were discussed and agreed to with the representatives of the PPU. They are written in Spanish. - 132- 5. Participatory meetings. The following participatory meetings were held i) in Cusco, Department of Cusco on May 29, 1995 attended by 24 participants including six local alcaldes and members of the local construction industry; ii) in Ccorca, Department of Cusco on May 30, 1995 where participants at the meeting numbered about 200, but it was not possible to get a list of names; iii) in Huancavelica, Department of Huancavelica on June 2, 1995 attended by about 37 participants including members of local agencies of FONCODES and COOPOP, members of the Sub-regional Directorate of Planning, members of local transport companies, Mothers Clubs, the local university, the College of Engineers and NGO's and in iv) Izcuchaca, Department of Huancavelica on June 3, 1995 attended by about 50 participants including local mayors, and members of Mother's Clubs. A full list of participants is in the Project Files. Report back on the findings of the Participatory Approach in the Road Maintenance Component of the RRRMP project 6. The Peruvian government is implementing general policies aimed at integrating the rural poor into the mainstream of national economy and culture. The functional impassability of the rural roads network is one of the conditions that must be changed so that the outlying areas can become a functional part of the nation. The present joint project by the World Bank, IDB and the Government of Peru aims to improve rural roads by rehabilitation and promotion of a permanent maintenance program. 7. Road maintenance is the missing link in the chain of events needed to assure efficient transportation systems. Regardless of how well constructed or rehabilitated roads are, in the long run without maintenance the trafficability of roads is compromised, and with it, a wide array of services that directly impact in the livelihood of towns and villages. A mere intellectual understanding of the dire effects of road maintenance deficit is not enough to accomplish behavior modification leading to effective maintenance efforts. If changes of community attitudes towards maintenance are necessary, then the people whose behavior has to change must see their own interests linked with the change and commit themselves to it. 8. How can the people within the local system learn the value and content of new social behaviors that will help bring in much needed development? It is not only by merely giving beneficiaries a description of the objectives involved in planning and implementing development activities. It may be then too late to generate behavior modification because community members already know that they are perceived as passive recipients of development initiatives. There is another approach that will allow beneficiaries more input and control. In this approach, stakeholders have to go through a process of evaluating their needs, defining development objectives and learning what they themselves would have to do to implement and sustain their project. Because it is the learning produced by working together that creates ownership and lasting relationships, there is simply no other way to build ownership and a productive network of relationships other than by involving the relevant stakeholders in participatory sessions. An adapted version of this process, the Community Participatory Workshop is applied here. 9. Participation is a process through which stakeholders influence and share control over development initiatives. How can it be implemented in a rural road rehabilitation and maintenance - 133 - project? In the case of the Peruvian Rural Road Rehabilitation and Maintenance Project, the answer is promoting stakeholders' ownership of the project, by means of linking the project with their own needs concerning transportation services. By including participatory project planning methodology, it was expected that the process: * would lead to a greater dialogue between the government representatives, Proyecto Especial de Caminos Rurales PERT-PCR and the local community organizations; * would lead to greater ownership of the strategy by the Peruvians at every level; * would contribute to the empowerment of people in rural and poor urban communities by giving them an opportunity to assess their own needs and propose solutions; * would likely lead to better implementation and sustainability of follow-on projects. 10. To achieve the intended objective of poverty alleviation in Peru6 the very project had to be designed around the purposeful inclusion of a large share of local labor, both in unskilled tasks and as members of micro-enterprises at charge of road maintenance. In this phase, a specific design for participatory interventions at the level of rural indigenous communities was included as the necessary means to: * ensure that all the needs of the rural poor were taken into account; * provide local communities with some necessary information about the project and their role in the project; * include local solutions in the project design; * mobilize support for road maintenance through increasing ownership of the project and also through promotion of micro-enterprise formation and operation. In this way the project will address the needs of the poorest rural areas, integrating them into mainstream economic activities by means of a working road network and so contributing to poverty alleviation through employment generation. Reaching the very poor stakeholders 11. Participatory methods that have been satisfactorily used to involve government officials and other relatively powerful stakeholders in development initiatives may be often inappropriate or inadequate for reaching the poor. There are many cultural, economic and political barriers which effectively prevent poor people from having any real stake in development initiatives. Without special efforts by the project designers, and without appropriate policies to address and overcome these obstacles, the voice of the poor will not be heard and their participation will at best be a token one. Reaching the poor, therefore, requires working with them to learn about their needs, understanding how development decisions are made in their communities, and identifying institutions and mechanisms which can get opportunities and resources into their hands. The decision to hold community participation workshops with comuneros in the high sierra was perceived by the project team as the most adequate means to reach the Peruvian poor. 12. Involving the poor in decision-making and getting resources to them also requires strengthening their capacity to act for themselves. This occurs through investments in social capital such as promoting local-level institutions and participatory processes; and support for community-based development efforts planned and implemented from the bottom up. These efforts require responsive institutions and legal and regulatory policies which enable, rather than - 134- hinder, local participation. In Periu, institutional support for community involvement was straightforward and constant throughout the RRRMP activities in the rural sierra. As designed, several meetings of MTC personnel and community leaders reinforced local institutions and provided the basis for an efficient network that would in the future help project implementation. This reflects an important objective of the project team: that the final project design, then, had to be co-produced by many of the people-at different organizational levels-who will have to work together to implement it. Promoting a shared ownership of the project that leads to community empowerment is also an intended product of participatory interventions. Participatory Project Planning 13. The Bank mission in Peru began local implementation of the participatory phase of the project planning on May 23, 1995. Information-gathering meetings with the local representatives of the Ministerio de Transportes y Comunicacion (MTC) included agreements about two different levels of community meetings. Selection of villages for methodology testing and evaluation was contingent upon poverty evaluation, by which only extremely poor communities in isolated regions were included. 14. A preliminary design for Community Participatory Workshop included two levels of public involvement. The first with community leaders (alcaldes, gobernadores and such) and heads of base organizations that are representatives of the intended beneficiaries, or heads of NGOs working with the poor in a similar way to the government body, FONCODES. These meetings in the cities of Cusco and Huancavelica lasted 5 to 6 hours. 15. The second level of Community Participatory Workshop was designed around a broad open invitation to whole communities, to gather in one-day meetings. This participatory design was applied to two rural communities, one was Ccorcca, in the Cusco Department and the second was Izcuchaca, in the Huancavelica Department. In both cases, nearby communities in the walking range vicinity were also included. Attendance fluctuated between 205 in Ccorcca and 50 participants in Izcuchaca, mainly due to seasonal constraints (potato harvesting season). Lunch was provided because the workshop was scheduled to begin at 10:00 a.m. and continued into the evening. Many participants live in nearby communities, so attendance was conditioned to the possibility of going back to their places during daylight hours, which necessitated ending the workshops around 4:00 p.m., to allow the attendees to return to their homes before dark. This also was done for security reasons, as there is renewed guerrilla activity in the sierra around Huancavelica. Community Participatory Workshop Design 16. The objectives of the World Bank mission included developing a proven methodology that could be replicated by local facilitator teams from MTC for enhancing community participation in project implementation. A widely known version of Logical Framework, (LF) as developed in the field by Inter-American Development Bank teams, was initially selected and applied by the original project team to organize project data. In this case, backup training and all necessary information were easily available. This was not the case in Cusco and Huancavelica. - 135 - 17. When LF was applied at the leaders' participatory workshops in the cities of Cusco and Huancavelica, it was intended to teach them the method to allow development of their own LF design. Organizational difficulties resulted in lack of time which prevented a detailed exposition of the methodology. Other obstacles were participant's lack of familiarity with logical connections (between means and ends, and cause and effect) and a deficit of detailed information about road maintenance that could be applied to long term planning. Participants were able to design problem trees and objectives trees, connecting creation of micro-enterprises with road maintenance, and discuss some of the risks/assumptions. Along the whole process, the wider purpose of having community leaders going through a problem-solving learning experience together was accomplished, and connections between leaders' different professions and origins were established. They developed a serious interest in micro-enterprise formation. 18. After taking stock from the Cusco experience, and focusing into the intrinsic value for a group to go together through a process of identifying problems, transforming them into objectives and evaluating alternatives for solutions, a design very similar to the LF was chosen. This is a simplified version of William Smith's Appreciation-Influence-Control (A-I-C) methodology, as described in World Bank Sourcebook on Participation, (p. 141), and follows the same logic structure of the Logical Framework. Both methods differ in the techniques used, not in the sequence of thinking (problems, objectives and strategies). In the A-I-C method, groups are requested to produce a common drawing of the problematic situation first, of the common development objectives second, and finally to suggest strategies to pursue objectives by means of cards that are organized in logical sequences by the facilitators of the participatory process. 19. Collective drawing on large paper sheets enabled these groups to work together. It allowed expression of ideas to even illiterate participants; facilitated dialogue between them and gave a concrete instrument to weave their ideas together and to share them with the rest of the workshop participants. Both male and female participants were encouraged to take the role of group leader and explain publicly each groups' drawings, so further encouraging participation across gender barriers. At the end of the workshops, facilitators would explain the main findings, assess consensual areas and connect workshop findings with Bank's project guidelines, giving participants a clear idea of the mutual involvement needed for project success. Selection of Stakeholders 20. Selection of stakeholders is the first step in the process of organizing a community participatory workshop. If one of the purposes is to promote ownership of the project in the local community, this selection is very important. Stakeholders are those affected by the outcome-- negatively or positively, or those who can affect the outcome of a proposed intervention. Because rural roads are such an important aspect in the area's development, the selection of stakeholders had to range from representatives of national government; of MTC, state or provincial authorities to local and municipal level representatives. A governmental institution, FONCODES, and its branch PREDES in Cusco was instrumental in identifying NGOs and local leaders. Mayors (alcaldes) were the first resource used in selecting leaders from the rural communities. They would give detailed information about the basic structure of the community and its organizations. Spontaneous mobilization happened: when local leaders knew about the - 136- meetings, they invited themselves. One group attended the Cusco meeting after hearing about it by the local radio news. 21. Also instrumental in this process was the ancestral ayllu, or communal organization that persists from the time of the Inca empire. This ayllu tradition has always invested local leaders with the task of representing their communities; for the Community Participatory Workshop it was indispensable in getting local leaders to the table. Among those leaders, representatives of women's groups like the Mother's Clubs were very important to provide a description of social needs (education; health-care) related to road rehabilitation and maintenance. Also, in the case of the Huancavelica meeting, they provided community women's view concerning their readiness for future road maintenance works. tWomen's empowrerment in Humnca'veica: it E V; t i : :i: i : : : 7ii::g: i-: :Abot 752 Clubes :de: Madresaor::Mother's Clubs are organized:and working to promotebetter living tconditionsbfor :poor 0twomen of the Peruviand siera. 44% of adult women.in the.rural sierra are illiterate, and never schooled girll between 5- anid 10 years fworkll-time has sheperds of the mily goats or pigs. Same mothers, organized by an NGG na:PRONA, are vol woring in road maintenance tasks. According to Elpidia Villalon, Presidenit of one Mother's Cl*band dat 40 the motheroften.children, this is their shared experience: :'Even w.hen we have to wakegupat threew in themorning, :to take care of the children and household chores, to bie int l .the at seven, what. we d. is reaWll important. We feel differen very proud of being able to feed theAfamily. I feel more apable, more tto mnuke effoirts to advance in life, ifter proving that we woen can do this:ye of work, It is hard work, and Stakesa lot of physical effort, but we women can do it.hand do vitwell. Whatiwe only aeed nowg isi to get fmoe olf it, anid tR get -paid gin c:ash, -instead of receiving sialary's value in: foodstuf. ' 0:0 0 CSommunity Participatory Workshop Development 22. Locations for the workshops were chosen to allow as many people as possible to attend. In the rural village of Ccorcca, the meeting was held in the public Plaza de Armas, as this was the only paved space available to allow around 200 people to gather. Having the meeting in the open air with no protection against the sun for about six hours was not the ideal situation. Impromptu collaboration from the school provided tables, but not enough chairs. The walls of the major's office (alcaldia) were chosen to hold the graphs produced. In Izcuchaca, conditions were more favorable and it was easier to use the empty school building. After finding the place and organizing the provision of teaching materials and food for the participants, the process of the workshop developed as follows: 23. At the beginning of the workshop, community participants were greeted by MTC representatives, IBRD personnel, and facilitators. Participants were invited to form small heterogeneous groups. The purpose was to facilitate interaction between persons from different fields of activity that usually have no chance to work together. The groups were asked to work together in a common drawing representing their actual transportation problems. When the drawings were finished, (using approximately 30 minutes) the groups were invited to select a participant as leader, who would step in front of the meeting and explain their ideas and answer audience's questions. In this phase, it is interesting to note the detailed quality of the drawings, thus revealing the villagers' in-depth knowledge of the roads and of their problems. The comuneros know the roads i in timate detail, because they spend so much time of their lives walking through them, carryentitheir products and herding their animals to pasture. - 137- 24. After finishing the exposition of each group's results, the participants were invited to transform their problems into objectives, by means of drawing a picture of their communities once problems were solved. How the future would look like, with the roads rehabilitated and maintained? Due to their multiple needs, it was inevitable that groups were simultaneously dealing with education, health and electricity needs, in addition to transportation. By first confronting their transportation needs, the villagers quickly came to see how important it was to have roads rehabilitated in order to solve those other needs. The learning process continued by inviting them to present their ideal villages drawings in public and again answering questions. 25. Finally, the participants were reorganized into homogeneous groups, each one working with people of their own communities, and invited to produce a listing of those strategies that would help them achieve their dreams. Focusing on those village developments that would connect them with road maintenance. Discussion of micro-enterprise formation was encouraged, and more information linking workshop's conclusions with IBRD project design offered, in order to weave the workshop conclusions within the project design. As an example of the methodology, participants groups' conclusions at the Community Participatory Workshop held in the village of Izcuchaca, on June 13, 1995, are listed below. First exercise: What are the community transportation problems? The road is too steep, too narrow, with too many curves. The road lacks pavement, and it becomes slippery when it rains. It is impossible for big trucks to pass, so the community is deprived of selling their products and of obtaining some other industrial products. We have very few resources and sometimes go hungry. If people are extremely poor, their children die from under nourishment and illness. In winter times there is no traffic between Palca and Nunungayoc, due to the potholes and the rain that swells the Palca river and floods the road. In general, we are almost isolated and lack health and education services. People are emigrating and those who stay are becoming poorer. Second exercise: What are the community development objectives? Road maintenance, including works of art, assured. Communities would have electricity and other services. Product transportation to the markets in due time. Reasonable cost of construction materials, due to reduction in the price of its transport. Also, economical price for transportation of people. Steady assistance by teachers, able to teach every day. Health assistance appropriate in case of emergencies like cholera. Commerce with other communities improved; local Sunday markets established in several communities. More attention from state authorities. Progressive substitution of animal transportation by vehicular transportation. Bridges with enough capacity that allow heavy truck loads to go through. More mineral exploitation with trucks transporting necessary tools for mineral extraction, e.g.: silver, zinc, copper, lead, silicon and kaolin. More in site production of materials and products. More potatoes, rice, wheat produced. More and better use of hydraulic resources. Raising progress expectations to be again frustrated, because of no IBRD or Peruvian Government timely delivery, would be a new problem. A general improvement in life conditions would make comuneros happier. Third exercise: What are the development strategies that the community could implement? Following the first two exercises, the groups were given small cards, and invited to write one idea in each card about possible strategies to achieve the ideal situation described in exercise two. There were no limits to the numbers of cards/ideas developed. Classification of cards produced by groups yielded five large categories: - 138 - 1.- Setting Development Committees: proposal to establish a ten-person Road Maintenance Committee, ruled by communal law, supporte by own and MTC resources. This committee should have the responsibility to organize the work teams to perform road maintenance, and also help establish some micro-enterprises. 2.- How would the Committees function?: With active community involvement, especially about road/transportation emergencies. Members would rotate, so everybody can be included and learn. Special attention to the inclusion of women, already organized in Mothers' Clubs. 3.- Funding for the road maintenance andfor the Committees: direct tolls are not appropriate due to the low traffic levels. Instead, active involvement of transport companies, which would pay dues to receive the transportation concession, in coordination with MTC or municipalities. Some help was needed with the provision of manual tools from MTC for performing road maintenance works. 4.- Other external support: It is necessary to coordinate with other communities and agree on what are each community's responsibilities concerning their share of road maintenance. Proposal to form a multi-sector committees (transport experts, comuneros, transportistas, etc.) with other communities to promote support for road maintenance. 5.- Public education campaign: Need to include a permanent public education effort, to make children and adults aware of the community dependency on roads for development. This should be supported by Ministry of Education programs. Promote the preventive care of the roads, in order to avoid trash, stones, and other intentional road damages. 26. The following boxes record i) the transportation problems as identified by the Community Participatory Workshop in Cusco; ii) a general synopsis of the transportation problems encountered in cities like Cusco and Huancavelica and iii) the transportation objectives as designed by the participants in the workshops. The Logical Framework as designed by the participants of the Community Participatory Workshop in Cusco May 29,1995 is also attached. Conclusions 27. Community participatory workshops are a powerful way of mobilizing public involvement and a sense of ownership of a development project. Even under the difficult conditions of extreme poverty, Peruvian comuneros know exactly what their problems are, what they dream as community development and what has to be done to--more than alleviate poverty--give them the basic and necessary conditions under which promote their own economic and social improvement. Ready to move beyond the phase of project design, frequently villagers are anxious to see their inclusion progressing towards an active participation in road maintenance works. Community consultation becomes inexorably community mobilization. The role of the RRRMP project concerning poverty alleviation is more than a purpose declaration: it now becomes a shared objective that connects international funding institutions, the government of Perui and the high sierra comuneros. Extremely poor communities' development dreams mobilized by consultation processes need to be channeled into common ventures that will make of long postponed improvement expectations a concrete reality. -139- Transportation problems as identffied by the Communty Paipatory Workshop inCsco May 2% 199L * There is a need for a nationa, and regional transportation plan, with wide state support. M.aintenance planning and its fmuding is a must. Specialized tools and vtained labor also is needed. * Roads not Maintained are dangerous, they have steep climbing and acurves. They are also narrow, and. two vehicles can't pass. In the road between soA yPpinto-Aea, bridges on't support adequate truck tonnagte: * Problems wth high transportation costs are widespread: not only products fo the market have higher prices, but importing products into villages is unreason xpensive. This is blocking mmerce between districts and villages. A consequence is the isolaion of vles. There is some problmuithcomne emigating to Lima or other cities, .in search ofbeer work opportunities. * There is a deficit in health and educational services because of rasportation difficulties. Health providers can't visit the villages frequmtly due to bad road conditions. Teachers don-'t provide steady attention to . students for the same reason. This reverts in blocking villagers' access- to better living conditions and poverty worsens. * Also public transportation.is costly and unsafe. When products, animals and peopleare transported together, there is a health problem for people. Problems with transportation in cities:like Cuwco and Huancaelica- * There is no funding allocation for road construction and maintenancet There are no lel p s to promote private activity, but only a centralized, highly bueaucratic adnilnistration of trnort syste.- * There is no night transrtaton system. * There is an indiscriminate import of non-commercial vehicles, but few ded.icated to transport needs, without: governmental policy. * There is a lack of organized provision of services, undue free competence for the sae routes while others are. unattended by providers. Transportation obeti as design by the Cobmmnity Paticpatory Workshop in.C Ma 29, 195 * A concerted effowt by all stakeholders in the transportation systm is needed, to: desi an .integratd solUtion. A consensus-building plan for estabishing.the infrastructure of transportation ievis is . * Development of a n for Road development, with incusion-of ra.l roads-. * Rehabilitation, widening and maintenance of roads. Constructo of wos Of art- Prention ofrod floodin by rivers.. Al-ignment. of .some rioads. :.. * sttional capacity reinforcement to munrcipalities and local goernments, toger W.h f in order to solve local transportation.problems. Promotion of transport private entepise Organzing: Techniclw Directions in municipalities and loc orpgaizations. * Uesign of an effective ode of transportation traffic. .Quality control of vehicles.. Pomotion Of uniformity in transportation regulation. Enforced renovation of vehicles in: disrepair. . * Promotion of permanent maintenance at charge of users and mcro-terpries.eP trani -ofroad workers. * Give cohesive power to municipalities to be-able to regulate public and lod trasportation between "rigcs Budget allocation- als for stret imprvemnt. .. .... * Prormoion of more competon bet companies, to reduce cotm of tr.nspo.tati on . * Improvement of road seurity, due to better vehl, more driversY training icn . training fortdrivers provide. : :. .. . .. .... - 140 - MARCO LGICO, WORKSHO DEACADS CUSCO_____ FIN INDICADORES VERIFICACION SUPUESTOS Reducci6n del nivel de pobreza; aumento * Comercializaci6n de los Estadisticas del INE, La lucha contra la del nivel de vida de la poblaci6n rural en productos agricolas sube el MICTI, CONACO pobreza continiia un 30% en cinco aflos. 50%. como prioridad * Mayor diversidad y para el gobierno competitividad de los del Peri. productos. * Industrializaci6n progresiva de las zonas agricolas. PROPOSITO INDICADORES VERIFICACION SUPUESTOS Rehabilitaci6n y mantenimiento del * Kms. de carreteras rurales * Estadistica del Ausencia de sistema de carreteras rurales. rehabilitadas en la Provincia Ministerio de desastres de Cusco. Transporte; naturales * Indice medio de circulaci6n * Estadisticas del (terremotos, diaria: Vehic. livianos: 10; Ministerio de deslizamientos, Vehic. pesados: 15 Agricultura; Iluvias), en la * Volumen de productos * Control Policial. regi6n. transportados: 200 pasajeros * Encuestas de por dia; 30 Tn de productos satisfacci6n del por dia pwiblico usuano. COMPONENTES INDICADORES VERIFICACION SUPUESTOS * Diseflo de un Plan General de * Sistema de Desarrollo Vial del * Publicaciones del Apoyo constante Rehabilitaci6n y Mantenimiento de Perui en ejecuci6n; marco legal Gobierno. del Gobierno del Carreteras Rurales del Peru. y operacional, idem. * Estadisticas del Peru. * Organizaci6n del Sistema de Mantenimiento del 80% de los Ministerio de Desarrollo Vial con intervenci6n de caminos rurales asegurado. Transportes. los gobiemos locales, entidades * Un Comite mantiene aprox. 20 * El Presidente de la putblicas y otros. Fornaci6n de Kms. de carretera. Comisi6n de Comites pro-Mantenimiento de * Micro-empresas por distrito en Transporte de la Carretera. operaciones emplean mano de Municipalidad * Formaci6n de micro-empresas de obra no calificada, en una evalua el trabajo mfltiples fines en el area del proporci6n del 60% de mantenimiento transporte. aumento sobre indices 1995. * Registros del * Creaci6n de Cajas Comunales. * No. Cajas Comunales, con un Ministerio de Disefio, fimanciaci6n y puesta en capital minimo establecido, Industria y funcionamiento en regiones. funcionando en las provincias Comercio. * Asistencia tecnica y entrenamiento a o regiones. * Registro del distintos niveles; administraci6n de Ministeio de microempresas; mantenimiento de Economia y vias; educaci6n vial. Finanzas ACTIVIDADES * Planificaci6n de proyectos viales. Priorizaci6n de rehabilitaciones. Gesti6n de pre-inversi6n. Diseflo del plan de financiamiento del mantenimiento de rutas. * Estudio tecnico y financiero para microempresas. Confecci6n del plan de negacios. * Organizaci6n de las microempresas con supervisi6n gerencial. * Diseffo del programa de capacitaci6n del personal en mantenimiento de carreteras. * Fornaci6n del organismo coordinador con otros entes a nivel provincial. * Estudio tecnico y financiero para Cajas Comunales; Marco Legal - 141 - ANNEX 10 Attachment I PERU RURAL ROADS REHABILITATION AND MAINTENANCE PROJ1ECT Operational Guidelines for the application of the participatory process TALLERES DE PARTICIPACION COMUNITARIA PROYECTO DE REHABILITACION Y MANTENIMIENTO DE CAMINOS RURALES Guias Operativas para la Consulta a los Beneficiarios 1. La metodologia del Taller de Participaci6n Comunitaria tiende a asegurar la participaci6n de toda la comunidad involucrada en el exito futuro del proyecto, en el grado adecuado a su interes. La aplicaci6n cuidadosa de la participaci6n comunitaria apoya el concepto te6rico que conecta la sostenibilidad futura del proyecto con el grado de participaci6n comunitaria en las etapas de disefio, ejecuci6n y mantenimiento del mismo. En este Manual, se describiran los pasos necesarios para asegurar la involucraci6n de todos aquellos sectores cuya participaci6n es absolutamente necesaria para la sostenibilidad futura del proyecto; se describira el mecanismo de identificaci6n de sus necesidades en el area del transporte y se resumiran aquellas soluciones a los problemas del transporte elaboradas por los mismos beneficiarios. El prop6sito del Taller de Participaci6n Comunitaria se describira formalmente en todas las localidades de la siguiente manera: "Como proveer de nantenimiento confinuado a los caminos rurales a ser rehabilitados prMimamnentepor elproyecto conjunto del Banco Mundial, el BID y el Gobierno del Perui." QUILENES PARTICIrPAN? IDENTIFICACION DE LOS INVOLUCRADOS 2. Este modelo tiene dos formas, adecuadas a las diferencias caracteristicas del ambito urbano y rural. Lo que se va a presentar aqui es la versi6n adecuada al ambito rural.. Una vez elegida la localidad donde se va a realizar la consulta comunitaria, y previamente a la preparaci6n del Taller de Participaci6n Comunitaria, se debera comenzar con una cuidadosa identificaci6n de los interesados directos e indirectos en el proyecto. Involucrados son todos aquellas personas individuales o grupos cuyo quehacer diario puede afectar el desenvolvintiento del sistema previsto. En el caso de los caminos rurales, un mapeo de todos los posibles involucrados tendria que incluir a las fuerzas vivas de la comunidad: los usuarios del sistema de transporte, los empresarios transportistas, los contratistas que hacen planificaci6n, rehabilitaci6n y mantenimiento de caminos, los representantes de la mano de obra, las entidades intemmedias u Organizaciones No Gubemamentales, Fondos Ejecutivos tipo FONCODES, todas las autoridades locales de la comunidad, (Alcalde, Regidores, Gobemador, etc.), mas los representantes locales del Ministerio de Transporte y de otros programas de los Ministerios, tales como PRA, PRONAA y COOPOP. Se tiene que asegurar la legitimidad del proceso por medio de la inclusi6n de representantes de todos los sectores involucrados, designados por ellos mismos. - 142 - Esto tambien asegurara que los participantes tomen el proyecto como algo de su propiedad y al hacerlo propio, aseguren su viabilidad y sostenimiento. La etapa de la identificaci6n de los involucrados se hara con la ayuda invalorable del personal tecnico del PERT, Ministerio de Transportes, Comunicaciones, Vivienda y Construcciones (MTCVC). Este personal tecnico, por estar familiarizado con la zona, puede tambien sugerir los nombres de personas o entidades que, aun sin tener titulos formales, tengan influencia en la zona y puedan ayudar a desarrollar un proceso mas participativo. La invitaci6n de los involucrados a participar puede ser hecha a traves del Alcalde, Gobernador, funcionarios del MTCVC, o Coordinadores del Taller, pero es importante mantener consistente el mensaje que se dice, que es el contenido de las instrucciones. Estas instrucciones diran mas o menos lo siguiente: "Esta es una invitaci6n a partcipar para todas aquellas organizaciones, ya sean gubernamentales u ONGs, puiblicas o privadas, o aquellas personas, varones y mujeres, que tengan algo que ver con la soluci6n de los problemas de transporte del drea Se trata de un Taller de Pardcipaci6n Comunitaria donde se trabajard en grupos por espacio de seis horas por lo menos. Para todas las personas de la comunidad, esta es una ocasi6n nuy importante, pues pernitira que opinen sobre las mejoras necesarias a! sistema vial Tambien dardaoportunidad a la generaci6n de ideas para el mejoramiento de los caminos de herradura, y la provision del mantenimiento continuado a los caminos rurales a serrehabilitados pr6ximamente por elproyecto conjunto del BancoMundial, el BID y d Gobierno del Per, " INDICA CION PRA CTICA: En esta primera etapa, se debera hacer una lista lo mas exhaustiva posible, sin excluir ninguin nombre. Si hubiera conflictos preexistentes entre uno o mas de los representantes de los distintos intereses en el area, TODOS los involucrados en el conflicto deben estar presentes. Dado que esta es una metodologia de diseflo participativo, la primera indicaci6n es lograr la asistencia de todos los interesados en el tema. La exclusi6n a priori de alguno de los involucrados legitimos puede dar lugar en elfuturo a mayores conflictos de intereses que repercutiran en la ejecuci6n del proyecto. La convocatoria en nombre de la rehabilitaci6n y mantenimiento de carreteras es de por si un tema tan significativo que subordina a otros conflictos previos por intereses menores. Por otro lado, la exclusi6n, ya sea deliberada o no intencional de uno de los involucrados es una descalificaci6n grave de su liderazgo local, ypor lo tanto capaz de suscitar d6ficits de colaboraci6n en elfuturo inmediato. Si estdn ausentes por alguna raz6n conocida, es urgente informarlos oportunamente de todo el proceso realizado y obtener su apoyo. ORGANIZACION DEL TALLER 3 . A continuaci6n, se presentari una lista sintetica de los elementos a preparar con anticipaci6n al Taller. Es importante repasar esta lista cuidadosamente, pues de su cumplimiento dependera el exito de la reuni6n. EQUIPO DE TALLER 4. Este equipo consta de un Lider de Taller y varios coordinadores. La persona que hace de Lider del Taller de Participaci6n Comunitaria no es por lo general la persona responsable del proyecto. El numero de Coordinadores necesarios dependera del niimero de participantes que se haya logrado reunir, y tamnbien de la ayuda disponible. Representantes de los Bancos en misi6n o de ONGs - 143 - involucradas en programas de desarrollo rural, que deseen participar, pueden incluirse como observador-participante dentro de algun grupo. Su presencia como observadores-participantes es invaluable, pues pueden ofrecer ideas--despues que el grupo haya hecho su propia busqueda--acerca de otros procesos o soluciones similares alcanzados en otros lados. El rol de Coordinador tambien puede ser desempefiado por los tecnicos del MTCVC, que son especialmente valiosos si son bilingues. El rol del Lider de Taller es el siguiente: a) Previo al Taller: (1) explicar los objetivos, metodologia y logistica del taller al personal local; (2) coordinar los equipos encargados de preparar el Taller; (3) seleccionar el sitio adecuado para realizar el Taller; (4) invitar personalmente a los lideres de la comunidad; (5) supervisar la provisi6n de iutiles y refrigerios. b) Durante el Taller: (1) Facilitar el Taller, ofreciendo a los participantes una explicaci6n acerca del marco general del Taller de Participaci6n Comunitaria, sus objetivos, prop6sitos, marco temporal y logistica; (2) explicar en cada etapa cuales son los objetivos y los procedimientos a seguir; (3) motivar la participaci6n entusiasta de todos los asistentes, proveyendo estimulo y apoyo a las ideas vertidas, especialmente cuidando que aquellos asistentes que rara vez son tenidos en cuenta puedan hablar; (4) al cierre, resumir en forma sencilla y comprensible los resultados alcanzados, de modo que todos los participantes se lleven una idea clara de las ideas creadas por consenso. El rol de los Coordinadores es el siguiente: a) Localizar el sitio para el Taller y asegurarse que tenga espacio suficiente y lugar en los muros donde colgar los grificos. b) Organizar a los participantes en grupos de trabajo, asegurando que haya el numero adecuado de ellos, adecuada mezcla de varones y mujeres por grupo de trabajo e invitando la participaci6n activa de todos. Tambien verificar que tengan mesas y sillas. c) Proveer a los grupos de los materiales de trabajo necesarios en cada etapa, tales como plumones y papel6grafos. d) Recorrer los grupos mientras estan trabajando para asegurarse que se ha entendido la consigna de trabajo y que todos estan aportando ideas. Aclarar dudas. e) Verificar que la traducci6n de y hacia el castellano sea constante. f) Recoger los graficos dibujados en papel6grafos y colgarlos de las paredes usando la cinta engomada. Si hay necesidad, retirar los graficos producidos en la etapa anterior para hacer lugar a los graficos de la etapa subsiguiente. - 144 - MATERIALES NECESARIOS 5. Hojas de papel blanco tamanio rotafoio, (70 cm. x 89 cm.), o mas grande, en cantidad de tres por cada grupo. Marcadores de colores en cantidad necesaria, uno por cada integrante. Tarjetas comunes de cartulina, ( 12.5 cm. x 8 cm.), en cantidad de por lo menos tres por cada participante, usadas del lado liso, sin renglones. Cinta adhesiva transparente, de tipo grueso para sostener las hojas de rotafoho a la pared, un rollo. Cinta adhesiva transparente comuin para sostener las tarjetas a las hojas de rotafolio. HORARIO 6. El Taller de Participaci6n Comunitaria es una experiencia que toma todo el dia. Posiblemente habra que citar a las personas para un reuni6n que comienza a las 9 de la manana, sabiendo que las dificultades del transporte haran posible el inicio formal recien a las 10:00 horas. Incluyendo una pausa para el almuerzo, se tratara de terminar la reuni6n alrededor de las 4:00. La raz6n para esta hora de finalizaci6n es permitir que las personas tengan por lo menos dos horas de luz de dia para volver caminando con seguridad a sus hogares. Se preguntara especialmente si este horario presenta problemas para familias con nifios, y se prevera un sitio que pueda responder a esos problemas. BUSQUEDA DE UN SMO ADECUADO 7. Dado que se promueve la mayor participaci6n posible, identificar un sitio donde se pueda acomodar a todos es problematico. Sin embargo, es importantisimo que se tenga un solo sitio, no dos salas o tres aulas. Hacer talleres simultaneos promueve aislamiento y falta de consenso. Por lo tanto, si no se puede hacer bajo techo, se identificari la plaza de la comunidad, el atrio de la iglesia local u otro sitio abierto donde todas los participantes puedan congregarse. Se dispondran de mesas y sillas en numero adecuado, recordando que para cada mesa habri siete u ocho sillas. Dado que el maximo nuimero de personas activamente enroladas en trabajo grupal no pasa de 7 u 8, se tratara de dividir el nuimero de participantes por 8 para saber el numero de grupos y por lo tanto el nuimero de mesas necesarias. A veces la adici6n espontanea de otras personas que ilegan mas tarde provee a los grupos de circulos que los rodean. A estas personas se les debe explicar expresamente que su propia participaci6n es bienvenida, no solo como espectadores de la dinamica grupal, sino como participantes activos. EXHIBICION DE LOS GRAFICOS GRUPALES 8. Dado que el proceso grupal del Taller de Participaci6n Comunitaria depende de manera importante en el propio feedback, exhibici6n de los trabajos grupales es una parte importante del proceso. Hay que buscar un sitio con muros alrededor de donde se puedan colgar los graficos, y desde donde el representante de cada grupo pueda explicar las ideas a las que arribaron en conjunto. Si no hay muros, se podra implementar un soporte de los grificos con una armaz6n de tipo rotafolio, claramente visible por todos los demas. Igualmente se debera verificar que la acuistica permita a todos los participantes escuchar la explicaci6n del representante grupal. Habiendo espacio mural suficiente, los graficos de la etapa I (Arbol de problemas) y los graficos de la etapa II (Arbol de Objetivos) permaneceran colgados mientras se trabaja en la etapa m ( Propuestas y Soluciones). Si no hubiera - 145 - lugar suficiente, tan pronto como todos los representantes grupales han pasado a exponer su trabajo en la etapa I, se quitan los grificos para dar lugar a colgar los de la etapa II, y sucesivamente se hace lo mismo para colgar los de la etapa Im. Estos quedan colgados hasta el final del Taller. REFRIGERIOS 9. Los participantes de las comunidades invitadas posiblemente concurran al Taller de Participaci6n Comunitaria usando medios de transporte propios, usualmente caminando varios kil6metros por la serrania. Es importante incluir en la programacion un refrigerio o almuerzo servido a todos. Se puede organizar este refrigerio a traves del alcalde local, dando a esta persona los recursos adecuados para que compre los elementos de comida y organice su preparaci6n con el trabajo de personas de la comunidad, o se puede encargar la preparaci6n a algun pequefno negocio de comidas del sitio. Hay que calcular en el numero de refrigerios servidos un 10-15% extra para los casos de menores que acompasan a los participantes. Es conveniente informar a los participantes desde el inicio del taller acerca de la distribuci6n del tiempo y de la inclusi6n de tiempo para el almuerzo y la provisi6n de este. DIFCULTADES IDIOMATICAS 10. Es posible que el idioma de los involucrados en del Taller de Participaci6n Comunitaria no sea el castellano. Hay que hacer las adecuadas previsiones para asegurar la traducci6n constante de las consignas y de las respuestas de los participantes de y hacia el idioma local. Posiblemente este sea trabajo del alcalde o de alguien que el designe en el mismo momento de iniciaci6n del Taller. Si los participantes explican los graficos en quichua u otro idioma local, hay que conseguir un traductor para la persona del equipo de Taller que esta tomando notas de las ideas expresadas. lNVITACION A LA PARTICIPACION DE TODOS 11. Un problema especial lo presenta el variable grado de analfabetismo de los participantes, y es por lo tanto conveniente verificar que haya alguien en el grupo que sepa escribir. Esto resuelve el problema de la escritura de las ideas grupales, pero puede presentar otros problemas. A pesar de que el ejercicio comienza con dibujos, muchas personas de escasa o nula escolaridad se auto excluyen del proceso por una falsa sensaci6n de incapacidad, dejando el liderazgo automatico del grupo a la persona que sabe escribir. Esta persona puede o no representar fielmente a las ideas de todos. Los Coordinadores deberan tener cuidado de ir personalmente grupo por grupo y estimular la participaci6n de todos. Especialmente las participantes mujeres pueden ofrecer un consentimniento silencioso, por lo cual es necesario estimularlas a expresar verbalmente o graficamente sus ideas. Ayuda el proveer de marcadores o plumones de colores, y tarjetas, a TODOS los integrantes, sepan o no escribir. Lista de posibles involucrados en el Peru 12. Se haran las invitaciones a los involucrados correspondientes dependiendo del tipo de proyecto. Esta es solamente una lista provisional, para dar una idea del amplio ambito de distintos involucrados que los temas de transporte pueden tener en el Peru. Tentativamente los posibles involucrados pueden incluir: Ministerio de Transportes; Gobierno regional; Ministerio de Agricultura - 146 - (PROMANECH); PRONAA (Club de Madres, Vaso de Leche); Empresas de transporte de carga y pasajeros; PAR, FONCODES, COOPOP y ONGs locales; Alcaldes y autoridades politicas; Colegios profesionales (Ingenieros, Economistas); firmas de ingenieria (consultoria, planificaci6n y construcci6n); firmas de alquiler de equipo pesado; iglesias; autoridades escolares; demas dirigentes de las comunidades involucradas. DESARROLLO DEL TALLER DE PARTICIPACION COMUNITARIA COMIENZO 13. Una vez instalados los involucrados en el local elegido, es conveniente preparar las introducciones y presentaciones formales en el orden jerarquico correspondiente. Asi, el Alcalde, o el gobemador si el Alcalde no esta presente, presentara a los funcionarios del MTCVC, a los enviados del BM y/o BID y al Equipo del Taller, respectivamente. Es importante que el representante del Ministerio de MTCVC haga una breve descripci6n del proyecto, su importancia para la comunidad y la necesidad de incluir la participaci6n de los involucrados a fin de tener un proyecto viable y sostenible. A continuaci6n, el Facilitador procederA a explicar la consigna de la Etapa I. INDICACIONPRACTICA: Es importante agradecer especialmente que los concurrentes suspendieran sus labores productivas, familias y tareas domesticas y caminaran una distancia considerable para poder estar presentes. ETAPA I: (Duraci6n: entre 45' y una hora) 14. En la primera parte de esta fase, los representantes de los involucrados hacen un diagnostico del estado del sistema de transportes, tal como los afecta a ellos. La persona que facilita el Taller los invita a reunirse en pequefios grupos de hasta 8 personas, mezclando personas provenientes de diferentes instituciones o comunidades. El Facilitador dice: "Les agradezco nuevamente haber venido y su colaboraci6n con el proyecto. A fin de que todos sepamnos como es la situaci6n actual y cuales son los problemas que tenemos, los invito a conversar dentro de su grupo sobre las dificultades mas habituales. Cuando hayan hablado todos, haran un dibujo sobre este papel que represente los problemas de transporte que todos experimentan. Para finalizar esta etapa, discutiremos los trabajos grupales en publico. No es importante el talento artistico de los participantes, sino que digan todo lo que tengan que expresar. INDICACION PRACTICA: Mezclar a las personas es muy importante, pues da un acceso no habitual a distintos niveles de involucrados. El prop6sito de esta modalidad es crear un acercamiento artificial que pueda abrir vias de comunicacion diferentes a las habituales. 15. El facilitador invita a los grupos a conversar por espacio de cierto tiempo, acerca de sus problemas en el area del transporte. El tiempo dedicado a esta actividad depende de los grupos, pero no deberia ser mas de veinte minutos. A partir de un cierto consenso acerca de experiencias comunes, se invita a los grupos a componer un dibujo unico que sintetice las experiencias personales de todos los integrantes. Se reitera que lo importante es la creaci6n grupal y no el grado de talento artistico que puedan desplegar. Se permite que agreguen palabras si lo hacen espontaneamente, pero esto no es sugerido en publico. Los Coordinadores recorren los grupos para invitar a todos a dibujar en el mismo - 147- papel, y al nmismo tiempo verifican que todos los dibujos tengan un numero consecutivo y que incluyan las firmas de los asistentes. En este momento es tambien conveniente hacer circular una hoja en limpio donde los asistentes escribiran sus nombres, organizaciones y/o comunidades a las que pertenecen. Al finalizar el tiempo, se cuelgan los papel6grafos sobre los muros por medio de la cinta fuerte engomada. Cuando todos los grificos grupales se han expuesto, se pide silencio y se invita a un representante del Grupo Numero 1, y asi sucesivamente, a exponer en publico el significado del grifico grupal. Los demas escuchan en silencio. Al finalizar la exposici6n, se invita al publico en general a formular preguntas al representante de este grupo acerca de los significados de su grafico. Se termina de este modo con la exposici6n del uiltimo grafico perteneciente al ultimo grupo. Un Coordinador toma notas de las expresiones grupales. INDICA CION PRA CTICA: Lo importante de este momento es que los grupos se escuchen mutuamente y perciban cuan compartidos son sus problemas. Oir a otros describiendo problemas comunes esfundamental para tener un diagnostico consensuado de lo que anda mal en la comunidad Todos los dibujos son validos. Elfacilitador tiene que asegurar que todos atienden las exposicionesy que los expositores grupales no sean siempre los mismos. ETAPA II: (Duraci6n: 30' a 45' minutos) 16. Los participantes retoman a los mismos grupos del ejercicio anterior. Ahora el facilitador los invita de esta manera a] siguiente ejercicio: "Ustedes han visto la cantidad de problemas de transporte que afectan a esta comunidad. Ahora supongamos que todos estanos viviendo en el ano 2000, y que estos problemas se han solucionado. Los invito a pensar como serian sus comunidades, una vez servidas por excelentes servicios de transporte. Cada grupo va a elaborar un dibujo conjunto que represente a esa comunidad del futuro, y despues los explicaremos en pulblico." INDICACION PRACTICA: Los participantes reciben indicaciones de no poner limites a su visi6n ideal, o de no fijar un limite de liempo demasiado estricto a la visi6n. El objetivo es estimular la creauividad grupal, promoviendo la expresi6n de sus deseos, a travis de la discusion y el dibujo. No se hace ningon intento de producir una uinica visi6n, sino que cada grupo produce una diferente. 17. Esta Etapa II temmina con la exposici6n grupal de los diferentes grificos, desde el nuimero 1 al ultimo, invitando a exponer a diferentes personas, una por cada grupo, como voceros grupales. El resto del publico es invitado a hacer preguntas o comentarios, con el prop6sito de promover identificaci6n mutua entre las visiones de un futuro positivo. El publico adquiere la noci6n de que todos comparten visiones parecidas del futuro posible para la comunidad. Al final de la Etapa II es posible ofrecer un refrigerio o el almuerzo, dando asi oportunidad para que los participantes conversen un poco mas entre ellos. (Idealmente, este intermedio deberia tomar no mas de 30'). ETAPA mI: (Duraci6n: entre 45' y una hora) 18. Una vez servido el refrigerio, se invitara a los participantes a tomar ubicaci6n en nuevos grupos, esta vez distribuidos de acuerdo a la instituci6n, comunidad o interes que los agrupa, sin - 148 - prestar atenci6n al nuimero. Es posible que haya grupos de dos o quince personas, todas pertenecientes a la misma organizaci6n o campo de trabajo. INDICACION PRACTICA: Los grupos homogeneos tienen por finalidad poner a trabajar las mismas habilidades enfocadas en un punto. Teniendo formaci6n y/o perspectivas comunes ayuda a proponer soluciones de manera rapida. No se ponen limites al tipo de ideas que se escriben, todas son validas. 19. Ahora se los invita a trabajar de la siguiente manera: "Tenemos ante nosotros los graficos que nos muestran como es la comunidad del futuro que todos sonamos. Es importante que pensemos ahora cuales son las decisiones, acciones y trabajos que tienen que hacerse ahora para Ilegar a ese resultado del ano 2000. Por favor, imaginense viviendo en ese futuro, miren para taras e identifiquen los eventos claves que tuvieron que darse para Ilegar a ese futuro. Tambien pensaremos en cuales son los recursos que la comunidad posee y que podriamos usar para conseguir este futuro. Tienen sobre la mesa una cantidad de tarjetas blancas. Escriban esas ideas, todas las que sea posible, en las tarjetas, solamente una idea por tarjeta Conversen luego entre ustedes y decidan cuales son las ideas mas apropiadas para realizar ese futuro sonado. Cuando no haya mas ideas que escribir, las fijaremos al papel6grafo que les entregaremos, formando un esquema de trabajo." INDICACION PRACTICA: Mirando desde el futuro hacia el pasado, se ven claramente los sucesos claves que deberan ocurrir, incluyendo cambios en la propia conducta personal o institucional. El hecho de que se mezclan TODAS las tarjetas producidas individualmente y se las trata sin distinci6n de autor asegura la universalizaci6n de las ideas, que ahora pertenecen al grupo. Esto facilitara la aceptaci6n de la estrategia producida por el grupo, de parte de todos sus integrantes, como si fuera la propia. 20. El facilitador invita a los grupos a llegar a un consenso sobre los eventos que tendran que darse para llegar al futuro deseado, cuando ofrece la hoja de papel y los invita a pegar las tarjetas seleccionadas por el grupo. Si es posible, el orden de las tarjetas sobre el papel6grafo tiene que reflejar una relaci6n de medios a fines: "haremos esto, para lograr esto otro," y asi sucesivamente. INDICA CION PRA CTICA: Al fijar las tarjetas sobre el papel se identificaran aquellas que proponen la misma idea, de las cuales se elegirM la mas precisa, eliminando las repetidas. Las tarjetas que quedan, son los eventos sobre los cuales se tiene consenso grupal y representan asi las prioridades a realizar en el plan estrategico. Es un momento importante pues en los grupos m6s dinamicos se ver6n procesos de negociaci6n interna entre las distintas ideas. Esto es necesario para llegar a las decisiones consensuadas sobre que hay que hacer primero, y para que hacerlo. A ch se tiene el proceso de diseho grupal de un futuro comun a la vista. Los coordinadores tienen especialmente que cuidar que todas las estrategias tengan oportunidad de ser discutidas por todos. 21. Al ilegar a este punto, el facilitador tiene que estar seguro que todos los intereses representados en el grupo han tenido ocasi6n de ser debidamente oidos, especialmente la voz de los participantes en desventaja, tales como los representantes de los usuarios pobres, o las representantes de los Clubes de Madres. Como esta etapa contiene los prop6sitos de acci6n especifica para cada interes, es muy importante que se acentue el hecho de que las estrategias presentadas, si bien creativas, deben estar dentro del alcance de la acci6n propia. Idealmente, cada grupo propondra aquellas estrategias que, - 149- dentro de su ambito de acci6n, son imprescindibles para lograr el futuro deseado, y que estan motivados a emprender. INDICACION PRACTICA: Si el proceso ha sido motivador, los grupos espont6neamente propondran aquellos cambios en su conducta habitual que son los necesarios para producir el futuro. En las comunidades hay ideas que hace mucho estan esperando una decisi6n compartida que las ponga en practica. Hasta ahora, lo que ha faltado es el consenso y la motivacion. Los coordinadores recorreran los grupos invitando a las personas a describir todos los cambios necesarios y posibles, dentro de instituciones ya existentes. Tambien podran proponerse entidades nuevas, si las funciones necesarias para el cambio no se incluyen en organizaciones actuales. ETAPA IV: Sesi6n Plenaria: (Duraci6n: 15' a 30' minutos) 22. Uno de los Coordinadores, o el Lider del Taller explicara las estrategias que resulten evidentes despu6s de leer las tarjetas y organizadas sobre el papel6grafo. La tarea defacilitador es organizar las propuestas de modo que caigan bajo dos o tres lineas de categoras de cambios bien definidos . Tambi6n podra combinar dos propuestas de modo de formar una general que tenga mas sentido. Mientras se va explicando, o al final de las exposiciones, el facilitador movera los papel6grafos de modo de presentarlos en un orden l6gico de operaciones. La idea es que aqui se describa, aunque sea en fineas muy simples, un plan estrategico de acciones sucesivas destinadas a implementar un plan de mantenimiento de los caminos rurales por la comunidad. Dando un ejemplo: el primer papel6grafo puede contener las tarjetas dando la idea de la constituci6n de los Comites Comunales de Mantenimiento Vial, el segundo papel6grafo tendra las tarjetas que aluden a los modos de funcionamiento de dichos Comites; el siguiente mostrara las ideas para obtener apoyo extemo a los proyectos y el ultimo papel6grafo contendra las tarjetas que se refieren a los procesos de educaci6n de la comunidad sobre el proyecto comuin. Aquellas tarjetas que no coinciden exactamente con las categorias elegidas, pero que si tienen algo que ver, se las incluye en un papel6grafo extra Hlamado "Ideas Varias", como podria ser, por ejemplo, un papel6grafo mostrando las ideas relacionadas con el mejoramiento de los caminos de herradura. Las tarjetas no relacionadas se descartan. Una vez que se tiene lista esta lectura de los emergentes de los grupos, se la explica al auditorio de manera clara y sencilla, ("Parece que ustedes, reunidos en grupos, piensan que se podria hacer esto y lo otro...") y luego se hace una invitaci6n formal a discutir las ideas surgidas. INDICA CION PRA CTICA: Es importante que esto sea hecho de modo tal que los grupos hagan preguntas y pidan explicaciones, de modo defavorecer que se vean cada vez mas involucrados en el planeamiento conjunto del programa de acci6n. De la habilidad del Lider del Taller o de los Coordinadores dependera que los asistentes se vayan con la percepci6n de haber creado comunitariamente el esbozo del plan de accion que les permitira tener intervencion directa en el mantenimiento de los caminos. 23. En este momento conviene ampliar la informaci6n disponible por el publico acerca de los procedimientos formales del Banco relativos al comienzo de las obras, el n(umero de personas de la comunidad que intervendran en micro-empresas o como operarios, mas una evaluaci6n del tiempo que tomara implementar los planes del Banco junto con los de la comunidad. Es muy importante que aqui se informe a los presentes sobre aspectos del prestamo relacionados con el fomento de las micro- - 150- empresas y tambien sobre la inclusi6n de mano de obra local par trabajos pagos de rehabilitaci6n de caminos. INDICACION PRACTICA: En el modelo original de participaci6n comunitaria (A-I-C) desarrollado por W. E. Smith, en esta Etapa el ejercicio finaliza cuando se encarga a los asistentes, agrupados, las tareas inherentes al plan de acci6n. En las cuatro aplicaciones practicas hecha por esta misi6n en Peru en Mayo 1995, dos con comunidades campesinas y dos con las fuerzas vivas de Cusco y Huancavelica, fue imposible plantear este nivel de compromiso. Dado que es un proceso progresivo, quizais en sucesivas reuniones se pueda encargar tareas. Idealmente se deberfa terminar con una lista de tare as distribuidas por equipos, homogeneizados por su pertenencia institucional o sus tareas profesionales. CIERRE DEL TALLER 24. El Lider del Taller agradecera a los asistentes su presencia al Taller, y dari oportunidad para que las otras autoridades, Alcalde, Gobernador, enviados del BM, etc., cierren sucesivarnente el Taller. INDICACIONPRACTICA: Es importante aqui transmitir que este es el primer encuentro de una serie que garantizard la comunicaci6n entre los beneficiariosy los ejecutores, a lo largo de los cinco ailos del Proyecto La comunidad tiene que percibir el interes no espor6dico sino constante del Banco, de incluir su participaci6n de manera org6nica que asegure la sostenibilidad del proyecto. PROGRAMA DELTALLER DE PARTICIPACION COMUNITARIA 10:00 COMIENZO. Presentaci6n del Equipo del Taller y de las autoridades. 10:15 ETAPAI; 11:15 ETAPAII; 13:00 ALMUERZO 14:00 ETAPA III; 15:30 ETAPA IV: SESION PLENARIA 16:00 CIERRE DEL TALLER - 151 - ANNEX 11 PERU RURAL ROADS REHABILITATION AND MAINTENANCE PROJECT Economic Evaluation And Eligibility Criteria General Appraisal Methodology 25. Rural roads are often lightly traveled and provide access to villages that are distant and costly to reach. The economic feasibility evaluation of rural roads should be based on foundations different from those for trunk networks. Two general types of investments in rural roads can be identified. One is the feeder-road type, which involves the rehabilitation or new construction of roads connecting existing farms, or areas of known agricultural potential, with already functional secondary or trunk roads. The main objectives of this type of rural road investment are, first, to reduce transport costs for existing volumes of agricultural output; and second, to increase agricultural production by means of inducing a decrease in agricultural input prices. The other type of rural road investment is the access-and-development road, which is intended to "jump- start" remote rural areas inhabited by poor communities living off a subsistence economy. The objective of these rural roads is to provide those poor communities with the opportunity to market their potential agricultural surplus, as well as access to other services, such as health and education, that are not provided in situ. The latter have a strong social policy purpose; the former have the aim of reaching areas of potential, agricultural development. The project includes roads of both types and hence the eligibility methodology incorporates criteria that attend the objectives of both types of rural roads. 26. In Peru, where over two third of rural households are poor, investments in rural roads are a major element of any poverty-eradication strategy. For those roads with low total and per-km costs, the appraisal methodology will rely on the assessment of readily-available poverty indicators. For those other roads or network of roads (including departmental links) with higher total costs and an agricultural-production focus, the appraisal methodology will follow simplified economic appraisal procedures based on the measurement of producer surplus. Description of Eligibility Procedures and Criteria 27. Projects would be generated by the requests of communities and local organizations (municipalities and NGOs) and their concept, including the main parameters of the proposed investment, submitted to the de-concentrated executing units (UEDs) of the PERT-PCR. The UEDs would analyze the sub-project concept and, once approved by the UTED, initiate, along with the proponent (see participatory procedures in Annex 10) and through contracts with local consultants, the collection of information for the evaluation of the eligibility of the proposal and the definition of its technical specifications. At the conceptual level, a sub-project would be put into the context of other rural development programs and of other rural road projects toward maximizing the impact of a particular proposal. When in performing this analysis, an additional - 152 - sub-project is identified by the UEDs, these units would pursue consultations with the communities in the sub-project's area of influence towards (a) validating their commitment to the sub-project, (b) incorporating local needs into the sub-project design, and (c) initiating the organization of the posterior maintenance activities. To ensure the sustainability of the investments, only those roads for which the community agrees with its design and is committed to its future maintenance would be subject to the complete eligibility criteria. 28. Four main criteria would be considered by the UEDs to evaluate the eligibility of the project proposals, namely: institutional criteria, technical criteria, social criteria, and economic criteria (which attempt to capture production-related benefits). The detailed definition of these criteria would be explained in the Operational Manual of the project with the objective of allowing the UEDs to uniformly and objectively apply the same yardstick to the approval of projects across the different regions of Peru. The application of those criteria to identify the sub-projects of the Project should allow to select, first, those low-cost works with a strong social purpose and, second, those larger-scale works (on the basis of total costs and cost per km) that have a proven worthiness in terms of their contribution to the potential increase in the agricultural and economic development of their influence area (thus ensuring the adequate use of scarce resources). Furthermore, those criteria, alongside with the process of project generation, would allow to select sub-projects that will have a good chance of being sustainable. (See flow chart in Attachment 1.) 29. The institutional criteria refer to the level of identification the communities in the area of influence of a particular sub-project would have with the road sub-project, including the degree of commitment to the future maintenance of those roads. The level of identification and commitment would be evaluated on the basis of different factors depending on the type of sub- project, as follows: (d) For those projects that involve the paving of village streets, the commitment would be ensured by requiring local co-financing of the street works above certain cost threshold and by the expression of interest in contributing to the execution of those works (e.g., through the provision of labor inputs). These proposals would have to be in the proximity of other rural roads sub-projects (either already executed or in consideration for execution). The Project would finance the amount corresponding to specified types of investment and would require, as indicated above, the contribution of the community if a maximum amount is surpassed. (e) For the road rehabilitation sub-projects, the commitment would take place to the extent that these project are identified and presented by the communities themselves and are validated through the schemes for local participation detailed in the Project Operational Manual (and summarized in Annex 10). (f) For the road maintenance works, the commitment would be structured through the creation of micro-enterprises consisting of laborers from the communities in the area of influence of the roads. The process of creation and training of these micro- enterprises would be further detailed in the Project Operational Manual. The - 153 - financing of the maintenance works would be initially covered with funds from the Project; incrementally, however, the local communities would have to finance these works through instruments that would be defined under a technical assistance sub-component of the Project. 30. Complementing the above-mentioned criteria, preference would be given to those sub- projects that are expected to be executed in geographical areas where other rural-related projects (such as extension programs, irrigation projects, etc.) are slated for implementation, with an aim at maximizing the socio-economic impact of the rural road sub-projects. 31. The technical criteria refer to the construction characteristics of the proposed sub-projects and their functionality within the road network in the pertinent province or department. The construction (or technological) characteristics would be defined to undertake works that, first, can be adequately maintained at the local level and that, second, can maximize the use of local labor. In this respect, the construction and maintenance costs of the proposed sub-projects would have to keep relation with the expected benefits of the road (as would then be assessed with the application of the socio-economic criteria). Furthermore, the proposed sub-projects would be analyzed--as specified in the Project Operational Manual--within the context of the broader transport network and, in particular, of the connection of the road to market and/or production centers of the province or department, with the objective of defining connected "trees" of rural roads and, when necessary, of departmental roads with the objective of maximizing the economic and transport benefits of the investments. 32. Both the institutional and the technical criteria are largely of a narrative nature; specific guidelines are incorporated into the Project Operation Manual regarding the maximum amount that can be disbursed for the rehabilitation of village streets and the feasible technical standards for the rehabilitation and maintenance of the rural roads. Though proposals would have to include a satisfactory program for the future maintenance of the rehabilitated works, the UEDs' analysts would be ultimately responsible for assessing the level of commitment at the local level, the coordination with other rural sector programs, and the functionality of the road network. 33. The social criteria would be applied to those sub-project with total cost and cost per kilometer below certain thresholds. The pilot and first-year programs included roads which had been selected purely on the basis of geographic (provincial) poverty indicators, mainly those related to infant mortality rates and unsatisfied basic needs. For the rest of the sub-projects, the evaluator would analyze the total amount of the investment, the cost per kilometer, and the population density per kilometer of road to identify those projects which would be evaluated solely on the basis of two poverty indicators: infant mortality rate and level of unsatisfied basic needs (as described and documented by the 1993 Census of Population). The parameters that define the limits under which a sub-project would be considered for evaluation based on those poverty indicators and the eligibility thresholds for the poverty indicators are based of the analysis of the projects being implemented under the pilot program. Those projects with a total cost below US$200,000 and a cost per kilometer below US$8,500 would become eligible if they are located in areas with infant mortality rates greater than 80, unsatisfied basic needs greater than 70% and a number of beneficiaries per kilometer greater than 100. (The poverty indicators would - 154- be calculated taken into consideration the provinces traversed by the proposed road and pro- rating the provincial indicators on the basis of the kilometers of road in each province.) Nonetheless, the projects would be analyzed as indicated in the previous paragraph in terms of their technical feasibility and the convenience of including them with other sub-projects in the same geographic area towards defining a functional "tree" of roads (rural and departmental) and, hence, maximizing the socio-economic impact of the proposed sub-project. When this "tree" is identified, it may happen that the cost of the overall project may become higher than the investment limits for the lone consideration of social criteria (i.e., poverty indicators); it this event, the "new" sub-project (now a "tree") would be evaluated against the economic criteria described below. 34. The economic criteria refer to the relation of the rehabilitation and maintenance costs of the sub-project and the benefits that the sub-project would bring about in terms of the increase of the net agricultural and livestock production (net of the local consumption and of production costs) in the area of influence of the sub-project. The procedures for the application of the socio- economic criteria would be included into the Project Operational Manual in a spreadsheet within which all the input variables and parameters would be specified, including the sources from which specific information would be derived and the values of the pertinent conversion factors. On the basis of this information, the internal economic rate of return of the sub-project would be calculated. The project would be eligible if the rate of return is higher than 10%. The 10% benchmark has been selected on the basis that, first, the projects have a strong social focus and, second, not all the production-related benefits would be quantified (for instance, the economic calculations would be based on the major 5 agricultural products in the area). 35. The application of the economic criteria consists of the following steps: (a) calculation of the number of hectares cultivated around an approximately five-kilometer band along the proposed road for the five major agricultural products as well as the production of livestock and milk if this production if of any significance in the road area-of-influence; (b) estimation of the increase in the area of production once the project were constructed and/or any possible increase in productivity (e.g., agricultural yields), ensuring that the increase in agricultural land does not take place at the expense of clearing natural forests or within legally protected areas; (c) definition of the percentage of the production that stays in the area for local consumption, with and without the project; (d) quantification of the production costs of the agricultural and livestock output, with and without the project; (e) reporting of the sales prices for the produced agricultural and livestock goods without the project and estimation of these prices for the situation with the project; (f) calculation of the existing and with-project costs of transporting the marketed products (through data on prevailing freight tariffs); (g) inputting the costs of rehabilitating the road and of the future routine and periodic maintenance costs, including any possible environmental-mitigation costs; (h) developing, for every year up to the horizon year of analysis (normally 10 years after the completion of the rehabilitation project), a table for each product showing the with and without project values for marketed production (net of local consumption), production costs, and net value added; (i) application of the corresponding conversion factors (for rehabilitation and maintenance costs, costs of agricultural and livestock production, sales prices, - 155 - and transport costs) to generate a similar number of tables with economic values ', (j) calculation of the annual net value added through the consolidation of the product tables; (k) calculation of the annual net flow of economic benefits by subtracting from the net value added the economic costs of rehabilitation and maintenance; and, finally, (1) calculation of the net present value for the stream of net benefits and the corresponding economic rate of return. This methodology has been applied to most sub-projects of the pilot and the findings are summarized in the next section. 36. It is expected that the described eligibility criteria would generate a list of projects that is evenly distributed among the different departments of Peru and among the various project components (e.g., between investments on village streets and on the rehabilitation and maintenance of rural roads). The bi-annual performance evaluation of the executed sub-projects would allow to assess the production impact of the road rehabilitation works--one year after they are completed--and test the adequacy of the poverty thresholds. At each annual review, an assessment would be performed to confirm these expectations and to incorporate the necessary adjustments to both the participatory process of project generation and the eligibility methodology. The Pilot Program 37. Twenty five studies of the pilot, located in four different departments, representing 76 percent of the kilometers and 70 percent of the costs of the pilot, were analyzed with an aim at evaluating their technical quality and estimate the socio-economic feasibility of the corresponding sub-projects. The studies contained a vast amount of information--in some cases beyond that necessary to carry out a satisfactory technical and socio-economic feasibility analysis--and the quality, except for a few exceptions was satisfactory. For the future, a clear definition of the data to be collected (within the Project Operational Manual) and the incorporation of templates to undertake this activity should facilitate the consultants' assignment and lead to uniformity in the type of information gathered. 38. Under the pilot studies, the uniformity of data collection, in spite of originating in different departments and having been gathered by different consultants, has been satisfactory. Data related to the existing conditions of the agricultural production show values around a 65% bracket around the average value. The largest discrepancies were presented in the data of agricultural production costs, for which six of the eleven products analyzed fell outside the 65% bracket. (This may, however, largely reflects actual differences in the costs of production across different regions.) In the future, the incorporation of standard values should allow to confirm the consultant-provided data and ensure uniformity across all the studies. The Third National Agricultural and Livestock Survey--with definite results to be published by end 1995--will permit to incorporate to the project data base precise standards for productivity, production costs, and farm gate prices for the relevant agricultural products. Costs of construction and maintenance have a conversion factor of 0.72 to reflect taxes (IGV) and a 25% of unskilled labor to which a conversion factor of 0.5 is applied. Agricultural and livestock production costs have a conversion factor of 0.75 to reflect a 50% of unskilled labor to which a conversion factor of 0.5 is applied. Finally, transport costs have a conversion factor of 0.9 to reflect market distortions. - 156- 39. The studies establish assumptions in relation to the future increase in the agricultural production (and its value added) as a consequence of the rehabilitation of the rural roads. In order to delimit those expectations, it has been assumed that any increase in the number of cultivated hectares cannot be higher than 5 percent and that this increase will take place one year after the completion of the rehabilitation works. This assumption is also kept for increases in livestock or milk production. Similarly, the analysis has also delimited the possible reduction in production costs, assuming that these costs would be reduced, a year after the completion of the works, by 5 percent as a consequence of the reduction in the costs of the inputs for that production (in turn, as a consequence of the reduction in the transport costs of those inputs). Increases in agricultural yields cannot be higher than 10 percent, reflecting the impact not only of lower input costs but also of improved difusion of technology. Finally, it is assumed that farm gate prices remain the same, before and after the rehabilitation works (conservative assumption that considers a rather competitive market for the commercialization of the pertinent agricultural and livestock products). These values are in line with similar projects in other developing 2 countries. 40. Table 1 summarizes the results of the economic evaluation of 25 of the pilot sub-projects, with an estimated cost of US$13.4 million. The results show a net present value of almost US$25 mnillion and a combined economic internal rate of return (EIRR)--prorated with the costs of the projects--of 44 percent. Five sub-projects--out of the 25--would yield EIRRs that fall below the 10% benchmark. These projects would have required a closer look at their rehabilitation and maintenance costs and the production possibilities, including the incorporation of other agricultural products that have not been part of the simplified procedure. The EIRRs for these projects between 7.1 percent and 9.5 percent are sufficiently close to the 10% benchmark to conclude that the refined analysis would have made the projects eligible under the procedures of the economic evaluation. 41. Table 2 summarizes a series of indicators for each of the above-mentioned pilot sub- projects. The table shows that, in general, those sub-projects with a smaller number of beneficiaries and a higher cost per beneficiary yield the lowest EIRRs. The table also shows a 2 One of the most comprehensive studies on the impact of rural infrastructure on economic and social benefits is summarized in the October 1990 report of the International Food Policy Research Institute titled Developmental Impact of Rural Infrastructure in Bangladesh, by R. Ahmed and M. Hossain. The report indicates that improvement in infrastructural endowment (measured by distances to social services, market centers, and means of travel, and the transport cost per mile) can increase household income by 33 percent, with the landless and small farmers garnering the larger share of the increases from agricultural crops, wages, and livestock. In addition the study shows that infrastructure development has a positive effect on health (with 77% of males and 77% of females in good health in infrastructural developed villages and 63% and 58% respectively, in underdeveloped villages). Previous World Bank rural road projects further confirm the positive benefits of rural road rehabilitation as a consequence of improved access to services. In the 1991 Ghana National Feeder Roads Rehabilitation and Maintenance project, based on a cross-sectional study of 2,700 households, it is documented that improved accessibility brought about an average 20% increase in agricultural production. This report highlights a list of unquantifiable benefits, including improved access to extension and other social services, and increased rural employment, specially for women. The impact on the living standards of women is another benefit-particularly in terms of reducing the time consumed in transport- also emphasized by recent literature on the impact of rural roads (see, for instance, Bryceson and Howe, 1993, "Rural Household Transport in Africa: Reducing the Burden on Women," World Development, Vol. 21 No. 11). A more recent World Bank appraisal report, the 1994 Mexico Second Decentralization and Regional Development Project, an economically-feasible road rehabilitation program was established with an average cost of US$27 per inhabitant. - 157- certain uniformity in the estimated rehabilitation costs per kilometer as well as the reported transport costs per ton-kilometer. The number of cultivated hectares per beneficiary shows a wider variation. However, this indicator reflects the distinct composition of the agricultural economies of different departments or provinces. Table 1. Pilot Sub-Project Economic Feasibility Indicators Road Rehab. NPV (US$'000) Road Sub-Project Department Cost (US$) 810% Ec. IRR Buena Vista-Huacho Ancash $ 696,661 $ 50 11.9% Llanganuco-Llaoma Ancash $ 658,241 $ 511 27.0% Sihuas-Palo Seco Ancash $ 332,238 $ 1,167 > 50% Ullacosa-Sequello Ayacucho $ 788,526 $ 114 14.0% Vilcashuaman I Ayacucho $ 537,500 $ (34) 8.2% Vilcashuaman 11 Ayacucho $ 450,000 $ (36) 7.7% San Jeronimo-Acapalla Cuzco $ 407,738 $ 2,175 > 50% Cuzco-Ccorca-Totora Cuzco $ 262,715 $ 703 > 50% Paruro-Yaurisque Cuzco $ 376,754 $ 2,085 > 50% Acomayo-Accha Cuzco $ 149,000 $ 1,404 > 50% Combapata-Livitaca Cuzco $ 808,000 $ 750 29.7% Pisao-Mika Cuzco $ 708,200 $ 162 16.1% Paucartambo-Huaccancca Cuzco $ 400,000 $ 2,798 > 50% Cunyaco-Pachacalla Huancavelica $ 61,540 $ 110 43.0% San Pedro-Lircay Huancavelica $ 168,290 $ 1,852 > 50% Parco-Ccarhuac Huancavelica $ 199,140 $ 31 13.7% Sta. Cruz de Lla-Huaribamba Huancavelica $ 282,570 $ 2,326 > 50% Pucara-Lachoccasa Huancavelica $ 490,480 $ 2,158 > 50% Pazos-Santiago de Pichos Huancavelica $ 580,050 $ 3,081 > 50% San Pedro-Huaribamba Huancavelica $ 366,400 $ 2,991 > 50% Chacahuayco-Rosario Huancavelica $ 199,850 $ 278 37.3% Ccasapata-Huancapita Huancavelica $ 243,390 $ (24) 7.1% Calzada-Anta Huancavelica $ 256,120 $ (13) 8.6% Acobamba-Marcas Huancavelica $ 483,220 $ 5 10.3% Izcuchaca-Puente Palca Huancavelica $ 455,000 $ (8) 9.5% Total/Prorated $ 10,361,623 $ 24,636 44.1% 42. In the event of a 20 percent increase in the costs of road rehabilitation, the combined economic Net Present Value (NPV) and Internal Rate of Return for the pilot sub-projects would be reduced to US$23 million and 38 percent, respectively. The combined NPV would remain positive even if production increases by 3.9 percent (one year after the completion of the works) and no improvements take place in agricultural yields and no reductions in production costs. Similarly, the NPV would remain positive if there are no increases in production and no reduction in production costs and agricultural yields increase by at least 6.2 percent. Finally, the combined NPV would remain positive if production costs decrease by 12.5 percent with no improvements in production volumes or agricultural yields. In sum, these sensitivity analyses demostrate the robustness of the economic worth of the pilot sub-projects. - 158 - Table 2. Pilot Sub-Project Indicators Project cost Cultivated Amual tons Project Benef. Rehab. cost Maint. cost per benef. hectareas prodtced Road Sub-Project Department No. of Kms per km per km (USS) per km (USS) (USS) per hab. per hab. Buena Vista-Huacho Ancash 54.4 156 $ 12,806 $ 2,192 $ 82 0.10 0.35 Llanganuco-Llaoma Ancash 80.0 120 $ 8,233 $ 1,897 $ 71 0.28 0.63 Sihuas-Palo Seco Ancash 36.1 377 $ 9,203 $ 1,580 $ 24 0.29 0.60 Ullacosa-Sequello Ayacucho 81.0 86 $ 9,735 S 1,076 $ 113 0.09 0.94 Vilcashuaman I Ayacucho 77.0 53 $ 6,980 $ 1,132 $ 132 0.43 0.62 Vilcashuaman II Ayacucho 48.5 108 $ 9,278 $ 1,375 $ 86 0.18 0.31 San Jeronimo-Acapalla Cuzco 63.4 404 $ 6,431 $ 1,556 $ 23 0.17 0.42 Cuzco-Ccorca-Totora Cuzco 31.0 181 $ 8,475 $ 1,591 $ 47 0.32 0.73 Paruro-Yaurisque Cuzco 28.5 468 $ 13,219 $ 1,591 $ 28 0.28 0.74 Acomayo-Accha Cuzco 36.0 554 $ 4,141 $ 1,556 $ 27 0.15 0.51 Combapata-Livitaca Cuzco 116.5 349 $ 6,933 $ 1,556 $ 42 0.05 0.23 Pisao-Mika Cuzco 52.6 330 $ 13,459 $ 1,556 $ 50 0.11 0.30 Paucartambo-Huaccancca Cuzco 32.5 605 $ 12,308 $ 1,556 $ 26 0.14 0.92 Cunyaco-Pachacalla Huancavelica 11.0 879 $ 5,582 $ 1,556 $ 6 0.03 0.14 San Pedro-Lircay Huancavelica 33.8 581 $ 4,980 $ 1,556 $ 14 0.20 0.63 Parco-Ccarhuac Huancavelica 44.4 222 $ 4,486 $ 1,556 $ 31 0.08 0.23 Sta. Cruz de Lla-Huanbamba Huancavelica 22.8 633 $ 12,371 $ 1,556 $ 31 0.35 0.81 Pucara-Lachoccasa Huancavelica 27.3 514 $ 17,966 $ 1,556 $ 37 0.34 0.84 Pazos-Santiago de Pichos Huancavelica 31.4 460 $ 18,467 $ 1,556 $ 53 0.45 1.06 SanPedro-Huaribamba Huancavelica 21.2 683 $ 17,294 $ 1,556 $ 30 0.50 0.98 Chacahuayco-Rosario Huancavelica 25.1 340 $ 7,956 $ 1,556 $ 28 0.11 0.24 Ccasapata-Huancapita Huancavelica 25.9 358 $ 9,414 $ 1,556 $ 29 0.05 0.15 Calzada-Anta Huancavelica 29.2 203 $ 8,785 $ 1,556 $ 73 0.16 0.25 Acobamba-Marcas Huancavelica 46.7 300 $ 10,344 $ 1,556 $ 42 0.19 0.21 lzcuchaca-Puente Palca Huancavelica 75.1 139 $ 6,057 $ 1,556 $ 67 0.31 0.54 ANNEX 11 Attachment 1 Process for the Application of Eligibility Criteria -f]Co-financing (village streets) Check for lIde-ntification and promotion (road rehabilitation) l lnstitutional criteN rk compliancea_ with rules for A o-enterprises (road_ maintenance) N -CCoordinationt pth other rural projct 5 \ /eChecklfCe {Technical citeri "technical _ Env ironmental mitigation measue Standalone functioneriai @Size of investment ont ot rtreste r t |Cost pRer km ler than USS8, 500 3 sw Check l possible l _lfr motlt rat grae tha _0: of proj Lct iSocialoon criteeria IUn-.tesfalEconomic n gRater ofReturn greater ta 1 jL ................Yes - 161 - ANNEX 12 PERU RURAL ROADS REHABILITATION AND MAINTENANCE PROJECT Pilot and 1996 Programs Pilot 1. Background. In view of the large scale of the Rural Roads Rehabilitation and Maintenance RRRMP project, and the history of inactivity in the rural road sector, Government decided to undertake a pilot prior to implementing the project. The pilot encompasses about 1,485 km of road rehabilitation and 21 km of paving of village streets in 19 provinces in the six Departments of Peruz ranking highest in terms of poverty (Ancash, Apurimac, Ayacucho, Cajamarca, Cusco, Huancavelica). The pilot would be financed retroactively by the proposed loan. Local consultants were engaged to produce project designs, and certain of the projects had, at the time of the Bank appraisal mission in May 1995, gone out to contract bidding with some works underway in the Department of Cusco. Subsequently works began in July 1995. Full details of location, length and costs of the pilot sub-projects are given in Attachment 1. 2. Objectives and Findings of the pilot. The main objective of the pilot is to establish the technical, administrative, socio-economic and cost information necessary to design the project. The specific objectives of the pilot are given in Box below. Objectives of the pilot Obtain information and generate experience about: * the availability and capacity of local consultants (who reside in the project areas) to undertake the studies; adequacy of the terms of reference and the costs, quality and consistency of the studies; * the nature of the works recommended, including their costs, duration and scheduling; * the capacity of the local contractors (who reside in the project areas) to undertake the works; • the socio-econoniic parameters in the project areas and the means of obtaining them; * recommended methods for the execution of the works, including specific proposals for the use of labor- intensive methodologies; * the distribution of the needs and works amnong certain road networks in order to adequately dimension the program. 3. Though implementation of the pilot is still underway, the experience gained to date has confirmed the validity of the assumptions and data used for project design: i) the local consultants (who reside in the project areas) demonstrated capacity to produce suitable designs in a timely manner, including adequate economic and technical assessments. Feedback from the initial reviews allowed improvement of the terms of reference for the studies; ii) the solutions proposed have been consistent with the type of road encountered, as a function of its traffic characteristics and the population served. Consultants' costs are on average about US$10,000 per km (net of taxes). This figure has been used for financial planning of the project in spite of the fact that so far contractors bids are 10 to 20 percent less than the consultants determined values. Given that contractors have been inactive in this sector for a long period of time, it has been decided that is - 162 - prudent to retain this more conservative value. This figure will be reviewed based on implementation experience; iii) the small local contractors have sufficient capacity to undertake the works under contracts in the range of US$200,000 - US$250,000. They were able to produce bids, and where construction has already begun, to undertake the works in an efficient manner. One of the aims of the project is the development of the local construction industry and there are indications that the project would address this objective; iv) the socio-economic criteria proposed for the project were found to be workable and the data readily accessible by consultants for their designs. Selection of sub-projects is based on poverty criteria and where the cost of the sub- project exceeds a certain level, the method of analysis has been expanded to include other indicators of economic viability; v) the objective of using of labor-based methods is being met in terms of the cost percentage given to manual labor in the road rehabilitation component. PERT- PCR will monitor this aspect more closely on the paving of village streets and plazas component to see that local material as well as local labor is being used to the greatest extent possible; vi) the targets proposed for the rehabilitation of primary and secondary roads were revised to take into account DGC's current accomplishments in rehabilitating those networks. The experience has highlighted the need for continuous coordination in the field. 4. In general the findings from the pilot to date are positive and where necessary improvements have been incorporated. The incremental nature of the project and the large number of sub-projects allows for changes and updates to be readily incorporated. The findings from the pilot are more fully discussed in the following sections. 5. Reviews of the pilot. Bank missions have reviewed the pilot to highlight any problems and update the pilot timely for improvement of the project. The implementing agency, PERT- PCR, is monitoring the progress of the pilot and incorporating changes where applicable. Reviews have been made of two aspects of the pilot sub-projects studies. i) review of consultants reports - November 1994 preappraisal mission; and ii) review of contract documents- June 1995 appraisal mission. The first one covers the design studies carried out by the local consultants and includes a review of the socio-economic indicators, the second one covers the actual contract bids received from the local contractors and is more focused on the cost aspects including the percentage use of manual labor. 6. General criteria. The following criteria are assigned to the pilot: i) the pilot is to be implemented in the regions of highest poverty; ii) the works under the pilot are to: 1) be simple and be limited to those works necessary to reestablish the trafficability of the road without necessitating changes in the geometry; 2) be implemented using labor based methods LBM; iii) the works are to be orientated towards prioritizing resolving drainage problems in order to facilitate later maintenance. 7. Poverty criteria. Various poverty indicators, including the Infant Mortality Rate and Index of Basic Needs Unsatisfied, were reviewed. The poverty indicator adopted for the selection of the six Departments for the pilot was the percentage of Chronic Malnutrition for 1993. (This is based on Census information for 1993 from the Ministry of Education and is based on a census of children from 6- 10 years of age). Attachment 2 gives the ranking by Department. The average percentage for the six Departments is 70%. While Amazonas ranks third, there are not many - 163 - roads in this Department. The selection of the 19 provinces for the pilot, out of a possible 71 within these six Departments, includes criteria of logistic capacity and the disposition of the local communities to participate in the project. 8. Selection criteria. Those roads which necessitated urgent rehabilitation and which were not included in the plans of MTC-DGC have been selected for the pilot. Having selected the road, adjacent roads were included in order to form a "road tree" to improve substantially the trafficability on a network basis in the region. Also included were those departmental roads or national roads connecting the "road tree" with the most important centers of consumption in the region which were found to be in poor condition. Of the 1,485 km of rural roads selected for the Pilot, approximately 94% are classified as local (vecina!) roads and 6% classified as departmental or national roads. (DGC has been rehabilitating "connecting" departmental roads in the selected areas) The roads were selected on the basis of departmental road maps of MTC and other information received about their condition and trafficability, after consultation with local authorities 9. Geographic location. The projects are located in the rural sierra, at altitudes reaching 2000m with rainfall of 1500mm in areas of difficult terrain and prone to landslides. The ambient weather conditions and the nature of the local terrain are the main causes of road deterioration in these areas. 10. Selected consultants. One university and 21 local consultants were engaged to collect socio-economic data and prepare the engineering designs for the roads. The consultants were required to produce a preliminary report in 40 days and a final report within 60 days. 11. Finding from the Pilot. The following sections outline the findings from the pilot and actions that have been taken or will be taken by