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| WITHIN | hLe C0PYJReport No. TO-460a

ONE WEEK

This report was prepared for use within the Bank and its affiliated organizations.They do not accept responsibility for its accuracy or completeness. The report maynot be published nor may it be quoted as representing their views.

INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT

INTERNATIONAL DEVELOPMENT ASSOCIATION

APPRAISAL OF

A SECOND TOLL TRANSPORT PROJECT

IN

MEXICO

January 19, 1965

Projects Department

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APPRAISAL OF A

SEOND TOLL TRANSPORT PROJECT

IN i=EXICO

TABLE OF CONTENTS

Page

Summary i-i

I. INTRODUCTION 1

II. GETERAL TRANSPORT BACKGROUND 2

III. CMAENOS Y PUENTES FEDERALES DE INGRESOS YSERVICIOS CONEXOS 5

A. Organization and Management 5B. Present Activities 5C. Present Finances 6

IV. THE PROJECT 9

A. Description of the Project 9B. Design Standards 13C. Status of Engineering and Execution

of the Project 13D. Cost Estimates 14E. Local Currency and Foreign Exchange

Cornponents 15F. Project Expenditure Schedule and

Disbursement 16G. Contract Award and Equipment Procurement

Procedures 17

V. FUTURE FINANCES AND PROGRAM FINANCING 18

A. Future Financial Results 18B. Financing of the Development Program 19

VI. ECONOiaC JUSTIFICATION 22

A. General 22B. Traffic Forecast 22C. The Project Items 24D. Benefits 26

VII. CONCLUSIONS AND RECO1 NDATIONS 27

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Table of Contents (continued)

Tables:

1. M4otor Vehicles registered in Mexico (1950-63)2. Highway Network (Length, Surface, Expenditures 1956-62)3. Actual Revenues from Toll Operations (1952-64)4. Actual Income Accounts (1959-64)5. Summary Balance Sheets (1960-64)6. Iain Design Standards for Toll Roads7. Design Standards for Toll Bridges8. Project Cost Estimate9. Forecast Revenues from To'l Operat-ons (1964-71)10. Forecast Income Accounts (196L-71)11. Program of Investments12. Statement of Cash Flow Estimates (1964-71)13. Debt Position (1964-71)14. Traffic Forecast on Project Toll. Roads (196.4-80)

Figures:

1. "Caxrninos y Puentes" Organization Chart2. Diagrammatic Representation of lIexico-Queretaro Road

Annex:

1. Bases of Computation for Toll Revenue Forecasts (1964-71)

Maps:

1. Main Highway INetwork and Projects Facilities2. Detailed Location of Project Facilities

1ExoO

APPRAISAL OF A

SECOND TOLL TRANSPORT PROJECT

Summary

i) The Government of Mexico, through its agency "Nacional FinancieraS.A." and on behalf of "Caminos y Puentes Federales de Ingresos y ServiciosConexos," has requested the Bank to assist in financing the development oftoll transport facilities. The Bank has already made a loan of US$ 30.5million, inclusive of interest during construction on the foreign component,for this purpose in 1962 (317-SE).

ii) The project, which is technically sound, consists of four tollroads, three toll bridges, additional lanes on an existing mixed toll andtoll-free road and miscellaneous equipment.

iii) The project is estimated to cost US$ 78.1 million equivalent (in-cluding interest during construction on the foreign component) over a periodof four years (1965-196$). The Bank participation would be US$ 32 millionequivalent to cover the foreign exchange component. Inclusive of the interestduring construction on the foreign component this amounts to 41% of tihe totalcost.

iv) Mexico is engaged in a program of toll transport facilities to pro-vide faster and safer road transportation in congested areas. These facil-ities are paid for by the users so that the Government can devote more of itsbudgetary resources to road construction and maintenance in areas not yetadequately served.

v) The M-inistry of Public Works !/(SOP) will be responsible for theplanning and execution of the project; "Caminos y Puentes" will be respon-sible for its financing, operation and maintenance. Both organizations areadequately staffed and no outside consultants are required.

vi) Reliable traffic forecasts indicate that the project is economicallyjustified. From road user benefits alone the project items would generallyyield economic returns of between 11% and 18%. The weighted average of allthe returns would be 15%.

vii) Cost estimates are acceptable, other than for the Penon-Texcocoroad, for which the cost estimate and economic justification are subject toreview. The foreign exchange percentage is realistic. The local currencycost of the project would be financed through a line of credit from the BancoHipotecario.

1/ Secretaria de Obras Publicas - for brevity SOP hereafter

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viii) "Cariinos y Puentes"ir present and future financial position issound. Its net return on investments after completion of the project is ex-pected to averae 14%.

ix) All road construction contracts would be awarded on the basis ofinternational competitive bidding, except as otherwise approved by the Bank.

x) The project is suitable for a Bank loan of US$ 32 million equivalentfor a period of 20 years including a four-year period of grace. The co-Borrowers would be "Caminos y Puentes Federales de Ingresos y ServiciosConexos" and "Nacional Financiera S.A."

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APPRAISAL OF A SECOND TOL, TRANSPORT PROJECT

I. INTRODUCTION

1. The Government of Mexico through its agency "Nacional Financierall,and on behalf of "Caminos y Puentes Federales de Ingresos y Serv_ciosConexos" 1/, has asked for the Bank's financial assistance to developadditional toll transport facilities. The project proposed consists of theconstruction of four new toll roads and three new toll bridges and the pro-vision of additional lanes to an existing mixed toll and toll-free route.The estimated total cost of the project, for which a Bank loan of US$ 32million equivalent has been requested, is US$ 78.1 million equivalent.

2. In 1962 the Bank made its first loan of US$ 30.5 million - 317-14E(1962) - for toll transport facilities in rexico. At that time, the tollauthority was named only "Caminos y Puentes Federales de Ingresos." Sincethen "Servicios Conexos" has been added to its title to permit it to engagein some non-toll transport activities. At the moment, these other zctivitiesare limited to a) the purchase of specializled heavy construction equipmentthat is rented to major construction projects being undertaken for the Govern-ment; b) the establishment of a plant for the production of special asphaltemulsion, and c) the construction of service centers alongside thetoll roads for sale to private business.

3. In addition to Loan 317-1'2 the Bank has made two other highwayloans to ilexico - Loan 268-IE (1960) (US$ 25 million) and Loan 35h->iE (1963)(US$ 40 million). These loans were for new construction, reconstruction andimprovement of the general Federal highway system in various parts of thecountry. (See iNap No. 1 for the location of project items in the three pre-ceding loans.) Although the projects financed by the 1960 and 1962 Bankloans are about a year or so behind their original schedule, the standard ofthe works so far completed is very satisfactory. There is good reason tobelieve that the revised completion dates will now be met.

4. Experience under Loan 317-ME has brought out three problems so far.First, the pressure to provide under and over-passes to satisfy local vehicle,pedestrian and animal traffic has been greater than expected on some of theproject roads. This has affected the completion of paving contracts. Second,the programming and timing of contract awards could be improved upon. Andthird, the acquisition of right-of-way has proved protracted in some "ejido"areas. 2/ These factors have contributed towards an increase in costs and toconstruction delays.

1/ Generally referred to hereafter for brevity as "Caminos y Puentes"2/ "ejidos" are government-sponsored group settlements under a closely con-

trolled system of cooperative farming. The farmers have use rights onlyin the land they occupy. They cannot sell or mortgage the lands, but theuse rights can be transferred by inheritance writhin the family.

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5. For the proposed project "Caminos y Puentes," which is responsiblefor the financing, operation and maintenance of the toll facilities, and theSOP, wihich is res-onsible for their planning, programming and execution haveaccepted that only those under and over-passes which are basic to the projectwill be eligible for Bank financing. These include over-passes for existingfree Federal and State roads which would otherwise cross the toll roads atgrade; over and under-passes for interchanges between the toll roads andexisting free Federal and State roads; and under-passes for cattle andpedestrian traffic. Because the exact number and locations of all other over-passes that may ultimately be required cannot be fully determined in advancethey will be financed entirely by "Caminos y Puentes0" Since the total costof these over-passes is not more than 2-3% of the total cost of the project,this arrangement is acceptable.

6. The SOP is aware of the above problems which, to some extent arisefrom reasons beyond its control - e.g. the local construction industry whichis so organized that one firm can rarely execute all stages of a road con-struction and by governmental social policies. During negotiations, however,the Government has given satisfactory assurance that the timing and program-ing of contract awrards in general will be improved by new procedures tofacilitate the early acquisition of right-of-way for the project items0 Asa result no particular difficulties are now anticipated in the execution ofthe project.

7. The project is, in part, an extension of work begun under Loan317-HE and, in part, is integrated with some of the general highway improve-ment works under the two other highway loans. As such, the project fitslogically into the continuing process of improving the Hexican highwaysystem, and is consistent with the recommendations of the Bank mission whichcarried out "An Appraisal of the Development Program of Mexico.' (ReportNo. WIH-137a and, in particular, Vol. V Annex IV - Transportation). The pro-ject is self-financing and outside of the Government's budget.

8. This report is based on studies carried out by "Caminos yr Puentes"and the SOP for this project and for Loan 317-ME, and on the findings of aBank appraisal mission Mwhich visited ilexico in September-October 1964.

II. GENERAL TRANSPORT BACKGROUJND

9. The highway sector of the Mexican economy has grown significantlyover the past decade or so as compared with the rail sector:

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1952 1957 1962Motor Vehlicles Registered 1/ - -

i) Automobiles 100 154 231ii) Buses 100 114 133iii) Trucks 100 177 212

Gasoline consumption 100 147 187Diesel/gas oil consumption 100 208 269 2/

Rpilway Traffic

i) Ton-kms 100 129 131ii) Passenger-inms 100 114 113

1/ Ton-inns and passenger-kms figures, wihich are more meaningful,will not be available until after the processing of datacollected in a recent Census of Transport

2/ Estinate by PEi.-E (Petroleos Mexicanos)

10. In this period Gross Domestic Product (GDP) at constant prices hasincreased at an average rate of 6% p.a. and total population by some 3% p.a.Urban dwellers, who formed 43% of the total population ten years ago, nowaccount for about 55% of the total. The Federal District (including IMexicoCity) has increased by over 2 million people to a population of 5.5 milliontoday, making it one of the world's largest metropolitan areas.

11. In the urban areas, particularly those of central iexico, risingincomes and growing population have stimulated the demand for fresh frIits,vegetables, fish and other perishables and also made possible the payment ofthe higher charges involved in transporting these conunodities. The generalprogress of the economy has given rise to a growing middle class and has beenaccompanied by a rapid increase in the ownerslhip of private cars for bothpleasure and business purposes (Table 1). The growth of the urban areas hasalso generated a demand for fast inter-city bus transport services which usetoll roads where they are available. Foreign tourists either travelling intheir ow,n vehicles or taking bus tours have increased greatly. Such visitorstend to take the main routes between major centers of interest.

12. A rapid growth in construction, manufacturing and service in-dustries has accompanied the development of the economy and the rise inpopulation. Manufacturing industries, in particular, are increasingly con-cerned with production planning, inventory control and the rapid movementand turnover of high value goods. The growing emphasis on the service as-pects of transportation - speed, flexible and frequent schedules, specializedequipment, dainage control, less stringent packaging requirements, etc. - hasresulted in a great increase in trucking, a large proportion of which isoperated directly by the firms in these industries rather than by commoncarriers.

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13. The general increase in highlay traffic of all kinds has over-loaded parts of the highway system and produced congestion on these routes.To provide for faster, more convenient and safer movemnent of the one millionor so vehicles now in Mlexico the highway network has been improved in qualityand extended (Table 2). Tbll facilities have been constructed on routeswhere traffic is especially heavy or the lack of bridges and ferries acts asa bottleneck. In the period 1955-62 some 7,830 million pesos (USQ 626 millionequivalent) were spent on highways, of which 70' was for construction and 30%for maintenance. The amounts allocated for road maintenance are adequate andthe quality of road maintenance work satisfactory. The total expenditureshave been divided in the following proportions - Federal free roads, 64%;toll roads, 7%; state roads, 14%; and local roads, 15%.

14. W4hen an existing free road approaches its saturation the Governmenthas the choice of improving the road or building an altermnative road, andfinancing the works through the budget or by tolls collected fro,i the users.Since there are many areas in the country not yet adequately served by roads,the Government considers that it would be undesirable to finance through thenational budget all new roads or road imnprovements in areas already well served.vlhere road congestion is caused mainly by local traffic, the Government t spolicy is to improve the existing free roads, and where highways are over-loaded with terminal-to-terminal freight, bus and passenger car traffic itprefers to build separate, limited access toll facilities with the free roadsas alternatives. So far, road users appear willina to accept this policy andto pay for the time savings, safety and service benefits offered by such tollfacilities.

15. Traffic on the 19,400 route-km Mexican railway system has increasedmore slowly than on the highways and at a rate below the increase in GDP. In1963 total rail traffic amounted to over 14 billion ton-kms and some 4 billionpassenger-kms. Rail freight traffic is characterized generally by the move-ment of large volumes of low value bulk commodities in full car loads overrelatively long hauls - an ideal rail traffic situation. As a result thefreight activities of the railway are viable. Highwray freight traffic, parti-cularly on the main and toll roads, consists by contrast of goods moving insmall shipments over short hauls, or goods requiring special service condi-tions irrespective of length of haul, or goods for which time and itsassociated costs are signi-icant. Road-rail comkpetition for freight trafficis only marginal, especially for hauls below 500 km. Despite the favorablefreight traffic environment the railways suffer large revenue losses for theusual litany of reasons - low passenger fares, the use of rail freight tariffsas an instrument for export promotion and for cost of living subsidies,uneconomic branch lines, etc. To put the railway system on a sound financialand commercial basis would necessitate overcoming administrative, fiscal,labor and social policy questions that are not amenable to easy shortrunsolutions (see Bank Report }E-137a, Vol. V, Annex IV referred to in Paragraph7 above). The new Government appears to be taking some of the first stepsrecommended in that Report to remedy the situation.

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III. CAXrNOS Y PUENTES FEDERAILES DE INGRESOS Y SERVICIOS CONTUOS

A. Organization and ianagenent

16. A public body wvas created in 1952 to take charge of the thenexisting tw¢o small toll highways. In 1959 it was reorganized as a PublicFederal Authority under the nare "Caminos y Puentes Federales de Ingresos"for the financing, operation and mainternance of' toll transport facilitiesin Mexico. It is an agency of the Government and its toll tariffs requirethe approval of the iklnistry of Communications and Transport (SCT). Undera Presidential Decree issued in June 1963 its title wias expanded to "Caminosy Puentes Federales de Ingresos y Servicios Conexos" so that it couldofficially include into its tasks: i) the purchase of heavy constructionequipment for rental; ii) the establislhment and operation of plants for theproduction of special asphalt paving materials, and iii) the constructionalong the toll roads of service centers which wrill be sold to privateinterests affected by the diversion of traffic from the f'ree roads to thetoll roads. So far only one of these centers at Rio Frio on the 14exico-Puebla road has been constructed.

17. The new Decree added a representative of the Navy MiCnistry to theBoard of Directors of "Caminos y Puentes" and established that the Kinisterof Public Works is to act as Chairman with the Hinister of Communications andTransport as Vice-Chairman. The Board includes a representative of the"Banco Nacional Hipotecario Urbano y de Obras Publicas,"1/an agency of theFederal Government, from which "Caminos y Puentes" borrows local funds forthe expatnsion of its toll facilities. Although in theory the organizationalstructure of "Caminos y Puentes" appears satisfactory and its lines ofauthority clear (Figure 1) in practice there is a concentration on the Sub-Director of Operations who is the channel through which most day-to-daymanagerial matters pass. During negotiations satisfactory assurances werereceived from "Caniinos y Puentes" that in view of its growing activities:

a) An effective delegation of authority will be givento the various departmental heads.

b) That since a further expansion of the "ServiciosConexos" could interfere wqith the main objectivesof "Caminos y Puentes," there will be no signifi-cant expansion of these connected services.

B. Present Activities

18. As of November 20, 1964 "Caminos y Puentes" operated seven tollroads, nine toll bridges and four ferry boats. Of these, two toll roads,three toll bridges and one ferry boat were financed under Loan 317-1NE. The

1/ Generally referred to hereafter for brevity as "Banco Hipotecario"

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total length of the seven toll roads is 469 !Url. This length wuill increaseto 769 iaf wihen the remaining toll roads being constructed under Loan 317-1Eare completed in late 1965.

19. The present toll facilities are satisfactorily operated andmaintained. The toll booths are provided with electronic devices to recordthe number and types of vehicles as well as tlhe tolls paid. An emergencybreakdown and repair service is provided free of charge on the toll roads.

C. Present Finances

i) Toll Revenues

20. "Caminos y Puentes" derives its income from tolls levied on theusers of the roads, bridges and ferries which it operates and, for a smallpart, from other non-transport activities known under the heading "ServiciosCone,xos."

21. Since 1952, toll revenues have increased rapidly from Ps. 0.6million to Ps. 110 million in 1963 (Table 3). Betw-een 1960-63 revenuesdoubled as a result of the continued growth in traffic and the opening of newfacilities. About 75% of the total toll revenues received in 1963 wasderived from roads, 201O from bridges and 5% from the ferries. Each 1] ofroad brought in about Ps. 395,000 in 1963 as against Ps. 152,000 in 1960.

22. In the case of the bridges financed under Loan 317-13, both thenumber of vehicles and the tolls received in 1963-64 are running at a higherfigure than forecast. On the Mexico-Puebla road the total number of vehiclesexceeded the 1963 forecast by LO%, but revenues iwere Ps. 9 million less thanthe Ps. 31.7 million forecast for that year. On the basis of provisionalfigures it appears that revenues in 196 41 may be Ps. 10 million below thePs. 34 million forecast. The explanation for this apparent paradox is thatthe number of trucks, which pay higher tolls has fallen belo.r expectations.The situation is lilkely to improve, however, when the next toll section(Puebla-Orizaba), wlhicha is also being financed under Loan 317-1I comnes intooperation in mid-1965. This will permit direct toll traffic for 265 km andprove more attractive to long-haul truck traffic.

ii) Toll Rates

23. The present toll rates are established on the basis of the.inistry of Communications and Transport's judgement as to "what the traffic-dill bear." Investment cost is not a determining factor and hence the 1963gross returns on the different facilities range from 5 to 24% for the roadsand from 8 to 44,ti for the bridges.

24. If calculated on a "per km" figure the toll rates average 13centavos per km (USe 1.0) for cars, 20 centavos (US3 1.6) for buses and25 centavos (USe 2.0) for most trucks. These rates are comparable to thoseapplied elsewhere in the world and are less than the economic savings result-ing from using the toll roads.

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25. Once a tariff has become established and generally know-n for a road"Cominos y Puentes" seems reluctant to ;equest changes, particularly, so longas its financial results are favorable. It is felt, however, that "Caninosy Puentes" should ma:e a periodic review of the particular toll rates oneach road in order to bring aoout a more continuous and fuller use of thefacilities (e.g. by establishing reduced rates for niglht freight traffic).During negotiations the Goverrnent's agreerment to tlhis has been obtained. Forcertain of the bridges thl-e difference between the rate of growtth of trafficand that of revenues is larger than that for the roaes because of theacceptable practice of granting reduced tolls to the inhabitants of theimnediate areas concerned.

iii) Inconme Accounts

26. As s3hown in Table 4 "Caminos y Puentes"' income record is good,with toll operating expenses being kept within reasonab'le limits. For thelast three years toll operating expenses (before depreciation) have averagedabout 20% of toll revenues. As a result of growing traffic, road maintenanceexpenses per km have increased from about Ps. 10,000 in 1961 to aboutPs. 17,000 in 1963. Administration expenses follow an upward trend but areless than 5% of tie toll revenues. The enployees of "Caminos y Puentes"which were 383 in 1960 are now 1,012. The increase reflects the new activitiesand the opening of newT toll facilities.

27. -Whlaile a realistic depreciation policy- has been adopted for mostequipment (20%), for buildings (5%) and for ferries (10%), the Board of"Caminos y Puentes" has decided that onr.y a 2% annual depreciation allowanceshould be used for roads and bridges. The argument is that thlese itemsremain par-t of the "national patrimony" and that it is not the Goverrn,lent'susual practice to miake allowiances for the depreciation of such infrastructureinvestment. This is reflected in "Caminos y Puentes'l operat4ng ratio whichis more favorable than it iwould be if a higher depreciation rate wrereapplied.

28. As mentioned in Paragraph 2, "Caiinos y Puentes" operates come"Serv_cios Conexos." In 1961, it bought about Ps. 56 million of heavy con-struction equipment mainly through an EKport-Im,port Banl loan to the Naciona'Financiera and through suppliers' credits. This equipment is for rental toGovernment agencies and private contractors and has been used mainly formajor darmi projects. A second group of equipment to the value of about Ps. 4million was bought in 1964, also largely thirouglh suppliers' credits. Theannual revenues from the rental of equipment amount to about 20% of theequipment purchase price and is earmarked for depreciation. The asphaltemulsion plant vith an installed annual capacity of 44d1 million liters iwascompleted at Irapuato in mid-l964.

29. Interest charges have grown substantially during the last threeyears, mainly because of the high rate on the Banco IHipotecario loans (10%).The "interest earned ratio" which has dropped as a consequence from 4.8:1 in1961 to 2.5:1 in 1963, is still indicative of a sound earning position. The

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ratio takes into account interest on Loan 317-i1i3E which, in fact, duringthe construction period is being paid out of that Loan Account but which,on the Board's instructions, is not capitalized but charged to revenue.

30. Since 1961 the operating ratio has been about 35% for the tolloperations alone. As pointed out in Paragraph 27 above, however, theoperating ratio is favorably influenced by the present depreciation policyfor roads and bridges. A higher depreciation allowance, say 1)% perannum, would have increased above ratio to about 50% and reduced net revenuesby about 2C0.

iv) Financial Position

31. The comparative balance sheets 1960-64 shown in Table 5, summarizethe financial history of "Caminos y Puentes". In 1959 when it took over theexisting assets they were covered by a non-interest bearing Government contri-bution to capital of Ps. 390 million. Since thlen, annual surpluses have beenadded to capital, which by August 31, 1964 had reached about Ps. 570 million,an increase of 46%. Net fixed assets (Ps. 781 million) and "works in pro-gress" (Ps. 375 million) now total Ps. 1,156 million, 49% of which is coveredby the equity, the balance being financed by Bank Loan 317-PE, loans from theBanco Hipotecario and by suppliers' credits. Net fixed assets for roads,bridges and ferries amounting to Ps. 703 million at the end of 1963 producedin that year net toll operating revenues of Ps. 70 million, a financialreturn of 10%.

32. At August 31, 1964 the long-term debt of "Caminos y Puentes" wasabout Ps. 535 million, of wihich Ps. 204 million represented disbursementsagainst Bank Loan 317-iE; Ps. 42 million for suppliers' credits and Ps. 289million from the Banco Hipotecario. The debt to the Banco Hipotecario resultsfrom an agreement (July 18, 1962) arising out of the negotiations for Loan317-IE, uhereby the Banco Hipotecario agreed i) to consolidate and extend fora period of six years "Caminos y Puentes'" outstanding loans and ii) to opena new 10-year line of credit (including a three-year period of grace) forPs. 500 million. From this latter line of credit, onlyr Ps. 1)46 million hadbeen writhdrawn by August 31, 196)4.

33. The debt serv-ice ratio which w-as 1.0:1.2 in 1962 improved to1.2:1 during 1963. For the first eight months of 1964 it remainslow (1.3:1). During the same period the long-term debt/equity ratio increasedfrom 34,'66 to 49/51. The current cash position is alwrays marginal because"Caminos y Puentes" chooses to use its cash to meet capital expendituresinstead of calling down the Banco Hipotecario loan accounts. This situatiTon?however, can be easily corrected at any time by exercising the latter option.

v) Accounting and Auditing

34. The accounts are submaitted successively to two auditors; to aninternal auditor who reports to the Director-General and to external auditorsappointed by the Board and who report independently to it. IWhile, on thewhole, the accounts are wvell-kept, the system could be greatly improved bymechanization. Ps. 3.5 million are provided in the proposed project for thepurchase of such mechanical equipment.

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IV. THE PROJECT

A. Description of the Project

35. The proposed project provides for (ilap ITo. 2):

i) the addition of two lanes in the existing tollsection (113 1ar) and the improvement of two freesections (including some 30 km of service roads)of the Mexico-Queretaro road (208 km);

ii) the construction of four new toll roads: Apaseo-Irapuato, Guadalajara-Zapotlanejo, Orizaba-Cordoba and Penon 2Aexcoco, totalling 1141 km;

iii) the construction of three toll bridges - La Piedad,Nautla and Tecolutla, and

iv) the procurement of equipment for the operation ofthe toll booths and of accounting equipment.

36. None of the roads and bridges included in the proposed project isunder construction; the status of engineering is explained in Paragraphs53-58. The project is expected to be executed in a per-iod of four years(January 1965 to Decenber 1966). The total estimated cost of the projectis Ps. 976.1 million (US$ 78.1 million equivalent) including interest duringconstruction on the foreign component.

a) The Toll Roads

37. The iNIexico-Queretaro (208 Io), Apaseo-Irapuato (71 Ean) andGuadalajara-Za)otlanejo (28 lkm) roads, a total of 307 Ian, are sections ofthe main route to the north of the coun-try and also to Guadalajara. TheOrizaba-Cordoba road (20 km) is an extension of the .;exico-Puebla-Orizaba roadwhlich is being financed under Bank Loan 317-S1. The Penon-Te;xcoco road(22 kmn) will represent a shortcut to Jalapa, Taripico and Veracruz.

38. A more detailed description of each of the proposed roads follows:

i) Mexico-Queretaro - This 208 ikn road comprises three sections(see also Figure 2):

a) Limits of the Federal District to the toll booth at Tepotzotlan.The terrain is generally flat except for 8 Ion thrnugh a mountainous area.This is a free road 30 han in length, wihich crosses a very congested suburban,industrial and residential area. Because the shortage of water is a limitingfactor on further housing and industrial developments within iIexico City,most of the present rapid expansion is talcing place to the north of the city.

1/ Penon lies in the north-east corner of the Federal District of Mexico

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The present road which runs through these areas has very high trafficvolumes. The first part of the section carries some 47,000 vehicles a daybut the number drops off rapidly to some 16,000 vehicles per day at hn 5.

39. Between the limits of the Federal District and th1e important urbandevelopment called "Ciudad Satelite"! (km 5) the section is a 6-lane dividedhigiway with a cement concrete pavement that is in bad condition because ofmany base failures. The project provides for the reconstruction of thebase and pavement and for the construction of twfo-lane service roads on eachside of the main road. Four interchanges will be built in this section toover-pass existing avenues and roads in order to provide the only accessfrom them and the service roads to the main road.

4o. No works i-ll be carried out along the 3 km section included in the"Ciudad Satelite" development which is already satisfactory. From 1kri 8 tothe toll booth (kan 30) a divided four-lane asDhalt concrete road wrillJ be builtby relocating or improving the existing two-lane road where necessaryr.Service roads will be built in parts of this section where necessary, forexample, when it crosses the important industrial areas of Tlalnepantla andTu'titlan iwlhere many factories and sone heavy industries are in operation orunder construction. The averag-e daily traf,ic in this section falls betweenkm 8 and km 30 from 7,200 to 6,000 vehicles, of -whicli 35% are commercialvehicles. The present road is already congested.

41. b) The Tepotzotlan-Pa2millas Section (113 km) is the only part ofthe Mexico-Queretaro road on which tolls are collected. The road crossesareas of flat, rolling and mountainous terrain. There are important agri-cultural developments along the flat and rolling areas. For about 30 km be-fore and after the town of Tepeji del Rio the road crosses a mountainous areawJhere earthworks wrill be heavy. The present road has two lanes (7.30 m width).The project works provide for the construction of two additional lanes whichwill be joined to the existing road or will form a separate embankmentaccording to the particular topographic conditions. Six interchanges -ill bebuilt along this section. The pavement will be of asphalt concrete. Trafficin this section has grown rapidly to about h,000 vehicles a day since it w^sopened in 1959. The road will be congested by the completion date of theplanned works.

42. c) The Palmillas-Queretaro Section (65 1m) is the other free roadsection included in the project. The present twio-lane road crosses re-latively flat terrain which is densely cultivated. San Juan del Rio, animportant commercial and industrial center, is located in this section. Thepresent two-lane 7.30 m wide road will be wi-dened to four lanes and pavedwith asplalt concrete. The additional lanes will be eithler a separate ernbank-ment or a wridening of the existing embanrment, according to the topographicconditions. The cities of San Juan del Rio and Queretaro will be by-passedand six interchanges will be bullt.

43. ii) The Apaseo-Irapuato road (71 km) will be a shlortcut of about5 KM over the present free road. i,ore iiportant, it will by-pass theimportant cities of Celaya and Salamanca which generate large amounts oflocal traffic that impede the flow of through traffic. The proposed road

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will traverse flat terrain that is densely cultivated. It will serve manynearby industrial developments in the Salan-anca area including one of PEEX'smain refinery plants. The project provides for the construction of a two-lane 7.20 m wide toll road with an asphalt concrete pave:nent.' There will befour interchanges to se-rve the c:ties of Apaseo, Celaya, Salamanca andIrapuato; the last of these -ill provide the necessary connections for directtraffic to the main road to Guadalajara. The present road wlhich is alreadycongested will continue to serve the local traffic needs.

44. iii) The Guadalajara-Zapotlanejo road (28 Ion) is the final sectionof the main route from Iqexico. The new road will avoid the growring trafficcongestion on the present free road. The first part of proposed road crossesa mountainous area in wrhich there is a deep gorge that will be crossed by a300 m span brLdge. The last 10 or 15 len approaching Guadalajara is rollingfiat terrain. 'Ihile the road will be designed as a four-lane road, it w-illbe built in two stages. The first, comprising two lanes with crawling lanesin the mountainous area, will provide sufficient road capacity to carry theirmmediate future traffic. T'ie second stage comprising two additiornal laneswill be built when the groTLrh of traffic justifies it. This is likely to be adecade or so from now; but to avoid higher costs in the future and impedimertsto traffic it has been agreed that all the bridges and the two interchanaesprovided will be built for four lanes. The road will have a 7.20 m Ianae as-phalt ccncrete pavement.

45. iv) The Orizaba-Cordoba road (20 1io) {.7ill relieve the existingtraffic congestion betwieen these two cities. At present, because of urbanand suourban developments these cit-es can be cons-Ldered as one unit wJithhouses, shops and small factories all along the road. The project road whichiill by-pass both cities but shorten the distance betwieen them crosses a moun-tainous area in which heavr earth moveement -will be necessary. A bridge froni250 to 500 m span depending on the final solution adopted will be built. Theroad will be a four-lane, asphalt concrete paved divided highway w.ith threeinterchanges.

46. v) The Pe;.,on-Texcoco road (22 'i<m) is the first section of thle roadto the north-east coastal part of -the country and of an alternative route tothe Port of Veracruz. The proposed new road, iLich wiell shortcut the existirgroad by 13 lcm, wTill contribute to the developDmenit of T'excoco as an urban andindustrial satellite of M4exico City. The proposed road which will cross theTexcoco Lakre presents special engineering and construction problems. Embanl:-rnents for four lanes will be constructed aith an appropriate time-intervalbeing allowed for the settlement of the embanlbent before thie final carpet isplaced. The present narrow ur.surfaced road that crosses the lake will be usedas a service road during construction. Two lanes will be built on each sideof the existing road. Although no bridges are necessary, culverts 1dll beconstructed to allowT the passage of water in order to maintain the equilibriumwater level of the lake. On the Mexico City side avenues tothe proposed road cross a congested urban area. Assurances have been obtainedduring negotiations that the improvement of these avenues wLll he finished he-fore the completion of the project road. Branch roads to the agricultural en-gineering school at Chapingo and for the by-passing of Texcoco town; areincluded in the project.

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b) The Toll Bridges

47. i) La Piedad Bridge. The present one-lane bridge is located inthe middle of the cityr of La Piedad on the main road to Guadalajara, aboutmidway between Irapuato and Zapotlanejo. Built in colonial times it representsa bottleneck to the movement of traffic. The proposed bridge will be part ofa short road by-passing the city and will have a total span of about 90 mdivided in four reinforced concrete sections writh a road width of 7.50 m andtwo sidewalks 1.50 m wide.

48. ii) Nautla Bridge. The proposed bridge would be located over theNautla River close to the towrn of Nautla, wjThich lies on the road along thecoast of the Gulf of Mexico. Crossings are made at present by a ferry boatthat operates 24 hours a day wjhich moves an average daily traffic of about 400vehicles, about 50% being cornercial vehicles. However, because of very highseasonal waters on the river or because of repairs to the ferry boat, theservice is suspended about 30 to I5 days a year during which time traffic hasto make a detour of some 300 km. Constructlon of the bridge will not onlystimulate the economy of the local area but also by giving a permanent andsafe crossing close one of the gaps on the coastal route. The propcsedbridge will have a span of about 270 m divided in six sections. Thefoundation w-ill be of driven piles or dredged concrete cylinders. The super-structure ri11 be of reinforced concrete g(irders writh the central steel spanof about 40 m. A clearance of 8 m over the high water wrill safely allow; thepassage of the srmall boats now using the river. If, however, the size of thleboats increases and the anount of navigation grows the steel girder can bereplaced by a lifting span for which appropriate foundations are being pro-vided as part of the project.

49. iii) Tecolutla Bridge. This bridge will be some 30 km north ofNautla on the same Gulf coastal road where problems similar to that at Nautlaare encountered and where there is also a ferry boat service provided 24hours a day. The proposed new bridge will be a substantial contribution tothe economic development of the economy of the area and wzill speed throughtraffic westwards Pachuca and Ifexico City and north to Tu.pan and to the portof Tampico where oil fields of PECX are located. The proposed bridge willhave a total span of about 600m divided in 13 sections. The foundation nllbe of driven piles or dredged concrete cylinders. The central span will bea steel girder that can be replaced by a lifting span if future navigation sorequires and for the foundation ofL' which provision is included in the project.

c) Miscellaneous Equipment

50. Electronic devices are installed in the toll booths in order torecord the number of vehicles, truck axles and the collection of tolls. Theproject provides Ps. 13 million (Uss l.04 nmillion equivalent) for the purchaseof equipment similar to that now in use at tile existing toll booths for thenew toll boothis to be constructed for the project roads and bridges. Theamount also includes provision for the purchase of srmiall electric plantsnecessary to operate the above equipment in cases where the booths are notlocated near nublic power supplies.

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51. The present statistical and records system used by "Caminos yPuentes" must be expanded and put on a meclhanical basis in order to processquickly the growing volume of information relating to traffic and tolls. Theproject includes an amount of Ps. 3.5 million (US$ 280,000 equivalent) forthe purchase of such necessary equipment.

B. Design Standards

52. The road and bridge design standards are the same as used for 317-ICEproject and have proved to be satisfactcr:- (Tables 6 and 7). The "Iexico-Queretaro road, however, is a special case because in the section close toA'exico City, the number of lanes varies from six to four according to trafficneeds and service roads will be built where necessary (Figure 2).

C. Status of Engineering and Execution of the Project

53. The organization and operations of SOP which is responsible for thedesign and construction of the project are satisfactory, and have already beendescribed ifully in appraisal reports for the other road loans made toMfexico.17 SOP is adequately staffed to carry out the project and no outsideconsultants are required.

54. Althougl final engineering has been prepared only for a 5 km sectionof the Mexico-Queretaro road, preliminary surveys and studies have beencarried out for the remaining proposed works. Survey parties are now in thefield locating the center line of the roads and carrying out soil investiga-tions. Final engineering for the earthworks and structures for the wjhole pro-ject is expected to be completed in 1965, and for the pavements by mid-1966.The La Piedad bridge is expected to be completed by the end of 1966; the twoother bridges and the roads, other than Mexico-Queretaro, by the end of 1967.The IIexico-Queretaro road should be completed by the end of 1968.

55. There is, howjever, a special engineering problem for the design ofthe Penon-Texcoco road which crosses Lake Texcoco. On the basis of theexisting information as to the soil conditions at the bottom of the lake, theSOP has prepared a preliminary cross-section for the road. For the finaldesign further soil investigations have to be carried out involving numerousborings along the proposed center line to determine the quality and thicknessof the soil layers in order to calculate the expected settlements. Theseuncertainties necessitate a reviewJ of the present preliminary cost estimatefor this road. During negotiations assurances have been obtained that if thereis a substantial increase in the final cost estimate the economic justificationtwill be reviewed and presented to the Bakc so that it can reconsider itsfinancial participation in this item. No disbursement from the Loan Accountwiould be made for this construction work until the Bank has confirmed itsfinal participation.

56. For the selvice roads to be built in the first 30 km of the MiIexico-Queretaro road I'Carinos y Puentes" is negotiating the possible participationof -the State of iexico and assurances have been obtained that they will bepursued to completion and the result made known to the Bank. Should thesenegotiations be unsuccessful the Governnent will cause these roads, which areto be constructed as part of the project, to be adequately maintained.

1/ Report No. TO-256a for Loan 268-ME and Report No. TO-382a for Loan 354-IME

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57. As mentioned in Paragraphs 4 and 5 a very large number of underand over-passes are being provided on some roads built under Loan 317-liE.During negotiations it has been agreed that for the proposed Droject onlythose over-passes crossing existing Federal and State freeroads and interchanges will be included for Bank financing, and that all theother over-passes will be financed entirely by "Caminos y Puentes."

58. The SOP has already acquired the land for part of the iNexico-Queretaro road, but for the three other roads the right-of-way has still tobe acquired. SOP does not foresee any delays or problems since new proceduresintroduced by the Government will facilitate the earlier acquisition of theright-of-way (Paragraph 4).

D. Cost Estimates

59. On the basis of the SOP's preliminary studies the cost estimatesfor the construction, engineering and supervision of roads and bridges in theproject total Ps. 826.3 million (US$ 66.1 million equivalent). Becausestudies are only preliminary a quantity contingency of 20% has been included,as compared with 10% in Loan 317-1E. For engineering and supervision, 10%has been provided as in previous loans. The right-of-way costs, w?hich areincluded in above figure, were estimated on the basis of the present costsof acquiring land. For the road construction works, the average quantitiesof earthworks per km were based on those obtained from previous works insimilar topographic conditions. The unit prices employed are those obtainedfor recent bids in the areas. A similar approach was used for the cost esti-mates of sub-base, base, pavements, culverts, bridges and miscellaneous works.The cost estimates arrived at take into account SOP's experience with recentworks and are acceptable as a reliable basis for the appraisal of the pro-ject.

60. A further contingency allowance of 10% for price increases is pro-vided as follows:

i) For Roads and Bridges:

a) Four per cent for labor cost increases because minimumwages and salaries in Mexico are generally increasedevery two years. The last increase took place inDecember 1963 and, since the project works will takefour years to complete, allowance has been made forthe expected 1966 and 1968 reviews.

b) Six per cent for construction equipment cost in-creases. In April 1964 a Presidential Decree wasissued making the local manufacture of much of themachinery and equipment used by the constructionindustry obligatory. Since the output of theseequipment factories will be low, the unit costwill be higler by an estimated 20%. Since the

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equipment component in the project works isestimated to be 30% of their total cost, a possibleincrease of 6% is provided for.

ii) For Miscellaneous Equipment:

The cost of this project itea.i has been estimated atpresent prices and since the larger part of theequipment uTill be purchased in ].967/68, a 10, priceincrease contingency has been allowed for.

61. As in the case of Loan 317-DIE provision is made to cover theinterest and other financial charges on the foreign exchange component duringconstruction. This amounts to Ps. 49 million (US$ 3.9 million equivalent).

62. On the basis of the foregoing the total cost of the project, whichis estimated at Ps. 976.1 million (US$ 78.1 million), can be broken dow-n asfollows:

(Pesos million)

Engineering TotalEst. and ProjectCost Supervision(10%) Cost

Roads 726.0 - 72.5 798.5Bridges 25.21/ .2.6 27.8

Total 751.2 75.1 626.3

Price Contin-ency forRoads and Bridges 75.1 7.5 82.6

diiscellaneous Euipment 16.5 - 16.5Price Contingency for

IHIiscell-aneous Equipment 1.7 - 1.7Interest during Construction L9.C0

Grand Total 976.1

(US$ 78.1 million equivalent)

1/ Includes 20% physical contingency. Details of the above costsare in Table 8.

E. Local Currency and Foreign Exchange Components

63. The SOP has furnished a detailed and acceptable analysis of theestimated foreign exchange component of the project items. A summary break-down of local currency and foreign exchange components is as followJs:

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(Pesos million)

ForeignEycha= Local CurrencyAroimtn Aount Total

Roads 295.4 37.0 l/ 503.1 63.0 798.5Bridges 8.3 30.0 V 19.5 70.0 27.8IEscellaneous

Equipment 15.7 95.0 .8 5.0 16.5

Total 319.4 37.9 523.4 62.1 842.8

Price Contingency(10%) 31.9 37.9 52.4 62.1 84.3Interest duringConstruction 49.0 100.0 - 1X9.0

Grand Total 1400.3 41.0 575.8 59.0 976.1

US$ million equivalent 32.0 46.1 78&1

1/ IWeighted average of Bank participation in these items is 36.7%(i) Interest on local currency is charged to revenue

The overall Bank participation in the project financin1g, exclusive of interestduring construction represents 37.9% of the project cost; including interestduring construction on the foreign exchange component, it increases to 41%.

F. Project Expenditure Schedule and Disbursement

64. The folloEing table gives a summary of the estimated annual brealk-down for the proposed project:

(Pesos million)

1965 1966 1967 1968 Total

Construction expenditure 128 331 301 83 843Price contingency (10%) 13 33 30 8 84Interest during construction 4 9 I5 21 149

Total 145 373 3146 112 976

broken down as follows:Local currency 80 226 205 57 576Foreign exchange 57 147 141 55 400

Foreign exchange (US$ million) 4.6 11.8 11.2 4.14 32.0

65. Foreign and local expenditures are expected to progress propor-tionately for roads and bridges. It is proposed therefore that for theseitems disbursements from the loan account should be made on the weigl.ted.average basis of 36.7%. Disbursement for the equipment would be made on thebasis of actual imnport cost.

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G. Contract Award and Equipment Procurement Procedures

66. All construction works will be let on the basis of internationalcompetitive bidding and in accordance with the Bank's "Guidelines relatingto Procurement," except for specialized works of less than Ps. 12.5 million(US$ 1.0 million equivalent) which, with the Bank's prior approval, may beawzarded locally or carried out by force account. It has been agreed, as forLoans 317-IIE and 354-ME, that where it is practical to do so works will becombined in order to form a minimum contract size of Ps. 25 million (Us$ 2.0million equivalent). Experience has shown that very few foreign firms submitbids and all construction contracts under the previous road loans have beenawarded to Mexican firms. The .MSexican construction industry is welldeveloped and efficient but most firms are of mediur,m size. This results, tosome extent, from the practice of dividing construction works into threeseparate contract items - earthworks, structures (bridges) and pavement ratherthan as one contract. The SOP has agreed to study the izayrs in which in thefuture contracts can be further increased in size and scope.

67. A special case to which SOP has already agreed, is the award of theearthworks and drainage of the Penon-Texcoco road as one contract (US$ 7.0million equivalent). It is essential that this work should be carried out byone contractor because some 3.2 rmiillion cubic meters of materials will haveto be hauled during the construction of this road, wThich will requirespecialized equipment working to a planned program. This agreement was con-firmed during negotiations.

68. During negotiations two measures taken recently by the Governmentwhich, prima facie, could affect the principle of international competitivebidding were discussed:

i) the implementation in December 1963 of the resolution ofa special joint committee of management, labor and Governmentrepresentatives, which established rules for the distri-bution of part of the profit of enterprises among theirworkers, and

ii) the Presidential Decree making the local manufacture ofmany machines and equipment used by the local constructionindustry obligatory (see Paragraphi 60).

69. The Government informed the Bank that the first measure is toorecent in its application to assess the effects. It also stated that becausethe bulk of the labor force used on road works is temporarily employed, it isunlikely to have much effect on road construction firms. Since the measureapplies equally to Mexican and non-i-Iexican enteiprises it does not distort thepractice of fair competition and, therefore, is acceptable. With regard to theDecree on equipment, the Government stated that if a foreign firm is awarded acontract there would be no limitations on its importing the necessary equip-ment, provided the equipment is re-exported at the end of the works.

70. The estimated cost of the three toll bridges included in the projectis below the agreed minimum contract size of Ps. 25 million. The contractsmay, with the Bank's prior approval, be awarded through local bidding. Theprocurement of the accountin- and record machines would take place after localbidding. In order to standardize operation and maintenance, the electronicequipment ior the toll booths would be purchased from the same foreignl manu-facturer that has provided the existing equipmenit, which has proved to besatisfactory.

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V. FUTURE FINANCES AND PROGRAM FIMNCING

A. Future Financial Results

i) Toll Revenues

71. Toll revenues expected to be collected from each facility duringthe period 1964-1971 are given in Table 9, and summarized below:

1963 (Ps. million)(actual) 1964 1965 1966 1967 1968 1969 1970 19711/

a) Facilities builtwithout the Bank'sfinancial assis- tance 76 84 92 100 108 121 7).!/ 79 2 842/

b) Facilities includedin Bank Loan 317-ME 34 40 94 141 157 177 189 200 212

c) Facilities includedin the proposed pro- - - - - 1 47 121?/ 130 / 137?!ject

Total 110 124 186 241 266 345 384 409 433

1/ The bases of' the above forecast are shown in Annex 1.2/ For 1969-71 revenues from Tepotzotlan-Palmillas section are

shown under category (c) (see Table 9).

72. In 1969, the first year after completion of the whole of the proposedproject, toll revenues are expected to reach Ps. 384 mnillion, a 250% increaseover 1963. The forecast for 1971 is Ps. 433 million, of which about 80% willderive from roads, 12% from bridges and 8% froma the ferries (Table 9).

ii) Future Income Accounts

73. L.s surmarized below, "Caminos y Puentes"l incoiie position is expectedto remain satisfactory (Table 10):-

1963 (Ps. million)(Actual) 1964 1965 1966 1967 i968 1°69 1970 1971

Toll Revenues 111 125 187 242 267 346 385 410 434Toll Operating

Expenses 22 24 34 40 44 52 58 60 63Depreciation 19 24 36 43 44 54 64 65 63Net Toll Revenues 70 77 117 159 179 240 263 2Th5Net non-toll Revenues 2 1 2 2 11 10 11 15 12Thtal net Revenues 72 76 T119 =I0 1T_9G0 25 727 300 320Interest charges 29 35 54 82 95 95 101 85 68Net Income *T3_ T-3 65 7 9 9F 155 173 21 -i2Interest Earned Ratio2.5:1 2e4:1 2.2:1 2.0:1 2.0:1 2.6:1 2.7:1 3.5:1 4.7:1Debt Service Ratio 1.2:1 1.3:1 1.0:1 1.0:1 1.1:1 1.3:1 1.2:1 1.4:1 1.5:1Nlet Revenues as a %of Net Fixed Assets 9.7% 7.2% 9.3% 11.4% 13.7% 13.7% 12.3% 13.6% 14.7%

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74. Realistic allowances have been made to meet expected salary increas-es and the costs of additional staff and materials necessary to deal with thegrowing toll ne twork. Maintenance expenses, which now average Ps. 17,000 perkm, have been increased progressively to Ps. 25,000 in 1971. However, tolloperating expenses - although increasing rapidly - are not expected to grow asfast as toll revenues, and by 1969/71 they wrill average 15, of tne toll revenuesas compared with a 20% average for 1961/63. Depreciation has been calculated onthe bases used at present (Para. 27).

75. Annual revenue frorn the rental of equipment is expected to remain atits present level, about 20p of tlle eauipment purchase price, and is fully ear-marked for depreciation. Once the equipment is depreciated (in 1966 for thefirst batch and in 1969 for the second batch) its gross revenue is expected todrop from Ps. 20 million in 1966 to Ps. 10 million in 1971. Since little in-formation is avaiLable on the asphalt emulsion plants whiich has just begunproduction, a conservative assumption has been made that it will produce anannual net revenue of Ps. 1.5 million only.

76. Allowances have been rnade for the interest charges of "Caminos yPuentes'l debt as follow-s: (i) three loans from the Banco Hipotecario at10% interest for 6, 10 and 10 years respectively; (ii) IBRD Loan 317-M4E at5-3/4% interest for 20 years including a tihree-year period of grace; and (iii)the proposed IBRD loan for 20 years at an assuw,med 52'; rate of interest, includ-ing a four-year period of grace during which period interest and other chargeson the foreign comnponent would be paid out of the Loan Account. Since interestis included in the repayment installments for the supplierstcredits it has beenincluded in the calculation of the debt service and not in the income account,

77. Net revenues are expected to grow frorm Ps. 78 million in 1964 toPs. 320 million in 1971, an increase of 310C', and net income after financialcharges is expected to rise from Ps. X3 million in 1964 to Ps. 252 million in1971, an increase of 500%. Applying the estimates of total net revenues toestimated net fixed assets the financial investment return on the total activi-ties of "Caminos y Puentes", after completion of the project, will average over1969-71 about 14/o. The operating ratio for toll operations alone is expectedto drop from 38% in 1964 to 29% in 1971. However, as explained in paragraph 27,it is favorably affected by the low depreciation allowance applied for roadsand bridges. A depreciation allowance of 4% per annuM would increase theoperating ratio to 52%' in 1964 and to 40% in 1971. The "interest-earned ratio"is expected to drop from 2.4:1 in 1964 to 2.0:1 in 1966/67 and then rise pro-gressively to 4.7:1 in 1971.

B. Financing of the Development Program

78. Concurrently with the project "Caminos y Puentes" intends to financethe completion of project 317-ivE and other capital investments. As shown inTable 11 its program of investments fro;n January 1, 1964 to December 31, 1971amounts to Ps. 1,702 million (US; 136.1 million equivalent) and is summarizedbelow:

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(Pesos million)

i) Construction equipment for rental 72.5ii) Ezuulsion plant-land .&

iii) Canargo bridge 2.0iv) Maintenance and repairs equipment 75.0

Sub-total 150.3

v) Completion of project 317-PIE 575.6vi) Proposed project 976.1

Total 1,702.0

Ifn addition, "Caminos y Puentes" is expected to carry out pavement reneTwialsworks estimated at Ps. 65.0 million, thus bringing its total capital expenrdi-tures for the period 1964/71 to Ps. 1,767.0 million.

79. Items i) to iv) above idll be financed br suppliers' credits andfrom "Caminos y Puentes'" accumulated reserves and its prospective earnings.The foreign exchange cost of iteri v) is financed by tae Bank Loan 317-11 withthe local currency cost being covered by a line of credit with the BancoHipotiecario.

80. The foreign exchange cost of the proposed project (item vi)),amounting to Ps. 400.3 million (US$ 32 million equivalent) including interestduring construction, is assumed to be financed entirely by the proposed Bankloan. The local currency cost of Ps. 575.8 million (US$ 46.1 million equi-valent) will be financed by the balance of the above-mentioned credit, and bya new line of credit of Ps. 450 million from the Banco Hipotecario and, for asmall amount, by "Caminos y Puentest'" own funds.

81. The capital resources available to "Camninos y Puentes" and the needof funds during the periods 196!4/68 and 1964/71 are given in the statement cfcash flow estimates (Table 12). The estimates are summrarlzed below:

Source and Application of Funds

(Pesos million)

1964/68 1969/71 196h/71Source of FundsCash from operations 733.1 837.3 1,570.4Banco IHipotecario 926.9 - 926.9Suppliers' credit !L6.9 4 b6.9IBRD 638.8 _ 638.8

Total 23h45-7 837.3 3,183.0

-21-(Pesos million)

1964/68 1969/71 1961/71A lication of FundsEquipment, Camargo bridge, etc. 107.2 b3.1 150.3Completion of project 317-ME 575.6 - 575.6Proposed project 976.1 - 976.1Pavement renewal 20.0 45.0 65.0Debt repayment 592.3 542.4 1,134.7

Total 2,271.2 630.5 2,901.7Surolus available forWorling CaTital 74.5 206.8 281.3

82. During the period 1964/71 the cash from operations will be largelyabsorbed by the debt service and by the wJorking capital requirements so thatthe investment program will have to be finaanced almost completely from borrowedmoney as show-,n below:

1964/68, 1969/71 1964/71(Ps.million) % (Ps.million) % (Ps.million) %

"Cam2inos y Puentes t" 66.3 4 88.1 100 15L.4 9own funds

Banco Hipotecario 926.9 55 - - 926.9 52Suppliers' credits 46.9 3 - _ )6.9 3IBRD 638.8 38 - _ 638.8 36

1,678.9 100 88.1 100 1,767.0 100

83. This will increase "Camlnos y Puentes'l debt from Ps. 419 millionat January 1, 19614 to Ps. 1,528 million at January 1, 1968. As of January 1,1972 it will have dropped to Ps. 897 million. The fluctuations of the debtposition are given in Table 13 which has been computed on the basis of thefollowing assumptions:

i) that no other capital expenditures will be incurred duringthe period 1965-71;

ii) the Ps. 450 million new line of credit from the Banco Hipote-cario would have a life of ton years including a four-yearperiod of grace with repayment being assumed to be made inequal installments from 1969 through 1974 and with an interestrate of 10% per annum;

iii) the proposed Banlc loan is assumed at 52eg interest with a 20-year life including a four-year period of grace.

During negotiations assurances have been received from the Governmenat thata) "Caminos 3r Puentes" will not undertaUke during 1965-71 major capital worksexcept if in accordance wuitil a financing plan accepted by the Bank, andb) a Ps. 450 million new line of credit will be made available by the BalncoHipotecario to "Caminos y Puentes" on terms and conditions satisfactory to theBank.

84. On the basis of the above assumptions the debt service ratio wfouldfluctuate from 1.3:1 in 1964 to a low of 1.0:1 in 1965/66 and then increaseprogressively to 1.5:1 in 1971. Although somewhat marginal, this situationis acceptable.

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85. The pro-forma balance sheet as of December 31, 1971 is expectedto show an improved debt/equity ratio of 36/t64 (as compared with 49/51 asof August 31, 1964) and to be approximately as follows:-

(Ps. million)Assets

Fixed assets 2,813Less accrued depreciation 581 2,232

Cash 281

2,513

Liabilities

Debt 897Capital and reserves 1,616

2,513

VI. ECONO;IC JUSTIFICATION

A. General

86. The high traffic growth rates on the facilities operated by ' tCaminosy Puentes" indicate that for many Haoxican highway uscrs shorter journey tiricsand operating safety have an economic va-lue for which they are prepared to pay.As compared with conditions on the alternative free roads these benefits de-rive from such features as (a) superior alignments and higher design standards(i.e. lowrer grades,, greater vertical and horizontal sight distances, widerwidths of lanes and shoulders, etc.); (b) limited access which keeps localvehicle, pedestrian and animal traffic off the roads; and (c) the generallyshorter distances between terminal points on the toll roads. By permittinghigher operating speeds, with greater safety, the toll roads not only reducedirect vehicle operating costs but also lower total transportation and dis-tribution costs. Speed is of importance in keeping down the size of businessinventories, turn-ng them over quickly. The savings to be realized are indi-cated by the fact that comnercial bank loans for inventory purposes cost some10-12%, or even more for small businesses. In Mexican banking policy suchloans are particularly discouraged as an tunproductive2 use of funds, A fur-ther attraction to the growTing use of toll roads is that "Caminos y Puentes"provides a free breakdowm towing and minor repair service which is of benefitto users.

B. Traffic Forecast

87. The Planning and Programming Division of the SOP is thoroughly con-versant with the modern highway planning and economic evaluation techniques.It has carried out detailed investigations into the cost of vehicle operationon a unit and time basis. It has made extensive studies into the origins anddestinations of road traffic, its distribution by vehicle types and size, the

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commodities trucked, etc. It has also studied the effects of opening theexisting toll roads on traffic distribution patterns. In its analyses forthe project the SOP considered the alternative solutions available, i.e.improving the existing roads, bluilding two-lane toll roads witih truck crawl-ing lanes -where necessary, etc., before arriving at thie solutions proposed.

88. In the past, the SOPts traffic forecasts have generally proved tobe conservative. Since the validity of its present forecasts is fundamentalto the economic justification of the proposed project facilities, their basisis briefly explained and then their reasonableness commented on. The fore-casts begin by determining the volume and type of' 1°63-64 traffic that wouldprobably have used the proposed newf toll roads if they had been available.This is arrived at on the basis of detailed Origin and Destination studiesand on the experience of having opened si-ilar toll facilities in Mexico. Tothis traffic 1.0% is added for the generation of traffic which would not other-wise arise. This total of 1963-64 traffic arrived at, is then forecast to in-crease up to 1970-71 at a rate falling from 9.0 p.a. by 0.5, each year to5.5% p.a. (Table 14). Traffic on toll roads already open for some tiine inMexico has increased as follows:-

Road Period Rate per annmm

Mexico-Cuernevaca 1953-63 9./1Amacuzac-Iguala 1953-63 14.7%Tepotzotlan-Palmillas 1959-63 13 .9

In view of this, an initial 9/Z annual traffic growth on the proposed tollroads is conservative.

89. The use of a long-term highway traffic growth rate averaging 5.5%p.a. is reasonable and is the saine as that averaged by the National Railwaysof Mlexico over the past 25 years. It is lower than the growth rate of vehicleregistrations in Mexico, which has been as follows:-

Average Annual Percentage Increase in Vehicle Registrations

(% rounded)Period Cars Buses Trucks All Vehicles

1953-63 9.5 3.5 7.0 8.01958-63 10.5 4.0 5.5_/ 8.o

90. At Mexico's present stage of economic development it is to be expect-ed that on the basis of experience in Mexico and elsewhere, highway trafficwill grow at a faster rate t'ian GDP, which, over the past decade, has increasedat an average rate of 6% p.a. A rising GDP is associaued with a more diversi-fied set of economic activities and with shifts in their locations. Theseforces create growing volumes of freight and passenger traffic, much of whichcan be moved more economically by road. Increasing national income is alsousually accompanied by larger amounts of automooile traffic for business and

1/ The apparent slow down in growth rate has been offset by the use oflarger trucks and a greater utilization of all trucks as the consequeniceof past road improvements.

local tourism. It is the MIexican Government Is policy to encourage new economicactivities and to spread thieir location while, at the same time, strengtheningexisting agriculture and industry, It is seeking, in particular, to reduce thedegree of economic concentration in i4exico City by encouraging development inits immediate suburban areas and in neighboring towns of the plateau (e.g.Queretaro, Salamanca, Puebla and Orizaba, etc.) as well as along the coastalareas. It is also making efforts to encourage the export of manufactured andprocessed goods as well as its traditional exports and to further the develop-ment of tourism.

91. The available evidence suggests that the past rate of GD? increasecan be maintained in the near future, given appropriate government policies andparticipation in Mexico?s development progra.i,s by external capital. There isevery reason to believe, therefore, in a continuing high overall highway traf-fic growth rate. The project items are in areas of high past and potentialgrowth where economic development should continue at a rapid pace and makepossible the traffic volumes forecast.

C. The Project Items

Mexico-QLeretaro-Ce'aya-Apaseo-Irapuato-La Piedar -Z anejo-GuadalajaraRoute

92. These project items have been discussed to some extent in paras.38 - b4 and 47 above. The Mexico-Queretaro route is the funnel through -whichall traffic from the north and north-west of lexico passes to the capital. Thepopulation of the Federal District has grown more rapidly than that of therest of the country. From 1.8 million in 1940 it increased to 3.0 million in1950 and is now put at 5.5 million. It has become the great consumption areafor foodstuffs, imported and Mexican manufactured goods. It is, in addition,a great manufacturing center, shipping goods to the remainder of Mlexico.

93. Some indication of the vital role which the Mlexico-Queretaro route,outside the immediate suburban area, plays in the national economy can be seenin the growth of the number of vehicles using this road, which increased from0.92 million in 1959 to 1.56 million in 1963 on the Tepotzotlan-Palmillas tollsection.

94. On reaching Queretaro the road becomes an existing toll section toCelaya. It gives access to a zone which has traditionally been of great horti-cultural i portance, but where there has been a significant development ofindustry over the past decade. Queretaro, for exaample, is the site of a largeindustrial complex for heavy machinery and the construction of parts for, andthe assembly of, specific types of construction and other equipment. TheInternational Finance Corporation has participated to the equivalent of US$ 1.6million in the Usfi 15.6 million program for the complex.

95. At Irapuato the road branches. One road runs north to Leon, a townof over 200,000 people which is the center of the Mexican shoe-manufacturingindustry, and to the i-iportant industrial towns of Monterrey, Saltillo, Torreonand Durango. The other branch runs southwest to Guadalajara through La Piedadand Zapotlanejo. The section Irapuato-Zapotlanejo is being improved as a freeroad under Loan 354-ME. Guadalajara is a center of growing manufacturing

importance and has many of the requisites for development - a large expandingmarket, skilled labor, power and water. It is also an important tourist andcultural center with two universities and a tiechnical college. It is theterminal point for the Pacifico Railwray wiiich serves the whole northwest coastof Mexico up to the U.S. border.

96. The zone of influence of the project items under this heading takesin about one-third of the country's population, 6)4% of the value of its indus-trial production and 17%o of its agricultural output0

Orizaba-Cordoba

97. This is a further 20 km section of an ultimate toll road from MexicoCity to Veracruz, the nation's main port. Tle section Mexico-Puebla (115 km)is already open to traffic. That between Puebla-Crizaba (150 km) which is alsobeing financed under Loan 317-TE and is scheduled for co,npletion by July 1965.As pointed out in detail in the appraisal report for Loan 317-MvE, the servicearea of the whole road is one of expanding industrial and economic activity.-/In brief, large areas of land in the southeast Gulf coast area of Mexico arebeing brought under irrigation. Cattle production to meet the needs of thegrowing urban markets of central Mexico is growing, with abo-it 60% of the valueof meat sales from the area going by road. Co-ap-etion of the major dam projectat Malpaso will increase the output of electricity significanvtly and is expectedto further industrial developments in the service area of the road. All thelatest indicators of econoirLic growth show a continuin- development of the areasince 1960, the last year considered in the June 1962 Appraisal Report referredto above.

Penon-Texcoco

98. The present road which is the first section of the routes servingthe area between the capital and such important towns as Cd.Sahagun and Tarmoicois below standard and congested. Cd. Sahagun is an important center for themanufacture of textile machinery, diesel trucks and buses and for freighu carsfor the railway. Tampico is the second most important port on the lAMexican Gulfcoast. The proposed road will also serve as an improved first section of thealternative route through Jalapa, an important coffee growing center, to theport and growing industrial city of Veracruz.

99. The Texcoco region is a center of intensive market gardening andmilk production for the capital. A major agricultural college near Texcoco(Chapingo) is to be greatly expanded i-n size wJith USAID assistance, amountingin the first stage to US' 30 million. Texcoco can ultimately become an im-portant factory area not only because of its closeness to the major marketbut also because it has water, power and an abundant supply of labor skilledin traditional handicrafts. Previous experience elsewhere in M.exico has shownthat such labor can be trained quickly in industrial skills.

1/ TO-315e, Appendix A, p. 1-3.

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D. Benefits

100. Continued traffic growth on the existing roads which are, or soonabout to be saturated, will produce increasing traffic congestion, as aresult of which vehicle operation costs and total distribution costs willincrease. Road maintenance costs will also be higher and/or the costs ofpavement renewal, reconstruiction or additional construction will be broughtforward. The toll facilities in the proposed project will not only avoidthese increased costs but also will produce additional savings because roadusers will be able to operate at higher speeds than possib'e on the existingfree roads. There will, in addition, be distance savings for users of thetoll roads. For the traffic which remains on the free roads both present andfuture delays will be avoided. A reduction in present or future maintenancecosts on the existing free roads could be set against the extra maintenancecosts of the new facilities but the SOP has conservatively assunod that thereis no saving in this respect.

101. The measurable road user benefits accruing as a result of the project,discounted over the varying assumed economic lives of the project iteins, yieldthe following estimated economic rates of return:-

Items Initial Investments/ Rate of Return(Ps. rmillion)

Roads

Mexico-t-iueretaro 19.715Apaseo-Irapuato 99.0 15%Guadalajara-Zapotlanejo 66.o 18%Orizaba-Cordoba 75.2 11%Penon-Texcoco 138.6 17%

Bridges

La Piedad 2.0 52%Nautla 9.9 17/oTecolutla 159 17%

Weighted Average of all Returns - 15,h%

17Construction cost plus quantity contingencies andEngineering and Supervision costs.

102. TlWhile the above returns would adequately justify the project, thereare additional benefits which, although not easy to measure, are important tothe national economy and to the success of the Government's policy objectives.For exarnple, the easier and quicker travel on the first section of the Mexico-Queretaro road and the opening of the Penon-Texcoco road will encourage thefurther develorment of existing industry around the periphery of if4exico City andalso Of industrial and residential dispersion in accordance with the Govern-

ment's policy. (To carry out this policy, a "Mexico Valley Authority" has beenestablished). By reducing urban congestion these projects will lower social

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overhead costs and, in particular, those of supplying wzater to liexico City.The proposed road works will also add to the value of land which is withineasy commuting distance and which is suitable only 'for residential or buildingpurposes. 1hlile nmuch of the agricultural land in the immediate vicinity ofmost of the other project roads is fairly well developed, the provision offast transport facilities will widen their effective service areas and bringmore producers economically nearer to major market centers. This should in-duce the development of new land as well as further intensify existing pro-duction and stimulate changes in crop patterns. The resulting increase in thevalue of land and property should yield greater tax revenues to the State andmunicipal governments in the service areas of the roads.

103. In view of the direct and indirect benefits and its role as an in-strument in the broader policy objectives of the Government described above,the project is economically justified.

VII. CONCLUSIONS AND RECOEENDATIONS

104. The project is economically justified, road users' benefits aloneyielding a net weighted average return of about 15%.

105. The project is technically sound and other than for the Penon-Texcoco road, for which the cost estimate and economic justification are sub-ject to review, the cost estimates are acceptable. It will be planned andcarried out by the ainistnr of Public W-forks (SOP), which is well organized andadequately staffed. No consultants are required for the project.

106. The project facilities will be financed, operated and maintained by"Caminos y Puentes," a Federal Government agency whose organization andfinances are satisfactory. The project is self-financing and does not rely onthe Government's budget.

107. The project, therefore, provides a suitable basis for a Bank loanof US$ 32 million equivalent to "Caminos y Puentes" and the "NacionalFinanciera." An appropriate term wiould be 20 years, including a four-yearperiod of grace.

January 19, 1965

TABLE 1

NEXCO

SECOND TOLL TRM!USPORT PROJECT

ANTUAL NTUEER OF Mr-OR VEHICLES REGISTERED (1950-63)

( wooo)

Automobiles Buses Trucks Total

1950 173.0 18.5 111.3 302.81951 209.3 19.3 132.7 361.31952 237.0 19.6 154.4 Lbll.01953 253.4 19.9 179.6 452.91954 273.7 20.1 193.5 487.31955 308.1 22.3 220.2 550.61956 320.4 21.0 240.1 581.51957 365.8 22.4 272.5 660.71958 378.9 22.7 273.8 675.b1959 437.7 25.9 300.9 764.51960 483.1 26.1 293.4 802.61961 520.7 33.4 300.2 854.31962 548.2 26.1 327.9 902.21963 618.0 27.6 352.7 998.2

Per cent increase p.a. (rounded to nearest 0.5%)

1950-63 10.5 3.0 9 5 / 9.51958-63 10.5 4.o 5.5 - 8.0

1/ understates increase in capacity because larger trucks beingregistered and roads improved

Source: Anuario Estadistico de los Estados Unidos M4exicanos

January 15, 1965

TABLE 2

MEXCO

SECOND TOLL TRANSPORT PROJECT

HIGHWAYS - LENGTH BY TYPE OF SURFACE AND EXPENDITURES (1.956-62)

1956 1.958 1960 1962 (1964)1/

1. Type of Surface (kns)

i) Earth 2,430 2,330 7,400 9,420ii) Gravel 6,770 7,330 10,320 111,9b0iii) Paved 19,410 22,300 27.370 29,280

Total 28,610 31,960 452090 53,6h4 (572170)

of idiich Toll Roads = 268 268 385 1425 (432)

2. Expenditures (Ps million)

i) Construction 606 S42 632 7i4ii) ilaintenance 178 191 288 356

Total 784 1,033 970 1,070

1/ At June 30, 1964

Source: Report No. IVJI-137a Part II, p.3 and Compendio Estadistico, 1962

January 15, 1965

MEXICO

SECOND TOLL TRANSPORT PROJECT

CAMINOS Y PUENTES FEDERALES DE INGRESOS Y SERVICIOS CONEXOS

ACTUAL REVENUES FROM TOLL OPERATIONS

(Ps million)

Actual Jan 1 - Aug 31Toll Facilities Starting 1952 1953 1954 1955 1956 1957 1958 1959 1960 1961 1962 1963 1964Date

Roads Km

Mexico-Cuernavaca 60 30 Nov 52 0.4 3.9 4.0 4.8 5.7 6.4 6.9 7.5 9.4 11.8 12.2 13.2 9.8Cuernavaca-Amacuzac 54 20 Dec 54 0.1 2.1 2.7 2.9 2.9 3.2 3.4 3.4 3.3 3.6 2.7Amacuzac-Iguala 50 30 Nov 52 0.2 2.2 2.2 3.7 4.7 5.1 5.5 6.1 6.3 6.1 6.3 6.8 5.0Tepotzotlan-Palmillas 113 1 Oct 58 4.3 19.6 23.0 25.9 28.7 32.5 23.6Queretaro-Celaya 40 14 Feb 62 4.2 5.3 3.6Mexico-PueblaL_ 115 5 May 62 14.9 22.7 16.0

Sub-total o.6 6.1 6.3 10.6 13.1 14.4 19.6 36.4 42.1 47.2 69.6 84.1 60.7

Bridges

Carrizal / 21 Mar 59 0.5Sinaloa 1 Jul 56 0.5 1.1 1.7 1.8 2.0 2.5 2.3 2.3 1.8Colorado 25 Mar 59 1.2 1.7 1.9 2.0 2.4 1.7Tuxpan 18 Mar 61 1.3 1.8 2.0 1.5Panuco 23 Sep 61 0.2 0.8 0.9 0.7Chariel 23 Sep 61 0.2 0.9 1.2 0.9Coatzacoaisos 18 Mar 62 4.7 7.2 5.3Culiacan 21 Sep 62 0.8 3.7 2.6Matamoros 2 16 Jul 64 0.4

Sub-tot 0.5 1.1 1.7 3.5 3.7 6.1 13.3 19.7 14.9

Ferries

Rio San Pedro 19 Feb 61 0.4 0.5 0.6 0.5Zacatal_Cd Carmen 19 Dec 60 1.4 1.9 2.3 1.8Puerto Real-Isla Aguada 13 Aug 61 0.9 2.9 3.4 2.6

Sub-total 2.7 5.3 6.3 4.9

TOTAL 0.6 6.1 6.3 10.6 13.6 15.5 21.3 39.9 45.8 56.0 88.2 110.1 80.5

/ Items ineluded in project 317-ME

/ The Carrizal bridge, built at Government's expense, was operated during a few months only by "Caminos y Puentes"

/ The Mexican portion of the international bridge between Matamoros and Brownsville (Texas) was transferred at no cost by the Government to "Caminos y Puentes"

MEXICO TABLE 4

SCOQND TOLL TRANSPORT PROJECT

CAMINOS Y PUENTES FEDERATES DE INGRESOS Y SERVICIOS CONEXOS

ACTUAL INCOME ACCOUNTS

(Ps million)

1959 1960 1961 1962 1963 1964August 31

A. Toll Rev ues 39.9 45.8 56.0 88.2 110.1 80.5Other 3 0.1 0.1 0.2 08 1.2 05

1 Sub-total 40.0 45.9 56.2 89.0 111.3 81.0

Toll Operating Expenses:Maintenance 1.2 1.9 2.7 4.0 7.4 6.1Repairs 0.7 1.6 2.0 2.0 1.3Operations 1.5 1.8 3.4 5.7 8.0 5.8Administration i L 1.4 2.4 4.0 S,O 2.9

2 Sub-total 3.8 5.8 10.1 15.7 22.4 16.1

Depreciation:Roads 8.0 7.1 7.7 11.3 13.4 8.6Bridges 0.1 0.2 o.6 2.1 2.5 1.7Ferries o.6 0.9 0.7 0.7Maintenance Equipment 0.3 0.5 0.8 1.6 2.0 1.4Furniture and Office Equipment - - 0.1 Q L 0.1 0.1

3 Sub-total 8.4 7.8 9.8 16.0 18.7 12.5

4 = 2+3 Total Toll Operating Expenses 12.2 13.6 19.9 31.7 41.1 28.6

5 = 1-4 Net Toll Operating Revenues 27.8 32.3 36.3 57.3 70.2 52.4

B. Non-toll Operating Revenues:Equipment for Rental 11.1 11.1 7.8Emulsion Plant 0.8Interest on Bank Deposits 1.0 0.8 0.3 o.6 2.5 1.3

6 Total 1.0 0.8 0.3 11.7 13.6 9.9

Non-toll Operating Expenses:Equipment for Rental 0.3 0.3 0.2Emulsion Plant 0 _ Ot.8

7 Sub-total 0.3 0.3 1.0

Depreciation:Equipment for Rental 11.1 11.1 7.4Emulsion Plant - - 0.4

8 Sub-total 11.1 11.1 7.8

9 = 7+8 Total Non-toll Operating Expenses 11.4 11.4 8.8

10 = 6-9 Net Non-toll Operating Revenues 1.0 0.8 0.3 0.3 2.2 1.1

11 = 5+10 Total Net Revenues 28.8 33.1 36.6 57.6 72.4 53.5

C. Interest Charges:Banco Hipotecario (Consolidated loan) 7.5 19.5 21.7 12.3Banco Hipotecario (10-year loan) 0.8 4.6IBRD 317-ME 1.2 6.7 7.4Suppliers Credits 0.2 0.2

12 Total 7.5 20.9 29.4 24.3

13 = 11-12 Net Income 28.8 33.1 29.1 36.7 43.0 29.2

D. Operating RatioFor Toll Operations Alone 30.5% 29.6% 35.4% 35.6% 36.9% 35.3%

Interest Earned Ratio - - 4.8:1 2.7:1 2.5:1 2.2:1

Hi Mainly insurance psymente for idamages caused to the facilities by users

MEXICO TABLE

SECOXTOLL TRANSPORT PROJECT

CAKINOS ! PtTNS FEDEUS DZ INGRSOS Y SZRVICI05 CONEXOS

SUMAMRY BALANCE SHEETS AS OF DECEMBER 31

(Ps millon)

1960 1961 1962 1963 1964Auzust l1

ASSETS

Fixed Assets (at cost)

Roads and bridges in operation 365.5 406.5 768.6 775.2 778.4Less: accumulated depreciation 40.7 _ 49.0 _ 62.4 78.5 88.9

324.8 357.5 706.2 689.5Ferries in operation 1.7 9.5 8.7 8.7 8.7Less: accumulated depreeiation _ .6 1.5 2.2 2.8

1.7 8.9 7.2 5.9Mintenance equipment 2.8 4.4 9.5 13.8 15.5Less: accumulated depreciation 1.5 - 2.2 - 3.9 - 5.8 _ 7.3

1.3 2.2 5.6 8.0 8.2Furniture and office equipment 0.8 0.9 1.3 1.4 1.5Less: accumulated depreciation 0.2 0.3 - 0.5 _ 0.5 _ 0.6

O.6 o.6 0.8 0.9 0.9Equipment for rental 55.5 55.5 55.5 100.2Less: accumulated depreciation _ 11.1 22.2 29.6

55.5 4.4 33.3 7.Emulsion plant 0.2 2.8 5.1Less: accumulated depreciation - 0.4

0.2 2.8 4.7Works in progress 142.5 260.8 16.0 182.5 375.6Land 0.1 O.1 0.1 090

Sujb-tota1l 471.0 685.6 780.5 931.6 1,156.3

Spares and materials (at cost) 0.1 0.1 0.2 0.3 0.3

Current Assets

Cash and bank accounts 1.3 2.3 3.3 7.4 9.8Short-term investments 1.7 9.3 24.6 19.9 20.7Yiscellaneous debtors 0.1 0.1 10.2 1.3 0.8

Sub-total 3.1 11.7 38.1 28.6 31.3

Deferred Assets 5.2 7.1 7.5 2.9 1.7

TOTAL ASSETS 479.4 704.5 826.3 963.4 1.189.6

LUILITIZS

Current Liabilities

Miscellaneous creditors 5.6 8.9 13.2 9.0 24.0Documents payable within 1 year 29.6 63.0 13.2 12.1 15.7Pending estimates (construction contracts) 18.7 22.0 4.1 6.oBanco Hipotecario (payable ,ithin 1 year) 38.0 - 38.0 - 39.0 o

Sub-total 53.9 93.9 68.5 65.1 78.7

Long-term Debt

Documents payable in more than 1 year 2.5 145.5 31.7 19.7 41.9Banco Hipotecario payable in more than 1 year 189.4 191.8 289.4IBRD loan (317-ME) - 32.6 142.8 204.4

Sub-t.ot.s1 2.5 145.5 253.7 354.3 535.7

Deferred Liabilities 2.6 4.9 4.6 6.3

Own Funds

Initial Government contribution and accumulated reserves 389.9 433.4 462.5 496.4 539.7 ,Surplus of the year 33.1 - 29.1 36.7 43.0 29.2

Sub-total 423.0 462.5 499.2 539.4 568.9

TOTAL LIABILITIES 479.4 704.5 826.3 963.4 l.i89.6

Long-term Debt/Equity Ratio 1/99 24/76 34/66 40/60 49/51

Corrent Ratio 1I17.4 1:8.0 1:1.8 12.3 1:2.5

1/ Differences are due (i) to changes made a posteriori in depreciation allovances which affected the surpluses and consequently tho acculated reserves ana(ii) to the transfer at no cst of the PNnuco Bridge from Government to 'Caminos y Puentes'

MEXICO

SECOND TOLL TFANSPORT PROJECT

GENERAL DESIGN STANDARDS FOR PROJECT ROADS

Mexico - Queretaro RouteTepotzotlan - Palmillas

Toll Section Guadalajara-and Two Access Roads Apaseo - Irapuato Zapotlane.jo Orizaba - Cordoba Penon - Texcoco

Roads (a) B F R M B F R M B F R M B F P M B F R M

Number of Lanes (b) 6+4(b) 4+4 4 4 4 2 2 2 2 4 4 4

Design speed (km/h) 80 110 110 90 110 100 100 90 100 100 110Minimum radius of

curvature (m) 191 382 382 254 382 327 327 254 327 327 382Maximum grade .. 5% ........ ........... ...... 4% ........ ............... 4% ..................... 4% ........Minimum sight

distance (m) 120 190 190 140 190 170 170 140 176 176 190Width of carpet 2x11.7 - 2x7.30 - 7.20 7.20 2x7.20 2x7.20

(m) 2x7.30 - 2x7.00Median strip (m) 1.20 1.20 1.20 - - _ variable variableShoulders (m) variable 1.90 .......... 1.90 2xl.00 2x1.00

2x2.80 2x2.80Right-of-way (m) 50 60 60 60 60 ............ 60 6..0 2x280Cross slope .......... 2% .......... 2% ............ 2% ............ 2% .......... 2%Maximum super-

elevation 10% ............ 10% ........... 10% 10% 10%Surface type and thickness 20 cm. cement concrete 5 cm. asphalt concrete 5 cm. asphalt 5 cm. asphalt 5 cm. asphalt concrete

for initial 8 km. 5 cm. concrete concreteasphalt concrete for theremainder

a) B = Built-yp areasF = Flat rural areasR = Rolling areasM = Mountainous areas

b) From K 0 to K 8, six lanes. From K 8 to K 30 (toll booth) four lanes.In addition two lanes service roads (7.00 m paved width) will be builton each side of the main road between K 0 and K 10 and K 20 to K 24.

January 15, 1965

MEXICO

SECOND TOLL TRANSPORiT PROJECT

TOLL BRIDGES

ProposedTotal Proposed Roadway Design

Bridge Len tns hidth Structure Remarks Loading(m)_'r (m) (m)

la Piedad 90 4 x 22,50 7.50 Prestressed Substructure: 1115 - S12concrete masonry

Niautla 270 6 x 45.00 7.50 Prestressed Foundations: H15 - S12concrete concrete piles

or dredged con-crete cylinders

Tecolutla 600 13 x 46O00 7.50 Prestressed Foundations: H15 - S12concrete concrete piles

or dredged con-crete cylinders

NOTE: The above toll bridges are along free roads; when the bridges are included in toll roads, thedesign load is 1120 - S16 (AASHO)

January 15, 1965

MEXICO TABLE 8

SECOND TOLL TRANSPCRT PROJECT

COST ESTIiATE

(Ps million)

Net Physical EngineeringLength Cost Contingenci es & Supervision TOTAL

(A) (B) (10% of A+B)Roads

1. 1N1exico-Queretaro 208 km 318.0 63.6 38.1 4i9.7a) DF-Tepotzotlan 30 87.0 17 .5T1014b) Tepotzotlan-Palmillas 113 146.0 29.2 17.5 192.7c) Palmillas-Queretaro 65 85.0 17.0 10.2 11.2.2

2. Apaseo-Irapuato 71 75.0 15.0 9.0 99.03. Guadalajara-Zapotlanejo 28 50.0 10.0 6.o 66.oh. Orizaba-Cordoba 20 57.0 11.4 6.8 75.25. Penon-Texcoco 22 105.0 21.0 12.6 138.6

Sub-total: Roads 349 605.0 121.0 72.5 7198.5

Bridges

6. La Piedad 90 m 1.5 0.3 0.2 2.07. Nautla 270 m 7.5 1.5 0.9 9.98. Tecolutla 600 m 12.0 2.4 1.5 15.9

Sub-total: Bridges 960 m 21.0 4.2 2.6 27.8

Miscellaneous Equipment

9. Accounting and RecordsMachines 3.5 3,5

10. Electronic Equipment, etc.for the Toll Booths 13.0 13.0

Sub-total: Equipment 16.5 16.5

TOTAL 642.5 125.2 75.1 842.8

Price Contingencies (10% of above) 84.3

Interest During Construction onForeign Component 19.0

GRANJD TOTAL 976.1

(US$ 78.1 million equivalent)

EXICO TABI 9

SECOND EIQLIJPGRT NGJNCT

CAMINOS Y POENTES FEDERALES DE INGRESOS Y SERVICIOS CONEXOS

FOBECAST REVENDES FROM TOLL OPERATIONS

(Pe million)

Actual &Toll Facilities Expected 1964 1965 1966 1967 1968 1969 1970 1971

StartingDats

A. OUTSIDE OF BANK FINANCINI

Roads1. Maxico-Cuernaaca 60 30 Nov 52 15.0 16.3 17.9 19.3 20.7 22.1 23.5 24.92. Cuernavaca-Amcuzao 54 20 Deo 54 4.2 4.6 5.0 5.4 5.8 6.2 6.6 7.03. Ameuzao-Iguala 50 30 Nov 52 8.0 8.7 9.4 10.1 10.8 ll.S 12.2 12.94. Tepotsotlan-Palmillas 113 1 Oct 58 34.0 37.0 40.1 43.3 51.1 (a) (a) (a)5. Queretsro-Celaya 40 14 Feb 62 5.4 5.7 6.o 6.3 6.6 7.0 7.4 7.8

66.6 72.3 78.4 84.4 95.0 46.8 49.7 52.6

U.-Sinaloa 1 Jul 56 2.5 2.6 2.8 3.0 3.2 3.4 3.7 4.07. Colorado 25 Mar 59 2.5 2.8 3.0 3.2 3.5 3.8 4.1 4.48. Twxpan 18 Mar 61 2.2 2.3 2.4 2.5 2.6 2.7 2.8 2.99. Panuco 23 Sep 61 1.1 1.2 1.3 1.4 1.5 1.6 1.7 1.8

10. Chariel 23 Sep 61 1.3 1.4 1.5 1.6 1.7 1.8 1.9 2.011. Mtamoros 16 Jul 64 1.0 2.0 2.2 2.4 2.6 2.8 3.0 3.212. Camargo 1 Jul 67 .5 1.1 1.2 1.2 1.3

10.6 12.3 13.2 14.6 16.2 17.3 18.4 19.6

Ferries13. Rio San P!dro 19 Feb 61 .7 .8 .9 1.0 1.1 1.2 1.3 1.414. Zacatal-C Camen 19 Dee 60 2.7 2.9 3.1 3.3 3.5 3.7 3.9 4.115. Puerto Real-Isla Aguada 13 Aug 61 3.8 4.1 4.4 4.7 5.0 5.3 5.7 6.o

7.2 7.8 8.4 9.0 9.6 10.2 10.9 ll.S

Sub-total A 84.4 92.4 100.0 108.0 120.8 74.3 79.0 83.7

B. PROJECT 317-ME

Roads Km16. Mexico-Puebla 115 5 May 62 24.0 27.3 33.8 36.2 38.8 41.3 43.9 46.517. Puebla-Orizaba 150 1 Jul 65 - 11.3 24.4 26.1 28.0 29.7 31.6 33.618. Mexico-Venta de Carpio-

Teotihuacan 37 15 Nov 64 1.5 18.5 19.9 21.1 22.5 23.8 25.3 26.719. Venta de Carpio-Tecamac 16 1 Jan 66 - 2.2 2.3 2.5 2.7 2.9 3.1 3.320. Tijuana-Ensenada 100 1 Jan 66 - - 21.8 29.1 38.6 40.2 41.8 43.521. La Pera-Cuautla 34 1 Jan 65 - 4.4 4.7 5.0 5.4 5.8 6.2 6.6

25.5 63.7 106.9 120.0 136.0 143.7 151.9 160.2

Bridgee22. Coatzacoalcas 18 May 62 7.8 8.5 9.2 10.0 10.8 12.6 12.5 13.423. Culiacan 21 Sep 62 4.0 4.2 4.4 4.6 4.8 5.0 5.3 5.624. Alvarado 15 Nov 64 .7 5.4 5.8 6.2 6.6 7.0 7.4 7.925. Caracol 1 Jul 65 - .3 .6 .6 .7 .7 .7 .826. Papaloacan 1 Jul 65 - .4 .7 .8 .9 .9 1.0 1.0

12.5 18.8 20.7 22.2 23.8 25.2 26.9 28.7Ferry27. Mazatlan-I. Paz 15 Nov 64 1.4 11.1 13.3 15.3 17.6 19.4 21.3 23.4

Sub-total B 39.4 93.6 140.9 157.5 177.4 188.3 200.1 212.3

C . PROPOSED PROJTOT

Roads Km28. Meaxico-Tepotmotlan- 208 1 Jan 69 (b) (b) (b) (b) (b) 69.3 73.8 78.2

Pal,sdlao-Queretaro29. 4paseo-Irapuato 71 1 Jan 68 - - 1 _ 15.4 17.8 19.7 20.730. Guadalajsra-Zapotlanejo 28 1 Jan 68 - - - - 6.6 7.1 7.5 7.931. Orisaba-Cordoba 20 1 Jan 68 - - - - 6.7 7.1 7.5 7.932. Penon-Texcoeo 22 1 Jan 68 _ _ _ - 14.9 15.8 16.8 17.7

43.6 117.1 125.3 132.4

33. La Piedad 1 Jan 67 - - - .5 .5 .6 .6 .634. Nautla 1 Jan 68 - - - - 1.2 1.3 1.4 1.535. Tecolutla 1 Jan 68 - - - - 1.9 2.0 2.2 2.3

.5 3.6 3.9 4.2 4.4

Sob-total C .5 47.2 121.0 129.5 136.8

GRAND TOTAL 123.8 186.0 240.9 266.0 345.4 383.6 408.6 432.8

Total Revenue f'rom Roads 92.1 136.0 185.3 204.4 274.6 307.6 326.9 345.2

Total Revenue from Bridges 23.1 31.1 33.9 37.3 43.6 46.4 49.5 52.7

Total Revenue from Ferries 8.6 18.9 21.7 24.3 27.2 29.6 32.2 34.9

(a) Revenue yield after completion of project vorks it listed under (28)(b) Revenue yield on the asting toll read is listed under (4)

ISlaCo TABLE 10

SECg&_TOLL TRANSPORT PROJECT

CAMINOS 7 PDENTES FEDERALES DE INGRESOS Y SERVICIOS CONEXOS

FOREiCAST INCOME ACCOUNTS

(Ps million)

1964 1965 1966 1967 1968 1969 1970 1971

A. Toll Re: ue 123.8 186.0 240.9 266.0 345.4 383.6 408.6 432.8Other 1/es 1.0 1.0 1.0 3,. 1.0 I1.0 1.0 1.0

1 Sub-total 124.8 187.0 241.9 267.0 346.4 384.6 409.6 433.8

Tell Operating ExpensestMaintenanc. 7.7 12*2 15.1 15.8 19.7 22.8 23.9 25.1Repairs 2.0 2.5 2.5 3.0 3.0 3.5 3.5 4.0Operations 8.8 13.7 15.7 17.5 21.4 22.5 23.6 24.8Administration S.S 6.0 7.0 7.5 8.o 9.0 9,0 9.5

2 Sub-tot 24.0 34.4 40.3 43.8 52.1 57.8 60.o 63.4

Depreciation:Roads 14.2 19.3 24.3 24.3 33.0 42.6 42.6 42.6Bridges 2.9 3.9 4.1 4.1 4.8 4.8 4.8 4.8Ferries 1.5 6.o 6.0 6.0 6.o 6.o 6.o 5.7Miintenance Equipment 4.7 6.3 7.9 9.5 9.9 10.3 10.9 9.3Furniture and Office Equipment .1 .1 .1 .1 .1 .1 .1 .1

3 Sub-total 23.4 35.6 42.4 44.0 53.8 63.8 64.4 62.5

4 = 2+3 Total Toll Operating Expenses 47.4 70.0 82.7 87.8 105.9 121.6 124.4 125.9

B. 5 = 1-4 Net Toll Operating Revenues 77.4 117.0 159.2 179.2 240.5 263.0 285.2 307.9

Non-toll Operating Revenues:Equipment for Rental 15.1 20.0 20.0 18.0 16.0 14.0 12.0 10.0Emulsion Plant 1.2 12.0 12.0 12.0 12.0 12.0 12.0 12.0Interest on Bank Deposits 1.5 1.5 1.5 1.5 1.5 1.5 1.5 1.5

6 Total 17.8 33.5 33.5 31.5 29.5 27.5 25.5 23.5

Non-toll Operating Expenses:Equipment for Rental 0.5 1.0 1.0 .9 .8 .7 .6 .5Enmulsion Plant 1.2 10.0 10.0 10.0 10.0 10.0 10.0 10.0

7, Sub-total 1.7 11.0 11.0 10.9 10.8 10.7 10.6 10.5

Depreciation:Equipment for Rental 15.1 20.0 20.0 8.9 8.9 5.1Emulsion Plant .5 .S .S .S .S .5 .S .S

8 Sub-t 15.6 20.5 20.5 9.4 9.4 5.6 .5 .5

9 = 7+8 Total Non-toll Operating Expenses 17.3 31.5 31.5 20.3 20.2 16.3 11.1 11.0

10 = 6-9 Net Non-toll Operating Revenues .5 2.0 2.0 11.2 9.3 11.2 14.4 12.5

11 = 5+10 Total Net Revenues 77.9 119.0 161.2 190.4 249.8 274.2 299.6 320.4

C. Interest Charges:Banco Hipotecario - Consolidated Loan 18.3 15.5 11.5 7.5 3.2

- 10-year Loan 9.5 27.8 38.4 33.9 26.8 19.7 12.5 5.4- New Loan 11.3 33.7 45.0 39.4 31.9 24.4

IBRD - Lean 317-ME 7.4 11.0 21.4 20.5 19.7 18.8 17.9 16.9- Proposed Loan 23.3 22.5 21.5

12 Total 35.2 54.3 82.6 95.6 94.7 101.2 84.8 68.2

13 11-12 Net Income 42.7 64.7 78.6 94.8 155.1 173.0 214.8 252.2

D. Operating Ratio:For Toll Operations Alone 38.o% 37.4% 34.2% 32.9% 30.6% 31.6% 30.4% 29.0%

Interest Earned Ratio 2.4:1 2.2:1 2.0:1 2.0:1 2.6:1 2.7:1 3.5:1 4.7:1

M./ Nainly insurance paynenta for damgea caused to the facilities. by Users

MEXICO TABT

SECOND TOLL TRANSPORT PROJECT

CAMINOS Y PUENTES FEDERALES DE INGRESOS Y SERVICIOS CONZEOS

PROGRAM OF INVESTMENTS

(Ps million)

Latest ExpenditorePROGRAM ITEMS Cost Until Balance E X P E N D I T U R E S C H E D U L E

Estimoates Dec 31, 1963 After(a) D b) (a-b) 1964 1965 1966 1967 1968 1969 1970 1971 1971

A. OUTSIDE BANK FINANCING

1. Construction equipment for rentl. 100.2 27.7 72.5 11.4 18.5 17.9 8.4 8.4 7.92. Ecmulsion plant land .8 .8 .1 .1 .1 .1 .1 .1 .1 .13. Comargo bridge 3.0 3.0 .2 .3 .3 .3 .3 .3 .3 1.04. Maintenance and repairs equipmjet 75.0 75.0 8.0 8.0 8.0 8.0 9.0 10.0 11.0 13.0

Sub-total A 179.0 27.7 151.3 19.5 26.8 26.3 16.8 17.8 18.3 11.4 13.4 1.0

B. PROJECT 317-MERoad s

5. Mexico-Puebla, including Ternelucan-Ocotoxco access road 154.9 118.4 36.5 29.8 6.7

6. Puebla-Ori2aba, including CiudadSerdar-Esperanzn access road 143.5 30.9 112.6 49.7 62.9

7. Mexico-Venta de Carpio-Tecamac,including Venta de Csrpio-Teotihuacanaccess road 130.6 18.7 111.9 59.2 52.7

8. Tijuana-.nsenada 163.2 40.3 122.9 47.6 75.39. La Pera-Cusutla 56.5 1.3 55.2 20.1 35.1

Bridges10. Coatzacoalcos 30.6 20.7 9.9 2.3 7.611. Culiacan 5.3 4.7 .6 .612. Alvarado 43.8 9.5 34.3 27.4 6.913. Caracol and Papaloacan 12.4 1.4 11.0 1.9 9.1

Ferr14. Mazatlao-La PFz, including terminals,

jetties and access road Pichilingue-Punta Priet. 82.9 41.7 41.2 28.1 13.1

Other15. Miscellaneous equip=ent 14.5 5.3 9.2 2.5 6.716. Contingencies 4.2 4.2 4.217. Interest and other charges during

34.0 7.9 26.1 17.0 9.1

construction (foreign component only)Sub-total B 876.4 300.9 575.6 286.2 289.4

C. PROPOSED PROJTFRoads

18. Maxico-TepotaotlarnP.lnullas-Queretaro 419.7 419.7 60.0 160.0 120.0 79.719. Apaseo-Irapuato 99.0 99.0 15.0 40.0 44.020. Guadalajara-Zapotlanejo 66.0 66.0 10.0 30.0 26.021. Orizaba-Cordoba 75.2 75.2 10.0 35.0 30.222. Peson-Te,coco 138.6 138.6 29.0 55.0 58.6

798.5 2 798.5 120.0 320.0 278.8 79.7Bridozs

23. La Piedad 2.0 2.0 1.0 1.024. Nasutla 9.9 9.9 2.0 4.0 3.925. Tecolutla 15.9 15.9 2.0 6.o 7.9

27.8 1/ 27.8 5.0 11.0 11.8Equitn

26. Accounting and record machines 3.5 5.5 3.527. Misce.lanesos 13.0 13.0 10.0 3.0

2' ~~~ ~~16.5 16.5 3.5 10.0 3.028. 10% contingencies on Items 18-27 6 86.3 84.3 32.8 33.1 30.1 8.329. Interest aod other charges dwring

construction (foreign compo..nt only) 49.0 49.0 3.9 8.7 15.4 21.0

Sub-total C 976.1 976.1 lIs.1 372.8 346.1 112.0

GRAND TOTAL (Pa million) 2,031.5 328.5 1,703.0 305.7 4f2.0 399.1 362.9 129.8 18.3 11.4 13.4 1.0

GRAND TOTAL (US$ million) 162.9 26.3 136.2 26s4 36.9 -31.9 29.0 10.4 1.5 .9 1.1 .1

i/ includes 20% for quantity contingencies and 10% for engineering and supervisionsee Paragraph 66 of text

MEXICO

SECOND TOLL TRANSPORT PROJECT

CAMINOS Y PUENTES FEDERALES DE INGRESOS Y SERVICIOS CONEXOS

STATEMENT OF CASH FLOW ESTIMATES

(Ps million)

(Total (Total)1964 1965 1966 1967 1968 (1964-68) 1969 1970 1971 (1964-71)

Sources of Funds

Available at beginning of period 22.6 22.8 48.o 67.9 79.4 22.6 74.5 106.1 184.8 22.6Surplus from operations 42.7 64.7 78.6 94.8 155.1 435.9 173.0 214.8 252.2 1,075.9Depreciation 39.0 56.1 62.9 53.4 63.2 274.6 69.4 64.9 63.0 471.9Banco Hipotecario:

Consolidated loan 8.6 8.6 8.610-year loan 114.1 300.0 54.2 468.3 468.3New loan 225.0 225.0 450.0 450.0

Suppliers credits 46.9 46.9 46.9IBRD: Loan 317-ME 115.0 123.5 238.5 238.5

Proposed loan 57.4 146.7 1-40.7 55.5 400.3 400.3

Total 38'.9 624.5 615.4 587.8 353.2 2,345.7 326.9 3'85.8 5o.0 3,183.0

Application of Funds

Capital expenditure outside of Bankfinancing 19.5 26.8 26.3 16.8 17.8 107.2 18.3 11.4 13.4 150.3

Project 317-ME 286.2 289.4 575.6 575.6Proposed project 145.2 372.8 346.1 112.0 976.1 976.1Pavement renewal 5.0 5.0 5.0 5.0 20.0 10.0 10. 25.0 65.0Debt repayment 56.4 114.1 143.4 134.5 143.9 592.3 182.5 179.6 180.3 1.134.7

Total 362.1 580.5 547.5 502.4 278.7 2,271.2 210.8 21l.0 218.7 2,901.7

Balance carried forward 26,8 48.0 67.9 79.4 74.5 74o5 106,1 184f.8 281.3 28163(working capital)

Since repayment of long- and short-term debt is included in the statement, current assets as of 1/1/64 (Ps 28.6 million) less pendingestimates on construction contract (Ps 6 million) are available for capital financing

MEXICO

SECOND T_OLL TRANSPORT PR3JECT

CAMINOS Y PUENTES FEDERALES DE INGRESOS Y SERVICIOS CONEXOS

DEBT POSITION

(Ps million)

B A N C O HI P O T E C A RIO I. B. R. D.Suppliers Total

Consolidated 10-year New Credits, 317-ME ProposedLoan Loan Loan Other Loan Loan

1964 At January 1 198.1 31.7 46.8 142.8 419.4Withdrawn 8.6 114.1 46.9 115.0 284.6Repaid 38.0 - 18.4 - 56.4At December 31 168.7 145.8 75.3 257.8 647.6

1965 At January 1 168.7 145.8 75.3 257.8 - 647.6Withdrawn - 300.0 - 123.5 57.3 480.8Repaid 40.0 35.7 32.0 6.4 - 114.1At December 31 128.7 410.1 43.3 374.9 57.3 1,014.3

1966 At January 1 128.7 410.1 - 43.3 374.9 57.3 1,014.3Withdrawn - 54.2 225.0 - - 147.0 426.2Repaid 40.0 71.4 - 18.6 13.4 - 143.4At December 31 88.7 392.9 225.0 24.7 361.5 204.3 1,297.1

1967 At January 1 88.7 392.9 225.0 24.7 361.5 204.3 1,297.1Withdrawn - - 225.0 - - 140.9 365.9Repaid 40.0 71.4 - 8.8 14.3 - 134.5At December 31 48.7 321.5 450.0 15.9 347.2 345.2 1,528.5

1968 At January 1 48.7 321.5 450.0 15.9 347.2 345.2 1,528.5Withdrawn - --- - - 55.1 55.1Repaid 48.7 71.4 - 8.7 15.1 - 143.9At December 31 - 250.1 450.0 7.2 332.1 400.3 1,439.7

1969 At January 1 250.1 450.0 7.2 332.1 400.3 1,439.7Withdrawn - - - -Repaid 71.4 75.0 5.9 16.0 14.2 182.5At December 31 178.7 375.0 1.3 316.1 386.1 1,257.2

1970 At January 1 178.7 375.0 1.3 316.1 386.1 1,257.2Withdrawn -Repaid 71.4 75.0 1.3 16.9 15.0 179.6At December 31 107.3 300.0 - 299.2 371.1 1,077.6

1971 At January 1 107.3 300.0 299.2 371.1 1,077.6Withdrawn -Repaid 71.4 75.0 17.9 16.0 180.3At December 31 35.9 225.0 281.3 355.1 897.3

MEXICO TABLE 14

SECOND TOLL TRAXlSPORT PROJECT

TRAFFIC FORECAST ON PROJECT TOLL ROADS (68)Present Future Present and Forecast

Roads and Sections No. of No. of No. of Vehicles per dayLanes Lanes 1964 1970 1980

1. Mexico-QueretaroA) Free Section

i)a) D9•. limits-Cd. Satelite 6 6 16,400 24,900 42,500b) Cd. Satelite-Tlalnepantla 2 4 7,200 10,900 18,600

ii) Tialnepantla-Lecheria 2 4 6,40o 9,800 16,700iii) Lecheria-Tepotzotlan 2 4 6,000 9,200 15,600

B) Toll Section

iv) Tepotzotlan-Tepejl 2 4 14,600 7,000 12,000v) Tepeji-Jilotepec 2 4 4,000 6,100 10,500

vi) Jilotepec-Palmillas 2 4 3,900 5,900 10,000

c) Free Section

vii) Palmillas-San Juan delRio 2 4 - 4,100 6,300 10,700

viii) San Juan del Rio-Amealco l/Jctn. 2 4 5,000 7,700 7,M00

ix) Amealco Jctn.-Queretaro 2 4 1/ 4,800 13,100 12,600

Present FutureFree TollRoad Road

2. Apaseo-Irapuato

i) Apaseo-Salamanca 2 2 3,600 4,600 7,900ii) Salamanca-Irapuato 2 2 3,200 4,500 7,700

3. Guadalajara-ZapotlaneLjo 2 2+1 3,400 4,100 6,900

4. Orizaba-Cordoba 2 14 3,000 4,200 7,200

5. Penon-Texcoco 2 4 5,500 6,100 10,500

1/ Twro additional but separate lanes from the existing free road will beprovided; they will have direct access to the toll section

2/ This is not a three-lane road in the usual sense, but involves an extralane for trucks on steep upgrades

MEXICO: SECOND TOLL TRANSPORT PROJECTCAMINOS Y PUENTES FEDERALES DE INGRESOS Y SERVICIOS CONEXOS

ORGANIZATION CHART

BOARD

-L_OUIPMENT ADVIS7ER

DIRECTOR GENERALINTERNAL AUDITOR -_ ROAD AND BRIDGE ADVISER

| SECRETARY'S OFFICE NALADIE

| INFORMATION COF:FICE Wj LGL DIE

X ~~~~~~MANAGER SBDRCO SUB-DIRECTOR OFDRCORO MAINTENANCEASPHALT EMULSIONS PLANT OPERATIONS ADMINISTRATION MANAGER

TECHNICAL ~ADMINISTRATIVE SCEAYASSAT ERTR SITNSGRESSPRIO

PROD CTIONSUPERINTENDENT

TOLLS ~~ELECTRONIC PURCHASE BUDGETROD

X 0 LABORATORY TOLDIVISION EQUIPMENT DIVISION CONTROLDIVISION ~ ~ DVIIO

ADMINISTRATION ACCOUNTING |ROAD OPERATIONS TREASURER'S WAREHOUSE BRIDGESAND ACCOUNTING L | DIVISION INSPECTORS DIVISION KEEPERS

FERRIES PERSONNEL BRIDGE OPERATIONS MAIL AND FILE FERRIESDIVISION INSPECTOR DIVISION

STATISTICS FERRY OPERATIONSDIVISION INSPECTOR

C

(2R)IBRD- 2498 1

MEXICO Figure 2

SECOND TOLL TRANSPORT PROJECT

uiagrammatic lleprcsentationof Presenit and Plannied

MEXICO CITY TO QUERETARO ROUTE

to Guadalajara

K 208 - QUERETARO

QUERETARO

rno c4os a

a q

"4 ~~~~~~~~~~K 166 - A...aI.a J...ctioc

0 .0

K 155 - San J-a del Eta

Tell Boo1h K 143 - P.l.illlaa

C ~~~~~~~~ ~~K 77 - JilotepecZa Mo Nuntainous

0 aao 't Area

0 ~~~~~~~~~~K 58 - Tep.ji del Rio

4 3 2 1

Toll Booth K 30 - Tepat.atlan

r < Ill I II K 24 - Tultitlan

r 1,! ,,! K 20 - LecheriaQ

a n g ! g S C K 10 - Talnaepantla

6 , II @ 3 2 ! 2 , K5 K8 - Ciudad Satelite

K 0 - Federal Di.trict Li.nlt

MEXICO CITY

KIEY

E.ie ting road (per lane)

Preject read (per l.na)

2 - lana service read.(included in project)

DECEMBER 1964 IBRD-1454

AMTEX 1

MEXICO

SECOND TOLL TRANSPORT PROJECT

BASES OF CO1PUTATION FOR TOLL REVENUE FORECASTS

(1964-71)

i) For the facilities built without the Bank's financialassistance (Items 1-15 in Table 9) and which, with the exceptionof the Camargo bridge, are all in operation - an average annualtraffic growth of 7.5% with no change in the present scale of tolls.

ii) For the facilities included in the Bank project 317-NE andwhich are in operation (Items 16, 18, 22, 23, 24 and 27 in Table 9) -the annual traffic growth rates explained in the appraisal reportT0315c for Loan 317-ME (Page 24, paragraph 100) with no change in thepresent scale of tolls.

iii) For the facilities included in the Bank project 317-ME andwhich are still under construction (Items 17, 19, 20, 21, 25 and 26 inTable 9) - the annual traffic growth rates as indicated in (ii) abovewith an average toll charge of 13, 20 and 25 centavos per km for cars,buses and trucks respectively. However, for the Tijuana-Ensenada roadhigher toll charges have been used (20, 25 and 30 centavos per kn) toreflect the international tourist traffic which will be the main userof the road.

iv) For the facilities included in the proposed project (Items 28-35in Table 9) - the growth of traffic on each facility as developed bySOP and explained in the econoiic chapter of this report to tollsaveraging 13 and 20 centavos per hzn for cars and buses/trucks respectively.These are similar to the present tariffs.

U. S. A. MEXICO

SECOND TOLL TRANSPORT

Nogol- PROJECT

Federal highways constrocted or under constrmction,

financed by previoos IBRD loans

'-.,- \_ First toll transport project (constructed or under'9 constrction)

Other uain highways

14 i\ 9 t;)We t 50t X l5t gf ,_ ,S; .,0- Projected toll roads and bridges

> t t 41" ,gtxNecros S Railways

0 *00 200 300 400 500

PLATeA N KILOMETERS

d.(es~_ .<HONDURAS >

DECEMBER 1964 Ii3RD-1438t11

Gulf ~ ~ \v of C Mhexlic)o

MEXICODETAILED MAP OF

PROJECTED TOLL ROADS0 20 40 60 80 10

KILOMETERS

To Aguascaittes To Oue Zos To San Luis Potosi Xilitlo To

ties ~~~TampicoLedn 9 / Hueju la

/sil TuxpanManuel

DobladoZopotionejo Iropuato ERETARO Pozo

cnstructed or under c o Axuilpon ECOLUTLA BRIDGE

ProjecdLa Piet ol Poriois outoo \_ ( > >\rk ;uochinong~~~~~~~~~~~~~~~~~~~~~~~170,no UTLA BRIDGE

r~~~~~~~~~~ao S Jo '0t pe Tucooma.. c Cdomro Sebocogung

>~~~~~ ~ ~~~~~~~~~ ~ ~~~~ del R( Teoeotihu e n

cuorocLed access roadsiACAPULCO- TalPpo. Eseondico /

xi

JU 16bero 5 4

(>~~~~~~~~~~~~~~~~~~r CdLPN.G Serd_ |

[ Z~~~~~~~~~~~~~~~~~~~~~~~~~Tx P ojctedc tolloroas / Nt

@6¢b@o@§e Projecteuaycs oad AzulLd4 Teotit Essonid i (n

JANUARY 1965 IBRD-1439R123~~~~~~HIL ANCNG