LN- (ALd4 PF

RESTRICTED

Report Nlo. T ' -22.a

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

APPRAISiAL OF

PORT OF PISCO PROJECT

PERU

Aprvil 70, 1I96

Pro ject.s Dlepartt. bnntl

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CURRENCY EQUIVALENTS

1 US dollar = 26. 8 soles1 Sol = 3. 7 cents1 million dollars = 26. 8 million soles

1 _:11:_ 1 _ S~~TFO &'27 '21%f* Il.l±ILJI so'es - J. .J p , .JVV

Tonnages of cargo are given throughoutin metric tons.

PERU

PORT OF PISCO PROJECT

TABLE OF CONTETTS

Page

SUMMARY i

I. INTRODUCTION 1

II. GENERAL BACKGROUND 1

A. The Ports of Peru - Port Development Plan 1B. Port Administration 3

TTTI TRP PORT OF PTSG X

A .- G

A. flr.e2ra Ii

B. Existing Facilities at Pisco 4CG. 5er.ii.i Area.C 5D. Past Traffic 6E. Future Tr i r ___

IV. THE PROJECT 10

A. Genera' -1

EB. Number of B3erths Required 11C. Project DesrcLiption 11D. Cost Estimate 121 T _ _ ' __- _ -__ _ - __ _- _ 1: __ I_ A -_ _ _ __ _- I _ X- n I). Lieslgn) QonQTrucb.Lun anu rruI;reIiLtntj 13.5

'v. ECONG101-l-C J'USTIFiICATIN Gw i4

VI. FUT'uiE PORT ADMU-NISTRATION i7

VII . rI1. A1'ajJ .1.0Vll . 'r I\NANCS 10

A. D.A.P.'s Financial Requirements iB. Future Earnings of the Port.of Pisco 20

VIII. CONCLUSIONS AND RECOMMENDATIONS 22

The folloiing appraisal repnort is based on economic renorts pre-pared by Consultores y Ingenieros Asociadas S. A. of Lima and engineer-ino rpnorts 1b Livese- and-i Henderson OfT London-. and on the findinos of

Bank missions, consisting of Messrs. S. Heien, A. Horrell Clark andW. P. ThalTi+itz, which visited Peru in Jly/August and Octoher 1965.

rl A t)T I;' V #A ? O>rPVrC zQ 0__ 4 -,A %LZLVILJ: V.V %JVVX1L112sM1S %1J 1119ALAV%AJ

APPENDICES: 1. Population of the Port of Pisco's Service Area - 19652. Past ±ra±±ic at rUtU 0of rPc0 - Dry Cargo - 1954-196U

3. Forecast of Traffic at Port of Pisco - 1965-19754. Detailed Description of Project5. Technical Studies for Improvement of Port of Chimbote and

River Ports6. Detailed Estimate of Cost of Bank Financed Project7. Estimated Benefits and Economic Return8. D.A.P. - NoP.A. Financial Requirements - 1965-19699. Summary of D.A.P. - N.P.A. Financial Requirements - 1965-1969

10. Bases and Assumptions Used for Estimated FinancialResults - port of Pisco

11. Estimated Revenue Account - Operations at port of Pisco -1970-1975

12. Pro Forma Balance Sheets - Operations at port of Pisco -

1970-1975

MAPS: 1. Peru - Major Ports and Service Areas - November 19651A. Peru - Port of Pisco Project - Hinterland2. Peru - Port of Pisco Project (Surrounding Areas)3. Peru - Port of Pisco Project - New Facilities

PERU

PORT OF PISCO PROJECT

SUMMARY

The Government of Peru has asked the Bank for a loan to pay theforeign exchange cost of a project consisting principally of:

a) the construction of new deep-water port facilitiesat Pisco and

b) studies for the improvement of other ports inPeru.

The total estimated cost of the project amounts to US$ 1.7 million equivaLentof which the foreign exchange costs amount to US$ 9.1 million equivalent.

ii. Pisco is a long-established lighterage port, about 275 ln southof Callao; the nort for T.ima. Tt serves an imnortant agricultural andmining area for which it is the natural outlet. The lighterage operationsare very uneConomyic ard subject to frequent delays on account of weatherand sea conditions. The existing facilities are very old, in a bad stateof repair ani badlyv sitedj. and are inadequate to handl e even the existingtraffice

iii. Traffic through the port has increased very rapidly during therecent years, because of the rapid expanS of the i hmrl industryl Atthe same! time substantial volumes of cargo, both imports and exports aredlve-r+ed at considerable expense to the port of Callao becIae of the lack offacilities at Pisco.

iv. To handle the traffic expected up to 1975 new deep-water facilities...;t b cost.-cte ata sWe w'vhadequate protection fromi wirdcn waves..

Tile project would provide for the construction of a four-berth margin-I whELrfat such a site on the western shore of the B ay of PaL*racas, about 35 by road

.rom Pisco. There will be adequate transit sheds, warehouses, open storagec:.reaF port operating equipment ard water supply.

The project is technically an,d economically sourd. *The cost est>rimAtesare realistic and the procurement procedures will conform to the Bank's require-LMP,nts. U UConsulting engineers accep able to Cuzhe BUaink wil bKue employed.

'3i- The port of Pisco s one of many ports operated and maunaged by the)ireccion de Administracion Portuaria (D.A.P.), a department of the Ministryof Finance a.nd Commerce. The D.A.P. is hampered by lack 01 finanCial a-ndndlministrative autonomy. The Government, thierehore, decided to set up aNational Port Authority (NPA) to operate all public ports in Peru other t-hanCallao. The powers, management and financial policies of the Authority, andthe laws under which it will function, haave been discussed during negotiationsand -:Ll beac.cept2Tthe to the Bank. (.-craticn,s consult nts -ill 1)e ciTh)loyCeC toa;'c;se on organizatiorl, 9, operating n.-r! accounting procedures.

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vii. The local currency costs of the project will be provided by aSpecial Account, fed from special port charges, set up by the Governmentfor the purpose of financing the port development program,supplemented ifnecessary from Government resources. Operations at the new port facilitieswill be financially sound at rates which compare favorably with ratescharged at other ports.

viii. The nroiect is suitable for a Bank loan of US$9.1 million ecuivalent.A term of 25 years, including a grace period of about five years, would beappropriate. The loan would be to the Government.

PORT OF PISCO

I. aNITItLROD1JUCTION

1. The Government of Peru has asked the Bank for a loan to meet theforeign currency costs of constructing new deep-water port facilities inthe Pisco area in place of the present inadequate and obsolete lighterageinstallations, and of technical studies for the improvement of other ports.The total foreign currency costs would amount to US$ 9.1 million equivalent,or 62 per cent out of a total estimated investment of US$ 14.7 millionequivalent.

2. The project consists of the construction of a four-berth marginalwharf, transit sheds, warehouses and other buildings, provision of a watersupply, the acquisition of port operating equipment, consulting services,and the technical studies referred to above.

II. GENERAL BACKGROUND

A. The Ports of Peru (Map 1) - Port Development Plan

3. The 2,000-kilometer long Peruvian coast is rocky with stretches ofshallow, sandy beaches, and few natural harbors whlere berths can be con-structed without breakwa-ters. Nevertheless, inarnjy ports have been developedalong the coast. mainly at more sheltered beaches near the mouths of thenumerous cultivated valleys. Nost of these ports have no berths for deep-draft vessels, cargo being transferred by lighters between shallow jettiesand ocean-going ships at anchor in deep water.

4. Six special purpose ocean ports are owned and cperated by privatecompanies, princinally for netroleum nroducts and mineral ores. Nineteenocean ports and four rivier ports on the Amazonas river system are owned andonerated hy the crnuernmPe:nt H-owe.ver, todny, with the gror.muh of trade andthe development of overland transport facilities along the Pacific coast,it is more ennonomnin1 t.r handle the cargo in a lim.ited nm.her Orf largeports rather than in a multiplicity of small liglhterage ports. The Govern-mennt.s nnprt inveP+.tmnt. nlnn is +.hereforn foce mninlv nn +.he imnrnovmen+.

of certain selected ports, where modern deep-water facilities can be provided.and w.Thich can each seer. a sibsta al area of the coMnt.r. The investmer.tplan and its financing are dealt with in Chapter VII.

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*e Durin g the negotiations for Loan 373-PE - Paita Port Project,during March, 1964, the Government agreed, because of the limitation ofresources then foreseen, to restrict expenditure on its port investmentprogram up to 1967 to include prinarily the completion of new port facili-ties at Salaverry and the payment of suppliers' credits incurred in respectthereto, and the improvement of the port of Paita. There were also provisionsfor minor works at Matarani, improvements to fish meal export ports, and thesupply of port operating equipment for general use. The Government alsoagreed to defer starting work on new facilities at Pisco until 1968. However,the rapid development of the fish-meal industry in the Pisco area, and increas-ing congestion at Callao, have forced the Government, with the Bank's agreement,to bring the Pisco project forward as a matter of priority.

6. The principal public coastal ports are:

(i) The port of Paita (located about 900 kilometers north of Lima),the natural outlet for a large part of northern Peru. Deep-water facilitiesj exnented to be comnleted by the end of1966, are now being provided at Paita with the help of BankLoan 373-E;.

(ii) Salaverrv (4On kilometers sonth of Paita), where modern nortfacilities were completed in October, 1964, to serve theity.v of Trujillo and nearby sugar-prouci ngareas;

(iii) ( lhjmhr+- fl,rn L--;1-mp+c n-.:+h ^f T.imon Uzm +hm wric+Ancr

deep-water pier is ot'med by the steel-producing Corporation

Government. It at present carries both steel products andordi.a.yr coAmercial traffic.

(iv) The port of Callao, near Li,m.a, which is the co.UtryJsprincipal port and is managed by an autonomous authority.

LAIU trL t1Lu-ougLI tLle portu -I' inL74 Was abuUUu 4.f

million tons, 26 per cent of Peru's total maritimetrf_fic. Construction of an oii pier and a minerals andgeneral cargo pier, financed partly by Bank Loan 208-PE,is expected to be completed by the end oI i969. Anearlier Bank Loan, No. 57-PE, helped to finance a grainsilo, bulk grain-handling plant and general cargohandling equipment;

(v) Niatarani (located about 800 kilometers south of Callao),the commercial port for southern Peru and Bolivia. It is

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now being extended by an additional 90 meters of quay,finaced :From ..L, Gov ent resources;

(vi)- The port of Pisco, descr-ed more fully ir. ChapterI

7. T'ne inland ports, Iquitos, Yurimaguas, Pu?dc pa aL rIdonado,are all located on the Amazonas river system. Only Iquitos has modernport facilities. Tne development of the country's eastern region req-uresnew investment in these ports to meet growing traffic requirements. Theport development plan of the Direccion de Administracion Portuaria (D.A.P.)is described in Chapter VII. Bank financing in connection with the portsof Peru to date is summarized below:

January 1952, No. 57-PE, Callao US$ 2,500,000 equivalent

Seotember 1958, No. 208-PE, Callao uS$ 6,575,000 equivalent

April 1964, No. 373-PE, Paita US$ 3,100,000 equivalent

US$ 12,175,000 equivalent

B. Port Administration

8. All the public ports of Peru, both coastal and river, other thanSalaverry and Callao are managed by D.A.P., a department of the Ministryof Finance and Commerce. Callao is operated by a Port Authority set up in1952. During 1965, a separate Port Authority to operate the port ofSalaverry was also set up.

9. The D.A.P. is headed by a Director, who is an official of theMinistry of Finance. The D.A.P. has no financial autonomy and very littleadministrative autonomy. The lack of adequate powers in these respectsalready prevents efficient administration. D.A.P. has been unable, becauseof tight budgetary control, to expand its higher management staff to keeppace with the increasing work load and responsibilities imposed by expandingtraffic and the need to improve Dort facilities. There is a serious shortageof competent, experienced engineers and of other qualified staff, who arenot attracted by the salary scales allowed by Government. With increasingtraffic this deficiency wjill be increasingly felt, and will adversely affectthe planning and carrying through of the port development plan. At theindividual port level, the relatively small-scale operations at presentinvolved are reasonably efficiently conducted. However, as traffic grows,the need for reorganization, with a stronger and more independent localmanagement wiLLl similar:Ly arise This question i9 dealt with further inChapter VI.

III. THE PORT OF PISCO

A. General (Maps 1 and 2)

10. Pisco is located in the eastern part of the Bay of Pisco, about275 km south of Callao by road. The port serves the valleys of Pisco, Ica,Canete, and Chinca, as well as the mining area south of Huancavelica.Several irrigation projects, based on diversion of water from the easternslopes of the Andes, are under consideration in its service area. Fishmealproduction is increasing ahd the mining industry is developing. Penetrationroads, now under construction in the hinterland, will extend the servicearea of the port. Port traffic is increasing, creating considerable con-gestion, and the existing facilities are deteriorating. The Government has,therefore, decided to construct modern deep-water port facilities at Pisco.

B. Existing Facilities at Pisco

II. Pisno is at present a lightarage pirt -rith a timber decked acrew-pilepier rnnstructed in 185q9 The piqr is 76O meters lng and 9.5 meters widew-itha small T head. It carries rail tracks leading to a D.A.P. - owned openstorage yrd-rA onA aderalI privately owned r onpn nand cnovrPedf1 storag-e areas inPisco. The pier is equipped with four 3-ton movable cranes and one 24-tonfiypxe a-rick. Thw-p r1iesel lo'romotivPs anrl 12 10-ton flat rars are used forcargo transport to and from the berths. The pier, crane, track and rollingstock are in bad condition. D.A.P. operates the shore facilities, lighterage equipment (about 50 lighters and 7 tugs, also in bad condition)

, ancrnA on n_,o+ 0 A 1

-n>r n.4 .r,A~ nnwnar4 QQ

12- The pier is sheltered from wind and swe to certai extent,by the Paracas Peninsula but during July and August a southerly wind calledth,1e "PDaraca" seriousl.y hicam-pers `---oeratons. There iz considera'ble -Jil=LA~ ~ 0. Q~. 0~ ±%UL3'LL0.UkJ.L UL.L 1, VJ,~ 0 .L %k.-L.JL LL~.' ---

tation in the bay, and the depth at the outer end of the pier is now only4 LUmeters± LU Lat W WatLer, Lthe- tidLU.L Lrange UtbeiLn abutlJ 90 ceUWimeters.

1 ~~ T~~ ~ - 4.L T% h N 1 _ _£ ' 1 - _-- .In addition u Ud Uthe D.AL.P. failities, there are, uea-'Y, a. small

shallow draft fishing wharf at San Andres, owned by fishing intAorasts, anda silmilar wharf owned and cperated by the Natiounal Fertilizer Cor-rationat La Puntilla, where there is also a slipway for repairing lighters, .

T.e International Petroleum Company has a tank farm at San Andres to wnichpetroleum products are transferred by submarine pipeline from ships in thebay.

North ef Pisco are two small ports, Tambo de Mora and Cerro Azt1.Tambo de M6ra, located 28 km north of Pisco, is a fish-landing port with'. %small pier situated in an open roadstead. Because of wind and heavy swells,difficulties in landing the fish catch arise frequently. There are sevenfishmeal factories in the area which export their prTducts through Pisco.They will continue to do so after completion of the new facilities at thelatter port.

15. Cerro Azul, about 80 km north of Pisco, is a minor light-ageport. Operations are frequently closed dow- because of wind and wave

conditions, anU traffiic Ls then LLLverLed LO Pisco. 'L is enxpected thabI

Cerro Azul will be abandoned when deep-water facilities are provided inPis Bco .

C. Service Area (Maps 1 and lA)

irSO The service area of the present port of Pisco is severely restric-ted by the primitive port facilities, and comprises little more than thecoastal Department of Ica, in which it is situated, and nearby areas of theadjacent Departments of Lima, Huancavelica and Ayacucho. However, acceptinga degree of marginal overlapping of the service areas of the ports of Callaoto the north and Matarani to the south, the potential service area of a deep-water port in the Pisco area would be considerably larger and would include,inland: all or most of the Departments of Huancavelica, Ayacucho and Apurimac,and parts of Cuzco; to the north the southern parts of Lima; and to thesouth, the northern part of Arequipa.

17. The potential service area covers approximately 160,000 sq. kms.and has a population (July 1965) estimated at about 1.7 million (see Ap-pendix 1), about 14% of the estimated total population of the country. Ingeneral the geographical conditions are similar to the country as a whole,comprising three distinct natural regions: a narrow coastal plain; the highmountain range of the Andes; and beyond the mountains, the jungle of theAmazon river basin. The coastal plain alternates between extensive areas ofcultivation, in the river valleys and irrigated areas, and desert. Thoniourntain area tzs few nossibilities for azricultxure but substantial mineralresources tThose development is mainly restricted by difficulties ofaccess,

in. The Government has plans to promote the industrial and avrinlIturaldevelopment of the area. These include hydroelectric projects, irrigationschemes. roads, hnioine anA Jnn1iigt.Jql areas. A new penet+ratioin road fromthe Pan American Highway near Pisco will go through the mountains and isexneetd.P to ,rea-ch rAirm'heo byhr 1067 an Cuzco yr 1071 . TI+ will i1rece byir

about 50% the overland route for considerable volumes of traffic, inclutdingminerals, thAt now have to use the Port of nalln' A -further road improve-ment from, Nazea in Ica Department to Abancay in Apurimac will also extendthe Service area to th.at Depar+ment pd t- par+s of Cuzco Department.There are plans for further development of the fishing and fishmeal in-dustriei inhe ar, -an 4-1-h G-overnmer. alz p- to develop a new in=

dustrial area near Pisco. Further plans include a new township near the newport and archeological and tourist zones in that area.

There are about 130 small-scale industrial enterprises in the port'spreen Interland. In the immediate vicinity ux Pisco there are seven cottongins, two baling plants,-three cotton seed mills, two whaling factories, ono

130-0z0 'warre"l petroleum tank amsdteBib^c n -eh-ibHof aleaingguan prducerl. Eairg fuu Jii Emeal ipoence ancs overeu..L catedof a leading guano pro&ucer. Eight fishmeal processing plants are located

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in the area with a total installed capacity of 180,000 tons of fishnmeal

a year. The production of wine and spirits is also an important activity.

D. Past Traffic

2L. For many years the traffic using the port of Pisco has necessarilybeen limited to cargoes for which the port, in spite of high operating costs.hazardous conditions and shipping delays, was less uneconomic than otherports. Details of past dry cargo traffic from 1954 to 1964 are given inAppendix 2 and summarized below for the years 1954, 1959 and 1964. Tonnagesof bulk petroleum products, which are unloaded by two submerged pipelinesdirect to tank farms ashore, are not available for most years prior to 1960.

------ WOO metric tons------___4 lQ9Q 1964

ExportsCotton 29.5 44.0 38.3Mineral 8 22 23=O 26=8Grtano 6.1 3.5Miscellaneous 13.2 5.± __=6

62.9 78.5 712

Fsishmeal 1.n 2.3 106.0

63.9 80.8 177.2

Tr.ports

Fertilizers 3.a 16.3 22.9

G-uano (Inward) 23.2 11.7 9.4Miscellaneous 91.9 4.1

32.7 13.6 13.5

Total Dry Cargo 102.1 113.6 216.4

Bulk Petroleum N.A. N.A. 176.9

den It may be noted particularly here that (i) apart from the recentsudden develupment in fishmeal exports (which commenced in 1963), the traificthrough the port has varied little in ten years and (ii) apart from ferti; z-ers, imports are virtually non-existent, all general cargo imports fcor thePisco area being landed at Callao because of the absence of adequate portf-acilities at Pisco.

E. Future Traffic

L>. Dry cargo traffic through sisco 2Luctuated bet..een LO','00 and14½0,tXO tons annualiy d.ring the decade 1954-1963, but has be^n exraldiLig

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rapidly in the past two years; in 1964 216,000 tons moved through theport, and in 1.965, traffic will have beeii approximately 25C,OJ)0 tons.This expansion is expected to continue because of:

a) further expansion of fishmeal production and experts;

b) increased fertilizer imports and cotton exports after theport of Cerro Azul is closed down and its traffic divertedto Pisco, and as new irrigation schemes in the port'sservice area start operating;

c) increased mineral exports and general cargo imports as the con-struction of a modern port in Pisco allows the diversion of partof this traffic from Callao, eliminating costly truckingover more than 250 km between the Callao and the hinterlandof' Pisco.

For these reasons, D.A.P. ts consultants, Consultores y Ingenieros AsociadosS.A., of Lima, have projected dry cargo movements of 523,060 tons in 1970,the first year of full operation of the new port of Pisco, anl 680,000 tons

in 1975. These are believed to be reasonable estimates.

23. A detailed forecast to 1975 is given in Appen,.ix 3 and summarizedbelow for certain years:

-------- Thousand Tons--------------Existing Facilities New Port FacilitiesActtual1964 1969 1970 1975

ExportsFishmeal 106 310 325 400Minerals 27 28 90 140Cotton 38 26 33 4"Other 6 - -

ImuortsFertilizers 23 17 22 30Other 3 4 45 _

27g 21 7 92

Coastal Traffic 13 7 8 8

Total Dry Cargo 216 392 523 68o

Bulk petroleum 177 267 287 4oQFish Oil. 33 .___

Totaq Cargo 3939

LL~ * L -L±.J .L. LL 3! I-ra.L.L .L fr L -~± .I ULtU. .J.''dL.L ) W ±. .U,c- . 5nce d4iversion of tafcrom Cerro Azu d Callao, wil.l. nottake place before 1970, fishmeal exports will account for nearly all of thepro",acted 'ra"Ic -. ircrease un"i 1>6. Al. tercro ewr- fm ea.~J Ju U.& cL±J.L I L±i Ue U.L.LJ .L.U~. J-..j ou'uer cago (ex-p3Lts ofJ mLICeraJs

and cotton and i.wports of fertilizers an<. geLepal zargo) il expected torem,zin a: proxiaL.t-e-y at presenL 'Leve's Uk,i .L969-

25, Since 1962, the Pisco area has participated in the remarkablegrow,th 01f te- n .M al ndustr nll along D'e ,uP r ^r-n oat T'he eaoyr

availability of anchovies, the source of fishmeal, in the immediatevCircinty- off LLIt,he coast acco-s for .eats excellent compet-itiv positio

in the world mar-ket for fishmeal. Being a valuable source of animalpruoteJI np.Li jJg andu chAit-LI fa-,,lng 1 i±-fhitC±l enIJUoyVs VgrowLing demnad at

stable prices. However, the period of explosive expansion in Peru'sfi, shinea&L .iUsry wiJll us o bebeimiHJdueU as UrJth i1,iL1tF,i±l pi Ukotua.

association is aware of the danger of overfishing and intends to ask itsmem'bers for a voluntary agreement on a celling on the total fishmLealproduction in Peru. The association believes that this ceiling should bebetween 1.8 and 2.0 million tons, a figure that could be sustained undernormal conditions, This would be reached by 1975 and compares withactual production of 1.5 million tons in 1964. "'naile total productionof fishmeal in Peru will thus increase moderately, production in the Piscoarea is foreseen to expand rapidly because the major part of the overallincrease will take place on the southern region and because of relocationof factories now situated in the Lima and Chimwote areas.

26, Despite its robust growth, fishmeal production in the Piscoarea had not reached more than 7.5% of total production in Peru' by 1964.As the area off the coast near Pisco has lately come to be known as anexceptionally rich fishing ground where the anchovies have two breedingseasons, fishmeal producers are tending to establish new factories closeto these relatively underfished areas. This movement is reinforced bythe undesirable conditions under which many firms operate in the Lima-Callao area. Most of them have no direct access to the shore and haveto transport the fish through the extremely congested area betweenCallao and Lima. These reasons have led nineteen firms to apply forlicenses to establish new factories in the Pisco area. If installed,the new factories will increase the area's fishmeal producing capacityby 300,000 tons annually over the existing capacity of 180,000 in thepresent eight factories assuming that variation in the catch will allowno more than 2,500 hours of factory utilization per year. The con-sultants have conservatively assumed that by 1970 only 50% of theadditional capacity will actually be installed and have therefore pro-jected 310,000 tons of fishmeal exports by 1969 and 325,000 tons in1970. By 1975, fishmeal exports should reach at least 400,000 tons,

27. During the past 10 years, the annual export of mineral ore,mostly zinc and copper concentrates, from Pisco fluctuated between20,000 and 33,000 tons, being 27,000 tons in 196h4 These ores aremined in Castrovirreyna in the department of Huancavelica about 10C kininland from Pisco. Mineral exports from these sources are expected tcamount to 28,000 tons in 1970. At nresent. all mines further inland inthe area of Huancavelica and even some mines in Castrovirrenya find it

more economical to exnort via Callao thereby avoiaine the bagging ofminerals and the costly lighterage operation in Pisco. Upon completion ofthe new nort in Pisco. these minep will export through Plsco resultingz inreductions in overland transport of between 160 and 250 km according to the1ocaP+orn or- t.he mines. Miner1s ol 1 riinntina in the -epnartmepntt nf' TIa are atpresent exported via Callao. They are transported by truck along the coastaLhighway actuall;y bypassing PiPco Minerals from these sourcer will also bediverted to Pisco eliminaating 275 km of trucking between Pisco and Callao._n_t her gr rvf' n4f M.Ia 1 _ A t4, +ho e,1, , -qo,-.+ ^,f +1h, Ai=npv+mrt+ nof

*~~"-1 -*_ >-- _S locte in_w th so_ -he- t- t of the dp --- -1Lima and -about half way between Callao and Pisco will also exportthroulghn P'so-. dltho4h no dstance -- 4-J. can .be realized, i+ is more

economicaL to avoid the congested Lima area and Callao port.

28. Apart from this diversion, exports of minerals will rise as newmUines are openeU anu existing ones exApnued in thlle areas o- Cast rov4-'"rey aV,Huancav2lica and Ayacucho. With the construction of the new road betweenCastrovirreyna and Ayacucho which is expeczed to be completed in 1967, amajor impediment for mining development in the area of Ayacucho will beremoved, resulting in mineral exports from tne area oI 5,000 tons in 1970and 25,000 tons in 1975. A summary of expected mineral exports through Piscoand their regional origin is as Ioiiows:

Volume ':0O tons:Dept. of

Castro- : : : :Huancavelica:virreyna : : : Dept. of :(Castro-

: Dept.: Dept. :Dept.of : Huancavelica : virreyna TotalMines at : of : of :Lima : (Huancavelica): mines atpresent : Ica : Ayacucho: : presentexporting,: : : : exportingthrough : : : throughPisco : : Callao)

1970 28 15 5 10 15 17 90

1975 35 20 25, 10 20 30

29. Cottorn was for many years the main export product of the Piscohinterland. Exports of ginned cotton during the last seven years averagedabout 43,000 tons. There is, however, a strong tendency among farmers todiversify their crops. It is estimated that this will. have led to a decrease incotton exports from 38,000 tons in 1964 to 32,000 tons in 1965. Only by1970/71, when the area of cultivated land and yields per acre have increased

through new irrigation schemes, are cotton exports likely to start togrow again. At the same time, after the new port of Prisco is completedand the port of Cerro Azul closed down, about 5,000 tons of cotton willbe diverted to Pisco. The combined effect of the new irrigation schemesand the diversion from Cerro Azul will eventually bring cotton exportsto the present level again.

30. Fertilizers have so far constituted the only noteworth importsthrough Pisco, averaging about 20,000 tons annually during the last fiveyears. Local production will substitute part of fertilizer imports butaiversion from Cerro Azul of about 6,000 tons and the additional require-ments of irrigation schemes should bring fertilizer imports to 22,000 tonsby 1970 and 30,000 tons by 1975.

-3-- General cargo imports through Pisco have always been insignif-icant. Machinery, vehicles and consumer goods were imported through Callaoand then trucked to the Pisco hinterland. After construction bf a modern portat Pisco, this traffic will be diverted from Callae. In addition, the im-plementation of irrigation schemes in the service area will tend to raisedemand for imported farm machinery and vehicles. Completion of the powerprojects should promote some industrial development in the Pisco area. Theforecast for imports of general cargo, therefore, is 45,000 tons in 1970and 62,000 tons in 1975.

IV. THE PROJECT

A. General

32. The increasing traffic, the unsatisfactory transport and storagefacilities, and the poor condition of the existing pier and the liahterageequipment require construction of new facilities at Pisco as soon as possible.It would be costly both to constriwet and to mainta-in such facilities at thepresent location of the lighterage port in the Pisco town area. Breakwaterswoalid bhe renuiree-i together with a considerabLe amou_nt of dredgine and reclam-ation. Accordingly, it has been decided that the new facilities should besi-ted Gn the west side of Paracas bay, where they will be well shelteredfrom wind and waves and where a minimum of dredging will be needed.

33. As shown on Map 2, the new facilities will be situated near PuntaPe errey, about 3 knm from the existIng towm- and port at Picco. A new 2-loreroad, 18 km long, is required to provide access to the existing road system.

Government bthes b&nc con1st6ruction of this road ad 1a96as udrtalen colvl.ote it X title c,:at of 19,b).

3)4. TlRhe UOVUo-v.UiJ,llL, LIU ha pr d aU[U c aL r L,1the 1Ae aUWUl

Paracas Bay, ';hich includes an industrial area, a tourLst area inclucdn-a smill poptulation center at Paracas, an aFU0aeoLo0ical area of aricielntIndian burial grounds, and an area allocated the D.A.P. on the ParacasPeninsuiar. The Government has defined the land area to be allocated forpurely port purposes, including future extensions, and h1as undertaken thatthe land and sea areas to be under the jurisdiction of the D.A.P., will bedefined in due course.

35. 1lithin the area assigned in the zone plan to the D.A.P. a new towm-ship will be developed in conjunction with the port to be called tne townof Punta Pejerry. Preliminary plans provide for a population of about 5,000,and include utilities, housing, schools, mtmicipal buildings, etc. Thlieto>Tn wrill not be part of the project. IHowrever, it is important, from thepoint of viewJ of the effective operation of' the newr facilities, t'hat suitablylocated and adequate housing for port workers should be available when thefirst of the new facilities is put into operation. Assurances have beenobtained from the Government that such housing and related facilities willbe provided in due time.

30. aThe project includes water supply installations which would besufficient for the initial requirements of both the new port facilitiesancl the proposed toTm. The continuity of adequate water supply is essentialto port operation, and assurances have accordingly been obtained from theGovernvient that it iill take all necessary measures to ensure this at alltimes in the future.

B. Numbser of Berths Reauired

37. In assessingt the size of the new nort to enable it to handlethe expected volume of traffic up to 1975, annual rates of throughputper berth have been assumed of 125.000 tons for general careo and 175,000tons for fish meal and minerals. The relatively low rate for mineralsarises from the smnanll tnsirnTmennts in which the cargo moves and tnh factthat the total quantity justifies only partially mechanized loading.On t.his basis t±he cn2aci+ yu of +.fh1rP be-rths V-Molrf1d be e in 1 97C0 2ndthat of four berths in 1975.

C. Project Description

38. The purpose of the project is to replace the existing lighteragefacilities at 'Piso; byi cntuing newT. fanci at no !+ Puin+t Pe jnrry. f"'-T 3

The project includes:

(a) initial dredging to a depth of 11 meters;(1-) a -ur-bertl JLSr, 7ri00 I --- -or L * tLL I I

meters, and a small-boat whazrf, 100 meters long with aJInimaJALumL u.epjJ ULIA 0±1 ± _L V iIIL:- Ut- J

(c) three transit sheds and two wrarehouses adjoining the new

(d) filling and leveling the port area, construction of serviceroads, and ut iJiies; -

(e) w*ater supply;(f) ad-i1inisuration and other a-ncillary buildings;(g) appro.ach road;

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(h) provision of a tugboat and port operating equipment; and(i) e - - - -- andA - a ns-. consu-,,lti,ng se ir1ces.

items (a) to (h) are ldescrlbe in detail in Appendix 4 A Item (i) inparagraphs 414 and 69. Iteni (g) will not be financed by the Bank.

39. The Project also includes technical studies and design work foririproveirients at d he LA LI Ver pU LUO of IqJuitUos, ±UIJL&ri,ua , Ual.lJJ and

Maldonado and the ocean port of- Chimbote. Costs of these improvementsare included in D.A.P. 's finIacial requirements as described in chapterVi, They are regarded as priority works, and are planned to be initiatedas soon as possible. Further details of these studies are gvein Appendix5.

D. Cost Estimate

LaO. The estimated cost of the Bank financed items in the project is S/394mi-lion (us$ 14.7 million equivalent). The necessary foreign excnange wouldamount to US$ 9.1 million. The cost estimate is based on final engineering ofconstruction items and includes 10% for physlcal contingencies, 25% for-ncreases in local prices during constructior~ and 8% for increases in foreignprices. It is considered to be realistic. Details are given in Appendix 6,the following being a summary:

Cost

Hlillion US$ Equivalent

Local ForeignItem Currency Exchange Total

I. Preparatory works .35 .142 .77Dredging .25 1.00 l.2S

3. Construction of a 4-berth jetty, etc. .99 1,83 2.82h. Levelling of port area roads and

utilities 1.24 1.34 2.585, Water Supply .35 .81 1.166. Sheds and other buildings .70 .70 1.407. Port operating equipment -- .46 .4680 Tugboat -- .26 .269, Physical construction contingencies

on Items 1-8 .39 .68 1.0710. Engineering services .17 .51 .68

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11. Alloi-iance for price increasesduring construction 1.11 .64 1.7.

12. Operations consultants .02 .08 .1013. Tecillecal studies Chimbote and

inland ports .08 .32 .4'

Total of Bank Financed items 5.65 9.05 14.70

Say 5.6 9.1 14b7

The local currency cost of the Bank financed items will be provided out ofa Special Account fund set up by the Government to finance port developmentas described in Chapter VII, supplemented if necessary by fuiids from thegeneral budget.

42. Construction is expected to start in October 1966 and should becompleted by October 1969. Expenditure on tlhe Bank financed items isscheduled approximately as follows:

Ilillion US$ Equivalent

Local ForeignYear Currency Exchange Total

1956 .3 .6 .9

1967 1.2 3.1 5.0

1963 1.8 3.0 4.3

1969 1.6 2.4 4.0

Total 5.6 9.1 lh.7

43. The estimated cost of the approach road to the port area which isbelng ULU -L. Ly J_Lui.aced Ub hLe uover.L;ent- ls S/ 22 rII Li.L

E. Design, Construction and Procurement

h4. The design and necessary bidding documents for the constructionwork have beera prepared by Livesey and Henderson., who are competentconsultants, and D.A.P. will employ the same firm to supervise construction.Constructio-n will be covered Dy a single conitract. Bidding for the con-struction contract and for equipment procurement will be carried out inaccordanCe with Banic policies.

V. ECON01MIIC JUSTIFICATION

11 UroucUUb±u1±

IThe new port facilities wo-uld yield n adequate economic returnon the investment cost of the project. Economic benefits would consist of;

a) reduction in cargo handling cost by eliminating lighterageof cargo and by more efficient handling on shore, esbimatedat S/. 13.2 million for 1970 and 16.4 million for 1975;

b) elimination of the overland haulage of goods presently im-ported or exported via Callao, resulting in savings in landtransport cost of SI. 12.6 million in 1970 and 21 million in1975;

c) reduction of vessel turn-around time, valued at Si. 31 millionfor 1970 and SI/ 40.5 million for 1975;

d) reduction of physical losses of fishmeal during the loadingprocess, valued at SI. 15.5 million for 1970 and S/. 20million for 1975; and

e) elimination of bagging of minerals presently exported throughPisco, resulting in savings of S/. 1.5 million in 1970 andS/. 1.9 million in 1975.

l,5. The total economic benefits from the project will be in the orderof S/. 75 million in 1970 and increase to S/. 100 million by 1975. Noincrease of benefits has been projected for the time after 1975 since anytraffic growtlh thereafter would require further investments. Projected overthe 30-year average life of the facilities, the benefits represent a 16%return on the investment cost, including the cost of the access road andhousing for port workers. (Appendix 7).

Reduced cargo handling costs

'O. After completion of the new nort. cargo will be handled to and fromships at b irth thereby eliminating costly lighterage. Cargo hand-ling on shore will also be more efficient because of the areater use ofmechanized equipment and more ample working space. No savings in cargohandling cost can be attributed to trnffir diverted from Callao where aport with modern handling facilities exists. The savings, therefore, apply tot-raffic-i whirh wrniili 'h hnntrlad in Pi.c-,( or GePrrn Azil if t.he new fac;'ities,

were not constructed. Applied to the projected volume of traffic not divertedfrom Gnla the savings ir cargo handling cost are the following:

Savings per Volume TOOO tons Savings SI. '000ton SI. i970 iL9( .LY(u l97

Fishmeal 33 325 400 10,725 13,200Minerals 35 28 35 980 1,225Cotton 20 33 40 660 800General Cargo 15 4 7 60 105FertiMlizers 35 22 30 770 1,050

Total 412 512 13,195 16,380

say 13,200 16,400

Reduced land transport costs

47. Large savings in overland transport cost will be realized whenminerals originating in the Pisco hinterland can be exported via Piscorather than Callao. Minerals originating from the Departments of Ica andAyacucho and those from Castrovirreyna not actually exported through Pisco,are at present trucked along the coastal highway to Callao.For this traffic, the savings will be a reduction in transport of 275 ikmat SI. 0.55 per t/km.

Tonnages diverted Savings infrom coastal highwav Overland Transport

'000 tons S/. '000

1970 37 5,6001975 75 11,300

Minerals originating fuirther inland in the npnartment of Huancavelica are atpresent trucked through the mountains over 440 km at a cost of S/. 0.95 pert/km to Callao. TUpon completion of the new port, they will 'h diverted toPisco over a distance of 280 km. The cost per ton/km on this shorter routewill be as high as S/. 1.10 s .ther .---- Hii n,r' rl is of 1_ostandard and no immediate plans for improvement are being made. The savings,therpforp- will be less than 'rnr_r+Ainal +t the distance save and ,eill

amount to SI. 100 per ton/trip.

Tonnages diverted Savings infrom Huancavreli a Overland Trwansport

'000 tons Si. _ 000

1970 15 1,5001975 2~~~~~0 2,000~

'uQ ~Tn,,a.po+ of gnerna,, cargon Aalte.+ ,A.' for , the Pisc se, t e nf eaan

presently imported via Callao will be discharged in Pisco thereby eliminatinlgtrW- .g --e 2'75 1,. from. C'al 4zo to Pisc at4. 0.55A perf- t,/1.

UJ.U~.l.L1f~ LIV L '.I) f4 L %j Ui LI.. .J& UVL -LQL.I CA. ULI~ *L i. ) j LI/ 18I.8.

Torr,ages U-LV .L LU oevrtedn -"I US Vt.LJ.veLaUn

from Caliao Transpot'VL OvO vIiU * _UU

197y g v 8,2001975 62! 8,300

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^9. Fertilizer imports and cotton exports diverted from Cerro Azui willbavo to be transported between Piaco and Canete over 95 km at S/. 0.55 pert/km. Thcee additional transport costs will amount to S/. 700,000 in 1970 andin 1975.

Total net savings in overland transport will thus be about Sj. 122.6million in 1970 and S/. 21 million in 1975.

Reduced turn-around time for ships

$1. Vessels calling at the new port and loading or discharging directlyalongside will be able to turn around much faster than at present. During1964 an average of about 35 ocean freighters a month normally called at Pisco.The tonnage they loaded or unloaded normally ranged between 200 and 2,0QO tons;in some rare instances vessels took up to 4,500 tons. According to the con-sultants and additional information obtained by the mission, 200 days ofship time could have been saved in moving the traffic volume of 1964 (203,0ONtons international dry cargo) if the planned new facilities had been avail-able to eliminate time-consuming lighterage. As it costs about US$1,500 wrS/. 40,200 to keep a ship waiting in port for a day, the savings would amountto SI. 8.2 million. By 1970, the new facilities will prevent the additionaldeŽlays which would be caused by moving the increased volume of 515,000 tonsdry cargo through the presently existing facilities. Additional savings willbe realized as larger ships will be loading or unleading larger volumes ofcargo. It can, therefore, be estimated that 775 ship days will be saved inmoving 515,000 tons of international dry cargo in 1970, which represent savingsof S/. 30 million.

52. The savings of shin time would adt. f1lrst. bhenefit mainly foreian shin-owners. These savings may, however, eventually accrue to the Peruvian economyas ConfePrPnCe r=+eA como 1-reflrct+ t-he fn+'r frn-aroend time in pnorts alongthe Peruvian coast. Even before this materializes the Government could reapsome of the benefits expected to accrue to for-eign shipowners in Pisco- byrapplying suitable pert charges. Furthermore, fishmeal and minerals will in-reasingly be e.xported con. -- t ch,4-kre sh. ps, t ef ich immediatelyr"eflect the actual time necessary in port.

Other benefits

5>. Loading fishmeal albngside will eliminate losses of cargo whichex-port'ers sOufffer at presentr in '.LU Ue co-aUre ofL Llht L ,il erag--e operationU- . TheMU

mission has conservatively estimated that, by loading alongside, losses couldUe reduced by c2, f votaL ishmeal exporvts val-ued a- US/. 2 u per WLt. 41is

will bring savings in 1970 of S/. 16.3 million and S/. 20 million in 1975.

Minerals at present being exported through Pisco will no longer "'aveto be bagged when the new facilities are completed. For 28,000 tons, savingsat S/. 54 per ton will amount to S/. 1.5 million in 1970, and S/. 1.9 millionIor 35,O'0 tons in 1975.

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VI. FUTUiE POflTl ADNIWILSTRATION

55. During recent years Peru's international trade has expanded rapidlyand will contirue to expand although probably at a reduced rate. Theexpansion imposes an increasingly severe strain on the smaller ports alongthe coast operated by the D.A.P., wrhich falls not only on the port facilitiesbut also on the D.A.P.'s organization. Tlhis strain on the organization willbe intensified with the coming into use of the new modern deep-water ports,particularly at Paita and Pisco. As has been explained earlier, the presen;organization suffers from serious drawbacks. It has no financial or opera-tional autonomy and is hampered in organizational development by btudgetconsiderations. The present situation is unsatisfactory, and the GovernmnenL;,tlherefore, intends to set up a National Port Authority (I'.P.A.) to beresponsible for operating all public ports except Callao, which will contimneto be operated by the existing Port Authority.

56. The N.P.A. will be established by the end of 1960 and will takeover ooeration of the port of Salaverry from the present Authority uhichwill thenL cease to exist. The Government has undertaken that N.P.A. iwillhave powers, management, resources, capital structure a-nd financial policiessatisfactorv to the Bank. In this connection, certain basic Drinciples andpolicies to be followsed in the legislation setting up N.P.A. have been agreedbetween the Government and the Banlc. It has been further agreed tihat thelaws, sta.tutes and regulations concerned wfill be discussed withl the Bankbpfnrep nactmont-

-7. The GhvnrMnrent haq also agreed tn emnlov onnration-s conslh1tanr..acceptable to thLe Bank. Their principal tasks wjill bc.: ta oevis coi:.iercialacrounting nro Aidirp-q. i ne1 miing costing procedurres An- prepare tariff'f ofcharges at Pisco and Paita, and also to assist in the implementation of then-rnc-irP..q andrl t..riffc- ton adxrisceo nn PrantiV nrnopOriinc * in :1 1 M-P A -nnr+:c

and to recommend measures to improve efficiency; and to advise on thedtine pd o tranni 1at-n and ,r'rocedures, incl,rlin, accountiri•; p o'

U .2 .A. Tiie forei4Li currency costs of the consi:'latts4 worlc at PaL('a -1'1 bei ';5o~rThr ;,vt~-~T-T ::i w s 4~ 1 e -'l p _7 373

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VTI. FINTANCE

A.* D .AA.PD. 's Financial q0 uirement (Appendices 8 and 9)

'IV. I ~Lit: L;U..LJ._:,Ll U JJ./ . .F oPUI- L. ~Li V~ UOAII7,11 , U±±J. LIt:U 0 .L Vill UL1.L U 1JURuto during the negotiations for the Paita loan (paragraph 6) principally inthe inclusion of an increased amount for improvements at 11o; in bringing for-ward the Pisco project; and in planning to start improvements at the riverportUs ear'liter. Th l'e pla-n S I n . two sectUons: iJ) current wuorks, c.;UrIsin t LLg

principally Paita but also including payment of suppliers' credits. forSalaverry; and (ii) new works covering projects at Pisco, Matarani, !lo andthe river ports.

59. The principal source of funds to finance the plan is a special fundset up by the Government in 1950 to finance the Salaverry port. It was laterextended to cover development expenditure at all the ports under control ofthe D.A.P. and is now known as "Special Account - Port Works in Salaverry andOther Ports". Part of the existing port revenues were diverted to this ac-count, which has also been augmented from time to time when additional lawsincreased the charges or created new ones, at private as well as public ports.The receipts credited to this fund rose from Soles 34.6 million in 1956 toSoles 73.9 million in 1963. In 1964, there was a considerable increase toSoles 97.1 million, due. mainly to the expansion of fishmeal traffic but alsoto a further increase in charges. These receipts are expected to increasesteadily to Soles 133.6 million in 1969.

60. The plan covering the period to 1969, the year in which constructionof the Pisco project is expected to be completed, is briefly as shown below.Details are given in Appendix 8 and summarized in Appendix 9. The D.A.P. ex-pects to be able to finance about 6h% of the total costs, including debt ser-vice, from Special Account receipts. The Government has indicated that itwould like to borrow from the Bank to help finance the development of theriver ports. Provision has been made in the Pisco cost estimate for engineer-ing and feasibility studies for this project and for possible new constructionat Chimbote. Cost estimates, other than for Paita and Pisco, are preliminary,and do not allow for price escalation.

Million Soles

Current Works

Otar 107Others 75

182

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New rvi ork

PF gsco, includfi Lng ,stu- e s fPo r CL 1-1 .bJo tle

and river ports 394

Matarani and Ilo 160Port equipment, excl-uding Pisco 13

612

Debt Service

Current works, including Salaverrysuppliers credits 123

New works 28151

945

Sources of Funds

Special Account receipts 608External borrowings:

Exiinbank - Equipment 10IBR]) : Paita 64

Pisco 244River Ports 19

337

945

61. On thes basis of the present estimates, some of which are prel minary,and assumi.ng the availability of external financing for the river porQs inaddition to Pisco, there is likely to be no shortage of funds for the periodas a whole. A peak shortage of about Soles 52 million would occur in 1968(Appendix 8), plus further debt service that would.be incurred in financingthis deficit. This relatively small shortage of funds might be avoided ifthe commencement of projects at Matarani and Ilo were postponed, but thepracticability of this would depend on the degree of urgency of the worksconcerned. During negotiations the program of port development in Peru andits financial requirements were discussed. The Republic of Peru has declaredits intention of carrying out the program and it has agreed to consult withthe Bank and to give careful consideration to its views, before making anychanges in the program.

62. In December 1963, the Ley Organica del Presunuesto Functional, LawNo. 14816, provi.ded that; unspent balances in special accounts were to revert

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autoinaical t-CL4 ; 11 o the- Tresryec iyear subi^,t to exmpi ns r spcfiedz inLI U'JkL . % C.i-L UJ VLLI- A %S ~ - j J ~ -- J '- -1 -- , --

annual budget laws. However, the present plan depends upon the funds in theD.A.P. Special ccount bei ng used4 s olel y for fi nanci h pr eelp,nLi .H I' * pec kUL L A uA1 UeiLJ uD ~ W-±LJ 4. 'J ±L L I.,.1L6Lig ~

program. To this effect, an undertaking was given by the Government in asupp'ieen'ur-DIy 1 et'uer b Lo UI ktIgremnu&J NAU. g{7D-rnV /in-.J 4 >W_] -34- A-4

1964; and on April 24, 1964, immediately after signing of the Paita loan docu-ments, Supreme Decree No. 65-H, dealing wLth the powers and functions of theD.A.P., provided that the funds in the "Special Account - Port Works in Sala-verry and Other Ports" should be -used oniLy for tlhese purposes*. Despite tLisagreement, substantial unspent balances were transferred to the Treasury atthe end oI 19614 and 1965, since the annuai budget laws did not i,n practiceprovide the necessary exemption of this account from the 1963 general law.In order to ensure that the Special Account funds will be devoted exclusivelyto financing port works and equipment in the future, the Government has nowagreed that it wi-l reimburse the Special Account promptly for any year-endbalances transferred to other depositories.

63. In connection with the setting up of N.P.A., the Government hasagreed that the Special Account charges will be discontinued at Paita by theend of 1966 and at other public ports by the end of 1969. This has been takeninto consideration in assessing the Special Account receipts shown in the abovetable.

B. Future Earnings of the Port of Pisco

64. The D.A.P. is not financially autonomous. Port revenues are treatedas income in the State budget and operating expenses are paid out of the budgetas are also the expenses of the D.A.P.'s head office in Lima. Ordinary receiptsfrom port operations (that is, excluding charges and taxes that are credited tothe Special Account) are usually insufficient to cover expenses, the deficitbeing met from the State budget. The tariffs for port services are complicatedand are contained in numerous laws and decrees. The tariffs consist entirelyof charges on cargo loaded or unloaded, no charges being made against ships,and include ad valorem taxes as well as tonnage c:.arges. The charges arearbitrary, and no attempt has been made to relate them to the cost of the ser-vices provided. Accounts on commercial lines are not kept, and no balancesheets or revenue accounts can be drawn up either for individual ports or forthe D.A.P. as a whole.

65. For these reasons, no realistic picture of the Dresent financialpositior of D.A.P. as a whole or of the port of Pisco in particular can beattempted. It is possible, nevertheless, to estimate future finances inrespect of operations at Pisco, as a specific part of the National PortAuthority.

66. It has been agreepd that at each puhlic port unrder the jurisdic-i nof the National Port Authority, _ncluding the ports of Pisco and Paita, oper-ati ons will eh carri OPi mt. on en nciln =r,mm,'pi l hzn;ziq rhi re.r 1.illhomaintained which are designed to produce revenues at each port sufficient tocover all i -ts ovnraincy nges inluiAing adequ Ate dpreciationa and to earna reasonable return on the value of its average net fixed asset- in use. In

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terms of cash availability, the objective will be to ensure that in-mernally-generated resources at each port will be sufficient to meet debt interest andrepayments, to provide adequate working capital, to maintain liquid reservesadequate to meet contingencies and to finance a reasonable portion of the costof capital investment programs, including replacement of assets. In additicn,separate commercial accounts will be kept at each port under the jurisdictionof N.P.A. As stated above, the charges now credited to the Special Accountwill be eliminated no later than the end of 1969, and in their stead port-usercharges will be established for individual services which will be reasonablyrelated to the costs of providing the indi.vidual services determined in ac-cordance with modern commercial accounting practices.

67. The ports of Pisco and Paita will be subject to these general pro-visions as a part of the N.P.A. In addition, specific agreements have beenreached whereby the objective will be for these ports to earn, not later thanthe second comnlAte vyar of fuill onpertion of the new facilities to be con-structed as part of the Bank projects, a rate of return of not less than six;per cent on the average net fixed assets valued on a realistic basis.

68. Based on the foregoing agreements and the assufliptions set forth inAppendix :10, the port of Pisco estimated-income accounts from 1970, the ex-nee-ted fi:rst full year of operation at the new facili+ties toe 1975 are qm-_

marized in Appendix 11, and the estimated balance-sheet data as of December 31,of each af the years in the 1970-197 period are set forth in Aprnendix 12.The forecasts assume that: (i) the local-currency costs of the project wouldbe treated as equity capital in the independent commercial accounts of theport of Pisco; (ii) the Bank loan would be recorded therein as debt capital;and 14iiii) 4t1he accounts w-Will. relr" etheaalbiWyo orking capital and

the reserves referred to above. However, no specific reserves are set forth.aspart of the es-t- ,ate' balance-sheet- duatla inas,much as the specific~ -^oun+s~., u A.L ULLI U-L110 u u A . U L1dII LA1 LILO L J'..A . '

required to meet future contingencies and investment needs at Pisco cannotnow be determi[ned. *m isese will be agreed between the Bank and the Goverrjfenltof Peru in the future after the consultants referred to in paragraph 57 havemadue their recommendations on these points, among other things.

69. The estimates are based on revenue forecasts prepared by t4E con-sultants, and modified by Bank staff. These modifications involve somewhathighier operating costs of labor and slightly higher rates and re-venues in. 171and 1972 in order to achieve a six per cent return in these years. The as-sumed port charges are approximately the same as those used for similar esti-mates in the Paita appraisal report and are equivalent, except for 1971 and1972, to the total of the present charges, including those credited to theSpecial Account. The principal charges are the equivalent of US$ 2.31 per tonof exports and US$ 2.80.per ton of imports. These charges are moderate andinclude ships' dues as well as cargo-handling rates, separate revenues beingestimated only for storage and warehousing.

70. The results of these estimates which are satisfactory are summarizedbelow, in millions of Soles:

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1971First Yearof Full

1970 Debt Service 1975

Operating revenues 36.2 44.1 47.3Operating expenses including

depreciation 21.5 22.4 24.6Operating surplus 14.7 21.7 22.7Times interest covered 1.Ox 1.5x 1.8xTimes debt service covered 1.9x 1.7x 1.7xReturn on average net fixed assets 3.9% 6.0% 7.3%Net current assets 12.7 26.3 79.9Debt/equity ratio 62/38 60/40 52/48

VIII. CONCLUSIONS AND RBCOMMENDATIONS

71. The Bank financed project is technically sound, and the estimatesof cost are realistic. Final designs have been prepared hy co.metent con-sultants, acceptable to the Bank, who will also supervise construction. Thepronosd o-nnstrurtion and procurpment arrangePments are satisfac-torv_

72. The project has high priority -ihin the Go.ernm.ent's program forimproving and developing the public ports which D.A.P. operates. D.A.P.'slack of fi.ancial and admiristrative auonomy has a harmfl effect on portoperations and development, and the Government intends to set up a NationalPort Authority no take o,er ad-inisrt-ati^n.. of these por

73. The pow s, managevment, anCd fi.ianci '.1 policies of the Au .r v ,

and the laws under which it will function, will be acceptable to the Bank.Op erato cons ultant -w1il be- er,ioyed to ad-vise O[D £JgaLJ.tion and oe r-

ating and accounting procedures.

74. The project is necessary and is economically justified, showingan economic rate of return oI i6 per cent. Operations at the port oI Piscowill be financially sound. The rate of return on net fixed assets is ex-pected to reach six per cent in 1971, the second year of full operation andto improve thereafter.

75. The local currency costs of the project will be provided out of aSpecial Account fund set up by the Government to finance port developmentworks, supplemented, if necessary, from the general budget.

76. The project is suitable for a loan of US$ 9.1 million equivalLitto the Government of Peru. A term of 25 years, including a grace period ofabout five years, would be appropriate.

April 20, 1966

A'PPY'T~mv I

PORT OF PISCO PROJECT

ropulation of the port of Pisco's servi1ce. - 1965

Total

Department of: Lima 109,249

ICA 255,930

Euancavelica 302,817

Ayacucho 410,772

Apurimac 288,223

Arequipa 20,235

Cuzco 106,991

Total - July 1961 1,494,217

E,stimated at July 1965 (a) 1,682,000

Note:

(a) 3% annual average growth rate.

Source: Consultants, from data supplied by Direccion Nacionalde Estadistica y Censos.

PCRT COF PI9,0 PR0JlT

Past trarfic at Por' of Pisco - Dry Cargo - 195I4-1946

Exports 1954 1955 1L956 1s57 1958 1959 1960 1961 1962 1963 196k

Cotton 29.5 35.3 kl.9 24.5 35,,8 4.4.0 38.7 45.5 54.o 45.3 38.3Kinerals 20.2 30.0 30.9 33.3 23,1 23.0 25.2 33.0 21.5 25.o 26.8Cotton Seed Cake 8.8 8.0 4.8 4.3 4.5 5.0 3.6 12,0 10.3 6.8 2.1Guano, - 5.5 - 11.59 8.1 6.1 8.4 1D,,2 11.8 7.0 3.5OiL Spers 4.3 1.8 - - - 0.2 - - - - -

Pishueal 1.0 - 2.0 2.0 2.0 2.3 2.1 2.,t 5.8 25.8 106.0Other Gd6cis 0.1 0.7 0.1 0.2 0.3 0.2 2.2 0,.1 0.9 0.5 0

SubtotAl 63.9 81.3 79.7 76.2 73.8 810.8 80.2 103.,2 104.3 1]10.4 177.2

Imports

Fertilizers 3.0 4-. 5.2 2.3 4.3 16.3 16.8 15., 21.4 14.0 22.9litre - 2.6 2.2 1.3 2.9 1.0 0.9 1.4 1.0 1.5 -Urea - - - - - - 2.3 1,0 0.1 - _

Steel Ingots o.4 - 1.0 - 0.5 0.9 1.3 1.8 1.1 0.8 1.5Steel Hooos 0.4 0.7 0.7 o.6 0.3 0.3 0.7 0,7 10.5 0.5 -Insectici-'es 0.4 - - - - - - - - -

Lubricants 0.4 - - - - - - - - -

Other Goocda 0.9 2.6 0.5 1.0c 0o4 0.7 o. O,8 0,8 0.9 10,3

SubtotaL 5.5 9.9 9.6 5.2 8.4 19.2 22.4 21,6 2h.9 17.7 25,7

Coastal Trade

Guano 23.2 34.2 ;27.0 17.9 8.9 1]1.7 10.1 lo.6 9.3 5.9 9.4Sugar 4.4 3.2 3-0 3.2 3.1 1.2 _ - - -_

Salt 4 .1 3.1 0.9 - _ _Lubricant a 0.2 - - - - - - - -

Readyadb Bags 0.3 o.4 0.5 1.2 0.4 0.3 0.5: 0.2 - - -

ODther Goocis 0.5 0.9 0.5 0.2 0.4 O.4 0.2 0.3 0.2 0.2 0.3 .

Eapty Cylinaeri t - -_ _ 2.6 2.8 3.9 3.8 t

SuxbtotaL _ 32.r 41.8 31.9 22.S5 12.8 _ 13.6 10.8l 13.7 32.3 10.0' 13.5

TOTiL DRY ilRGO 102.1 133.0 1;21.2 103. 9 95.0 113.6 113. A 138.5 ll;L.5 138.1 216.4

Bulk Petroleunu S.A. N.A. 114.4 NA.A, N.A. ll.A. 1iL.0 126.1 137.9 150.6 176.9

Source: Consultants

PORT OF PISCO PROJECT

Forecast or Traslrl at Port of icoa - 1I65-1971

000's Tons

Firport,,! ~ ~~~~~ActuaLlEzgxprts 19641 1965 1966 1967 1968 1969 1970 1971. 1972 1973 1974 1975

Fis]:meal 1D6 160 200 230 265 310 325 340 355 365 385 40OOOres concentrates 27 22 25 26 27 ;28 90 115 130 133 136 1140Cotton 36 32 :30 29 27 :26 33 40 40 40 40 40Cotton seed cake 2 1 Guano 4 - - - - - - - - - - -

Others _ - - - -_ _.- _ .._.. _ _ -~

Sub-total 177 215 255 285; 319 364 448 495 525 538 561 580

D"port's

Fertilizers 23 20 19 18 18 17 22' 30 30 30 30 30Others 3 4 _4 1 _4 4 45 55 56 c;8 60 62

Sub-total 26 24 23 2,2 22 21 67' 85 86 l88 90 92

Coastal Trade

u:ao 9 4 4 3 2 1 - - - -

Others 4 4 4 _ 5_ 5 6 6. .. J 8 8 8 8 8

Sub-tot,al 13 8 8 8 7 7 8 8 8 8 8 8

Total Dry Cargo 216 247 286 315 348 392 523 588 619 634 659 680

Petroleum 177 200 215 23:1 248 267 287 308 331 356 383 400Fisi Oil - - ' 33 34 35 37 38 40

Total Cargo 393 447 501 5414 596 659 84:3 930 985 1,027 1,080 1, 120

Source: Consultants and Bank Mission

APE NMX 4

PO?T OF PISCC PPCJECT

DETAILED DBSCTRIPTICT OF P,ROJECT

(IiAPS 2 Ali3D 3)

1. ~ About 1 nnn n0n m rhir- mePtezrs of silt, sand ancd clayr have to hpdredged and disposed of outside the harbor to reach a depth of 11 metersalongside thle w)arf. About 2,00r0 -bi me+ter= s P 3biiu I A rls and hir

a certain amount of rock will have to be removed from the port site. Asswe A 1 O1Crlts a ..d 4cur. reI _O 4.,. a re±_ v LA A 4ns 4 -,n i c ±1nt in t ,h .na r h area, no d n+i1

amount of siltation is expected. However, DAP will make suitable arrange-menrts to ensure maintenance dredgi-g, as may- be required.

Thle JUi.axL.

H(UU_-Lf C log`hrf wil be bu±±u ai-u equiJL1-ped' euK . p1 | UU-£118 bC Le'ur 'Lon1g WlicI1t1 Ii 1L UCU U | | fWU uUlJCuD C

four ships simultaneously. It will be a tubular steel pile cathodicallyprotected structure with a reinforced concrete deck. Tihe depbh alongsidethe new berths will be 11 meters. There will be one open berth for handling

rinerals and fertilizer, one berth for fish-meal export, and two generalcargo berths. In addition, a small-boat jetty with an alongside depth offive meters will be buiit for the accommodation oI harbor craft, tugs andlighters.

Port Area

3. Levelling of the port's 12-hectare transit area will requireexcavation and transport of about 700,000 cubic meters of fill, partlyrock. The port will be equipped with the necessary stacking areas, roads,fire and fresh water mains, sewers, electrical distribution cable, a weighbridge, fencing, and two 50-meter high light towers.

Fresh Water Supply

4. About 2,500 cubic nieters of water are estiriatnd to be neededdaily for the port and a town of 5,000 inhabitants. The water will besupplied from the Rio Seco arca where several wells are located yieldingfrom 20 to 30 liters per second. It is expected that no treatment otherthan normal chlorination will be required. Lhree wells with pumpingstation and necessary storage will be constructed and water mains about15 kilometers long, will carry- the water to the port. A reservoir witha capacity of 6,ooo cubic meters will be built on the high ground behirdIthe new port facilities.

Annroach Road

5. Land aecess from Pisco and the Pan Amerinan Riahwrr to the n_eport facilities at Punta Pejerrey requ res the construction ot a new two-lane road, 18 krnm lonnt. The road will i4. IL meters wPv.c ie with a prvedcarriage-way, 6.6 meters wide, and with 2,2-meter wide compact2:- shoulders.T.he roan will the "-rt area in the south%vest, co,ner d- wil1 by=p1ssthe towr. as shown on Mep 2. Construction of the road has been beu,an and it

APPENDIX 4- page 2

is expiected to be completed by end 1966, at a cost of about S/. 22mIllion, US$ 0.8 million equival,nt. The construction will be carriedout and paid $'or by the Government.

Sheds and Other Buildings

6. The fishmeal berth and the general cargo berths will have transitsheds with a combined floor space of 9,000 square meters. 'The two generalcargo berths will also have warehouses, each with a floor space of 3,000square meters. A two-story administration h-ilding with a floor area ofabout 850 square meters and customs and labor offices with floor areas of 430and 185 square meters respectively will also be constructed together with thefollowing minor buildings:

(i) a police station;(ii) a fire station;

(iii) a dangerous goods store;(iv) a storage yard office;(v) mechanical workshops;

(vi) a generator house; and(vii) various auxiliaray buildings.

Tugtboat and Port Equi?minent

7 * Paracas Bav. during the winter nonths, is quite windv and an800 HP '72-foot diesel tugboat will be required for the berthing of ships.It will be equipped for f-ire fighting.

8. The electrical generator equioment and t1,e water pumps requiredfor fire fighting in the port area, and for the fresh water supply fromthe Rio Seco area are incl ndori in the nrnipjet. est-im-te under iterwris )I and5 of Appendix 6r In addition, cargo-handling equipment and workshopequininpent wil:l be procured, the details of whirh Will be decided at a laterdate as precise requirements become apparent.

Appendix 5

FORT OF PLSCO PROJECT

Technical Studies for LmDrovement_of Port of Chimbote and River Ports

1. The traffic through the port of Chimbote, which in 1964 was about780,000 tons, is handled by two deep-water berths and a lighterage pier.Export amounted to 639,000 tons including 556,000 tons of fish meal, 45,000tons of fish oil, and 29,000 tons of coal and ores. Import totalled 67,000tons, mostly scrap iron, coke, and macllinery for the steel plant; and of thecoastal traffic 6.0ooo tons was iron ore for the steel plant, 9,000 tonsguano and 6,000 tons various items. The continued growth of both import andexoort; estimated to reach an anrnuel volume of about 2.1 ndllion tons by1975, makes expansion of the deep-water facilities imperative. The ownerand onerator of Chimbote Steel Mill, Sociedad Siderurgica de Chimbote, Se.A(SOGESA), is preparing plans for the construction of a two-berth mineralpier designed to handle all stee'-mir cargo, e-pnected to reach 900000 tonsby 1975, but additional facilities will be needed to handle the remaining1,200,000 tons of cargo expected by 1975 DnAsPo has accordingly preparedpreliminary plans for a four-berth deep-water pier, about five kilometersfrom the steel=..ill pier in the southern part ofP Ferrol Bay r e plnrs,which are in a preliminary stage, require more explicit traffic and technicalstudies as well as u-to=date cost estim.tes. The studies wouldrd include the

preparation of traffic forecasts based on an economic study of the port'sservice area, assessment of the economic benefits from the project and itsfinancial viability, and preliminary engineering including soil investigatior.to the extent necessar-y 'to arrive aet a firm, estimate of cost. The estm,atedcost of the study is US$ 200,000 equivalent of which US$ 160,000 equivalentwould be foreign exchalge.

2.he inland ports, Iquitos, 'Yurimaguas, rucallpa, aid Maldonado,on the Amazon River system must be improved. Development of Peru's easternregion, the "Selva,i, is under way; and traific through tne river ports isgrowing steadily0 Only Iquitos has modern fa'vilities, consisting of ananchored pontoon wharf, 105 meters long, 6-10 meters wide, and with shedsand warehouses covering an area of about 4,000 square meters. The floatingpier provides berthing space for only one ocean-going ship. 'Wnen two vesselsare in port at the same time, it is necessary for one to anchor in the riverusing lighterage for handling the cargo. The traffic, at present about85,ooo tons a year, is expected to reach 130,000 tons by 1975; and thefloating wharf is far from sufficient to handle such volume of traffic.DOAoP. plans to expand the'pier to alleviate the present congestion and toaccommodate future traffic.

3. Pucallpa is located on the Ucayali River in an area where con-siderable erosion of the river bank takes place. There are no port .'>cili-ties of any kind at Pucallpa. A yearly cargo volume of about 25,000 tonsis handled manually over slippery river banks. The traffic is estimated toreach 62,000 tons in 1975, and D.A.P. plans to provide a floating wharf andcertain upland facilities to eliminate the present difficulty.

App enctix 5Page 2

4. YuriUnaguas, located on the Ucay-ali River, is the only shipplngoutlet for a prosperous agricultural area in the department of San Martin.The present traffic is about 10,000 tons a year, expected to grow to 17,000tons by 1975. No port facilities of any kind exist in Yurimaguas, and D.A.P.plans to build a floating wharf which would allow future relocation, ifrequired, by changing river-bank conditions.

5. The port of Maldonado presently handles some 4,000 tons of cargoa year which may increase to 8,000 tons in 1975. Also here D.A.P. plansto provide some facilities to aid in the manual handling of cargo. No finaldesign has been prepared.

6. All four river ports mentioned above need improvement or newfacilities. However, studies similar to those described above in the caseof Chimbote will be required before an appraisal of the projects can be made.The cost of these studies for the four ports is estimated at US$200,000equivalent of which US$l,000 would be foreign exchange.

P'EP-.UPort of_ Pisco ProJect

Detailed Estimate of Cost of Bank F'inanced 1P4j ect

Iters Expressed in Million S/. Expressed in Million US$ILC FE To ,a1 LC FE Total

1. Preparatory works 9,294 1:L.359 20 653 .348 .423 .771

2. Dredging 6.678 26.712 33.390 .249 .997 1.246

3. Construction of a 4-berth jetty,700 meters long, and a small boat;Jetty, 100 meters long 26.432 49.024 75.456 .986 1.829 2.815

4. Leveling of port area, roads,paved areas, and utilities 33.352 35.812 69.164 1.244 1.337 2.'-581

5. 'Water supply 9.343 21.802 31.145 .349 .813 1.162

6. Sheds and other builclings> 18.742 18.743 37.485 .6995 .700 1.399

7, Port operating equipTaent 12.205 12.205 'r55 .455

8. Iu -boat 7.102 7.102 .265 .265

9. Ehysical construction contin-gencies, 10% on items 1-8 10.384 18.276 28.660 .388 .682 1.070

10. Ehgineering services 4.579 13.738 18.317 .171 .512 . 683

11. Allowances for price increasesduring construction - 25%L1 local,8%; foreign on items 1-10 29.701 17.182 46.883 1.109 .641 1.750

12. Operations consultants .536 2.144 2.680 .020 .080 .1L00

13. Techlnical studies, Chimbote and t

inland ports 2.144 8.576 10.720 .08C) .32?0 . 400 (D

I'otal 151.185 242.675 393.860 5.643 9.0t4 14 .697 N

Rounded to 150.000 244.000 394000 ;.60oC 9.100 14.700 c

APPENDIX 7

PORT OF PTSCO PROJECT

Estimated Benefits and Economic Return

I. BENEFITS Soles '000

1969 1970 1971 1972 1973 1974k 1975

Type of Benefits

A. Reduc-tion in cargohandiing cost 12,)00 13,200 14,200 l4,800 15,200 15,BOo 16,LOO

B. Reduction in overla:ndtransport cost --- 12,600 17,400 19,100 19,600 20,400 21,000

C. Elimination of Physicallosses of fishmieal 15,50C 16,300 17,000 17,800 18,300 19,300 20,000

D. Elimination of baggingof minerals 1,500 1,500 1,600 1,700 1,800 1,800 1,900

En Reduction in vesselturn around time 23,200 31,000 35,000 36,800 37,800 39,300 b0,50C,

Total 52,700 7L4,600 85,200 90,200 92,700 96.600 99,800

I. COSTS AND DISBURSEMENT SCHEDULE

Soles '0001966 1967 1968 1969 1970-1998W8_

Direct project cost 24,100 134,000 128,700 107,200

A.cess Road 21,700

'Tousing i) 26,800 26,800

Maintenance Cost _ _7,000 anrnually

Total 4 L 16o,8oo 155,500 107,200

The economic return is approximately 16%

i) refers only to the part of housing which is essential for the arorLAio l o0

APPEMTT 8

PORS OF PB5C0 PROJECT

DIRECCION DE ADMINISTRACION PORrUARIA - NATIONAL PORTS AUTHORT

Financial Requirements - 1965-1969Ml-lion Solea

Total1965 1966 1967 1968 1969 1965-1969

Fundo Raqrd

Current Vorkes in Progregs and Debt Service

WorksPaita 39.0 146.o 22.0 107.0Minor perta 735 23,Major maintenance 7.0 7.0 7.0 7.0 7.0 35.0Salaverry dredging 4.0 4-.Port equipment 11,0 11.0

84.5 53.0 29.0 7.0 7.0 180.5

p.c.n,c._4.1 Q*t.ag 4..w.1..AA....4.,. ....4.... 6

86.1 53.0 29.0 7.0 7.0 182.1

Debt ServiceSalaverry: Suppliers credits 31.7 16.5 17.3 65.5Eximbank : Port equipmMt 2.9 7.9 7.5 7.1 6.7 32.1Paita : IBRD 2.0 4.u 5.0 7.0 7.0 25.0

36.6 28.4 29.8 14.1

13.7 122.6

122.7 81.h 58.8 21.1 20.7 304.7

New Works

Pisco - 24. 1 13a.0 128.6 107.2 393.9Matarani 6.o 30.0 lh.0 50.0lo 11.2 52. 4 6.8 110.0River Porte 10.2 17.0 17.8 45.0

6.o 75.5 217.0 193.2 107.2 598.9Port equipment, excluding Pisoo 3.0 6.o [.5 13.5

6.o 78.5 217.0 199.2 111.7 612.4

Debt ServicePisco IBRD and River Ports 1.1 4.2 8.9 13.5 27.7

6.o 79.6 221.2 208.1 125.2 64o.1

Grand Total of Fundes Required 128.7 161.0 250.0 229.2 115.9 944h.8

Sources of Funds

Special Account Receipts 110.0 115.5 121.3 127.4 133.6 607.8

Bor.owir gs (Extrna' )Currnt Works in Progress

Paita - IBRD Loan No. 373-PE 20.0 32.0 12.0 64.0Port EquiDment - Eximbank Loan 10.0 I 1.

New WorksExternal

Pieco - 1551) 16.1 83.1 80.4 6

4.3 24)3.9River Ports 6.1 8.6 4.5 19.2

30.0 5J.a. 103.7 a.9 674.3 337.1

Total Resources 140.0 169.7 225.0 212.3 197.9 944.9

Annuatl SuPlua 11.3 8.7 52.0 0.1, -.- 55.0 16.9

Curulative Sulue 11.3 20.0 .00.1 0.1Deficit ~~~~35.0 51.9

Source: D.A.P. modified by Bank Staff

Based on preliminary estimates and does not allow for priceescalatimn except in respect of the Bank projects.

PORT OF PISCO PROJECT

D]:RECION DE ADMINISTRACION PORTUARIA - NATIONAL PORTS AUTHORITY

Summary of Financial Requirements - 1965-19659 Million Soles

Total196C5 1966 1967 1968 1969 L965-1969

Current Works in Progress

Works 86.1 53.0 29.0 7.0 7.0 18:2.1Debt Service S-6 28.4 29.8 1)4.1 ]L3.7 12:2.6

122.7 81.4 58.8 21.1 20.7 30)4.7

External Borrowings 30.0 32.0 12.0 74.0Special Account Receipts 110.0 115.5 121.3 127.74 133.6 607.8

140 .0 147.5 133-3 127.)4 ln.6 681.8

Balance of Special Account FundsAvailable 17.3 66.1 74.5 10C63 112.9 377.1

New Works

Works 6.0 78.5 217.0 199.2 111.7 612.4Debt Service :1.1 4.2 8.9 13.5 27.7

6..0 79.6 221.2 208.1 125.2 640.1

External Borrowings 2:2.2 91.7 8)4.9 64.3 263.1Balance of Special Account, Funds B/D 17.3 66.1 74.5 106.-3 112.9 37.1

1'7.3 88B.3 166.2 191.2 177.2 6)40.2

Balance of Special Account, FundsAvailable 11.3 8B.7 522.0

Deficit of Funds 55.0 16.9 0.1

Accumulative Surplus 11.3 20.0 0.1 0.1Deficit 35.0 ';1.9

L'srP (~P nTQrEN I 4-

Principall Bases andu Assumptions usedu for Estk1imatue%d Financial'Results in respect of Operations at the Port of Pisco

1. A new~ National Ports Authority will be established by the end of1966 and the "Special Account" charges will be eliminated by the end of1969; and user-charges related to service costs will be assessed exclusivelythereafter.

2. Construction of the new port would be completed by January 1, 1970.

3. Except for slightly higher charges in 1971 and 1572, in order toachieve a 6 per cent return, the tariff of charges for port services wouldbe as follows, as suggested by D.A.P., such charges covering not only cargohandling but dockage, etc. and all other services except storage and ware-housing:

Exports, dry cargo Soles 62.0 ($2.31) per tonImports, 'I " 75.0 ($2.80) " "Coastal trade " 30.0 ($1.12) " "Bulk liquid petroleum " 5.0 ($0-19) " "Fish oil - 20.0 ($0.75) " r

These overall rates of charges are considerably lower than comparativecharges at Callao, so that there is a reasonable margin for increasingthe tariff should this be necessary, without the risk of encouraging trafficto use Callao in preference to Pisco. The rates are also substantially be-low those at comparable ports in other countries.

4. The personnel operating expenses would average Soles 10.00 per tonon dry cargo as compared with the present cost of Soles 6.70 per ton. Pro-vision has been made for materials, maLntenance, supervision and D.A.P. headoffice expenses.

5. Depreciation has been charged on a straight-line basis on an averagelife of the project as a whole of 30 years.

6. Operations at the port of Pisco would be required to provide forservice of the Bank loan as from January 1, 1970, the loan being for US$ 9.1million equivalent (Soles 2LL million) for a total of 25 years at 6 Der centper annum, repayments commencing on May 15, 1971.

7. Cperations at the new works of the Port of Pisco would not be ccn-cerned with the npresnt. ohsole-te nort facilities- at. Piqrr)-

PORT OF PISCO PROJECTEstimated Revenue Account in respec of Operations at Port of PiLsco 1970-1975

(Thousand Soles)

1970 19711 1 97 2 197 1974 1975flr1c1rtinteg RevenueS

Tonnage ChargeEx;ports 9 S/. 6S2 per ton 27,790 30,690 32,550 33,356 34,782 35,960Imports; @ S. 75 5,025 6,375 6, 45- 6,600 6,750 6,900

Coasta:L traffic © S/. 30 " " 240 240 240 :240 240 240Bu'Lk Petro:Leum @ S,/. 5 II 1,435 1,'540 1,655 1,780 1,915 2,000Fish oil 9 S/. 20 U 660 680 700 740 760 800

O)V -) 7 1 , c z i4.;- , '? 72. iL4 , 7 V V 4, L

Storage andl warehouse rents 1,0C46 1,176 1,.238 1,268 1,318 1,360Adclitional revienue to earn 6% by

second flill year of operation -- 3,O8 1,097 _ _

Total Operating Revenues 36,196 44,109 43,930 43,984 45,765 47,260

OporatLng liBpenses 8,8)40 9,740 10,320 10,760 11,320 11,880Depreci ation 12,682 12, 682 12,682 12,682 12,682

Total Operating Expenses 21,522 22,1122 23,002 23,442 24,002 24,,562

Cp4EratL:Ius 14,674 21, 687 20,928 20,542 21,763 22,698

Interest Expense 14,634 14,)494 14,105 13,696 131,259 12,802Tirnes :Interest Covered 1.0 1l.5 1.5 1.5 1.6 1.8Net Income 70 7,:L93 23 -Cbw TIT5T 9 9

O>srat:Hng :urplus ~1us Denreciation 27,356 34,369 33,610 33,224 34,)445 35,380

Total1 Debt Service 14,634 20,'792 20,805 20,798 20,,763 20,708Times !Debt. Service Covered 1.9 1.7 11.6 1.6 1.7

Increase in Net Current AssetsOperating surplus plus depreciat, on,less debt service 1^ 2722 13,577 12,805 12, 26 13,682 14,672

Return on Aver age Net Fixed A.s-sete 3.9 .0 6.0 6.1 A 7

PORT OF PISCO PROJECTPro Forma Balance Sheets in respect of Operations at F'ort of Flisco

December 31, 1970-197TMiLlion Soles

1970 1971 1972 1973 1974 1975Assets

Fixed Asset,s at; cost 381.4 381.4 381.4 381,.4 381.4 381.4

Less AccumLlated Depreciation 12.7 25.4 3B.,O 50.7 63. 76.1

Net Fixed Assets 368.7 356.0 343.4 330.7 318.0 '05.3

Net, Current; Assets 12.7 26.3 39.1 51.5 65.2 79.9

Susnen'se Account - IBRI) loan forstudies otherthan at Pisco 12.5 12.5 12,5 12.5 12.5 12.5

393-9 394.8 395 4-2.7 395.7 397.7

Capital

Local currency inveosted in project 150.0 150.,O 150,.0 150.0 150.0 15C).0

Earned S!ra1us 0.0 7.2 14,.1 20.9 29.4 39 3

150.0 157..2 164,.1 170.9 179.4 189.3

Debt IE3RD 243.9 237.6 230.9 223.8 216.3 208.4

393.9 224,8 395.0 3 7 95.7 39_l-7

Debt/E_uity__R_tio 62/38 60/h,O 58/142 57/43 55/45 52,'48

Source: Bank Staff

| T E C U A D O R / C O LO0 M B I A/

I .mV '

Lob,"O1l1i u;°< S '& -fi,/ /,>:I ob;tosgillU1lliou/rot 11|1111!$ v n l, 5

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0 /mn :o,tslti-8R Pi,ERl&s . !;,' - _ = ; q \

Et D-tP % C-

° 9, ;4 1 S?\,- =E_ = =zr _tLt i.s gm~U-t\ -- = , -_

Chi. ., Esq ;,; == __ __CCSFnC dc ; nawrv>_ =_ __ == t _ Z_I_

\V . 0_,,- = __--

o a=tossc4- ~~~~~~~87 !! . t

MAJOR PORTS AN3D t ;. - ... 2t ~SERVICE AREAiS- | Xg>

0: Prtbivec ports.: s>>,Ztro.i ////4

|PAITAI WIjor portsSERVICE. AREAS ,.r 4\>J

| _ _ ~~~~~lllj Pa-AnrrnUhay 1!!1lAll 1l 4:19 I-- iGra.Liond. pal.jsCtr .i.

11-A.-i- rpod oo Hnighn ,\,

| O 50 200 25l zo )1 300 .. t <

| ~~~~~KILOMETERS / / llrn

APRI L 196t. 1.JiRR-J1134R3

MAP LA

P E R U

PORT OF PISCO PROJ ECTHINTERLAND

-- Asphalt road,s

- Gravel roads (to be improvedj

Dirt roads (to be ieprov-d)

............... ........ Proposed roads

1,,i.,. ~Port of Pisco Sevice Area !* Mines in operation

* 'Mioes st died by *E1 danco M-rc

I f 0 / I

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FEBROABY 190(. IIIRD- Ib99RI

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ta,7 _ ; wi $ 7 , G'/l ~~~~P APAoE R U

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PORT 'OF PISCO PROJECT ' t . ;

SUL)RROU NDI NG A R E A S ,'t ;

PErUF / 2 A M P A D E L E c H U Z A

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SJRROUNDING AREAS fHtrOa,,o ... t ....... . 0 t*t'O.. . .... .1 g fi I I fi Z Sos , C7 r _ _~t

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AdmiintratIo. wiilOingP E R U ''s ,i . Custoes ofrico

F'ORT OF PISCO PRC)JECT ;5 Labour AdMin:btratiOn Of-ICe

NEW FACiLITIES // 3 -~~~~~~~~~~~~~~~~~~~1 Police StIonN- E 'w' F A4 C i L i T 1 E S hc on

/1/ ~~~~~~7 -Ch.ck Point

Weigh Bridge

/ ~~~~~~~9 -.Fire stati-n

ID Dangeror . Goo,ds Store

ii;' ~~~~~~~12 -.Storage Yard OCcj ~~~~~~~~(Proaeii flera; shown in redl . i 1 . Labour Orricel

- / Q i 13 * Puallc LaoatorleS

/ -~~~~~~~1 Mechanical WorkshopSI,- Generator Rouse13- Marine Yard

0 1N Wosrks Yard

\ Llght;lng Ter 5 m.

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