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Document of

The World Bank

FOR OFFICIAL USE ONLY

Report No. 15806

IMPLEMENTATION COMPLETION REPORT

COLOMBIA

CUCUTA WATER SUPPLY AND SEWERAGE PROJECT(LOAN 2470-CO)

JUNE 24, 1996

Environment and Urban Development Division

Country Department IIILatin America and the Caribbean Region

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

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CURRENCY EQUIVALENTS

Currency Unit = Colombian Peso (Col $)

EXCHANGE RATE EFFECTIVE MARCH 1, 1984

US$1.00 = Col$92.3Col$1.00 = US$0.0108

WEIGHTS AND MEASURES

Metric System

FISCAL YEAR

January 1 to December 31

PRINCIPAL ABBREVIATIONS AND ACRONYMS USED

CRAS Water and Sanitation Regulatory Comission

DNP National Planning Department

EAAB Water and Sewerage Company of BogotA

EMC Water and Sewerage Company of Cucuta

FINDETER Territorial Development Financing Agency

INSFOPAL National Institute of Urban Development

SSPD Superintendency of Domiciliary Public Services

UFW Unnacounted For Water

FOR OFFICIAL USE ONLY

TABLE OF CONTENTS

PREFACE.

EVALUATION SUMMARY.11

PART I: PROJECT IMPLEMENTATION ASSESSMENT ............................................. 1

1. STATEMENT OF OBJECTIVES ............................................. 12. ACHIEVEMENT OF OBJECTIVES .......................... 1.....13. MAJOR FACTORS AFFECTING PROJECT IMPLEMENTATION ......................... 94. PROJECT SUSTAINABILITY ............................................................ 115. BANK PERFORMANCE ............................................................ 126. BORROWER PERFORMANCE ............................................................ 137. ASSESSMENT OF OUTCOME ............................................................ 148. FUTURE OPERATIONS ............................................................ 159. KEY LESSONS LEARNED ............................................................ 16

PART II: STATISTICAL ANNEXES ............................................................ 18

TABLE 1: SUMMARY OF ASSESSMENTS ............................................................ 18TABLE 2: RELATED BANK LOANS ............................................................ 19TABLE 3: PROJECT TIMETABLE ................................................................ 19TABLE 4: LOAN DISBURSEMENTS: CUMULATIVE ESTIMATED AND ACTUAL ..................... 20TABLE 5: KEY INDICATORS FOR PROJECT IMPLEMENTATION ........................................... 21

TABLE 6: KEY INDICATORS FOR PROJECT OPERATION ..................................................... 21TABLE 7: STUDIES INCLUDED IN PROJECT ............................................................ 22TABLE 8A: PROJECT COSTS ............................................................ 23TABLE 8B: PROJECT FINANCING ............................................................ 24TABLE 9: ECONOMiC RATE OF RETURN ............................................................ 24TABLE 10: STATUS OF LEGAL COVENANTS ............................................................ 25TABLE 11: COMPLIANCE WITH OPERATIONAL MANUAL STATEMENTS .............................. 28TABLE 12: BANK RESOURCES: STAFF INPUTS ............................................................ 28TABLE 13: BANK RESOURCES: MISSION ............................................................ 29

ANNEX 1 ............................................................ 29

ANNEX 2 ............................................................ 31

This document has a restricted distribution and may be used by recipients only in the performance of theirofficial dutics. Its contents rnay not otherwise bc disclosed wiLhout World E3ank authorization.


COLOMBIA

CUCUTA WATER SUPPLY AND SEWERAGE PROJECT

LOAN 2470 - CO

PREFACE

This is the Implementation Completion Report (ICR) for the Cuicuta Water Supply andSewerage Project in Colombia for which Loan 2470-CO of US$18.5 millon equivalent wasapproved on September 11, 1984, and became effective on April 30, 1985.

The loan was closed on June 30, 1995, 36 months later than the original closing date (June30, 1992). Final disbursement took place on July 6, 1995, at which time a balance ofUS$374.299.24 was canceled. Cofinancing for the project was provided by the NationalGovernment and by FINDETER (Local Loans).

The ICR was prepared by Mr. Menahem Libhaber (LA3EU) and by Mr. German Silva(Consultant) of the Latin America and the Caribbean Region, and reviewed by Mr. Eugene D.McCarthy (Division Chief, LA3EU) and Mr. Robert Crown (Project Adviser, LA3DR).

Preparation of this ICR began during the Bank's final supervisi6n/completion mission inFebruary 1995. It is based on material in the project files. The borrower contributed to thepreparation of the ICR by working closely with the team which prepared the ICR and byproviding comments on the draft ICR, which have been incorporated into the final document.

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EVALUATION SUMMARY


LOAN 2470-CO

COLOMBIA

Introduction

i. Colombia, with a population of about 35 million inhabitants, 70% of which is urban, hasmade impressive strides in expanding its water and sanitation sector in the past decade. Over 76%of the population has now access to drinking water, while sanitary sewerage covers 64% ofhouseholds in the country. The coverage levels in the four biggest urban centers of Bogota,Medellin, Cali and Barranquilla, which together account for 30% of the population, issubstantially higher, at 88% for water and 85% for sewerage. The demand for improving andexpanding the water supply and sewerage services is still high. Nevertheless, major institutionalproblems persist, having their origin in highly politicized utility companies and lack ofaccountability and performance. A new regulatory framework conducive to efficiencyimprovements, expanded private sector participation in the delivery of public services, greateraccountability, and more arm's length relationship between utilities and local politicians waslegislated by the Government as Public Services Law (Law 142) enacted in July 1994. TheGovernment's main sector goals are to: (a) restructure the existing institutions; (b) increasenational household coverage of water and sewerage services; (c) improve the quality of drinkingwater from public systems; and (d) formulate and initiate implementation of wastewater treatmentstrategy for the largest cities. Since 1968 the Bank has made 14 loans, totaling US$700 million,for water supply and sanitation development in Colombia.

Statement of Project Objectives

ii. The Cu:cuta water supply and sewerage project had two main objectives: (a) to improveand expand water supply, sewerage and storm drainage services in the city of Cucuta; and (b) tohelp the water company of Cucuta, Empresas Municipales de Cucuta (EMC), develop into astrong multi-service municipal company which could serve as a model for similar companies inother medium-size Colombian cities.

Achievement of Objectives

iii. While the institutional strengthening of EMC was not accomplished and its conversion toa model utility did not take place, most of the physical works provided for by the Staff AppraisalReport (SAR), with the exception of a small component of drainage works, were executed, i.e.,100% of the upgrading and expansion of the water supply systems, 100% of the Zulia river water

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supply scheme and over 95% of upgrading and expansion of the sewerage systems. As a result ofthe project, the water and sewerage coverage rates in Cucuta were increased to 90% each, andthe water supply flow to the city has been almost doubled by the Zulia river water supply scheme,a new water source and its ancillary supply works, which has been brought on stream. The mainimpact of the new water supply works is ensuring continuous supply to a low-income populationof about 250,000 inhabitants (40 % of the city's population), which prior to project completion,either had no access at all to water supply or received water under severe rationing conditions.Taking into consideration the successful achievement of the important project objective ofimproving and expanding the water supply and sewerage services in the city of Cucuta, theproject has been rated as marginally satisfactory, even though-the objective of institutionalimprovement has not been achieved.

Major Factors which Affected Project Implemetation

iv. Implementation of the project was negatively affected by a number of factors:

* the political climate in the city, manifested by substantial and continuous interferenceby local politicians in EMC's management. The individual interests of these politicianstook precedence over the institutional well being of EMC and the need for thiscompany to provide an efficient service to its customers;

* EMC's institutional weaknesses and the constant changes in its key personnel, resultingfrom the political intervention;

v EMC's chronic financial problems and its difficulty in generating counterpart resourcesdue to high administrative and operating costs and the combined impact of a very highUnaccounted For Water (UFW) percentage, lack of political will to raise tariffs to thenecessary levels, the rigidities created by the strong labor unions, and a burdensomecollective labor agreement;

* lack of consistency and clarity in the criteria both by the Bank and by EMC concerningthe design of the wastewater treatment plant during an extended period includingpreparation and implementation. The final design of the treatment plant, which wasprepared during the last year of project implementation, appears to be meeting theappropriate capacity, technology, and environmental protection demands.

v. The contracting of a Fiduciary Agency which acted, during the extension period, as theproject executing agency, had an obvious positive impact on the project. This operationalarrangement allowed the successful completion of the Zulia river water supply works, the projectcomponent that will probably yield the greatest benefit for the city of Cucuta.

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Project Sustainability

vi. Despite the success achieved in executing the Zulia river water supply works, the project'ssustainability is still in doubt due to the pattern of intervention by local politicians in thecompany's administrative decisions, constant changing of EMC managers, lack of continuity ofqualified personnel in key positions and unsatisfactory operational and administrative procedures.Sustainability will depend mainly on the commitment of local leaders to help in solving the type ofproblems which EMC is facing, as well as on continuous monitoring and strict control on the partof the new supervisory bodies set up recently by Law 142, the Water and Sanitation RegulatoryCommission (Comision Reguladora de Agua y Saneamiento--CRAS) and the Superintendency ofDomestic Public Services (Superintendencia de Servicios Publicos Domiciliarios--SSPD), withrespect to the adoption of an appropriate institutional structure. Internally, project sustainabilitywill depend on urgent implementation of the UFW control program and on financial rehabilitationof the company through tariff adjustment, a basic requirement to enable EMC to meet itsoperational, network expansion and debt-service costs.

Bank Performance

vii. The Appraisal Report accurately identified the major expansion needs. The main risksidentified in the SAR were EMC's institutional and financial weaknesses, particularly thoseattributable to the commitment of national and local authorities to timely adjustment of tariffs.The risk of delays in implementation of physical works was rated as low. This risk was clearlyunderestimated, in view of the innumerable problems encountered during the project. Interferenceby local politicians in project management and in EMC's internal management, a situation thatobviously had a very unfavorable impact on the project by weakening EMC's managerial andadministrative capability, was not deemed to represent a risk. The estimated cost for constructionof the wastewater treatment plant was considerably lower than required. Consequently,management of the program for construction of the wastewater treatment plant was not alwayssatisfactory and the plant was eventually not constructed under the project.

viii. The Bank suspended disbursements in late December, 1990, when it became convincedthat the borrower was not honoring its commitments; it did not cancel the loan, however, seekinginstead corrective actions by EMC. In this case, the Bank's flexible approach undoubtedlyallowed the completion of the Zulia river works, a component essential to the supply of water toCucuta's lower-income population. It also led EMC to a position which enables it to increase itsrevenues through the sale of the incremental water supplied by the project, and improve itsfinancial situation. However, it was not successful in resolving EMC's institutional crisis.

ix. In view of EMC's limited creditworthiness and debt servicing capacity, the size of theapproved loan ($18.5 million) was too big for that company.

Borrower Performance

x. The institutional weakness of the borrower (EMC), the constant interference by localpoliticians in its administration and the resulting instability of its key personnel preventedachievement of one of the main project objectives, that of converting EMC into a modelenterprise.

xi. EMC's inadequate financing capacity, combined with its inability to reduce the UFWpercentage and the lack of political will to raise water tariffs and get rid of surplus personnel,forced the guarantor (the Govemment of Colombia) to assume responsibility for repayment of theloan obligations, with only one exception, when EMC made a repayment in the second half of1995.

xii. Chronic local political interference and the weakness of EMC's managerial capacitycompelled the National Government to require that project management be entrusted to aFiduciary Agency, independent of EMC and relatively free from local and regional politicalpressures and interference.

xiii. The National Government, particularly DNP and, to a certain extent, FINDETER,provided continuous support to the project and contributed to resolution of the problems thatarose during project implementation. However, they were not effective in bringing aboutinstitutional improvements in EMC. It also undertook a radical institutional reform by enactingLaw 142 in July 1994, which created an appropriate framework for the efficient operation ofwater supply and sewerage utilities in the future. The success of this reform still depends on theGovemment's effectiveness in enforcing this Law.

Assessment of Outcome

xiv. Overall, the project results can be regarded as marginally satisfactory. Implementation ofthe works took place satisfactorily, though behind schedule. On the other hand, the scheduledinstitutional strengthening programs and studies were not all carried out, and those that were,were either not performed satisfactorily, or their recommendations were not implemented byEMC.

xv. Calculation of the economic Intemal Rate of Retum (IRR) for the project, performed byEMC on the basis of project costs and marginal benefits over the next 30 years, assuming that thecurrent tariffs remain unchanged in Dollar terms and that UFW losses are reduced to 35 percent,yielded an IRR for the principal project component of -0.08 percent, which is unsatisfactory.Sensitivity analysis of the IRR to: (i) changes in the UFW percentage; and (ii) adjustment of theaverage water tariff, shows that the project could have been economically satisfactory had EMCimplements a strict program for reduction of UFW losses and increased the tariffs by 40%.

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Future Operations

xvi. In 1994, in light of the water supply sector's serious institutional problems, the NationalCongress enacted Law 142/94, regulating domestic public utilities' services. The Law assignedinstitutional responsibility for the water supply and basic sanitation sector to the Ministry ofEconomic Development. It also set up a Water and Sanitation Regulatory Commission (CRAS)and a Superintendency of Domestic Public Services (SSPD), responsible for overseeing thesepublic enterprises and assessing their financial, technical and administrative management.Although implementation of the reform has barely begun, the situation of the sector and itsenterprises is expected to improve substantially in the medium term. Law 142 also provides that,effective July 1996, all the public service utilities should either become share holding companiesor organized as public-sector industrial and commercial enterprises, and in addition must furnishthe CRAS with a study demonstrating their entrepreneurial viability. The Bank's future operationswill have to be conducted with these new enterprises, once they have been restructured andadjusted financially and operationally in accordance with guidelines set out by the CRAS.

Key Lessons Learned

xvii. Significant parts of the institutional strengthening programs (managerial, financial,administrative and technical) ought to have been implemented up front, as a condition precedentto approval of the loan, and not as part of it. It should normally be a requirement that theborrowing entity achieve, prior to signing the loan agreement, a level of viability--managerial,financial, technical, and administrative--sufficient to guarantee proper management of the project.Overall, however, the institutional improvement objectives for Cucuta were not realistic andCiicuta is a good example of why there has been a change in the Bank's approach in recent yearsto the strategy of institutional improvement in the water sector, focusing on promoting privatesector participation.

xviii. In the case of loans to regional or local utility companies, the local political environmentshould always be evaluated during project preparation and the evaluation results should be takeninto consideration, so as to ensure, if warranted, incorporation of mechanisms such as up frontinstitutional adjustments, to insulate them from political intervention,.

xix. The use of a Fiduciary Agency as a project management unit was successful in that itliberated the project management from its dependence on EMC and sheltered it from politicalintervention and from a lack of continuity of EMC's management. Had it been used from theoutset, project implementation could have been reduced by 2-3 years.

xx. The size of an approved loan should be in proportion to the company's annual billingvolume and hence its capacity to generate internally sufficient resources to service its debtobligations. In the present case, a loan of US$18.5 million exceeded EMC's debt-servicingcapacity, and the project should have been implemented in two stages, the first one consisting ofrehabilitation and expansion of the water and sewerage networks, as well as UFW reduction, andthe second consisting of the Zulia river water supply works.

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xxi. The completion of the physical works resulted in important benefits, in particular, ensuringcontinuous supply to a low-income population of about 250,000 inhabitants (40 % of the city'spopulation), which prior to project completion, either had no access at all to water supply orreceived water under severe rationing conditions. The achieved benefits justified the decision toextend the closing date of the loan.


COLOMBIA


LOAN 2470-CO

PART I: PROJECT IMPLEMENTATION ASSESSMENT

1. STATEMENT OF OBJECTIVES

I. The Ciucuta water supply and sewerage project had two primary objectives:

(a) to improve and expand water supply, sewerage and storm drainage servicesin the city of Cucuta; and

(b) to help EMC develop into a strong multi-service municipal company thatcould serve as a model for similar companies in other medium-sizeColombian cities.

2. ACHIEVEMENT OF OBJECTIVES

2. Achievement of the project objectives was marginally satisfactory even though theinstitutional strengthening objective was not achieved. The reason for the marginallysatisfactory rating is that, except for a small component of drainage works, the physicalworks provided for by the SAR were fully (close to 100%) executed, the water andsewerage coverage rates were increased to 90% each, and a new water source (the Zuliariver) and its ancillary supply works, which almost doubled the water supply capacity tothe city, has been brought on stream, benefiting a low-income population of about250,000 inhabitants (40 % of the city's population), which prior to project completion,either had no access at all to water supply or received water under severe rationingconditions. More specifically, the upgrading works and expanding of water supply(components A and B) and sewerage (component C) systems were almost fullyimplemented (100% implementation for components A and B and over 95% forcomponent C), though well behind the original timetable. Construction of the wastewateroxidation ponds under component C did not take place, however, due to considerableunderestimation of the construction costs during project preparation as well as due toconceptual errors in the designs prepared during the initial years of the project; this madeit necessary to replace the execution of the originally proposed works by the preparationof studies and engineering designs for a wastewater treatment plant. Neither the drainagecanals lining nor the storm-water collector works provided for under part D of the project

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were executed. Even though most of the studies proposed in parts E and F werecommissioned and carried out, their recommendations were not implemented, with theresult that the objective of institutional strengthening of EMC and its conversion into amodel utility was not achieved.

3. Part A: Expansion of the Water Supply System. The works included incomponent A are defined in Table 1, which also contains details on the works executed.

Table 1: Implementation of Works Under Component A

Implementationprovided for in

the Loan Implemented %Description Agreement as of 06/30/95 Execution

A. EXPANSION OF THEEXISTING WATERSUPPLY SYSTEM

- Primary networks 43.0 km 62.4 km 145- Storage tanks 8,000 m3 9,700 m3 121- Las Lomas pumping station 120 I/s 120 I/s 100- Los Benefactores pumping

station 6 I/s 6 I/s 100- Secondary networks 120 km 120 km 100- House connections 10,000 units 10,000+ units 100- Domestic meters supply andinstallation 50,000 units 50,000 units 100

4. Part B: Zulia River Water Supply System. The initiation of construction of thenew Zulia river water supply system was delayed until 1991 due to EMC's seriousfinancial problems and consideration was even given to canceling this component. It wasfinally decided to go ahead with this Component, which was completed satisfactorily inJanuary 1996, raising the water supply capacity to the city of Cucuta by 70% and ensuringadequate supply to the city up to the year 2005, provided the percentage of water losses isreduced to a lower level of around 35%; if, however, the current UFW level of 42%remains unchanged, the available supply will barely suffice to meet the current needs.While it is true that the works were completed more than three years behind schedule,their impact on the city and on the low-income residential neighborhoods, usually locatedin areas of high topographical level, has been so great that it mitigated the negative impactcaused by the delays in execution. The achievement of this physical goal justified thedecision to extend the closing date of the loan. Canceling the loan on the original closingdate would have: (a) subjected the city's low-income residents to further years of water

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rationing, since EMC would have had great difficulty in obtaining new loans to completethe works; and (b) deprived EMC from the prospect of increasing its revenues andimproving its financial situation, leaving it with uncompleted works after having investedUS$ 11 million (actual disbursement on original closing date). The works executed underpart B of the project are summarized in Table 2.

Table 2: Implementation of Works Under Component B

Implementationprovided for in Implementation

Descriptin .the Loan as of 06/30/95 ExecutionDescription Agreement

B. ZULIA WATER SUPPLYSYSTEM

- 48" pipe connecting the intaketo the raw water pump station 0.45 km 0.45 km 100

- Raw water pumping station(Termotasajero) 1.0 m3/s 1.0 m3/s 100

- 36" pipe connecting the rawwater pumping station to thepressure break structure 1.5 km 1.5 km 100

- 39" pipe connecteng thepressure break structureto Dofia Nidia treatment plant 15.0 km 15.0 anm 100

- Dofia Nidia treatment plant 1.0 m3/s 1.0 m3/s 100- Treated water pumpingstation at Dofia Nidia 1.0 m3/s 1.0 m3/s 100

- Loma de Bolivar pumpingstation 0.3 m3/s 0 0

- Storage tanks:* Antonia Santos 3200 m3 3200 m3 100* Loma de Bolivar Bajo 2000 m3 0 0* Loma de Bolivar Alto 2700 m3 0 0

5. The Loma de Bolivar Bajo and Loma de Bolivar Alto tanks and the correspondingpumping stations, which are essential to supply the neighborhoods of Los Alpes, Victoriaand Belen, were not constructed due to lack of resources. These investments amount toless than US$ 1 million, and EMC will most probably complete these works, by utilizingits own resources, when they become available.

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6. Part C: Sewerage Works. The works under part C were partially executed, asspecified in Table 3.

Table 3: Implementation of Works Under Component C



C. SEWERAGE SYSTEM

- Primary collectors 11.0 km 10.2 km 90- Secondary networks 100.0 km 124.72 km 125- House connections 8200 units 6636 units 81- Construction of the wastewater

treatment plant 1.0 m3/s Design Only* 0

* Design has been completed in April 1966.

7. The scheduled works, except for construction of the wastewater treatment plant,were almost fully executed, with small differences in relation to the preliminary estimates,resulting from adjustments made after completion of detailed design.

8. The construction of the wastewater treatment plant was originally included in theproject to recover the water quality in the Pamplonita river to which the Cuicutawastewater is discharged and to prevent deterioration of the water quality in the Zuliariver to which the Pamplonita river discharges and which flows into Venezuelan territory.The upgrading of the water quality in the rivers downstream of Culcuta was supposed tobenefit communities living next to the rivers and to ensure that Venezuela's reparian rightson the Zulia river would not be adversely affected. Before signing the Loan Agreement,the Bank had sent the Executive Director representing Venezuela a letter of commitmentto construct, as part of the project, a wastewater treatment plant which would ensure thatno incremental pollution would reach Venezuelan territory as a result of implementation ofthe project.

9. During project preparation, EMC requested the local consulting firm which waspreparing the sewerage master plan, to draw up a preliminary report on alternativewastewater treatment systems, including their location and preliminary cost estimates. Anoxidation ponds treatment plant was recommended as the most appropriate alternative butits cost was considerably underestimated. As a result, an unrealistically low budget wasallocated for construction of the treatment plant. In July 1985, while initiating thesupervision of the project, the Bank suggested that additional studies be carried out forsite verification and revision of the preliminary cost estimates. At the beginning of 1986,

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EMC hired a foreign consulting firm to perform the corresponding feasibility studies,utilizing Bank financing. The consultants recommended an oxidation ponds treatmentsystem and selected a site which involved the construction of a 10 kmcollector/interceptor. As a result of this feasibility study, the estimated cost amounted toUS$7.5 million (compared to the original estimate of US$1.3 million), a figure thatexceeded EMC's financing capacity. With the advice of the consulting firm which carriedout the feasibility study and the local consulting firm which was in charge of supervisingthe works, EMC proposed to the Bank that the design criteria be revised to reducetreatment capacity from the original value of 1.0 m3/s to 0.30 m3/s. It also committed tocarry out simultaneously a program for control of industrial wastes discharges andpermanent monitoring of water quality, the effect of which would be to reduce the adverseimpact on the quality of the water of the Zulia river within the territorial borders ofVenezuela.

10. EMC awarded the contract for final design of the 0.3 m3/s treatment plant to thesame consulting firm which carried out the feasibility study, and in 1991 acquired the landrequired for construction of the treatment plant. In July 1992, however, EMC requestedthe Bank (in its fax of July 28, 1992) to postpone the initiation of the bidding process forconstruction of the treatment plant because it had found serious shortcomings in thestructural designs and cost estimates and had reservations about the concept of phaseddevelopment of the project with the initial phase treating only 0.3 m3/s. As a consequenceof these concerns, the Bank carried out a further review from which it concluded that, inaddition to EMC's observations, the selected treatment plant site was not suitable for anoxidation ponds plant since it was located within the city limits and an environmentalimpact study of the proposed plant had not been carried out (aide-memoire of September24, 1992).

11. In September 1992, EMC, DNP and the Bank jointly agreed to carry out a newstudy to find a suitable solution to Cucuta's sewage treatment problem; this led toamendment of the description of part C of the loan agreement (loan agreement amendmentof May 24, 1993), which reflects a modification in the Bank's approach, accepting that,because of budget constraints, the treatment plant could not be constructed under theproject and would have to be constructed at a later stage', but ensuring the completion ofits detailed design in the framework of the project. The modification of the Bank'sapproach was communicated to the Executive Director representing Venezuela on March1, 1993. The extension period of the loan closing date was granted to allow for thecompletion of the wastewater treatment plant detailed design.

12. In December 1993, EMC awarded a consortium of a foreign and a local consultingfirms a contract to carry out a feasibility study for treatment of the entire flow of thewastewater of Cuicuta, with a first stage plant capacity of 1.0 m3/s, as originally envisagedduring project preparation. The consultants completed this study in August 1994. In

The Colombian Govermnent has committed, in DNP letter UDU-DEM No. 8955 dated February 3, 1993, to condruct a watowadertreatment plant which would be economically, financially, institutionally and environmentally viable. Moreover, the Bank informedthe Executive Director representing Venezuela, in March 1, 1993 that it was willing to finance the treatent plant

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February 1995, following a call for bids among prequalified bidders, EMC awarded thecontract for detailed design of the treatment plant to the same consortium that hadprepared the feasibility studies. The final design report was completed in April 1996. Thefinal design, which is based on compliance with Colombian Decree 1594 of 1984, relatedto discharge of treated wastewater to receiving water bodies (which requires 80% removalof: (a) organic matter expressed as Biochemical Oxygen Demand (BOD); and (b)suspended solids, from municipal wastewater prior to its discharge into a river), providesfor the construction of a first phase plant for a capacity of 1.25 m3/s, consisting of a trainof ponds which include: (i) anaerobic ponds; (ii) recirculated facultative ponds; and (iii)maturation ponds. The second and third stage are identical, each with a capacity of 0.625m3/s, consisting of anaerobic ponds followed by biological filters with secondarysedimentation tanks. The cost of construction of the first phase plant is estimated atUS$18.5 million and that of the associated main collectors US$20.5 million, amounting toa total cost of US$39.0 million for wastewater treatment, as compared to an estimate ofUS$1.3 million ten years earlier.

13. The Pamplonita river flows 55 km downstream of Cujcuta in a remote, isolated anduninhabited border zone within the territory of Colombia, before it discharges into theZulia river. The flow of the Zulia river is over 10 times bigger than that of the Pamplonita,with the result of: (a) considerable self purification of the water during its flow in thePamplonita river; and (b) high dilution of the Pamplonita river water before it reaches theVenezuelan border after several additional kilometers of flow of the Zulia river. Thefeasibility study carried out in 1994, found that the self purification which takes place inthe Pamplonita river before it flows into the Zulia river is significant. Consequently, forcomplying with the requirement of preventing an incremental contamination of the Zuliariver within the Venezuelan territory in the medium term (up to the year 2005), not even aminimal treatment is required (while in order to maintain satisfactory conditions in termsof BOD and Dissolved Oxygen (DO) in the Pamplonita river, only a minimum - primarylevel - treatment is required). This conclusion of the report casts serious doubts about thebasis for the SAR concern in regard to the need for preventing an incremental pollutionfrom reaching Venezuelan territory, and the resulting approach of the necessity to treat theexpected incremental 1 m3/s of wastewater. From this new information it seemsreasonable to conclude that the modification in the Bank's approach in early 1993, whichresulted in postponing the construction of the treatment plant, would not have resulted,therefore, in adverse environmental effects in Venezuelan territory in the medium term. Itfollows that the willingness of the Bank to finance the treatment plant should be revisited.

14. In conclusion, the detailed design of an appropriate wastewater treatment plantwith a capacity for: (a) maintaining the quality of the Pamplonita river water withinColombian river quality standards; and (b) preventing future contamination of the Zuliariver water in the long run, is now complete and available to the decision makers ofCuicuta, providing them with accurate data on which to base the decision to construct theplant, and enabling them to: (a) assess its financial viability in light of current commitmentsand the new ones stenmming from the wastewater treatment plant project; and (b) negotiatewith the National Government its participation in financing the treatment plant.

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15. Part D: Storm Water Drainage. In agreement with the Bank, this projectcomponent was not executed due to EMC's lack of resources. This is a small component,involving an investment of US$ 1.4 million and EMC may complete it using its ownresources, when they become available. The works of component D provided for in theloan agreement are defined in Table 4.

Table 4: Works Under Component D of the Project



D. STORM WATERDRAINAGE SYSTEMS

- Storm water drainagecollectors 5.0 km 0 0

- Relining of Bogota canal 13.0 km 0 0

16. Part E: Institutional Strengthening. A number of studies and advisoryassistance services were contracted under this project component. The following is adescription of these studies and their impact on EMC:

* Preparation of a management control information system. The study wascarried out but the developed system was not put into operation due todifficulties EMC had in being able to use it;

* Study of the reorganization of EMC, revaluation of assets and actuarialcalculation of pension obligations. This study was not completed satisfactorilybecause of the inexperience of the selected consulting firm and the lack ofcommitment of EMC's management to implement institutional improvements;

* Study of improvement of operational practices and UFW control. This studywas carried out only partially and with a substantial delay. As a result of thesuspension of disbursements the study was interrupted, and was not renewedwhen the suspension was lifted because of the slow response of the consultant.Consequently, the network simulation and telemetry portion of the study wasnot executed at all and the implementation of the study's recommendationswas very limited. The UFW index continues to be very high (42%), a fact thatclearly demonstrates a continuing need for implementing the consultant'srecommendations;

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* Vehicles and laboratory equipment were acquired, and training of variousofficials and professional in Colombia and abroad was financed.

17. Although the aforementioned studies and advisory services were carried out inpart, the goal of institutional strengthening of EMC was never achieved due to lack ofpolitical commitment and too frequent changes of management. The concept of achievingbetter performance of an ailing public utility by attempting to implement the institutionalimprovement program proposed in the Cucuta project proved to be unrealistic; even ifadditional efforts had been invested in implementing that program prior to suspension ofdisbursements, it is very doubtful that the expected institutional improvement would havebeen achieved. Cucuta is a good example of why there has been a change in the Bank'sapproach towards institutional improvement, which is now directed to promoting privatesector participation as a means for such improvement. Two attempts to bring aboutsignificant institutional reform were in fact carried out after the suspension was lifted in1992. These reforms were not part of the original institutional strengthening program andwere based on newer concepts, including in one case the concept of private sectorparticipation The first one took place in 1992 and was aimed at liquidating EMC andcreating a new company with private sector participation which would take over theresponsibility for providing the water supply, sewerage and solid wastes services inCucuta. The concept was based on the process which was undertaken in Barranquilla,i.e., creating a mixed capital company with a minority of private share holders who wouldhave the control of the company in the Board of Directors and would eliminate theMayor's and Municipal Council's control of the board and help insulate the company frompolitical intervention. A mixed capital company, "Metroservicios", was constituted butthe private sector of Cucuta showed no interest in purchasing its shares and the effortfailed. One possible reason for the unwillingness of the private sector to participate is thelocation of Cucuta in a guerrilla activity zone and the fear of the guerrilla reaction. Privatesector participation requires stability and is not expected to be achieved in unstableguerrilla controled areas. The second attempt at institutional reform took place in1993/94 by creating the "SAAC" (Sociedad de Acueducto y Alcantarillado de Cucuta), anassociation between several public entities including the Municipality, the "AreaMetroplolitana", the Local Government of the Department of Norte de Santander and thelocal power company, which was formed to take over responsibility for providing thewater supply and sewerage services and was not controlled by the Mayor. Theconsolidation of "SAAC" and the preparations for transfer of responsibility weresupported by the Bank but lack of political commitment of the Municipality and of EMC'smanagement, as well as the objection of EMC's labor union, the transfer of responsibilityfor the services never took place. After the closing of the loan, "SAAC" was liquidated.

18. Part F: Studies. The feasibility ,tudy for integrating municipal public services inthe metropolitan area of Cuicuta was not carried out. Supervision of the civil engineeringworks and the designs of the wastewater treatment plant were carried out under this partof the project.

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3. MAJOR FACTORS AFFECTING PROJECT IMPLEMENTATION

19. Implementation of the project was hampered by a number of factors. These can begrouped into five categories:

(a) The political climate in the city. The individual interests of local politicalleaders, who changed every two years, i.e five times during theimplementation period, took precedence over: (i) the provision of basicservices to the city's population; (ii) the interests of EMC; and (iii) thegoal of providing an efficient and high quality service to the consumers.There was a continuous interference by local politicians in EMC's day-to-day management, constant pressures to meet bureaucratic requests and anunwillingness to approve adequate tariff levels. The most pronouncedadverse effect of the political interference was the resulting lack ofmanagerial autonomy in EMC and the frequent management changes thatensued.

(b) EMC's institutional instability and lack of managerial autonomy. Theinstitutional instability of EMC and its financial weakness caused delays,failure to take timely decisions and project implementation problems. As aresult of the political interference and the lack of managerial autonomy, thefrequency of replacement of the general manager and EMC's senior staffwas extremely high. During the project execution period (1984-1995) 11general managers were officially appointed and a number of others wereappointed as acting managers for short periods; on average, eachadministration lasted a year. The project suffered greatly from the constantchanges in EMC's general manager and in key personnel. The necessarycontinuity of management and of operational staff with adequate technicalcompetence to maintain EMC's technical, operational and institutionalmemory was lacking.

(c) EMC's financial weakness. The chronic financial problems of EMC areapparent from the Bank's supervision reports and the analyses of theavailable audit reports (1986-94). EMC experienced operating losses inthe years 1986, 1991, 1992 and 1993 and annual losses in 1986, 1987,1988, 1991 and 1992. EMC's financial deficits are attributable to highadministrative and operating costs, the hiring of unnecessary personnel as aresult of political interference, and the combined effect of a very high UFWpercentage and lack of political decision to raise tariffs to the necessarylevels during a number of years. These problems were aggravated by astrong labor union and a burdensome collective labor agreement. The costof the social benefits of EMC's personnel is equal to 140% of their salary,in contrast to the 56% value that private enterprises in Colombia usuallyhave to pay.

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(d) The lack of clear and consistent criteria on the part of EMC and theBank in regard to the design of the wastewater treatment plant.During appraisal the cost of the treatment plant was considerablyunderestimated and consequently, an unrealistically low budget wasallocated for its construction. This led to changes in the conceptual basisof the plant design and its capacity was altered and adjusted during thecourse of the project, in light of availability of funds, without any clear andpersuasive technical justification. The unsatisfactory performance of theconsultants initially hired by EMC to conduct the studies and design of theplant further hampered the project.

(e) Suspension of disbursements for a period of 15 months. On December28, 1990, as a consequence of a prolonged failure to comply with theconditions of the loan agreement, which was a result of EMC's weakinstitutional, managerial and financial capacity, the Bank suspendeddisbursements. The specific reasons for suspension of disbursements were:(i) frequent changes in management and in the professional team; (ii)inefficient performance coupled with transfers of the cost of inefficienciesto the customers through increasing tariffs and then offsetting the resultingrevenues by hiring unnecessary employees; (iii) noncompliance with majorfinancial covenants, in particular, the rate of return covenant, and notcovering the cost of the market service but rather subsidizing it from therevenues of the water service; (iv) shortage of counterpart funds; (v) delaysin implementation of the physical works; and (vi) failure to meetcommitments concerning the wastewater treatment plant. The suspensionwas lifted in March 1992, following a period of intensive supervision by theBank, effective participation by the National Government through DNP,corrective actions taken by EMC so as to comply with the Bank'sconditions, and constitution of an external project management unit under acontract with a Fiduciary Agency. The corrective actions taken by Cucutawhich led to the suspension being lifted were: (i) authorization by theCucuta Municipal Council to liquidate EMC and create a new companywith private sector participation for provision of the services of watersupply, sewerage and solid wastes; (ii) agreement to implement a voluntarystaff separation program to reduce personnel costs; (iii) formulating afinancing plan involving funds from different sources including, NationalGovernment grant using funds administered by FINDETER, ear-markedVAT and betterment levies revenues of the Municipality, grants from theLocal Government of the Departamento de Norte de Santander and shortterm loans; (iv) contracting a Fiduciary Agency to execute the project andmanage the project funds; and (v) approval of a tariff increase of 20%.

20. The appointment of a Fiduciary Agency, which acted as the project managementunit, operating in practice, though not officially, independently of EMC's management,had an obvious positive impact on the project. The successful completion of the Zuliariver water supply works, the component that will probably yield the greatest benefit for

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the city of Cucuta, can be attributed to this project management arrangement. TheFiduciary Agency managed to execute 30% of the project works during 1994 and torealize in that year disbursements of close to US$ 5 million, equivalent to 27% of the loanamount and to 2.5 times the largest disbursement carried out in earlier project years.

4. PROJECT SUSTAINABILITY

21. Despite the achievement of implementing the Zulia river water supply works, theproject's sustainability is in doubt due to: (i) interference by local politicians in themanagement of EMC and lack of managerial autonomy of the company; (ii) the resultingfrequent changes of management; (iii) lack of continuity of qualified personnel in keypositions; and (iv) shortcomings in EMC's operational and administrative procedures.Project sustainability will depend basically on the commitment that local leaders andpoliticians (Government, Senators, Mayor's Office, Municipal Council, Board ofDirectors, labor unions and civic leaders) are prepared to make in order to tackle theproblems affecting EMC as well as on continuous monitoring and strict control on the partof the new supervisory entities (the CRAS and the SSPD) set up recently by Law 142,with respect to actions aimed at:

* Facilitating the adoption of an appropriate institutional structure which wouldprotect EMC from interference by local politicians and the heavy burdenimposed by the current collective labor agreement;

= Supporting EMC in achieving efficiency and effectiveness, and monitoring itsoperational, commercial, administrative and financial performance, as well asthe quality, reliability and continuity in service delivery;

v approving periodic tariff adjustments which will enable EMC to finance its: (i)operating costs; (ii) maintenance costs; (iii) equipment renewal costs; (iv)necessary investments to maintain service coverage; (v) actuarial pension costs;(vi) debt-service obligations; and (vii) earn an acceptable return on its fixedassets.

22. Within the management of the company, operational sustainability of the projectwill depend on continuous monitoring of the basic performance indicators and on theefficient management of EMC's technical, human and financial resources, placing theachievement of EMC institutional objectives above political interests; in particularsustainability will depend on the:

* urgent implementation of the UFW contitol program to reduce losses to around25 percent;

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* implementation of an institutional, technical and financial strengtheningprogram which would include appointing of qualified key technical,administrative and operational personnel;

* implementation of a financial rehabilitation of the company in terms of tariffadjustment and control of UFW, which is a basic requirement to enable EMCto meet its operational, system expansion and debt-service costs and cease tobe a heavy burden on its loan guarantor, the Government of Colombia.

5. BANK PERFORMANCE

23. The identification, preparation and appraisal of the project by the Bank was basedon its previous knowledge of the water sector in Colombia, in which it had already carriedout nine lending operations, with INSFOPAL, EAAB and the municipalities of Cali,Palmira and Barranquilla. In response to the negative experience with INSFOPAL, theBank changed its strategy for the water supply and sanitation sector in Colombia,concluding that multi-city lending was not feasible and that direct lending to the largermunicipal utility companies, with careful prior selection, would be preferable in future.

24. The SAR pinpointed the major needs to expand the conveyance and distributionnetworks, raise water treatment capacity and storage volumes as well as to expand thesewerage system.

25. The main risks identified in the SAR were the institutional and financialweaknesses, particularly those attributable to the attitude of central and local authorities totimely implementation of the required tariff increases. This did in fact transpire over mostof the project implementation period, confirming the SAR's risk assessment. Interferenceby local politicians in project management and in the internal management of EMC, asituation that clearly had a very unfavorable impact on the project by weakening EMC'smanagerial and administrative capability, was not deemed to represent a risk.

26. A total of 20 supervision missions were carried out during the 10 yearimplementation period, utilizing 202.8 person-weeks. Both the back-to-office reports andthe project archives allow easy tracking of project implementation, the problemsencountered, monitoring of compliance with legal commitments and the plans of actionagreed upon.

27. Management of the wastewater treatment plant construction program was notalways satisfactory. During appraisal, the cost of the treatment plant was considerablyunderestimated and consequently, an unrealistically low budget was allocated for itsconstruction. This budget constraint was a major cause of the problems and confusionrelated to the treatment plant component and the reason for eventually not constructingthe plant. The changes in the conceptual plant design and the unsatisfactory performanceof the consultants initially hired by EMC utilizing loan proceeds, resulted in a cumulativedelay of seven years for completion of design. During the last three years of the project

- 13 -

implementation (1993-1995), however, the wastewater treatement plant design was putback on course, and the studies and designs as finally executed, following amendment ofthe loan agreement, are appropriate and complete. The final design will provide EMCwith accurate data on which to base the decision to construct the plant, enable it to assessthe plant's financial viability in light of current commitments and the new ones stemmingfrom the wastewater treatment project, and to negotiate with the National Government itsparticipation in its financing the treatment plant.

28. In general, it is advisable to cancel a loan promptly after the Bank becomesconvinced that the borrower is not in a position to honor its commitments with respect tothe proposed works and physical targets, repeatedly fails to comply with the conditionsand legal commitments of the loan, or fails to take institutional decisions that ensure theproject's fuiture sustainability. In this case, the tolerant attitude taken by the Bankundoubtedly enabled EMC to complete the Zulia river water supply works, a componentessential in providing water to Cuicuta's lower-income population. Had the loan closingdate not been extended, the city's population, especially its lower-income residents, wouldhave been subjected to many more years of water rationing. However, it was notsuccessful in resolving EMC's institutional crisis, despite the correction actions taken(Paragraph 19 (e)) as a condition of lifting the suspension.

29. The size of the Bank loan-which was made directly to EMC with the guarantee ofthe Government-was probably too big for EMC in view of its weak financing capacity andlimited creditworthiness. It was approved on the basis of overly optimistic assumptions,and as a result of change of sector strategy from multi-city lending through INSFOPAL todirect lending on a selective basis to the larger municipal utility companies, with EMCbeing the first of these companies. It is most likely that the National Government, asguarantor, will eventually have to assume responsibility for repaying the debt to the Bankand FINDETER.

6. BORROWER PERFORMANCE

30. The institutional weakness of the borrower (EMC), the continued interference bylocal politicians in its administration, and the resulting instability of its key personnelprevented achieving one of the main project objectives,i.e. that of converting EMC into amodel enterprise.

31. EMC's inadequate financing capacity, combined with its inability to reduce theUFW percentage and the lack of political will to raise water tariffs and dismissunnecessary personnel, forced the guarantor (the Government of Colombia) to assumeresponsibility for repayment of the loan obligations, with one exception, when EMC madea repayment in the second half of 1995.

32. Serious local political interference and the weakness of EMC's managerial capacitycompelled the National Government to require that the project management be entrustedto a Fiduciary Agency, independent of EMC and relatively free from local and regionalpolitical pressures and interference.

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33. The National Government, particularly DNP and to a certain extent FINDETER,provided continuous support to the project and contributed to resolution of the problemsthat arose during project implementation, but was not effective in imposing institutionalimprovements of EMC. It also undertook a radical institutional reform by enacting Law142 in July 1994, which created an appropriate framework for the efficient operation ofwater supply and sewerage utilities in the future. However, the enforcement of this Lawand the regulation of the water sector has not yet reached full effectiveness, and thesuccess of the reform still depends on the decisiveness and effectiveness in enforcing thisLaw in the future.

7. ASSESSMENT OF OUTCOME

34. Overall, the project results can be regarded as marginally satisfactory.Implementation of the water supply networks expansion works, the new Zulia river watersupply system, the sewerage works and the design of the wastewater treatment plant wasaccomplished satisfactorily, though behind schedule. The storm water drainage expansionworks were not carried out because of lack of funds; however, this was a minorcomponent of the overall project works. The main impact of the new water supply worksis that from now on, the lower-income population, accounting for 40% of the city'sresidents, will enjoy continuous water supply, while prior to project completion thispopulation either had no access at all to water supply or received water once every 15days.

35. Not all the scheduled institutional strengthening programs and studies were carriedout. Those that were have either not been completed satisfactorily, or theirrecommendations were not implemented by EMC. In essence, there was no realcommitment on the part of EMC's owner, the Municipality of Cucuta, nor on part ofEMC's management to the institutional strengthening programs.

36. EMC's calculation of the economic internal rate of return (IRR) of the project,based on project costs and projected marginal income generated over the next 30 years,assuming that the current tariffs (0.193 US$/m3 for water and an additional 50% forsewerage) remain unchanged in US$ terms and that UFW losses are reduced to 35%,yielded an IRR of 0.08%, which is clearly unsatisfactory. Analysis of the sensitivity of theIRR to changes in the UFW percentage, assuming a tariff increase of 40%, yields theresults presented in Table 5. The IRR value estimated at appraisal was 12%.

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Table 5: Sensitivity Analysis of IRR to UFW and Tariff Levels

IRRUFW

I ~(%) (/)

Average Tariff Average TariffMaintained in Current Increased by 40%

Value

42 -2.73 6.5735 0. 08 9.6030 2.62 11.7825 4.43 13.72

37. This analysis indicates that the project could have been economically satisfactory,if EMC had implemented a strict action plan to reduce UFW and had adjusted the watertariffs.

8. FUTURE OPERATIONS

38. In 1994, in light of the water supply sector's serious institutional problems and thefailure of the existing public utility model in Colombia (including water supply andsewerage utilities) as a result of chronic financial crises, poor planning capacity,management shortcomings, service coverage deficiencies and other factors, theGovernment enacted Law 142 for regulating the domestic public services. The Lawassigned institutional responsibility for the water supply and sanitation sector to theMinistry of Development, which set up a Vice Ministry of Water Supply and Sanitation.It also created a Water and Sanitation Regulatory Commission (CRAS), responsible forpromoting competition among service providers, controlling monopolies, approving tariffsand laying down the technical standards to be applied by utility companies. It also createda Domestic Public Services Superintendency (SSPD), responsible for overseeing the utilityenterprises and their financial, technical and administrative management and ensuring thatcentral government, departmental and municipal subsidies are used in the way prescribedin the regulations. Although implementation of the reform has barely begun, the situationof the sector and its enterprises is expected to steadily improve in the medium term.

39. Law 142 provides that, effective July 1996, all utility enterprises be transformedinto either share holding companies or organized as public-sector industrial andcommercial enterprises; in addition, each of them must furnish the CRAS with a studydemonstrating their entrepreneurial viability. The Bank's future operations will have to beconducted with these new enterprises, once they have been restructured and adjustedfinancially and operationally in accordance with guidelines set forth by the CRAS.

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40. Participation of the private sector in the provision of water and sewerage servicesthrough various models of association with the new enterprises created under Law 142, isundoubtedly the route that will be adopted by many enterprises. This has already occurredin the case of the water company of Cartagena. Support for such initiatives, which willhelp to improve operational efficiency of water companies, represents a possible area ofinterest for the future Bank operations.

9. KEY LESSONS LEARNED

41. The Need for a New Approach for Institutional Reform. In general, the initialsteps of any institutional strengthening programs (managerial, financial, administrative andtechnical) ought to be implemented, at least in part, up front, as a condition precedent toapproval of the loan, and not as part of it. It should normally be a requirement that theborrowing entity demostrate prior to signing the loan agreement, a minimum level ofviability--managerial, financial, technical, and administrative--sufficient to guaranteeproper management of the project. The institutional improvement objectives of theCucuta project were not realistic and Ciucuta is a good example why there has been achange in recent years in the Bank's overall approach to institutional improvement in thewater sector, focusing on promoting private sector participation.

42. Evualuation of Local Political Environment. In the case of loans to regional orlocal utility companies, the local political environment should always be evaluated duringproject preparation and the evaluation results should be taken into consideration, so as toensure, if warranted, incorporation of mechanisms which will prevent politicalintervention, such as requiring up front institutional adjustments.

43. Use of a Fiduciary Agent in Project Implementation. The use of a FiduciaryAgency as a project management unit (which took place following lifting of thesuspension) was successful in that it liberated the project management from its dependencein EMC and sheltered it from political intervention and from lack of continuity of EMC'smanagement in latter part of project implementation. Had it been used from the outset,project implementation could have been reduced by as much as 2-3 years.

44. Need for Adequate Determination of the Size of the Loan. The size of anapproved loan should be in proportion to the company's annual billing volume and henceits capacity to generate internally sufficient resources to service its debt obligations. In thepresent case, a loan of US$18.5 million exceeded EMC's debt-servicing capacity, and theproject should have been implemented in two stages, the first one consisting ofrehabilitation and expansion of the water and sewerage networks, as well as UFWreduction, and the second consisting of the Zulia river water supply works.

45. Importance of Completion of the Physical Works. The extension of the closingdate, which allowed completing the works, resulted in: (a) increasing water supply to thecity by 70%; (b) achieving water and sewerage coverage rates of 90% each; (c) ensuringcontinuous water supply to a low-income population of about 250,000 inhabitants (40 %of the city's population), which prior to project completion, either had no access at all to

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water supply or received water under severe rationing conditions; and (d) improvingsignificantly the financial situation of EMC. Canceling the loan on the original closingdate would have: (a) subjected the city's low-income residents to further years of waterrationing, since EMC would have had great difficulty in obtaining new loans to completethe works; and (b) deprived EMC from the prospect of increasing its revenues andimproving its financial situation, leaving it with uncompleted works after having investedUS$ 11 million (actual disbursement on original closing date).

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PART II: STATISTICAL ANNEXES

TABLE 1: SUMMARY OF ASSESSMENTS

A Achievement of Objectives ' Substantial Partial Negligible , Not applicable

Macroeconomnic policiesSector policies x

Fiancial objectives a

Instiutional development x

Physical objxctives x

Poverty reduction

Gender concenns

Other social objectives

Environntntal objectives

Public sector rnanagentent .xPrivate sector development x

Other (specify)

B. Project Sustainability Likely Unlikely Uncertain

HighlyC. Bank Performance Satisfactory Satisfactory Deficient

IdentificationPreparation assistance

Appraisal

Supervision

HighlyD. Borrower Performaance Satisfactory Satisfactory Deflcient

Preparation

hIplemnentation

Covenant conpliance xOperation (if appliable) 7

- -- -- --Highly Marginally HighlyE Assessment of Outcome Satisfadory Satisfactory Unsatisfactory Unsatisfactory

.~~~~~~~~E .l . j.

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TABLE 2: RELATED BANK LOANS

Loan Purpose Year of Statusl_______________________________ approval

Preceding Operations

1072-CO Sec ond Multi-City Water Supply and 1975 Completed in 1982Sewerage project

1967-CO Barranquilla Water Supply Project 1985 Canceled in Nov.1991

2512-CO Fourth Bogota Water Supply and 1985 Loan Closing -April1993

Sewerage Project. Project CompletionReport,June 28, 1994

Following Operations

2961-CO Colombia Water and Sewerage 1988 Loan closing dateSector Project 31-Dec-96

TABLE 3: PROJECT TIMETABLE

Steps in project cycle Date planned Date actual/latest estimate

Identification (Executive Project Summary)

Preparation Sep-83 11-Jul-83

Appraisal Nov-84 14-Aug-84

Negotiations 8-May-84

Board presentation 11-Sep-84

Signing 21 -Sep-84

Effectiveness 30-Apr-85

Project completion 30-Dec-91 31-Dec-95

Loan closing 30-Jun-92 30-Jun-95

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TABLE 4: LOAN DISBURSEMENTS: CUMULATIVE ESTIMATED AND ACTUAL

_____ _____ _ ___ __ __ ____ (US$ Thousands) _ _ __ _ _ _ _ _ __ _ _ _ _ _ __ _ _ _

FY 85 86 87 88 89[g0 91 92 93 94 1 95

Appraisal Estimnate 1.6 4.4 8.3 13.3j 16.7 17.7j 18.2 18.5 18.5 18.51 18-5

:Actual 1.05. 3.05 5.17 6.77 886 1054i 11;55 12899 13.11 18.02 18.13

Actual as % Estimate 65.625 69.318 62.289 50.902| 53 054 59.548i 63 462 69.676i 70.865 97.405 98.00Date of final disburs. July 6, 1995

1-- - 0- =Estimated

2 DReal

2 3 4 5 6 7 8 9 10 11

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TABLE 5: KEY INDICATORS FOR PROJECT IMPLEMENTATION

I. Key implementation

indicators in SAR Estimated ActualPresident's Report (1992) (1992)

Financial Tar2ets

Average Water tariff (US$/m3) 0.24 (1) 0. 18

Rate of return 6.9 -1.47

(1) Calculated, based on average water tariff estimated in SAR in current Colombian pesoand the SAR estimated exchange rate for 1992

TABLE 6: KEY INDICATORS FOR PROJECT OPERATION

1. Key operating indicators in ESTIMATED ACTUALSAR/ President's Report l

(1992) (1992) (1995)

OPERATIONS

I-Water produced (m3 million) 42.2 50.8 38.0 *

1-Water sold (m3 million) 31.2 31.6 21.2 *

2-Water unaccounted for (%) 26.0 38.3 44.1 *

3.-Water connections (1992) 72,200.0 81,622.0 100,321

4.Sewerage connections 60,800.0 77,041.0 89,878

5-Water coverage (% Pop. served) 80.0 90.3

PERSONNEL

Employees/1000 water connections 6.0 4.70

* Up to September 1995

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TABLE 7: STUDIES INCLUDED IN PROJECT

Study Purpose as deflned status Impact of study

at appraisal/redefined I

1. Administration and Management Strengthening Administration and Management Executed Recommendations partially

through introduction of appropriate MIS systems. implemented with minor

positive inpact

2. Operation and Maintenance Implement more efficient practices and systems Partially Executed Recommendations partially

implemented with minor

positive impact

3. Control of water unaccounted for Strengthen EMC capabilities in reducing Partially Executed Recommendations partially

unaccounted for water implemented with minor

positive impact

4. Integration of Municipal services Improvement of service quality Not executed

in the Cucuta "Metropolitan Area".

5. Project Administration and Planning, review of design and supervision of Executed Very positive

Supervision of construction Construction

6. Design of wastewater Preparation of funal designs, cost estimates Executed after

treatment plant and bidding documents many problems

and

substantial

delays

- 23 -

TABLE 8A: PROJECT COSTS

Item Appraisal Actual /Latest Estim.Estimate US$M

US$M

Local Foreign Local ForeignCosts Costs Total costs Costs Total

CAT. 1- EQUIPMENT& 3.75 7.86 1161 6.9 9.54 16.44MATERIALS

CAT.-2- CIVIL WORKS 8.77 2.88 11 65 10.85 3.75 14.6

CAT.3 -CONSULTANTS' 1.26 0.16 1 .42 1 .48 1.12 2.6SERVICES

3A- GEN. PROJ. 0 0 0 0 0.11 0.11SERVICES

3B- DESIGN 0 0 0 1.85 1.38 3.23WASTEWATER

CAT.4- TRAING & 0.45 0.31 0.76 0.12 0.18 0.3SCHOLARSHIPS

CAT.5- INTEREST & OTHER 1.86 3.19 5.05 0.49 2 2.49CHARGES.

CAT. 6- INITIAL DEPOSIT 0 0 0 0 0 0

CAT. 7-FEE 0 0.05 0.05 0 0.05 0.05

CAT. UNALLOCATED 3.31 4.05 7.36 0 0 0

RICE CONTINGENCIES)

TOTAL 19.4 18.5 37.9 21.69 18.13 39.821= . _- -

- 24 -

TABLE 8B: PROJECT FINANCING

Appraisal Estimate Actual/latest estimateForegin Local Total Foregin Local

Financing Source Costs Costs Costs costs Costs Total

IBRD/IDA 18.50 0.00 18.50 18.12 0.00 18.12

EMC Internal cash 8.30 8.30 4.96 4.96generation _____

G o v e r n m e n t 6.90 6.90 13.20 13.20

Local Loan 4.20 4.20 3.53 3.53

Total 18.50 19.40 37.90 18.12 21.69 39.81

TABLE 9: ECONOMIC RATE OF RETURN

EIRRUFW

Average Tariff Average TariffMaintained in Current Increased by 40%

Value

42 -2.73 6.5735 0.08 9.6030 2.62 11.7825 4.43 13.72

TABLE 10: STATUS OF LEGAL COVENANTS

1 1 1 ~~~~~~~~~~~~~~~~~~ Revwise-tA&reement Secton Covenant Swtus Onginal Fulfl ment 4 Descnption of covenant | Comments

_________ :__Ape ._ fus4fiilment date date | _GUARANTEE AGREEMENT

2.02 (a) and (b) 2 The Government to provide Col$800 million, towards project Government contributions are expectedfinancing and agree to make arrangements for meeting due to cost overrun (in pesos costs)

.__________ ____________ ________ _______ _____________ _______ _ inadequate financingequate_financing

LOAN AGREEMENT2.02 (c) I C EMC to open and satisfactorily maintain a Special Account.3.02 5 C EMC to appoint Consultants on terms and conditions Appointment of Consultants in certain

satisfactory to the Bank. areas (unaccounted for water reductionstudy, for example) has not been timelyhowever.

3.05 5 CD EMC shall not later than June 30, 1993 hire the consultant The feasibility study for the Cucutaservices for preparation of the feasibility study and, if wasewater treatment plant has not yetapplicable and warranted, for the detailed design of the started and considering the present statewastewater treatment plant, both under part C of the Project, of the hiring process, the work wouldand shall by, not later than February 2S, 1994 and December start, at best, only towards end January31, 1994, furnish to the Bank final findings and 1994, with a seven month dely in regard F'recommendations of the feasibility and the detailed design to the date agreed upon in therespectively. amendment to the loan agreement.

Consequently, EMC is in no condition tocomply with its commitments regardingthe completeion of the design of thewastewater treatment plant before theloan closing date.

3.06 3 CD EMC to acquire land for waste water treatment. (Target Date -December 31, 1986).

3.07 (a) 4 C EMC to make arrangements for borrowing ColS600 million The Municipality has made arrangementstowards project financing. to borrow ColS2,000 for transferring the

_ _ _ ~~~~~~~~~~~~~~~~~~~~~~~~~proceeds to EMC.3.08 5 C Preparation of details on sewerage network construction under Delayed submission however, did not

the project. (Target Date - March 31, 1985). have any significant irnpact.3.09 6 NC EMC to take actions to protect environment and maintain See Sec. 3.05 for related details; EMC

quality of the receiving Pamplonita River. recognizes the need to provide for wastetreatment prior to discharge inPanmplonita; EMC has also initiated inSept. 1988 an industrial waste pollution

3.10 S NC EMC to establish a Project Coordination Unit for carrying out A coordination unit was establihd but______ _____ __________ the project. isa performance was poor. Aa a

Revsised :: : : : ..A4g.reernnt S::e Covenant Status Otig,lnal F:: llmeis : Des nof conant Coments

__________ fs4~~~~ypefuYlllmet date date

consequence, the Bank requiredcontracting of a fiduciary agency forproject management.

5.01 (a) 2 C EMC to maintain separate financial needs for each of itsDepartments (Water, Solid Wastes, Slaughter House andMarket Operations).

5.02 1 CD EMC to arrange for yearly auditing of its financial statements Usually submitted after significantand submit to the Bank certified copies of audits. (Target Date delays. The audit report for FY 92 abd-not later than May 30 of each year). FY 93 were submitted with a delay of 4

months.5.03 1 CD Auditing of Special Account and submission to the Bank See remark for 5.02 above.

certified copies of above audit. (Target Date - Not later than_May 30 of each year).

5.05 2 NC EMC not to incur additional debt - except that noted in Sec. Additional debts (mainly from the3.07(a) above - unless revenues exceed 1.5 times the debt- Municipality) were warranted withservice. adequate Bank monitoring.

5.06 2 NC EMC not to undertake major capital expenditures (outside ofthe Project) in excess of US$I million without the Bank's_concurrence.

5.07 1 NC EMC to revalue fixed assets annually. (Target Date - Not laterthan February 28, of each year). _

5.08 2 C EMC to submit to the Bank a rolling 3-year Financial Plan.(Target Date - Not later than September 30, of each year).

5.09 (a), (b) and 2 NC EMC to achieve following ROR for water and sewerage Agreed values of ROR were never(c) operations: 1-5% in '84; 3-5% in '85; 5% in '86; 5.5% in '87 achieved. A new covenant of working

and '88; 6% in '89; and 7% thereafter; EMC to review with the ratio was introduced as follows:Bank and undertake measures to meet compliance as needed. - WR not higher than 70% by Dec.

31, 1992 (achieved)- WR not higher than 60% by

Dec. 31, 19935.10 (a),(b) and 2 NC EMC to produce adequate revenues to cover the operation of(c) other Departments except the Water and Sewerage Department,

and to review with the Bank and undertake measures to meetcompliance as needed.

5.11 2 NC EMC to reduce Accounts Receivable (not to exceed 3.0 in 1984 EMC is activating collections to reduceand 2.5 in 1985 and thereafter). arrears.

5.12 2 NC EMC not to tranafer funds betwen Departments except The Water and Sewerage Service hasthere is a Surplus. been subsidizing other services since

project inception.

Key covenant Types:I = Accounts/audit2 = Financial Performance/revenue generation from beneficiaries 8 = Indigenous people3 = Flow and utilization of projed funds 9 = Monitoring review, and reporting4 = Counterpart fiunding 10 = Project Implementation not covered by categories 1-95 = Management aspects of the project of executing agency 11 = Sectorial or cross-sectorial budgetary or other resource allocation6 = Environmental covenants 12 = Sectorial or cross-sectorial policy/regulatory/institutional action7 = Involuntary resettlement 13 = OtherStatusC = covenant complied withCD = complied with aflter delayNC = not complied with

t'l3

- 28 -

TABLE 11: COMPLIANCE WITH OPERATIONAL MANUAL STATEMENTS

No significant lack of compliance with applicable Bank Operational Statement (OD orOP/BP).

TABLE 12: BANK RESOURCES: STAFF INPUTS

Stage of Project Planned Revised ActualCycle Weeks US$ (1) Weeks US$ (1) Weeks US$ (1)

Through Appraisal 61.8Appraisal-Board _ 6.4Board-EffectivenessSupervision 134.6Completion I

TOTAL 202.8

(1) Information not available

- 29 -

TABLE 13: BANK RESOURCES: MISSION

Stage of Project Month/ Number Days in Specialized Performance Types ofCycle year of field Staff Skills Rating (overall) problems

persons RepresentedThrough appraisal Oct-81 2 5 SE,FA

Jun-83Dic-83 2 30 SE,FA

Appraisal throughBoard Approval

Board Approval Oct-84 2 6 SE,FA 1through Effectiveness

Supervision May-85 2 8 SE,FA 2 AFNov-85 3 AF,PMEne-86 2 10 FA,C 2 AF,PMMay-86 1 5 SE 2 AF,PMMar-87 1 3 FA 2 AFAgo-87 1 4 SE 2 AFDec-87 2 12 SE,FA 3 AFMay-88 2 32 SE-FA 4 AF,PMOct-88 2 22 SE,FA 3 AF,PMMar-89 1 4 SE 2 AF,PMMay-89 3 9 FA,SE,UT 3 AF,PM,CLCJun-90 2 2 FA,CJul-91 2 18 C (1)Sep-92 1 11 SE 3 AF,PM,CLCAbr-93 1 2 FAMay-93 2 6 SE,FA 3 AF,PM,CLCOct-93 2 10 SE,FA 3 AF,PM,CLCJul-94 2 10 SE,FA U AF,PM,CLCFeb-95 1 1 SE U

Completion

TOTAL 210

SE=Sanitary Engineer C=Consultant FA=Financial AnalystAF=Availability of funds UT=Urban/Transport Planner CLC=compliance Legal CovenantsPM=Project Management Perf.(1)=Disbursemsnt suspended

ANNEX 1

AVERAGE WATER TARIFF AND WATER LOSSES

YEAR Vol. Vol. Losses Water Sewerage Tatal Average Exch. Average Average TotalProduced Billed Billed Billed Billed Tariff Rate Water (Water & Sew)

Tariff TariffM3 (1) M3 (1) (%) 1,000 1000 1000 (Peso/m3 (June 30) (US$/m3) (US$/m3)

Peso(l) Peso(l) Peso(l) Billed)1985 15,724,708 142.91986 9 = __ 213.761987 _ _ _ _ _ _ _ _ _ _ _ _ _ __ _ _ __ _ _ _ __ _ __ 243.32

1988 45,491,710 20,260,765 55.46 656,361 313,153 969,514 47.85 299.28 0.108 0.1601989 45,453,929 27,664,417 39.14 1,208,221 570,469 1,778,690 64.30 381.79 0.114 0.1681990 45,191,072 26,531,550 41.29 1,416,044 667,418 2,083,462 78.53 502.39 0.109 0.1561991 46,797,608 30,404,420 35.03 1,998,453 919,030 2,917,483 95.96 628.82 0.104 0.1531992 50,801,097 31,620,724 37.76 3,245,887 1,492,416 4,738,303 149.85 758.62 0.135 0.1981993 51,223,474 30,643,864 40.18 4,317,987 2,021,634 6,339,621 206.88 787.12 0.187 0.2631994 50,769,167 30,179,118 40.56 4,848,092 2,277,717 7,125,809 236.12 819.64 0.196 0.288

1995(2) 38,004,893 21,243,320 44.10 4,009,218 . 881.23

(1) Extracted from available audit reports and EMC data(2) Production and billing data refer to the period January-September 1996

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ANNEX 2

PROJECT REVIEW FROM BORROWER'S PERSPECTIVE

GG-00195

San Jose de Ciicuta, May 27, 1996

Messers.WORLD BANKAtt. Ing. Menahem LibhaberEnvironment and Urban development DivisionDepartment IIIRegional Office for Latin America and the Caribean1818 H street, N.W.Washington D.C. 20433U.S.A.

Ref: Implementation Completion Report of the Cucuta Water Supply and SewerageProject

In response to your request we would like to present our opinion regarding the captioneddocument.

Achievement of Objectives

We do not share the opinion that, from the institutional standpoint, EMC is currently in acondition which is worse than its condition at the date of signing the Loan Agreement.

In the following paragraphs the executed works of the various project components areindicated and compared with the implementation levels provided for in the LoanAgreement:

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Implementation of Works Under Component A: Extension of the Existing WaterSupply System



A. EXPANSION OF THEEXISTING WATERSUPPLY SYSTEM

- Primary networks 43.0 km 62.4 km 145- Storage tanks 8,000 m3 9,700 m3 121- Las Lomas pumping station 120 I/s 120 V/s 100- Los Benefactores pumpingstation 6 Vs 6 Is 100

- Secondary networks 120 km 120 km 100- House connections 10,000 units 10,000+ units More thanI 00- Domestic meters supply andinstallation 50,000 units 50,000 units 100

Implementation of Works Under Component B: Zulia River Water Supply System

Out of component B works, the Loma de Bolivar Bajo and Loma de Bolivar Alto tanksand the corresponding pumping stations, which are essential to supply of the high westernpart of the city, were not constructed due to lack of resources, although the pumpingequipment was purchased. Nevertheless, during project implementation the pressurebreak chamber (consisting of two tanks with a volume of 1600 m3 each) and the AntoniaSantos tank (with a volume of 3200 m3), essential structures for adequate operation of thenew Zulia river supply scheme, were incorporated into the system. In total, 9,600 m3 ofstorage volume was constructed, i.e., more than the projected 7000 m3.

Implementation of Works Under Component C: Sewerage Networks

The programmed works of this component were fully executed, providing adequatesanitation to the periferic neighborhoods of San Martin, Panamericano, Aeropuerto,Virgilio Barco, Ospina Perez, Belisario and Doia Nidia. Following is a summary of theexecuted works:

-33 -



C. SEWERAGE SYSTEM

- Primary collectors 11.0 km 10.2 km 90- Secondary networks 100.0 km 124.72 km 124.72- House connections 8200 units 6636 units 81

In addition, the final design of the collection, conveyance and treatment plant of thewastewater of Ciicuta have been completed. It is important to clarify that, although theconstruction of a wastewater treatment plant with a capacity of I m3 formed part of theproject, the financial resources allocated for the construction of the plant wereconsiderably under estimated and were sufficient only for design of that plant.Consequently, it was impossible to construct the plant by utilizing the loan proceeds,especially when taking into consideration that the cost of this plant, including thecollection and conveyance systems, amounts to US$ 40 million.

Component C: Storm water Drainage

This component was postponed due to lack of resources.

Major Factors Affecting Project Implementation

The ICR failed to mention the incidence of devaluation of the Colombian peso in relationto the Dollar, which generated an increment in the required counterpart funds and resultedin shortage of funds for project implementation. The report should also mention that theloan proceeds allocated for the wastewater components, especially for the wastewatertreatment plant, were not sufficient for achieving the objective.

Bank Performance

It is acknowledged that the Bank's decision to extend the loan closing date allowed theeffective completion of the new Zulia river water supply works (except for Loma deBolivar Alto and Loma de Bolivar Bajo tanks), which are essential for the city and arecurrently in operation.

- 34 -

Lessons Learned

Taking into consideration that the Bank provides only partial financing for projects and theBorrower is required to contribute counterpart funds, it is necessary that the Bank appliesa more flexible policy in regard to compliance with goals by the Borrower, with theobjective of avoiding delays in project implementation resulting from shortage ofcounterpart funds caused by the devaluation of the local currency (the Colombian Peso).

Because of the devaluation of the local currency, the Bank should also considerincrementing the financing percentage of civil works

Sincerely,

Jesus Javier Duarte QuinteroGeneral Manager, EMC

-35

11UCUTA

oc- 001951

San Jos6 del Gi ,Q 27 MAyn w9g _INCOMLELOG

Date rc'd. JH1. - 4 i996Project No. _ : 7- 0-C C:ontrolN

Senores Assigned t e: Action Taken_

WORLD BAttu. geniero Menahem LibbaberDivishh de Medio Ambiente y Desarrollo UrbanoDepartamento mMOWi RegioS Paa America Latik y el CaribeI818 H*.Street. N.W.Washington D.C. 20433U.S.A.

Referencia: Informe de cumnPliniento de la mp 1ec de Proyecto de

Acueducto y Alcantarilado de Cu lta.

I'm atencifn a s solicitu, atentamente nos perjtim,s eresa nuestro conceptosobre el dmmw=o~ indicado en la refrezcia:

LOGRO DE OBJrElVoS

No estamos de acuerdo con la afirmwin de que las EMC desde el punto de vistaasucional'l estii en peores condicicnes, que al momento de fimar el cridito.

A conhinuaci6n w mlaclwn~an dieet oIoLdepo~dnepeiS~~ ~~ ~~ &ro yes dopntsde e, dOnepreviarevzi6n Y correccic1 se indcan ins obras ejccutuasj y se comparan con io

estab1ec'd enCionfraO de PrMMMzO 2470-Co.,

AVNDA 6 CALLE 11 IDIlN. JOBgEL'WPONO. 713W.1.372= FAX (975) 714112

- 36 -

IMCUCUTA

S~mu hnw hau3dh 2

COMONENTE A. EXPANS1ON DEL SISTEMA EXISTENTE

DESCRIPCIO)N SEGUN CONTRATO E-JECUTADO A %;DE AVANCE PRtSTAMO JUNIO 30 IM9 FISICO

Rude MWrice. 43 Km 62.4 km 145

- Twiques de AlJmenrrerto 8000 Its 9.700.0 mB 121

-Esueoi6ndeBombeoLas Lors 1201ps 120.0Lps 100

- tdao6n Bomboo Lao Berefactoros -0- 150 Lps 100

- Pude Seouarias 120 Kms 120 Kms 100

C*rC.kn doryioIijmrie 10.000 Mis do 10.000 Mk 10O

-. $unstros e Instde Medidores 50.000 bO.00D.0 un 100

COMPONENTE B. SISTMA DEL RIO ZULIA

De la componente B de] Proyecto Zulia, por falta de fmanciaci6n no fueronconstruidos los Tanques Loma de Bolfvar Bajo y Loma de Bolivar Alto y aunque seadquirieron los equipos respectivos, no se construy6 la Estaci6n de Bombeo Loma deBolfvar Bajos, componentes necesaios pam abastecer la zona occidental alta de laci5dad, sin embargo, durante la ejecuci6n del proyecto se incorporaron los Tanquesde la CAmara de Quiebre (2 Tanques de 1600 m3 c/u.) y el Tanque Antonia Santos(1 Tanque de 3200 m3), estructuras necesarias para la adeazada operaci6n del NuevoAcueducto del Rio Zulia. En total se construyeron 9600 m3 de almacenamiento de7000 m3 programados.

COMPONENTE C. ALCANTAR,LLADO

De esta componeznte las obras previstas fueron ejecutadas en su totalidad saneindoselos banios perifricos de San Martfn, Panamencano, Aeropuerto, Virgilo Barco,Ospina Perz, Belisano y Dofia Nidia, cuyo resamen se muesta a continuaci6n:

AVCNIDA 6 CALLS 11 EDIF.SAN JOSETELIZONOS 71305-7nm2 FAX (975) 714112

- 37 -

CMCUCUTA

S0mm DIU= 3

DESMRIPCION BEGUN CONTRATO EJECUTADO A % DE AVANCE- PRESTAMO JUNIO 30 1995 FiSiCo

- Contr.de cokctors prlnw 11 Kne 10.2 Krn 90Dieho de Laune de oiddaci6n 1000 Wgseg. 1000 Its/seg 100

Redos de alcart. secwunderias 100 Kms 124.72 Kms 124.72

- C n r~ &danSiewia* 8200 on n un 8t

(*) Diseos terminados en Abril de 1996.

AdemAs se alcanz6 a realizar el diseno defnitivo del sistema de colecci6n, conducci6ny planta de tratamiento de aguas residuales para la ciudad de Cicuta. Sobre elparticular, es importante aclarar, que en la programacion fmanciera del proyecto,aunque se habia contemplado la construcci6n de una planta de tratamiento de aguasresiduales con capacidad de I m3/seg., los recmusos que se previeron para este finsolamente alcanzl7on para la fase de disefios; de ahi tambien la miposibilidad deconstnirla con cargo al contrato de pr6stamo suscrito con el Banco Mundial, mAximesi se tieme en cuenta que el valor de la irnsina asciende a los US 40.000.000 incluidoel sistemna de coleccid6n y conducci6n de aguas negras.

COMPONENTE D. ALCANTARILLADO DE AGUAS LLUVIAS

Este componente se aplaz6 por falta de fianciaci6n.

PRINCIPALES FACTOS QUE AEECTARON EL PROYECTO

En el informe falt6 incluir la incidencia de la devaluacion del peso frente al d6lar,situaci6n que gener6 el incremento de recursos de contrapartida por parte de las EMC,causando desfinanciaci6n en el proyecto.

AVENIDA 6 CAlLE DI KDJDIFAN JOSETILONOS n30n3722 Ax W7sX Mg) n74

- 38 -

EMCICUTA

Sdmam BhW JAnmdi 4

Debe incluirse que las partidas previstas en el contrato de prnstmo para lacomponentes de aguas negras, especialmente para la construeci6n de la Plmta deTratamiento de Aguas Residuales, no fueron suficientes para lograr el objetivo.

DESEMPENO DEL BANCO

Se reconoce que la decisi6n del Banco Mundial de prorrogar en el tiernpo la vigenciadel contrato de prsamo, pennitio la terminaci6n efectiva del Nuevo Acueducto delRio Zulia (con excepci6n de los tanques Loma de Bolivar Alto y Bajo), obraspriritarias para la ciudad y que actualmente se encuentra en operacion.

LECCIONES APRENDIIDAS

T eniendo en cuenta que la financiaci6n de los proyectos por parte del Banco Mundialse hace en forma parcal, requinmndose recursas de contaparida por parte del entepresaatario, se hlace necesario la aplicaci6n por parte del Banco Mundial de unapolitica mnis flexible en lo referente aI cumplirniento de metas por parte del rnismoente prestatario con el objeto de que el proyecto no se dilate en el tiempo, situacionque por efectos de la devaluaci6n de la moneda (pesos colombianos) generamcranentos en los diras de contrapartida, desfinanciando por consiguiente losproyectos.

Por la inisma circunstancia de la devaluaci6n de la moneda, debe considerarse laposlbilidad de irementar el porcentaje de financiaci6n por parte del Banco Mundialpara las obras civiles.

Atentamente,

AVENIDA 6 CALLE 11 EDIFSAN JOSTKIZONOS M0-7137M FAX ("7) 714132

IMAGING

Report No: 15806Type: ICR

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