R EsTR ICTED RETURN TO Report No. TO-382a REPORTS DESK WITHIN 0 .K This report was prepared for use within the Bank and its affiliated organizations. They do not accept responsibility for its accuracyor completeness. The report may not be published nor may it be quoted as representing their views. INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT INTERNATIONAL DEVELOPMENT ASSOCIATION APPRAISAL OF SECOND FEDERAL HIGHWAY PROJECT MEXICO September 6, 1963 Department of Technical Operations Public Disclosure Authorized Public Disclosure Authorized Public Disclosure Authorized Public Disclosure Authorized Public Disclosure Authorized Public Disclosure Authorized Public Disclosure Authorized Public Disclosure Authorized
Transcript
R EsTR ICTED
RETURN TO Report No. TO-382a
REPORTS DESKWITHIN
0 .K
This report was prepared for use within the Bank and its affiliated organizations.They do not accept responsibility for its accuracy or completeness. The report maynot be published nor may it be quoted as representing their views.
INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT
INTERNATIONAL DEVELOPMENT ASSOCIATION
APPRAISAL OF
SECOND FEDERAL HIGHWAY PROJECT
MEXICO
September 6, 1963
Department of Technical Operations
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CURRENCY EQUIVALENTS
US $1 = Ps. 12. 50Ps. 1 million = US $80, 000
M E X I C O
APPRAISAL OF SECOND FEDERAJJ HIGIIJAY PROJECT
TABLE OF CONTENTS
Page
SUIVMARY i_ii
I, INTRODUCTION 1
II. BACKGRORMD INFORI-MTION 2
A. Highway Network 2B. Highway Organization and its Adequacy 2C. Highway Financing 3
III. THE PROJECT 5
A. Description 5B. Highwiay Program 5C. Procurement of Maintenance and
Laboratory Equipment 6D. Cost Estimates and Financing 7E. Execution of the Project and Procurement 8
IV. ECONOU1C JUSTIFICATION 10
A. General 10B. Road Users' Benefits - Rate of Return 10
a. Improvement of Existing Roads 10b. Construction of New Trunk Roads 11
C. Feeder and Penetration Roads 11D. Other Benefits 12
V. CONCLUSIONS 13
AMNEXES
AP=LS
TABLES
1. Registered vehicles, 1932-62.2. Total actual and planned expenditures for construction,
reconstruction and maintenance of roads in Mexico1955/6.6,
3. Taxes affecting road users and highway expenditures 1959/62.4. Summary of works included in the Project.5. Design standards for roads included in the Project.6. Cost estimates and timing of e:.penditures for roads included
in the Project.7. Average unit cost per km. for road construction for various
types of roads and topographical conditions.8. Maintenance and laboratory equipment.9. mLements considered in computation of Iconomic rate of
return based on road users' savings.
APPZNDIX
On economic benefits.
FIGTJTRhS
1. Organization chart of the Secretariat of Public Works.2. Organization chart of the Department of Maintenance of
Federal Highways.
1. Federal Highway system with location of Maintenance DivisionHeadquarters and repair shops.
2. Main Highwiay network showing the roads included in the Project.
M E X I C O
APPRAISAL OF SECOND FEDERAL HIGHWtAY PROJECT
SUMIARY
i) The Mexican Government has asked the Bank to assist in the financingof a Highway Project which is a part of its general economic developmentprogram. This will be the second loan for Federal highways made to Mexico bythe Bank,
ii) The proposed Project provides for:
i) the partial improvement or reconstruction of11 paved roads totaling 2,154 km,;
ii) the completion of 20 roads already underconstruction totaling 2,021 km;
iii) the construction of 9 new roads totaling793 km;
iv) the procurement of additional maintenanceand laboratory equipment.
iii) The total estimated cost, including contingencies, is US$96 millionequivalent, of which the Bank will finance US$hO million which represents theforeign currency cost. The local currency cost will be provided by theGovernment through annual appropriations in the Federal Budget. The Projectis expected to be completed by the middle of 1966.
iv) Traffic on the existing road system has increased steadily and as aresult some of the main roads should be improved and their standards raised.Other roads are to be completed and new roads constructed to fill gaps in themain highwiay network of the country and to penetrate into regions not yetserved by the highway system. The Project is limited to roads in the FederalHighway system.
v) The Project is technically sound and is economically justified on thebasis of savings in transport costs and/or the expected increase in productionand economic development in the areas to be served by the new roads.
vi) The responsible executive agency will be the Secretariat of PublicWorks acting through several of its departments. The planning and design ofthe roads is being carried out by the Department of Projects and Laboratories.Construction will be supervised by its Department of Construction of FederalHighways and maintenance by its Department of Maintenance of Federal Highways.These Departments have a sound organization with clear lines of authority.Their staffs are qualified and experienced; therefore, consultants are notrequired.
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vii) The design standards adopted for the different types of roadsincluded in the Project are satisfactoryo Engineering surveys and designshave been completed for many of these roads with preliminary surveys madefor the remainder. The cost estimates are reliable and adequate contin-gencies have been included.
viii) The contracts to be financed by the Bank will be awarded throughinternational competitive bidding, except for contracts which have alreadybeen let and for those small road sections which cannot be grouped intosizeable contracts, local coinpetitive bidding being applied in such cases.Procurement of maintenance and laboratory equipment will also be madethrough international competitive bidding.
ix) The proposed Project provides a suitable basis for a Bank loan ofUS$40 million equivalent. An appropriate term for the US$31.5 millionportion pertaining to the roads would be 20 years with a 4-year grace period;for the Us$8.5 million portion pertaining to equipment, a term of 6 yearswith a one year and a half grace period has been requested by the MexicanGovernment in view of the circumstances explained in paragraph 18.
I. INTRODUCTION
1, The Mexican Government has asked the Bank to assist in the financingof a three-year (1963-66) Federal Highway Program which comprises the improve-ment and partial reconstruction of 2,154 Im of existing roads, construction orcompletion of 8, 84 km of roads, together with the purchase of laboratory andmaintenance equipment for the Federal Highway network. The total cost of theproposed Project is estimated at about US$96 million equivalent, of which theBank will finance the total foreign exchange cost amounting to US$40 million.The Project, which is part of Mexico's general development program, is basedon studies made by the Secretariat of Public Works and was appraised by Bankmissions to Mexico in Ncvember-December 1962 and February-March 1963.
2. In October 1960, the Bank made a US$25 million loan to Kexico tomeet the foreign exchange cost (36.4%) of a US$64 million program for theconstruction or reconstruction of about 3,150 km of its Federal Highway System.The works are about 50 percent completed. The amount of the loan disbursedto date is US$8,3 million. Although the scheduled completion date is late1964, it now appears that mid-1965 is more realistic,
3. In June 1962, a US$30.5 million loan was made to cover the foreignexchange cost of a US$67 million program for the construction or completionof three toll roads totaling 384 kms, four access roads, and five toll bridges,and for the purchase of a ferry boat. Tenders have already been received forabout one-half of the highway and bridge works. The balance will be tenderedfor during 1963. The order for the ferry was placed recently. The project isabout 25 percent completed and is scheduled for completion in late 1964.Loan disbursements to date amount to US$6.7 million.
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II. BACKGROUND ITTOF?J1ATION
4. The Mexican Government has submitted for the Bank's appraisala general development program for the next three years. This program,which has been analyzed by a special Bank mission, covers all aspects ofthe economy: industry, agriculture, transportation, social services,etc. The highwqay sector, which includes about US$270 million equivalentfor construction and reconstruction of all types of roads, accounts forabout 10% of total planned investment. This total includes work underloans 268-ME and 317-ME, the proposed project, State and local roads,and a small amount of federal roads outside of the project.
A. Highway Yetwork
5. The MIexican road network, although small in relation to area andpopulation, has been growing at a rapid pace as shown by the followingfigures:
Length of networlk in km
December 1955 December 1962
Toll hi;hways 238 424Federal roads 13,056 20,972State and local roads* 12,324 25,304
25,618 46,700
6. At the same time, the number of vehicles has increased steadily(Table 1). Over the ten years, 1952 to 1962, it has more than doubledfrom Il,000 to 906,000 which represents an average annual increase of 8%.
13. Highway Orgarization and its Adequacy
7. The planning, engineering, construction and maintenance of theFederal HighwTay System fall under the direct responsibility of theSecretariat of Public 'A1orks (S.O.P.) acting through its various specializeddepartments. The organization structure of the Secretariat is outlined inFigure 1.
8. The Department of Planning and Programing carries out studies andmakes recorimendations to the Secretary for such matters as the selection ofroads on the basis of economic priorities and justifications, the co-ordination of highway programing with the programs of other Governmententities, and with project financing.
* Roads for which State and local entities participate in the financing.
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9. The Denartment of Projects and Laboratories performs the basicengineering for the roads with the use of modern techniques. The choiceof design standards is based on detailed traffic studies.
10. The Department of Construction of Federal Highways handles suchmatters as selection of contractors and their control wqhile executing theworks. The local construction industry in Mdexico is well developed. TheNational Chamber of the Construction Industry has a membership of 1,700contracting comoanies which own equipment estimated to be worth some U.S.$290 million equivalent. In general they build roads efficiently andeconomically. The specifications provided to them are well prepared andenforced by an S.O.P. staff of more than 500 engineers and technicians.Thus proper control of the works is achieved.
11. Maintenance of federal highways is carried out by the Departmentof Maintenance of Federal Highways, the organization of which is sliown inFigure 2. For maintenance purposes, the country has been divided into 21Divisions (see Map 1), each headed by a chief engineer assisted by anappropriate number of superintendents, foremen, etc. The Divisions havethe necessary facilities such as repair shops, stocks of spare parts,radio and telephone communications, housing, etc., as well as theappropriate maintenance equipment. In 1959 the S.O.P. through an externalloan, purchased maintenance equipment worth $6 million. Some units ofequipment purchased earlier and some of those acquired under this loan arenow at the limit of their economic life and need replacement. The recentand expected development of the road network requires additional maintenanceequipment. New equipment for laboratory control and research in the Depart-ment of Projects and Laboratories is also required.
12. In general roads are adequately maintained. Satisfactorylegislation exists to control the weights, speed and dimension of vehicles.These are enforced by road patrols operating under the Secretariat ofTransport and Communications.
13. The departments, which will be charged with the various aspects ofthe proposed Project, are adeqiu,ately staffed with competent personnel.They operate efficiently and do not require outside consultants.
C. HighwZay Financing
14. The construction, reconstruction and maintenance of highways(other than toll roads) are financed through annual budgetary appropriationsof the Federal and State Governments and, to a lesser extent) throughforeign loans and credits. The total program of highway exoenditures forthe period 1955-65 is shown in Table 2; figures up to 1962 are actual, thosefor 1963-65 are as presently planned. The total expenditure other than fortoll roads has tended to increase; over the 8-year period, 1955-69, itaveraged about Ps 900 million a year and is excpected to be about Ps 1,300
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per annum over the years 1963-65. For toll highways, investment, partlyfinanced by Loan 317-TE, is expected to be particularly heavy in 1963 and 1964.
15. The various taxes collected either directly or indirectly by theFederal Government from vehicle owners are redistributed on 1ogally fixedpercentage bases among the Federal Government itself, the State and FederalDistrict Governments and the Comite Nacional de Caminos Vecinales. There isalso a separate tax on income from the sale of gasoline in the Federal District.
16. Highway users as a group appear to make a reasonable contributiontowards the cost of highways in l-lexico. To illustrate, in order to replace thewhole of the existing Mexican highway system would cost approximately Ps. 17.80billion at cutrrent prices. If it is assumed that some 5 percent of the totalexisting road length would not be replaced because it has outlived its originaleconomic function, then, on the basis of an average life of 25 years for thehighways, the amount of the annuity at 8 percent interest required to amortizethe investment would be Ps. 1.22 billion per annum. To this must be addedannual maintenance costs of Ps. 0.30 billion, giving a total figure of Ps. 1.52billion.
17. In 1962 the taxes paid by vehicle owners amounted to Ps. 1.20 billion,(See Table 3). This figure, however, excludes vehicle registration and driverlicense fees collected and kept by the State governments as well as spec_altaxes paid to some of these governments from property owners wihose land hasincreased in value as a result of new road construction. In addition, someproportion of general taxation could be allocated as a contribution for otheradministrative and social benefits which accrue to the general public fromthe highways. Thus it can be concluded that the total contribution by thedirect beneficiaries of the highway system is fairly close to the Ps. 1.52billion figure above.
18. Financial procedures of the Federal Government prevent the Secretar-iat of Public Works from keeping a depreciation cr renewals fund supplied bymonies out of the regular budgetary allocat on. Depreciation charges arerecorded only for accounting purposes. Therefore, when the Secretariatrequires either replacement or additional maintenance equipment it has torequest funds either directly through its annual estimates submitted to theMinistry of Finance or indirectly through an external financial agency. Itis Government policy that the time period for loans obtained to purchaseequipment should not exceed the average expected life of the equipment. Theservice payments on these loans constitute in a sense, the only permittedform of obtaining annual budgetary allocatiQns for the depreciation andrenewal of equipment.
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III. THE PROJECT
A. Description
19. The proposed Project provides for:
i) the partial improvement and reconstructionof 11 roads totaling 2,l154 km;
ii) the completion of 20 roads, already underconstruction, totaling 2,021 km;
iii) the construction of 9 new roads totaling793 km;
iv) the procurement of additional equipment formaintenance of the Federal Highway networksand for laboratories and control of con-struction works.
B. Highway Program
20. The Project roads have been selected by the Government as thosehaving a high priority. This judgment is confirmed in Section IV below onthe economic justification of the Project.
21. Although the main highway network has grown steadily, some import-ant gaps still remain. New penetration roads are required for the develop-ment of potentially rich areas. The increases in the number and size ofvehicles on some of the major highways necessitates their improvement orreconstruction. The Project roads are scattered throughout the country(Map 2). Details of the type of work to be done on each road are given inTable 4.
22. In general, roads Noo 1 to 11 in Table 4 require the same type ofwork. Many of these sections were built some twenty years ago to standardswhich are inadequate for the needs of the present heavy traffic volumes;widening, realignments and base strengthening are necessary. Included inthis group are three very important east-west highway sections which servemajor agricultural and industrial areas:
Road No. 3 - Monterrey to Torreon - 346 kn to bereconstructed - average traffic 700to 2,500 vehicles per day;
Road No. 4 - Celaya to Tepic - 405 km to bereconstructed - average traffic800 to 3,400 vehicles per day;
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Road No. 7 - Mexico City to Veracruz - 262 km to bereconstructed - average traffic 800 to5,200 vehicles per day.
The Acapulco-Zihuatanejo Road (No. 10) which forms part of the PacificoCoastal Highway was severely damaged by a cyclone in 1961 and requiresrehabilitation.
23. A special case in the Coatzacoalcos-Frontera Road (No. 9) whichis located in an area where no road aggregates are available, and will beconstructed with a "mix in place?l bituminous stabilized base.
24. Roads No. 12 to 31 are those on which construction began before1963 and which are expected to be completed under the 1963/66 program.
25. The remaining roads (No. 32 to 40) may be divided into two groups:
i) The two roads (No. 33 and 37) will fill gaps in the NationalHighway network. In addition to shortening the distancesbetween their terminal points, they are expected to stimulatethe economic development of the areas they will cross.
ii) The remainder (Nos. 32,34 through 36, and 38 through 40) arepenetration roads into areas where development is hamperedthrough the lack of satisfactory communications.
26. Design standards for the roads included in the Project are detailedin Table 5. Taking into account the varying topographical conditions, eachone of the four standards is modified for flat and rolling, hilly, mediummountainous, and heavy mountainous country, making a total of 16 differentstandards in all. These standards which are the same as used for the Loan268-PIE project are satisfactory. The particular choice of standards for eachroad takes into account the expected volume of traffic in the given topo-graphical conditions. Comprehensive traffic studies taken over the past 12years, which cover such aspects as congestion trends, vehicle growth by types,origin and destination surveys, etc., are used as the basis for road design;electronic computers are now being used for this purpose.
Ce Procurement ef Maintenance and Laboratory Equipment
27. The Project provides for the procurement of maintenance equipmentto replace worn out machinery, to intensify mechanization of operations andto meet the increased needs resulting from a growing network carrying anincreasing amount of traffic. An indication of the increased maintenancerequirements on the Federal HighJay network is given by the trend of annualexpenditures which increased from Ps. 111 million in 1955 to Ps. 263 in 1962and are expected to reach Ps. 323 million for 1965, a threefold increase in10 years. H4aintenance equipment to'be procured includes vehicles, machinery,spare parts, tolls for repair e1wpe, togvthor with r^dao camnicatiomiequipment.
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28. In addition to the needs of the Maintenance Department, the Depart-ment of Projects and Laboratories, which is in charge of the design andscientific control of the highways, needs additional equipment because ofthe expansion of the network. Most of this equipment would be of foreignmanufacture. A summary list of the maintenance and laboratory equipment isgiven in Table 8.
D. Cost Estimates and Financing
29. The total estimated cost of the Project is Ps. 1,199 million(US$96 million equiv.), made up as follows:
Local Funds IBRD Funds TotalPs. US$ equiv. Ps. US$ equiv. Ps. US$ equiv.
30, Cost estimates for each road in the Highway Project are given inTable 6. These estimates which were prepared by the Secretariat of PublicWorks are based on experience obtained in the recent execution of a largeamount of works. For new construction works, the estimates are based onaverage unit cost per km for each type of road, taking into account topo-graphical conditions (Table 7). The cost of small bridges is included inthe average cost of drainage. The cost of larger bridges has been computedseparately but included in the total for each road. For reconstructionworks, the estimates are based mainly on unit prices for different types ofworks. The unit prices which were estimated for different parts of thecountry according to local conditions are regularly reviewed and approved bya National Commission of Unit Prices, the Chairman of which is the Secretaryof Public Works.
31. The costs shown for each road in Table 6 include an addition of 10percent for engineering and administration and a further 10 percent for physi-cal contingencies. An overall price contingency factor of 10 percent was thenadded to the overall cost of the Highway Project to allow for price increasesduring the period of its execution. The amounts shown in paragraph 29 includeall these additions.
32. The estimated cost cC maintenance and laboratory and control equip-ment is based on recent quotations by local representatives of manufacturersincluding 5 percent for spare parts. Since the bulk of the equipment is to beprocured abroads transport costs to Mexico are included in the estimate.
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33. The cost estimate of the Project appears reliable, both on the basisof the method followed and on the Bankts experience with Loans 268-NE and317-ME, for which the Project estimates were also prepared by the Secretariatof Public lWorks.
3h. The execution of the roads Project is expected to take about tbXco.7ycars. .intn e and labor.wrt bq ipmcvnt XLo7d be purehascd within one yearand a half. The annual breakdown between the estimated local crurfeny and theforeign exthange uxpenditures is as follows:
Total Local Currency Foreign Exchange ExpendituresExpenditure Expenditure Ps. US$ equivalent
Year Ps. Ps. (millions) (millions)a_____________________ 0-oO,oo J 00 __ -_______________--------
35. The Secretariat of Public Works prepared a detailed computation ofthe foreign component in the cost of highway works. This component, whichwas shown to be an average of 36 percent, has been checked by the mission andappears satisfactory. The loan will cover the total cost of the equipment.
36. The local currency costs of the Project, Ps. 699 million (us$ 56million equivalent), would be financed by the Federal budget. The Secretariatof Public Works has been assured by the Secretariat of Finance and theSecretariat of the Presidency that enough funds would be appropriated tocover the local cost of the Project. The foreign exchange cost of US$ 40.0million equivalent will be covered by the requested Bank loan.
E. Execution of the Project and Procurement
37. The Secretariat of Public Works is competent to supervise the execu-tion of the Project. Road construction, bridges, and improvement works will becarried out 6n contracts awarded through international competitive biddingwhenever practicable, on the basis of unit price contracts.
38. Contracts amounting to about Ps. 110 million, or 11 percent of thehighway part of the Project, were already awarded in 1962 and so far in 1963,after local competitive bidding. It has been agreed that only contracts ofPs. 25 raillion (equivalent to US$ 2 million) or more are likely to interestforeign bidders. On this basis, less than half of the work already awardedwould have been eligible for international competitive bidding. For theremaining 89 percent of the highway part of the Project, individual roads underthe above limit will be grouped where practical to produce contracts of a valueto interest foreign bidders. It is estimated that on this basis about two-thirds of the higwrAy part will fall into that category. A list of thc roadsthuw eligible for internatinal coppetitive bidding has been agreed upon.
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39. On the two previous highway loans to Mexico (#268 and 317-4'E) asimilar situation was encountered. Works already underway at the date ofthe loan and included in it amounted respectively to about 15 percent and17 percent. For the remaining works the minimum amount of contracts wasUS$1 million in the 268-SE Project, and US$2 million in the 317-ME Projectexcept for small and scattered sections of works which could not be reason-ably grouped into contracts of this size. However, experience in Mexicohas shown that although many international tenders for road works have beencalled and some bids were submitted by foreign contractors, no contract wasever awarded to them because their bids have always been higher than thoseof IIexican contractors.
ho. The procurement of eqcipment for contracts amounting to more thanUS030,000 equivalent, will also be awarded on the basis of internationalcompetitive bidding, taking into account not only price but also such termsand conditions as quality, delivery, performance, guarantees, and servicefacilities in Mexico, in agreement with the Bank's usual procedures. Due tothe type of the equipment, most of it will be imported; however, some usualitems, mainly vehicles, are assembled or partly manufactured in M,Iexico. Ithas been agreed during loan negotiations that for the procurement of theseitems, the Secretaria de Obras Publicas may award the contract to the lowiestMexican bidder offering satisfactory terns and conditions, as indicatedabove, provided that his offered price does not exceed the offered price ofthe lowest acceptable foreign bidder by more than 10 percent, without takinginto account customs duties.
41. The Government has requested that Bank financing be applied topayments made from January 1, 1963; this would be acceptable.
h2. The Government has agreed to ensure that the entire Federal Highwaynetwork will be adecpately maintained and properly used. It has also agreedthat machinery and equipment for road maintenance will be adequately maintainedand repaired and suitable workshops are provided and maintained for thatpurpose.
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IV. ECONONIC JUSTIFICATION
A. General
43. The roads in the Project, which are scattered throughout thecountry, were selected by the Government as being of the highest immediatepriority. The Mission's analysis confirms their economic justification.The roads are expected to bring to the economy important benefits which varyin nature depending on the type of traffic and region served and whether ornot roads already exist. For those roads where the benefits are clearlymeasurable in terms of road user savings, computations of rates of return onthe proposed investments have been made. In order to arrive at an economicjustification in other cases,estimates were made of the agricultural develop-ment expected to take place in conjunction with the road improvement or itsprovision. None of the proposed new roads will conflict with existing railtransport.
B. Road Users' Benefits - Rate of Return
44. For each of the 17 roads numbered 1 to 11, 17, 24(a), 26, 27, 32and 37, a rate of return has been computed by equating the present valuesof future costs and benefits. The total estimated cost of these works(Ps. 55 million) is made up of Ps. 80 million spent before January 1, 1963with the balance of Ps. 471 million being included in the Project. Theoverall rate of return on the investment is expected to be about 25 percent.For individual roads the computed rates range from 10 to 80 percent.
45. The users' benefits were calculated on the basis of detailed infor-mation relating to vehicle operating costs and traffic counts provided bythe Secretariat of Public Works and on reasonable traffic projections.Details of the method used in assessing the benefits are given in theAppendix. The results of the calculations axe sunmarized in Table 9. Thecalculations were divided in two main categories, described below undera and b:
a. Improvement of Existing Roads
b6. The improvement of Roads numbered 1 to 9 and 11 should result indefinite advantages to users. The investments in them must be considered asadditions to already existing investments. Since further improvements of asimilar nature undoubtedly will be needed in the futures the period chosen topay off the planned investments has been limited to 10 years. The only costtaken into account is that of the investment itself. Maintenance will notcost more -- in most instances less - after the works have been executed.As an example, the computation for road No. 5, Irapuato-Silao, is shown inthe Appendix. It is an important section on one of the main roads leadingfrom Mexico City to the north of the country. Irapuato lies on the mainhighway from Mtexico to Guadalajara, 65 km from Celaya, the terminal of thetoll highway to Mexico City through Queretaro. In 1962, traffic countsshowed a daily traffic of about 2,200 vehicles, which is expected to increaseto about 5,000 vehicles by 1974. Trucks and buses accounted for 46 percentof the total. With the proposed road improvements, the average speed ofcommercial vehicles is expected to increase from 45 to 60 Im per hour. Theresulting savings would pay for the investment in 10 years with a return of
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28 percent. Similar computations applied to roads 1 to 9 and 11 produced ratesof return ranging from 11 to 80 parcent, with an overall return of 30 percent,as shown in Table 9.
b. Construction of New Trunk Roads
47. The seven roads numbered 17, 24(a), 26, 27, 31, 32, 37 and 40 areentirely new constructions, for which the useful economic life has beentaken as 25 years. Road No. 10, Acapulco-Zihuatanejo has been included inthe category because the importance of reconstruction works is such that forthe purposes of calculating a rate of return it may be considered as a newroad. The road was destroyed by a hurricane and will require importantrelocation, including that of an entire 57 km section. Costs considered inthe rate of return computation for new roads include the initial investment,routine and periodic maintenance and resurfacing after 10 and 20 years; ratesobtained for the roads vary from 10 to 60 percent, with an overall return ofsome 20 percent. (See Table 9).
48. The six roads, Nos. 17, 27, 31, 32, 37, 39 and 40 will provide muchshorter connections between points which are already linked by other routes.Two of the roads will provide better alternatives to existing routes: i) road24(a), Naucalpan-Toluca, is to provide a new link for traffic going from theimportant industrial region in the north of Mexico City to Toluca (high pro-portion of commercial traffic -- trucks 55 percent, buses 10 percent),avoiding a cumbersome time-wasting passage through the City to the older routefurther south; and ii) road 26, San Jose-Zinapecuaro-Huajumbaro, near Morelia,for which the computation, showing a rate of return of 22 percent, isreproduced in the Appendix. The road will be part of the main highway fromMexico City to Morelia. It will replace a badly situated and deterioratedsection in the neighboring -rountains, which has grades of 9 percent andnearly 500 curves, of which many are very sharp. Traffic counts on the oldroad already exceed 900 vehicles a day; it is expected that 90 percent ofthe traffic will be transferred to the new road and that average commercialvehicle speed will increase from 40 to 55 km per hour. Daily traffic isexpected to average about 1,000 vehicles in 1965 and 2,000 ten years later.
C. Feeder and Penetration Roads
49. The roads included in this category are those numbered 12 through 16,18 through 23, 24(b), 25, 28 through 30, 32 through 36, 38 and 39. Their mainpurpose is to provide adequate access to regions which have hitherto remainedmore or less isolated from the rest of the country. At present, some of theregions can already be reached by trails which are usable by trucks onlyduring the dry season, under conditions which are hazardous and costly to thevehicle operators, or by tracks usable only by animals.
5o. The regions to be served are primarily agricultural. The roads wouldprovide better access to markets, which in several instances should facilitatethe transition from a subsistence to a market agricultural economy. Areassuitable for cultivation would be more accessible, It would be possible tointroduce other crops, perishable and non-perishable, for sale in marketswhich could not previously be reached. At the same time these regions areexpected to develop new markets for produce of other regions in the country.
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51. The selection of the roads retained in the Program has been based ona careful study of the present and potential agricultural production workedout by the Secretariat of Public Works in conjunction with the Secretariat ofAgriculture. The general method used in assessing production is outlined inthe Appendix.
52. Most of the feeder and penetration roads can be classified in one oftwo major categories according to the predominant type of benefits which maybe expected: (i) the reduction of transport cost of goods from the use ofexisting trails to the use of the new road, of (ii) the increase in agri-cultural production expected to take place in conjunction with the existenceof the new road.
53. For roads of the first category there are no traffic counts, but fromdata on agricultural production and consumption and general knowledge of theregion to be served, an estimate has been made of the volume of goods leavingand entering the region. An estimate of transport cost savings was then madeby multiplying this amount by an average carrying distance and by the calcu-lated difference in the cost of one ton-km of transport between a modern roadand the existing inadequate means of transport. A typical example is roadNo. 14, Cardel-Nautla, which will serve a fertile coastal strip along the Gulfof Mexico, north of the port of Veracruz. Main production in the zone ofinfluence includes sugar cane, corn, rice, coffee, bananas and other tropicalfruit, cattle and milk. Production increased considerably since the regionwas made accessible b\r an earth track some years ago, but transportation hasremained costly, hazardous and is interrupted during wet periods. A computa-tion explained in greater detail in the Appendix has shown that estimatedtransport savings based on the present volume of production would provide an.18 percent return on the investment.
54. Road No. 12, Soto La Marina-Aldama-Manuel has been taken as anexample of a road in the second category as outlined in the Appendix. The roadwill extend into a region north of Tampico, which is still, to a large extent,virgin territory covered by jungle and bush. Potential production is severaltimes the present output; it may reasonably be assumed that within the first10 years after opening of the road gross agricultural production will increasefrom about Ps. 14 to 28 million a year, and that further increase can beexpected thereafter. A road investment of Ps. 45 million in view of such adevelopment appears quite reasonable. Production in the region includescattle, sisal, corn, tomatoes, sugar cane, cotton and chili.
D. Other Benefits
55. In the above analysis, as a fair approximation and for purposes ofsimplicity, only the main category of benefits has been retained for each road.However, in most cases other types of benefits will also result and may in timebecome very important. Several roads which are basically intended to serveagricultural regions will also close gaps in the highway system, resulting inadditional benefits to the economy. In certain instances new light industrieswould, no doubt, be attracted by greater accessibility to labor markets andsources of raw materials. It is also expected that the roads would facilitatethe improvement of the administration, health and educational standards of
- 13 -
sizeable coimmunities which until now lived in isolation; this should eventuallylead to improvement of their economic productivity.
54. One examp2e, for which the latter type of benefit is predominant,is road 20, Iguala-Cd. Altamirano. The road would traverse a mountainousregion and join a number of densely populated valleys which remain almostisolated from the rest of the country. About 150,000 people, living primarilyon subsistence farming at present would be directly affected by the new road.The proposed additional investment would amount to US"60 per capita, or anannual cost of US$6 per capita considering 8 percent interest and 25-yearamortization. Such an investment is modest in a country where average annualper capita income is US$350 and per capita investment US$50. So long as thearea remains unconnected to the main highway network of the country, it willhave little opportunity for growth and the economic and social horizons ofthe people will be limited.
V. CONCLUSIONS
57, The Project is technica ly sound and cost estimates are realistic.The works are justified economically by expected savings in vehicle operatingcosts resulting from improved road transport conditions and by the increaseof production and expected development of the areas to be served by the newroads. The additional maintenance and laboratory equipment is required forimproving highway maintenance and design of the roads.
58. The responsible executing agency is the Secretariat of Public Works.The various Departments concerned with the Project (Planning, Projects andLaboratories, Construction and iaintenance) have a sound organization andclear lines of authority; their staff is competent and no outside consultantsare required.
59. The local funds for the Project will be provided by the MexicanGovernment through annual budgetary appropriations in the Federal Budget.
60. The proposed Project provides a suitable basis for a Bank loan ofUSh4O million equivalent. An appropriate term for the part of the loanpertaining to road works, amounting to US031.5 million equivalent, would be20 years including a 4-year period of grace; for the part of the loan per-taining to equipment, amounting to US&8.5 million equivalent, a term of 6years including a one-year and a half period of grace has been requested bythe Mexican Government for the reasons explained in paragraph 18.
September 6, 1963
Table 1
M E X I C 0
SF,'CO" 77777L HIGHI -Y PROJECT
Registered Vehicles
(thousards)
Year Cars Buses Trucks TOTAL
1932 60 5 21 86
19h2 113 11 54 178
1952 237 20 154 411
1953 253 20 180 453
1954 27h 20 193 h87
1955 308 22 220 550
1956 320 21 240 581
1957 366 22 273 661
1958 379 23 274 676
1959 438 26 301 765
1960 h83 26 293 802
1961 h87 34 319 8ho
1962 1/ 526 36 344 906
1/ Estimated numbers.
Table 2Page 1
MXCO
SECOND FEDERMAL HIGHWAT PROJECT
Total Actual and Planned Expendituresfor Construction, Reconstruction andMaintenance of Roads in Mexico.
(Pesos millions)
Federal State Local Toll Total AllYear Roads Roads R Roads / Sub-total Roads Roads
Total Expenditure for Federal Roads 952 1,046 784 46 2,828-
Table 2Page 2
MEXICO
SECOND FEDER AL HIGHWAY PROJECT
Total Actual and Planned Expendituresfor Construction, Reconstruction andMaintenance of Roads in Mexico.
(Pesos millions)
1/ includes 50 percent federal and 50 percent state participationL/ includes 1/3 federal, 1/3 state and 1/3 private participation3/ includes Ps. 75 million (equiv, US$6 million) Eximbank loanv7 includes financing by Loan 268-4'iE
includes financing by Loan 268-'ME and proposed new loanincludes financing by proposed new loan
/ includes financing by Loan 317-ME7/ balance of proposed new loan only
9. Federal District Share ofall above 124 142 150 157 573
Grand Total 998 1,050 1,156 1,205 4, 409
B. Expenditures
1. Constructiona) Federal (Open Highways) 462 351 362 383 1,558b) State 123 145 115 109 492c) Local 203 78 83 77 441
Total 788 574 560 569 2,491
2. Maintenancea) Federal 329 250 255 263 1,097b) State 30 36 61 80 207
Total 359 286 316 343 1,304
Grand Total 1,147 860 876 912 3,795
Source: Secretariato o1 Finance and Public Works.
Notes: 1/ Excludes Toll Roads.2/ Excludes duties on trucks in first half of year.3/ Estimated at previous year's figures./ Excludes vehicle licence fees collected by the States.
MXIC0SECCND FEDERAL HIGHWAY PROJECT
Summary of Works Included in Prolect (in Kms)Total Length ofleneth Planned Work Works remainins. to be done after 1/1/63
K2l KmCompletion of VariousA. Roads to be Reconstructed Desizn Gradin Sub-base Pavement works
34. Comitan-Lagunas de Montebello 50 50 Conpleted 50 50 --35. San Felipe-Ojuelos 62 62 June 1964 52 62 62 1736. Pto. Vallarta-Barra de Navidad Z50 250 Nov. 1964 250 250 - -37. Uruapan-Patzcuaro 55 55 May 1964 55 55 55 -38. Valladolid-Carrillo Paerto i0 130 Oct. 1964 130 130 -39. Villa Constitucion-Puerto Escondico 100 100 Aug. 1964 100 100 - _40. Monterrey-Monolova (Coahuil. Section) 43 41 May 1964 43 43 43 -
793 793
Grand Total (A), (B), (C) - 6.622 4.968
km
Table 5MEXI00
SECOND FEDERAL HIGHWAY MIOJECT
Design Standards for Roads Included in theProposed Highway Project
Flat andRolling Hilly Medium Heavy
Geometric Design Unit Country Country Mountainous Mountainous
Special Type (1)
Design speed Km/h 70 60 50 40Width of embankment Meter 9.0 9.0 8.5 8.0Width of surfacing Meter 7.2 7.2 7.2 7.2Minimum radius of curvature Meter 104 69 44 25Maximum grade % 5.0 6.0 7.0 8.0
Type A
Design speed Km/h 70 60 50 40Width of embankment Meter 9.0 9.0 8.5 8.0Width of surfacing Meter 6.1 6.1 6.1 6,1Minimum radius of curvature Meter 143 104 69 44Maximum. grade %.0 5.0 5.5 6.0
Type B
Design speed Km/h 60 50 40 35Wiidth of embanlakent Meter 8 8 7.5 7.0Width of surfacing Meter 6.1 6.1 6.1 5.5Minimum radius of curvature Meter 104 69 44 25Maximum grade % 4U5 5.5 6 6.5
Design speed Km/h 50 40 30 25Width of embankment Meter 7.0 7.0 6.5 6.oWidth of surfacing Meter 5.5 5.5 5.5 5.5Minimum radius of curvature Meter 69 44 25 17Maximum grade % 5 6 6.5 7
Minimum load design for bridges: H-15 - S-12 (AASHO)
(1) Geometric design standards for "Special Type" roads are shown onlyfor general information; these standards may be modified in certainsections to avoid costly reconstruction.
ME XIC
SECOND FEDERAL HIGHWAY PROJECT
Cost Esti=ate, for the Procosed Banl Finnced Project(millions of Pesoo )
TOTAL LENGTH OF % RENAININGLENGTH PLANNED WORK TOTAL BEFORE EXPENDITURES
A. ROADS TO BE RECONSTRUCTED KFI 4M TYPE OF ROAD COST 1963 1963/66 1926 1f 196 f2 1963/66
1. Mexicali-san Luis Rio Colorado 68 65 Special 6.7 - 6.7 - 6.7 - _ 1002. Jimenez-Chihuahua 220 220 Special 20.2 - 20.2 3.0 17.2 - - 1003. Monterrey_Torreon 353 346 Special and A 78.2 - 78.2 15.0 40.0 23.2 _ 1004. Celaya-,Tpic 544 405 Special and A 77.4 - 77.4 10.0 40.0 27.4 - 1005. Irapoato-Silao 35 35 Special 9.4 - 9.4 - 9.4 - 1006. MoreliaeGuadalajara 360 58 A 15.0 - 15.0 _ 10.0 5.0 - 1007. Nexico-Jalapa-Veracruz 445 262 Special end A 30.0 - 30.0 - 15.0 15.0 - 1008. Orizaha-Veracruz (Pane del Toro) 120 57 Special 7.3 - 7.3 - 7.3 - - 1009. Coat.acoalcos-Frontera 243 169 A 38.4 - 38.4 10.0 15.0 13.4 - 100
10. Aoapuloo-Zihuatanejo 238 234 B 73.2 - 73.2 5.0 30.0 38.2 - 10011. Veraoruz-Coatoacoalco 30 303 Special 368 36.8 5. o 11.8 - 100
2,929 2,154 392.6 - 392.6 48.0 210.6 134.0 - 100
B. ROADS TO BE COMPLETED
12. Seto la Yarina-Aldama-Meruel 156 156 C 44.7 14.7 30.0 6.0 9.9 14.1 - 6713. Tuxpan-TampiLo 179 131 Special 86.8 51.3 35.5 7.0 11.8 16.7 - 4114. Nautla-Cardel 118 82 C 75.6 59.2 16.4 6.0 10.4 - - 2215. Escopetazo-Pichucalco 183 158 C 84.4 56.1 28.3 3.0 15.0 10.3 - 3316. Escarcega-Chetumal 260 119 B 55.4 35.4 20.0 5.0 6.0 9.0 - 3617. San Pedro-Cuatro Cienegas 190 150 C 31.8 14.8 17.0 4.0 6.0 7.0 - 5318. Huixtla-Motozintla 65 65 C 17.6 3.6 14.0 - 7.0 7.0 _ 8019. S.atiago Papaequia-e-Tepehcaeee 46 46 C 14.6 2.0 12.6 3.0 4.0 5.6 - 8620. Iguala-Cd. Altaiirano 194 194 C 65.4 35.4 30.0 5.0 10.0 10.0 5.0 4621. Tlerra Colorada-Ayutla 80 60 C 17.8 7.7 10.1 2.5 3.0 4.6 - 5722. Pachuca-Nuejutla-Tempoal 280 70 C 87.0 61.8 25.2 6.0 10.0 9.2 - 2923. Guadalajara-Barra de Navidad 316 127 C 59.2 39.2 20.0 5.0 6.0 9.0 - 3424. Naucalpan-Toluca-TemYacaltepec 128 110 A and B 79.7 60.0 19.7 6.0 7.5 6.2 - 2525. Zitacuaro-Tuzantla 55 20 C 15.4 6.4 9.0 2.6 3.0 3.4 - 5826. San Jose-Zinapeeuaro-Buajumbaro 72 52 C 22.0 16.0 6.0 1.5 1.5 3.0 - 2727. Tehuacac-Huajuapan 116 81 C 35.2 26.9 8.3 2.0 2.5 3.8 _ 2428. Imuris-Cananea-Agua Prieta 179 179 C 72.2 37.2 35.0 9.0 11.8 14.2 - 4829. Cd. Guerrere-Ent. a Evo. Laredo 103 72 C 33.8 27.4 6.4 3.1 3.3 - _ 1930. Cardenes-Puerto Ceiba 63 58 B 34.0 20.4 13.6 3.0 5.0 5.6 - 4031. Carapan-Manuel Dobiado 117 91 C 40.9 19.6 2L.3 30 10.0 8.3 -5S2
24a. Naucalpan-Toluca 65 34.9 850 65 .09 11%26. San Jose-Zinapecuaro-Huajumbaro 52 22.0 800 59 .23 22%17. San Pedro-Cuatro Cienegas 150 31.8 300 45 200 km .35 30%27. Tehuacan4ruajuapan 81 35.2 200 41 40/225 km .08 10%33. Arriaga-Tapanatepec 43 16.0 300 50 67 km .71 60%37. Uruapan-Patzcuaro 55 18.5 300 55 55 km .32 40%
Sub-total 680 231.6 .21 20% (D$
TOTAL 24600 551Q0 .27 255-o
1) In some cases of partial reconstruction, the length of works shown is shorter than the distance betweenterminal cities*
2) WJhere two figures are shown, they indicate the range of variation of traffic counts at different stations.
3) Where two figures are shown they indicate the range of variation of traffic compositicn along the road.
4) For new construction, the figures are derived from traffic previously using other roads.
5) Comparison with the following column shows that the ratio of first year benefits to investrment gives agood approximation of the rate of return.
O CDCD
Z (
Appendix
MEXICO
SE-GO_D iEAL HIGHKTA PfOJECT
NOTE ON ECONOMIC BENEFITS
A. Road Users' Savings
1. As mentioned in the report, for 15 roads and part of a 16th, a rateof return was calculated by equating the present values of road user benefitswith costs. The basis for computing road users' benefits is that the samejourney over the new or improved road will cost less to the vehicle operatorsthan it would have had they continued to use the old road. The savirgs resultfranreduced expenditure on the following elements: i) for trucks and busesonly, the salaries of the driver and his assistant, and ii) for all vehiclesdepreciation and repairs, insurance and consumption of fuel, lubricants andtires. In all cases vehicle operating costs will be reduced because of theimproved condition of the road and to smoother traffic flow. In cases wherethe new route will be shorter, the total cost of operating vehicles over thedifference of distance will be eliminated.
2. The computation of road users' savings to be expected from a par-ticular investment requires the calculation of the benefits per vehicle andthe nunber of vehicles to which these benefits are expected to apply. TheSecretariat of Public Works has cor¢puted on the basis of extensive studiesboth the cost per km and the cost per hour of the various types of vehicles,without taking into account the time value of passengers, but including thewages of truck and bus drivers and their assistants. Vehicle depreciation,fuel cost, etc. were calculated net of taxes.
3. It has been derived from such data that for a road in average con-dition the operating cost (net of taxes) of vehicles running at 50 km/hour isas follows:
Average CommercialVehicle
(trucks and buses) Automobile(Pesos/km)
Depreciation and repairs .276 .204Insurance .010 .008Salaries of driver and helper .444 -Fuel and lubricants .340 .163Tires .150 .o63
Total (net of taxes) 1.220 .438
Equivalent uS$ .10 .035
4. When the roads are improved there is a reduction in the cost per kmnof all the elements listed in the above table. It has been calculated forexample that if an inadequate road permitting an average speed of 40 km/hour
-ii_
is improved to allow for a speed of 60 km/hour, the average cost/km of opera-ting commercial vehicles is reduced from Ps 1.36 to Ps 1.12, showing aneconomy of Ps 0.24, equivalent UST2Akm. When a new shorter route is con-structed, the economy will be anywhere from Ps 1.1 to about Ps 2.- per truck-km or bus-ka saved, depending on the condition of the old road.
5. On the Federal highway system traffic counts for cars, trucks andbuses are made one to four times a year on most of the roads usually overperiods of about one week, taking care of seasonal variations of traffic whenthey exist. The traffic counts are supplemented by origin and destinationstudies. Reasonable traffic projections are then obtained by multiplying thetraffic counts by traffic increment factors, showing the ratio of estimatedtraffic in any year to that of the preceding year. A standard series oftraffic increment factors starting with 8% (in recent years highway traffichas been increasing at an average rate of 9% and GNP 5 to 6%) in the firstyear and progressively decreasing to 5.6% has been adopted in most cases.These increment rates which were applied uniformly to most roads wereestablished on the basis of broad experierce of the High-vway Department andare considered reasonable.
B. Rate of Return
6. The computations of the rates of return for two roads are reproducedin this Appendix (Tables A and B) to illustrate the method followed. Thefirst one, Irapuato-Silao, is an existing road to be improved; the second,San Jose-Zinapecuaro-Huajumbaro, is to be an entirely new road which willprovide its users with greatly improved traveling conditions as compared toan existing low standard winding road in the mountains.
7. The tables show (i) traffic projections based on the latest trafficcounts, (ii) costs retained in the computation, (iii) calculated annual roaduser benefits, which were derived from the breakdown of traffic betweencommercial vehicles and automobiles and data on the particular economiesexpected to accrue for each type of vehicles for each road, and (iv) thesolution of the equation showing the economic rate of return. As explainedin the report, for road improvement w!orks (Table A) the rate of return wasbased on benefits accruing during the first 10 years and, as a conservativeassumption, maintenance costs were assumed to remain the same as if the roadhad not been improved; for the Irapuato-Silao road a rate of return of 28%was found. For new roads (Table B), a 25-year period was considered areasonable economic life and maintenance and resurfacing costs were includedin the calculation; the rate found for the San Jose-Huajumbaro road was 22%.
C. Determination of Agricultural Production in Zone of Influence ofPenetration Roads
8. Statistics of agricultural production have been established by theYIinistry of Agriculture for each community for the year 1958, based on the1950 census and on more recent information obtained in the field. Most ofthe 1960 census figures are not yet available, so that agricultural data inthe present report pertain to the year 1958. Population figures are thoseof the 1960 census.
- iii -
9. The Ministry's statistics include areas under cultivation,volumes produced for the various crops, and numbers of livestock for eachmunicipality. Also, maps are available showing the distribution of theareas by different types of land; cultivable (irrigated and non-irrigated),wooded, unproductive, grazing.
10. For each of the project roads, a map was made showing simultaneous-ly the limits of municipalities, estimated cultivable land (irrigated andnon-irrigated) and the zone of influence of the road. The latter area wasdelimitated according to topographical features and the presence of other roads,up to a maxiraum distance of about 10 km froim the new road.
11. Frorm the above data, production figures for the areas within thezone of influence were estimated as well as the proportion of cultivableland in actual use. Forecasts of future production were made assuiaing reason-able annual percentage incremenits based on general experience in Mvexico, thepossibilities of extending the areas under cultivation, and the improvedaccess to the region to be provided by the new road.
D. Economic Benefits for Feeder and Penetration Roads
12. On the basis of the data obtained with the above mlethod, the roadswere divided into two main categories as explained in the body of the report:i) those for which a sizeable production already exists and where significantreduction of transport costs may be expected, and ii) those for which themain benefits of the road will be to facilitate the development of agricul-tural production. The following two roads were selected for illustrativepurposes; similar data is available for all roads falling within thesecategories.
Boad No.l 4 - Cardel-Nautla - 118 krm-Ps. 75.6 million
13. This is a road of the first type for which the significant dataabout the zone of influence may be surnarized as follows:
- annual rainfall 1,280 mm.- population 60,000- area zone of influence 1741,000 hectares- cultivable area 92,500 hectares- proportion of cultivable area harvested 58.2$- number of heads of cattle 92,400- gross value agricultural production,annual Ps 120 million- value production available for
mqarketing, annual Ps 100 million- quantity production available for
marketing, annual 344,000 tons- main production: sugar cane, corn, rice,
coffee, bananas and other tropicalfruit, cattle and milk
- estimated reduction of transport cost whennew road will replace existing trackPs 1-/ton-kn, from Ps 1.50 at presentto Ps 0.50 on new road
14. On the basis of the above data, the outgoing agricultural trafficamounts to about 6.4 million ton-kmi annually, with a corresponding return
- iv -
traffic of 5.2 million ton-km in other merchandise, a total of 11.6 millionton-km. On such a traffic the new road would produce user savings of aboutPs 12 million which would give a return of 18 percent on the Ps. 75.6 millioninvestment over a 25-year period.
Road No. 12 - Soto la Marina-Aldama-Yanuel: 156 km - Ps 44.7 million
15. This road falls within the second category. Significant data aboutthe tone of influ6nce may be summarized as follows:
- rainfall 681 mm.- population 13,500- area zone of influence 584,000 hectares- cultivable area 48,500 hectares- proportion of cultivable area
harvested 12.0%- number heads of cattle 46,800- gross value of present agricultural
productior annual Ps 14.3 million- value production available for marketing,annual Ps 8.7 million- main production: cattle, corn, sisal, tomato,
sugar cane, cotton and chili
16. In contrast to the previous case, at the present level of production,the value of production available for marketing is small. The most signifi-cant figrure is that only 12% of the cultivable land is actually harvested,for which an important reason is the lack of accessibility of the region.In Mexico, overall agricultural production is developing at the rate of 5%per year. In the present case, in view of the important unused potential,it may reasonably be assumed that given proper access to the region an increaseof 7% a year can be expected which would double the production in 10 years,increasing its value from Ps 14 to 28 million. Sufficient land is availablefor the production to double again to Ps 56 million during the next 10 years.Such a development would well justify a road investment of Ps 44.7 million.
2. IPLROVEiIENT IRAPUATO-SILAO
Traffic Projection Costs Benefits Rate of Return Computation
Traffic Increment Number of Present Present worth
Count Factor Vehicles Ps. 000,000 Ps. 000,000 Year No. worth of of costs and_________ ___________ ___________ _ ______ 1 at 28% benefits at 28%
Traffic Projection Rate of Return ComputationIncrement Number of Costs Savings Savings Present Worth Present Worth ofFactor Vehicles Ps: i_: w.Osll Ps3Plnr less Costs Year No. of 1 at 22% Costs & Ebnefits at 22%
