FILE Copy. Report No. 1458b-BO Bolivia: Appraisal of an Aviation Development Project. April 28, Document of the World Bank

Transcription

1 Public Disclosure Authorized Public Disclosure Authorized Public Disclosure Authorized Public Disclosure Authorized Report No. 1458b-BO Bolivia: Appraisal of an Aviation Development Project April 28, 1977 Latin America and the Caribbean Projects Department FOR OFFICIAL USE ONLY Document of the World Bank FILE Copy This document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contents may not otherwise be disclosed without World Bank authorization.

2 Currency Equivalents 1 Bolivian Peso ($b) = US$0.05 US$1.00 = 20.0 Bolivian Pesos ($b) 1 million Bolivian Pesos ($b) = US$50,000 System of Weights and Measures Metric US Units 1 kilometer (km) = 0.62 mile (mi) 1 meter (m) feet (ft) 1 liter (1) = 0.26 US gallon 1 kilogram (kg) = 2.20 pounds (lb) 1 ton = 2,205 pounds Fiscal Year January 1 to December 31 Abbreviations and Acronyms AASANA AGA ATC COM CNA DGAC DGTTA DME ECLA FAB HF ICAO/OACI ILS ISB LAB LRB MTCCA NAVAID NDB RX SAC SSB TX UNDP VASI VHF VOR Airports and Air Navigation Services Administration Aerodromes and Ground Aids Air Traffic Control Communications National Aviation Council Directorate General of Civil Aviation Directorate General of Air Transport and Aerial Work Distance Measuring Equipment Economic Commission of Latin America Bolivian Air Force High Frequency International Civil Aviation Organization Instrument Landing System Independent Side Band Lloyd Aerea Boliviano Locating Radio Beacon Ministry of Transport, Communications, and Civil Aviation Navigational Aid Non-Directional Radio Beacon Receiver Under-Secretary for Civil Aviation Single Side Band Transmitter United Nations Development Programme Visual Approach Slope Indicator Very High Frequency Very High Frequency Omni-Directional Radio Range Aircraft Nominal B Boeing three-engine jet 119 seats 2 tons belly load B seats 4.5 tons belly load CV-580 Convair twin-engine turbo propeller 8 tons pay load F-27 Fokker twin-engine turbo propeller 40 seats or 5 tons pay load C-46 Curtiss twin-engine piston propeller 5.5 tons pay load DC-3 Douglas twin-engine piston propeller 28 seats 3 tons pay load

3 FOR OFFICIAL USE ONLY BOLIVIA APPRAISAL OF AN AVIATION DEVELOPMENT PROJECT TABLE OF CONTENTS Page No. SUMMARY AND CONCLUSIONS i-ii 1. INTRODUCTION... o BACKGROUND... 1 A. General... 1 B. The Transport Sector... 2 C. Transport Planning and Coordination... 3 D. Development Plan BOLIVIAN AVIATION... 5 A. Existing Air Transport B. Present Air Traffic C. Traffic Forecasts (Project Airports)... 7 Passenger Forecast Cargo Forecast Aircraft Movements... 8 D. Existing Organizations... 8 E. The Borrower - AASANA THE PROJECT A. Objectives B. Description... * Airport Construction and Improvements Design and Supervision of Construction Design of Cochabamba Runway Provision of Equipment AASANA Technical Assistance and Staff Training C. Special Components of the Project D. Ecology E. Cost Estimate This Appraisal Report has been prepared by Messrs. B. Bostrom (Aviation Economist), J. Bowlin (Financial Analyst) and W.B.R. Zetterstrom (Aviation Engineer) and Ms. V. Foster (Editor). This docuwmnt has a retnctod distribution and may be used by recipients only in the performance of their official dutie. Its contents may not otherwise be disclosd without World Bank autmrlaaton.

4 TABLE OF CONTENTS (Cont'd) Page No. F. Execution G. Procurement H. Disbursements ECONOMIC EVALUATION A. General *.* B. Economic Analysis C. Cost Savings D. Project Return FINANCIAL EVALUATION A. Existing Situation B. Financial Objectives C. Financial Plan D. Financial Projections AGREEMENTS REACHED AND RECOMMENDATION TABLES 1. Total Freight Movement in Bolivia 2. Comparative Economy Air Fares, Names and Abbreviations of Airports 4. Forecast Passenger and Freight at Project Airports 5. Forecast Aircraft Traffic 6. Cost Estimates 7. Disbursement Schedule 8. Estimated Aircraft Cost Savings in Quantified Project Benefits Sensitivity Analysis of Economic Rate of Return 11. Balance Sheets AASANA 12. Statement of Revenues - AASANA 13. Projected Operating Statements - AASANA 14. Projected Project Airport Operating Statements - Riberalta Airport 15. Projected Project Airport Operating Statements - Santa Ana Airport 16. Projected Project Airport Operating Statements - San Borja Airport 17. Projected Project Airport Operating Statements - Tarija Airport 18. Project Cash Flow - AASANA 19. Projected Balance Sheets - AASANA 20. Schedule of Selected Financial Indicators

5 TABLE OF CONTENTS (Cont'd) ANNEXES 1. Bank Group Projects in the Transport Sector 2. Bolivia Aircraft and Airport Inventory 3. Aircraft Accidents in Bolivia 4. Traffic Forecast Methodology 5. Existing Airport Conditions and Proposed Improvements 6. Location List for Equipment Included in the Project 7. Regional Maintenance Equipment 8. Draft Technical Assistance Job Descriptions 9. Special Components of the Project 10. Project Progress Monitoring Indices 11. Summary and Conclusions of Bolivia Transport Sector Report 12. Details of the Economic Evaluation 13. Financial Assumptions CHART 1. Organization Chart MAPS IBRD IBRD Project Airports Telecommunications Network

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7 BOLIVIA APPRAISAL OF AN AVIATION DEVELOPMENT PROJECT SUMMARY AND CONCLUSIONS i. This report appraises a project comprising: (a) the construction of two new domestic airports (Riberalta and San Borja) and major improvements at two others (Santa Ana and Tarija); (b) the design and supervision of construction in (a); (c) the provision of air navigational aids (Navaids) and communications (Com) equipment at the project airports and new countrywide Navaid and Com systems; (d) the provision of general maintenance equipment and runway maintenance equipment; (e) the provision of technical assistance and staff training to the Borrower; and (f) the design of a new runway, aprons and related works at the Cochabamba Airport. ii. The difficulties for surface transport created by topography and population distribution are reflected in high infrastructure costs. Given the scarcity of surface transport and the low population density in the lowlands, the Government is emphasizing the development of aviation for this and other isolated parts of the country. iii. The project, to be administered by Administracion de Aeropuertos y Servicios Auxiliares a la Navegacion Aerea (AASANA), will enable the domestic airlines and, in particular, the almost wholly Government-owned Lloyd Aereo Boliviano (LAB), to use larger, more productive aircraft, which already exist in their fleets, at a higher daily utilization rate with correspondingly lower unit costs. The project will also reduce the delays, cancellations and diversions for aircraft through improved aeronautical communications, navigational aids and runway maintenance equipment. The technical assistance and training element are intended to strengthen the planning, maintenance and construction units responsible for civil works and equipment of the borrower. The inadequate length and poor orientation of the present runway at Cochabamba, the main base of LAB, make it advisable to construct a new runway. It is desirable to support the project by providing funds for its detailed design. However, it is not possible at this stage to include the construction of the new runway in the present loan because of limited funds.

8 - ii - iv. The proposed US$25.0 million Bank loan represents the 60% foreign exchange component plus 8.4% of the local cost component (expenditures for local consultants) of the US$39.5 million required for the project. The remaining local costs will be financed by an equity investment from the Government, which will exempt project items from taxes and duties. v. Contracts would be awarded through international competitive bidding in accordance with Bank Guidelines. Retroactive financing would be required for design and supervision at three airports as well as paving and supervision at one airport (Tarija). Such amounts should not exceed US$1.7 million. vi. The main project benefits are cash savings to LAB from better utilized, more efficient and productive aircraft. The transport to or from isolated communities by non-scheduled Bolivian cargo airlines would also be assisted by the provision of better communications, air navigational aids and runway maintenance. In addition, unquantified benefits include time savings to passengers and prevention of spoilage of air cargo, improved air safety and better inter-regional integration of the country. The quantified economic return ranges from 12% to 24% for individual project items, with an average of 19% for the project as a whole. vii. The financial evaluation is based on the assumptions of tariff increases to cover operating costs for AASANA's entire system by 1980 and to give a return on fixed assets of 4% from 1985 onward. Even with these tariff increases, substantial benefits will still accrue to LAB, which, however, will be required for its continued fleet modernization. viii. This report is based on economic and engineering studies made by the proposed Borrower and its consultants. It would be the fourth Bank Group transportation project in Bolivia and the first in aviation development. ix. The proposed project is suitable for a Bank loan of US$25.0 million to AASANA, with a Government guarantee. The term would be 20 years, including a grace period of four and one-half years.

9 BOLIVIA APPRAISAL OF AN AVIATION DEVELOPMENT PROJECT 1. INTRODUCTION 1.01 The Government of Bolivia has requested Bank Group financial assistance in upgrading its air transport system to meet domestic transport needs more adequately. The project selected as the most appropriate concentrates on construction or reconstruction of four airports in isolated parts of the country: Riberalta, Santa Ana de Yacuma and San Borja in the northern department of Beni and Tarija in the south. The project also includes design for a new runway, taxiways and apron at Cochabamba; aeronautical communications and air navigational equipment; and runway maintenance equipment and technical assistance and training for the operating agency, Administracion de Aeropuertos y Servicios Auxiliares a la Navegacion Aerea (AASANA), the proposed borrower This would be the first Bank Group aviation project in Bolivia. Annex 1 gives details of previous Bank Group loans and credits for Bolivian transportation projects (railways and pipelines) Project cost is estimated at US$39.5 million (net of taxes and duties) with a US$23.7 million, or 60%, foreign exchange component. The proposed loan of US$25.0 million would cover this foreign exchange requirement plus US$1.3 million equivalent to cover a part of the costs of consultant services for detailed engineering design (paras and 4.10) This report is based on the technical and economic studies prepared by AASANA and its various consultants and on the findings of a Bank appraisal mission comprising Messrs. B. Bostrom (Aviation Economist), W.B.R. Zetterstrom (Aviation Engineer) and J. Bowlin (Financial Analyst), which visited Bolivia in November The report has been edited by Ms. V. Foster. 2. BACKGROUND A. General 2.01 Bolivia has an area of 1.1 million km 2, which can be roughly divided into the barren highlands "Altiplano" in the western part of the country, where most of the country's population lives; the central valleys in the midwest, and the lowlands to the east and the north. The departments of Pando, Beni and Santa Cruz are in the latter area and represent more than half the territory of the country, but contain only a small part (19%) of the population. Because of topographical barriers and long distances, transportation's role of encouraging overall economic development through an interchange of production among regions is unusually difficult. The provision of adequate transportation is further complicated by low traffic densities The difficulties caused by topography and population distribution are reflected in high transport infrastructure costs, necessitating a very

10 careful analysis of the most appropriate modes of transportation and potential projects for investment. After such an analysis, the Government is emphasizing the development of aviation for isolated parts of the country. Of the total transport projects in the five-year plan , an allocation of 21% has been made to investments in civil aviation. B. The Transport Sector (See Table I for comparison of traffic by modes) Railways 2.03 The railway is a very important transport mode as a result of the focus on mining as the prime activity for the modern sector of the economy. The system consists of about 3,400 km of meter-gauge Government-owned single track line (Map IBRD 12654). The most important route is the line connecting the mining areas and La Paz with the Chilean ports of Arica and Antofagasta. This western network is not directly connected to the eastern lines linking Santa Cruz with the Argentine and Brazilian meter-gauge networks; the only connection between the two networks is through Argentine territory. Although less important in terms of traffic, the line between Brazil and Santa Cruz is vital since it is the only surface mode of transport in this area and the natural import route for this rapidly growing part of the country. As a result of improvements in management and operation through two Bank-financed projects and tariff increases in 1975 and 1977, the railway is presently operating at a profit. A third railway project is being considered for Bank financing. Highways 2.04 The present road system consists of about 38,000 km, of which 3% (1,166 km) are paved, 17% (6,559 km) are gravel surfaced and the remainder, 80% (29,831 km), are unimproved earth roads. The most important part of the network is located in the highlands and valleys, where 84% of the population is concentrated in 34% of the territory. In contrast, the lowlands of the northern and eastern regions, which have twice the area of the other two regions, are insufficiently serviced by a few low standard roads. The road network generally is laid out in the form of a "Y" with Oruro as center; the main stem pointing to the south toward Sucre, Potosi, Tarija and through Villazon and Bermejo into Argentina; the left arm stretching through La Paz into the Titicaca and Yungas regions; and the right arm leading through Cochabamba into the lowlands of Santa Cruz. In view of the road conditions, road transport is primarily important only on relatively short hauls. Waterways 2.05 The river transport system is made up of an extensive network of inland waterways located in the eastern and northern parts of Bolivia, measuring about 1,600 km. Minimum channel depths vary from 1.0 to 3.5 m, with seasonal variations of up to 9.0 m. The system consists of five main waterways, as shown on Map IBRD These rivers represent the only available transport mode for commodities whose value is too low to justify movement by air. As such, they perform a vital function even though the quantities moved are small.

11 Lake transport is limited to Lake Titicaca, the highest navigable lake in the world. Its primary function is that of an alternate transport corridor to the Pacific Ocean through the Peruvian lake port of Puno, by rail and road to the seaports of Matarani and Mollendo. In terms of ton-km of freight traffic, lake traffic is more important than river traffic. Pipelines 2.07 The state oil company operates 2,462 km of oil pipelines and 754 km of gas pipelines. The oil pipelines allow access from the major production fields to the Pacific seaport of Arica and to the Argentine border. The Bank-financed natural gas pipeline (Loan 635-BO) conveys gas to Argentina. Depending on the success of intensive exploration efforts now under way and the confirmation of identified reserves, significant new pipeline construction may be undertaken. Aviation 2.08 The aviation sector is discussed in Chapter 3. C. Transport Planning and Coordination 2.09 Important issues related to transport planning and coordination in Bolivia need attention. As an example, during the next 20 years, there is little doubt that Bolivia will have to construct and improve a substantial number of roads. This program, which could cost several hundred million dollars, must be carefully defined and evaluated against the alternatives offered by the other transport modes A National Transport Survey for Bolivia, financed by UNDP, was completed in 1969, with the Bank acting as Executing Agency; it proposed a program for integrated transport development over the following ten years. One of its main recommendations was that a Directorate of Planning and Coordination should be created. The Directorate was created and, for a time, was attached to the Ministry of Coordination and Planning, but is now in the Ministry of Transportation, Communications and Civil Aviation (MTCCA) For achieving better planning and coordination, the Bank, in 1972, assisted in the preparation of terms of reference for a UNDP-financed technical assistance program to strengthen this Directorate. This program, with ECLA acting as executing agency, was cancelled in 1976 due to lack of funds after only partial implementation (a consultant worked for a few weeks at MTCCA and assisted in the preparation of projects to be included in the National Five-Year Investment Plan, ) The gap in knowledge regarding transport facilities and equipment, their condition, their age and their ability to meet expected demands is serious. Although individual project studies have been undertaken, there has been no real coordination among them. The Government has decided to update its National Transport Plan again under the direction of the Directorate of Planning and Coordination. The main objectives of the Plan would be to:

12 -4- (a) analyze and project the transport demand in relation to planned development of the economy; (b) review existing capacity and operations; (c) determine the role of each mode in relation to the demand; (d) recommend policies and operational improvements designed to make best use of available capacity; and (e) prepare a program of investments necessary to improve and expand capacity to meet projected demand Due to the limited funds available, UNDP and the Government have requested that financing of the program be taken over by the Bank. Funds for the needed updating of the National Transport Plan and for a technical assistance contract for its implementation are being recommended in the Third Railway Project now under consideration (para. 2.03). D. Development Plan 2.14 The Government's main transport strategy (except for pipelines, planned by the Ministries of Mines and Industry), for the five years can be summarized as follows: (a) extend and improve the road network to meet national and regional development related to high priority sectors in the economy; (b) continue the rehabilitation of the state railway; (c) modernize air transport through improvement and reequipment of infrastructure, ensuring permanent availability of smaller airports, particularly in the north and northeast; (d) extend the river and lake fleet and improve port facilities and river navigation; and (e) achieve an efficient operation of each transport mode in such a way that costs are low and services satisfy the demand The present MTCCA plan calls for investment, during , in projects already under execution totalling US$475 million in transport, excluding pipelines; of this total, US$266 million is for highways, US$107 million is for railways, and US$102 million is for aviation. In addition, projects of US$439 million are under study, with an aviation share of US$111 million and the rest for highways. This may be compared to total public sector investment of US$2,436 million, or almost 20%. Productive sectors (industry, mining, hydrocarbons and agriculture) will use about 60% of the public sector investment, and energy and public services will use the rest. About 62% of the transport investment is in foreign exchange and is likely to require external financing. Continued sector planning and coordi-

13 - 5 - nation are required to ensure that the projects under study are justified in their overall context and are well-timed. Of the US$102 million investment for aviation, the major part is for airport improvement and aircraft purchases for the national airline, Lloyd Aereo Boliviano (LAB). This planned investment is ambitious, but seems achievable In addition to the proposed project and other Government investments in the five-year plan above, it became apparent during appraisal that, because of a recent aircraft accident at Santa Cruz, a great deal of public pressure was being exerted to relocate the existing airport to a site some 15 km north of the town. However, various Government officials (notably in finance and planning) raised serious reservations to this proposed construction, primarily due to the 1976 completion of a new terminal building at the existing airport, the high interest rates and short payback period for the money to be borrowed, and the probable necessity to have the airport designed, constructed and financed by a consortium of firms as a turnkey project with its inherent risk of over-design and high construction costs. Since the probability of construction of this proposed airport is unknown, as well as its likely timing, costs of construction and financing, such costs have not been included in the financial projections for the project. It is assumed that, if such an airport were constructed, AASANA would be the operator of the airport only, not the owner. Assurances were obtained during negotiations that assets for a new Santa Cruz airport would not be transferred to, nor debt service cost borne by, AASANA until it can be demonstrated that such a transfer will not prevent AASANA from complying with the relevant financial covenants of the Loan Agreement (para. 6.08). 3. BOLIVIAN AVIATION A. Existing Air Transport 3.01 Civil aviation in Bolivia is, to a considerable degree, a relic of the 1940's (Annex 2). The communications (Com) equipment and navigational aids (Navaids) and some of the airfields date from that era, and the backbone of the domestic flying industry has basically consisted of aircraft of about 1945 vintage, relatively low in capital cost and operated with a minimum of maintenance. Airports have been difficult and costly to build; the electronic equipment, although good in its day, is now old, unreliable, and difficult and costly to maintain. Operating costs, as well as availability, of the older aircraft and spare parts are becoming a matter of concern. Runways, buildings, roads, power plants, radios, beacons and other components have received very limited maintenance and improvement. The Government, in view of other demands on its resources, did not, in the past, feel that expenditures in the field of air transport were of high priority since the system, under the conditions and with the aircraft types in use, presumably would continue to function to some degree. The high (reported) accident rate (Annex 3) and other unreported incidents, however, have led to a change of view. The Government is aware of the vital role of civil aviation in the country and is anxious to improve the existing situation. Some progress has been made, and air transport within Bolivia is now in a state of transition. LAB is completing a change in aircraft

14 -6- which involves an upgrading of service so that certain airports previously served by piston-engined Douglas DC-3 aircraft will change to turbo-propellerdriven Fokker F-27 and certain F-27 airports will be served by jet aircraft (Boeing 727). Comparative airline economy tariffs are shown in Table About 30 airports are managed by AASANA and served regularly by LAB flights (Table 3). The four major cities--la Paz, Cochabamba, Santa Cruz and Trinidad--account for more than 80% of the regular passenger and 70% of the cargo traffic. All of these airports, with some weight restrictions, are used by jet aircraft such as the Boeing B The other airports are in poor condition and can accept only small propeller-driven aircraft. During the wet season, several of these airports are closed for considerable periods. This can be a serious limitation since it coincides with the time when all other modes of transport, except limited river transport in certain areas, are also out of service Air transport is a vital means of communication, despite its relatively high cost, and is likely to remain so due to the topography of the country. The areas where the greatest potential for development could be assisted by improved air transport are northeast of the mountain area and in the south. The departments of Beni and Pando are accessible only by river, and then for only part of the year. At present, air transport is the only practical mode for passengers and high-value or perishable goods. This may gradually change when penetration roads from La Paz are built. Nevertheless, the quality of the roads that can be built at reasonable cost in this area is likely to be such that air transport will remain dominant for many years. In addition, the sparse population would make air transport the most economical mode. Trinidad, the capital of Beni, has the only airport of the two departments which is usable regardless of weather conditions. B. Present Air Traffic 3.04 The traffic of LAB has developed substantially since 1965 with the most rapid growth occurring over the past five years. Domestic passenger traffic has increased at a yearly rate of 14.5%, as a result of improved air services responding to the demands of a rapidly growing economy. Domestic air cargo, on the other hand, has been almost stable for the country as a whole because of airport and aircraft limitations Scheduled cargo and passenger traffic is monopolized by LAB, but unscheduled cargo service is split among several private operators. These private cargo operators are normally engaged in transporting meat from the Beni area and are owned by meat wholesalers, cattle owners' associations, and slaughterhouse companies. Conditions under which these flights are operated present major problems. The availability and low capital cost of old second-hand cargo aircraft have been attractive in the short run, particularly in view of the airport limitations and the ability of these aircraft to operate successfully from them. Of about 50 aircraft (Annex 2), only two are less than 20 years old. The most typical is the 30-year old C-46, which

15 - 7 - carries 5 to 6 tons fairly efficiently on short flights; however, its operational capabilities are marginal for the high mountains which have to be passed to and from Beni About 250 small aircraft are operated by air taxi companies and individuals and, although the number of passengers and cargo transported is small, these aircraft do provide vital services to the large areas of the country which lack all-weather roads. A comparison of traffic of the various types of carriers follows: Traffic by Carrier Type in 1975 Passengers Cargo (tons) LAB 396,000 4,300 Air Taxi Operators 30,000 1,600 Transportes Aereos Militares 16, Government Oil Company 11,700 - Non-Scheduled Cargo Airlines 9,000 32,000 The air passenger traffic of 463,200 may be compared to the railway traffic of 832,000 passengers for the western system and 317,000 for the eastern system in 1975; the highway traffic to the eastern sections was negligible. C. Traffic Forecasts (Project Airports) 3.07 The passenger traffic forecasts for the project airports, prepared primarily by AASANA, Oficina de Planificacion, and its consultants Ingenieria Politecnica Americana (Bolivian), in consultation with the Bank, took two factors into consideration: (a) the general traffic trend, based on such matters as future population and income growth; and (b) the additional growth as a result of service improvements at the individual project airports. For the latter purpose, an analysis was made of previous traffic development at other airports in Bolivia after the introduction of jet service. Passenger Forecast 3.08 The AASANA passenger forecast growth rates, based on historical traffic adjusted by the Bank to reflect actual traffic, generally reflect the current traffic trend. This methodology was also used for transit traffic at all airports. At the time of completion of the project airports, the number of transits will reduce at Riberalta, Santa Ana de Yacuma and Tarija. At the same time, in Riberalta, the origin and destination traffic will be increased by a diversion of one-half the forecast traffic from Guayaramerin. These two towns, which are only 95 km apart, are connected by a good all-weather gravel road. The actual average growth rate has been about 15% per year. The forecast tapers this rate to about 6% between 1985 and 1990 to reflect a more mature market. For details of passenger and cargo forecasts, see Table 4 and Annex 4.

16 -8- Cargo Forecast 3.09 Cargo traffic is of comparatively minor importance on a system basis. However, it constitutes a significant and growing portion of traffic at three of the project airports (Riberalta, Santa Ana de Yacuma, and San Borja). AASANA's cargo forecast growth rates were used, with an adjustment to consider 1975 traffic. Until completion of the improvements at the project airports, the growth is generally based on the current traffic trend. The forecast cargo growth for the three project airports is 14% through 1980, reducing gradually to 8% between 1985 and Aircraft Movements 3.10 Aircraft movement forecasts (Table 5) were developed primarily by AASANA and its consultants. These were adjusted by the Bank in line with the traffic forecasts and with consideration of the impact of larger, more efficient aircraft types. D. Existing Organizations 3.11 The present organization of civil aviation in Bolivia is relatively complex for the size of the country (Chart 1). Overall control is exercised by MTCCA, in consultation with the National Aviation Council (CNA). The latter--which consists of the Commander of the Bolivian Air Force (FAB), the Minister of Foreign Relations and the Minister of MTCCA--is primarily concerned with the approval of new national airlines, operations, establishing of the level and structure of national passenger and freight tariffs, bilateral agreements for international carriers operating in and over the country and the conditions under which airlines may operate in Bolivia. The Under- Secretary of Civil Aviation (SAC), the entity primarily concerned with ongoing operations of aviation in Bolivia, is supported by the Directorate General of Civil Aviation (DGAC), the Directorate General of Air Transportation and Aerial Works (DGTTA) and AASANA. The principal responsibility of DGAC is the setting of safety standards for the airports and those airlines which use them, in addition to the licensing of pilots and certification of aircraft airworthiness. DGTTA deals with the applications for establishing new national airlines, setting the level and structure of national passenger and freight tariffs and arranging bilateral agreements. AASANA is the entity concerned with the planning, construction and operation of the airport and navigation facilities to support the air transport system. LAB, the national airline, and other non-scheduled airlines are the principal users of these facilities. A total of about 2,000 people are employed in the aviation sector, not counting those in associated activities such as customs, air cargo handling, and catering. AASANA has about 550 employees, compared with 750 for the almost totally Government-owned airline, LAB. The remaining personnel are spread over several small charter airlines and the two directorates (DGAC and DGTTA). The Bolivian Air Force has long been engaged in civil air transport and, although its civil activities have been curtailed, it continues to provide a service on some of the uneconomic, low-density routes.

17 -9- E. The Borrower - AASANA 3.12 AASANA was created by Law No in 1967 and formally established on April 17, 1968 as a Government entity with operational autonomy for its specific administrative functions. The most important of these are to administer, plan, maintain, operate and improve the network of national airports for regular public use as well as related services to aircraft flying between airports. To perform these functions, AASANA may enter into all types of agreements and contracts in accordance with established legal requirements; AASANA is exempt from taxes and duties. The legal domicile is in La Paz, but AASANA may establish offices in other parts of the country as required. In accordance with the Law of Public Institutions, AASANA has a Board of Directors, but the direction and decisions regarding AASANA's daily operations are the full responsibility of the Executive Director and the Technical Director of AASANA As detailed in Chart 1, the main functions are carried out at the headquarters, with regional airports divided into four groups. I4ore than half of the staff is located in La Paz. The effect of an extensive reorganization in 1975 has left AASANA with an essentially well structured organization. However, inherent in this reorganization is the reliance on a limited number of qualified staff members, such as the Technical Director and Department Heads of Administration, Operations, Civil Works and Electronics. These staff members--together with the Chiefs of Auditing, Planning, Legal and Personnel offices--comprise the Council of Executive Coordination, which is presided over by the Executive Director. In view of the responsibilities of the Technical Director (described in Annex 8), an advisor is being proposed to assist in daily operations. With these improvements, it is felt that AASANA will be able to implement the proposed project Present assets of AASANA are very modest compared to the needed investment. They consist mainly of the old assets transferred from LAB as part of the Bolivian Government equity at the time of the creation of AASANA, USAID capital assistance totalling US$7.3 million (the last part committed in 1968), with Bolivian Government counterpart contributions and operating subsidies for several years thereafter (para. 6.04). These limited funds constitute one cause of the present constraints of the borrower, which have been partly remedied by substantial tariff increases in Another factor is that of the limitations on staff and organization, which again were subject to internal changes and significant salary increases in 1975 in order to retain qualified staff in an improved administration. Despite a more progressive management, much remains to be done in order to improve the efficiency of the proposed borrower. Some essential technical training has been provided by International Civil Aviation Organization (ICAO) experts, but management experience, particularly in implementing a large scale investment program of civil works and electronics, is still very limited, and it has not been possible to recruit or retain certain individual technical staff members. It was agreed during negotiations that salaries for technical

18 specialists will be continually adjusted by AASANA in order to be competitive with alternate employment in Bolivia. It is still too early to evaluate the results of the reorganization, but it is clear that more experienced staff at certain levels are required The operations of, and maintenance by, AASANA are closely related to the requirements of air transportation. In the general shortcomings explained above (para. 3.01), the lack of functioning aids and equipment for civil aviation plays a significant part. AASANA has been slow in catching up because of obsolete equipment. The provision of inadequate services, particularly for domestic flights, is due to managerial problems, to the lack of sufficient numbers of specialized technical staff, and to difficulties involving weather and topography. It is expected that the combination of assistance by the Bank project and ICAO will continue to improve substantially the maintenance of both airports and equipment. 4. THE PROJECT A. Oblectives 4.01 The Bolivian Government is attempting to integrate the widely dispersed and sometimes isolated communities of the department of Beni into the economic and social life of the country by developing a dependable air transport system. To help meet this objective, the project aims at providing a nucleus of airports in Beni which can handle larger and more efficient aircraft than at present; developing rational countrywide systems of Navaids and air/ ground and point-to-point Com equipment; and providing technical assistance for the administration, maintenance and operation of the airport system. The Government wishes to improve the inadequate airport runway at Tarija, to establish a ground maintenance capability and also to realign the runway at Cochabamba. B. Description 4.02 The project would consist of: (a) the construction of two new domestic airports (Riberalta and San Borja) and major improvements at two others (Santa Ana and Tarija); (b) the design and supervision of construction in (a); (c) the provision of Navaids and Com equipment at the project airports and new countrywide Navaid and Com systems; (d) the provision of general maintenance equipment for AASANA and runway maintenance equipment for Santa Ana Airport;

19 (e) the provision of technical assistance and staff training for AASANA; and (f) the provision of final design for the construction of a new runway, apron and taxiways for the Cochabamba Airport. Airport Construction and Improvements 4.03 A detailed description of existing conditions at the four project airports and Cochabamba as well as the proposed construction and improvements are given in Annex 5. Improvements are summarized in paragraphs 4.04 through 4.07 following Riberalta. The construction of a new medium range jet (B-727) airport at Riberalta would include earthworks; drainage; paved 2,000 x 45 m runway; lead-in taxiway; apron; fuel farm; terminal building; control tower; a maintenance/crash fire, rescue vehicle shed; fencing, access and ancillary roads and all necessary utility systems San Boria. The construction of a new turbo-prop (F-27) airport at San Borja would be similar to that at Riberalta except that the paved runway would be 1,800 x 30 m Santa Ana. The construction of a new (F-27) runway at Santa Ana would include earthworks; drainage; a sealed 1,800 x 30 m runway; lead-in taxiway; apron; fuel farm; renovation of existing terminal building and tower; a maintenance/crash fire, rescue vehicle shed; fencing and necessary access road improvements Tarila. The construction of a new (B-727) runway at Tarija would include paving of the newly constructed 2,800 x 45 m runway, a lead-in taxiway and apron, construction of a drainage canal around the southeast end of the runway, and fencing. Since the base course of the new runway would be completed by February 1977, the paving and drainage should be done as soon as possible to avoid weather damage to the new construction. Thus, the contract for the paving is likely to be let prior to signing of the loan. Design and Supervision of Construction 4.08 AASANA plans to engage local consultants to do the final engineering and supervision of construction of the three Beni airports. The engineering at Tarija has already been done, but AASANA will engage a local consultant for the construction supervision. It is expected that the work of these consultants will be satisfactory. To assist in further developing this newly emerging local industry, as a substitute for the estimated foreign component cost if a foreign consultant were hired, the project will provide 70% of the total costs of design and the subsequent supervision of construction of the three Beni airports and 70% of the cost of supervision of the construction at Tarija Airport. Because these contracts are to be let before the proposed loan will be presented to the Board, costs incurred for consultant services after December 31, 1976 (estimated at US$0.7 million) are proposed to be included in the loan.

20 Supervision of construction would be required through the last quarter of calendar year For the sake of continuity, it would be desirable that the consultants selected for the design work be retained for the supervision of construction. Design of Cochabamba Runway 4.10 The runway at Cochabamba Airport, the home airport for LAB, is so oriented that obstructions impose weight restrictions on the larger aircraft now being flown by LAB. Such restrictions have become an operational and financial burden for LAB, and they will become more serious as operations increase and larger aircraft are acquired. To alleviate this problem, a new runway, oriented about 90 degrees from the existing one, was proposed by a feasibility study prepared last year. A preliminary analysis by Bank staff indicated that such a runway would be justified in the early 1980's. Construction at Cochabamba is included in AASANA's program for Since it is difficult for AASANA to obtain other than operational funds from either its revenues or the Government, 70% of the estimated costs of the detailed final engineering design for this high priority item have been included in the project. Provision of Equipment 4.11 Air Navigational Aids and Communications Equipment. At each of the project airports except Santa Ana, Navaids (VOR/DME) 1/ would be installed as approach and enroute aids. At all project airports, locator beacons (NDB) 2/ would be installed. New VHF 3/ air/ground and HF-SSB 4/ point-to-point voice and teletype communications would be installed between the project airports and system hubs at La Paz, Cochabamba and Trinidad. Other Navaids and Com equipment would be installed at selected points to fill out complete systems for the country (Map IBRD 12655), except for those air traffic areas controlled from Santa Cruz, omitted because of lower priority and fund limitations. Lists of this equipment and its locations are given in Annex 6. Engineering for the systems would be performed by the ICAO technical assistance personnel now assigned to AASANA. Design and installation of certain teletypewriter systems would be done by the equipment manufacturer, selected through international competitive bidding (para. 4.26). 1/ Very High Frequency Omni-Directional Radio Range/Distance Measuring Equipment 2/ Non-Directional Radio Beacon 3/ Very High Frequency 4/ High Frequency Single Side Band

21 Visual Aids. Runway, taxiway and apron lighting would be installed at all project airports. At San Borja, the runway lighting would be spaced for a 45 m wide runway rather than a 30 m one in order to allow for the expected early widening of the runway to B-727 standards. Rotating beacons and obstruction lights would be provided at each project airport. VASI's 1/ would be installed at project airports as well as certain other selected airports in the country. Each of the project airports would be provided with basic runway marking (Annex 6) Maintenance Equipment. For AASANA to maintain the various airports under its control properly, equipment would be required which would have to travel on a planned basis around the system. Since most of the airports are unpaved, the greater portion would consist of earth moving, compaction and grading equipment. Light asphalt spraying equipment would be stationed at Santa Ana to maintain the sealed surface which would be provided at this airport. Lists of both sets of equipment are given in Annex 7. AASANA Technical Assistance and Staff Training 4.14 To strengthen its airport administration and maintenance capabilities, AASANA would engage a team of five Spanish-speaking experts for the following positions for a five-year period: Technical Director Advisor, Chief Budget and Accounting Division, Chief Telecommunications Maintenance Division, Chief Navaids Maintenance Division and Chief Airport Construction and Maintenance Combined Divisions. Draft job descriptions for these various positions are given in Annex 8. In addition, 30 man-years of training for AASANA personnel outside Bolivia would be provided. The foreign exchange costs of the experts and the training would be financed from the Bank loan. C. Special Components of the Project 4.15 These special project items of a minor but essential support nature are to be financed by the proposed loan, except as indicated in Annex 9. D. Ecology 4.16 The ecological and environmental effects of the development of the project airports and the proposed reorientation of the main Cochabamba airport were taken into account during the siting and preliminary design studies. Two of the airports (Riberalta and San Borja) are being relocated to remove them from the immediate vicinity that they serve, thus making more remote the noise, fumes and safety problems associated with the approach and departure paths of aircraft. Land being released at Riberalta and San Borja would become available for further expansion of the two towns; the land being taken in the one place is unused rain forest between river banks and, in the other, is low lying grazing land. The Santa Ana and Tarija developments are on existing airport land. Drainage improvements at all four airports would reduce the possibility of stagnant, insect breeding pools. 1/ Visual Approach Slope Indicators

22 The reorientation of the main runway at Cochabamba would relocate the heavy aircraft flight paths from over the city to over agricultural land. The obvious effect of this is the reduction of noise for the city population, but more important is the reduction of risk associated with the existing requirement for aircraft to make low level turns above the city because of high ground obstructions in the normal flight pattern. Zoning restrictions for the new runway would be developed by the Government. A copy of a suggested regulation will be provided to the Government. E. Cost Estimate 4.18 The total project cost, including contingencies, is US$39.46 million. The foreign exchange component is US$23.67 million, or 60% of the total project cost. This project is exempt from taxes and duties (para. 3.12) The cost estimate shown below (in prices expected at the end of June 1977) is categorized by type of work. A detailed itemization of the project components is given in Table 6. % of $b (million) US$ (million) Project Local Foreign Total Local Foreign Total Content Civil Works Engineering Design and Supervision Aviation Equipment Maintenance Equipment Technical Assistance Training Cochabamba Design Contingencies: Physical 10% Price 22.8% Total The cost estimates were developed originally by the engineering consultants responsible for the feasibility studies. They were updated during the appraisal by AASANA engineers using known costs in the various localities. These costs are considered reasonable. Construction at Tarija and Santa Ana would take place on the existing airport property. The land at Riberalta has already been transferred to AASANA by the town at no cost, and the land at San Borja would be purchased by AASANA. This is not expected to delay the project. Land cost is included in the estimates of local costs Physical contingencies amounting to 10% have been included in the cost estimate. An additional item for price contingencies, of an average of

23 % on the local component and 7.75% on the foreign component, compounded quarterly, has been included to allow for anticipated increases in labor and material costs, which, in this case, are approximately equal. Foreign component contingencies are slightly lower than those in the Bank guidelines because of expected lower equipment cost escalation. F. Execution 4.22 The project would be executed by AASANA. The civil works contracts for Tarija are expected to be awarded prior to signing of the loan. The civil works contracts for Riberalta, San Borja and Santa Ana are expected to be awarded by October The work is expected to take about one and onehalf years at Tarija and to provide employment for about 150 men. The work at the other three airports would take about three years and would provide employment for about 500 men each at Riberalta and San Borja and 250 at Santa Ana. Tarija is expected to be completed by January 1979, followed by Riberalta, San Borja and Santa Ana by December The technical assistance portion of the project would run through September AASANA would handle all Navaid and Com equipment procurement without assistance from consultants. Part of this equipment would be installed by AASANA and part by the equipment manufacturers AASANA would administer the 25 man-year technical assistance portion of the loan and also the 30 man-year training component. During negotiations, job descriptions for these positions were agreed upon (para and Annex 8). A training program should be prepared by AASANA and its technical experts, after their engagement, to begin no later than October 1978 and to last for a period of three years During negotiations, a project implementation schedule was agreed. The estimate of project execution is given in Annex 10. G. Procurement 4.26 Contracts for civil works (earthworks, paving, drainage, water and electrical supply and distribution, sewerage, buildings, etc.) at Riberalta, San Borja and Santa Ana airports, and visual aids, Navaid and Com equipment and installation would be awarded after international competitive bidding by prequalified contractors. Since equipment is not produced locally, no local suppliers are expected, but local bidders would be granted a margin of preference by adding 15% to the CIF value of foreign bids (or the applicable customs duties, whichever is lower) Although the paving contract at Tarija would be awarded prior to the signing of the loan documents (para. 4.07), it would be awarded in accordance with the Bank "Guidelines for Procurement," but after only limited advertisement because of the urgency of the work and the remote character of the project location. Foreign contractors are not excluded. The drainage contract was added to the existing civil works contract proper at unit costs established in April The original contract was awarded in accordance with Bank "Guidelines," but after only local advertisement. In view of the urgency of the work, the relative smallness of the contract and the favorable prices,

24 Bank financing for this contract would be justified. Because these contracts were or will be let before the proposed loan will be presented to the Board, costs incurred after February 28, 1977 (estimated at US$1.0 million) are proposed to be included in the loan. The engineering contract (an estimated 40 man-years at US$50,000 per year) for the design and supervision of the construction of the four project airports would also be awarded, prior to signing of the loan, to local Bolivian engineers. The award of the estimated 20 man-year contract (at US$50,000 per year) for the engineering for Cochabamba would be similar, except that it would not be awarded until after signing of the loan. Consultants' terms of reference and contracts should be acceptable to the Bank A negotiated contract for 25 man-years at an estimated US$50,000 per man-year would be executed by AASANA for the provision of the five-man technical assistance team. Training would be arranged individually through UNDP/ICAO or technical training schools at rates not exceeding approximately US$6,000 per year per candidate. H. Disbursements 4.29 Disbursement of funds from the loan would be on the following basis: (a) 100% of foreign expenditures for equipment and its installation; (b) 100% of foreign expenditures for technical assistance and training; (c) 56% of total expenditures for civil works; and (d) 70% of total expenditures for engineering services. A schedule showing the estimated rate of disbursement is given in Table 7. Retroactive financing of civil works undertaken after February 28, 1977 up to US$1.0 million and of engineering services after December 31, 1976 up to US$0.7 million, for a total of US$1.7 million, is proposed. 5. ECONOMIC EVALUATION A. General 5.01 In Bolivia, the need for air transport is greatly reinforced by the topography of the country. The summary and conclusions of the latest transport sector report for Bolivia are given in Annex 11. The presence of flat lowlands partly flooded and isolated for several months each year, separated by high mountain ranges from the most populated part of Bolivia, creates formidable obstacles for any development of transport. These lowlands, particularly in the northeast, will have to be developed over an extensive period in order to relieve the population pressure on the barren Altiplano. A main solution has been attempted in the development of the present road

25 from La Paz to the Yungas (eastern valleys), crossing over one of the highest passes in the Andean mountain range (4,600 meters). Despite heavy investment, it will be many years before this road can penetrate into more than a small part of the department of Beni, and, more important, be reliable under allweather conditions To integrate this part of the country, the primary transport modes would have to continue to be river transport for bulk goods and air transport for passengers and for valuable and/or perishable goods. Air transport to this area has not changed character in many years due to the infrastructure limitations. Only one airport in the area, Trinidad (since 1975), is capable of receiving more cost-effective jet aircraft. The most important part of the proposed project, therefore, addresses the problem of improving air transport to the main centers by providing better airports. When making agricultural loans, the Bank has recognized the lack of adequate airports as a limitation to the growth of the cattle industry A similar, but not quite so serious, situation exists in the south, where Tarija is the main town, 935 km from La Paz, with poor road connections Another main part of the proposed project is the improvement of the general infrastructure for air navigation in Bolivia, where obsolete navigational aids and aeronautical communications create not only hazardous safety conditions but also high costs in the form of low aircraft utilization, many cancelled and delayed flights and other indirect effects of unreliable services The proposed project responds to the most urgent needs of a relatively large program of well justified aviation infrastructure improvements (para. 6.13) The areas in Bolivia which will be served primarily are the towns of San Borja, Santa Ana de Yacuma and Riberalta - Guayaramerin in the northern part with a total population of about 50,000 and Tarija in the south with about the same population. These are both relatively poorly developed agricultural areas which have suffered from isolation from the rest of Bolivia. The main activities are cattle raising in Beni (Santa Ana and San Borja), exploitation of rubber and nuts at Riberalta and grains, vegetables and vineyards around Tarija. Of these four towns, only Tarija is connected by road to other parts of Bolivia. The road under construction from La Paz to San Borja and Trinidad will probably be usable only part of the year until it can be upgraded to an all-weather road--an undertaking which may take a long time. Santa Ana and Riberalta are likely to be without road connection to the rest of Bolivia for at least another 15 years. B. Economic Analysis 5.07 Details of the economic analysis are set forth in Annex 12 and are summarized below. Since air transport is clearly essential for the development of these isolated areas of Bolivia, the economic case for the project depends on its ability to provide transport capacity more efficiently than do the existing air services. The construction and equipment costs, as well as the physical contingencies, have been included as an economic cost of the project.

26 The major source of quantifiable benefits for the project airports is the much lower operating cost of more efficient aircraft, already in the fleet, which these airports would allow after the improvement. Other factors which have been considered are aircraft delay savings and values of released urban land where the airport has been moved to a new site. These are very small portions of the justification since the most important factor - increased reliability of services - can be quantified only with respect to improved utilization of aircraft. Without the project, higher aircraft operating costs could lead to airline tariff increases or service deterioration. No passenger or cargo time savings have been included. C. Cost Savings 5.09 Transport cost savings over the routes from each airport were calculated per passenger or ton based on the unit cost differential between better aircraft and presently used aircraft (Annex 12 and Table 8). This situation differs among the airports. In the cases of Riberalta and Tarija, the aircraft are now F-27, to be replaced by B for passengers and 50% of the air cargo. For San Borja and Santa Ana, the situation is more complex. Presently, passenger traffic has been handled by F-27 and DC-3 aircraft and cargo by a variety of aircraft, with the predominant being DC-3 and Curtiss C-46 piston-engine aircraft carrying 3 to 6 tons per trip. The most appropriate replacement aircraft for future cargo traffic, in particular, is difficult to establish in view of the fragmentation of the air cargo trade into 25 different companies with an attendant lack of long-term planning. It is expected, however, that the existing piston aircraft will be replaced by small jet or turbo-prop aircraft for passengers and a turbo-prop aircraft, such as the CONVAIR CV-580, for cargo. For the economic evaluation and traffic forecasts, this aircraft has been used for providing cost characteristics and capacity A serious problem for Bolivian aviation is the lack of a reliable aeronautical communications network and air navigational aids. This lack, together with the runway conditions at the project airports, has caused very poor regularity for both scheduled and non-scheduled air services. In 1975, as an example, more than 1,500 hours of aircraft time were lost for LAB DC-3 and F-27 aircraft in delays and cancelled flights; this is almost equivalent to a requirement for one additional aircraft. Some of these delays would still continue as a result of weather conditions, but a significant reduction of hours lost to the level now achieved by B-727 aircraft at the four main airports should be possible A similar limitation exists, particularly for the airports in Beni, because of the lack of a properly-equipped unit for runway preventive maintenance. In the rainy season, a number of AASANA airports are out of service because of the condition of their runways. Some closures during heavy rains or inundation are unavoidable, but certain aircraft delays and cancellations would be avoided by improved runway maintenance. This type of savings could be quantified only for LAB scheduled flights and, thus, underestimates these benefits considerably in view of the present large volume of non-scheduled flights in Beni.

27 D. Project Return 5.12 Excluding any savings of passenger time or cargo spoilage, the total return of the project is 19% (for project benefits, see Table 9); this approximates the discounted cash flow financial return for the combined airportairline system as far as these airports and airway facilities are concerned. For San Borja and Santa Ana, part of the savings accrue to private cargo airlines, but, for the major part of the project investment, the main beneficiary is the Bolivian Government, through its almost complete ownership of LAB. Since, without the project, it would probably be necessary to make larger fare increases, some of the benefits would be passed on to the Bolivian users Based on quantified benefits, the best estimate of economic return for San Borja and Riberalta is 24% for each, for Tarija 15%, and for Santa Ana de Yacuma 12%. There are substantial unquantified benefits, for Santa Ana in particular. This community is, and for many years will remain, isolated except by river. The present closures of the airport have serious effects on the unscheduled flights, but, because of lack of adequate data, only delays to scheduled flights have been quantified. The return for the aeronautical communications and electronic aids is 18%, and, for the runway maintenance equipment, the return is 16% The results of the sensitivity analysis for all the project components are shown in Table 10. Cost increases are considered the most significant risk. However, even if costs increase by 15%, the overall rate is still 17%. The effect of road improvements to San Borja has been tested under various assumptions. The most serious, but unlikely, assumption of no air cargo at all after 1985 still gives an economic return of 14% at this airport. The first year return of the total project is almost 17% and is satisfactory for the individual project components. 6. FINANCIAL EVALUATION A. Existing Situation 6.01 AASANA has essentially been a breakeven entity in recent years, covering only working expenses. It operates under a budgetary system whereby a general budget of anticipated revenues and working expenses is developed and submitted to the Ministry of Finance for approval. Any unusual expenditures outside the budget must receive prior Government approval AASANA maintains control over revenues and operating expenses. Revenues collected are deposited in the AASANA account, and checks for payment are drawn against this account. Any excess of revenues remains with AASANA.

28 Accounting records of the revenue and expenditure items are kept at AASANA headquarters. The records are not maintained so that revenues and expenses can be readily identified by airport and type of service but, rather, for the system in total. However, the Bank staff was able to obtain a reasonable breakdown of revenues and expenses for the project airports for Capital items are supplied for the most part directly by the Government as equity inputs, with additional assistance by USAID. However, the receipt of assets from LAB, approximately eight years ago, and subsequent investment, as reflected in AASANA's books, may be understated to some extent. Due to this fact and to the inconsistent treatment of assets and liabilities from one year to the next in the balance sheets, it is currently difficult to make a proper assessment of AASANA's financial posture. After analyzing available information, the Bank staff prepared balance sheets for 1970 through 1974 (Table 11). A high percentage of the assets at small airports have been in service beyond what is normally considered the economic life for such items and should be replaced in the immediate future The accounting system is inadequate and should be redesigned to supply information by individual airports and by classifications necessary to formulate and review user charges. Following these improvements, the structure and level of airport tariffs should be reviewed. The accounting system should also include provision for the proper valuation and disposal of assets. AASANA realizes these deficiencies and needs assistance for improvement in this area. This assistance would be provided by a foreign expert to be engaged as Chief of the Budget and Accounting Division (para. 4.14). It was agreed during negotiations that AASANA would consult periodically with the Bank on structure and level of airport tariffs The accounts are currently subject to review by the Government at irregular intervals. During negotiations, an agreement was reached with AASANA that certified copies of the audited annual accounts beginning with the year ending December 31, 1978 would be furnished to the Bank, not later than four months after the end of each calendar year, by independent auditors satisfactory to the Bank. B. Financial Objectives 6.07 Government policy has been to maintain AASANA's tariffs at a low level in order to assist aviation development. However, in 1975, landing fees were increased for LAB and foreign carriers by 60%; for non-scheduled carriers and general aviation, they remained at previous levels. At the same time, salaries of AASANA personnel were increased by an average of 60% to compensate for the cumulative effect of inflation and in accordance with reorganization efforts to maintain qualified personnel. These circumstances have made it barely possible for AASANA to cover working expenses. As a result, the new infrastructure requirements would have to continue to be met by the Government and outside sources. In the future, any surplus resulting from AASANA operations could be applied to acquisition of capital assets. Agreement was

29 reached with the Government and AASANA regarding more specific financial objectives of a k-nd typical for a prudently managed independent public agency, as further described below. The financial projections contained in the following paragraphs reflect these objectives and assumptions AASANA revised its scheduled service landing fee tariffs in 1975, and the Bank has discussed with AASANA the need for a prompt increase in user charges. However, the current level of tariffs will not be sufficient to cover the operating expenses for the project period ( ). Therefore, it has been assumed in the projections in this report that future tariff increases would result in total revenues being increased by 20% in 1977, 20% in 1979, 10% in 1980, 10% in 1982 and 10% in It was agreed during negotiations that, before November 1 of each fiscal year, a review of user charges will be made on the basis of realistic traffic forecasts, and such adjustments as are necessary will be applied in order to attain an overall working ratio of no more than 75% in 1978, 60% in , and a return on revalued net fixed assets no less than 2% in and no less than 4% in Due to the scale of investment in a few years, the project airports cannot meet the rate of return covenant, but it was agreed that the combined working ratio for the project airports would be no more than 85% in C. Financial Plan 6.09 The total cost of the project is estimated to be US$39.46 million, of which approximately 64% of the financing would be in the form of a Bank loan to AASANA. The balance, including any cost overruns, would be equity provided by the Government. US$ $b Million Million a. Bank loan to AASANA b. Government Equity It was agreed during negotiations that the Bank will be consulted before any investment in any of AASANA's facilities of over US$1.0 million, in any one year, is undertaken. D. Financial Prolections Operating Results 6.11 AASANA operating revenues by category for 1975, and projected through 1990, are set out in Table 12, and the projected operating statements are given

30 in Table 13. Financial assumptions are detailed in Annex 13. Summarized forecast results for 1977, 1980, 1985 and 1990 are as follows: $b Million Revenue Expenses Operating Surplus Depreciation Operating Income/(Loss) (14.9) Interest Net Profit/(Loss) (14.9) (18.8) Throughout the projection period, revenues cover all working expenses, including depreciation, with the exception of 1977 and The years of 1980 and 1981 barely meet this goal. This occurs because three of the four project airports and other Government investments are completed in these years, and the increase in the depreciation provision is not immediately compensated by comparable traffic and tariff increases. However, depreciation exceeds debt service, and the financial objectives would be met in all years of the project (para 6.08) The projected operating results of the four project airports are set out in Tables 14, 15, 16 and 17. All project airports develop sufficient traffic to generate revenue greater than working expenses by 1984; however, none of the airports would be able to cover operating expenses after project completion. Non-project airports would receive increased revenues in the form of increased landing and navigational fees, as a result of the project. The financial objectives for the project airports would be met after 1984 (para. 6.08). Cash Flow 6.13 A projected cash flow for AASANA, based on the assumptions contained in paragraph 6.09, is shown in Table 18. Provision has been made for the replacement of assets included in the project, when required, and for the addition of other necessary items (para 6.04). A summary of the cash flow for the construction period is set out below:

31 S -----$b Million Source of Funds From Operations Loan - World Bank Government Equity - Project Government Equity - Non-Project / Government Equity - For Cash Requirements Application of Funds Total Capital Investments A Loans - Principal Interest Total Cash Surplus Opening Balance Closing Balance /1 Includes airport investments in addition to proposed project which are as follows for ($b million): La Paz 303.2, Cochabamba 273.5, Cobija 221.3, Sucre 155.0, and others The difference from the total for Government Equity, Non-Project, is the result of equity inputs from AASANA due to its favorable cash position in 1978 and Since current receivables and liabilities are relatively high (Table 11), it was agreed, at the time of negotiations, that receivables from operating revenues will be collected, and payables for working expenses will be paid, within 90 days. Balance Sheets 6.14 Projected balance sheets for have been prepared and are included in Table 19. Financial indicators are shown in Table 20.

32 AGREEMENTS REACHED AND RECOMMENDATION 7.01 During negotiations, agreement was reached with the Government regarding the following: (a) assets for a new Santa Cruz airport not to be transferred to, nor debt service cost borne by, AASANA until it can be demonstrated that such a transfer will not prevent AASANA from complying with the relevant financial covenants of the Loan Agreement (para. 2.16); (b) salaries for technical specialists to be continually adjusted by AASANA in order to be competitive with alternate employment in Bolivia (para. 3.15); (c) job descriptions for technical assistance and training components of the loan (para. 4.24); (d) project implementation schedule (para. 4.25); (e) AASANA to consult periodically with the Bank on the structure and level of airport tariffs (para. 6.05); (f) certified copies of the audited annual accounts beginning with the year ending December 31, 1978 to be furnished to the Bank, not later than four months after the end of each calendar year, by independent auditors satisfactory to the Bank (para. 6.06); (g) before November 1 of each fiscal year, a review of user charges to be made on the basis of realistic traffic forecasts, and tariffs to be adjusted as necessary to produce a working ratio of no more than 75% in 1978, 60% in , and return on revalued net fixed assets no less than 2% in and no less than 4% in 1985 and thereafter (para. 6.08); (h) combined working ratio of the project airports to be no more than 85% by 1985 and thereafter (para. 6.08); (i) the Bank to be consulted before any investment in any of AASANA's facilities of over US$1.0 million, in any one year, is undertaken (para. 6.10); and (j) receivables from operating revenues to be collected, and payables for working expenses to be paid, within 90 days (para. 6.13).

33 Retroactive financing for the foreign costs (estimated at US$1.0 million) for the paving and the construction of the drainage canal at Tarija done after February 28, 1977 and for local and foreign costs for engineering services at the three Beni airports and Tarija incurred after December 31, 1976 (estimated at US$0.7 million) is included in the proposed loan The proposed project constitutes a suitable basis for a Bank loan of US$25.0 million to AASANA, with a Government guarantee. The term would be 20 years, including a grace period of four and one-half years. April 28, 1977

34

35 BOLIVIA AVIATION l)evelopment PROJECT Total Freight Movement in Bolivia Ton-Km % % Ton-Km % % Sources Subtotal Total 10 Subtotal Total Data for 1967 based on the DMJM ROAD TRANSPORT Study for the Ministerio de Transportes y Comunicaciones. Vata for Minerals came from the following Other Cargo sources: Mini. de Transportes y Total Comunicaciones Estimate RAIL TRANSPORT Minerals Other Cargo ENFE Total RIVER TRANSPORT Min. de Transportes y Comunicaciones Estimate LAKE TRANSPORT Min. de Transportes y Communicaciones Estimate AIR TRANSPORT Subtotal PIPELINE TRINSPORT Crude Oil Petroleum Products _ YPFB Total loo.0 Average growth rate 1967/1974, 08.8? yearly Source: IBRD Mission 1 February 1977

36 BOLIVIA TABLE 2 AVIATION DEVELOPMENT PROJECT Comparative Economy Air Fares, US$ Route Distance US$ Per Mile (Miles) Bolivia La Paz - Santa Cruz Cochabamba - Tarija La Paz -- Trinidad Cochabamba - Trinidad Cochabamba - Santa Cruz Cochabamba - La Paz San Borja - Trinidad Santa Ana - Trinidad Cochabamba - Oruro Brazil Rio de Janeiro - Sao Paulo Rio de Janeiro - Belo Horizonte Rio de Janeiro - Porto Alegre Canada Fredericton - Montreal Edmonton - Peace River Calgary - Medicine Hat C31-bia Bogota - Cartagena Bogota - Medellin Bogota - Leticia Peru Lima - Pucallpa Lima - Tingo Maria Lima - Cuzco United Kingdom Glasgow - London East Midlands - Jersey Aberdeen - Edinburgh United States of America Cincinnati - Atlanta El Paso - Tucson New York - Washington Bangor - Presque Isle Albany - Rutland Source: ABC World Airways Guide, March 1976 November 1976

37 TABLE 3 BOLIVIA AVIATION DEVELOPMENT PROJECT Names and Abbreviations of Airports Apolo Ascencion de Guarayos Camiri Cobija Cochabamba Concepcion Charafia Guayaramerdn La Paz Magdalena Oruro Puerto Suarez Potosl Riberalta Robore- Rurrenabaque San Borja San Ignacio de Moxos San Ignacio de Velasco San Javier San Joaquin San Jose de Chiquitos San Ram6n Santa Ana Santa Cruz Sucre Tarija Trinidad Yacuiba Bermejo Puerto Rico Reyes San Matlas Santa Rosa Villa Montes AP AS CA CO CB CP CN GY LP MG OR PS PO RI RB RQ SB SM SI JV Jo JE RA SA CZ SU TJ TR YA BJ (X) PR (X) RY (X) TI (X) SR (X) VM (X) (X) Airports which will be under AASANA Jurisdiction. Source: IBRD Mission February 1977

38 TABLE 4 BOLIVIA AVIATION DEVELOPMENT PROJECT Forecast Passengers (Embarking and Disembarking) and Freight at Project Airports Airport Passengers Pc Percent Average Annual Actual Forecast Growth Riberalta 7,600 13,600 17,500 38,300 57,400 76, Santa Ana de Yacuma 4,400 9,000 12,000 18,900 32,400 43, San Borja 1,700 5,100 6,100 8,800 14,600 19, Tarija 8,500 18,200 24,300 41,500 69,900 96, Airport Freight (tons) Percent Actual Forecast Average Annual Growth Riberalta 5604'5-1,840 2,650 4,197 6,759 9, Santa Ana de Yacuma 1,6504/ 1,166 1,360 1,983 3,483 5, San Borja 2,935 4,706 5,489 8,003 14,060 20, Tarija3/ 1/ Apparent abnormal growth at Riberalta from 1977 to 1980 results from the introduction of jet aircraft and diversion of one half of the projected normal traffic growth from Guayaramerin. 2/ Includes non-scheduled traffic. Scheduled traffic will move in passenger aircraft. 3/ No significant freight traffic is anticipated at Tarija. 4/ / LAB flights only. Source: AASANA and its consultants and IBRD Mission December 1976

39 TABLE 5 BOLIVIA AVIATION DEVELOPMENT PROJECT Forecast Aircraft Traffic Annual Landings Riberalta Passenger1/ Cargo / Other-- 2,386 4,791 7,812 10,457 Santa Ana de Yacuma Passenger2/ Cargo Other-51 4,688 7,529 10,547 13,458 San Boria Passenger Cargo ,255 1,679 Other- / 3,259 6,531 10,503 13,752 Tariia Passenger-/ ,334 Other-/ 655 1,362 2,562 4,681 1/ Based on passenger growth and on changes from DC-3 and F-27 to B-737 and B / Based on passenger growth and on changes from DC-3-and F-27 to F-27 or similar aircraft type thru 1984 and B-737 and F-27 thereafter. 3/ Based on passenger growth' and on changes from DC-3 and F-27 to B-737 and F-27. 4/ Based on freight growth and on changes from C-47 and C-46 to CV-580. Assumes 50% of Riberalta freight will move on passenger jet aircraft by / Includes Air Taxi, Private, TAM, FAB and Flying School Landings. Source: IBRD Mission December 1976

40 TABLE 6 BOLIVIA AVIATION DEVELOPMENT PROJECT Cost Estimates $b (000) US$ (000) Local Foreign Total Local Foreign Total Civil Works Riberalta 46,280 78, ,320 2,314 3,902 6,216 San Borja 44,479 60, ,700 2,224 3,011 5,235 Santa Ana 46,231 37,049 83,280 2,312 1,852 4,164 Tarija 38,903 49,857 88,760 1,945 2,493 4,438 Subtotal 175, , ,060 8,795 11,258 20,053 Eng. design & Supervision 32,096 8,024 40,120 1, ,006 Equipment Lights, VASIS & Tower Equip. 2,310 23,110 25, ,155 1,271 Navaids and Communications 9,460 47,300 56, ,365 2,838 Maintenance equipment 1,376 13,724 15, Santa Ana equipment 204 2,036 2, Subtotal 13,350 86,170 99, ,308 4,976 Contingencies on Construction and Equipment Physical 10% 20,157 33,923 54,080 1,008 1,696 2,704 Price 22.8% 49,672 86, ,740 2,484 4,303 6,787 Tech. Assistance 7,582 22,727 30, ,136 1,515 Training 200 4,545 4, Subtotal 7,782 27,272 35, ,363 1,752 Contingencies TA & Training 10% 778 2,728 3, Cochabamba design 16,000 4,000 20, ,000 Total ,08,0 15,788 23,666 39,454 Price Contingencies, Rates per Year Foreign 10.0% 8.0% 7.0% 6.0% Local 8.4% 8.0% 7.5% 7.0% Source: IBRD Mission February 1977

41 TABLE 7 BOLIVIA AVIATION DEVELOPMENT PROJECT Disbursement Schedule FY78 13US$(000) December ,342 March ,904 June ,781 FY79 September ,370 December ,992 March ,669 June ,877 FY80 September ,496 December ,408 March ,628 June ,633 FY81 September ,875 December ,842 March ,440 June ,586 FY82 September ,669 December ,475 March ,563 June ,811 FY83 September ,874 December ,937 March ,000 Source: IBRD Mission February 1977

42 BOLIVIA TABLE 8 AVIATION DEVELOPMENT PROJECT Estimated Aircraft Cost Savings in 1981 Savings Per Passenger Cost Saving Passenger Aircraft Passengers US$ US$ Tarija 31, ,380 Riberalta 41, ,685 San Borja 9, ,223 Santa Ana de Yacuma 22, ,702 Cargo Aircraft Tons Savings Per Ton Cargo US$ Riberalta 2, ,592 San Borja 8, ,079,770 Santa Ana de Yacuma 2, ,778 Delays/Diversions Cost Per Hours of Hour US$ Aircraft Time Tarija ,094 Riberalta ,224 San Borja ,082 Santa Ana de Yacuma ,072 Aeronautical Communications 337 1, ,993 Runway Maintenance Equipment ,819 4,481,414 Source: LAB, AASANA, DGTTA, Mission Estimates February 1977

43 BOLIVIA AVIATION DEVELOPMENT PROJECT Quantified Project Benefits US$ (000) Riberalta Santa Ana de Yacuma Aeronautical Runway Tarija Aircraft Land Value San Borja Aircraft Maintenance Communications Maintenance Total ,330-1, , , , , ,586-1, , ,731-1, , ,891-1, , ,065 2,064-2, , ,134 2,209-2, , ,208 2,364-2, , ,286 2,531-2, , ,370 2,709-2, , ,459 2,900-3, , ,553 3,104-3, , ,655 3, , ,762 3, , , ,877 3, , , ,999 4, , , ,129 4, , , ,267 4, , , ,415 5, , ,027 Source: Mission Estimates, AASANA December 1976 'IC

44 BOLIVIA AVIATION DEVELOPMENT PROJECT Sensitivity Analysis of Economic Rate of Return Best Construction Costs Benefits First years Estimate -15% +15% -25% +25% return Tarija l/ Riberalta San Borja Santa Ana de 1/ Yacuma Aeronautical communications Runway maintenance equipment Total Project / First year return has been adjusted to take into account the effects of generated traffic. Source: IBRD Mission H April 1977

45 I1 BOLIVIA AVIATION DEVELOPMENT PROJECT AASANA Summary Balance Sheets as of December 31 ($b 000) Assets Current Assets Cash ,037 4,219 3,666 Short Term Invest-4ients Prepaid Items Subtotal ,282 4,467 4,432 Receivables 5,253 7,315 8,479 15,123 25,407 Inventories 4,760 7,221 7,755 15,907 26,971 Total Current Assets 10,758 15,091 18,516 35,497 56,810 Fixed Assets - Gross 61,253 60,728 61, , ,226 Less Accumulated Depreciation 4,528 5,778 9,120 12,909 16,578 Net Fixed Assets 56,725 54,950 51,971 93, ,648 Construction in Progress ,941 Total Fixed Assets 56,725 54,956 51,971 94, ,589 Total Assets 67,483 70,047 70, , ,399 Liabilities Current 2,712 4,653 4,981 5,792 13,937 Deferred 1,480 2,151 2,738 3,447 4,581 Capital and Reserves (Closing - December 31) 63,291 63,243 62, , ,881 Total Liabilities 67,483 70,047 70, , ,399 Source: IBRD Mission February 1977

46 BOLIVIA AVIATION DEVELOPMENT PROJECT AASANA Statement of Revenues ($b Million) Funds 1/ Passenger from National Treasury" Year End Landing Airport Overflight Navigational Landing Navigational December 31 Fees Tax Fees Fees Messages Other Fees Fees Total Revenue / Reimbursement from the Government for exempt services. Source: AASANA and IBRD Mission December 1976

47 BOLIVIA AVIATION DEVELOPMENT PROJECT AASANA Projected Operating Statements ($b Million) Working Operating Net Year End Operating Working Expenses Surplus/ Income/ Profit/ December 31 Revenue Maintenance Wages Other Total (Deficit) Depreciation (Loss) Interest (Loss) ( 3.6) 19761/ (20.3) (14.9) (14,9) ( 8.6) 7.8 (16.4) ,1_...3_Q iLA_ (35.0) ( 4.2) Q J5_ _ ,Q_5Q / Unaudited 2/ Estimated Source: AASANA and IBRD Mission April 1977

48 BOL IVTIA AVIATION DEVELOPMENT PROJECT Riberalta Airport Projected Operating Statements ($b 000) Working Year End Operating Working Expenses Surplus/ Operating Profit/ December 31 Revenue Maintenance Wages Other Total (Deficit) Depreciation (Loss) ( 28.9) ( 228.9) 1976-= ( 59.0) ( 259.0) ( 26.2) _ (578.2) (6796.2) ' (169.9) (6387.9) (6177.0) (5679.4) _ (5249.0) (5046.2) (4835.8) (4623.6) (3637.8) 1/ Unaudited 2/ Estimate Source: AASANA and IBRD Mission December 1976

49 BOLIVIA AVIATION DEVELOPMENT PROJECT Santa Ana Airport Projected Operating Statements ($b 000) Working Year End Operating Working Expenses Surplus/ Operating Profit/ December 31 Revenue Maintenance Wages Other Total (Deficit) Depreciation (Loss) I/ 1975-= ( 56.9) 50.0 ( 106.9) 1976-, (127.5) 50.0 ( 177.5) ( 28.0) (542.8) (5171.8) (264.5) (4893.5) (133.4) (4762.4) (4423.5) (---A Q) (4778.0) (4634.0) (4490.1) (4336.5) (4176.3) 1/ Unaudited > 2/ Estimate M Source: AASANA and IBRD Mission - December 1976

50 BOLIVIA AVIATION DEVELOPMENT PROJECT San Borja Airport Projected Operating Statements ($b 000) Working Year End Operating Working Expenses Surplus/ Operating Profit/ December 31 Revenue Maintenance Wages Other Total (Deficit) Depreciation (Loss) 19751/ (492.3) 50.0 ( 542.3) 1976.= (265.5) 50.0 ( 315.5) (106.7) 50.0 ( 156.7) ( 38.2) 50.0 ( 88.2) K Q ( (768.1) (6235.1) (366.7) (5833.7) (189.6) (5656.6) (5214.7) (4885.0) (4725.6) (4559.4) (4378.6) (4186.0) (3233.7) 1/ Unaudited 2/ Estimate Source: AASANA and IBRD Mission December 1976

51 BOLITVIA AVIATION DEVELOPMENT PROJECT Tarija Airport Projected Operating Statements ($b 000) Working Year End Operating Working Expenses Surplus/ Operating Profit! December 31 Revenue Maintenance Wages Other Total (Deficit) Depreciation (Loss) ( 85.1) ( 185.1) 1975w ( 87.-1) ( 187.1) (1786.8) (6653.8) (1705.6) (6572.6) (1198.5) (6065.5) ) (6140.9) ( 682.4) Z4ILZY ( 256.0) (5985.0) ( 8.7) (5737.7) (5187.7) (4897.0) i (4337.1) (4063.1) (3769.2) (3016.6) 1/ Unaudited 2/ Estimate Source: AASANA and IBRD Mission December 1976

52 BOLIVIA AVIATION DEVELOPMENT PROJECT AASANA Projected Cash Flow ($b million) Source of Funds 2/ Application of Funds Goverimnent Debtors Cash World Government Government EqUity for Total Capital Loan Repayment Total Annual Cumulative Year Ended Operating 1/ Less from Bank Equity Equity Non- Cash Cash Invest- Cash Cash Cash December 31 Surplus Creditors Operations Loan Project Project Requirements Available ments Principal Interest Required Surplus Balance , , , , , , , / From Table 13 / Cash requirements to cover lag between disbursements required annual cash balance. by AASANA or the Government and reimbursement by the World Bank, interest payments and Source: IBRD Mission April 1977

53 BOLIVIA &VIATION D1ELOPMEN)qT PROJEC.T prltoected B6e1e,ncm Sheete ce of Deceffmber 31 6$ etillions} L Aeset s trent Assets: Lab 1/ , eceiv bles , S 59, b Fixed Assets - Gross , , , , , , , ,126.8 Accueulated deprecialaon 3, , , : set fixed asaset ln, uee , t 1, , , , , , , , , ,269S9 2, ,263.8 Coc,strc,ctioc, in ptosres t i, ,357:S' 2,244.6 Z,199T6 5T~ 2, , , , ,269.9 T ,263,8 Liabilities _ a , , , , , , , ,846.4 Current liabilities: Trade creditors Ilold 24.6 backs , k ' S Long-term debt - 8.2% , Ceeltal: Present investment New Govermeent equity } , l 1,394,0 1, , ,397:3 J18 1, 7,919.5 T,915- Tg3 1,919.5 t T5 Belainad earnisgcusl tddefiit (23.9) (38.8) (55.2) (46.2) (65.0) (100.0) (104.2) (92.0) (36.6) 36.1 t Profit,i(Ions) (14.9) (16.4) 9.0 (18.8) (35.0) (4.2) ,0510S (38.6) ( (65.0) (104.2) (59202) ( w86,3 Total Cai,ittl , , , , ,827,5 1, , , , , , ,606.0 Total_ iabllities ,333.5 :j 2, ,273.t , ,587,2 1/ Table 18 Somrtt: IBRD Mission April 1977

54 TABLE 20 BOLIVIA AVIATION DEVELOPMENT PROJECT AASANA Schedule of Selected Financial Indicators Annual Return on Combined Working Ratio Working Ratio Net Fixed Assets in Use Project Airports AASANA AASANA (%) (%) (%) Source: IBRD Mission April 1977

55 ANNEX 1 BOLIVIA AVIATION DEVELOPMENT PROJECT Bank Group Projects in the Transport Sector Loan or Effective Amount Present Credit No. Date (US$ million) Works Status 635-BO November 2, CIA YACIBOL - Completed Loan BAGOC TRANSPOR- in 1972 TADORES Gas Pipeline 346-BO February 21, Bolivia Railways Completed Credit (ENFE) in BO August 6, Bolivia Railways Under Loan (ENFE) 1975/76 execution investment plan April 1977

56 ANNEX 2 Page 1 BOLIVIA AVIATION DEVELOPMENT PROJECT Bolivia Aircraft on Register 1975 NO. OF AIRCRAFT Lloyd Aereo Boliviano BOEING BOEING FAIRCHILD F-27 4 DOUGLAS DC-3 3 Non-Scheduled Airlines DOUGLAS C-54 4 DC-7B 1 C-53 1 C-47/DC-3 10 FAIRCHILD F-27 2 CURTISS C CONVAIR OTHERS 5 Yacimientos Petroliferos AERO COMMANDER 2 Fiscales Bolivianos D.H. BEAVER 1 D.H. TWIN OTTER 2 Air Taxi Companies and Private VARIOUS SMALL 170 Aerial Work on Training AIRCRAFT 86 TOTAL 320 Source: DGAC January 1977

57 .4 H > oo0ooooo >4 >4 0 0 >4 '0 0 0 >4 r C,C, C, CO C, C, >4 >4 No zcz-s.. N 0>' - '0 * OOO 00-a OOC, o 0 8.3oo >4 0 Ci 0. a 0' >4 3 C-' 0 0 >3' > >4 0 C. C, C, N '1 1 'C 0 C, C, ' N N o 0 0 on on 0 N N Ci 'o N N" 0 3, >4 C, CO 0 0 C. '1 0 - > 0' 0 0 C, N 0 - ron 0'nC, Ct N 0 N 0 0 C-' N 'C 0 0> CC o ' C, C-C 8 4> >4."N a 0<,i N >4 >4 >4 >4 >4 >4 >4 C4 >4 >4 C, C, >4 >4 >4 >4 >4 >4 CO >4 CC >4 >4 >4 >4 >4 >4 >4 >4 >4 >4 C, 0 >4 C, >4 II I- >4 >4 >4 >4 >4 >4 C, >4 >4 C, C, >4 >4 C, >4 >4 >4 C, >4 >4 >4 >4 >4 >4 >4 >4 >4 >4 >4 >4 >4 no >4 C, zc8 1>3 0448' 8' >300 >3>3C3000>C-3' - 0 >3 >3>30 >300>3>30>4>300> > > >3>3fl a 8' '000-0 > o o o a o o a o 3 3 >4 >3>4 o > N 0 0 N CC >4 N N >4 CC 4 CC CO CC CC CC 0 CC 0 N CC > N 0 0 N >3 >3 0 0>3 058' 8' o o 8' 8' 8' >3>3 >3 05 Z 0' > OC 0 0 >3 >3 0 0' W3 I 83 '0 >3>3000' 8' CO ' - -, - 0 >3 >3 >3 > >4 0' >3 >3C-'>3>3C-" 8' 55000t 00 '-'8 - '4 > C" 0 '3>3 >3>3>3 300 > >3 C >3 - >300n1L I >3 >4 >30' ' >40'00 - >3 - >3*0 CO 0 0 0' C-i>4 8' o o 0 >4 0 >3.. > >3'3N*>3>3>3>3. >30. 0>35. >4. 0'. >3 >3C'0>300. >3 > >3 * 03 >3> >3 >3 '0 >3C" C C, Ci Ct 38' >4 C' '0 >4 >4 '0 0 0 >4 >4 0 >4 > >3 0 C, >4 0 C, 0 >4 a a a ' 0 >4 0 >4 0' - I "'C -- a-r r a o noon 3ow ow --3, 8' - - ow - *fl- 8 N ' 8' -I-C 0 - ' '00 0'--- - C, - - '0 0 O 0' 0 0 OC 0'' 0 * IX 0' o po < < V 8' o no < 400 o'4'4 ion o 8', N CO N C, N 4 0 N N I-t ' N N N 0 - ONNONNOo N a 0 0 0> N S N NC ;>?. o 4 0' N' C00'0' 8' 8' 8' Ia 0>3 8 8 >4 > p >3 a C, RXXX%XxXgx CCCCCC,i,, 3 C 33XXR X XXX.. *CCCC>IC I >3 - I' ' >3 >3>3>3>30>3>3 >3 >3 >3 >3 0"O no >4 a a a a >4 a a a. >4 a a >4 >4 >4 a aao 0 C CCCCC,,C,. ' I S S C COO >4 >3 0 >3 0>3>3 o o >3>3>3>3>3>3>3>3>3>3 o ' >3 0 C3>3>3>3C, >3>4 >3 3.0 >3 >3>3,05 >4 '0 X a a 'o >3 >3 >4>3>3 >3>3>3>3>3>34>3>3>3 >3 >3"J"4>3I"3 >3>0 >3 >3>3>30>" - >3 - >3-0 0 >4 >3 0 >4 o >4 0 0 a 0 >4 0 o o a > A 0 040>0 4 >3 I-tO

58 ANNEX 3 BOLIVIA AVIATION DEVELOPMENT PROJECT Aircraft Accidents in Bolivia 1. The statistics for were alarming: 112 accidents, of which 54 were major, the aircraft being either destroyed or seriously damaged. Of these, 11 were fatal. Relating this to the approximately 320 or so aircraft on the Bolivian Register evidences a very high rate. 2. The rate was particularly disturbing in the transport aircraft category: 36 accidents within three years with only 50 aircraft on the Register as of 30 October All but one occurred on non-scheduled operations, and 70% involved total loss or major damage to the aircraft. 3. Of the accidents to transport category aircraft, 56% were Curtiss C-46 piston-engined old-vintage aeroplanes, recognized as difficult to maintain and to fly. Also, general aviation recorded a high rate: 76 accidents, with 154 aircraft on the Register as of 30 October The statistics were similar in 1975 with 76 accidents, of which 27 involved transport-type aircraft (Douglas DC-3, Curtiss C-46, etc.) on nonscheduled operations. This may be related to about 300 aircraft on register that year. In 1976, the situation improved as a result of improved control of airworthiness and flight standards. The airport and enroute conditions, however, continue to limit the achievable safety of operations. 5. Some 22 transport-type aircraft were written off completely as a result of accidents during , which, even if the aircraft are old, represents a significant loss and increases insurance premiums substantially. January 1977

59 ANNEX 4 BOLIVIA AVIATION DEVELOPMENT PROJECT Traffic Forecast Methodology Passenger Forecasts 1. The basic forecasts of passengers and cargo traffic were developed in the feasibility studies for the different airports carried out during by several entities. The forecasts for Tarija and San Borja were done by the Bolivian consultant IPA, the one for Santa Ana de Yacuma by a consortium of IPA and the Brazilian firm Hidroservicio and, finally, AASANA's own staff prepared the forecasts for Riberalta. For passengers, two methods were employed: one based on previous traffic trends, the other on a multiple regression analysis based on urban population and per capita income. The results of these methods were similar. 2. These basic forecasts were revised by the Bank staff in consultation with AASANA, Oficina de Planificacion. In this revision, two adjustments were made, first to update the base year for traffic development to a common year 1975, and, second, to account for additional traffic growth as a result of better services on completion of the project. This additional traffic is due primarily to presently suppressed demand and, to a very limited extent, is the result of cost reductions for travelers. To determine the additional traffic growth, comparisons were made with recent experience with jet aircraft introduction at airports such as Trinidad and Sucre where, despite unchanged or increased passenger fares, accelerated traffic growth has been experienced as a result of more reliable services. For traffic development prior to project completion, LAB detailed traffic forecasts for the next fiveyear period have served as a guide to check the validity of the assumptions made. For Riberalta, it has been assumed that 50% of the normal traffic at Guayaramerin would be diverted to the new airport. Despite these adjustments, the average growth rate for the period is less than the actual achieved over the past five-year period. Cargo Forecasts 3. For cargo, the same entities as mentioned above made the basic traffic forecast. For Tarija, air cargo is so limited that no special cargo flights would be required. The forecasts for the other airports were based on a continuation of previous traffic trends and the relationship of air cargo with GNP for Bolivia and the province of Beni. These were reviewed against tendencies in the economic development of the region and, in particular, the cattle industry. The result was the adoption by the Bank staff of lower growth rates for the years after No factor of inducement by better services was included since the majority of air cargo is assumed to continue to be carried by propeller-type aircraft. April 1977

60 ANNEX 5 Page 1 BOLIVIA AVIATION DEVELOPMENT PROJECT Existing Airport Conditions and Proposed Improvements A. Existing Airport Conditions (i) Riberalta The existing airport is located at the southwest edge of the town on a plain between the Rio Beni and an ancient river bed and about 20 meters above the river. The airport has an elevation of m and consists of two dirt, lime and gravel runways sparsely covered with grass. The main runway is 1,800 x 50 m on an alignment of 9/27 and has an effective gradient of 0.45%; the second runway, 1,100 x 50 m on an alignment of 15/33, is rarely used. The airport has a small terminal building served by a partially asphalt paved apron of 26,800 m 2. Although relatively well drained, the operational surfaces of the airport suffer during the wet season, and constant maintenance is required to repair soft spots. There is small control tower with old communications equipment adjacent to the terminal. The airport does not have lights, but has an NDB. Between the threshold of R/W 09 and the river are two residential blocks. Since all except the lightest aircraft must use this runway, the houses are continually subjected to dangers relating to low flying aircraft during critical periods of their operation as well as attendant noise, fumes, etc. Expansion of the runway would necessitate demolition of these houses and would separate from the town the remaining flat land to the south of the runway, without the construction of a costly road along the river edge. Expansion of the runway at the opposite end would require excessive fill due to the close proximity of the ancient river bed (between 15 and 20 meters lower than the runway elevation). The short runway alignment is even more critical as far as the location of the town is concerned. Flights to R/W 15 must pass over the central portion of the town. Expansion of the runway in this direction would not be practical since it would split the town in half. Expansion in the opposite direction would be restricted, in the same manner as the other runway, by the ancient river bed. However, even if the costs for this extension were acceptable, the necessity for flights over the town would not be accepted. (ii) San Borja The existing airport is located directly adjacent to the northeast side of the town, between the town and the Rio Rapulo. It is at an elevation

61 ANNEX 5 Page 2 of m and consists of a single 1,800 x 50 m dirt and lime runway covered with grass on an alignment of 15/30. The runway has an effective gradient of 0.06%. A small terminal building with a 13,500 m 2 apron and three slaughterhouses are located on the town side of the runway. The grass has been worn thin in many places, and, during the wet season, the airport must be closed for extended periods because of excessive softness of the runway. There is a small control tower near the terminal which contains some old communications equipment, and there is also an old NDB located at the airport. The runway is not provided with lighting, and no operations are allowed during the hours of darkness. (iii) Santa Ana The existing airport is located about 2 km to the southwest of the town at an elevation of m. It consists of a single 1,500 x 50 m dirt and lime runway covered with grass on an alignment of 14/32, which has an effective gradient of 0.21%. There is a small terminal building with a control tower on the northeast side of the runway, served by a 1,200 m 2 apron. A slaughterhouse has been built on the side opposite the terminal at the edge of the flight strip. Everywhere except directly on the runway are large chimneytype ant hills. The runway is flooded during the wet season and, for a considerable time after recession of the water, must remain closed because of soft operating surfaces. The tower has some old communications equipment, and the airport has an NDB; the runway is not provided with lighting, however, and all operations cease at dusk. (iv) Tarija The existing airport is located about 3 km to the east of the town across the Rio Bermejo at an elevation of 1,861.0 m. It has two runways. The longer, originally 2,000 x 45 m with an effective gradient of 0.72%, is in the process of being strengthened and lengthened to 2,800 x 45 m to accommodate Boeing B-727 aircraft. The second, 1,220 x 80 m of dirt, lime and sand, is being regraded at the intersection of the two runways near the terminal area. The alignment of the main runway is 15/33. The terminal building is modest but suitable, with an apron of 3,520 m2 and an attached control tower. The tower contains old communications equipment, and the airport has an NDB but no runway lighting.

62 ANNEX 5 Page 3 The river passes close to the northwest end of the runway and along the southwest side. A deep arroyo crosses the extended centerline of the runway at the southeast end. The northwest end of the river has been protected with riprap, but the southeast end is badly in need of similar protection to prevent erosion of the runway end. When completed in the spring of 1977, the prime runway will be serviceable in most weather conditions, but will require heavy maintenance to remain so. (v) Cochabamba The existing airport is adjacent to the southwest side of the city at an elevation of 2,547.0 m in a mountain valley which runs roughly northwest/ southeast. The airport has two runways, only one of which is in use. The main runway, 04/22, is 2,500 x 45 m with a gradient of 0.22% and is asphaltpaved, but it is aligned so that all operations pass over the center of the city. The closeness of the mountains on the northeast city end requires lowlevel turns either on final approach or just after takeoff. A hill which penetrates the obstruction clearance zones just south of the extended center line at this end further complicates operations. At the southwest end, the mountains, while providing more clearance, still force low-level turns during both operations. The second runway, 1,500 x 30 m on an alignment of 13/31, was asphalt-sealed at one time, but has now mostly deteriorated and is seldom used. The terminal area is on the north side of the northeast end of R/W 22. The terminal building is overloaded during periods of heavy traffic. A control tower is attached, which contains the major weather station for Bolivia. All equipment is old. The apron is 20,000 m 2 asphalt paved. A paved taxiway extends to the maintenance base of LAB near the intersection of the two runways. The airport has an NDB, and a VOR has been purchased but not yet installed. Edge lighting has recently been installed on R/W 04/22, its taxiways and the apron. B. Proposed Project (i) Riberalta A new airport will be constructed at a site about 5 km northeast of the town. Approaches to the single runway will be entirely clear of built-up areas. The runway will be 2,000 x 45 m paved with asphaltic concrete and will be stressed for a Boeing B A terminal building designed for a peak hour of 200 passengers will be constructed near the middle of the

63 ANNEX 5 Page 4 north side of the runway. It will be served by an apron sized for three B-727 aircraft. The apron will be connected to the runway by short lead-in taxiways. The terminal area will be provided with a paved access road from the main highway which passes the airport site on the west. Adequate automobile parking areas will be provided as well as a fuel storage area. A control tower and a shed for emergency equipment will be built. All necessary utilities will be provided. A perimeter chain link fence will be provided. The entire area will be suitably drained. The aircraft operational areas will be provided with edge lighting. New VHF and HF communications equipment will be installed. A VOR/DME and a 50W NDB will be installed, as well as a VASI system at one end of the runway. (ii) San Borja A new airport will be constructed at a site about 4 km northwest of the town. Approaches to the single runway will be entirely clear of built-up areas. The runway will be 1,800 x 30 m paved with asphaltic concrete and will be stressed for a Fokker F-27. A terminal building designed for a peak hour of 100 passengers will be constructed near the middle of the east side of the runway. It will be served by a paved apron, sized for three F-27 aircraft, which will be connected to the runway by a short paved lead-in taxiway. The terminal area will be provided with a gravel access road from the nearest tow.n road. Adequate automobile parking areas will be provided as well as a fuel storage area. A control tower and a shed for emergency equipment will he built. All necessary utilities and a perimeter chain link fence will be p,ovided. The entire area will be suitably drained. The aircraft operational areas will be provided with edge lighting. However, the runway edge lighting will be spaced for a 45 m runway rather than for the 30 m being constructed. New VHF and HF communications equipment, a VOR/DME and a 50 W NDB will be installed, and there will be a VASI system at one end of the runway. Because of the major meat air cargo business, a multiple position gravel aircraft apron with gravel lead-in taxiway to the runway will be provided beyond the terminal area on the same side of the runway to accommodate the reconstruc Lon of exisling slaughterhouses. (iii) Santa Ana A new runway will be constructed at the existing site parallel to the existing runway but about 300 m from the face of the existing terminal building. Approaches to this single runway will be entirely clear of builtp areas. The runway will be 1,800 x 30 m crushed rock with double sand asphalt seal, and will be stressed for a Fokker F-27. The terminal building will be renovated for a peak hour of 100 passengers. It will be served by a sealed apron sized for three F-27 aircraft and connected to the runway by

64 ANNEX 5 Page 5 a short sealed lead-in taxiway. The terminal area will be provided with a gravel access road from the nearest road in town. Adequate gravel automobile parking areas will be provided as well as a fuel storage area. The existing control tower will be renovated, and a shed for emergency equipment will be built. All necessary utilities will be refurbished. A perimeter chain link fence will be provided. The entire area will be suitably drained. The aircraft operational areas will be provided with edge lighting. New VHF and HF communications equipment will be installed. A 50W NDB will be installed in addition to a VASI system at one end of the runway. Because of the major meat air cargo business, a multiple position gravel aircraft apron with gravel lead-in taxiway to the runway will be provided on the opposite side of the runway from the terminal building to accommodate the reconstruction of existing slaughterhouses. (iv) Tarija The new 2,800 x 45 m crushed rock runway will be overlayed with 10 cm of asphaltic concrete for its entire length. The two lead-in taxiways and the three B-727 position aprons will also be paved. The second runway will not be paved, but grade transitions between the two runways will be provided. The runway, apron and taxiways will be provided with edge lighting and a VASI will be provided at one runway threshold. The existing terminal building and control tower are adequate, but new VHF and HF communications equipment will be provided as well as a VOR/DME and a 50W NDB. Chain link fencing will be provided around the entire perimeter of the airport. The arroyo passing the southeast threshold of the runvay will be diverted and armored with riprap, and the portion within 150 m of each side of the extended runway centerline will be covered. C. Engineering Design and construction supervision for the above airport work will be provided. Design of a new runway for Cochabamba will also be provided. This runway will probably be aligned on 13/31, which parallels the major axis of the Cochabamba valley. The position of the runway will be about 500 meters to the southwest of the existing R/W 13/31. Such a location will require a new taxiway sy2le.i and a relocation of the terminal area. It is also probable that the maintenance base of LAB will be relocated. A feasibility study carried out in 1975 proposed such positioning.

65 ANNEX 5 Page 6 D. Other Project Components Various special components and communications, navaid, lighting and maintenance equipment proposed for inclusion in the project are listed in Annexes 6, 7 and 9. February 1977

66 ANNEX 6 Page 1 BOLIVIA AVIATION DEVELOPMENT PROJECT Location List for Equipment Included in the Project Airport Lighting (R/W, T/W, Apron, Obstruction and Beacon) Riberalta, San Borja, Tarija and Santa Ana VOR's Riberalta, San Borja, Tarija and Robore, Caranavi DME's Riberalta, San Borja, Tarija and Trinidad, Caranavi NDB's 1KW Trinidad, Cobija, Robore, Sucre and Yacuiba NDB's 50W Riberalta, San Borja, Tarija, Santa Ana, Apolo, Ascencion, Magdalena, San Ignacio de V., San Jose, San Javier, Guayaramerin L 50W La Paz, Guayaramerin, Sucre and Trinidad (2) VASI La Paz, Cochabamba (2), Trinidad (2), Santa Cruz (2) and Sucre (2), Riberalta, San Borja, Santa Ana and Tarija TX HF ISB IKW Trinidad (4), Cochabamba (2), La Paz (2) TX HF SSB 150W, 4 channel (2 at each total 36) Cobija, Riberalta, Guayaramerin, Santa Ana, San Joaquin, San Ramon, Magdalena, San Ignacio de M. - Sucre, Potosi, Camiri, Yacuiba, Tarija - Apolo, Rurrenabaque, San Borja, Oruro, Charana RX HF SSB 4 channels (4 at each of above, total 72) RX HF ISB 4 channels Cochabamba (4), Trinidad (8) Tower Equipment (VHF, tape recorders, met., etc.) Riberalta, San Borja, Santa Ana and Tarija

67 ANNEX 6 Page 2 Teletypewriter equipment Terminal and Control Equipment La Paz, Cochabamba, Santa Cruz and Trinidad Transmitter Group (6 circuits each) La Paz (3), Cochabamba, Santa Cruz and Trinidad Receiver Group (6 circuits each) La Paz (3), Cochabamba, Santa Cruz and Trinidad Teletypewriters RO La Paz (18), Cochabamba (6), Santa Cruz (6), and Trinidad (6) Teletypewriters ASR La Paz (8), Cochabamba (2), Santa Cruz (2), and Trinidad (2) Teletypewriters KSR La Paz (8), Cochabamba (6), Santa Cruz (6) and Trinidad (6) Portable TD La Paz (2) Power Supply La Paz (5), Cochabamba (2), Santa Cruz (2) and Trinidad (2) Reperforator La Paz (18), Cochabamba (6), Santa Cruz (6) and Trinidad (6) January 1977

68 ANNEX 7 BOLIVIA AVIATION DEVELOPMENT PROJECT Regional Maintenance Equipment D-6 Tractor Front End Loader MotSrgrader 5 mj Dumptruck.(3) Dual Wheel Self-Propelled Sheeps Foot Roller with Blade Hand Compactors (2) D-24 Scraper 1,500-Gallon Tank Truck Santa Ana Airport Maintenance Equipment Asphalt Mixing Plant 8T/Hr Bitumen Boiler/Sprayer 500 gals Asphalt Cauldron 500 kg Direct Drum Hand Sprayer Tandem Vibratory Roller 1,140 kg Compressor, Breaking Tools and Hoses, 125 cfm, 100 psi Garage Compressor, 100 psi Oxy-Acetylene Burning Gear Welding Transformer and Tools Carpenter's Tool Kit Electrician's Tool Kit Diesel Fitter's Tool Kit Vehicle Mechanic's Tool Kit Pavement Maintenance Hand Tools January 1977

69 ANNEX 8 BOLIVIA AVIATION DEVELOPMENT PROJECT Draft Technical Assistance Job Descriptions 1. Advisor to the Technical Director The Advisor to the Director, who is the immediate assistant of the Executive Director, must have a university degree and experience in aviation infrastructure. He must also have the same qualifications as are required for the position of the Executive Director. The Advisor shall advise the Technical Director in his daily responsibilities to: (a) Direct, coordinate, supervise and evaluate the work of the operational divisions in accordance with the policy and/or plans of action adopted; (b) Assist the Executive Director in the study and preparation of the Institution's policies and also help him with the tasks of direction and coordination with specific functions within his field of competence and with other matters for which his assistance is needed; (c) Check on the pertinence of procedures, regulations, manuals and other instruments within his field of competence; (d) Supervise the progress of programs, projects and works, and, together with the heads of technical departments, study any actions or measures for effecting corrections or changes; (e) Comply with and enforce resolutions, rules, procedures and all other provisions governing technical operations at airports or at enroute stations; (f) Substitute for the Executive Director and exercise his authority in accordance with the general rules, in the latter's absence; (g) Represent the Executive Director and exercise his authority in such official activities as the latter may indicate to him, and perform all such tasks as he may delegate to him; and (h) Perform all other functions pertinent to his position.

70 ANNEX 8 Page 2 2. Accounts Division Chief basis to: The Accounts Division Chief shall be responsible on a day-to-day (a) Ensure that the financial records are kept in accordance with regulations as established by the Government and in a manner compatible with generally accepted accounting principles. This shall encompass AASANA Headquarters, Regional Offices, Airports and enroute stations managed by AASANA by location and Cost Center; (b) Ensure that recommendations are presented to management for the setting of structure and level of tariffs, as may be required, in accordance with a review of cost data in (a) above. (c) Ensure that monthly financial status reports of investment undertaken by AASANA by location and Cost Center are prepared; (d) Ensure development of manpower, operating and capital budgets by location and Cost Center annually displayed by month for the operating year, and also the preparation of annual budgets for a projected period of five years; (e) Ensure that accounting data are provided for planning and decision-making purposes; (f) Ensure that AASANA's monthly budgeted and actual financial status reports are prepared; (g) Direct the taking of inventory for general balance sheet purposes; (h) Supervise the general balance sheet preparation; (i) Centralize operating and other expenditures on the basis of a cost accounting plan and the programs budget; (j) Ensure that summary accounts to be sent to debtors are prepared, and summary accounts sent by creditors are checked; (k) Ensure that year-end adjustments or corrections for the accurate determination of the Institution's financial, economic and assets situation are made; (1) Supervise the implementation of a coordinated costs system; (m) Ensure that vouchers used for the recording of transactions are properly filed; (n) Analyze and act on financial reports from the regional offices; and (0) Perform any other functions assigned by the Department Chief.

71 ANNEX 8 Page 3 3. Construction and Supervision and Maintenance Combined Divisions Chief The Chief of these combined Divisions shall: (a) Inform and advise the Department Chief on the work of the Division, proposing the most appropriate measure and methods for performing its functions; (b) Direct supervision of construction, improvement and/or maintenance of runways, taxiways, parking aprons, drainage, access roads and other civil works carried out at airports and enroute stations managed by AASANA; (c) Direct supervision of construction, improvement or expansion and/or maintenance of airport buildings and other architectural or service facilities at airports and enroute stations managed by AASANA; (d) Be responsible for the preparation of, review and approval of, progress payment certificates. (e) Be responsible for the preparation and approval of work change orders; (f) Be responsible for the preparation and updating of the technical specifications required for works construction, and enforcement of compliance therewith; (g) Be responsible for the quantitative calculations and unit prices, budgets, work schedules and construction methods for the work of the division; (h) Supervise the different tests required to ensure the proper execution of works; (i) Coordinate with the Studies and Projects Division in deciding on work changes, in issuing orders for such changes and in performing any corrections to the work done by the division; (j) Direct the corresponding technical inspections and recommend acceptance of the works; (k) Monitor supervision of the construction works when such supervision is carried out by third parties; (1) Supervise the preparation of programs, budgets and technical specifications related to airport and enroute station maintenance;

72 ANNEX 8 Page 4 (m) Schedule and evaluate execution of the maintenance works carried out by the different regional centers; (n) Periodically direct the inspection of the different airports and enroute stations within the AASANA network, to ensure compliance with the maintenance program; (o) Direct studies and propose the purchase and replacement of machinery and equipment required for airport and enroute station maintenance; (p) Supervise the establishment and updating of unit prices for maintenance work, by region; and (q) Perform other duties as assigned by the Department Chief. 4. Air Navigational Aids Division Chief The Chief of this Division shall: (a) Ensure that the level of standard approved for the facility is implemented and the radio navaid systems are maintained so that the safe operation of aircraft is guaranteed; (b) Supervise the preparation and implementation of the rules and regulations necessary for the proper maintenance and conservation of radio navaid equipment, installations and components; (c) Supervise the preparation of technical instructions and publications for the optimum use of the facilities installed and/or maintained; (d) Ensure that the operation of the equipment and facilities for which the Division is responsible are continually monitored and periodically evaluated; (e) Ensure that systems for recording adjustments, operating reports and flight test reports are systematically analyzed and evaluated; (f) Coordinate the Division's activities with the Operations Department, regional airport managers and companies operating aircraft in order to provide the assistance required to improve service; (g) Cause all pertinent frequencies to be monitored and recommend the use of specific frequencies for aeronautical radio navaid services in accordance with the regulations;

73 ANNEX 8 Page 5 (h) Study and make recommendations on requirements for specialized personnel; and (i) Perform other duties as assigned by the Department Chief. 5. Telecommunications Systems Division Chief The Chief of this Division shall: (a) Supervise the installation and maintenance of all communications equipment and systems necessary to ensure the optimum provision of air traffic control and information services in accordance with the approved operating regulations; (b) Study and make recommendations on requirements for specialized personnel; (c) Ensure that the performance of the equipment for which the Division is responsible is adequately monitored and periodically evaluated; (d) Ensure that the systems for recording adjustments, operating reports, flight test reports, etc., are systematically analyzed and evaluated; and (e) Perform other duties as assigned by the Department Chief. February 1977

74 ANNEX 9 Page 1 BOLIVIA AVIATION DEVELOPMENT PROJECT Special Components of the Project Airport Access Roads The new airport at Riberalta would be constructed southeast of the town along an existing highway. The project would include an access road from this highway to the terminal area (1 km). The new airport at San Borja would be constructed 4 km northwest of the town. The project would include an access road from an existing main road at the outskirts of the town to the terminal area of the airport. The existing access road at Santa Ana would be regraded and spread with gravel from the town to the terminal area (2 km). No road work is necessary at Tarija. Electric Power Supply The project would provide prime and standby engine generators for the three Beni airports. Power-generating equipment necessary at Tarija and other locations for Navaid or Com equipment is being provided under a grant from the UK (next page). Potable Water Supply and Sewage Disposal Water for the project airports would come from wells. It would be treated before entering the distribution system. Sewage would be disposed of by means of septic tanks and leaching fields. Slaughterhouse Because of the location of the proposed new runway at Santa Ana, an existing slaughterhouse would have to be demolished. A new slaughterhouse would be constructed under the project in a more suitable location relative to the runway and terminal area.

75 ANNEX 9 Page 2 BOLIVIA AVIATION DEVELOPMENT PROJECT Engine Generator Sets - Grant Aid from United Kingdom All engine generator sets will be dual, rated for elevation, air cooled diesel with electric starting equipment and automatic transfer switches and isolation switches. Size Location 10 KW Apolo 10 KW Ascension de G. 10 KW Camiri 10 KW Concepcion 10 KW Magdalena 10 KW Rurrenabaque 10 KW San Ignacio de M. 10 KW San Ignacio de V. 10 KW San Javier 10 KW San Joaquin 10 KW San Jose 10 KW Charana 25 KW Guayaramerin 25 KW Oruro 25 KW Potosi 25 KW Puerto Suarez 25 KW Robore 25 KW Yacuiba 25 KW 2 sets Spare 35 KW Cobija 35 KW Sucre 35 KW Tarija NOTE: One of the spare 25 KW sets should be installed at Caranavi for the proposed VOR. Januarv 1977

76 ANNEX 10 Page 1 BOLIVIA AVIATION DEVELOPMENT PROJECT Project Progress Monitoring Indices Construction Date Accomplished or To Be Met Completion of draft construction working drawings for Tarija. February 1977 Completion of draft contract documents for Tarija. February 1977 AASANA and Bank review of draft drawings and documents. February 1977 Advertisement for interested contractors for Tarija paving. April 1977 Completion of final contract drawings and documents for Tarija. April 1977 AASANA and Bank review of final civil works contract documents and drawings for Tarija. April 1977 Advertisement for prequalified consultants for Riberalta, San Borja and Santa Ana. April 1977 Invitations to bid issued for Tarija. May 1977 Selection of consultants for Riberalta, San Borja and Santa Ana. June 1977 Bids opened for Tarija paving. July 1977 AASANA and Bank review of awards. August 1977 Award of contract at Tarija. September 1977 Notice to proceed at Tarija. October 1977 Completion of draft construction working drawings for Riberalta, San Borja and Santa Ana. March 1978 Completion of draft contract documents for Riberalta, San Borja and Santa Ana. March 1978 Solicitation of pre-qualification information. February 1978 AASANA and Bank review of Draft drawings and documents. March 1978

77 ANNEX 10 Page 2 Review of pre-qualification information. March 1978 Completion of final contract drawings and documents for Riberalta, San Borja and Santa Ana. May 1978 AASANA and Bank review of pre-qualified list and final civil works contract documents and drawings for Riberalta, San Borja and Santa Ana. May 1978 Invitations to bid issued for Riberalta, San Borja and Santa Ana civil works. June 1978 Bids opened for Riberalta, San Borja and Santa Ana civil works. September 1978 AASANA's recommendation for awards. October 1978 AASANA and Bank review of awards. October 1978 Award and notice to proceed at Riberalta, Santa Ana and San Borja civil works. December 1978 Completion of Tarija civil works contract. January 1979 Final acceptance of Tarija civil works contract. January 1980 Completion of Riberalta, Santa Ana and San Borja civil works contracts. December 1981 Final acceptance of Riberalta and San Borja civil works contract. December 1982

78 ANNEX 10 Page 3 Riberalta, San Borja and Santa Ana Airports Final Engineering Short list of potential consultants prepared by AASANA. February 1977 Short list of consultants approved by Bank. February 1977 Draft Terms of Reference for the Riberalta, San Borja and Santa Ana Airports Final Engineering prepared by AASANA. March 1977 Draft Terms of Reference for Contract reviewed by Bank. April 1977 Fir.al Terms of Reference prepared by AASANA. April 1977 Final Terms of Reference approved by Bank and Invitation to propose sent to approved short list by AASANA. April 1977 Proposals for design opened. May 1977 AASANA's recommendation for award. June 1977 Bank review of proposed award. July 1977 Award of Contract. August 1977 Notice to proceed. September 1977 Consultants' draft designs. March 1978 AASANA and Bank review of preliminary designs. March 1978 AASANA and Bank approval of preliminary designs. April 1978 Consultants' final designs and contract documents. May 1978 Acceptance of final designs and contract documents by AASANA and Bank. June 1978

79 ANNEX 10 Page 4 Maintenance Equipment Advertisement for interested contractors for airport maintenance equipment. July 1977 Completion of draft contract documents for maintenance equipment. August 1977 Solicitation for pre-qualification information for maintenance equipment manufactures. September 1977 AASANA and Bank review of draft contract documents for maintenance equipment. October 1c77 Consultants' review of pre-qualification information for maintenance equipment manufacturers. October 1977 Consultants' recommendation of pre-qualified maintenance equipment contractor list. November 1977 Completion of final maintenance equipment contract documents. November 1977 AASANA and Bank review of pre-qualified list and final contract documents for maintenance equipment. December 1977 Invitations to bid issued for maintenance equipment contract. February 1978 Bids for maintenance equipment contract opened. May 1978 Consultants' recommendation for award of maintenance equipment contract. May 1978 AASANA and Bank review of award for maintenance equipment contract. June 1978 Award and notice to proceed with maintenance equipment contract. July 1978 Delivery of maintenance equipment. October 1980

80 ANNEX 10 Page 5 AASANA Technical Assistance and Training AASANA to prepare Terms of Reference for technical assistance positions for AASANA. May 1977 Review of Terms of Reference for TA positions by Bank. June 1977 Search for grant funding for training by AASANA. June 1977 Search for TA experts by AASANA/Bank or others. June 1977 Review of candidates and selection of experts for TA positions by AASANA and Bank. August 1977 Mobilization of TA experts in Bolivia. December 1977 Preparation of training plan by AASANA and its TA experts. September 1978 Review of training plan by Bank. October 1978 Selection of trainees-by AASANA. October 1978 Review of training candidates by Bank. November 1978 Placement of trainees in training facilities. December 1978 Completion of TA Training End 1982

81 ANNEX 10 Page 6 Navaids, Com. and Tower Equipment Advertisement for interested contractors for navigational aids, communication and control tower equipment manufacture and installation. December 1977 Completion of draft construction drawings and contract documents for navaids and communications. February 1978 Solicitation for pre-qualification information for navaids and communications contractor. February 1978 AASANA and Bank review of draft navaids and communications drawings and contract documents. April 1978 AASANA's review of pre-qualification information for navaids and communications contractors. April 1978 AASANA's recommendation of pre-qualified navaids and communications contractor list. May 1978 Completion of final navaids and communications contract drawings and documents. May 1978 Bank review of pre-qualified list and final contract documents and drawings for navaids and communications contract. June 1978 Invitations to bid issued for navaids and communications contract. July 1978 Bids for navaids and communications contract opened. October 1978 AASANA's recommendation for award of navaids and communications contract. November 1978 Bank review of award for navaids and communications contract. November 1978 Award and notice to proceed with navaids and communications contract. December 1978 Completion of navaids and communications contract. June 1980 Acceptance of navaids and communications contract. June 1981

82 ANNEX 10 Page 7 Cochabamba Airport Engineering Final Design Draft Terms of Reference for the Cochabamba Airport Engineering Final Design prepared by AASANA. October 1977 Draft Terms of Reference for Contract reviewed by Bank. November 1977 Short list of potential consultants prepared by AASANA. November 1977 Short list of consultants approved by Bank. December 1977 Final Terms of Reference prepared by AASANA. December 1977 Final Terms of Reference approved by Bank and invitation to proposed sent to approved short list by AASANA. February 1978 Proposals for design opened. May 1978 AASANA's recommendation for award. June 1978 Bank review of proposed award. July 1978 Award of contract and notice to proceed. July 1978 Consultants' preliminary design. December 1978 AASANA and Bank review of preliminary design. February 1979 AASANA and Bank approval of preliminary design. February 1979 Consultants' final design and contract documents. July 1980 Acceptance of final design and contract documents by AASANA and Bank. September 1980 April 1977

83 ANNEX 11 Page 1 BOLIVIA AVIATION DEVELOPMENT PROJECT Summary and Conclusions of Transport Sector Report Bank Group Operations in the Transport Sector 1. The Bank's first involvement in Bolivia's Transport Sector was as executing agency for a UNDP-financed National Transport Survey (1967); this was followed by the financing of a Pipeline Project (Loan 655-BO, September 1971, US$23 million) and two Railway Projects (IDA Credit 346-BO, November 1972, US$8 million, and Loan 1121-BO, June 1975, US$32 million). At present, the Bank is appraising a Third Railway Project (proposed loan of US$35 million), which would include funds for updating the National Transport Survey and for subsequent technical assistance to the Directorate of Planning and Coordination, as well as an Aviation Development Project (proposed loan of US$25 million). To date, there has been no Bank involvement in the highway sector. Sector Knowledge 2. The Bank's knowledge of railways and aviation is good and that of pipelines is reasonable. There is a gap in knowledge regarding the overall traffic demand as well as the ability of highways and waterways to meet the expected demand. The overall knowledge, therefore, is not sufficient to establish the future role that each mode should play or to provide a base for the formulation of a comprehensive transportation policy. The Transport Sector 3. Bolivia, as a land-locked country with adverse geography and climate and a scattered population, presents serious resource allocation problems with respect to the role of transport in its development. Its major commodities, oil and gas, are transported fairly efficiently by pipelines, but its other foreign exchange earning commodities must rely on facilities with high investment and high maintenance costs. In 1974, total freight movements in Bolivia amounted to about 5.5 billion ton-km. Of this total, 75% was carried by pipelines, 16.3% by road, 7.0% by rail, 1.1% by waterways, and 0.6% by air. 4. Early development of the Bolivian transport network was based on the construction of railways to serve the needs of foreign trade and the mining sector in particular. The road network was developed later to meet the needs of internal communication and to fill the gaps left by the railway. Air transportation, which has grown rapidly in the last 10 years, serves long-distance passenger traffic and gives access to extensive isolated areas. The two principal river routes in Bolivia, the Ichilo-Mlamore and the Beni, are a means of supplying the vast areas in the north and northeast, especially for heavy and non-perishable goods, and Lake Titicaca serves as a navigable link with the

84 ANNEX 11 Page 2 southern Peru railway and the Pacific port of Matarani. Pipelines is the latest mode that became developed. Transport Modes 5. By far the most important individual transport mode in Bolivia is the pipeline, which accounts for a very high share (75%) of freight transport (in ton-km). This reflects both the importance of the petroleum industry and the relatively low level of development of the rest of the economy. The state oil company operates 2,462 km of oil pipelines and 754 km of gas pipelines. Compared with this system, the road network of about 38,000 km is much larger, but only 1,166 km are paved and 6,559 km have gravel surface. The railway system is about 3,400 km long, and the river system measures about 1,600 km. The national airline, LAB, has a route network of about 27,800 km, of which 11,000 km are within Bolivia. 6. Most of the country is accessible by only one transport mode; for large areas of the country, access is available only at high transport cost or with poor service, or both. Topography and the quality of the transport infrastructure place serious restrictions on the vehicles that can be used, i.e., 5-6 ton trucks on most roads, ton barges on the rivers, turbopropeller aircraft of 5 tons payload at most airports and relatively short trains. Although improvements, particularly for railways and aviation, are being made, many of the vehicles (e.g., trucks, barges and aircraft) have not been maintained properly and are clearly overaged. Bolivia has about 17,500 trucks with a carrying capacity of 88,000 tons. The river barges have a total capacity of some 3,000 tons; 50 aircraft, about 300 tons; and 1,950 railway wagons, about 43,000 tons. These numbers are only roughly indicative, due to the number of vehicles out of service, e.g., about 40% for the railway wagons and a similar, but less serious, situation for both aircraft and barges. Other factors are the speed of the vehicles (25-30 km/hour for trucks) and the amount of idle time since vehicles are used for storage. These differences would have to be taken into account in any estimate of productivity by transport mode. Passenger traffic is served by some 50,000 light vehicles, 4,000 buses, eight aircraft in scheduled air services, 188 railway passenger cars and hydrofoils on Lake Titicaca. 7. Traffic data are incomplete, particularly for intercity road transport. Apart from the specialized role of pipeline transport, road transport accounts for 65% of the remaining transport effort as compared to 28% for the railways and small contributions by river, lake and air transport (about 2% each). Intercity passenger transport by railway in 1975 totalled about 832,000 passengers for the Western System and 317,000 passengers for the Eastern System; this may be compared to 463,000 domestic air passengers. Intercity road transport is probably more important than other modes of transport, but very uncertain in view of the large number of unaccounted-for travellers by truck.

85 ANNEX 11 Page 3 8. A common major problem for all transport modes (except possibly lake) is the lack of supporting infrastructure coupled with poor maintenance of existing infrastructure. This is a serious matter since it limits the use of larger, more economical vehicles and decreases average utilization. Transport Planning and Coordination 9. The Ministry of Transport, Communication and Civil Aviation (MTCCA) is responsible for formulating, directing and executing policy. The investment proposals of MTCCA are reviewed by the National Economic and Planning Council (CONEPLAN) to determine the overall level of investment in light of national priorities. At present, only four of the five transport modes are fully under the jurisdiction of MTCCA: highways, railways, aviation and waterways. Pipelines are under the jurisdiction of Yacimientos Petroliferos Fiscales Bolivianos (YPFB), which, in turn, reports to the Mlinistry of Energy and Hydrocarbons. 10. A National Transport Survey for Bolivia, financed by UNDP, was completed in 1969, with the Bank acting as Executing Agency. It proposed a program for integrated transport development over the following ten years, and those projects which were justified in the Survey have mostly been started or are included in the National Development Plan. One of the Survey's main recommendations was that a Directorate of Planning and Coordination (DPC) should be created. The Directorate was created and, for a time, was attached to the Ministry of Coordination and Planning, but is now in MTCCA. As a means of achieving better planning and coordination, the Bank, in 1972, assisted in the preparation of terms of reference for a UNDP-financed technical assistance program to strengthen this Directorate. 11. This UNDP-financed program of technical assistance to the Directorate of Planning and Coordination, with ECLA acting as executing agency, was begun and cancelled in 1976, due to lack of funds, after only partial implementation. 12. The gap in knowledge regarding transport facilities and equipment, their condition, age and ability to meet expected demands is serious, especially for highways and waterways. Although many individual project studies have been undertaken, there has been no real coordination among them. Accordingly, the Government has decided that DPC, with the help of consultants, should update the National Transport Survey. The main objectives of this National Transport Survey would be to: (a) analyze and project the transport demand in relation to planned development of the economy; (b) review existing capacity and operations;

86 ANNEX 11 Page 4 (c) determine the role of each mode in relation to the demand; (d) recommend policies and operational improvements designed to make best use of existing and future capacities; (e) prepare a program of investments necessary to improve and expand capacities to meet projected demands; (f) recommend measures for the strengthening of DPC under MTCCA and develop a new organization and staffing plan for it; (g) ensure that a maximum amount of working knowledge is imparted to the counterpart personnel, and assure that the organization of traffic counts and other data collection exercises will be undertaken in such a way that they can most easily be incorporated in the future routine work; and (h) indicate the method of implementation for the major policy recommendations that might serve as terms of reference for a subsequent two-year technical assistance to DPC. Export-Import Transport 13. Bolivia relies heavily on exports and imports for the development of its economy. The main exports are minerals via Peru and Chile, crude oil to Argentina and Chile, gas to Argentina, and agricultural commodities, especially cotton and wood, to Argentina and Brazil. Recently, major sugar exports to Chile also took place. Imports are mainly wheat and flour from Argentina and, via Peru and Chile, iron and steel, mechanical equipment, vehicles and other durable goods. 14. The main carrier (except pipelines) is the railway, which, in 1975, carried 350,000 tons of imports and 153,000 tons of exports by the western network (mainly through Arica and Antofagasta) compared to imports of 167,700 tons and exports of 89,600 tons by the eastern network. 15. External transport facilities assume special importance in the economy of the nation since most imports and the exports of high-bulk ores and certain farm commodities depend on efficient, low-cost transportation and, especially, on access to the Pacific ports of Antofagasta, Arica and Matarani. Another related problem is that Bolivia's potentially most significant export markets in South America--represented by such cities as Lima, Santiago, Buenos Aires, Asuncion, Montevideo, Sao Paulo and Rio de Janeiro--are located at great distances from La Paz, ranging from 1,100 to 2,800 km by air and even farther by overland and river routes.

87 ANNEX 11 Page 5 Sector Objectives and Strategy 16. The Government's present Five-Year Plan ( ) includes, as major goals, the expansion of the main export sectors--hydrocarbons and minerals and agriculture and agro-industries--in order to break the foreign exchange constraint to development. The plan recognizes that infrastructure such as transport and communications is basic to the country's development and is given high priority. The latest Economic Memorandum on Bolivia (March 23, 1977) concurs with this view. The targets for transport call for investments in projects already started of about US$475 million, excluding pipelines: 56% for highways, 23% for railways, and 21% for aviation. Some 62% of these investments are in foreign exchange. In addition to these projects already under way, the Government has under study some US$439 million in possible projects. The Five-Year Plan does not include capital investments for waterways, which are relatively minor. 17. From the Five-Year Investment Plan ( ), it appears that the Government's major objectives for the Transport Sector are: (a) Roads: extension of the road network; (b) Railroads: rehabilitation and modernization of the National Railroad System to allow more efficient operation and to continue its financial viability; and (c) Air Transport: improvement and construction of airport facilities and improvement of the air navigation system to provide all-weather availability of most airports. 18. The pipeline subsector has proposed new investments for of some US$799 million, which would extend the pipeline network and increase throughput over existing lines. 19. The Five-Year Plan addresses itself primarily to new construction with no added emphasis being given to rehabilitation and maintenance of the existing network (para. 20), particularly in the road subsector. Since the transportation investments are large, and may even be excessive, continued sector planning and coordination are required to ensure that the projects under study are justified in their overall content and are well-timed. Since even the transport investments already' committed are ambitious, it is likely that most of these projects under study cannot be carried out in the period. In considering the development needs of the country, it should be recognized, however, that not all the perceived investments will necessarily be economically justified, but each should be a least-cost solution. In particular, duplication of services, i.e., parallel road and rail lines, should be avoided.

88 ANNEX 11 Page 6 Bank Group Contribution 20. The Transport Sector Mission identified several maintenance and investment requirements (particularly for rehabilitation) in the Bolivian transport sector; it has also pointed out the need for updating the National Transport Survey and for strengthening the Directorate of Planning and Coordination under MTCCA. The Bank's main objective is to assist in high priority infrastructure projects and to guide in the selection of a future investment program as yet only partly defined, i.e., projects under study estimated to cost US$439 million. This two-part objective would not only deal with overall transport coordination, but to be effective, would also approach, at the same time, the most important of the individual transport modes. The Bank's previous involvement with railways and pipelines will now be broadened by projects in aviation and, possibly, in roads. A focus will be put on the selection of projects meeting the development strategy, rehabilitation and maintenance of the present system with emphasis on the Government-provided infrastructure and upgrading of managerial capability to perform these tasks. 21. The Bank's immediate measures to assist the Government in reaching these objectives in the transport sector should be the provision for financing the foreign exchange component of: (a) the updating of the National Transport Survey and subsequent technical assistance to the Directorate of Planning and Coordination under the proposed Third Railway Project (para. 21 (c)) at an estimated cost of US$1.5 million equivalent; (b) the technical assistance for highway maintenance funded under the proposed Third Railway Project (para 21 (c)) at an estimated cost of US$0.5 million equivalent (para. 22); (c) investments included in ENFE's Five-Year Investment Plan ( ) which are to be committed in 1977 and 1978, and the continuation of the ongoing program of technical assistance to ENFE with an estimated cost of US$32.9 million equivalent also in the proposed Third Railway Project; (d) assistance to AASANA for airport construction; provision of technical assistance to AASANA; electronic equipment; construction equipment for runway maintenance; design of works at Cochabamba. The estimated total cost is US$39.5 million, with a Bank contribution of US$25.0 million equivalent in the proposed airfields project. 22. During discussions with the Transport Sector Mission, the Government authorities requested Bank assistance in the field of highway maintenance. The proposed initial project is a Pilot Project in three separate districts (La Paz, Cochabamba and Santa Cruz) of the Servicio Nacional de Caminos (SNC). April 1977

89 AlNNEX 12 Page 1 BOLIVIA AVIATION DEVELOPMENT PROJECT Details of the Economic Evaluation 1. The most important economic benefits are derived from the use of more efficient aircraft or from more efficient utilization of existing aircraft. The basic costs are derived from current aircraft used by Lloyd Aereo Boliviano and the major non-scheduled cargo airlines. These data have been compared with cost experience in other countries, particularly the United States. The costs have all been referred to 1975 price levels. Similarly, the traffic composition and route lengths have been the latest available. For each airport, passengers and air cargo were multiplied by weighted averages of travel distances and by the differential in aircraft costs. 2. These estimates are based on conservative assumptions. First, relative costs for old aircraft will increase overtime when spare parts become more difficult to obtain and maintenance and fuel consumption increase. Second, the benefit data all relate to price levels of 1975 whereas the project economic costs are mid Third, with improved aircraft and better services, the average stage length for passengers and, to a certain extent, for air cargo, will increase. 3. The basic direct operating cost data for the main types of aircraft are the following: Boeing Fairchild Douglas Curtiss Convair B F-27 D-C3 C-46 CV US$- Block hour cost 1, Cost per ton-km used for performed.2012 pass. only Cost per passkm performed used for cargo only 4. The average distances used are the following in km: Tarija Riberalta San Borja Santa Ana de Yacuma Passengers Cargo

90 ANNEX 12 Page 2 5. Present delays can be caused either on the ground or enroute. Diverted flights normally mean additional time enroute, whereas cancellations normally mean non-productive time for an aircraft on the ground. For delays, cancellations or diversions in this economic evaluation, the benefit-per-hour for better electronic equipment for communications and navigation or runway maintenance equipment has been assumed as the average revenue per block hour less variable costs for an F-27 (i.e., US$700-US$363 = US$337). For diversions or delays caused by airport conditions, the block hour cost for F-27 (US$427) or C-46 (US$400) has been used. 6. The differentials in cost between expected future aircraft and current (1975) aircraft use have been converted to an average cost per passenger or ton of cargo for each airport. Average costs for aircraft include depreciation to reflect more accurately the gradual changes from one type to another of aircraft which are in the present fleet. No new aircraft are expected to be needed only for the relatively limited traffic at project airports. Without the project, additional second-hand aircraft may have to be purchased. The effect of this is likely to understate benefits more than the slight overstatement due to generated traffic by the project. 7. These have been multiplied by forecast passenger volumes or cargo tonnages. The delays, cancellations or diversions have been estimated from LAB and AASANA daily records for For non-scheduled aircraft, only the diversions from San Borja have been possible to ascertain. These delays have been assumed to grow in the same proportion as traffic over the project period. 8. The economic life of the airports has generally been assumed at 19 to 22 years, with the exception of San Borja at 12 years due to the possibility of competition from improved road connections from this community, which may change the character of the airport. The physical life of the electronic equipment and the runway maintenance equipment has been assumed at 11 and 5.5 years, respectively. No residual values have been assumed. 9. For Riberalta, the site of existing airport land close to builtup parts of the town is expected to yield US$600,000 in today's prices and is included as a benefit in For Santa Ana de Yacuma, the yearly avoided cost of maintaining the airport has been estimated at US$100,000 based on works carried out in which, in the absence of the project, would have to be carried out annually. April 1977

91 ANNEX 13 Page 1 BOLIVIA AVIATION DEVELOPMENT PROJECT Financial Assumptions 1. Revenues, expenses and capital costs are stated in constant values (1976), but include price contingencies for project capital costs. 2. Tariffs used are in accordance with the revised User Charges of AASANA, which became effective in August Commencing with the year 1977, the date of project implementation, total revenues have been increased as follows based on expected tariff increases (para 6.08); Individual Increase Cumulative Increase % 20% % 44% % 58% % 74% % 92% 3. Wages were increased at 2% per year to allow for increased requirements resulting from greater traffic. 4. Other expenses were increased at 2% per year to allow for the requirements resulting from increased AASANA operations. 5. Depreciation employed is in accordance with the depreciation policy established by the Government. (a) Civil works (runways, buildings, access roads, fences) - 2.5% commencing when the facilities are expected to be in use. (b) Aviation equipment (communications, navigational aids, lights) - 10% commencing when the facilities are expected to be in use. (c) Maintenance equipment - received and in use. 20% commencing when the equipment is 6. Maintenance: (a) Civil works after % of replacement cost per year. (b) Aviation, ground maintenance, and firefighting equipment - 5% of replacement cost per year. (c) In 1975 and 1976, minimal required to operate existing aircraft.

92 ANNEX 13 Page 2 7. Terms of the Bank loan: Repayment over 20 years, including a grace period of four-andone-half years at an interest rate of 8.2%. January 1977

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