Embed Size (px)
Citation preview
Document ofThe World Bank
Report No: 18989 CO
PROJECT APPRAISAL DOCUMENT
ONA
PROPOSED LOAN
IN THE AMOUNT OF US$85 MILLION
TO THE
DISTRICT OF CARTAGENA
WITH THE GUARANTEE OF THE REPUBLIC OF COLOMBIA
FOR THE
CARTAGENA WATER SUPPLY, SEWERAGE AND ENVIRONMENTALMANAGEMENT PROJECT
June 28, 1999
Finance, Private Sector and Infrastructure DepartmentColombia, Ecuador and Venezuela Country Managing UnitLatin America and the Caribbean Regional Office
Pub
lic D
iscl
osur
e A
utho
rized
Pub
lic D
iscl
osur
e A
utho
rized
Pub
lic D
iscl
osur
e A
utho
rized
Pub
lic D
iscl
osur
e A
utho
rized
Pub
lic D
iscl
osur
e A
utho
rized
Pub
lic D
iscl
osur
e A
utho
rized
Pub
lic D
iscl
osur
e A
utho
rized
Pub
lic D
iscl
osur
e A
utho
rized
CURRENCY EQUIVALENTS(Exchange Rate Effective May 31, 1999)
Currency Unit = Peso ($)$1682.12 = US$1.00
$1 million = US$594.5
FISCAL YEARJanuary I - December 31
ABBREVIATIONS AND ACRONYMS
ACUACAR Aguas de Cartagena (the water and sewerage company of Cartagena)AGBAR Aguas de Barcelona (The water and Sewerage company of Barcelona)BOD Biochemical Oxygen DemandCARDIQUE Corporaci6n Autonoma del Canal del Dique (the regional
environmental authority in Cartagena)CAS Country Assistance StrategyCIOH National Oceanographic InstituteCRA Comisi6n Reguladora de Agua (Water Regulating Committee)DAMARENA The Municipal Environmental Department of the District of CartagenaDAP Direcci6n de Agua Potable y Saneamiento (Water and Sanitation
Directorate)DIMAR Marine and Port DirectorateDNP Departamento Nacional de Planeaci6n (National Planning Department)DTF Deposito Termino Fijo (interest rate of a fixed term deposit)EPD Empresas Publicas Distritales (the previous water and sewerage utility
of Cartagena)FINDETER Financiera de Desarrollo Territorial (a second tier financial
intermediary for regional and local infrastructure investmentestablished in 1990)
HDPE High Density Poly EthyleneKm KilometerKw KilowattM MeterMCM Million Cubic MeterMm MillimeterM3/d Cubic meter per dayM3/s Cubic meter per secondNGO Non Governmental OrganizationPIU Project Implementation UnitPLC Programmable ControllerPMR Project Management ReportPSP Private Sector ParticipationRCCP Reinforced Concrete Cylindrical PipeSS Suspended SolidsSSPD Superintendencia de Servicios Publicos Domiciliarios
(Superintendency of Domestic Public Services)WSS Water and Sewerage Sector
Vice President: S. Javed BurkiCountry Management Unit Director: Andr6s SolimanoSector Management Unit Director: Danny LeipzigerTask Manager: Menahem Libhaber
ColombiaCartagena, Water Supply Sewerage and Environmental Management Project
CONTENTS
A. Project Development Objective ............ 2..........................................2
Project development objective and key performance indicators .............................................. 2
B. Strategic Context ...................................................... 2
1. Sector-related CAS goal supported by the project ................................................... 22. Main sector issues and Government strategy ....................................................... 23. Sector issues to be addressed by the project and strategic choices .......................... 3
C. Project Description Summary ....................................................... 7
1. Project components ....................................................... 72. Key policy and institutional reforms supported by the project ................................ 83. Benefits and target population ....................................................... 94. Institutional and implementation arrangements ...................................................... 10
D. Project Rationale ....................................................... 1
1. Project alternatives considered and reasons for rejection ........................................ 112. Major related projects financed by the Bank and/or
other development agencies ...................................................... 123. Lessons learned and reflected in proposed project design ....................................... 124. Indications of borrower commitment and ownership .............................................. 145. Value added of Bank support in this project ...................................................... 14
E. Summary Project Analyses ..................................................... 15
1. Economic ..................................................... 152. Financial ..................................................... 163. Technical ..................................................... 174. Institutional ......... 19............. 195. Social ...................... 196. Environmental assessment ................... 217. Participatory approach ................... 23
F. Sustainability and Risks ............................................ 24
1. Sustainability ......... 242. Critical risks . 253. Possible controversial aspects ............................ 26
G. Main Loan Conditions . 27
1. Effectiveness conditions .272. Other .27
H. Readiness for Implementation ................................... 28
I. Compliance with Bank Policies ................................... 28
Annexes
Annex 1. Project Design Summary .29Annex IA Key Performance Indicators .31Annex 2. Detailed Project Description .33Annex 3. Estimated Project Costs .45Annex 4. Cost-Benefit Analysis Summary .50Annex 5. Financial Assessment of Project Entities .63Annex 6. Procurement and Disbursement Arrangements .77
Table A. Project Costs by Procurement Arrangements .82Table Al. Consultant Selection Arrangements ................................. 83Table B. Thresholds for Procurement Methods and Prior Review .84Table C. Allocation of Loan Proceeds .85
Annex 7. Project Processing Budget and Schedule .86Annex 8. Documents in Project File .87Annex 9. Environmental Assessment Summary .89Annex 10. Social Assessment Summary Country at a Glance .102Annex I 1. Statement of Loans and Credits .109Annex 12. Country at a Glance .111
Maps Section:
IBRD 30299 Project LocationIBRD 30300 Secondary Sewerage NetworksIBRD 30301 Primary Sewage Collection SystemIBRD 30302 Main Wastewater Conveyance System, Treatment Installations and Submarine
OutfallIBRD 30303 Parallel Water Pipeline Dolores-AlbornozIBRD 30304 Water Supply Works
ColombiaCartagena Water Supply, Sewerage and Environmental Management Project
Project Appraisal Document
Latin America and the Caribbean Regional OfficeColombia, Ecuador and Venezuela Country Managing Unit (LCC4C)
Date: June 28, 1999 Task Team Leader/Task Manager: Menahem LibhaberCountry Manager/Director: Andres Solimano Sector Manager/Director: Danny LeipzigerProject ID: CO-PE- Sector: Water Supply & Program Objective Category: Environmentally Sustainable44140 Sanitation DevelopmentLending Instrument: Sector Investment Loan Program of Targeted Intervention: [X] Yes [ ] No
Project Financing Data [X] Loan [ Credit [] Guarantee [] Other[Specify]
For Loans/Credits/Others:
Amount (US$m): 85.0Proposed terms: [ Multicurrency [X] Single currency, specify US Dollar
Grace period (years): 5 [] Standard [] Fixed [X] LIBOR-basedVariable
Years to maturity: 17Commitment fee: 0.75%
Service charge: N/A%Front-end Fee 1%
Financing plan (US$m):Source Local Foreign Total
Government 20.0 0.0 20.0District of Cartagena (Municiplaity) 7.6 0.0 7.6ACUACAR (the water company of Cartagena) 4.6 0.0 4.6IBRD including Front-end Fee of 1% 28.0 57.0 85.0
Total 60.2 57.0 117.2
Borrower: The District of CartagenaGuarantor: The Government of ColombiaResponsible agency(ies): Aguas de Cartagena (ACUACAR)
Estimated disbursements (Bank FY/US$M): 1999 2000 2001 2002 2003 2004Annual 6.0 17.3 27.5 17.7 13.0 3.5
Cumulative 6.0 23.3 50.8 68.5 81.5 85.0
Project implementation period: 5 years Expected effectiveness date: October 30, 1999 Expected closing date: December31, 2004
OSD PAD Form: July 30, 1997
Page 2
A: Project Development Objective
1. Project development objective and key performance indicators (see Annex 1):
The project development objectives are to: (i) improve the water and sewerage services of Cartagena andthe sanitary conditions of the city's poorest population, by expanding water and sewerage coverage,particularly in the city's poor neighborhoods, (ii) facilitate the environmental cleanup of water bodiessurrounding the city (Cartagena Bay, Caribbean beaches and Cienaga de la Virgen lake) by providingadequate collection, treatment and disposal of the entire flow of the city's wastewater; and (iii) improvethe sustainability of water and sewerage services in Cartagena by leveraging Bank support to shore up theprivate sector participation (PSP) model pioneered by ACUACAR, the city's mixed-capital water andsanitation utility, against the prospect of political interference.
The key performance indicators for the project development objectives are: (a) "environmental indicatorswhich measure sewerage coverage rate and volume of sewage treated; (b) ) "utility-based" indicatorswhich measure the operational and financial efficiency of ACUACAR; and (c) financial indicators of theDistrict of Cartagena. Details on the performance indicators are provided in Annex IA.
B: Strategic Context
1. Sector-related Country Assistance Strategy (CAS) goal supported by the project (see Annex 1):
CAS document number: 17107-CO Date of latest CAS discussion: November 6, 1997
Improve sustainable infrastructure services. The project would address part of the CAS agenda byfocusing on: (i) improving infrastructure services and (ii) ensuring sustainable development. Colombia'spoor and deteriorating infrastructure has long been identified as a critical constraint to faster economicgrowth. The new government's strategy to improve the quantity and quality of water supply, sewerage andsewage treatment infrastructure emphasizes increased private sector participation. At the same time, theproject supports the CAS goal to reduce environmental health risks, while incorporating environmentalconsiderations and sustainable development incentives into the provision of public services. Increasedcollection, treatment and adequate disposal of sewage in Cartagena under the proposed project will reducepollution of the Cartagena Bay, the Cienaga, and the Caribbean beaches, and hence reduce environmentalhealth risks faced by the population, particularly the urban poor.
2. Main sector issues and Government strategy:
Sectoral Context. A maJor restructuring of the water and sanitation sector took place in 1991. The rightof municipalities to provide water and sanitation services was confirmed in the constitution. In 1994 anew law was enacted (Law 142 ) which established a legislative and regulatory framework for the sectorthat emphasizes efficiency of service provision through the introduction of competition in the sector.
The Vice Ministry of Water, Housing and Urban Development in the Ministry of Economic Developmentis responsible for the water sector. The responsibilities for the sector have been assigned to differentinstitutions within the Vice Ministry. The Potable Water and Sanitation Directorate (DAPS) oversees thewater and sanitation sector, formulates sector policies and plans sector development. The WaterRegulatory Commission (CRAS) promotes competition among service providers, controls monopolies,approves tariffs based on standard formulas and on investment plans submitted by the operatingcompanies and sets service quality and technical standards to be followed by utilities. In addition, theSuperintendency of Domestic Public Services (SSPD) is responsible for monitoring and supervising theadequacy and efficiency of the operations, for establishing uniform accounting systems, supervising theadministration of subsidies and monitoring the general administration of public services companies.Apart from these agencies within the Ministry of Economic Development, environmental regulation ishandled by Autonomous Regional Corporations.
Page 3
Colombia, with a population of about 37 million, has made impressive progress in the expansion of waterand sanitation services in urban areas over the past decade. Approximately 88% of the urban populationof 27 million were connected to public water supplies in 1996. About 75% were either connected topublic sewerage or had individual septic tanks in 1996. Rural coverage was lower with about 31% of the10 million rural population connected to public water supplies in 1996. Some 10% of the population inrural areas was connected to sewerage systems in 1996. However, the increase in coverage rates does notreveal the quality of service, which lags behind. Water rationing and intermittent supplies are common inmost water supply systems. Only slightly less than 50 percent of all drinking water is treated, and as aresult the drinking water quality in many systems is sub-standard. Sufficient pressure in the water supplysystem is lacking, adding to the risk of bacteriological contamination. Sewage collection systems do nothave sufficient hydraulic capacity to handle wastewater flows especially in poor neighborhoods, resultingin overflow problems. The share of collected sanitary sewage receiving any treatment whatsoever isbelow 5%, which is low for a middle-income country as Colombia.
Despite significant progress in the water and sanitation sector in the recent years, some major issuesremain unsolved. A more detailed description of the major sectoral issues can be found in a recent waterand sanitation sector policy note prepared by the Bank recently (see Project Files). The main sector issuesare: (i) the need to improve the quality of the water and sewerage services; (ii) the need to improvefinancial and operational efficiency in the provision of the water and sewerage services; (iii) the largeinvestment financing needs; and (iv) slower than expected improvements under the new institutionalframework of Law 142.
Government Strategy
The new Government has pledged to deepen the sector reforms outlined above and to move aggressivelyon WSS service expansion as part of a concerted effort to improve living conditions and to prepare theground for national reconciliation. Improved coverage, service quality and environmental sustainability ofwater supply and sanitation services figure prominently in the Govemment's program "Change forConstruction of Peace 1998-2002" (Cambio para Construir la Paz, 1998-2002) which contains a chapteron the policy for the water and sanitation sector, designed to buttress the material basis for political movesto end the country's long-running civil war. The plan emphasizes environmentally sustainabledevelopment, improved sewerage coverage for unserved urban areas and the need to attract private capitalfor the WSS sector. In addition, the new Government has specifically committed itself to developing PSPin urban service delivery in cooperation with the Bank ("Programa de Modernizaci6n Empresarial",1998-2002).
The objectives of the water and sanitation policy are to: (i) create regulatory and control conditionswhich would permit the public service companies to increase the coverage of water and sewerage servicesand improve the water quality, focusing on benefiting primarily the population of limited resources; (ii)advance, in cooperation with the environmental policy, in deternining the water resources balance andthe vulnerability of water supply sources; and (iii) advance in implementing a plan for wastewatertreatment based on economic, social and environmental viability.
The means which the Government proposes to undertake for achieving its goals are the following: (i)strengthen the mechanisms of regulation and control so as to provide the public service companies with aclear framework of rules, regulations and incentives; (ii) strengthen the technical assistance programs;(iii) provide Govemment financial support to promote the modemization of the sector companies andimprove management efficiency; and (iv) improve the coordination between Government agencies.
Local Sector Issues
Background: The District of Cartagena de Indias has a population of about 750,000 inhabitants, whichhas been growing at 2.5% p.a. in recent years. It is surrounded by water on almost all sides - the
Page 4
Caribbean Sea in the north and west, Cartagena Bay in the south and the Cienaga de la Virgen lagoon (ain-city large coastal lagoon hereafter denominated the Cienaga) in the north-east, as well as traversed byseveral interconnected water courses (cafios y lagos). Thanks to its historical landmarks and spectacularnatural scenery, Cartagena is Colombia's largest tourist area, as manifested by its name: Distrito Turisticoy Cultural (Turistic and Cultural District), with a large annual influx of about 700,00 national and foreignvisitors drawn by its tropical climate, natural beauty and historical sites. A floating population ofthousands of tourists can be encountered in the city all year long, with peak numbers during vacationseasons and holidays. UNESCO declared in 1984 the Old City, Fortresses and Group of Monuments inCartagena as Cultural Heritage Site of Humanity. The city's economy is heavily dependent on thetourism industry which generates an estimated US$315 million in annual revenue. Cartagena has also athriving industrial sector with important petrochemical, beverage and seafood processing industries, mostof which are located in the Mamonal industrial estate, and is an important port city and a gateway forsupplies, goods, lumber, and general merchandise imports to the country The port moves over 10 milliontons of cargo per year. The city and its surroundings represents a complex area particularly from thesocio-economic and ecological perspectives. Cartagena is a destination for rural Colombians displaced byviolence in the countryside looking for better economic opportunities, making it one of Colombia's mostrapidly growing cities. Cartagena has doubled its population in the past 20 years. As a result of highimmigration to the city of poor population from other parts of Colombia, 84% of the fixed population isof low and medium-low income, 31% of which is extremely poor. About 14% of the population is ofmedium and medium-high income and less than 2% is of high income.
The city's water resources contribute significantly to the quality of life of its residents by providingvenues for both leisure (swimming, water sports) and commercial activities (fishing, commerce).Unfortunately, the water bodies surrounding Cartagena are severely befouled by wastewater as they arethe repositories of the untreated municipal and industrial liquid wastes of the city, with a current totalflow of 145,000 m3/day, 30% of which is discharged into the Cartagena Bay, other 60% into the Cienagade La Virgen.and 10% into the in-city water courses. Overflows from the overloaded sewage collectorsin the wealthy neighborhoods of the city contaminate the beaches and further contaminate the in-citywater courses, while industrial wastes from the Mamonal industrial estate area contribute additionalcontamination loads to the Cartagena Bay. The population residing in the poor neighborhoods around thecienaga suffers from the worst sanitation conditions, since as a result of lack of sewerage networks inthese neighborhoods, raw sewage is flowing in its streets. As the city grew rapidly, water and sanitationinfrastructure lagged behind. Whereas the rich parts of Cartagena, including the hotel areas, have highcoverage of water and sewerage, the poorer parts of the city have low coverage of these services. Thepresent situation has generated severe public health, sanitation and environmental problems, which, inaddition to their direct impact on the population in deteriorating quality of life, are posing a seriousrestriction to sustainable economic development of Cartagena, especially in the tourism sector, which isthe main income source in the city.
Up until June 1995, the water and sewerage services in Cartagena have for a long time been under theresponsibility of Empresas Publicas Distritales (EPD), an overstaffed and extremely inefficient publicutility, which suffered from continually increasing financial problems, resulting in poor and everdeteriorating performance leading to a low level of service delivery.
Key local sector issues : The water and sanitation sector in Cartagena faces the following challenges:
* Insufficient water supply coverage: In spite of the continuous major efforts and investments carriedout by ACUACAR and the District of Cartagena to expand the water coverage and improve service,the current water coverage rate of about 80% is still insufficient and needs to be increased. Most ofthe areas lacking water distribution networks are the poor neighborhoods in the southwest part of thecity, located in the vicinity of the Cienaga.
Page 5
* Insufficient sewerage services: The sewerage coverage level in the city is currently about 65%,leaving over a third of the population, especially in the poorest areas around the Cienaga and in partof the southwestern zone adjacent to the Cartagena Bay, without sewerage services. In these areas rawsewage flows in open channels in the streets. Since the Cienaga itself is heavily polluted and opencanals carrying sewage from other parts of the city cross poor neighborhoods on their way to theCienaga, Cartagena's poor population is exposed to about 60% of the city's untreated sewage. Thesewage collection system is particularly deficient in the southeast and southwest sections of the city.The network in other parts of Cartagena is very old and many sewers are hydraulically constrained,particularly during the peak tourist seasons. In view of deficient sanitation services, city authoritiesare forced to restrict construction of new buildings in order to avoid a further deterioration ofservices. Sewage collection and disposal problems represent a major obstacle to Cartagena's overalleconomic development.
* Inadequate wastewater management system: Cartagena has no sewage treatment facilities and liquidwastes from municipal and industrial areas are discharged without treatment to the Cartagena Bay(receiving 30% of the discharge), the Cienaga (receiving 60%), and the in-city water courses thateventually reach the bay and the Cienaga (receiving the balance 10%). Projections for 2025 indicatethat Cartagena will generate about 305,000 m3/d of sewage. The discharge of raw wastewater iscreating serious environmental and health problems and also hampering activities such as swimming,fishing, and shellfish harvesting.
* Industrial wastewater discharges in Mamonal: The industrial zone of Mamonal is located in theoutskirts of the District. It consumes an estimated 20,000 m3/d of potable quality water and 61,800m3/d of raw water for process and cooling requirements. The industrial zone is not connected to anddoes not discharge its wastewater to the municipal sewerage network but rather discharges itswastewater to the Cartagena Bay, part of it only after partial or minimal treatment.
Local Government Strategy
The District of Cartagena was one of the first municipalities in Colombia to introduce private sectorparticipation in the sector. In October 1993, following many years of chronic inefficiency, politicalinterference and poor quality of service, the Mayor of Cartagena decided to liquidate the municipal waterand sewerage utility to create a new public-private mixed capital enterprise. The Bank, through aprevious Bank loan (Loan 2961-CO for the " Colombia Water Supply and Sewerage Sector Project"),provided technical assistance to help the process. In December 1994, after a public bidding process,Aguas de Barcelona (AGBAR, the privately owned water company of Barcelona), was selected as thepartner of the municipality, and the mixed enterprise ACUACAR was created with an initial capital ofUS$ 4 million and took over the responsibility for the provision of the water and sewerage services inJune 1995. Under a contract similar to lease agreements, the District is responsible for future capitalinvestments to expand the existing water and wastewater system, while ACUACAR is responsible forcapital expenditures to improve the existing system and has the right to use existing and future assets atno cost during the contract life. The creation of ACUACAR improved the service quality and operationalefficiency substantially, as discussed later in Block E, section 4.
Since the take over of the responsibility for the water and sewerage services by ACUACAR, the Districtof Cartagena and ACUACAR have made significant investment for expanding the water and seweragecoverage in the city. The current strategy of the District is to continue improving the services and toresolve environmental problems through the implementation of the proposed project, which is aimed ataddressing the outstanding problems of the water and sanitation sector in Cartagena. In terms of watersupply the proposed project would support the completion of the second stage of the water supply masterplan. i.e., provide the installations required to satisfy the needs up to the year 2010. It would increase thewater supply coverage from the current value of about 80% to 89%. In terms of sewage collectiontreatment and disposal the proposed project, jointly with other efforts undertaken in parallel (the IDB
Page 6
project under implementation and investments by the District and ACUACAR from their own sources),would increase sewerage coverage from 75% to 88%. In addition, the proposed project would result inthe cleanup of the water bodies to which the Cartagena's wastewater is currently being discharged(Cartagena Bay, the Cienaga, the beaches and the water courses crossing the city), while dischargingtreated wastewater into the Caribbean sea without negative environmental impacts.
3. Sector Issues to be Addressed by the Project and Strategic Decisions.
The proposed project is aimed at addressing the outstanding problems of the water and sanitation sector inCartagena. With the privatization of the water and sewerage services in Cartagena completed and withgood prospects for continuing success from the institutional standpoint, the Cartagena Water Supply,Sewerage and Environmental Management Project would address three significant sector issues: (i)insufficient water and sewerage coverage; (ii) change in investment pattern that will reflect changes inpriority, putting additional emphasis on the treatment and adequate disposal of wastewater to reducewater pollution; and (iii) support PSP arrangements targeting at improving the financial and operationalefficiency of the water and sanitation services. On a strategic level it is worth noting that some of themajor institutional changes (primarily, creation of ACUACAR as a mixed capital utility) have alreadybeen front-loaded under a previous loan with physical investments deferred to the project currently underpreparation.
The components of this project have been strategically selected to complement investments underimplementation with funding from the District of Cartagena, ACUACAR and IDB in areas that currentlydischarge to the Cartagena Bay, in the hotel area of Bocagrande, and in the southwestern part of the city.The investments financed by these sources do not, however, include the southeastern part of the city,areas draining to the Cienaga, or wastewater treatment and disposal facilities of any kind. The proposedBank project would complete the sewage collection program of the city while providing treatment anddisposal for all wastewater generated city-wide. It is therefore key to capturing the full health andenvironmental benefits from investments made by all sides.
Page 7
C: Project Description Summary
1. Project components (see Annex 2for a detailed description and Annex 3for a detailed costbreakdown).'
Component Category Cost Incl. % of Bank- % ofContingencies Total financing Bank-
(US$M) (US$M) financingA. Expansion of the Water Supply System Physical 9.9 8.4 7.3 74B. Expansion of the Sewerage System in Physical 35.7 30.5 26.2 74
the Cienaga BasinC. Construction of the Main Wastewater Physical 28.1 24.0 20.6 74
Conveyance SystemD. Construction of the Wastewater Physical 6.8 5.8 5.0 74
Treatment InstallationsE. Construction of the Submarine Outfall Physical 22.8 19.5 16.6 74F. Industrial Wastewater Discharge Institutional 0.6 0.5 0.6 100
Control BuildingG. Environmental and Social Component Environmental 3.3 2.8 3.3 100H. Project Management, Technical Project 9.1 7.7 4.5 49
Assistance, Studies, design and ManagementSupervision
Front-end Fee 0.9 0.8 0.9 100
Total 117.2 1 00.0 85.0 73
Component A - Expansion of the water supply system: This component includes the followingsubprojects: (i) expansion and improvement of the water production system; (ii) increase of the watercoverage in the city; (iii) replacement of primary distribution mains; (iv) mitigation of environmentalimpact of water treatment sludge; (v) remote control systems; and (vi) Unaccounted For Water (UFW)reduction plan.
Component B - Expansion of sewerage system in the Cienaga Basin: This component includes thefollowing subprojects: (i) enhancement of conveyance capacity of existing sewage collectors in thesouthwest, southeast, and central parts of the city that currently drain to the Cienaga; (ii) expansion ofsecondary sewerage network in the southwest, southeast, and central parts of the city, as well as theBoquilla area, that currently drain to the Cienaga; (iii) construction of new pressure lines and pumpingstations; and (v) construction of new gravity collectors in residential areas.
Component C - Construction of the main wastewater conveyance system: This component includes thefollowing subprojects: (i) upgarding of the Paraiso pumping station; (ii) construction of the pipeline fromParaiso pumping station to the,treatment plant site; and (iii) construction of the effluent pipeline from thetreatment plant to the submarine outfall at the Caribbean shoreline. The conveyance system would consistof a 72" reinforced concrete cylindrical pressure pipe (RCCP) with a total length of 23.85 km.
Component D - Construction of the Wastewater Treatment Installations: The Preliminary treatmentInstallations will remove floatable materials, grease, oil, sand, and grit. Treatment facilities will includesix rotary screens (1.5 mm clearance) followed by two vortex-type grit chambers. The rotary screenswill remove rags, floatable material, and large solids. The expected volume of screenings generated by therotary screens is about 8.5 m3/d. In addition. The vortex-type grit chambers will remove about 5.1 m3/dof sand and grit.
Page 8
Component E - Construction of Submarine Outfall: This component consists of construction of thesubmarine outfall for the safe discharge of the pre-treated effluent to the Caribbean sea near PuntaCanoas. The main conveyance system will connect the treatment plant with the submarine outfall. Theoutfall would be constructed using a 72" reinforced concrete pipe. Total outfall length would be 2,850 mand the discharge point (diffuser area) will be submerged at a depth of 20 m. The diffuser will have alength of 540 m, with a riser spacing of 20 m, i.e., a total of 27 risers. Each riser will be made of a 12"diameter pipe, 2 m long. The upper end of each riser pipe will be sealed by a welded plate, and it willhave 2 openings close to the plate, each of 8" diameter, i.e., the total number of discharge ports will be 54.In the surf zone between the shoreline and the 3 m-depth contour, outfall pipes will probably be laid usinga trestle built over the water. At greater depths, a barge-mounted crane would probably be used forconstruction.
Component F - Industrial Wastewater Discharge Control: This component would address the issuesrelated to industrial wastes discharged to the municipal sewerage network, and includes the followingactivities: (i) carrying out a survey to identify key sources of industrial pollution in the city of Cartagena;(ii) establishing a system for regulating the discharge of industrial wastes, either to the sewerage systemor to receiving bodies; (iii) establishing a system for auditing the status of industrial wastes discharge; (iv)defining strategies to control small and dispersed sources of industrial pollution discharging to thesewerage networks (gasoline stations and mechanical repair shops); and (v) providing technical assistancein selection and design of pretreatment processes.
Component G - Environmental and Social Component: This part of the project seeks to implementmitigation measures of the environmental and social impacts of the project. The environmentalmanagement program includes: (i) environmental supervision during construction; (ii) restoration andconservation of the Cienaga de la Virgen nature reserve; (iii) carrying out a monitoring program beforeand after construction of the marine outfall to study the fate of pathogenic coliforms and othercontaminants discharged through the outfall; and (iv) environmental instututional strengthening program.The social management program includes: (i) organization and Strengthening of the community; (ii)construction rehabilitation and equipping of community centers; (iii) support to in house basic sanitationin La Boquilla; and (iv) strengthening of the Community Relations Unit of ACUACAR.
Component H - Project Management, Technical Assistance, Studies, design and Supervision: Thiscomponent would support and partially finance the following activities: (i) project management; (ii)design and supervision of the water supply systems works; (iii) design and supervision of the seweragesystems works; (iv) design of the main wastewater conveyance system, treatment installations andsubmarine outfall; (v) supervision of the main conveyance system works; (vi) supervision of the treatmentinstallation and submarine outfall works; and (vi) procurement audits.
Additional details regarding the project and a more detailed project description are provided in Annex 2.
2. Key policy and institutional reforms supported by the project.
This project supports two key institutional reforms. First, the consolidation of the sector reform processin Cartagena's water and sewerage sector and second, the implementation of a national policy to financeenvironmental infrastructure investments, especially wastewater treatment infrastructure.
Consolidating the sector reform . The privatization process in the water and sanitation sector inCartagena was supported by the Bank under a previous project ("Water Supply and Sewerage SectorProject", Loan 2961-CO) and was the first PSP process carried out in the water sector in Colombia. Asdiscussed in Block E Section 4, the creation of a mixed enterprise has brought notable improvements inquality of service provision. Despite the substantial improvements, the reform process is still fragile.Since the District owns 50% of ACUACAR's shares, the company and the contract may be subject topolitical interference by future mayors. The Bank's participation in this project at this critical juncturewill help consolidate the sector reform and establish a much needed credibility of the mixed enterprise
Page 9
model adopted in Cartagena, where the public sector is responsible for financing major infrastructureinvestments. One of the loan conditions is to maintain the private sector participation in the provision ofwater and sewerage services in Cartagena.
A national policy for environmental infrastructure investment financing. This project supports theNational Government's policy to provide capital investment subsidies for a large environmentalinfrastructure, with clear externalities. This project would support Cartagena's efforts to be the first cityin Colombia to achieve broad coverage in wastewater collection and environmentally-safe treatment anddisposal of the wastewater. In many of the developed countries such as the U.S., Japan, and members ofthe EU, there is a clear policy for the central government to provide investment subsidies ranging between50-100% of total cost for wastewater treatment and disposal infrastructure. The ability to cover theinvestment costs for sewerage and wastewater treatment and disposal in cities like Cartagena using onlyinternally generated revenues based on tariffs is very limited. Furthermore, as a significant portion of thepollution in Cartagena is generated by sources from outside the region (i.e., by visiting tourists and by thepopulation living upstream in the Magdalena river, whose contamination arrives to Cartagena through theCanal del Dique), there is a justification for participation of the central Government in the financing ofCartagena's environmental infrastructure. Currently, the Government uses oil production royalties toprovide grants for environmental infrastructure. As part of the financing for this project, the Governmenthas agreed to provide a grant of US$20 million which will serve as part of the project's counterpart funds.
3. Benefits and target population:
The project is expected to bring significant public health benefits in terms of sanitation services especiallyin the city's poor and marginal areas. It will also improve overall standards of living in the city, especiallyin poor neighborhoods around the Cienaga, and reduce urban pollution city-wide. Finally, the project willenhance the socio-economic development of the region which is dependent on tourism and by reducingenvironmental pollution and public health risks will provide great benefits to the tourism industry. Theachievement of project objectives will also alleviate environmental problems, particularly pertaining towater and beach pollution.
In the city's poorest neighborhoods (especially in the San Jose de Los Campanos, El Poz6n, VillaEstrella, La Boquilla, Paseo Bolivar, Zona Suroccidental and Zona Suroriental sub-basins which currentlydischarge their sewage to the Cienaga), approximately 80,000 people will directly benefit from projectinvestments in increasing sewerage and water supply coverage. In Cartagena as a whole, about 750,000inhabitants will benefit from the improvements in the reliability of the water supply service and especiallyfrom the environmental improvements that wastewater collection, treatment and safe disposal systemswill bring to the Caribbean beaches, the Cienaga, the Cartagena Bay and to other water courses whichcross the city. Finally, the 700,000 tourists that visit Cartagena annually will benefit from theenvironmental improvements brought about by the project. While tourism and associated economicgrowth depend on a variety of factors beyond the direct control of this project, the promotion ofCartagena's tourism industry and its impact on the city's economic growth are major indirect benefits thatare expected to accrue to Cartagena' s population as a whole.
In a larger sense, by strengthening ACUACAR and the reform process, the project will also benefit thewater and sanitation sector in Colombia as a whole, since ACUACAR serves as a model for thetransformation of public utilities nationwide. Given that ACUACAR is the first mixed-capital water andsanitation utility created under Law 142, its success has important repercussions on overall sectordevelopment.
Page 10
4. Institutional and implementation arrangements.
Implementation Period: FY00 - FY05 (5 years)
Project administration and coordination: The Borrower is the District of Cartagena. The ProjectImplementation Unit (PIU) will be located in ACUACAR. The PIU will implement the project with thefunds made available by the District. The PIU, which operates under the joint auspices of the District andACUACAR's board of directors, is already in charge of the entire investment program for all projectsfinanced by ACUACAR, the District, and IDB. The PIU has been working efficiently with the Bankunder the previous loan and during project preparation, and is familiar with the Bank's procurementguidelines as well as project preparation and implementation procedures. The PIU enjoys the support ofthe technical department of ACUACAR, which is composed of highly qualified staff. The PIU also hasaccess to technology and support of the AGBAR group. The PIU will be assisted by consulting firms forthe design and supervision of highly specialized works such as wastewater treatment facilities andsubmarine outfall installations. It will also be assisted by a highly qualified panel of experts who wouldserve as a project steering committee. The PIU will be in charge of design and supervision of routineworks, and its staff would have access to substantive training on various aspects of project management,should a need for such training be detected.
Legal Agreements: In addition to the three legal agreements which would be signed by the Bank, i.e., theLoan Agreement between the District and the Bank, the Project Agreement between ACUACAR and theBank, and the Guarantee Agreement between the Government and the Bank, two agreements between theColombian parties need to be signed: (i) a subsidiary agreement between the District and ACUACAR,regarding: (a) transfer of the earmarked funds and Government contribution to counterpart funds from theDistrict to ACUACAR as a counterpart contribution; (b) transfer of the Bank funds from the District toACUACAR to be used for project implementation; (c) contribution of US$ 4.6 million of ACUACAR tothe counterpart fund on a non reimbursable basis, by carrying out or paying for the services required forthe detailed design and supervision of works under parts A and B of the project and for the overallmanagement of the project; and (d) payment of US$ 15.4 million by ACUACAR to the District during theyears 2005-201 1 as a contribution to the debt service of the Bank loan; and (ii) a fiduaciary agreement toestablish a special account under a trust fund agreement (Contrato de fiducia irrevocable) for purposes ofensuring availability of counterpart funds for the project. Such an account will be fed w-ith the earmarkedfunds (20% of National Government transfer and 18% of property tax, complemented by royalty funds -fondo de regalia - and environmental fees - tasa retributiva - in case of shortfall) and the proceeds of theGovernment contribution to the counterpart funds. This Government contribution will be secured throughthe issuing by the Government, prior to effectiveness, of a Certificado de Vigencias Futuras providing forbudgetary contributions of US$ 20 million equivalent for the Project, to be made available to the Districtduring the years 1999-2004 according to an agreed schedule as required by the project.
Flow of funds: Bank funds will be used by ACUACAR through a special account. The District'scontribution to counterpart funds, which will be fed from the earmarked funds (20% of Law 60 transfersand 18% of the municipal property tax, petroleum royalties and environmental fees) according to therequired schedule of the counterpart funds, and the funds of the Government contribution to counterpartfunds, will be deposited, during the five years of project implementation, in a fiduciary account and beused by ACUACAR exclusively to finance project activities, according to needs. The District will alsoestablish another separate account under the fiduciary agreement, in connection with thecounter-guarantee agreement to be signed between the District and the Government of Colombia, forpurposes of depositing therein the funds necessary for the interest charges and debt service of the Loan.This account will be fed from the remainder of the earmarked funds. The trust fund management will alsorepay from this account any previous commitments of the District referred to the earmarked funds. Thisaccount will remain open until the completion of servicing the debt to the Bank. During the years2005-2011, ACUACAR will deposit in the second separate fiduciary account a annual amount of US$ 2.2million (totaling US$ 15.4 million), as a contribution for servicing the debt to the Bank.
Page 1 1
Procurement: Works wholly or partly funded by IBRD will be procured in accordance with the Bank'sGuidelines for Procurement under IBRD Loans and IDA Credits (published in January 1995; revised inSeptember 1997 and January 1999). Consulting services wholly or partly financed by IBRD will beprocured in accordance with the Bank's Guidelines for Selection and Employment of Consultants byWorld Bank Borrowers (published in January 1997, revised in September 1997 and January 1999). ThePIU will use Standard Bidding Documents published by the Bank for preparation of bidding documentsfor works and goods to be procured under International Competitive Bidding (ICB), and for Requests forProposals and consulting services contracts. Detailed project procurement arrangements are given inAnnex 6. A procurement capacity assessment of the PIU has been carried out and it was classified as type"A". A few recommendations to improve filing and will be provided to the implementation agency.
Project Financial Management and Auditing: A project financial management assessment was carriedout by a LAC Financial Management Specialist (FMS). The FMS concluded that ACUACAR has all thenecessary capacity to manage the financial affairs of the project in accordance with Bank standards.ACUACAR's key management positions are occupied by seasoned professionals with a record of tangibleaccomplishments since the new management took over the Company three and a half years ago. Projectmanagement expressed preference to avail themselves to PMR based disbursements, as they already havethe installed capacity to produce quarterly progress reports together with fluent budget formulation androutinely prepared cash projections. Other than minor guidance on PMR format and close monitoring ofthe initial disbursement process, there would be no other specific attention needed from the Bank forACUACAR to be in full compliance with Bank financial management standards. Shortly aftereffectiveness, an independent accounting firm would be engaged to carry out the covenanted yearly audit,in accordance with terms of reference approved by the Bank.
Monitoring and Evaluation: The Bank will devote approximately 40 staff weeks to supervision throughFY 2004. In addition to the implementation of physical works, supervision missions will focus on waterquality monitoring of the water bodies surrounding and bisecting Cartagena as well as on the District'seffort to enforce compliance with industrial effluents discharge standards. Complementary investmentsby the District and ACUACAR will also be monitored. The PIU will provide updates on keyperformance indicators as part of its PMR. A mid term review will be carried out three years after signingthe Loan Agreement.
Retroactive Financing: Retroactive financing of up to 10% of the loan amount was agreed upon. Theretroactive financing will be provided for eligible expenses incurred after a date of twelve months beforethe signing of the Loan Agreement, and conditioned on following Bank procurement guidelines. It isrequired in order to: (i) enable completing the ambitious program before closing date; and (ii) help theGovernment to ease the economic crisis by generating employment in the poor Caribbean coastal zone ofthe country.
D: Project Rationale
1. Project alternatives considered and reasons for rejection.
In assessing the options for continuing Bank support the water and sanitation sector in Cartagena, weconsidered the possibility of terminating the support to the sector, considering the fact that the previousBank project (Water Supply and Sewerage Sector Project, closed on December 31, 1996) was successfulin bringing in a private operator to manage and operate the system. However, as discussed before, thereform process is still at its early stage, and the participation of the Bank at this juncture would reinforcethe credibility of the mixed (public and private) capital enterprise model, when any formn of PSP,especially in the water sector, is still under public scrutiny. Furthermore, ACUACAR's negotiations withIFC for the latter to finance a part of the investment program were not successful, because ofACUACAR's ownership structure, i.e., 50% owned by the public sector.
Page 12
A sector reform project: Past water and sanitation sector projects in Colombia have had mixed successin trying to implement major institutional reforrns in parallel with physical investment measures. In lightof this experience, the project team pushed hard for the creation of ACUACAR, a mixed capitalenterprise, during the latter half of the previous Bank project, by leveraging the prospect of additionalBank financing for Cartagena's WSS sector under the proposed operation. Institutional reforms havetherefore been front-loaded, i.e., the reform was a pre-condition for this project, which supports a majorenvironmental infrastructure investment.
General financing support to ACUACAR's investment program: This alternative was rejected sinceACUACAR can achieve full cost recovery from its investments in rehabilitation and extension watersupply in affluent neighborhoods and hotel areas. The project's financial support, therefore, is targetedto those which full cost recovery is hard to achieve, namely, sewerage networks for low-incomeneighborhoods surrounding the Cienaga, wastewater conveyance, treatment and disposal systems.
2. Major related projects financed by the Bank and/or other development agencies (completed, ongoingand planned):
Sector issue Project Latest Supervision (Form 590)Ratings
(Bank-financed projects only)Implementation Development
Progress (IP) Objective (DO)Bank-financed
Water Supply & Sanitation 2470-CO: Cficuta Water Supply & S (completed in USewerage Project 1995)
Water Supply & Sanitation 2637-CO: Barranquilla Water HU (cancelled HIUSupply Project in 1991)
Water Supply & Sanitation 2512-CO: Fourth Bogota Water S (completed in SSupply Project 1993)
Water Supply & Sanitation 2961-CO: Water Supply and S (completed in SSewerage Sector Project 1996)
Water Supply & Sanitation 3952-CO/3953-CO: Santa Fe I Water S SSupply and Sewerage RehabilitationProject
Water Supply & Sanitation 4345-CO -Urban Infrastructure S SServices Development Project
Urban Environment 3973-CO: Urban Environment S STechnical Assistance Project
Urban Environment Urban Environment Management In preparation In preparationInvestment Project
Other developmentagencies
IDB Cartagena Sewerage Project Under implementation
IP/DO Ratings: HS (Highly Satisfactory), S (Satisfactory), U (Unsatisfactory), HU (HighlyUnsatisfactory)
Page 13
3. Lessons learned and reflected in the project design:
Background. Since 1975, the Bank has made 13 loans totaling approximately US$707 million for watersupply and sewerage development in Colombia. About 60% of these funds were lent to five municipalwater companies, Bogota, Cali, Barranquilla, Cucuta and Plamira, through ten separate operations. By far,the largest borrower has been the Bogota Water and Sewerage Company (EAAB) which alone hasborrowed over US$400 million under five separate operations. In addition to loans for large cities, theBank has also supported sector investment through a multi-city lending operation through theintermediary for municipal development FINDETER, involving sublending for over 300 subprojects inmedium and small size communities. This line of activity continues under a new operation withFINDETER.
The Bank's overall experience in Colombia's water and sanitation sector is mixed, with satisfactoryachievement of physical objectives but inadequate progress towards the institutional and financialperformance goals set at appraisal. The lesson's learned from the past experience are summarized below:
Front-loading institutional change. The most important lesson is that key institutional and financialreforms should be front-loaded. This key finding is reflected in the design of the present project in asmuch as significant institutional reforms have already been sought and achieved during projectpreparation.
Safeguards against political interference. Cartagena and Barranquilla represent two successful cases ofinstitutional improvement through private sector participation in water and sanitation services. Thissuggests that PSP is the most promising strategy for achieving institutional improvement in Colombia'sWSS sector companies. Past and present Bank experience in Colombia point to a consistent pattern ofpolitical interference in the WSS sector. In Barranquilla, a new Mayor, who succeeded the Mayor whoawarded and signed the PSP contract, recently tried to cancel this contract after taking office. Though notsuccessful, his behavior highlights the potential risks of political interference and non-compliance ofcommitments on part of the public sector. Consequently there is an overriding need to protect the PSPmodel pioneered in Cartagena against the prospect of interference from future District authorities. To thisend, one of the project conditions specifically requires District authorities to maintain private sectorparticipation in the provision of the water and sewerage services in Cartagena.
Appropriate design standards. On a technical level, past Bank projects in the sector have often fallenvictim to chronic overestimation of water demand and frequent implementation delays, which, in aninflationary environment, have resulted in cost overruns for most of the projects. The focus on sewerageservices in unserved areas that already have water services, as well as the careful design of wastewatertreatment and disposal facilities, through a strategy of minimum cost that is protective of the environment,will minimize the risk of over-design in the proposed project.
Focus on sewage collection and treatment. The June 1994 Colombia Poverty Assessment Report(Report No. 126730-CO) concluded that lack of access to water and sewerage is mostly a problem for theurban poor. The report makes the following recommendations: (i) current neglect of wastewater treatmentraises serious environmental concerns, and points to the need for concerted action at all levels to deal withthe health and economic welfare of all residents, especially the poor, who live in marginal settlementsalong polluted waterways; (ii) an urgent priority is the need to design and restructure tariff systems thatprovide incentives to improved public awareness of the true cost of water and sewerage services and totargeting social subsidies in such a manner that they reach the poor; and (iii) in areas with near-universalcoverage, focus should be directed to reducing UFW and improving quality in such areas. Theserecommendation have been reflected in the proposed project design in the following form : (i) wastewatercollection in poor areas and treatment/disposal of sewage produced city-wide account for the vastmajority of physical investments; (ii) tariff increases in parallel with ACUACAR's water and sewerage
Page 14
expansion measures will enhance public awareness of the true cost of water and sanitation investments;and (iii) activities to reduce UFW are an integral part of the project.
4. Indications of borrower commitment and ownership:
Borrower commitment is high as evidenced by the privatization reform process initiated by the District ofCartagena, which is considered the most successful experiences in public utilities privatization inColombia. In part, the District moved on PSP because it was convinced that it was the key to continueddonor involvement in Cartagena's WSS sector. At the federal level, improved coverage, service qualityand environmental sustainability of water supply and sanitation services figure prominently in thegovernment's "Water and Sanitation for Peace Plan" ("Plan de Agua y Saneamiento par la Paz",1999-2002) which is designed to buttress the material basis for political moves to end the country'slong-running civil war. The plan emphasizes environmentally sustainable development, improvedsewerage coverage for unserved urban areas and the need to attract private capital for the WSS sector. Inaddition, the new Government has specifically committed itself to promoting PSP in urban servicedelivery in cooperation with the Bank ("Programa de Modernizaci6n Empresarial", 1998-2002).
ACUACAR and the District as its majority owner, have invested significantly in expansion of watersupply and sewerage networks using funds granted by the District, cash internally generated byACUACAR and loans contracted by ACUACAR. This suggests a long-term commitment by both theprivate partner and, more importantly, the District, to making their mixed-capital enterprise a success. TheDistrict has also taken a loan from the IDB (which will be fully repaid by ACUACAR) to extend thesewerage network as part of a comprehensive investment program of which the proposed project is anintegral part. ACUACAR and the District have strongly supported the preparation of this project and thePIU has effectively coordinated the preparation of all technical, environmental, social, financial, andeconomic preparatory studies for this project. ACUACAR has also financed from its own resources asignificant part of studies associated with project preparation.
5. Value added of Bank support in this project.
Consolidating the Sector Reform (Private Sector Participation): The Bank's role in the process ofprivatization of the water and sewerage services in Cartagena and in the creation of ACUACAR has beenpivotal. The Bank has helped attract private sector participation in Car tagena and played a crucial role inensuring the success of the privatization by promoting ideas, providing a framework for consideringdifferent PSP options, extending technical assistance, convincing the political decision makers to supportworthwhile institutional changes, acting as an important catalyst to accelerate process implementation andserving as a mediator in the negotiations. The Bank provided and continues to provide stability to theACUACAR contract, which still operates in a volatile environment, by protecting it from political risks atthe local and national levels. In view of the achievements of ACUACAR it is important that it continuesto thrive and provide good service to its customers. For that it deserves all the support it can get to protectit from political interference. The continuing Bank involvement in the Cartagena water sector through theproposed project would diminish political risks to ACUACAR.
Provision of long term financing for environmental infrastructure: The District of Cartagena iscurrently unable to comply with its obligation to finance the expansion of the water supply and seweragesystems. Non compliance by the public sector of its obligations, financial and others, under PSP contractsis known to be one of the major problems in utility refonn and the cause of failure of many operations.The Bank's involvement would provide much needed long term financing which is not easily available inlocal capital markets, enable the public sector to comply with its investment commitments and facilitatesthe involvement of other domestic and intemational lenders on improved financing terms.
Poverty focus : In addition, the Bank's participation would provide an important poverty focus to theproject and ensures that ACUACAR's efficiency gains benefit the poor. Bank-financed investments in
Page 15
water supply and especially in sewerage infrastructure in the impoverished sub-basins that drain to theCienaga would have a direct impact on improving the quality of life of the poor.
Technical leadership: The borrower has sought Bank assistance because of its worldwide experiencewith environmental protection and coastal zone management and its ability to deliver technical supportfor environmentally safe and cost-effective wastewater treatment and disposal strategies. Thoughinternationally well-established as a disposal option for coastal cities, modem marine outfalls are new toColombia and Bank support has been instrumental in ensuring that engineering consultants considered afull range of wastewater management alternatives, of treatment options and, subsequently, of outfallconstruction sites. A panel of experts hired by the Bank provided guidance in carrying out the feasibilitystudies and in selecting the most appropriate solution. Bank participation in the proposed project wouldensure the continued involvement of top level experts during the detailed design and implementationstages of the works and would provide the required quality assurance, for complicated works as thedesign and construction of a large outfall, for which there is limited experience in Colombia.
Bank involvement is the only way to ensure, within a reasonably short period, the environmental cleanupof the water bodies surrounding Cartagena and application of sound environmental management practicesof liquid wastes, as well as the improvement of the quality of life of the poor, while providing a boost tothe economy.
E: Summary Project Analysis (Detailed assessments are in the project file, see Annex 8)
1. Economic (supported by Annex 4):
[X] Cost-Benefit Analysis: []Cost Effectiveness Analysis:[] Other
Type of Indicator Total ProjectNPV (C$ billion) 14IRR 16%Benefit - Cost Ratio (BCR) 1.17Fiscal Impact (C$ billion) 48
The economic feasibility of the Cartagena Water Supply, Sewerage and Environmental Cleanup projectwas determined by evaluating all infrastructure subprojects, that account for more than 88 percent of thetotal project costs. The project will finance water supply, sewage collection and treatment subprojects.
The results show that most subprojects are economically viable as they will generate positive net benefits.Two water supply subprojects in Falda de la Popa and Zonas de Invasi6n were dropped from the projectdue to their lack of viability. The project in Zona de Norte was dropped because of its high financialprofitability should be easily financed privately by ACUACAR. Two other water supply projects are notmeeting the cut-off rate of 12 percent, and it is possible that with adjustments in the technical design theseprojects would become feasible (El Poz6n and Plan Barrios). In case, adjustments in the design will notresult in feasible projects, these subprojects should also be dropped from the Project.
As for the sewage collection subprojects, two subprojects (El Poz6n and Paseo Bolivar) just do not meetthe cut-off rate of 12 percent. However, as these projects are situated in very poor neighborhoods and thewillingness to pay for sewerage services only partially captures the environmental and public healthbenefits related to this service, there could be a social rationale to include these subprojects in the Project.However, it is recommended that these subprojects will be redesigned to ensure their viability.
The differences between financial and economic costs have been summarized in conversion factors. Theeconomic benefits for the sewage collection and treatment projects are estimated to be equal to the
Page 16
willingness to pay for these services. For the water supply projects, detailed willingness to pay data wasnot available, and hence economic benefits are estimated to be reflected by the current water rates, whichare adjusted for the impact of shadow pricing.
The fiscal impact of the Project is negative at C$48 billion due to the large capital subsidies for thesewage collection and treatment infrastructure. Although the overall fiscal impact is negative, the CentralGovernment is actually benefiting from the project, and most of the costs of this project are hence beingborne by the District of Cartagena. The distributive analysis shows that especially the consumers willgain from the implementation of the project. Also ACUACAR will substantially benefit from thisproject, especially the water supply sub-component will generate substantial incremental revenues.
The risk analysis shows that there is a direct relationship between the viability of subprojects and the riskprofile of the subprojects. The less viable a project, the higher the risk profile. Hence, it is recommendedthat the subprojects that currently have an internal rate of return of 12 percent or lower will be redesignedso as to decrease the risk associated with the implementation of these subprojects.
2. Financial (see Annex 5):
The proposed US$117.2 million project will be financed jointly by the Bank, District of Cartegena,ACUACAR, and the National Government. The repayment of the Bank loan of US$85 million, will bethe responsibility of the District of Cartagena, with a partial contribution from ACUACAR of US$15.4million between years 2005 and 2011. The National Government, the District, and ACUACAR willprovide the counterpart funds of US$20 million, US$7.6 million, and US$4.6 million, respectively. Wecarried out the financial assessment (past and current performance assessment, financial projections, riskand sensitivity analyses) of the District of Cartagena and ACUACAR, in particular, of their capacity toprovide counterpart funds and debt service. The analyses showed that the proposed financing scheme isrobust with nearly 80% probability that there will be no financial shortfall. The details of the analysis arepresented in Annex 5.
Until 1996, the District of Cartagena suffered low tax collection rates (less than 30%) and high personnelcosts, which left them with nearly US$50 million of accumulated deficits at the end of 1996. Thefinancial situation of the District of Cartagena, however, improved considerably since 1997. A series ofactions contributed to the improvements: (i) the self declaration system (autoaval-uo) for tne property tax;(ii) a more severe penalty system for non-payment; (iii) the withholding system for industry and businesstaxes; and (iv) sale of its telephone company, among others. Thanks to these improvements, the Districtof Cartagena collected about 44% of property tax base and reported a small current surplus in 1998.Based on the past trend and the expected performance improvements, we prepared financial projectionsfor the District. Under the base case scernario, the District wiii be able to provide counterpart funding in atimely manner and pay the debt service fully, given US$20 million contribution from the NationalGovernment.
The sensitivity and risk analyses showed that the project's financial success - i.e. timely provision ofcounterpart funding and debt service coverage -- is largely dependent on the district's capacity to improvetax collection rates and the stability of the exchange rate. To minimize the risks, the district's taxcollection performance will be closely monitored through the project's monitoring system. The taxcollection rates is one of the financial covenants which is included in the Loan Agreement. In addition,we obtained the District's commitment to use all earmarked funds (20% of National Government transferand 18% of property tax) to finance this project during the project implementation period, complementedby royalty funds (fondo de regalia) and environmental fees (tasa retributiva), in case of shortfall.
The operational and financial performance of the water company improved since 1995 when the mixedenterprise ACUACAR was established. Thanks to a major cost reduction brought about by the privatemanagement, the company reported a positive net income for years 1996, 1997, and 1998. Although thecompany reported net profit, the cash flow situation of the company worsened in 1998, mainly because
Page 17
the company took on local loans for investments. The company, however has been adopting anaggressive commercial policy, including metering, disconnection, and identification of illegal connection,which is expected to produce results in the coming years.
Under the base case scenario, ACUACAR's financial situation will improve only gradually. Because thecompany carried out a high level of capital investments, and took on local commercial bank loans tofinance these investments in 1997, the debt service will remain high until 2004. It will take until 2001 forthe company to generate sufficient internal cash to cover its debt service requirements. Nonetheless, bythe time ACUACAR becomes responsible for operating and maintaining the system and for repaying apart of the Bank loan (both in 2005), the company's financial situation is expected to improve.
3. Technical:
The feasibility study for treatment and disposal of the wastewater of Cartagena identified and analyzed acomprehensive set of alternatives related to the final location for the sewerage collection system, the levelof wastewater treatment, the alignment and exact location for an ocean outfall, sites of major pumpingstations, sewerage pipe material and size, and underwater depth of the outfall diffuser pipe. The mainoptions for the final disposal of the domestic sewage of Cartagena analyzed in the feasibility study were(i) the Cartagena Bay; (ii) the Cienaga de La Virgen; (iii) the Caribbean Sea; and (iv) reuse and irrigation.Local and regional environmental authorities have established the clean up of the Bay and the Cienaga asa top regional priority. Continuing the discharge of sewage to the Bay was found unsustainable becauseof its limited assimilating capacity. Discharge of treated effluent to the Cienaga resulted highlyexpensive, since treatment before such discharge should include nutrient removal. Wastewater reuse forirrigation is not feasible at the present time in the Cartagena region given the lack of suitable areas toreceive the entire wastewater volumes both during the dry and rainy seasons. At any rate, any wastewaterreuse scheme should be coupled with installations of alternative discharge of the wastewater during theseasons that irrigation is not required and in emergency situations. A submarine outfall may very wellserve as such alternative discharge option. The project does not exclude future partial reuse initiatives forthe Cartagena wastewater and the conveyance and submarine outfall systems could well support any suchinitiatives in the future.
Alternatives for the final disposal options and treatment levels of wastewater included a combination ofthe following:
Disposal Options
* Continuing wastewater discharges into the Cartagena Bay and the Tesca Lagoon in the same currentproportion (40% to the Bay, 60% to the Cienaga);
* Elimination of the Bay discharge and disposal of all wastewater into the Cienaga;* Elimination of both Bay and Cienaga discharges and disposal of all wastewater into the Caribbean
Sea; and* Reuse for irrigation.
Treatment Options
* Preliminary treatment: microstrainers and settling tanks for the removal of solids* Primary treatment: settling tanks, and anaerobic digestion and drying of sludge;* Conventional secondary treatment: activated sludge plants, anaerobic digestion and drying of sludge* Advanced treatment: biological and chemical removal of nutrients.
Over fifteen alternatives combining different treatment levels and final disposal sites were considered. Inaddition, four different outfall alignment and discharge sites into the Caribbean Sea were identified. Allalternatives were evaluated from technical, economic, environmental and social perspectives. Water
Page 1 8
quality, initial investment costs, operation and maintenance costs, and land uptake were the maincomparison criteria. However, other environmental and social criteria were used as well. Thecomparison alternatives indicated that disposal of all the wastewater to the Caribbean sea is the mostfeasible option. Having identified the receiving water body of the Cartagena wastewater, intensiveoceanographic studies including current measuring efforts were carried out for over a year across theocean front area of Cartagena. These measurements constituted the main input to hydrodynamic andwater quality mathematical models. Fatal flaw analysis (considering simultaneous adverse conditions forwind, current velocity and direction, coliform concentrations, and low bacterial decay rates) for all outfallalternative sites at the end of the design period proved that some outfall sites would not meet adoptedstandards. However, outfall location would be feasible at three of the proposed sites. Additional multi-objective analysis was necessary to select the final alignment of the outfall. The selected discharge site atPunta Canoa, located some 20 km north of Cartagena, will guarantee a minimum 1:100 dilution ratio inthe mix zone with a current velocity of 0.20 m/s (a very conservative estimate). However, prevalentaverage velocities (measured for over a year at the outfall site) will reach dilution levels higher than 1:300at the outfall exit. The outfall site of the selected alternative is located furthest to the north of the city inrelation to all the alternative sites considered. Although located at the greatest distance from the city, itresulted in minimum cost because the sea next to the city has a very mild bottom slope, which means thata very long outfall (of about 9 km) is required in this area to reach deep enough water. In Punta Canoathe sea bottom is steeper, so the length of an outfall that reaches comparably deep water at that site is only2.85 km, and the combined cost of on shore and off shore pipes resulted lowest for the Punta Canoa site.The main conveyance, treatment and wastewater disposal installations would consist of:
e expansion and improvement of the existing Paraiso pumping statione land conveyance system, a 23.85 km long pipe of 72" diameter- preliminary treatment works consisting of micro-strainers and two vortex-type settling tankse submarine outfall, 2850 m long, 72" diameter, discharging at a seawater depth of 20 m, with a
total capacity of 4 m3/s at the year 2025* a 0.5 km long diffuser with 27 vertical riser pipes and 2 ports each for a total of 54 ports
After a five-year project construction period (1999-2004), the operation of the outfall will beimplemented in 2 phases: Phase 1 (2005-2015) and Phase 11 (2015-2025). The first phase, which isconstructed under the project, would include the pumping station, land conveyance system, preliminarytreatment and submarine outfall. For the second phase, which would be constructed towards the year2015, an aerated flow-equalization basin at the Paraiso pumping station site, would be added, as well asan additional transfer pumping station to convey wastewater to equalization basin.
Although the technical solution selected offers significant advantages over competing alternatives, it willrequire careful monitoring. Computer models using very conservative assumptions about the propagationof the effluent plume emanating from the outfall's diffuser have confirmed the environmental viability ofthis disposal option. Nonetheless, a monitoring program will be set up under the environmentalcomponent of the project to ensure that pathogenic coliforms discharged through the outfall do not reachbathing beaches. Should outfall performance fall short of expectations, additional sewage treatmentsystems can be retrofitted at the treatment plant site prior to discharge. This approach constitutes acost-effective strategy that minimizes investments to achieve the environmental and health objectives ofthe project, and ensures that unnecessary over-investments are not undertaken.
The component of expansion of sewerage system in the Cienaga Basin is aimed at providing sanitationservices to the poorest neighborhoods of Cartgena who currently lack these services and live in precariousconditions, with raw sewage flowing in open channels in the streets. It is of the type of investments thatthe Bank should be supporting. This component also includes the investments for interconnection anddiversion of the Bay basin wastewater to the main conveyance system which will carry it to the treatmentinstallations and to the outfall. These investments are a prerequisite for investing in the sewage treatmentand disposal systems.
Page 19
In summary, the combined effect of the sewage collection, conveyance, treatment and disposal, whichwould be carried out under the project, would be the recuperation of the water quality in the main waterbodies surrounding Cartagena, i.e., the Cartagena beaches, the Bay and the Cienaga, coupled with acontrolled and safe discharge of effluent to the Caribbean sea through a submarine outfall located about20 km north to the city, which would discharge the effluent into the sea at a distance of 2.85 km from theshore.
The water supply systems component of the project is aimed at increasing the reliability of supply andreducing vulnerability through: (i) expansion and improvement of the water production and treatmentsystems; (ii) increase of storage capacity and pressures in the system; (iii) replacement of dilapidatedprimary distribution mains, and reconstruction of pressure mains on top of which houses have been builtand present risks to the population; (iv) reduction of UFW; and (v) installation of a remote controlsystem. It also aims at increasing the water coverage service, exclusively in the poorest neighborhoods ofthe city.
4. Institutional:
In a conventional water and sewerage projects which is implemented by public utilities, the mainchallenge is to ensure the sustainability of investments, in view of institutional weaknesses. In the caseof the proposed project, institutional problems have been dealt with up-front through the creation ofACUACAR, a public-private mixed enterprise with private management. ACUACAR is a well-managedwater and sewerage service company, the operational performance of which compares well with the bestinternational standards. Corporate operation has developed along ultra-modem partnering lines. TheACUACAR model brings together a private operator and a public authority in a service company undertransparent corporate governance rules, providing an opportunity for disciplined activity andaccountability before customers and shareholders. The two major stock holders of the company, theDistrict of Cartagena and Aguas de Barcelona, work well under partnership conditions.
During its first three and a half years of operation, ACUACAR has achieved significant improvements inoperational performance. Achievements include putting the business on a sound commercial footing,increasing efficiency and staff commitment, creating a credit-worthy public/private company, providingcustomer satisfaction and dialogue, and increasingly reliable information. Management and staff arewell-qualified and trained and demonstrate a high degree of competence, motivation and commitment.More specifically, improvements made by ACUACAR include: (i) increasing water supply, inproduction, treatment and coverage; (ii) increasing sewerage coverage; (iii) improving water quality; (iv)introducing modem commercial and recognizable management information systems; (v) installing watermeters on practically all its customers connections; (vi) improving continuity of service; (vii)rationalizing labor force; (viii) putting in place a staff training program and creating an enabling andencouraging working environment; (ix) investing heavily in Technology/Information Systems; (x)introducing an environment of maintenance of assets; (xi) introducing automated control of processes andoperation; (xii) improving efficiency and financial performance; (xiii) undertaking significant investmentsfor expansion of services by borrowing from local banks and multilateral donors, although suchinvestments are not mandatory under the ACUACAR contract, (xiv) improving relations with customers;and (xv) creating relations of trust with suppliers.
These efforts resulted in: (i) ISO 9002 accreditation for its quality of operations and laboratory (the firstwater utility in Latin America which obtained such accreditation); and (ii) high customer satisfactiondemonstrated in customer surveys.
5. Social.
Social assessment: A social assessment was carried out during project preparation. Its main objectiveswere to: (i) assess the social impact of the project; (ii) assess social and economic conditions of the targetpopulation and establish a base-line for social monitoring and evaluation; (iii) consult beneficiaries about
Page 20
their priority needs and views about the project; (iv) identify community-based organizations willing tosupport project implementation; (v) identify social obstacles and risks; and (vi) prepare a mitigationprogram, as required.
Socioeconomic conditions The socioeconomic analysis revealed that the majority of the population livesunder lowest levels of poverty conditions (strata 1 and 2 according to Colombian classification); whichcorrespond to a monthly per capita income of between US$ 20-60 for stratum 1 and US$ 100-270 forstratum 2.
Social impact: The social assessment proved that the project will benefit the poorest communities inCartagena which currently lack sanitary services. No resettlement or other negative impact would resultfrom the project. The results of the consultation process indicated that the majority of the householdsagreed that the project will improve their living standards. However, they expressed concern that once theimprovements are completed, property prices might increase and they might be forced to leave theirneighborhoods, that might force them to abandon their neighborhoods. This has been the general trend inCartagena, spurred by tourism investments and wealthy urban residential growth, affecting particularlythe communities in the north corridor. These communities, though in favor of the project, claimed not toreceive any concrete benefit from it, but rather the negative impact during the outfall construction period.To relieve their concerns, a condition that the District of Cartagena would ensure that, within four yearsfrom loan signing, piped water supply service will be provided to the north zone communities, has beenincorporated in the loan agreement.
One positive outcome from consultation was that all communities surrounding the Cienaga expressedconcern about its contamination and agreed to collaborate in its rehabilitation. In the Willingness to Paysurvey which was carried out under the economic analysis of the project it was found that the Cienaga ismuch more important to the population than the beaches and the Cartagena bay. The reason for that isthat the majority of the population resides in the vicinity of the Cienaga, far away from the beaches andthe bay.
Impact mitigation and community development program: The Mitigation and Community DevelopmentProgram aims at addressing the social impact of the project by strengthening community organizations toface the changes and consolidate their neighborhoods, contributing to the project through participation.To this effect the project would include: (i) support for urban rehabilitation, improvement of sanitaryconditions and clean up activities; (ii) strengthening and development of community organizations topromote participation and social control (veedurias); and (iii) promotion of community development toconsolidate communities, avoid or reduce conflicts and recover cultural heritage, mainly by rehabilitatingthe Cienaga.
Urban Rehabilitation: From the social point of view the main mitigation measure is to ensure thatcommunities will not be displaced, once the benefits of the project are accomplished, under the pressuresof urban growth and speculation. This situation is spurred by the insecurity of land tenure, theuncontrolled squatting process around Cienaga and the deficiency of public services. To address thissituation the project will support the efforts of the District's urban rehabilitation program through thefollowing actions: (i) promoting community participation in the urban rehabilitation program; (ii)supporting a pilot program to introduce sanitary facilities in selected households; (iii) supporting theestablishment and consolidation of community centers to be the focal point of community activities andurban rehabilitation programs.
Strengthening Community Organizations: This activity is intended to promote local leadership andprovide community organizations with the capacity for self-development. It comprises three main areas oftraining and specific actions: (i) strengthening capacity of community organizations; (ii) establishing ofsocial control mechanisms to monitor the project's social and environmental impact (veedurias); and (iii)promoting better sanitary conditions as well as a culture of payment for services and social responsibility.
Page 21
Community Development: This activity aims at supporting the cleanup efforts of the project by: (i)promoting community participation in cleaning up neighborhoods; (ii) protect and/or develop communalareas; (iii) promote cultural and local sports groups to improve relationships and avoid conflicts; (iv)promote community groups to carry out activities such as recycling solid waste, protecting anddeveloping tourism and other activities related to community development.
Support North Zoner Black Communities: A condition has been incorporated in the Loan Agreementwhich will result in the undertaking of special program by the District to provide water and sanitaryservices to the black communities in the North Corridor comprising: Punta Canoas, Manzanillo del Marand Arroyo de Piedra. This area, including La Boquilla, will also benefit from a pilot program tointroduce sanitary services in the poorest households. Moreover, two community centers, one in LaBoquilla and other one in Punta Canoa will be built to support the District's urban rehabilitation programto consolidate these communities.
Supportfrom the District of Cartagena: The District of Cartagena will support this mitigation programby: (i) including in its Urban Development Plan a strategy to protect and consolidate the urban integrity ofthe communities around the Cienaga and the North Zone; and (ii) providing these two areas with priorityattention through the Citizens Participation and People Development Program.
Actions by ACUACAR: ACUACAR will implement an Information and Social Communication Programto: (i) inform communities about construction schedules; (ii) provide means to reduce nuisance duringconstruction; and (iii) respond promptly to community complaints. Under the environmental mitigationplan the community will be informed and trained about environmental issues. Additionally, a publicrelations campaign will be implemented to improve the relations of ACUACR with its customers.
Environmental Concerns: The environmental concerns raised by the communities will be addressed bythe establishment of a team of environmental specialists that will monitor compliance with theenvironmental plan. Additionally, upon request by the community, an independent consultant from OMSwould provide external support and advise.
A more complete summary of the Social Assessment is presented in Annex 10.
6. Environmental assessment: Environmental Category [X] A [ ] B [ ] C
The proposed project is expected to have significant beneficial environmental and health impacts as it willextend and improve the sewage collection network and will provide a safe wastewater treatment anddisposal method that is protective of the environment. Nonetheless, the construction of sewage collectionnetworks and treatment and other ancillary facilities, as well as disposal of treated wastewater through asubmarine outfall has the potential to cause, if not properly mitigated, negative environmental impacts.For this reason, the project has been classified as EA Category A. A full EA was commissioned underterms of reference agreed with the Bank. Formal Bank review of the final reports was carried out beforeappraisal and they were found to conform fully to Bank policy guidelines regarding environmental andsocial issues.
The environmental assessment process was based on a two-phase approach: (i) a feasibility studyanalyzed collection, treatment, and disposal options of the wastewater of Cartagena and those werecompared on their technical, economic and environmental merits; (ii) once a project scheme was selected,a more detailed environmental assessment designed a comprehensive environmental management plan(EMP). A Bank-appointed panel of five international experts, with broad experience in wastewatermanagement, design and construction of ocean outfalls, water quality and oceanographic modeling,environmental impact assessment and private sector participation provided advice, reviewed technicalreports, and participated in public consultation meetings and in a two-day workshop at Bank headquartersin Washington. Perhaps the most important methodological characteristic of the EA was the introduction
Page 22
(for the first time in Colombia) of cumulative impact analysis. Impacts on wetland and marineecosystems, water quality, fisheries, communities and cultural heritage were evaluated and adequatemitigation and compensation measures were identified. The selected outfall site ensures minimumenvironmental risks. All the above mentioned reports have been made available in the Public InformationCenter of the World Bank in Washington. A summary of the environmental assessment report is includedin Annex 9.
Status of Category A Assessment: EA start-up date: August 1998Date of first EA draft: December 1998Current status: Completed and reviewed by the Bank
Proposed actions: The EA report recommends the implementation of an Environmental Management Plan(EMP). The EMP proposes a number of measures to mitigate environmental impacts during theconstruction and implementation phases and establishes an organizational structure, set of procedures anda budget to implement activities under the EMP. The EMP has also identified a set of priorityenvironmental activities that will enhance environmental conditions in Cartagena and will assureachievement of the project's environmental objectives. The EMP is divided in two parts: (i) managementof construction activities; and (ii) environmental enhancement. The goal of these activities is to: (i)improve urban environmental quality; (ii) improve natural resources management, particularly in highlysensitive areas such as the wetlands of the Cienaga; (iii) develop environmental education and publicawareness programs for wastewater management and conservation of urban natural ecosystems. A firmwill be hired to implement the activities detailed in the EMP related to the construction phase. This phasewill also include the implementation of an environmental baseline program to monitor oceanographic,biological and ecological indicators. After construction, this program will be converted to a long-termmonitoring program.
The environmental and social component of the project would also include activities designed to improvethe overall environmental quality of the city and the area to the city's North and ensure attainment ofoverall environmental objectives. The most important activities to be implemented include: (i)restoration, conservation and management of the Cienaga de la Virgen wetland ecosystems, to ensure itslong-term sustainability. The project will finance legai and technical feasibility studies to create a legallyprotected area, management plans, environmental education programs in surrounding communities, andawareness programs regarding solid waste disposal in water bodies, mangrove deforestation, andover-fishing.; (ii) activities aimed at assisting in establishing the regulatory framework and providingtechnical assistance related to pretreatment of industrial and non-domestic wastes for the purpose ofcontrolling existing and future toxic discharges into the sewage system and thereby in the outfalldischarge. The project would finance an industrial pollution survey in the sewerage network,establishment of a database on industrial pollution to be updated by both ACUACAR and CARDIQUE,the preparation of regulations for industrial and non-domestic sewerage connections, and the definitionand dissemination of pollution control and clean technologies for most significant sectors; and (iii)implementation of an institutional strengthening program, to ensure institutional capacity to implementthe EMP. The project would finance training workshops, study tours and specialization courses forDAMARENA and CARDIQUE in topics such as wetland management, pollution control, water qualitymonitoring and environmental audits.
Final engineering designs would include the preparation of detailed measures to deal with contingencyplans (power black outs), additional site-specific environmental guidelines for construction, specialconstruction practices for river and drainage crossing and ocean approach, demarcation of mix zone,undersea construction process and right of way restoration and management. These measures will beincluded in the bidding documents used in the project.
Local groups and NGOs consulted: J.A.C, JAL Comuna 3, JAL Comuna 5, JAL Comuna 6, JAL
Page 23
Comuna 7, Madre Comunitaria, Asociaci6n Civica, Junta de Desarrollo Comunal, Comitd Empresarial,Sayco, Comite Civico, Comite Cultural Zona Sur-Oriental, A.S.E, Cocidepa.
Resettlement: No involuntary resettlement is expected to take place as a result of the construction of anycomponent of the facilities to be financed by the project, as indicated by the feasibility analysis and theenvironmental analysis of alternatives. The EA has provided additional field evidence that no involuntaryresettlement will take place.
Other project components include the construction of water and sewerage networks, expansion of waterstorage and treatment systems, pumping stations, and water intakes. All sites were screened for potentialsensitive impacts such as affecting wetlands and other ecosystems, resettlement and nuisances forcommunities. No sensitive issues were identified. An Environmental Data Sheet for each proposedinfrastructure site was prepared and was submitted to the Bank. Finally, an environmental manual withspecifications for the construction of water and sewerage networks and other water and sanitationinfrastructure will be prepared and included in bidding documents.
Borrower permission to release EA: [X] Yes [] No [ I N/A
7. Participatory approach [key stakeholders, how involved, and what they have influenced, ifparticipatory approach not used, describe why not applicable]:
a. Primary beneficiaries and other affected groups:
The poor population living in the Southeast and North zones of the city would benefit from water andsewerage networks. The entire population of Cartagena would benefit from the sewage treatment anddisposal installations.
b. Other key stakeholders:
The tourism industry, hotelsTouristsFishermnen in the Cartagena Bay and in the CienagaCommunity organizations and local authorities
The project has been prepared under a participatory approach that began on February 1998 with a firstStakeholders Workshops and concluded in February 1999 with a Second Stakeholders Workshop, whilein between, the social assessment and the environmental impact assessment also included a consultationprocess with the main stakeholders. As required under Colombia's environmental law, public hearingswere held in each community which would be affected by the construction works associated with thewastewater conveyance, treatment and disposal system. The initial series of consultations were held inFebruary 1998 concurrent with the presentation of the first draft of the project feasibility study. At thisworkshop, the terms of reference for the Environmental Impact Study were discussed and agreed uponwith the workshop participants, which included: representatives of the Ministry of Environment,ACUACAR, CARDIQUE, DAMARENA (the Municipal Environmental Department), national and localenvironmental NGOs, municipal government agencies, community organizations, professionalassociations, community representatives and private sector representatives.
During preparation of the EA, public consultation meetings were held in those communities that would bemost affected by the project: Arroyo de Piedra, Manzanillo del Mar, La Boquilla, Sur Oriental Zone andPunta Canoas. Coinmunity concems were registered and taken into account in the preparation of theEnvironmental Management Plan. A final public consultation workshop (with the same variety ofparticipants as the first one) to review and discuss the final draft of the feasibility study and the EA reportwas held in February 1999. The EA report has been made publicly available in Cartagena. The EAreport includes an annex that summarizes the consultation process including participants, a record ofconcerns, and agreements reached during the meetings.
Page 24
This participatory approach will continue during implementation through the Social Impact Mitigationand Community Development Program as described in Section 5 of Block E.
F: Sustainability and Risks
1. Sustainability:
The up-front resolution of the Cartagena water sector institutional issues by the creation of ACUACARensures high quality in the provision of services and sustainability of the investments, and provides asound basis for Bank participation in the proposed project, which would be based on a strong and capablewater and sewerage utility. The continued Bank involvement in Cartagena's WSS sector will furtherenhance ACUACAR's operational independence and will ensure that the utility's installations willcontinue to be operated with private sector efficiency.
The sustainability of the project is also linked to ACUACAR's financial viability. The worksimplemented under the project would generate additional income and strengthen the financial position ofACUACAR, thereby contributing to project sustainability.
The selection of the project components is based on least-cost analysis to ensure that the environmentalinvestments will generate the largest impact against the least costs. Consultations with differentstakeholders will reduce the risk of objection to the selected option to reduce water pollution in the city.
The financial risk of the project that the District will not be able to provide counterpart funding and paydebt service in a timely manner will be mitigated by: (i) the National Government's commitment toprovide US$20 million counterpart funding on a Grant basis; (ii) the District's commitment to use allearmarked funds (18% of property tax income and 20% of National Government transfers - Ley 60) net ofexisting commitments as well as one million dollar of proceeds from the sale of TermoCartagena forproject counterpart funds and debt payments; (iii) use of petroleum royalty income (about US$9 millionper year) in case of financial shortfall; and (iv) the establishment of a trust fund, where theaforementioned financial resources will be deposited and monitored.
Page 25
2. Critical Risks (reflecting assumptions in the fourth column ofAnnex 1):
Risk Risk Rating Risk Minimization Measure
Annex 1, cell "from Objective to Purpose" _ _Contamination of water bodies by other sources S The project includes a component foris not eliminated industrial wastewater discharge control,
aimed at assisting the establishment of aregulatory framework and provide technicalassistance to pre-treatment of industrialwastes.
Sewerage works financed through other sources N Most of the sewage investments, financed(IDB, District, and ACUACAR) are not through other sources, are already underimplemented implementation.Annex 1, cell "from Outputs to Objective"Consumers are not willing to pay for water S Improved water supply and seweragesupply and sewage services services would result in higher customer
satisfaction and consequently, consumerswould be willing to pay for the services
Future mayors are not supportive of the M The project's success in the initial yearsinstitutional model and political objections arise should be ensured so that it would be hard for
future mayors to withdraw their support to theinstitutional model
Annex 1, cell "from Components to Outputs"Counterpart funding will not be available on M A great part of the counterpart funds istime provided by the Government and the risk
associated with its provision is lower. Incase of shortfall of the District earmnarkedfund, it was agreed that they will becomplemented by petroleum royalty funds,which are a secure source, independent ofinternal generation by the District
Cost overruns during implementation, because S Macroeconomic stability will need to beof higher than projected currency devaluation maintained by the Government. In case ofand interest rates, will be incurred. cost overruns, the District, ACUACAR or the
Government would need to provide theadditional required funds
The District does not have sufficient capacity to M The mayor of Cartagena is the Chairman ofcontrol the ACUACAR contract and follow up the Board of ACUACAR and an additionalon project implementation activities Board member is a representative f the
District. This facilitates follow up andcontrol. In case of problems, the mayor maynominate a full-time controller, as permittedunder the ACUACAR contract.
Overall Risk Rating MRisk Rating - H (High Risk), S (Substantial Risk), M (Modest Risk), N (Negligible or Low Risk)
Page 26
3. Possible Controversial Aspects:
The two main potential controversial aspects of this project are those related to the use of a submarineoutfall as part of a wastewater treatment and disposal system, and the planned increase in tariffs.
Submarine Outfall: The use of a submarine outfall as part of a wastewater treatment and disposal systemmay cause some controversy due to a lack of understanding of the technology. As part of the project, anextensive environmental monitoring program will compare environmental conditions in the coastal areasof the project before and after construction of the outfall and its preliminary treatment system, and willdetermine whether pathogenic coliforms discharged through the outfall diffuser reach bathing beaches.The use of outfalls for wastewater management in developed countries require -- in some cases by law --secondary treatment of sewage prior to final disposal in the ocean, regardless of coastal conditions and theassimilation capacity of the ocean environment. Given the oceanographic and bathymetric conditions inthe project area, the use of secondary treatment prior to outfall disposal would not achieve a significantlyhigher level of environmental protection. Furthermore, the levels of toxic substances and heavy metals inthe area connected to the sewerage network are small as the larger part of Cartagena's industry is locatedin the area of Mamonal, outside the city limits and not connected to the sewage network. Finally, onecomponent of the project is specifically designed to support the District's efforts to ensure adequatepre-treatment of industrial wastewater in the city.
The use of secondary wastewater treatment above and beyond the preliminary treatment proposed underthis project would make the technical solution financially non-viable. Only if the monitoring programindicates that a significant portion of the pathogenic coliforms discharged through the outfall diffuserreach bathing beaches, or if some other environmental problem emerges as a result of effluent discharge,additional treatment options would be considered and subsequently implemented. Appropriate provisionsto reserve land for future additions to the proposed treatment facilities have already been taken.
Tariff increase: Since the privatization of water and sewerage services in Cartagena, ACUACAR has beenauthorized by the CRA to increase tariffs on a yearly basis during the period 1997-2001. Projectedpercentages of increase are presented in the table below using as a basis the average 1996 tariffs of aboutUS$0.46/m3 for water and US$0.24/m3 for sewerage. With these increases, 2001 tariffs would reachUS$0.59/m3 for water and US$0.36/m3 for sewerage. Tariff increases between 1997 and 2001 supportACUACAR's own investments in water supply infrastructure and the repayment of the IDB loan.
The authorized annual tariff increase is a controversial issue, and ACUACAR considers that it willbecome more and more difficult to generate the corresponding revenues. No tariff increases are plannedas part of the proposed project, and ACUACAR will provide its share in the repaymrent of the loan on thebasis of the 2001 tariffs. The potential controversy was the reason for avoiding additional tariff increase,over and above the existing authorization of the CRA. As a result, the additional financing will now bepaid through the national and municipal government through an implicit policy that will subsidize sewagetreatment investments.
Approved Yearly Percentage Increases of Average TariffYear Water Sewerage1997 10% 17%1998 6% 10%1999 4% 7%2000 3% 4%2001 3% 4%
Page 27
G: Main Loan Conditions
1. Conditions for Negotiations: None
2. Conditionsfor Effectiveness:
* Signing of a subsidiary agreement between the District and ACUACAR, in terms acceptable tothe Bank, in regard to: (i) transfer of the earmarked funds from the District to ACUACAR and ofthe Government funds under the Grant Agreement, as a counterpart contribution; (ii) transfer ofthe Bank funds to ACUACAR, to be used for project implementation; and (ii) payment of US$15.4 million by ACUACAR to the District during the years 2005-2011 as a contribution for debtservice of the Bank loan;
* Issuing a Certificado de Vigencias Futuras by the Government providing for budgetarycontributions of US$ 20 million equivalent for the Project (the Government contribution toCounterpart Funds) to be made available to the District during the years 1999-2004 according toan agreed schedule as required by the project;
* Establishing, through a fiduaciary agreement, a special account under a trust fund agreement(Contrato de fiducia irrevocable) for purposes of ensuring availability of counterpart funds for theproject. Such an account will be fed with the earmarked funds (20% of National Governmenttransfer and 18% of property tax, complemented by royalty funds - fondo de regalia - andenvironmental fees - tasa retributiva - in case of shortfall) and the proceeds of the Governmentcontribution to the counterpart funds; and
* Making an initial deposit of an amount equivalent to at least US$ 1 million in the trust fundaccount.
3. Other [classify according to covenant types used in the Legal Agreements.]:
* The ACUACAR contract will be maintained, except as otherwise agreed with the Bank;
* The Bank retains the right to suspend disbursements if the IDB loan is suspended, unless theDistrict demonstrates the availability of additional funds to continue works under the IDB project;
* Time bound operational and financial indicators targets agreed upon with the Bank will be usedfor monitoring and evaluation of the project and the performance of ACAUACAR and theDistrict;
* ACUACAR will consult with the Bank all future changes in tariff level and tariff structure;
* The District shall: (i) increase the rate of collection of the amount due on account of property tax,as estimated by the latest applicable property tax reassessment carried out by it, to at least 49% inthe year 2000 and 51% in the year 2001 and each year thereafter; and (ii) maintain a set offinancial indicators in accordance with the requirements of the Law governing contracting of debtby municipalities.
* The District shall maintain the special account under the trust fund agreement (Contrato defiducia irrevocable) during the project implementation period for purposes of ensuringavailability of counterpart funds for the project. This account will be fed with the earmarkedfunds and the proceeds of the Government contribution to the counterpart funds, and its proceeds
Page 28
will be made available to ACUACAR as a source of counterpart funds for implementing theproject.
* The District will, no later than December 31, 2003, complete or cause to be completed, in amanner satisfactory to the Bank, the construction of a water supply systems to the communities ofPunta Canoas, Manzanillo del Mar and Arroyo de Piedras, located in the north zone of Cartagena.Disbursements for construction of the submarine outfall will not be authorized, unless progress,satisfactory to the Bank, has occurred in carrying out the construction of the mentioned watersupply systems. This condition complies with to the recommendation of the social analysis of theproject, so as to incorporate into the beneficiaries of the project also the poor black communitiesof the north zone, in which the wastewater conveyance, treatment and disposal systems will belocated and which currently do not have a piped water service.
* The District will carry out or cause to carry out an industrial wastes control program in Manonal,according to time bound targets agreed upon with the Bank.
H. Readiness for Implementation[X] The engineering design documents for the first year's activities are complete and ready for the startof project implementation. [ ] Not applicable.[X] The procurement documents for the first year's activities are complete and ready for the start ofproject implementation.[X] The Project Implementation Plan has been appraised and found to be realistic and of satisfactoryquality.[] The following items are lacking and are discussed under loan conditions (Section G):
I. Compliance with Bank Policies[X] This project complies with all applicable Bank policies.[ ] [The following exceptions to Bank policies are recommended for approval: . The project
complies with all other applicable Bank policies.]
[signature]Task Team Lea ger: Menahem Libhaber
[signature]Sector Manager/Director: n7 L pziger
[signature]Country Manager/Director: Aid liman
Page 29
Annex 1Cartagena Water Supply, Sewerage and Environmental Management Project
Project Design Summary
Narrative Summary Key Performance Indicators Monitoring and Critical AssumptionsEvaluation
Sector-related CAS (Goal to BankGoal: Mission)
Expand coverage of * Increase quality and coverage of Ex-post evaluation * Macroeconomicwater supply, sewerage water supply and sanitation stability and growthand sewage treatment services will allow governmentand disposal services to make counterpart
* Facilitate private sector * Creation of mechanisms to paymentsparticipation and private facilitate private sectorsector investment in participation in the provision ofinfrastructure services urban public services
Project Development (Objective to Goal)Objective:
1. Improve the water and 1. Decrease in: (i) evacuation of * Periodic reports of * Contamination ofsewerage services of wastewater in open channels on the ACUACAR water bodies by otherCartagena and sanitary street; and (ii) discharge of regarding sources, especiallyconditions in the city wastewater to the Cienaga through improvement of contamination of the
the storm drainage system sanitary conditions Cartagena Bay byin problematic industrial effluent
2. Facilitate the 2. Reduce the level of pathogenic neighborhoods and fromn the Mamonalenvironmental leanup of the coliform contamination along the calculation of industrial estate, isenvirbonmenta clauprofnd the beaches of Cartagena, the Bay and the performance eliminated
Cartagena Cienaga to meet Colombian standards indicatorsfor direct contact recreational * Inspections by fiSewerage worksactivities, once the marine outfall has supervisionbeen completed. missions for rinanced by other
improvement in sources (IDB, District,
3. Enhance sustainability of 3. Performance indicators of sanitary conditions ACUACAR's ownwater and sewerage services ACUACAR and verification of implementedin Cartagena by leveraging performanceBank support to shore up the indicatorsPSP model pioneered by * Reports ofACUACAR; the city's monitoringmixed-capital water and programs of watersanitation utility, against the quality in theprospect of political receiving bodiesinterference based on laboratory
analyses of watersamples
* Customersatisfaction surveyregarding the waterand sewerageservices
Outputs: (Outputs to Objective)
* Water supply systems * Increase in water Coverage * The PIU willconstructed prepare periodic Consumers willing to
project output and pay for the services* Sewerage Network in * Increase in sewerage coverage implementation
Page 30
Narrative Summary Key Performance Indicators Monitoring and Critical AssumptionsEvaluation
Cienaga Basin reports * Future mayorsconstructed and in * Monitoring during continue to beservice supervision supportive of the
missions institutional model. No* Main conveyance * Surveys to establish political objections
system constructed sewerage coverage arisein the Cienaga basin
* Treatment installations * All of Cartagena's wastewater and in the entire cityconstructed treated and adequately disposed
of by the mid 2004* Marine outfall * Dates of signing construction
constructed contractsPercentage of works completedeach project year, compared withbenchmarks
Project Components: Inputs: (Components to* The PIU of Outputs)
1. Expansion of the water 1. US$ 9.1 million ACUACAR will Sufficient Counterpartsupply system prepare detailed Funds available,
project including the
2. Expansion of the 2. US$ 36.4 million implementation Governmentsewerage in the Cienaga reports on a Go ntbasin quarterly basis and 2ontibuion
will provide annual 0 million
3. Construction of main 3. US$ 28.1 million audited financial * Currency devaluationwastewater conveyance statements for the and interest rates dosystem project not exceed forecasted
values and do not4. Construction of treatment 4. US$ 6.8 million 0 Bank supervision result in cost overrunsinstallations missions will visit
Cartagena two or * The District has5. Construction of the 5. US$ 22.7 million three times a year sufficient capacity tosubmarine outfall depending on the control the
volume of works ACUACAR contract6. Industrial wastewater 6. US$ 0.6 million and unforeseen and follow up projectdischarge control circumstances implementation
activities7. Environmental and social 7. US$ 3.3 millioncomponent
8. Project management, 8. US$ 9.1technical assistance, studies,design and supervision
See values of monitoring indicators in Annex IA
Page 31
Annex IACartagena Water Supply, Sewerage and Environmental Management Project
Key Performance Indicators
Performance Indicators of ACUACARIndicator Unit Base Target Value Expected at
Line 1999 2000 200 2002 200 2004 FullValue 1 3 Impact
Operational.Water coverage % 80% 80% 80% 82% 86% 87% 89% 89%Volume of water produced 000 m3/d 230 230 234 245 268 280 286 289Volume of treated water 000 m3/d 194 194 198 207 230 242 246 249distributedVolume of raw water sold 000 m3/d 36 36 36 38 38 38 40 40Volume of treated water 000 m3/d 109 109 115 124 142 152 158 164soldVolume of water loss 000 m3/d 85 85 83 82 87 89 88 85Unaccounted For Water 44 44 42 40 38 37 36 34(UFW)*Volume M3/Con/m 26 26 23 22 21 20 19 17lost/connection/monthVolume loss / kilometer M3/ km /m 2750 2750 2600 253 2600 240 2370 2250pipe/month 0 0Metered connections % 93% 95% 98% 98% 98% 98% 98% 98%Continuity of service** % 95% 95% 96% 96% 96% 97% 97% 98%Staff on payroll /1000 No. 2.8 2.8 2.9 3.0 3.0 2.9 2.8 2.8connectionsResponse time to breaks days 1.27 1.27 1.25 1.23 1.21 1.19 1.17 1.15W. Pipebreaks/1OOkm/year No. 256 256 248 241 234 222 221 200W$S km with GIS No. 1700 1700 1850 200 2150 225 2300 2350
0 0Sewerage Coverage % 69% 69% 76% 81% 84% 86% 88% 90%Volume sewage treated 000m3/d 0 0 0 0 0 0 88 149Km sewerage inspected by Km/year 78 78 82 86 90 95 100TVNo. of sewerage clogging No. 525 525 512 499 487 474 463 450cleared/100 km
FinancialOperating margin % 15.3 9.8 12.3 15.5 13.0 12.4 12.6Net profit margin % 7.1 0.7 4.6 7.5 6.5 6.6 7.5Return on equity % 17.3 1.7 11.5 18.0 14.5 13.7 14.4Current ratio Times 1.26 0.95 0.91 0.92 0.91 0.99 1.14Debt service coverage Times 1.46 0.77 0.89 1.25 1.22 1.45 3.99Debt/total capitalization % 68.9 65.3 63.3 58.2 55.0 50.7 45.6Uncollactables in 18 % 8 8 8 8 8 88months
*UFW: Volume of treated water sold/volume of treated water distributed.**Continuity of service: percentage of users which receive service 24 hours per day.
Page 32
Performance Indicators of the District of Cartagena
District performance indicators measure its capacity to repay the loan and to provide counterpartfunding, and are not monitored to evaluate development objectives of the District.
Baseline 1999 2000 2001 2002 2003 2004Earmarked Revenue forSewerage Investments (US$million)
18% of Property Tax 3.5 3.8 4.1 4.3 5.0 5.0 5.020% of National Government 3.4 3.5 3.7 3.7 3.8 3.8 3.9Transfer
Subtotal 6.9 7.3 7.8 8.0 8.7 8.8 8.9100% of Environmental fee 0 0.35 0.35 0.35 0.35 0.355% of Royalty (Fondo Regalia) 0.26 0.27 0.27 0.27 0.27 0.27Total earmarked revenue 7.6 8.4 8.6 9.3 9.4 9.5
Financial RatiosProperty Tax Collection Rates 44% 46% 49% 51% 51% 51% 51%
(%)__ _ _ _
Interest payment/Net 25% 20% 17% 16% 14% 13% 11%operational surplus /1 (%)Debt balance/current revenue /2 56% 56% 57% 68% 70% 70% 64%
(%)__ _ _ _
Net operational surplus /3/debt 2.3 3.2 3.5 3.7 5.2 5.7 6.5service (times)Earmarked funds /debt service 1.4 1.9 2.1 1.8 1.9 2.0
(times) /4 _ /1 Interest payment/Net operational surplus - Maximum allowed by the National Government for approving new debtsis 40%/2 Debt balance/current revenue - Maximum allowed by the National Government for approving of new debts is 80%,but 70% is considered high./3 Net operational surplus: Current Income + Capital Income - Operating Costs - Minimum Social Investments14 Earmarked funds not including Royalty
Page 33
Annex 2Cartagena Water Supply, Sewerage and Environmental Management Project
Detailed Project Description
Background
Water Supply System
The proposed project is a part of the water and sewerage master plan developed by ACUACARover the past few years. The water and sewerage master plan includes a comprehensivetime-bound investment plan to be implemented in the short, medium and the long-terms.
The water supply master plan consists of three stages:
a) Rehabilitation stage (1997) which included the preliminary work done by ACUACAR sincethe take over of responsibility in June 1995 aimed at improving the state of the existingsystem. During this stage, production capacity (pumping capacity from canal del dique to thecity) was increased from 165,000 m3/day to 225,000 m3/day (i.e., from 1.9 m3/s to 2.6m3/s); water treatment capacity was increased from 165,000 m3/day to 240,000 m3/day (i.e.,from 1.9 m3/s to 2.8 m3/s); pressure level and stability in the distribution network wasimproved as well as the reliability of the electrical supply systems;
b) Extension stage (2010) aimed at increasing the production capacity from 225,000 m3.day to290,000 m3/day (i.e., from 2.6 m3/s to 3.4 m3/s) and increasing the water treatment capacityfrom 240,000 m3/d to 270,000 m3/day (i.e., from 2.8 m3/s to 3.1 m3/s);
c) New production system stage (2021) aimed at increasing the production capacity from290,000 m3/day to 455,000 m3/day ((i.e., from 3.4 m3/s to 5.3 m3/s) and increasing the watertreatment capacity from 270,000 m3/d to 405,000 m3/day (i.e., from 3.1 m3/s to 4.7 m3/s).
The proposed project is aimed at partially financing the second stage of the water supply masterplan. i.e., provide the installations required to satisfy the needs up to the year 2010.
Sewage Collection and Disposal
Cartagena consists of two sewerage drainage basins: (i) the Cartagena Bay basin (or the baybasin) which receives about 40% of the city's sewage; and (ii) the Cienaga de la Virgen Basin (orthe Cienaga basin) which receives about 60% of the sewage generated in the city. At present, thewastewater is discharged to these water bodies without treatment. A small portion of the rawsewage is also discharged to the water courses crossing the city and to the Cartagena beaches as aresult of overflows from overloaded sewerage networks, or discharge from pumping stationsduring frequent power failures.
The sewerage coverage in Cartagena is currently 65%. Works under implementation, financed bythe District of Cartagena, ACUACAR and the IDB would increase the coverage to 75%. Themain areas which do not have sewerage networks are: (i) the southeastern zone adjacent to theCienaga de la Virgen; (ii) part of the southwestern zone adjacent to the Cartagena Bay, and (iii)the higher part of the southern zone (invasion neighborhoods). In addition, the service in some ofthe areas that have sewerage networks is deficient because of undersized systems resulting frompopulation growth which was not accompanied with systems upgrade.
Page 34
To resolve the severe environmental problems resulting from the inadequate collection anddisposal of the sewage, and to increase the sewerage coverage in the city, ACUACAR hasdeveloped a sewerage master plan, which includes the following projects:
a) The southeastern system: this system is located in the vicinity of the Cienaga de la Virgen,aimed to serve a group of the poorest neighborhoods of the city. At present this zone doesnot have a sewage collection network and the sewage is flowing in open channels in thestreets. ACUACAR has initiated works in this area, financed by the District and ownresources, concentrating on the main collection system and pumping stations. However, themajority of the networks still need to be installed.
b) IThe Bay drainage system: the objective of this program is to improve the sanitary conditionsin the Bay drainage basin. With the implementation of this program the followingachievements will be accomplished: (i) increase of the sewerage coverage in the basin; (ii)rehabilitation of old networks and upgrading hydraulic capacity of networks to fit thepopulation growth needs; and (iii) improvements in the sewage discharge from the existingold outfall located in the Cartagena Bay.
c) Wastewater treatment and disposal system: This program aims at conveying all the city'swastewater to a treatment plant in which they would undergo appropriate treatment, andsubsequently a proper discharge of the treated wastewater into the Caribbean sea for safedisposal. With the implementation of this program the current discharge of the city'suntreated wastewater to the Bay and to the Cienaga will be disconnected and these two waterbodies will recover from the negative impact caused by the discharge of raw wastewater inthem. According to the recommendations of the feasibility study for treatment and disposal ofthe wastewater of Cartagena, carried out as part of the preparation of the proposed project, thewastewater of the Bay basin will be diverted into the main collection system of the Cienagabasin, and the combined flow of the two basin will reach the Paraiso Pumping station, fomwhich it will be pumped to the preliminary treatment plant site at the vicinity of Punta Canoa,and from there discharged to the sea via a 2.8 Km. long submarine outfall, discharging at awater depth of 20 m.
The proposed project would finance a part of (a) and (c) of the master plan. Part (b) is beingfinanced by an IDB project of US$ 43.5 million, out of which US$ 24 million is a loan whichwould be repaid by ACUACAR. Jointly the two projects would complete the sewerage system ofCartagena ( the expected sewerage coverage after completion of the two projects is 88%). Inaddition, the proposed project would result in the cleanup of the water bodies to which theCartagena wastewater is currently being discharged (Cartagena Bay, the Cienaga, the beaches andthe water courses crossing the city), while safely discharging treated wastewater into theCaribbean city without negative environmental impacts.
Project Description
Part A: Expansion of the Water Supply System - US$ 9.9 million
In terms of water supply the proposed project is aimed at completing the second stage of thewater supply master plan. i.e., provide the installations required to satisfy the needs up to the year2006. Works include construction of pumping and conveyance lines of raw water, constructionof a sludge treatment plant, expansion of storage, interconnection of distribution networks,installation and replacement of primary and secondary networks and optimization of existingnetworks.
Page 35
The water supply component contains subprojects for:
* Expansion and improvement of the water production system;* Increase of the water coverage in the city;* Replacement of primary distribution mains;* Mitigation of environmental impact of sludge;* Remote control systems;* Unaccounted For Water (UFW) reduction plan; and
Expansion and improvement of the water production system
This component includes several subprojects: (i) solution to crossing of creeks by the artificialchannel Juan Gomez- Dolores; (ii) construction of a parallel pipeline Dolores-Piedrecitas-Albornoz (second stage); (iii) expansion of the storage tank at Albornoz pumping station; and (iv)construction of a new power line for Albornoz pumping station. The respective works are thefollowing:
Solution to crossing of creeks by the artificial channel Juan Gomez- Dolores: Construction oftwo sedimentation tanks, each 50 m long, 30 m wide and 2 m deep with respective concrete linedoverflow weirs, in the confluence of the creeks to the artificial channel that connects de CienagaJuan Gonez with the pumping station Dolores, for the purpose of reducing the amount ofsediments which these creeks carry to the channel, and which during the rainy season inflictadditional costs for the water treatment.
Construction of a parallel pipeline Dolores-Piedrecitas-Albornoz (second stage): Continuationof the construction of the parallel new pipeline that conveys raw water between the pumpingstations Dolores-Piedrecitas-Albornoz, for which the supply and installation of 4526 m of a 1000mm diameter pipeline is required, distributed as follows: (i) 1100 m between Dolores pumpingstation and the point at which the pipeline previously installed start, and from which it alreadyreaches Piedrecitas pumping station; and (ii) 3426 m between Piedrecitas pumping station and thepoint at which the pipeline previously installed start, and from which it already reaches Albornozpumping station. With this work implemented, the raw water conveyance capacity will reach290,000 m3/day and the vulnerability of the system, resulting from frequent breaks in the existingpipeline, will be reduced.
Expansion ofAlbornoz reservoir: Construction of a new reservoir in Albomoz pumping stationnext to the existing reservoir, with a volume of 96,000 m3, including the respective connectionstructures to the system. This would increase the storage capacity of the intake in the Albornozstation, allowing 8 hours of pumping in albornoz without receiving water from Dolores, thusreducing the vulnerability of the raw water conveyance system and increasing its reliability.
Construction of a new power line lo Albornoz: Installation of a new three phase power line of13,200 V from the Temera substation to the Albornoz pumping station, made of a AAAC No. 4/0cable insulated at 34.5 KV, with concrete posts of 12.0 m. With this work, the Albornoz stationwill have two alternate power supply sources. This would reduce the vulnerability of the rawwater conveyance system and increase its reliability.
Page 36
Increase of water coverage in the city
This component consists of investments for increasing the water coverage in the low incomeneighborhoods, by implementing the following subprojects: (i) water networks in El Pozon; and(iii) completion of water networks in the Southeastern zone.
Water networks in El Pozon: This work consists of supply and installation of 21,400 m of HighDensity Polyethylene (HDPE) pipes of 1 1O mm diameters and 3500 house connections. Thiswork would provide an additional coverage to 60% to EL Pozon, which, with the currentcoverage of 40% would ensure a 100% coverage in this poor neighborhood.
Completion water networks in the Southeastern zone: This work consists of supply andinstallation of 1280 m of HDPE pipes of 200 mm diameter and 7445 m of HPDE pipe of 110 mmdiameter, to complete the water networks in the neighborhoods of La Maria, San Francisco andParaiso, located in the extreme right of the southeastern zone of the city. This work, jointly withthe work currently implemented by ACUCAR will increase the water coverage in this zone to92%.
Replacement of primary distribution mains
This component consists of relocation of parts of the main pressure distribution pipelines becausehouses were built right on these pipelines and this imposes a risk for the population in the eventof pipe breaks. Works included consist of: (i) relocation of the 30" Amberes pipeline; and (ii)connecting the Colinas tank to the Alcalis system.
Relocation of the 30 " Amberes pipeline: This work consists of supply and installation of 1100 mof ductile iron of 800 mm diameter in Amberes, at Madrid street, for the purpose of relocating theexisting pipe, over which 20 houses have been built, since the current situation poses a risk to thecommunity.
Connecting the Colinas tank to the Alcalis system: This work consists of supply and installationof 1900 m ductile iron pipeline of 600 mm diameter from the Colinas tank along the Henequenroad, crossing the neighborhoods of Antonio Jose de Sucre, 20 de Julio and Villa Barazza,connecting to the 24" pipeline to Mamonal. With this work it will be possible to supply treatedwater to the Mamonal industrial zone through the Colinas tank, increasing the reliability ofsupply to the inductrial zone and reducing operating costs
Mitigation of environmental impact of sludge
This work is aimed at mitigating the negative environmental impact of the sludge produced in thewater treatment plant, i.e., converting the partial treatment currently carried out to efficientmechanical treatment. Work consists of construction of two concrete sludge thickening tanks of35 m diameter and 3.5 effective depth, supply and installation of the pumping system of thesupernatant (50 KW installed power), supply and installation of the sludge pumping station (45KW installed power), improvement of the existing sludge sedimentation lagoons and constructionof concrete sludge drying beds (total area of 2,500 m2). With this works, adecuate managementwould be provided to 9 tonlday of sludge produced by the water treatment process, therebyimproving the environmental conditions around the El Bosque treatment plant and the evacuationchannel of the filters wash water and of the underflow from the sedimentation tanks, which areevacuated to the Cartagena Bay.
Remote control systems
Page 37
This component is aimed at providing remote control systems for operating the principalwastewater pumping stations and introduce measurement and control instruments in strategicpoints of the water and sewerage networks, with which an optimization and control of operationof these systems can be reached. The remote control program includes the following 5components:
(a) Raw water: supply and installation of electromagnetic flow meters. Design supply andinstallation of the systems for local automatic operation of each station, interrelating thepumping between stations with the water level at the treatment plant raw water tank.
(b) Water distribution network: supply and installation of electromagnetic flow meters in ElLimbo, installation of 13 control points at different sites of the network, installation ofcontrol valves and automatic chlorination at El Carmelo, Installation of automaticpostchlorination at Colinas tank, installation of remote control for pumping station SantaLucia, installation of flow and pressure measurement a well as residual chlorinemeasurement for the north zone system and installation of remote control for the freetrade zone.
(c) Water treatment plant: Completion of the remote control system of the treatmentprocesses at El Bosque Plant.
(d) Remote control center: update and improvement of the software and hardware systems ofthe remote control center and of the Programable controllers (PLCs). Construction of anew remote control center.
(e) Wastewater system: implementation of a remote control system in the seven wastewaterpumping stations.
Unaccounted For Water (UFW) reduction plan
This plan is aimed at reducing UFW by means of sectorization and optimization of thedistribution networks and through the water networks plan barrios. It contemplates the installationof 2000 m of HDPE pipelines of 300 mm diameter, 4430 m of HDPE pipelines of 110 mmdiameter and 860 m of HDPE pipelines of 63 mm diameter in various neighborhoods. Theseworks will improve the hydraulic performance of the existing water networks in El Prado, sanIsidro bajo, Cartagenita, Altos del Nuevo Bosque and Villa Estrella, which would reduce UFW.
Part B: Expansion of the Sewerage System in the Cienaga Basin - US$ 35.7 million
In terms of sewerage works the project aims at improving sanitation conditions in the areas of theCienaga drainage basin which do not have at present sewerage systems or which receive adeficient service. This would achieved by: (i) increasing the coverage of the sewerage network,and (ii) replacing, rehabilitating and enhancing the conveyance capacity of collectors andnetworks in certain parts of the city in which the sewerage system is currently undersized orobsolete. Works include construction of main collectors, pressure pipes and pumping stations, aswell as construction of new secondary networks and optimization of existing networks.
The Cienaga basin sewerage component contains subprojects for:
* enhancement of conveyance capacity of existing sewage collectors in the southwest,southeast, and central parts of the city that currently drain to the Cienaga;
Page 38
* expansion of secondary sewerage network in the southwest, southeast, and central partsof the city, as well as the Boquilla area, that currently drain to the Cienaga;
* construction of new pressure lines and pumping stations; and* construction of new gravity collectors in residential areas.
Enhancement of conveyance capacity of existing collectors
This subproject involves expanding the capacity of the existing collectors in the south-west,south-east, and central parts of the city which currently discharge sewage to the Cienaga. Thiswould include reinforcing and optimizing the existing sewers in order to eliminate currentdeficiencies and carry the sewage to a common site for treatment and final disposal. Thefollowing table summarizes the main features of the sewers included under this component.
Works for Capacity Enhancement of Existing Collectors
Collector Name Neighborhoods Served Length Diameter(km) (mm)
Paseo Bolivar- El Cabrero, Torices, La Espafiola, Urbanizacion 4.45 300-700Cabrero-Marbella Tequendama, Santa Rita, Pedro Salazar, Canapote and
_ __________________ _ Crespito
Crespo-EI Oro Crespo 1.48 300-400Pedro Romero-Maria Las Brisas, Andalucia, Galan, La Gloria, 19 de Abril, 2.55 300-700Auxiliadora Espafifa, Las Lomas, Junin, Amberes, Maria Auxiliadora,
Alcibia, La Esperanza, Las Flores, La Maria, and El! ___________________ C ieloTabu Zaragocilla, La Campinia, Armenia, El Cairo, and La 0.77 300-600
VillaBlas de Lezo Santa Lucia, Los Alpes, Trece de Junio, and El Carmen 0.97 300-400Derecho-Santa Lucia-ChapacuaBias de Lezo Las Gaviotas, Chiquinquira, La Casteilana, Las Gavias, 2.33 300-800Izquierdo Contadora, Republica de Venezuela, Los Ejecutivos, Los
Angeles, Villa Sandra, Paseo de la Castellana, LosCalamares, Los Almendros, Buenos Aires, Las Delicias,and El Rubi
Socorro-Blas de Lezo El Socorro, Blas de Lezo, Los Caracoles, Los Jardines, 3.73 300-600La Victoria and Altos de los Jardines
San Fernando- Medellin, Berlin, Los Ciruelos, San Fernando, Alameda, 4.36 300-700Medellin-Los La Victoria, Nazareno, Villa Rubia, La Consolata, ElCiruelos Educador, and Maria CanoTernera-Recreo-EI Ternera, Siboney, Beirut, Urbanizacion el Eden, 2.08 300-600Eden Valencia, El Recreo, Mayorga, Urbanizacion Baru, and
La Concepcion _
Secondary sewerage networks
This subproject includes expansion of the sewerage network in the south-west, south-east, andcentral areas, as well as the Boquilla sector, all of which currently drain to the Cienaga. Thefollowing table summarizes the main features of the networks to be included in this component:
Page 39
New Sewerage Networks to be Constructed Under the Project
Name of Work Neighborhoods Served Total Length Diameter(km) and (mm)
CharacteristiCs
Pozon and Villa Poz6n and Villa Estrella, located on the eastern 34 km of 200Estrella shore of the Cienage secondary
collectors5.12 km of 300-400primary
collectorsSoutheastern Olaya Herrera, Rafael Nuiez, Libano, Playas 9.3 km of 200Zone de Acapulco, and other neighborhoods located secondary
around the Cienaga collectorsLa Boquilla La Boquilla 7.2 km of 200-300
secondarycollectors
San Jose de los San Jose de los Campanos 9.0 km of 200-400Campanos secondary and
primarycollectors
Southwest Zone Maria Cano, El Educador, San Fernando, and 15.5 km of 200Cesar Fl6rez secondary
collectorsFalda de la Popa Loma Fresca, Paraiso, Pablo VI, Repuiblica del 11.7 km of 200
Caribe, Palestina, Paraiso II, and San Bernardo secondarycollectors
Pumping stations and pressure lines
This subproject includes investments for expanding and renovating pumping stations and pressurelines, which would permit conveying the sewage of the Cartagena Bay basin tho the Cienagabasin system and connect all areas in the Cienaga basin with a central collection system, i.e.,either with the San Francisco collector or the Cordialidad Collectors, both of which would conveythe wastewater to the central collection point of all the wastewater of Cartagena at Paraisopumping station. It includes the following facilities:
* Pumping station El Oro and pressure line from El Oro to San Francisco (length 2.0 km,diameter 1 000 mm);
* Pumping station Cielo Mar and pressure line from Cielo Mar to Crespo (length 1.5 km,diameter 500 mm);
* Pumping station Blas de Lezo and pressure line from Blas de Lezo to Cordialidad (length 2.5km, diameter 1200 mm);
* Pressure line from El Bosque to Amberes (length 0.8 km, diameter 1000 mm) drainingtowards Ricaurte; and
* Pressure line from Ceballos to Buenos Aires (length 1.5 km, diameter 800 mm).
Page 40
New gravity collectors
This component would support the construction of gravity collectors which receive the sewagefrom the above-mentioned pressure lines. The new sewers included under this subproject are:
* Amberes-Ricaurte collector: This collector with a length of 3.06 km and a diameter between1300 and 1600 mm would receive sewage from the El Bosque-Amberes pressure line.
* Buenos Aires-Blas de Lezo collector: This collector with a length of 1.14 km and a diameterof 900 mm would receive sewage from the Ceballos-Buenos Aires pressure line.
Part C: Construction of the Main Conveyance System-of the Wastewater to the TreatmentPlant - US$ 28.1 million
One of the project objectives is to cleanup the water bodies surrounding Cartagena (the Bay, theCienaga, the beaches and the water courses crossing the city) from the raw wastewater currentlydischarged to them. This would be achieved by collecting all the wastewater of Cartagena,conveying them to a treatment plant and discharging the effluent into the Caribbean sea in acontrolled and safe fashion. Part C of the project comprises the construction of the mainconveyance system of the collected wastewater of the city to the treatment plant and from there tothe Caribbean shore. This component includes the following subprojects:
* Upgrading of the Paraiso pumping station;e Construction of the pipeline from Paraiso pumping station to the treatment plant site; and
Construction of the effluent pipeline from the treatment plant to the submarine outfall atthe Caribbean shoreline.
Upgarding of the Paraiso pumping station
Currently, the Paraiso pumping station discharges part of the wastewater of the Cienaga basininto the Cienaga. As a result of the project works, all the wastewater from the Cienaga Basin andthe Cartagena Bay basin service areas, i.e., all the city's wastewater, would be collected andtransported via trunk sewers to one point, the Paraiso pumping station, from which it would beconveyed to the treatment plant site, located at a distance of 18 km from Paraiso. The projectwould finance modifications to the Paraiso pumping station, so as to upgrade its function fromthat of discharging part of the wastewater to the nearby Cienaga to that of pumping the entireflow of the city's wastewater to the remote treatment plant site. The pumping station will require8 new submersible sewage pumps, 8 new starters, new valves and pressure pipes and accessoriesas well as a variety of electrical, mechanical, structural and architectural modifications in theexisting pumping station to accommodate the design year (2015) average flow (Qa) of 227.000m3/d (2.6 m3/s), with a peak hourly flow (Qmax) of 341,000 m3/d (about 4 m3/s, using a peak factorof factor of 1.5).
Construction of the pipeline from Paraiso pumping station to the treatment plant site
From the Paraiso pumping station the wastewater would be pumped to the treatment plant sitenorth of Cuchilla Canalete (between the "Corregimiento de Punta Canoas" and the "ArroyoGuayepo") by means of a 18 km (2000 mm, i.e., 72" diameter) reinforced concrete force main.The construction of the 72" pressure main would be financed and implemented under the project;
After the year 2015, retention basins would have to be added next to the Paraiso pumping stationto regulate peak wet season flows in excess of 341,000 m3/d, while still allowing to operate the
Page 41
system with the same 72" force main. The addition of these retention basins (which does notform part of the present project, but rather would be constructed at a later stage) would allow theforce main to handle flows through the year 2025.
Construction of the effluent pipeline from the treatment plant to the submarine outfall at theCaribbean shoreline
After undergoing preliminary treatment, a conveyance gravity reinforced concrete pipe section of2.85 km length of the same diameter of the pressure pipe, i.e., 72", will channel the treatmentplant effluent to the shoreline where it will connect to the submarine outfall. The construction ofthe 72" effluent gravity line would be financed and implemented under the project.
Part D: Construction of Treatment Installations - US$ 6.8 million
According to the project strategy, a pretreatment consisting of preliminary treatment installationswould be provided for the wastewater treatment prior to its discharge to the Caribbean seathrough a submarine outfall. The submarine outfall has been designed to provide safe disposal ofthe effluent of the preliminary treatment plant. As part of the project strategy, an intensivemonitoring program of sea water and sea bed at the outfall vicinity would be carried out. Shouldit indicate that coliforms discharged through the outfall are reaching bathing beaches, or should itpoint to any other water quality problems resulting from the effluent discharge, additionaltreatment trains will be added at a later stage to ensure meeting water quality targets. A 20 ha sitewill be reserved to accommodate future treatment installations, if needed.
The Preliminary treatment Installations will remove floatable materials, grease, oil, sand, and grit.Treatment facilities will include six rotary screens (1.5 mm clearance) followed by two vortex-type grit chambers. The rotary screens will remove rags, floatable material, and large solids. Theexpected volume of screenings generated by the rotary screens is about 8.5 m3/d. In addition. Thevortex-type grit chambers will remove about 5.1 m3/d of sand and grit.
The total percentages of contaminants removal by the treatment facility are: (i) reduction ofsuspended particles with diameter larger than 0.75 mm by 100% which corresponds to the effectof primary treatment in a settling tank; (ii) reduction of other undissolved materials by 80-90%;(iii) reduction of BOD by 10-20%, and (iv) reduction of all grease and oil by 30% to 40%.
Part E: Construction of the Submarine Outfall - US$ 22.7 million
This subproject consists of construction of the submarine outfall for the safe discharge of thepre-treated effluent to the Caribbean sea near Punta Canoas. The main conveyance system willconnect the treatment plant with the submarine outfall. The outfall would be constructed using a72" reinforced concrete pipe. Total outfall length would be 2,850 m and the discharge point(diffuser area) will be submerged at a depth of 20 m. The diffuser will have a length of 540 m,with a riser spacing of 20 m, i.e., a total of 27 risers. Each riser will be made of a 12" diameterpipe, 2 m long. The upper end of each riser pipe will be sealed by a welded plate, and it will have2 openings close to the plate, each of diameter 8", i.e., the total number of discharge ports will be54.
In the surf zone between the shoreline and the 3m-depth contour, outfall pipes will probably belaid using a trestle built over the water. At greater depths, a barge-mounted crane would probablybe used for construction.
Page 42
Part F: Industrial Wastewater Discharge Control - US$ 0.6 million
This part of the project would address issues related to industrial wastes discharged to themunicipal sewerage network. It is not aimed to provide investments for treatment installation butrather to assist in establishing the regulatory framework and provide technical assistance relatedto pretreatment of industrial wastes. It would support the following activities: (i) carrying out asurvey to identify key sources of industrial pollution in the city of Cartagena, i.e., establishing abaseline inventory and data base for industrial pollution within the city areas served by thesewerage networks (based on preliminary assessments, most of these are expected to be smallindustrial and commercial establishments, such as restaurants and car shops, since larger industryis located in Mamonal, outside the city's sewerage networks limits); (ii) establishing a system forregulating the discharge of industrial wastes, either to the sewerage system or to receiving bodies;(iii) establishing a system for auditing the status of industrial wastes discharge; (iv) definingstrategies for control of small and dispersed sources of industrial pollution discharging to thesewerage networks (gasoline stations and mechanical repair shops); and (v) providing technicalassistance in selection and design of pretreatment processes.
Part G: Environmental and Social Component - USS 3.3 million
This part of the project seeks to implement mitigation measures of the environmental and socialimpacts of the project. The environmental management program includes: (i) environmentalsupervision during construction; (ii) restoration and conservation of the Cienaga de la Virgennature reserve; (iii) carrying out a monitoring program before and after construction of the marineoutfall to study the fate of pathogenic coliforms and other contaminants discharged through theoutfall; and (iv) environmental institutional strengthening program. The social managementprogram includes: (i) organization and Strengthening of the community; (ii) constructionrehabilitation and equipping of community centers; (iii) support of in house basic sanitation in LaBoquilla; and (iv) strengthening of the Community Relations unit of ACUACAR. The socialplan includes also supply of piped water to the communities of Zona Norte, which would beundertaken by the District and forms a condition of the Loan.
Environmental management program
Environmental supervision during construction: this task would be carried out by a consultingfirm which would ensure that the contractors comply with environmental requirements. Theconsulting firm would also non-construction related components of the environmentalmanagement plan, such as providing information to the public and implementing the socialcommunication program, providing environmental education to the community and providinginstitutional support to DAMARENA.
Restoration and conservation of the Cienaga de la Virgen nature reserve: this activity include: (a)carrying out of legal, technical and land tenure studies and the preparation of management andoperational plans for the Cienaga protected area with the assistance of a consulting firm; and (b)providing support to institutional and community initiatives to preserve the Cienaga (solid wastescollection, prevention of liquid wastes discharge in the area, preparing a decree declaring theCienaga sa a protected area), with the aid of and under the responsibility of the Secretaria deParticipacion Communitaria of the District of Cartagena, which would be in charge of communityinitiatives, and of DAMARENA, which would be in charge of the Cienaga preservation program.
Monitoring program before and after construction of the marine outfall: this activity includes thecarrying out of a comprehensive program for monitoring the quality of sea water and sea bedbefore and after the construction of the outfall, so as to determine the fate of pathogenic coliforms
Page 43
and other contaminants discharged through it, establish its impact and provide basic informationwhich would help in formulating a decision regarding the need for upgrading the treatmentfacilities.
Environmental institutional management program: this activity is aimed at ensuring institutionalcapacity to implement the environmental management program. It includes the financing oftraining workshops, study tours and specialization courses for DAMARENA and CARDIQUE intopics such as wetland management, pollution control, water quality monitoring andenvironmental audits.
Social management program
Organization and Strengthening of the community: this activity includes support to organize thecommunity, strengthen its organizations and promote participation in the project. It would becarried out through the Secretaria de Participacion Communitaria of the District of Cartagena.This activity will include Rehabilitation of poor communities which would promote communityparticipation in the ongoing Urban Rehabilitation Program carried out by the District ofCartagena to consolidate the urban development of these communities. It will also includePromoting Community Development which would support community's activities to improvesanitary conditions in their own neighborhoods, support the project's clean-up efforts, mainlyaround La Cienaga and promote integration of community-based groups to developincome-generating activities related to the project such as solid-waste recycling.
Construction rehabilitation and equipping of community centers: this activity would providefinancing for construction of three new community centers, rehabilitating three existing,deteriorated community centers and equipping of all six centers. These community would be thefocal point for community activities, social integration and amelioration of urban conditionscenters would provide the facilities required for community organization, support andparticipation in the project. The construction activities would be managed by the projectimplementation unit of ACUACAR.
Support of in house basic sanitation in La Boquilla: this activity would finance houseconnections, internal piping and bathrooms to selected extremely poor households (stratum 1) tobenefit some 500 families in the north zone and around the Cienega. It wold serve as ademonstration pilot to educate and promote sanitary services among poor communities whichhave never had piped water and sewerage services. This activity would be carried out by theDistrict of Cartagena through its housing agency CORVIVIENDA (Fondo de Interes y ReformaUrbana Distrital de Catagena, created by and agreement of the Municipal Council in 1991).
Strengthening of the Community Relations unit ofACUACAR: this activity would provideassistance to the Community Relations Unit of ACUACAR in dealing with the increased numberof poor customers and in improving its performance. It would also support carrying out a publiccommunication campaign to keep population in Cartagena informed about the progress on projectimplementation. It will be carried out with the assistance of the consulting firm in charge of theenvironmental supervision and public information.
Part H: Project management, Technical Assistance, Studies, Design and Supervision ofWorks - US$ 9.1 million
This component would support and partially finance the following activities: (i) projectmanagement; (ii) Design and supervision of the water supply systems works; (iii) design andsupervision of the sewerage systems works; (iv) design of the main wastewater conveyance
Page 44
system, treatment installations and submarine outfall; (v) supervision of the main conveyancesystem works; and (vi) supervision of the treatment installation and submarine outfall works.
The project management activities which would be carried out by the PIU, the unit in charge ofproject implementation, include: financing of consultants to the PIU, assistance in completion ofdetailed engineering designs as required, preparation of bidding documents for purchase ofequipment and execution of works, preparation of letters of invitation and correspondingpackages for hiring consultants and carrying out all the procurement processes as required,assistance in supervision of all works and carrying out the financial management activities of theproject. The other activities under this part of the project are mainly design and supervisionactivities, which would be carried out by consulting firms.
Page 45
Annex 3Cartagena Water Supply, Sewerage and Environmental Management Project
Estimated Project Costs
Project Component Local Foreign Total-----------------------US $ million--------------------
1. Expansion of the Water Supply System 6.41 2.20 8.622. Expansion of the Sewerage System in the Cienaga Basin 15.82 14.34 30.163. Construction of the Main Wastewater Conveyance Systm 11.84 10.97 22.814. Construction of the Wastewater Treatment Installations 2.73 2.88 5.615. Construction of the Submarine Outfall 5.08 13.03 18.116. Industrial Wastewater Discharge Control 0.50 0.00 0.507. Environmental and Social Component 2.75 0.00 2.758. Project Management, Technical Assistance, Studies, 4.40 3.20 7.60
Design and Supervision
Total Baseline Cost 49.54 46.63 96.16Physical Contingencies 4.65 4.66 9.31Price Contingencies 5.15 5.70 10.85Front -end Fee 0.85 0.85
Total Project Cost 59.34 57.84 117.18
Page 46
Annex 3Cartagena Water Supply, Sewerage and Environmental Management Project
Estimated Project Costs (Details)(US$ Million Excluding Front-end Fee)
MaterialsComponent Equipment Works Studies Total Cost Local Foreign %Foreign %Base Cost
A. Water Supply Systems 2.81 4.61 7.42 5.44 1.98 27 8.2Al. Canal Juan Gomez 0.00 0.22 0.22 0.22 0.00 0 0.2
A2. Parallel line Dolores-Albornoz 0.72 0.44 1,16 0.48 0.68 59 1.3A3. Expansion of AlbornozReservoir 0.02 0.37 0.39 0.39 0,00 0 0.4A4. New Power Line to AlbomozPump Station 0.15 0.05 0.20 0.06 0.14 70 0.2
A5. Sludge Treatment El BosqueStage I 0.12 0.61 0.74 0.62 0.12 16 0.8A6. Relocation of Amberes pipe30' 0.35 0.41 0.76 0.43 0.33 44 0.8
A7. Connecting Colinas Tank toAlcalis System 0.52 0.64 1.15 0.66 0.49 43 1.3
A8. Water Network El Pozon 0.47 1.57 2.03 1.99 0.04 2 2.3
A9. Water Network Plan Barrios 0.08 0.12 0.20 0.19 0.01 6 0.2
Al0. Completion of Networks ZonaSuroriental 0.13 0.18 0.31 0.30 0.01 5 0.3
All. Telecommand 0.27 0.27 0.12 0.15 56 0.3
B. Cienaga Basin Sewerage 18.86 9.74 28.60 14.25 14.35 50 31.7
B1. Collectors Enhancement 5.49 2.16 7.65 3.83 3.83 50 8.5
82. Sewerage Networks 7.04 3.16 10.20 5.10 5.10 50 11.3
B3. Pressure Pipes 3.48 2.31 5.79 2.90 2.90 50 6.4B4. New Collectors 1.73 0.68 2.41 1.21 1.21 50 2.7
B5. Pumping Stations 1.12 1.43 2.55 1.22 1.33 52 2.8
C. Main Conveyance System 10.32 10.59 20.91 9.94 10.97 52 23.2
Cl. Paraiso Pump Station 1.40 0.38 1.78 0.37 1.41 79 2.0
C2. On Shore Pipeline, 1A, 2A, 2Band 3A 4.66 5.77 10.43 5.21 5.21 50 11.6
C3. On Shore Pipeline, 38, 3C, 3Dand 3E 4.26 4.45 8.70 4.35 4.35 50 9.6
D. Treatment Installations 2.88 1.56 4.44 1.55 2.88 65 4.9
E. Submarine Ouffall 1.42 16.58 18.00 5.04 12.96 72 20.0
F. Industrial Wastes 0.50 0.50 0.50 0.00 0 0.6
G. Environmental and SocialComponent 0.60 2.15 2.75 2.75 0.00 0 3.0
Gl. Env. Supervision 0.50 0.50 0.50 0.00 0 0.6
G2. Cienaga Conservation 0.40 0.40 0.40 0.00 0 0.4
G3. Coastal Waters Monitoring 1.00 1.00 1.00 0.00 0 1.1
G4. Community Org. Support 0.25 0.25 0.25 0.00 0 0.3G5. Construction CommunityCenters 0.40 0.40 0.40 0.00 0 0.4
G6. La Boquilla Basic Sanitation 0.20 0.20 0.20 0.00 0 0.2
Page 47
Annex 3Cartagena Water Supply, Sewerage and Environmental Management Project
Estimated Project Costs (Details) - Continued(US$ Million Excluding Front-end Fee)
MaterialsComponent Equipment Works Studies Total Cost Local Foreign %Foreign %Base Cost
H. Project Management, TA andStudies 7.60 7.60 4.40 3.20 42 8.4
Hi. Project Management 1.00 1.00 1.00 0.00 0 1.1
H2. Design & Supervision of WaterSupply Systems 0.80 0.80 0.80 0.00 0 0.9
H3. Design & Supervision ofSewerage Systems 2.60 2.60 2.60 0.00 0 2.9
H4. Design Conveyance Treatmentand Outfall 1.50 1.50 0.00 1.50 100 1.7
H5.Supervision Conveyance 0.80 0.80 0.00 0.80 100 0.9
H6. Supervision Treatment andSubmarine Outfall o.9o o.9o 0.00 0.90 100 1.0
Total Base Cost 36.28 43.69 10.25 90.22 43.87 46.35 51 100.0
Physical Contingencies 3.63 4.37 1.03 9.02 4.39 4.63 51 10.0
Price Contingencies 10.85 5.15 5.70 53 12.0
Total Project Cost i`o.0g 53.41 56.68 51 122.0
Land Acquisition 2.62 2.62 0.00 0 2.9
Duties and Taxes (VAT) 3.61 3.61 0.00 0 4.0
Total Investment 116.32 59.64 56.68 49 128.9
Page 48
Annex 3Cartagena Water Supply, Sewerage and Environmental Management Project
Project Components by Year - Totals Including Contingencies(US$ Million Excluding Front-end Fee)
olombiaartagenaroject Components by Year -- Totals Including CoUS$ Million) Totals Including Contingencies
1999 2000 2001 2002 2003 2004 Total
1. Water Supply System 2.07 7.84 - - 9.912. Cienaga Basin Sewerage 3.88 10.11 21.74 - - - 35.733. Main Conveyance System - 1.17 7.91 11.98 7.00 - 28.054. Treatment Installations - 1.23 - 3.70 1.88 - 6.815. Submarine Outfall - - 5.01 6.96 7.18 3.58 22.736. Industrial Wastes - 0.12 0.12 0.12 0.13 0.13 0.627. Environmental and Social Component 0.40 0.94 0.72 0.37 0.38 0.53 3.348. Project Management 1.02 3.03 1.98 1.36 1.15 0.59 9.14
otal PROJECT COSTS 7.37 24.43 37.49 24.50 17.72 4.83 116.33
Page 49
Annex 3Cartagena Water Supply, Sewerage and Environmental Management Project
Project Implementation Schedule
~~~~~~~~~~~~1 199 2000 2W 2002 0T<2= D g04 2tID Task Name _ _@ Q21Q31Q4 QqQ Q Q'IQYQ31Q Q l QI A. Water Supply Systems
2 Canal Juan Gomez
3 Parallei line Dolores - Albornoz
4 Expansion of Albomoz Reservoir
5 New Power Line to Albornoz Pump Station
6 Sludge Treatment Ei Bosque Stage I
7 Relocation of Amberes Pipe 30"
8 Connecting Coiinas Tank to Aicalis System
9 Water Network El Pozon
10 Water Network Plan Barrios
11 Completion of Networks Zona Suroriental
12 Telecommand
13 B. Cienaga Basin Sewerage
14 Collectors iEnhancement
15 Sewerage Networks
16 Pressure Pipes
17 New Collectors
18 Pumping Stations
19 C. Main Conveyance System _
20 Paraeso Pump Station
21 On Shore Pipeline, 1A, 2A, 2B and 3A
22 On Shore Pipeline, 3B, 30, 3D and 3E
23 D. Treatment Installations
24 E. Submarine Outfail
25 F. Industrial Wastes
26 G. Environmental and Sociai Component V
27 Environmental Supervision
28 Cienaga Conservation
29 Coastal Waters Monitoring
30 Community Orgahniiati6n Support
31 Construction Community Centers
32 La Boquilla Basic Sanitation
33 H. Project Management, TA and Studies __
34 Project Management
35 Design & Supervision of Water Supply Sys
36 Design & Supervision of Sewerage System
37 Design Conveyance, Treatment and Outfal
38 Supervision Conveyanrce
39 Supervision Treatment and Submarine Out _
Page 50
Annex 4Cartagena Water Supply, Sewerage and Environmental Management Project
Cost Benefit Analysis Summary
The Cartagena Water Supply, Sewerage and Environmental Cleanup Project, which compromisesof a number of subprojects, is financially and economically viable when some of the componentsof the project will be either redesigned or discarded from the investment program. This is theconclusion of a detailed financial, economic and distributive analysis, enhanced by elaboratesensitivity and risk analyses.
I. OBJECTIVE
The objectives of the Project are: (i) to improve the water supply and sanitary conditions ofCartagena's population by expanding water supply and sewerage coverage, particularly in thecity's poor areas; (ii) to facilitate the environmental cleanup of the water bodies located in andaround the city through the collection, treatment and disposal of wastewater; and (iii) to improvethe sustainability of water and sewerage services in Cartagena by leveraging Bank support tounderpin the PSP model pioneered by ACUACAR. On the basis of these objectives, the cost-benefit analysis was used to measure: (i) the financial and economic viability of the investmentprojects that will be partially financed by the Bank; and (ii) the distributive impact of thosesubprojects; and (iii) the risk profile of each subproject.
3I. METHODOLOGY
A number of steps was taken to enable us to undertake the cost-benefit analysis of the project.These steps included (i) the definition of the 'with' and 'without' project scenarios; (ii) theidentification of separable project components; (iii) the preparation, execution and analysis ofwillingness to pay studies; (iv) the analysis of the benefits of the water supply proiects; and (v)preparation of the financial and economic analyses of the water supply, sewage collection andtreatment subprojects. The evaluated infrastructure components represent 88 percent of the totalproject cost.
To identify the incremental costs and benefits resulting from each subproject, "with" and"without" project scenarios were built for each subproject. The "with" project scenario considersthe proposed investment plan and its associated targets. The "without" project scenario considersthat current coverage levels will be maintained over time. This would require some replacementinvestments in the future, but due to lack of data on the current asset base these are not includedin the flow of costs in the "without" project scenario.
Costs and benefits associated with the "with" and "without" project scenarios are projected for 30years, that is, during the implementation period and until the full impact of the subprojects isobtained. The cash flows were discounted using a discount rate of 12 percent which is estimatedto be a proxy of Colombia's opportunity cost of capital. Benefits from the water supply projectinclude the elimination of rationing and intermittent supplies and service coverage increases.Benefits from sewage collection and treatment subprojects include a reduction of water pollutionlevels through service coverage increases. The improved hygienic and environmental conditionsthat result from increasing water supply and sewerage coverage will translate into improvedhygienic conditions that will result in decreases in infant mortality and a reduction in the incidenceof water-borne diseases. Improved environmental conditions contribute to the recovery of
Page 51
beaches, enhance tourism activities and other water uses, and increase recreational activities.However, no effort is made to quantify these benefits. Additional benefits, that were not includedin the analysis, comprise of a temporary but significant generation ofjobs during projectimplementation.
The project is evaluated from three different perspectives. Thefinancial viability of eachsubproject is appraised measuring its flows of costs and benefits in market prices. Under afinancial perspective, benefits are assumed equal to the estimated flow of financial revenues.Because of the particular financing structure of this project, a very large part of the investmentsare actually subsidized. The economic viability is determining the flows of costs and benefits ineconomic or shadow prices. This is particularly important, because of the project's intangibleenvironmental benefits which are often not efficiently allocated by the market. In the economicanalysis, benefits are assumed equal to the willingness to pay (WTP) for sewage collection,treatment and disposal services for each beneficiary household. As no WTP studies wereundertaken for the water supply subprojects, as they were added on to the project in a later stage,it was generally assumed that current water rates reflect customers' willingness to pay. The flowof financial cost is transformed into economic costs through the use of conversion factors. Thedistributive analysis identifies the winners and losers among the different groups with interestsand stakes in the project: the central government, the government of the District of Cartagena, thewater company and its customers, and the utility's labor force affected by subprojectinterventions. The sensitivity and risk analysis enhances the accuracy of the financial andeconomic analyses by incorporating uncertainty into the project analysis.
1II. ASSUMPTIONS
The primary source of data is ACUACAR that has provided data regarding market demand andsupply, project specifics, comprehensive cost and investment data, project financing details,expected financial returns, and market distortions. An extensive WTP survey for sewagecollection, treatment and final disposal in different areas of intervention was conducted byconsultants in April 1998.
Investment costs include the cost of the works and the indirect cost of investment such as the costof administration, supervision and physical contingencies. "With" and "without" projectscenarios include connection cost generated from population growth, but only the "with" projectscenario includes the connection costs generated from an expansion of coverage. Because almostall investments are subsidized by the government, the actual financial investment cost are almostnegligible. The rest value of the investments is considered zero.
Operational and maintenance (O&Mj costs include the cost of labor, power and maintenance.For the water supply and sewerage investments, they are calculated as 0.5 percent of the cost ofcivil works, and 3 percent of equipment.
The implementation schedule of each sewerage collection subproject varies from 1 to 2 yearsdepending on its size. The sewage treatment subproject will be implemented in 6 years due to itscomplexity. The implementation period of the water supply subprojects will take 3 years.
Current and projected population in the project areas are based on the most recent data of thewater utility operating in the project area, and the number of households per connection served byACUACAR. Coverage levels were estimated by the company based on their own planning andresources availability. The annual targets for the installation of new service connections resultfrom projected coverage levels.
Page 52
Per capita water and sewage consumption was derived from the surveys that were undertaken inthe project areas. Non-residential consumption was based on data provided by ACUACAR, andconsultant studies.
Water and sewage billed Water billed for metered connections is based on the volume of waterbilled multiplied by the average water tariff. Sewage billed is assumed equal to the sewagevolume given by the number of connections, and the average tariff for the appropriate incomegroups. It is assumed that the introduction of sewage treatment will not result into theestablishment of a separate tariff for sewage treatment. The collection efficiency rate, defined assales collected over total sales, was assumed to remain unchanged in the "with" and "without"project scenario and stay at 85 percent.
The tariffstructures and levels were assumed to change for the "with" project scenario. An realtariff increase for water supply and sewerage services is foreseen between 1998 and 2001. On thebasis of the surveys conducted in a number of project areas, price and income elasticities wereestimated as -0.28 and 0.41, respectively. The annual average household income is estimated togrow at about 2 percent during the lifetime of the project.
Taxes on services applicable to civil works, projects and supervision, materials and equipment areon average 1 6 percent. Custom duties for heavy machinery, pumps, and PVC pipes arerespectively 5, 15 and 20 percent.
Dividend Payments. When profit is made, 50 percent is assigned to reserves for ACUACAR. Theother 50 percent is paid out in dividends, of which 50 percent is assigned to the District ofCartagena, 45.9 percent is for Aguas de Barcelona (a foreign water company) and the remainderis for other shareholders.
Page 53
IV. FINANCIAL ANALYSIS
The financial analysis of each subproject measures the flow of costs and benefits in market prices.Cost and benefits are measured in market prices and calculated based on the assumptionspresented in the last section. In the analysis, the impact of taxes and subsidies are included.Investments are largely subsidized through the particular financing structure of the project.Therefore the financial viability of each subproject is appraised from the investment point of viewwhich, excluding the cost of financing, allows for an assessment of the financial return of theproject (Table 1). The project horizon is set at 30 years and the annual cash flows are discountedat a rate of 12 percent, which is assumed to be Colombia's opportunity cost of capital.
Water Supply Subprojects. The system improvement project - aimed at improving the service bythe elimination of rationing and intermittent supplies, improvement of pressure, and operation andmaintenance cost savings - is financially viable. Because no WTP were available for thiscomponent, the benefits are calculated by the financial revenues that will be generated throughthe elimination of rationing. Based on the data that ACUACAR has provided, rationing currentlyaffects about 21 percent of residential connections. It is assumed that elimination of rationingwill result in a consumption increase of about 55 lcd. In addition, the project will generate(energy cost) savings and savings in maintenance through the implementation of a telecommandsystem.
The benefits of the subprojects aimed at the expansion of water supply to poor neighborhoods isassumed to be equal to the financial revenues that the new customers will generate. Because of achange in the cross-subsidy system, poor customers in strata 1 and 2 'will have to paysubstantially more in the next few years - estimated real rate increases of about 90 percentbetween 1998 and 2001. Even with the sharp increase in water rates, none of the expansionprojects - with the exception of that in the Zona Suroriental (which has the lowest per capitainvestment costs- is financially viable.
The subproject "Zona Norte" is highly beneficial due to the large benefits it generates because ofthe future development of this area, resulting in the construction of up-scale residences and theconstruction of hotels to cater the development of tourism (the latter benefit has not beenquantified). In addition, the project will benefit households in three poor communities in thisarea. As a result, net benefits are very high and the internal rate of return of this subproject is 38percent.
Sewage collection and treatment subprojects. All sewage collection and treatment subprojects,with the exception of the sewage collection project in Crespo-El Oro (which faces very low percapita investment cost) generate insufficient benefits to justify these investments on financialgrounds. However, when the investment subsidies that will be provided are taken into account,all sewage collection subprojects generate positive financial returns. The sewage treatmentsubproject generates no benefits as no treatment charge will be implemented to recover the costof this project.
IThe current residential rate structure has 6 strata, in which the first three strata are subsidized by thehighest three strata. The cross-subsidy structure will be reviewed in the next few years, resulting in smallercross-subsidies between the different strata, and hence resulting in sharp real rate increases for especiallythe poor(est) customers.
Page 54
Table 1: Results of the Financial Analysis (excluding investment subsidies)
San Jose de los Campanos 2,121 2,432 (311) 11%El Pozon - Villa Estrella 2,412 8,678 (6,266) 1%La Boquilla 714 1,719 (1,006) 4%Crespo - El Oro 1,337 392 945 39%Paseo Bolivar 180 839 (660) 0%Zona Suroccidental 1,101 2,154 (1,053) 5%Zona Suroriental 1,403 2,585 (1,182) 5%Sewage Collection 9,266 18,799 (9,533) 4%
(a) Sewage 0 64,291 (64,291) n.aTreatment
System Improvement 11,198 10,658 540 13%Expansion El Pozon 2,803 3,159 (356) 11%Expansion Falda de la Popa 369 2,013 (1,645) n.a.Expansion Plan Barrios 240 323 (83) 9%Expansion Zona Suroriental 723 502 222 17%Expansion Zonas de Invasion 519 1,140 (621) 4%Zona Norte 28,702 6,579 22,122 38%
(b) Water Supply 44,554 24,376 20,178 18%
(c) TOTAL 53,820 109,829 (56,009) 3%
However, when the investment subsidies that will be provided are taken into account, all sewagecollection subprojects generate positive financial returns. The only exception is the sewagetreatment subproject, that as no treatment charge will be implemented will not generate anybenefits.
V. ECONOMIC ANALYSIS
The economic viability of each subproject is appraised converting financial cash flows intoeconomic cash flows by using conversion factors and WTP estimates (that include the use andnon-use values of water supply and sewerage services), and then discounting these cash flowsusing a discount rate of 12 percent.
Conversion factors
Conversion factors eliminate market distortions created by taxes, tariffs and subsidies, add apremium on foreign exchange on the tradable components of each input, and account for anychanges in domestic prices that may occur as a result of the project. The standard conversionfactor was calculated at 0.92. All economic costs of the project inputs are lower than the marketcosts due to the high taxes and tariffs charged in Colombia that offset the impact of the foreignexchange premium. The project suffers substantially from market distortions as is reflected in thelow conversion factors, with labor as the most illustrative example. The land market was assumeddistorted with a financial price slightly below the economic price (due to the standard conversionfactor of 0.92). Since taxes and tariffs are merely transfer payments from consumers to the
Page 55
government, they are not treated as a resource cost to society (they have a conversion factor equalto zero).
Table 2: Conversion Factors
-Iteku - tConversionFactor
Unskilled labor 0.68Skilled labor 0.75Local Materials and Equipment 0.86Imported Materials and Equipment- PVC pipes 0.72- Heavy machinery 0.82- Pumps 0.75
Willingness to Pay
A contingency valuation study based on willingness to pay (WTP) surveys was conducted: (i) tocapture the non-use value of sewage disposal services, the intangible value that is not captured bythe market and does not generate financial returns, including any recreational and environmentalbenefits that could be attributed to the project; (ii) to study the perceived value of sewerageservices vis-a-vis tiheir current prices.
The non-use economic value of sewage disposal services is large due to externalities and benefitsthat are not typically attributed to the service. Externalities to the entire society, such as thebenefits that arise from living in a cleaner environment; and benefits to consumers, such as thebenefit of maintaining the purity of water sources.
The WTP for sewerage services were estimated based on how the services are expected toimprove as a consequence of the projects. Separate surveys were undertaken, due to thedifferences in the areas that are affected by project interventions, for sewage collection andtreatment. WTP surveys for sewage collection were conducted for 500 households in the districtsof Campanos, El Poz6n, La Boquilla and Zona Suroccidental. WTP estimates for the three otherproject areas (Crespo, Paseo Bolivar and Zona Suroriental) were taken from the survey localitiesmost similar to those project areas. The WTP study for sewage treatment was conducted under500 households in the city of Cartagena as this subproject will benefit the total population of thecity. The results of the surveys are summarized in Table 3.
Page 56
Table 3: Absolute and Relative Willingness to Pay for Water and Sewerage Services
Sewage CollectionSan Jose de los Campanos 20,230 2.87 4.8%El Pozon 15,900 2.77 5.7%La Boquilla 14,570 276 4.9%Zona Suroccidental 20,210 3.24 5.2%
(d) Sewage 9,227 0.33 1.0%Treatment
The main issue affecting sewage collection and/or treatment, the estimated WTP and the WTPrelation to the municipality's average income are identified in Table 3. WTP estimates forprovision of sewage collection are about 3 times higher than current tariffs. The average WTPfor sewage collection seems very high at about 5 percent of monthly household income. Thiscould be an indicator for the urgent need to undertake sewage collection project in poorneighborhoods. It could suggest that customers are aware of the adverse environmental impacts ofthe lack of sewerage collection. It is likely that because of the separate surveys, households tendto overlook their budget constraints, and hence have overestimated their overall willingness topay for water supply, sewage collection, treatment and final disposal. In the sensitivity and riskanalysis the very high levels of willingness to pay will be tested in more detail.
The WTP for treatment is more consistent with data found in studies possible that a large part ofthe public health impacts of improved sanitation are included in the elsewhere in Latin America,and is equal to about 1 percent of household income.
Other benefits arising from improved environmental conditions that will contribute to therecovery of beaches, enhance tourism activities and other water uses, and increase recreationalactivities have not been quantified. Preliminary studies show that these benefits can besubstantially.2
There are no separate WTP studies for improved water supplies and expansion of water supply inthe poorest neighborhoods. For improved water supplies, it has been assumed that thewillingness to pay of existing customers is equal to the increased financial revenues because ofhigher monthly consumption as rationing is eliminated. For the expansion of water supplyservices in poor neighborhoods, water consumption levels in other poor neighborhoods are usedas a yardstick, and multiplied by the average tariff levels for the lowest income groups. For thefuture development of Zona Norte, ACUACAR provided data indicating that at 2015 theequivalent of 77,000 people will have settled in this area, mainly high-income households. Inaddition, increased development will also result in an increase in water consumption and sewageproduction of commercial holdings, which have not been included in the analysis due to lack ofreliable data.
Results
2 Ana Maria Ibanez, Nancy Lozano Garcia and Kenneth McConnell, The Benefits of Improving WaterQuality in Cartagena Bay, Colombia, September 1998. Using a travel cost method, the annual benefits ofimproved water quality by beach users was estimated at US$969,000.
Page 57
The introduction of willingness to pay and shadow prices to correct the financial flows of benefitsand costs improves the financial estimates significantly as presented in Table 1.
Table 4: Results of the Economic Analysis
Projet Net?Pre,$ Vatue (O 0O, s of A 8. efW t -: .: - aal Rate
San Jose de los Campanos 2,404 2,198 6 12%El Pozon - Villa Estrella 6,130 7,073 (943) 10%La Boquilla 1,970 1,437 533 16%Crespo - El Oro 5,056 695 4,360 171%Paseo Bolivar 487 670 (182) 8%Zona Suroccidental 2,500 1,785 715 17%Zona Suroriental 5,502 2,104 3,398 32%Sewage Collection 24,051 16,163 7,888 16%Sewage Treatment 56,620 52,633 3,988 15%
System Improvement 11,483 10,533 950 14%Expansion El Pozon 2,656 3,048 (483) 9%Expansion Falda de la Popa 337 1,490 (1,152) n.a.Expansion Plan Barrios 220 292 (73) 8%Expansion Zona Suroriental 662 557 103 15%Expansion Zonas de 706 904 (432) 4%Invasion 25,548 9,516 16,031 45%Zona NorteWater Supply 14,929 13,015 1,915 15%*
TOTAL 95,601 81,811 13,790 16%*
Note:* excluding the water supply projects in Falda de la Popa, the Zonas de Invasi6n and Zona Norteand adjustments in system improvement subproject.
Water Supply Subprojects3. The system improvement project generates a positive net benefit ofC$910 million, and a internal rate of return of 14 percent. The expansion projects do not generatepositive net benefits with the exception of the subproject in Zona Suroriential and hence shouldnot be undertaken in their current form due to lack of benefits. They either should be redesignedto ensure that they will generate a positive net benefit (possibly El Poz6n and Plan Barrios - incase they can not be redesigned successfully, these projects should be dropped) or be dropped ofthe current project (Falda de la Popa and the Zonas de Invasion)4. The "Zona Norte" project
The economic rate of return is slightly lower than the financial rate of return due to the use of shadowpricing in benefits and costs.4The per capita investment costs in Falda de la Popa and Zonas de Invasi6n are US$557 and US$212
Page 58
generates large benefits, and has an internal rate of return of 45 percent has been dropped fromthe project because of the need to scale it down, and as this is a very profitable component, it canbe easily financed privately by ACUACAR itself.
Sewage Collection and Treatment Subprojects. For each sewage collection subproject, theeconomic NPV is higher than the financial NPV, due to the large positive externalities of theproject which are not internalized in the market prices of the services provided. However, two ofthe seven subprojects -El Poz6n and Paseo Bolivar - do not meet the cut-off internal rate ofreturn of 12 percent.
Yet, these two projects have positive internal rates of return, which are very reasonable forsewage collection projects, especially taken into account that they serve the poorest populationsof Cartagena. As some of the externalities associated with sewage collection were not quantifiedin monetary terms, including environmental benefits and public health benefits (that are usuallyonly partially reflected in households' willingness to pay) it is possible that the actual benefits ofsewage collection are higher than calculated in Table 4. However, it is recommended that thesetwo projects will be redesigned so as to ensure that they will generate sufficient cash flow.
The sewage treatment project generates a positive net benefit and a rate of return of I5 percent.
VI. DISTRIBUTIVE ANALYSIS
The distribution of positive externalities , which is defined as the difference between theeconomic and financial cash flows, is analyzed to determine who benefits and who pays for thecosts of the subprojects. The big winners are the customers of ACUACAR, but also ACUACARand other shareholders that realize benefits in the form of dividend payments. The District ofCartagena which assumes most of the debt service for the loan that is financing the project isproviding a very significant contribution to the project. The implicit subsidy policy that theDistrict of Cartagena and the central government have embarked upon results in a negative fiscalimpact for the sewerage projects. Labor benefits from premiums on salaries and wages.
Consumption externalities result from the prices that are actually charged a-nd the WTP for watersupply and sanitation services. Consumption externalities for the total projects are positive andestimated at C$68 billion.
There is a sharp difference between the net fiscal impact of the water supply and sewerageprojects. Mainly because of the large capital subsidies given to the project (for more details onthe financing of the project, see Annex 5), the sewerage subprojects will be a drain on thegovernments' resources. The negative fiscal impact of the sewage collection and treatmentprojects is estimated at C$65 billion. For the water supply projects (excluding those of Falda dela Popa ,the Zonas de Invasi6n, Zona Norte and adjustments in the system improvement project),the impact of capital subsidies is offset by the positive impact of incremental taxes, and hence thefiscal impact of these projects is positive and estimated at about C$17 billion. The total fiscalimpact is negative at C$48 billion.
Due to the high taxes and custom duties being paid in Colombia, the central government willbenefit from the project because of the large tax income it will generate. As a result, the net fiscalimpact on the central government will be positive at C$13 billion. The District of Cartagena willbenefit from dividend payments it will receive from ACUACAR, but the net fiscal impact for the
respectively. The per capita investment cost for El Pozon and Plan Barrios are US$116 and US$133respectively and could possibly be beneficial when being redesigned. In case, adjustments in the designstill result in negative net benefits, the subprojects should be discarded from the project.
Page 59
District of Cartagena will be very negative at almost C$61 billion. Hence, the total net fiscalimpact will be negative at C$48 billion. The burden on the District of Cartagena is mainly due tothe large debt service payments that have to be made in connection with the repayment of theWorld Bank loan.
Table 5 shows that ACUACAR will benefit from the project especially from the water supplyprojects. Their net gain is estimated at C$16 billion. The benefits to the employees ofACUACAR are estimated at C$6 billion for the entire project. They are due to the wagepremiums that the water utility pays over the fair market price of equivalent labor. Because somesubprojects are more labor-intensive than others, labor benefits differ across projects. In addition,other stakeholders will benefit in the form of dividend payments estimated at C$0.4 billion.
Table 5: Distribution of Benefits
;rGjeCt N~et *'res~nt Value (C$ uiIiQr), p of pril 198
C NO trla D*t i a Labor Othir T
_ _~~~~~~~~~z . ,. .. i ...,, .._. _
San Jose de los 117 383 (1,354) 1,213 192 41 594Campanos 3,316 (611) (6,531) 677 687 11 (2,450)El Pozon 918 (29) (1,195) 495 127 6 323La Boquilla 3,111 460 118 1,497 31 34 5,251Crespo - El Oro 241 (63) (635) 75 65 0 (317)Paseo Bolivar 1,154 (83) (1,563) 398 167 6 80Zona Suroccidental 3,438 (149) (1,919) 759 201 4 2,335Zona SurorientalSewage Collection 12,297 (91) (13,079) 5,115 1,470 103 5,814
Sewage Treatment 56,620 848 (52,965) 0 4,164 0 8,668System Improvement 285 6,008 3,655 7,064 652 249 17,914Expansion El Pozon (1,107) 5,114 898 2,621 210 63 7,799Expansion Plan Barrios (95) 438 69 215 21 5 652Expansion Zona (286) 1,292 221 702 31 17 1,979SurorientalWater Supply (1,201) 12,570 4,827 10,847 772 342 28,158
TOTAL 67,716 13,327 (61,216) 15,962 6,405 446 42,640
VII. POVERTY IMPACT
The poverty impact analysis measures how much of the consumer benefits accrue to poorcustomers. Based on the income data collected for the project areas during the willingness-to-paysurveys, it was impossible to calculate with any accuracy the impact of the project on the poor.Assuming that (i) poor consumers are defined as customers that fit into the first three strata of thetariff structure; and (ii) that most rich households will already been connected to the water supplysystem, and hence new customers will mainly be poorer households.
Page 60
On the basis of these assumptions, poor consumers will receive most of the benefits of the projectas can be seen in Table 6
Table 6: Distribution of Consumption Benefits between Poor and Non-Poor(in C$ billion)
Prroiet Poor := - X,Water Supply Projects (1,201) 83 (1,201)System Improvement 203 83 285Expansion Projects (1,487) 0 (1,487)Sewage Collection Projects 12,297 0 12,297Sewage Treatment Projects 47,958 8,663 56,621
Total Project 58,970 8,746 67,716
Note *:The negative impact is mainly due to shadow pricing the financial benefits in order to obtain theeconomic benefits.
VIII. SENSITIVITY AND RISK ANALYSIS
The sensitivity analysis defined the following major risk variables: investment cost overruns,project delays, changes in the unaccounted for water, labor productivity, collection efficiency andthe willingness to pay for access to new or improved services. Most of these variables are largelybeyond management control, with the exception of the willingness to pay for access to or animprovement in water and sewerage services which is based on consumer's preferences and islargely beyond management control.
Table 7: Risk Variables and their Impact and Risk Significance
Risk Variable Impact and Risk SignificanceWillingness to Pay for Sewerage Services Direct impact on benefits; based on consumer's
preferences and hence largely beyondmanagement control
Collection efficiency Direct impact on benefits; largely undermanagement control
Tourism development in Zona Norte Direct impact on benefits, hence largelybeyond management control
Rationing Direct impact on benefits; largely undermanagement control.
Population growth Indirect impact on benefits, beyondmanagement control
Investment Cost Overrun Direct impact on investment costs; largelyunder management control
Operation and Maintenance Cost Overrun Direct impact on operation and maintenance________________________________________ costs; largely under management control
The risk analysis recalculated the results of the financial and economic analysis by changing thesemajor risk variables all at the same time using the Crystal Ball software. For the willingness topay for sewage services, a normal distribution was used with a standard deviation of 20 percent tocapture the uncertainties regarding consumers' willingness to pay for this type of services. For
Page 61
the willingness to pay for water supply services, also a normal distribution was used with astandard deviation of 10 percent.
For tourism development, a uniform distribution was used with a range of 0.20 to 1.00 assumingthat in the worst-case scenario only 20 percent of the forecasted growth will materialize. For theimpact of rationing a normal distribution has assumed with a standard deviation of 20 percent.For risk variables regarding the investment and the operating cost overruns, a triangle distributionwas assumed with values ranging from 0.80 to 1.20.
Results Economic Risk Assessment
The economic risk analysis shows that the projects that turn out to be unviable have high riskprofiles, while the projects that are economically viable in general have low risk profiles.
As for the sewage collection and treatment projects, the risk analysis confirms the results fromthe economic analysis. The three projects with internal rates of return below the cut-off rate of 12percent - Campanos, El Pozon and Paseo Bolivar - also show low probabilities that they willgenerate net positive benefits. The other projects have probabilities of generating a positive netpresent value ranging from 60 to 100 percent as can be seen in Table 8. The sewage treatmentproject has a sufficient rate of return, yet the risk involved in this project is substantial.
Table 8: Results of Economic Risk Analysis
Project Probability Mean NPVNPV >0 (C$ billion)
Water Supply ProjectsSystem Improvement 78% 775Expansion El Pozon 0% (53'i)Expansion Plan Barrios 0% (79)Expansion Zona Suroriental 98% 88Sewage Collection ProjectsSan Jose de los Campanos 53% 21El Pozon - Vila Estrella 25% (970)La Boquilla 89% 515Crespo - El Oro 100% 4,338Paseo Bolivar 0% (189)Suroccidental 96% 730Suroriental 100% 3,398Sewage Treatment Project 63% 3,855
IX. Conclusions
The Cartagena project looks sufficiently robust if the non-viable subprojects will be eitherredesigned or dropped from the project. The water supply expansion subprojects - with theexception of that in Zona Suroriental - can not be justified on economic grounds, and should notto be undertaken in their current form.
Two of the sewage collection projects are having internal rates of returns that are below thecut-off rate of 12 percent. These sewage collection projects are likely to generate important publichealth and environmental benefits to society that are not captured in individual households'willingness to pay particularly as these projects are undertaken in poor neighborhoods of the city.
Page 62
However, it is recommended that these currently unviable sewage collection projects as well asthe subproject in San Jose de los Campanos that faces a higher risk profile should be redesignedto ensure their long-term sustainability.
All other subprojects will generate substantial net benefits to society. All the main stakeholders,i.e., consumers, water company and the company's labor force will reap benefits when thesubprojects are being implemented. Consumers will benefit from increased availability,reliability and quality of water supply and sewerage services. The labor force will benefit fromhigher than market salaries, while they also will benefit through dividend payments. The netfiscal impact of the project shows a distinct pattern between sewerage and water supply projects.The water supply subprojects show a positive net fiscal impact, while the sewerage projects showa negative fiscal impact. The total fiscal impact of the project is negative at C$48 billion.However, the distribution of these benefits are rather unequal, with the central governmentbenefiting from additional tax revenues will see a total positive net benefit of C$13 billion, whilethe impact on the District of Cartagena will be negative at almost C$6 1 billion.
Page 63
Annex 5Cartagena Water Supply, Sewerage and Environmental Management Project
Financial Assessment of Project Entities
The proposed US$117.2 million project will be financed jointly by the Bank, District ofCartegena, ACUACAR, and the National Government. The repayment of the Bank loan, will bethe responsibility of the District of Cartagena, with a partial contribution from ACUACAR ofUS$15.4 million between years 2005 and 2011. The financing scheme of the proposed project issummarized below. This annex summarizes the financial assessment of the District of Cartagenaand ACUACAR, in particular, of their capacity to provide counterpart funds and debt service.The analyses showed that the proposed financing scheme is robust with nearly 80% probabilitythat there will be no financial shortfall.
PROJECT FINANCING STRUCTURE
Financing and Counterpart Funds Repayment to the Bank
IBRD US$ 85.00 million * District of Cartagena: All debt serviceDistrict of Cartagena US$ 7.58 million except for those paid by ACUACARACUACAR US$ 4.60 million between 2005 and 2011.National Government US$ 20.00 million * ACUACAR: US$15.4 million of debtTotal Project US$117.18 million service between 2005-2011.
The District of Cartagena will provide its counterpart fund provision through the followingearmarked funds, which will be deposited into a trust fund to be created for the Project:
* 18% of property tax collecteda 20% of National Government transfers (as determined by Law 60)* 100% of environmental fees (tasa retributiva)* a part of royalty (fondo de regalia) in case there is a shortfall* a part of proceeds from the sale of Termo Cartagena of US$1 million
DISTRICT OF CARTAGENA
Recent Past and Current Situation
The current revenue and costs of the District of Cartagena were about US$53 million in 1998 andUS$52 million, respectively. The main revenue source of the district is property tax and industryand business taxes which together account for 76% of current revenue. In addition, the Districtreceives capital revenues which include transfers from the National Government, extraordinaryitems such as sale of assets, and other earmarked investment funds. Personnel costs, pensions forex-public sector employees, and debt service account for about 15%, 22%, and 42% of currentcosts respectively. 20% of National Government transfers (Ley 60) and 18% of property taxcollected are earmarked for sewerage and environmental infrastructure.
Until 1996, the District of Cartagena suffered low tax collection rates (less than 30%) and highpersonnel costs. In particular, the personnel costs almost doubled, when it agreed to absorb the
Page 64
former public water and sanitation utility employees (about 1,500 people), who were nottransferred to the newly created public-private mixed utility "ACUACAR".
To cover the operational deficits and increasing level of public works, the District took on highlevels of debts, which left them with nearly US$50 million of accumulated deficits at the end of1996. The financial situation of the District of Cartagena, however, improved considerably since1997, when it signed a performance contract with the Central Government. A series of actionscontributed to the improvements: (i) the self declaration system (autoavaluo) for the property tax;(ii) a more severe penalty system for non-payment; (iii) the withholding system for industry andbusiness taxes; and (iv) sale of its telephone company, among others.
Thanks to these improvements, the District of Cartagena collected about 44% of property taxbase and reported a small current surplus in 1998.
Basic Financial DataDistrict of Cartagena
(in current US$ million)
1995 1996 1997 1998Current revenueTax revenue 18.0 27.5 37.8 43.3Other income 14.6 7.3 6.3 9.9Subtotal 32.6 34.8 44.2 53.2
Current costsAdministrative costs 18.2 33.5 29.6 30.1Debt service 15.0 24.8 17.9 21.5Subtotal 33.2 58.3 47.6 51.6
Current deficit -0.5 -23.5 -3.4 1.6Capital revenue /2 31.0 58.1 145.5/ 71.1Investments 39.4 82.1 129.0 93.1Accounts payable* 41.9 2.5Deficit before credits -8.9 -47.5 -28.8 -22.8New credits 12.3 15.6 18.7 10.3Final deficit 3.3 -31.9 -10.1 -12.5Property tax collection rate 18% 27% 42% 44%
/I Ccntral Governtent budget iransfers, etc./2 Including the sale of the telephone company for about US$47 million.
Financial Projections
Based on the current performance and the expected performance improvements in the future, weprepared the financial projections for the District, which is presented in Attachment 1 of thisAnnex.
Assumptions. In the base case scenario, we are assuming the following: (i) local currencydevaluation over US dollar is 3% over purchasing power parity (PPP) per year until 2007, and 0%thereafter; (ii) the District will improve its tax collection rate from 44% in 1998 to 51% by year2002; (iii) the District's property tax base will increase in 2002 by 15% in real terms as a result ofreassessment (as per Law 14); (iv) there will be no additional sale of assets; (v) no increase inpersonnel costs in real terms, (vi) additional Loans to be taken by the District for water andsewerage investments are minimal. The counterpart funds and debt service for the proposedLoan will be paid mainly out of earmarked funds water and sewerage investments - 18% of
Page 65
property tax and 20% of National Government transfers (Ley 60), complemented by the proceedsfrom Termo Cartagena sale proceed of US$ I million, environmental fee (tasa retributiva) andthe royalty fund (fondo de regalia). A more detailed description of the assumptions are availablein Project Files.
Under the base case scenario, the District will be able to provide counterpart funding in a timelymanner and pay the debt service fully provided that the National Government will transferUS$20million between years 1999 and 2004 for the proposed project.
Base Case Scenario - Financing Plan and Main Financial RatiosBaseline 1999 2000 2001 2002 2003 2004
Earmarked Revenue for SewerageInvestments (US$ million)
18% of Property Tax 3.5 3.8 4.1 4.3 5.0 5.0 5.020% of National Government 3.4 3.5 3.7 3.7 3.8 3.8 3.9Transfer
Subtotal 6.9 7.3 7.8 8.0 8.7 8.8 8.9100% of Environmental fee 0 0.35 0.35 0.35 0.35 0.355 % of Royalty (Fondo Regalia) 0.26 0.27 0.27 0.27 0.27 0.27Total earmarked revenue 7.5 8.4 8.6 9.3 9.4 9.5
Financing Plan1BRD 5.93 17.73 27.20 17.78 12.86 3.50National Government 1.39 4.17 6.40 4.18 3.03 0.82District of Cartagena 0.45 0.73 2.79 1.94 1.44 0.20ACUACAR 0.40 1.80 1.10 0.60 0.40 0.30
Total 8.17 24.43 37.49 24.50 17.72 4.83
Financial RatiosProperty Tax Collection Rates (%) 44% 46% 49% 51% 51% 51% 51%Interest payment/Net operational 25% 20% 17% 16% 14% 13% 11%
surplus /1 (%)Debt balance/current revenue /2 (%) 56% 56% 57% 68% 70% 70% 64%Net operational surplus /3/debt 2.3 3.2 3.5 3.7 5.2 5.7 6.5
service (times)Earmarked funds /debt service 1.4 1.9 2.1 1.8 1.9 2.0
(times) /4/1 Interest payment/Net operational surplus - Maximum allowed by the National Government for approving new debtsis 40%/2 Debt balance/current revenue - Maximum allowed by the National Government for approving of new debts is 80%,but 70% is considered high./3 Net operational surplus: Current Income + Capital Income - Operating Costs - Minimum Social Investments/4 Earmarked funds not including Royalty
Sensitivity and Risk Analysis
In order to assess the impact of changes in critical assumptions, we carried out a sensitivity andrisk analysis on selected variables. We measured the impact of the changes in these variables tothe main financial indicators of the District. Both the variables and the indicators are summarizedin the following table:
Page 66
Variables Indicators* Tax collection rate * Financial shortfall/surplus during project implementation.* Administrative costs * Minimum debt service coverage throughout the life of* Project investment costs the loan.* Exchange rate devaluation * Earmarked funds/debt service (minimum 2000-2007)
* Operational Surplus/ debt service (minimum 2000-2007)* Interest/operational surplus (maximum 2000-2007)* Debt balance/current revenue (maximum 2000-2007)
The main conclusions that can be drawn from the different runs of sensitivity analysis (presentedin Attachment 3) are as follows:
* The project's financial viability, in terms of timely provision of counterpart funding, islargely dependent on the District's ability to improve tax collection rates. Slight decrease inthe collection rates (based case assumes a gradual increase) will make it impossible for theDistrict to comply with the Project financing requirements.
* The project's viability, in terms of the District's debt service capacity, is highly sensitive toexchange rate devaluation. Devaluation of more than 5.5% per year (over PPP) between1999-2001 will require that the District resort to funds other than the earmarked funds, suchas the royalty funds or the National Government guarantee to pay for the debt service.
* The project's viability is less sensitive to changes in the District's administrative costs. Theadministrative cost, however, will affect the overall financial health of the district. Costincrease of more than 13-14% per year in real terms will make the District impossible tocomply with the National Law 358 (the Law that limits public debts. The NationalGovernment will not allow the District to take any more debts when certain debt capacityindicators are not complied with).
* The project's financial viability is also sensitive to the investment cost overrun. Aninvestment cost overrun of more than 7% will cause financial shortfall. The project,however, assumes sufficient physical and price contingencies.
Risk Analysis
After confirming the importance of the four risk factors, we then conducted a risk analysis todetermine the probability of project's success. For each risk variable, we assigned a probabilitydistribution. Using the Crystal Ball risk analysis software, we ran a simulation of 1000 trials todetermine the probability of the project's success, measured by a set of indicators (same as thoseused in sensitivity analysis).
The probability distributions and standard deviations used for the analysis are summarized below:
Variables Assumptions* Property tax collection rate * Normal distribution. Mean value 3% increase per year to
improvements 51%. Standard deviation 5%. Minimum = 2% decreaseper year; maximum = 6% increase per year.
* Project investment costs * Triangular distribution. Likeliest: no cost overrun = 1.Minimum = 0.8 (20% reduction), maximum = 1.2 (20%increase)
* Administrative costs * Triangular distribution. Likeliest: no real increase= 1.
Page 67
Variables AssumptionsMinimum = 0.9 (10% decrease), maximum = 1.2 (20%increase)
Exchange rate devaluation * Lognormal distribution. Standard deviation: 10%. Meanrover PPP 0.97 (3% devaluation over PPP) Maximum 1.10 (10%
appreciation over PPP), minimum 0.88 (22% depreciationover PPP) -Based on historical observation '80-'97
Main Results of Risk Analysis
Indicators Mean Static Probabilityexpected estimate
valueFinancial shortfall/surplus US$7.4 US$8.2 Of not having a 79.2%during project million Million financial short-fallimplementation (US$million).Total earmarked funds*/debt 3.3 3.0 Of minimum debt 98.4%service throughout the life of service coveragethe loan minimum (2000-10) being more than 1.0Operational Surplus/ debt 3.1 3.5 Of minimum being 93.6%service minimum (2000-10) more than 1.0Interest/operational surplus 18% 17% Of maximum being 92.4%maximum (2000-10) less than 40%Total debt balance/current 75% 70% Of maximum being 89.4%revenue maximum (2000-10) less than 80%* 18% of property tax; 20% of National Govemment transfer (ICN, Law 60); environmental fee(tasa retributiva); and 5% of royalty (fondo de regalia)
Risk Sensitivity to Factors - Contribution to VarianceFinancial shortfallsurplus
l__ == . ~~~~~~~~~~~Contribution to Variance* Exchange rate devaluation over PPP 51.2%* Collection efficiency gain 24.6%* Project investment costs 24.0%• Administrative costs 0.2%
Conclusions
The sensitivity and risk analysis showed that the proposed financial scheme is robust, with nearly80% probability that there will be no financial shortfall, both in terms of counterpart provisionand debt service. Although the project's financial viability depends largely on the District'scapacity to improve tax collection rates, as well as local currency stability, the proposed financialscheme allows for sufficient cushion. Nonetheless, we will closely monitor the financialperformance of the District and ACUACAR through a set of indicators as presented in Annex 1.
Although not presented here, when we first analyzed the riskiness of the originally proposedfinancing structure, with a larger investment program of US$128 million, with a Bank loan ofUS$100 million, and lower ACUACAR contribution to counterpart funds and debt repayment, wefound that the project's financial structure posed a high risk of being not viable. The chances ofthe District defaulting on counterpart fund and debt service obligation was more than 50%. The
Page 68
initial financing structure was then modified to the current scheme, making it much more robust,as described above. The analysis carried out on the initial financing scheme is available inproject files.
ACUACAR
Background
In 1995, the public water company of Cartagena was abolished and replaced by a new companyACUACAR, with 46% capital participation of a private Spanish operator Aguas de Barcelona(Agbar). In parallel, the Spanish operator signed a management contract with the District. Ineffect, the contract is similar to a leasing model. T he contract structure is summarized in Box 1.
Although the original contract specified that Box 1. ACUACAR - The ContractACUACAR is not responsible for financing Structureinvestments, in reality, ACUACAR hasfinanced about US$ 27 million of investment The main content of the contract signedin the past three years. For the proposed between the District of Cartagena and Agbar,project, ACUACAR agreed to provide the private operator of Cartagena is ascounterpart funding of US$4.6 million (by follows:financing the cost of project design and workssupervision) and to contribute US$15.4 * Share holding: Agbar 46%; District 50%;million of the debt service of the proposed employees and other 4%.loan between 2005 and 2011. We carried out * Management contract: Agbar providesa financial analysis and prepared a financial technical assistance for a fee of 4.9% ofprojection to deterrnine the financial capacity operating revenue net of bad debts.
D I)ividend policy: Shareholders receiveof ACUACAR in fulfilling the prOJeCt dividend at least 50% of net incomefinancial obligations as well as the general a ACUACAR is not obliged to financefinancial viability of the firm.
Current Performance ACUACAR Before and After PSPMain Operational Performance
ACUACAR provides water and Before ('94) - Aftersewerage services to about 101,000 l ('98)and 89,000 clients, respectively and # of employees 1300 280bills about US$30 million per year. Employee per 1000 15 4ACUACAR's tariff structure follows connectionsthe National Law 142, which classifies Metering 30 94the residential customers into 6 groups, Days accounts 216 88
receivable/land allows cross subsidy between the Number of Clients 84,143 101,238customer groups, but within certain Unaccounted for water 60% 45%limits (places a cap on overcharges). Production capacity 160,000 260,000ACUACAR's customer base is largely (m3/day)poor. Although business and Service continuity/2 60% 92%industries account for 28% of total Time to respond to pipe 6 days 1.3 daysrevenue, the rest of revenue comes breakslargely from the lower income Turbidity (NTV) 2.3 0.6customer groups. At the end of 1998, I/ not including current bills44% of customers was classified as 2/ total hours of service of clients surveyed/(24 hours x number"estrato 1" and "estrato 2", the low of clients)income customer groups. In terms ofrevenue, these two groups accounted for about 18% of ACUACAR's revenue. When we include
Page 69
the "estrato 3", the lower middle Selected of Financial Data (1995-1998)income group, the three lower (In current US$ million)income groups (estrato 1-3) 1995 1996 1997 1998account for 73% of total Revenue 15.1 31.0 35.7 34.7*customer base and 3 8% of total Real increase % 17% 13%revenue. Operating Income 0.9 2.6 3.3 5.3
Net Income 1.1 2.2 3.4 2.5The operational and financial Cash from operations -0.8 -3.9 4.0 -8.6performance of the company Investments 4.4 2.9 14.3 4.8improved since 1995 when Debt financing 5.1 4.0 13.3 1.5ACUACAR was partially Financial Ratios:privatized. Thanks to a major Operating margin 6% 9% 9% 15%cost reduction brought about by Return on Equity 16% 25% 31% 17%
Debt service coverage - - 1.6 1.5the private management, the Current Ratio 2.3 2.1 1.9 1.2company reported positive net * figures in dollar lower due to exchange rate devaluationincome for years 1996, 1997,and 1998. Although the company reported net profit in 1998, the cash situation of the companydeteriorated. The cash flow situation of the company worsened in 1998, mainly because thecompany took on local loans for investment. The working capital requirements increasedbecause: (i) ACUACAR financed connection costs of new customers (about 6,500 newconnections for US$200 per connection; by law ACUACAR provides 3 year financing for thepoor), and (ii) of the tariff increase of about 13%., and resulting increase in accounts receivables.The company, however has been adopting an aggressive commercial policy, including metering,disconnection, and identification of illegal connection, which is expected to produce results in thecoming years.
Financial Projections
Based on the current performance and the expected performance improvements in the future aspresented by ACUACAR, we prepared the financial projections, which is presented inAttachment 2 of this Annex.
In the base case scenario, we are conservatively assuming the following: (i) real increase inaverage tariff of 7%, 4%, and 0.9% per year in 1999, 2000, and 2001 respectively, but almost90% increase in category 1 and 2 customers (following the guidelines of the National tariff Law);(ii) gradual increase in customer base, with higher increase in lower income customer groups(category 1, 2, 3); (iii) no substantial improvements in commercial performance (disconnectedcustomer will decrease gradually from 6.5% to 4.5% of total revenue; bad debts will stay at 8% ofrevenue); (iv) gradual efficiency gains reflected in the operating cost reduction of 0.3% per year;and (v) minimum level of own-account investments during 1999-2007 (about US$12.5 million).Summary of main assumptions are included in Attachment 2. A more detailed summary ofassumptions is available in the Project Files.
Under the base case scenario, ACUACAR's financial situation will improve only gradually.Because the company carried out a high level of capital investments, and took on localcommercial bank loans to finance these investments in 1997, the debt service will remain highuntil 2004. It will take until 2001 for the company to generate sufficient internal cash to cover itsdebt service requirements. Nonetheless, by the time ACUACAR becomes responsible foroperating and maintaining the system (by 2005), and for repaying a part of the Bank loan (in2005), the company's financial situation is expected to improve. The selected financial ratios arepresented below.
Page 70
ACUACAR - Main Financial Ratios
1998 1999 2000 2001 2002 2003 2004 2005 2006Operating margin 15.3% 9.8% 12.3% 15.5% 13.0% 12.4% 12.6% 8.5% 9.6%Netprofitmargin 7.1% 0.7% 4.6% 7.5% 6.5% 6.6% 7.5% 5.1% 5.2%Return on Equity 17.3% 1.7% 11.5% 18.0% 14.5% 13.7% 14.4% 9.9% 10.2%Debt Service Coverage 1.46 0.77 0.89 1.25 1.22 1.45 3.99 5.12 2.46Current Ratio 1.26 0.95 0.91 0.92 0.91 0.99 1.14 1.15 1.21Debt as % of Total 68.9% 65.3% 63.3% 58.2% 55.0% 50.7% 45.6% 48.6% 50.7%Capitalization
Sensitivity Analysis
The eventual improvements in ACUACAR's financial performance is dependent on the followingcritical assumptions: (i) that ACUACAR's own-account investments (not financed by theDistrict) will be minimal; and (ii) that ACUACAR's commercial performance will not deterioratefurther.
In order to determine the impact of the main assumptions, we carried out a sensitivity analysisselected variables. We measured the impact of the changes in these variables to the main financialindicators of ACUACAR. Both the variables and the indicators are summarized in the tablebelow. The results of the different runs of sensitivity analysis are presented in Attachment 3.
Variables Indicators* Collection rates * Return on Equity* Investment cost * Minimum Current Ratio* Operation and maintenance i Minimum Debt Service Coverage
cost* Exchange rate devaluation
The main re.sults of the sens-itivly analysis can be summarized as follows:
* ACUACAR's liquidity situation will not improve substantially until it pays up its debts withthe local Banks.
* ACUACAR's financial performance is highly sensitive to its commercial performance.The urgent task for ACUACAR is to continue its efforts to improve its commercial performance:improve collection rates, and improve its reconnection rates, so as not to lose customer base.• Improvements in operational efficiency will also help improve the financial health of the
company.* ACUACAR's financial situation is less sensitive to the exchange rate devaluation, as most of
its debts are in local currency, except for the proposed loan.
Conclusions:
Although ACUACAR's short-term liquidity problem is hard to solve until it pays up thecommercial bank debts, there are a series of actions that ACUACAR can take to improve itsfinancial performance. The most important task is to continue to improve its commercialperformance. Although it is not an easy task to make lower income customers pay, especiallywith the sharp tariff increases in the recent years for lower income customers, the commercialperformance is by far the most important factor in improving the financial health of the company.The company can also further improve its operational efficiency by reducing operating costs
Page 71
gradually over the years. Furthermore, ACUACAR should try to keep the investment level tominimum, or raise tariff, if higher level of investments are to be carried out to maintain thefinancial health of the company.
Page 72
Annex 5- Attachment 1
Cartagena Water supply, Sewerage and Environmental Management ProjectFinancial ProjectionsDistrict of Cartagena
Years Ending December: 1997 through 2007In millions of Current Colombian Pesos
1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007
Actual Forecast
CurrentRevenue 51,895 84,663 101,078 118,499 133,999 157,241 174,275 193,169 214,128 237,380 263,1790 0 0 0 0 0 0 0 0 0
TaxRevenues 44,642 68,864 82,752 97,607 111,018 131,962 146,468 162,581 180,482 200,369 222,467of which:Property Tax 20,566 30,737 37,762 45,418 52,566 66,496 73,146 80,460 88,507 97,357 107,093Industry and Business Tax 20,739 33,584 39,629 45,970 51,486 57,664 64,584 72,334 81,014 90,736 101,624Other Taxes 3,337 4,544 5,362 6,220 6,966 7,802 8,738 9,787 10,961 12,276 13,749
Non-Tax Revenues 7,253 15,798 18,326 20,892 22,981 25,279 27,807 30,587 33,646 37,011 40,7120 0 0 0 0 0 0 0 0 0 0
CurrentCosts 56,143 82,067 81,638 91,219 99,109 100,252 108,027 115,453 138,048 146,404 153,9800 0 0 0 0 0 0 0 0 0 0
Central Administration 28,924 38,845 41,232 47,005 51,705 56,876 62,563 68,820 75,702 83,272 91,599of which:personnel 8,158 12,161 14,107 16,082 17,690 19,459 21,405 23,545 25,900 28,490 31,339pensions for ex-public sector 11,333 17,980 20,857 23,777 26,154 28,770 31,647 34,812 38,293 42,122 46,334
employeesLegislative Branch 6,078 9,000 10,440 11,902 13,092 14,401 15,841 17,425 19,168 21,084 23,193Operational Surplus 1/ 91,258 109,559 124,122 141,234 167,197 186,491 208,336 232,757 260,060 290,587
0 0 0 0 0 0 0 0 0 0 0Debt Service (non-Bank) 21,141 34,222 28,718 29,493 28,480 19,382 16,704 13,533 10,626 7,853 3,350Debt Service (Bank) 0 0 1,248 2,820 5,832 9,594 12,919 15,675 32,553 34,194 35,838
0 0 0 0 0 0 0 0 0 0 0Current Deficits/Surplus -4,248 2,596 19,440 27,279 34,890 56,989 66,248 77,716 76,080 90,977 109,199
0 0 0 0 0 0 0 0 0 0 0CapitalRevenue 170,618 113,116 130,479 148,756 165,379 184,510 205,866 230,516 258,139 289,094 323,789
of which:Transfers from the National 23,409 27,074 31,948 36,420 40,609 45,482 50,940 57,307 64,471 72,529 81,596
GovemmentProceeds from Sale of Assets 55,001 0 0 0 0 0 0 0 0 0 0Transfers (Education and 41,832 55,778 65,818 75,033 83,661 93,701 104,945 118,063 132,821 149,423 168,101
Health)*Grants 15,032 8,151 9,455 10,779 11,857 13,042 14,347 15,781 17,359 19,095 21,005Cofinancing 11,986 15,485 17,963 20,477 22,525 24,778 27,255 29,981 32,979 36,277 39,905Other 23,359 0 0 0 0 0 0 0 0 0 0
Investmnents 152,186 i47,971 147,000 148,756 165,379 184,510 205,866 230,516 258,139 289,094 323,789Accounts Payable 49,500 4,047 19,952 0 0 0 0 0 0 0 0Deficit/Surplus before New -35,316 -36,306 -17,033 27,279 34,890 56,989 66,248 77,716 76,080 90,977 109,199LoansNew Loans 22,030 16,354 17,033 0 0 0 0 0 0 0 0Final Deficit/Surplus -13,286 -19,952 0 27,279 34,890 56,989 66,248 77,716 76,080 90,977 109,199
Financial RatiosInterest/Operational Surplus 25% 20% 17% 16% 14% 13% 11% 10% 8% 7%Debt Balance/Current Revenue 56% 56% 57% 68% 70% 70% 64% 52% 42% 34%IncreaseinDebtBalance 0% 16% 19% 33% 19% 12% 1% -9% -10% -10%
3.3 3.8 4.5 7.8 10.1 14.0 19.9 30.1 78.9Eannarked Funds*/Debt service 5.4 2.1 2.3 2.2 2.1 2.1 1.5 1.4 1.3Operational Surplus/debt service 2.3 3.2 3.5 3.7 5.2 5.7 6.5 4.9 5.6 6.7
/1 Interest payment/Net operational surplus - Maximum allowed by the National Government for approving new debtsis 40%/2 Debt balance/current revenue - Maximum allowed by the National Government for approving of new debts is 80%,but 70% is considered high./3 Net operational surplus: Current Income + Capital Income - Operating Costs - Minimum Social Investments/4 Earmarked funds not including Royalty
Page 73
Annex 5- Attachment 2
Cartagena Water supply, Sewerage and Environmental Management ProjectACUACAR Water and Sewerage Company of CartagenaFinancial Summary for Revenue Earning Project Entities
Years Ending December: 1997 through 2007(In Millions of Current Pesos)
1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007
Actual ForecastIncome Statement Items
Billed Water (000 m3) 34,575 35,634 36,167 38,412 40,648 42,288 46,088 47,068 48,071 49,097 50,146Billed Sewerage (000 m3) 28,538 29,546 31,657 33,865 36,540 38,548 40,021 41,050 42,090 43,173 44,268Billed Raw Water (000 m3) 16,540 17,202 17,546 17,581 17,581 17,581 17,581 17,581 17,581 17,581 17,581Water tariff (US$/m3) 0.55 0.56 0.56 0.57 0.58 0.57 0.53 0.54 0.54 0.54 0.54Sewerage tariff (US$/m3) 0.32 0.29 0.29 0.30 0.31 0.31 0.31 0.31 0.31 0.31 0.32Rawwatertariff(US$/m3) 0.22 0.20 0.18 0.18 0.18 0.18 0.18 0.18 0.18 0.18 0.18
Revenues 42,122 55,197 59,441 71,069 85,404 94,375 103,962 115,178 128,196 143,155 161,100(% increase in real terms) 13% -6% 9% 9% 0% 0% 1% 1% 2% 2%
Operating Income 4,732 8,466 5,816 8,735 13,201 12,307 12,911 14,495 10,954 13,770 17,224Net Income 4,374 3,919 403 3,239 6,412 6,122 6,879 8,625 6,476 7,510 9,275
Funds Statement ItemsInternal Sources 3,060 3,404 809 3,638 7,202 7,430 8,864 11,405 9,036 9,557 10,804Borrowings 15,737 2,352 -2,099 2,542 -56 898 0 0 7,152 11,243 11,503Equity Investments 0 5,300 0 0 0 0 0 0 0 0 0
Total Sources 18,798 11,056 -1,290 6,181 7,146 8,328 8,864 11,405 16,188 20,801 22,307Capital Expenditures 16,924 7,652 230 2,565 636 1,905 450 861 7,933 12,358 13,781Working Capital Increase -1,687 17,016 -8,508 3,546 4,431 3,401 4,084 4,973 5,913 5,100 1,691
(Decrease)Debt Service 0 0 3,198 4,831 4,831 5,508 5,508 2,310 677 1,699 1,022Dividend Payout 971 1,968 1,764 182 874 1,774 1,837 2,064 4,312 3,238 3,755
Total Applications 16,208 26,637 -3,316 11,124 10,773 12,588 11,878 10,207 18,835 22,394 20,249Change in Cash 2,590 -15,581 2,027 -4,943 -3,627 -4,260 -3,014 1,198 -2,647 -1,594 2,058
Balance Sheet ItemsCurrentAssets 20,319 34,231 26,827 31,826 37,951 43,517 49,456 56,383 64,501 71,938 76,455
Less Current Liabilities 10,516 27,139 28,200 34,882 41,193 47,963 50,014 49,555 55,889 59,648 60,973NetFixedAssets 27,291 38,610 41,015 45,081 47,093 50,351 51,939 53,663 63,153 77,949 95,112
Total Assets 37,094 45,702 39,642 42,026 43,851 45,905 51,381 60,491 71,765 90,238 110,595Debt 23,901 23,055 16,125 13,837 8,273 3,663 1,354 677 6,130 16,352 26,833Equity 13,192 22,647 23,517 28,189 35,578 42,241 50,028 59,814 65,634 73,887 83,762
Total Liabilities and Equity 37,094 45,702 39,642 42,026 43,851 45,905 51,381 60,491 71,765 90,238 110,595
Financial Ratios,Operating Income as a
%ofRevenue 11% 15% 10% 12% 15% 13% 12% 13% 9% 10% 11%Net Income as a
% of Revenue 10% 7% 1% 5% 8% 6% 7% 7% 5% 5% 6%Return Equity 33% 17% 2% 11% 18% 14% 14% 14% 10% 10% 11%Debt Service Coverage 1.6 1.5 0.8 0.9 1.2 1.2 1.5 4.0 5.1 2.5 2.3PercentofTotalCapital 18% 44% 351% 142% 1132% 390% 1970% 1324% 114% 77% 78%Expenditures financed by InternalSourcesCurrentRatio 1.9 1.3 1,0 0.9 0.9 0.9 1.0 1.1 1.2 1.2 1.3Debt as % of Total Capitalization 64% 50% 41% 33% 19% 8% 3% 1% 9% 18% 24%
Main assumptions:Local Inflation 17.8% 16.0% 14.0% 10.0% 10.0% 10.0% 10.0% 10.0% 10.0% 10.0% 10.0%Exchange Rates (end year) 1180 1590 1813 1994 2193 2413 2654 2919 3211 3532 3885Devaluation over PPP 4% 20% 3% 3% 3% 3% 3% 3% 3% 3% 3%Real increase in tariffwater 11% 13% 7% 4% 1% -1% -6% 0% 0% 0% 0%sewerage 15% 1% 6% 4% 6% 0% -1% 0% 0% 0% 2%
Bad debts 8% 8% 8% 8% 8% 8% 8% 8% 8% 8% 8%
Page 74
Attachment 3
Sensitivity Analysis - District of Cartagena
Tax Collection Rate
Status quo (No 3% increase 6% increase Switchingincrease) per year values5
(Base Case)Financial surplus/shortfall during -2 3.6 9.3 1.1% decreaseproject implementation (US$million)Total earmarked funds*/debt service 0.6 1.1 1.4 2.3% increasethroughout the life of the loan -minimum 1999-2017 (times)Operational Surplus/ debt service - 3.2 3.5 3.8 16.5% decreaseminimum 2000-2010 (times)Interest/operational surplus - 18.4 17 15.7 15.6% decreasemaximum 2000-20 10 (%)
Total debt balance/current revenue 73 70 68 7% decrease- maximum 2000-2010 (%) ___== _____________ = _
Investment Cost OverrunReduction by Base case Increase by Switching
20% (US$117 20% values 5million)
Financial surplus/shortfall during 14.5 3.6 -7.3 6.6% increaseproject implementation (US$million)Total earmarked funds*/debt service 1.4 1.1 0.0 2.0% increasethroughout the life of the loan -minimum 1999-2017 (times)Operational Surplus/ debt service - 3.6 3.5 3.4 420% increaseminimum 2000-2010 (times)
Interest/operational surplus - 16.4 17 17.5 415% increasemaximum 2000-2010 (%) _
Total debt balance/current revenue 61 70 81 19% increase- maximum 2000-2010 (%)
Local Currency Devaluation Against US Dollar(devaluation over PPP)
Switching Values where:Financial shortfall/surplus during project implementation (US$million) =0Total earmarked funds*/debt service throughout the life of the loan (minimum 1999- =1.02017)Operational Surplus/ debt service (minimum 2000-2010) =1.0Interest/operational surplus (maximum 2000-2010) =40%Total debt balance/current revenue =80%(maximum 2000-2010)
Page 75
Devaluation of Base Case Appreciation of Switching10% over PPP Devaluation of 10% over PPP values5
per year, from 3% over PPP per per year, from1999 to 2001. year, from 1999 1999 to 2001.
Devaluation of to 2007 Devaluation of3% over PPP per 3% over PPP peryear, from 2002 year, from 2002
to 2007. to 2007.Financial shortfall/surplus during -5.9 3.6 30 5.5%project implementation (US$million) devaluation from
1999 to 2001.3% devaluationfrom 2002 to
2007Total earmarked funds*/debt service 0.1 1.1 1.4 3.5%throughout the life of the loan devaluation from(minimum 1999-2017) 1999 to 2001.
3% devaluationfrom 2002 to
2007Operational Surplus/ debt service 3.4 3.5 3.6 77% devaluation(minimum 2000-2010) from 1999 to
2001.3% devaluationfrom 2002 to
2007Interest/operational surplus 17.3 17 16.3 69% devaluation(maximum 2000-2010) from 1999 to
2001.3% devaluationfrom 2002 to
2007Total debt balance/current revenue 81 70 57 9.5%(maximum 2000-2010) devaluation from
1999 to 2001.3% devaluationfrom 2002 to
2007
Administrative CostReduction by Base Case (no 15% increase Switching
15% real increase) values 5
Operational Surplus/ debt service 3.7 3.5 0.5 13.4 increase(minimum 2000-2010)Interest/operational surplus 16% 17% 126% 12.8 increase(maximum 2000-2010)Total debt balance/current revenue 70% 70% 107% 13.8 increase(maximum 2000-2010)
Page 76
Sensitivity Analysis - ACUACAR
Commercial Performance5% more Base Case 5% less Switching Values'
improvements than Gradual decrease improvements thanbase case from 18% to 14% the base case
Return on Equity (%/6) 15 10 -4 Decrease 4.4%Minimum Current Ratio 1 0.9 0.78 Increase 5%(times)Minimum debt service 1.15 0.89 0.51 Increase 2.2%coverage (times)
O&M Cost
10% increase Base Case 110% reduction Switching values 6
Return on Equity (%) 0 10 1 5 Increase 4.8%Minimum Current Ratio 0.68 0.91 1.08 Decrease 5%(times)Minimum debt service 0.66 0.89 1.39 Decrease 3%coverage (times)
_Capital Expenditures10% increase Base Case I10% reduction Switching values
Return on Equity (%) 9 10 11 Increase 18%Minimum Current Ratio 0.83 0.91 0.98 Decrease 12%(times)
Minimum debt service 0.81 0.89 0.99 Decrease 1 1%coverage (times) .
Exchange Rate Devaluation
Devaluation of Base Case Appreciation of Switching values'10% over PPP per Devaluation of 3% Devaluation Of
year over PPP per year 10% over PPP per
Return on Equity (%) 8 10 12 30% devaluationfrom 1999 to 2001.
3% devaluationfrom 2002 to 2007
Minimum Current 0.90 0.91 0.92 n/aRatio (times)Minimum debt 0.86 0.89 0.93 35% appreciationservice coverage from 1999 to 2001.(times) 3% devaluation______________________ ________________ ._______________ ._______________ from 2002 to 2007
6 Switching values where:Operating Margin (%)Net Profit Margin (0)Return on Equity (%/.) =0Minimum Current Ratio (times) 1.0Minimum debt service coverage (times) 1.0
Page 77
Annex 6Cartagena Water Supply, Sewerage and Environmental Management Project
Procurement and Financial Management Arrangements
Procurement
The loan would provide funds to the District of Cartagena to: (i) improve and expand the watersupply system; (ii) construct sewerage networks in the Cienaga drainage basin; (iii) construct themain wastewater conveyance system; (iv) construct wastewater treatment and disposalinstallation; (v) carry out project support activities such as environmental and social programsand project management activities. A procurement capacity assessment was carried out on theimplementing agency and it was concluded that this is an agency type "A". A fewrecommendations to improve filing and internal instructions will be reflected in an improvementaction plan.
Consulting services, goods and works for IBRD-financed activities would be procuredrespectively in accordance with the provisions of the World Bank Guidelines for Selection andEmployment of Consultants by World Bank borrowers published in January 1997 and revised inSeptember 1997 and January 1999, and the Guidelines for Procurement under IBRD Loans andIDA Credits, published in January 1995 and revised in September 1997 and January 1999. Theprocurement arrangements for the project components are described below and summarized inTables A and B.
Goods estimated to cost more than US$ 250,000 would be procured through Internationalcompetitive Bidding (ICB) procedures. Goods estimated to cost less than US$250,000 and morethan US$50,000 would be procured using National Competitive Bidding (NCB) procedures.Computers and vehicles estimated to cost less than US$250,000 and more than US$50,000 wouldbe procured following Limited International Bidding (LIB) procedures, among the limitednumber of foreign suppliers with service and maintenance facilities in Colombia. Goodspurchased in packages estimated to cost less than US$50,000 each would be procured throughinternational or national shopping, up to an aggregate of US$ 1 million. Remote controlequipment of proprietary nature will be procured directly from manufacturers.
Works estimated to cost more than US$ 5 million would be procured through ICB procedures.Works estimated to cost less than US$ 5 million and more than US$ 400,000, would be procuredthrough NCB procedures, up to an aggregate of US$ 20 million. Works estimated to cost lessthan US$ 400,000, would be procured locally, on the basis of price quotations from at least threequalified contractors, up to an aggregate of US$ 2 million. Prequalification will be carried out forthe construction of the submarine outfall. The implementation agency will consider an annualprequalification for the minor works using procedures acceptable to the Bank.
Consulting services, studies and technical assistance related to environment, social andcommunity participation activities: All studies by consulting firms estimated to cost more thanUS$ 200,000 would be procured utilizing QCBS procedures, except the services for detaileddesign of the main wastewater conveyance system, the wastewater treatment plant and thesubmarine outfall (all under one contract) which would be procured utilizing QBS procedures.The contracts for detailed design and supervision of construction of the water supply andsewerage systems under components A and B of the project would be directly awarded to Aguasde Barcelona, the private operator associate of ACUACAR and will be financed with localcounterpart funds since the designs are urgently needed and the proposed approach would save alot of time and would provide continuity, consistency and uniformity in design standards. Studies
Page 78
by consulting firms estimated to cost less than US$ 200,000 would be procured utilizing FixedBudget Selection. Studies by consulting firms estimated to cost less than US$ 50,000 would beprocured utilizing Consultants qualification (CQ) procedures. Some consulting services,especially that of the panel of experts which will accompany and review the design of thewastewater conveyance, treatment and disposal system through the submarine outfall, would beprocured under individual consultants' procedures per section V of the Consultants Guidelines.Procurement audits will be hired annually using QCBS procedures.
The procurement packages proposed by ACUACAR and the corresponding procurementprocedure are summarized in the following table:
Proposed Procurement Packages and the Corresponding Procurement Procedures
Procurement Package Procurement Type ProcurementProcedure
I. Purchase of pipes for primary water networks (diameters greater Goods ICBthan 1000 mm)
2. Relocation of Amberes pipe 30", Connecting Colinas tank to the Works NCBAlcalis System and installing the parallel line Dolores-Albomoz
3. Purchase of pipes of diameters 63-300 mm for secondary water Goods ICBnetworks
4. Construction of Distribution networks at El Pozon, suroriental Works NCBzone and plan barrios
5. Construction of Canal Juan Gomez and construction of sludge Works NCBtreatment installations for El Bosque6. Construction of the new power line to Albornoz pumping station Works Three
Quotations7. Expansion of Albornoz reservoir Works Three
Quotations
8. Purchase of remote control equipment Goods Direct purchase
9. Purchase of pipes for sewerage networks of diameters smaller Goods ICBthan 600 mm
10. Purchase of pipes for sewage collectors of diameters equal or Goods ICBgreater than 600 mm
11. Purchase of sewage pressure pipes Goods ICB
12. Enhancement of the capacity of collectors in Paseo Bolivar, Works NCBCabrero, Marbella, Crespo, El Oro and construction of networks inLa Boquilla, Crespo-EI Oro, Paseo Bolivar and Suroriental Zone13. Enhancement of the capacity of collectors in Pedro Romero, Works NCBMaria Auxiliadora, Tabu, Blas de Lezo, santa Lucia14. Enhancement of the capacity of collectors in Soccoro, San Works NCBFernnado, Medellin, Los ciruelos, Ternera and Recreo, Eden andconstruction of pressure line Bias de Lezo-Cordialidad
Page 79
Procurement Package Procurement Type ProcurementProcedure
15. Construction of sewerage networks in El Pozon and Villa Works NCBEstrella16. Construction of sewerage networks in La Boquilla, Crespo, El Works NCBOro, Paseo Bolivar17. Construction of sewerage networks in San Jose de Los Works NCBCampanos and Suroccidental zone18. Construction of pressure lines El Oro-San Francisco, Cielomar- Works NCBCrespo, Ceballos-Buenos Aires and of collector Buenos Aires-Biasde Lezo19. Construction of pressure line Bosque-Amberes and of collector Works NCBAmberes-Ricaute20. Construction of Pumping Station Bias de Lezo Works NCB21. Construction of Pumping Stations El Oro, Cielomar Works NCB22. Purchase of PVC and concrete pipes Goods ICB23. Construction of Paraiso pumping station Works NCB24. Supply of on shore pipeline Goods ICB25. Construction of on shore pipeline, sections IA, 2A, 2B, 3A Works ICB26. Construction of on shore pipeline, sections 3B, 3C, 3D, 3E Works ICB27. Construction of wastewater treatment installations Works ICB28. Construction of submarine outfall Works ICB29. Industrial wastewater discharge control Consulting Services, QCBS,
firms and individual Individualconsultants Consultants
30. Environmental supervision Consulting Services, QCBSfirmn
31. Restoration and conservation of the Cienaga Consulting Services, QCBS,firms and individual Individualconsultants Consultants
32. Coastal waters monitoring Consulting Services, QCBSfirm
33. Support to community organizations Consulting Services, QCBS,firms and individual Individualconsultants Consultants
34. Construction of community centers Works NCB
35. La Boquilla basic sanitation Works ThreeQuotations
36. Project management, consulting support Consulting Services, Individualindividual Consultantsconsultants
37. Project management, support equipment and sofrware Goods NCB
38. Design and supervision of water supply systems Consulting Services, Directfirm Contracting,
NBF39. Design and supervision of sewerage systems Consulting Services, Direct
firm Contracting,NBF
Page 80
Procurement Package Procurement Type ProcurementProcedure
40. Design of conveyance, treatment and submarine outfall Consulting Services, QBSfirm
41. Supervision of conveyance works Consulting Services, QCBSfirm
42. Supervision of submarine outfall and wastewater treatment Consulting Services, QCBSworks firm
Procurement costs by procurement arrangements are presented in Tables A and A I
Bank prior review: The PIU within the Technical Department of ACUACAR will be responsiblefor implementing the project. This unit has experience in procurement and in Bank procedures.PIU staff would have access to training in procurement and to support by procurement specialistsshould such training and support be necessary. Table B summarizes the thresholds forprocurement methods and prior Bank review. These arrangements would result in prior reviewby the Bank of contacts associated with about 80% of project cost.
Procurement Audits: An independent annual procurement audit will be carried out to reviewprocurement methods.
Financial Management
Disbursement: The proposed IBRD loan would be disbursed based on quarterly ProjectManagement Reports (PMRs) over five years with effectiveness expected in October 1999. Theloan closing date would be June 30, 2004. The allocation of loan proceeds is provided in Table Cof this Annex. The loan will be disburscd against (i) civil works at a rate of 75% for allexpenditures; (ii) purchase of goods at a rate of 75% for local expenditures and 100% for foreignexpenditures; and (iii) consulting services at a rate of 100% for all studies, designs, supervision,technical assistance and training, excluding the design and supervision of water supply andsewerage works, which would be financed by counterpart funds.
Project Financial Management: A project financial management assessment was carried out by aLAC Financial Management Specialist (FMS). The FMS concluded that ACUACAR has all thenecessary capacity to manage the financial affairs of the project in accordance with Bankstandards. ACUACAR's key management positions are occupied by seasoned professionals witha record of tangible accomplishments since the new management took over the Company threeand a half years ago. Project management expressed preference to avail themselves to PMRbased disbursements, as they already have the installed capacity to produce quarterly progressreports together with fluent budget formulation and routinely prepared cash projections. Otherthan minor guidance on PMR format and close monitoring of the initial disbursement process,there would be no other specific attention needed from the Bank for ACUACAR to be in fullcompliance with Bank financial management standards. Presentation of evidence to producePMRs in accordance with Bank requirements would be an effectiveness condition.
Reporting: In accordance with LACI, the PIU would produce and submit to the Bank, on aquarterly basis, a Project Management Report (PMR), which allows for the simultaneousmonitoring of financial and physical activities of the project, while also serving as an applicationfor disbursement from the loan account. Each PMR would include a financial forecast for thefollowing six months, on which the disbursement to the Special Account would be based. It isexpected that the PMRs would be submitted respectively by January 21, April 21, July 21 and
Page 81
October 21 of each year. The contents of the PMR would be discussed and finalized by the dateof effectiveness. By July 31 of each year, beginning in 1999, the PIU would prepare and forwardto the Bank an annual implementation plan detailing project activities contemplated for thesubsequent calendar year, and outlining counterpart funding requirements. These estimates ofcounterpart funding requirements would form the basis for budgetary allocation by the District ofCartagena. Not later than six months prior to project completion, the Bank and the PIU wouldcollaborate in producing: (i) an Operational Plan, indicating how the project impact would besustained; and (ii) an Implementation Completion Report (ICR) to assess project effectivenessand its contribution to the improvement of the water and sanitation services and environmentalmanagement in Cartagena.
Special Account: To facilitate disbursements against eligible expenditures, a Special Account inUS dollars shall be established, on terms and conditions satisfactory to the Bank, at a commercialbank bank authorized to maintain an account in US$, with an amount of the authorized allocationthat would vary to cover two quarters of expenditures financed by the loan. This authorizedallocation of the special account cannot exceed an amount of US$ 10 million. The SpecialAccount would be replenished at least quarterly, based on the budget presented in the PMR, toassure liquidity of funds, and all replenishment applications (form 1903) would be accompaniedby reconciled statements from the bank in which the account is maintained, showing alltransactions in the Special Account. Supporting documentation would be maintained by the PIUfor at least one fiscal year after the year in which the last disbursement from the loan took place,and would be available for Bank staff and independent auditors' review.
Annual Audit: In addition to submission of quarterly PMRs, the project will be required to submitto the Bank an annual audit report which would include audits of the project accounts, the specialaccount and the financial statements of ACUACAR. The audit report would be prepared byindependent chartered auditors acceptable to the Bank. No later than five months after the end ofeach fiscal year, the PIU would submit to the Bank copies of audit reports containing separateauditors' opinions on project accounts, PMRs, the Special Account and ACUACAR's financialstatements. Detailed terms of reference for the auditors will be prepared following the guidelinesincluded in the World Bank's Financial Accounting Reporting and Auditing Handbook.
Retroactive expenditures: The possibility for retroactive financing of up to 10% of the loanamount was agreed upon, to assist in implementing urgently necessary sewerage works in poorneighborhoods in which raw sewage flows in the streets. The retroactive financing will beprovided for eligible expenses incurred after a date of twelve months before the signing of theLoan Agreement, and conditioned on following Bank procurement guidelines.
Page 82
Annex 6, Table A: Project Costs by Procurement Arrangements7
(US$ million equivalent)
Expenditure Category Procurement Method Total Cost(including
contingencies)ICB NCB Other N.B.F
1. WorksWater supply, sewerage, 41.1 20.0 61.1Wastewater conveyance (30.9)1 (15.0) (45.9)treatment and disposal
2. GoodsSupply of pipes, pumping 39.9 0.2 0.4 2.6 2 43.1equipment, electrical and (30.2) (0.2) (0.3) (0.0) (30.7)control equipmnent
3. Services and TrainingStudies, design, supervision 7.5 3 4.64 12.1and training (7.5) (0.0) (7.5)
4. MiscellaneousFront-end fee 0.9 0.9
(0.9) (0.9)
Total81.0 20.2 8.8 7.2 117.2
(61.1) (15.2) (8.7) (0.0) (85.0)
Notes: 1. Figures in parenthesis are the amounts to be financed by the Bankloan;
2. Acquisition of land;3. Various selection methods will be used including QCBS, QBS,
Direct Contracting and selection of individual consultants;4. Design and supervision of water and sewerage systems.
7 For details on presentation of Procurement Methods refer to OD 11.02, "Procurement Arrangements forInvestment Operations." Details on Consultant Services can be shown more easily in the Table Al fonnat(additional to Table A, where applicable).
Page 83
Annex 6, Table Al: Consultant Selection Arrangements
(in US$ million equivalent)
Selection Method Total CostConsultant Services (including
Expenditure Category contingencies)QCBS QBS SFB LCS CQ Other N.B.F. __
A. Firms 4.4 1.8 4.6 10.8
B. Individuals 1.3 1.3
Total 4.4 1.8 1.3 4.6 12.1
Note: QCBS = Quality- and Cost-Based SelectionQBS = Quality-based SelectionSFB = Selection under a Fixed BudgetLCS Least-Cost SelectionCQ Selection Based on Consultants' QualificationsOther = Selection of individual consultants (per Section V of ConsultantsGuidelines), Commercial Practices, etc.
N.B.F. = Not Bank-financed.Figures in parenthesis are the amounts to be financed by the Bank loan.
Page 84
Annex 6, Table B: Thresholds for Procurement Methods and Prior Review
Expenditure Contract Value Procurement Contracts Subject toCategory (Threshold) Method Prior Review /
Estimated Total ValueSubject to Prior
ReviewUS $ thousands US $ millions
1. Works>5,000 ICB All/42.0
400-5,000 NCB First three/3.0<400 Quotations (at least 3) None/0
2. Goods>250 ICB All/40.0
50-250 LIB (for computers, All/0.3software and vehicles
<50 International and None/0National Shopping,Direct Contracting All/0.25
3. Services
(a) Consulting Firns >200 QCBS, QBS All/7.5<200 Fixed Budget Selection All/0
<50 Consultant Review of TORs onlyQualification
(b) Individual Consultants >50 According to Section V All/0.6of Consultants'Guidelines
<50 According to Section V Review of TORsof Consultants' only/0.8Guidelines
Total value of contracts subject to prior review: 94.5
Page 85
Annex 6, Table C: Allocation of Loan Proceeds
Expenditure Category Amount in Financing PercentageUS$ million
Civil Works 42.00 75%
Goods 28.00 75% of local and100% of foreign
Consulting Services & Training 7.10 100%(except for design and supervision
of water and sewerage works underparts A and B, and project managementunder part H)
Unallocated 7.05
Front-end Fee 0.85 100% payable to the Bank uponeffectiveness
Total 85.0
Page 86
Annex 7Cartagena Water supply, Sewerage and Environmental Management Project
Project Processing Budget and Schedule
A. Project Budget (US$000) Planned Actual(At final PCD stage)
201.9
B. Project Schedule Planned Actual(At final PCD stage)
Time taken to prepare the project (months) 29 51First Bank mission (identification) 05/05/1995 05/05/1995Appraisal mission departure 01/17/1997 05/16/1999Negotiations 03/15/1997 06/04/1999Planned Date of Effectiveness 09/15/1997 07/30/1999
Prepared by: Aguas de Cartagena, the Water Utility of Cartagena
Preparation assistance: PHRD, TF29605
Bank staff who worked on the project included:Name Specialty
Menahem Libhaber Task Manager (Sr. Sanitary Engineer)Yoko Katakura Financial AnalystCaroline Van Den Berg EconomistFranz Drees Water Supply and Sanitary EngineerJuan David Quintero Sr. Environmental SpecialistMaria Elena Castro Social SpecialistLivio Pino Financial Management SpecialistMaria Victoria Lister Quality Assurance OfficerEfraim Jimenez Sr. Procurement SpecialistJose Augusto Carvallho Sr. CounselIssam Abousleiman Disbursement OfficerCarl Bartone Peer reviewerRobert Taylor Peer ReviewerSilvia Delgado Staff AssistantMartha Gonzalez Staff Assistant
Page 87
Annex 8Cartagena Water Supply, Sewerage and Environmental Management Project
Documents i-n the Project File
Estudio de Factibilidad para el Tratamiento de las Aguas Residuales de Cartagena y para ladisposicion Final del efluente al Mar Adyacente a Traves de un emisarion Submarino, InformeFinal, Hazen and Sawyer, Octubre de 1998.
Informes de Progreso del Estudio de Factibilidad para el Tratamiento de las Aguas Residuales deCartagena y para la disposicion Final del efluente al Mar Adyacente a Traves de un emisarionSubmarino, Hazen and Sawyer, October 1997, July 1998.
Informe de Trabajos de Campo del Estudio de Factibilidad para el Tratamiento de las AguasResiduales de Cartagena y para la disposicion Final del efluente al Mar Adyacente a Traves de unemisarion Submarino, Hazen and Sawyer, Julio de 1998
Cartagena Water Supply, Sewerage and Environmental Cleanup Project, Panel of Experts reporton Review of the First Progress Report of the Feasibility Study for Treatment and Disposal ofCartagena's Wastewater, February 1998.
Cartagena Water Supply, Sewerage and Environmental Cleanup Project, Panel of Experts reporton Review of the Draft Final Report of the Feasibility Study for Treatment and Disposal ofCartagena's Wastewater, July 1998.
Documento de Evaluacion del Proyecto de Alcantarillado de Cartagena, Operaci6n No.1089/OC-CO, del BID, Aprobada el 25 de Febrero de 1998.
Cartagena de Indias, Resumen Planes Maestros de Acueducto y Alcantarillado, Febrero de 1999.
Estudio de Factibilidad y Disenios en nivel de factibilidad del sistema de AlcantarilladoFinanciado por el Banco Mundial, Aguas de Cartagena, Febrero de 1998.
Estudio de Impacto Ambiental del Emisario Submarino de Cartagena, Neotropicos, Meddelin,Marzo de 1999.
Cartagena, Water Supply, Sewerage and Environmental Cleanup Project, EnvironmentalAssessment, Executive Summary, ACUACAR/Distrito de Cartagena, Neotropicos, March 1999.
Documento Fichas de Manejo Ambiental, proyecto de Inversiones en el Sistema de Acueducto yAlcantarillado de Cartagena de Indias, Proyecto Banco Mundial. Uguas de Cartagena, Marzo de1999.
Estudio de Impacto Ambiental, Proyecto Alcantarillado Vertiente Bahia de Cartagena, Colombia.Hazen and Sawyer, Enero de 1998.
Consultancy on Leakage Management and Application of the "BABE" Concepts to theDistribution System of Cartagena, Colombia, Sthepen Myers and Stephen Preston, Bristol WasterConsulting Services, February 1999.
Evaluation of the performnance of ACUACAR, Barry Walton, Halcrow Management Science,November 1998.
Page 88
Evaluaci6n Social del Proyecto de Alcantarillado y saneamiento de Cartagena, Pilar Vasquez yAlvaro Baquero, Agosto de 1998.
Evaluaci6n Social del Proyecto de Alcantarillado y saneamiento de Cartagena, Reporte de lostalleres de Consulta de la Comunidad, Pilar Vasquez y Alvaro Baquero, Agosto de 1998.
Analisis Costo -Beneficio del Proyecto de Alcantarillado y Manejo Ambiental de Cartagena,Jorge Ducci, Soluciones Integrales S.A., Octubre de 1998.
Analisis Costo -Beneficio del Programa de Acueducto de Cartagena, Aguas de Cartagena,Febrero de 1999
The Benefits of Improving Water Quality in the Cartagena Bay, Colombia, Ana Maria Ibanez,Kenneth McConnel, University of Maryland at College Park, August 1998.
Distrito de Cartagena, Situaci6n Financiera y Proyecciones, Cesar Vargas, Mayo de 1998.
Financial Analysis and Financial Projections of ACUACAR, Sergio Sour, Halcrow ManagementScience, November 1998
Financial Analysis and Financial Projections of the District of Cartagena, Sergio Sour, HalcrowManagement Science, November 1998
Colombia, Cartagena Water Supply, Sewerage and Environmental Cleanup Project, Initial ProjectExecutive Summary, December 1995.
Colombia, Water Supply and Wastewater Policy Note, FPSI, July 1998
Institutional Context and Evaluation of the Performance of ACUACAR, Barry Walton
Leakage Management, Application of the BABE Concept to the Distribution System ofCartagena, Stephen Myers and Stephen Preston, January 31 - February 12, 1999
Page 89
Annex 9Cartagena Sewerage and Environmental Management Project
Environmental Assessment Summary
Introduction
To assist the Government of Colombia in addressing the problems related to waterpollution in the city of Cartagena, the project will develop a cost-effective approach tocomprehensive wastewater management and water pollution control in the major water bodies inand around the city. Cartagena, a Caribbean city on the northwestern part of Colombia, is one ofColombia's five most important cities with well over 750,000 inhabitants. The project willinclude investments for the collection, treatment and final disposal of domestic sewage. Thecommunities living around a major urban wetland- the "Cienaga de La Virgen" Lagoon- andsurrounding areas will benefit from proposed investments in water and sewage collection, whilethe benefits of treatment and final disposal will benefit the entire city. The project will alsoinclude water supply systems for the poor rural communities North of Cartagena, which lie nearthe path of the proposed outfall.
When completed, the proposed project would have: (i) improved water supply byrehabilitation, expansion and optimization of the operation of water supply systems and bydeveloping additional water supply sources, so as to ensure the increased demand up to the year2020; (ii) improved sewerage and drainage services in Cartagena by expanding the coverage rateof the sewerage network (up to about 90%), specially in poor marginal areas; (iii) contributed toenvironmental cleanup and protection in Cartagena by providing installations for controllingpollution of water bodies surrounding and crossing the urban area; (iv) supported theconsolidation of new institutional arrangements with private sector participation (ACUACAR, theWater and Sewerage Company of Cartagena is a Municipality-Aguas de Barcelona mixed public-private enterprise); and (v) contributed to the goal of achieving sustainable economicdevelopment in the Cartagena region by ensuring reliable water and sewerage services andalleviating water pollution problems.
This annex summarizes the findings of the following technical, environmental, and socialstudies carried out by ACUACAR during project preparation: Feasibility Study for WastewaterTreatment and Disposal in Cartagena, 1998, and Environmental Diagnostics of OutfallAlternatives for the Disposal of Wastewater in Cartagena, 1998 (both prepared byHazen&Sawyer, Consulting Engineers); Environmental Impact Assessment - Ocean Outfall inCartagena, 1999 (prepared by a joint venture of national and local NGOs, Fundacion Neotropicosand Fundacion Vida, reinforced by a group of national and international consultants); and SocialAssessment of the Cartagena Sanitation Project, 1998 (prepared by national consultants underterms of reference agreed with the Bank). These reports were submitted to ACUACAR fordetailed review and are available in ACUACAR's offices and other offices in the Municipality.Formal Bank review of the final reports was carried out before appraisal and they conform fullyto Bank policy guidelines regarding environmental and social issues. All above reports have beenmade available in the Public Information Center of the World Bank in Washington.
Environmental Assessment Process and Legal Framework
Perhaps the most environmentally and socially sensitive component of the proposed projectwill be the construction and operation of an ocean outfall discharging into the Caribbean Sea. Afull Environmental Assessment (EA) was carried out following terms of reference agreed with theBank. These terms of reference were discussed in a major public consultation meeting with the
Page 90
participation of local, regional and national environmental agencies, NGOs and professionalassociations.
Under Colombia's environmental legislation (Law 99 of 1993) an environmental licenseissued by CARDIQUE (the Regional Environmental Agency) would be required for the project.CARDIQUE also approved the terms of reference for the EA. In addition, the project will alsohave to be approved by the National Oceanographic Institute (CIOH) under the Marine and PortsDirectorate of the Colombian Navy (DIMAR). Colombia is signatory of major internationalbiodiversity, marine pollution and wetland (RAMSAR) protection treaties.
The environmental assessment process was based on a two-phase approach: (i) a feasibilitystudy analyzed collection, treatment, and disposal options which were compared on theirtechnical, economic and environmental merits; (ii) once a project scheme was selected, a moredetailed environmental assessment designed a comprehensive environmental management plan(EMP). A Bank-appointed panel of five international experts, with broad experience inwastewater management, design and construction of ocean outfalls, water quality andoceanographic modeling, environmental impact assessment, and private sector participationprovided advice, reviewed technical reports, and participated in public consultation meetings andin a one-day workshop at Bank headquarters in Washington.
Cumulative Impacts. Perhaps the most important methodological characteristic of the EA was theintroduction (a first in Colombia) of cumulative impact analysis. All projects, whether ongoingor planned, with some relevance to the sanitation conditions of the city, the conservation ofwetlands and other ecosystems, and the expansion of the urban perimeter were identified andincluded in the analysis of impacts. Major projects identified included: sewerage expansion andimprovement in the Cartagena Bay sewerage network financed by the IDB; a proposed new outlet(Bocana) for the Cienaga de La Virgen Lagoon, financed by the Dutch Government; a proposednational highway which will surround the southern perimeter of the Cienaga de La VirgenLagoon which will be constructed by the National Highways Institute (INVIAS); a proposedexpansion of the city airport which will impact on some wetland areas; and private tourismdevelopment plans on the northern area of Cartagena. The social dynamics in and around theCienaga de La Virgen lagoon was studied in great detail. Invasion and illegal filling of wetlandhas been exacerbated by an increased influx of population displaced by violence and otherpolitical instability in Colombia. The environmental impact analysis was carried out with thisdynamic setting as a backdrop. Finally, and most importantly, the EA effort interacted withongoing efforts by the municinalitv of Cartagena to prepare a new land use plan. The conveyancesystems, treatment facilities and outfall site, as well as a protected area in the Cienaga de LaVirgen Lagoon have already been incorporated in preliminary drafts of the land use plan.
Water Quality Standards. Colombia does not have water quality standards for domestic sewagedischarges through ocean outfalls. Existing water quality standards establish limits for total andfecal coliforms in surface waters with potential recreational uses. These standards are shown inTable I and were adopted as conditions to be met in all recreational beaches under outfalloperation at the end of the design period (2025).
Table 1: Bacterial Standards for Recreational Water Use(NMP/100 ml)
Parameter Primary Contact Secondary ContactTotal Colifortns 1000 5000Fecal Colifonns 200 1000
Page 91
Environmental Setting
A necessary and important element of the EA was the baseline research that analyzed thephysical, ecological, and social characteristics of the project area. The project area is complexparticularly from the socio-economic and ecological perspectives so an environmental baselinewas needed to highlight locations of highest potential impact. The most relevant characteristicsof the project's area of influence which supported the decision making process on wastewatermanagement options are:
* Cartagena lies within a complex landscape of interconnected wetlands, bays and coastalplains. This landscape has been modified by urban expansion, construction of infrastructuresuch as urban and national roads and the city airport, as well as infrastructure built by theSpanish hundreds of years ago such as the Canal del Dique (connecting the Bay to theMagdalena River) and an underwater wall at the Bay's main water entrance.
* The Cartagena ocean front area is under the influence of favorable strong current patterns forocean dispersion and bacterial decay. The area is also subject to sediment loads from theplume of the Magdalena River at Barranquilla, some 120 km east of Cartagena.
* Although ocean floor slopes are very low (high deposition of sediments) in the oceanfront,bathymetric surveys revealed areas of steeper slopes north of Cartagena at Punta Canoas,some 20-km north of Cartagena.
e The marine ecos-stem around Cartagena varies widely from the uniquely diverse Islas delRosario National Park and the Isle of Tierrabomba (across the Bay) with important coralreefs and marine life, to areas with less biodiversity such as the Cienaga de La Virgenlagoon, a wetland area which nevertheless still is an important ecosystem for small-scalefisheries. Ocean bottom in front of Cartagena is generally of low biodiversity but somelobster fishing areas can be found in specific points.
* All wetlands, canals and the Cartagena Bay are heavily polluted from discharges of rawsewage (40% of sewage goes to the Bay and the other 60% to the Cienaga de La VirgenLagoon), industrial pollution (Mamonal Industrial Park), and urban and agricultural run-off.The Canal del Dique is a major source of sediment and organic pollution loads into the Bay.Less than 60% of the population had sewage collection services in 1997. Water pollutionhas been identified as the principal factor for deteriorated quality of life conditions and aserious restriction to achieve the full tourism potential of the city.
* Ocean sewage discharge is not an altogether unknown technology in Cartagena. A 38 year-old outfall (800m, 30" diameter, 22 m deep) discharges raw sewage (not even withpreliminary treatment) into the Cartagena Bay. This outfall, an important factor inmaintaining less dramatic unsanitary conditions in Cartagena during the last three decades,has outlived its design capacity. Although most of the time the sewage plume is trappedbelow the Bay's surface because of thermal stratification, strong wind, tides and waves canbreak up sewage into the surface. Bacteriological pollution in the inner bay is high andfloating materials are visible during those periods.
* The urban landscape of Cartagena reflects a number of factors related to its role as: (i) astrategic center during the Spanish colonial period; (ii) a destination for domestic andinternational tourism (Cartagena is a UNESCO World Heritage Site), with over 700,000tourists per year, with beach recreation also a major attraction for tourists; (iii) a commercial
Page 92
port moving over 10 million tons of cargo per year; (iv) a nationally important industrialcenter for petrochemicals; and (v) a destination for rural Colombians displaced by violencein the countryside looking for better economic opportunities, making Cartagena one ofColombia's most rapidly growing cities. Cartagena has doubled its population (up to 800,000 inhabitants) in the last 20 years.
* Within the urban sector, low-income residents living along the periphery of the Cienaga deLa Virgen are considered to be among the city's most impoverished, living in the floodprone areas of the Lagoon. Most live without any basic services and some are dependent onthe natural resources of the Cienaga for their survival (fish, firewood, and small game).During the rainy season those who live adjacent to the Cienaga are susceptible to floods andserious health problems. Garbage is disposed along lagoon shores. Public space is poorlydeveloped and non-existent in some areas.
* To the North of the city, land is used for livestock production, small- scale agriculture,fisheries and small-business/commercial purposes. Small poor communities in the area haveno sanitation services. The Northem Zone Master Land Use Plan (1994) and the proposednew Land Use Zoning Plan (1998) have both identified the northern zone as an area forfuture urban expansion with an expected saturation population of over 150,000 inhabitants.Private developers for both hotel and urban development projects have targeted the area.
Analysis of Alternatives
The feasibility study identified and analyzed a comprehensive set of alternatives related tothe final location for the sewerage collection system, the level of wastewater treatment, thealignment and exact location for an ocean outfall, sites of major pumping stations, sewerage pipematerial and size, and underwater depth of the outfall diffuser pipe. The main options for thefinal destination of domestic sewage in Cartagena analyzed in the feasibility study were (i) theCartagena Bay; (ii) the Cienaga de La Virgen Lagoon; (iii) the Caribbean Sea; and (iv) reuse andirrigation. Local and regional environmental authorities have established the clean up of the Bayand the Lagoon as a top regional priority= In addition, the feasibility study concluded tnatwastewater reuse and irrigation is not feasible at the present time in the Cartagena area given thelack of suitable areas to receive the entire wastewater volumes both during the dry and rainyseasons. However, the project does not exclude future partial reuse initiatives for Cartagena. andthe conveyance and outfall systems could well support any such initiatives in the future.
Alternatives for the final disposal sites and treatment levels of wastewater included acombination of the following:
* Continuing wastewater discharges into the Cartagena Bay and the La Virgen Lagoon in thesame current proportion (40% to the Bay, 60% to the Lagoon)
* Elimination of the Bay discharge and disposal of all wastewater into the La Virgen Lagoon;and
* Elimination of both Bay and La Virgen discharges and disposal of all wastewater into theCaribbean Sea.
* Preliminary treatment: microstrainers and settling tanks for the removal of solids* Primary treatment: settling tanks, and anaerobic digestion and drying of solids;* Conventional secondary treatment: activated sludge plants, anaerobic digestion and drying of
* sludge* Advanced treatment: biological removal of nutrients.
Page 93
Over fifteen alternatives combining different treatment levels and final disposal sites wereconsidered. In addition, four different outfall alignment and discharge sites into the CaribbeanSea were identified. All alternatives were evaluated from technical, economic, environmentaland social perspectives. Water quality, initial investment costs, operation and maintenance costs
and land uptake were the main comparison criteria. However, other environmental and socialcriteria were used as well (see Table 2).
Table 2: Environmental Criteria in Analysis of Alternatives
ALTERNATVES ENVIRONMENTAL CRITERIAFinal Site for Outfall * Water quality restrictions in the receiving water body(ocean, bay, or Lagoon) * Recommendations of Water & Sewerage Master PlanSewage Treatment * Location and volume required for disposal of sludge and solidsOcean Outfall Site * Least number and quality of affected habitats
* Avoidance of coral reefs* Coliform levels at beaches <200 NMP/dl* Fatal flaw analysis of NMP fecal coliforms
Location of Pumping Station Sites * Minimize impact on wetlands and mangrove swamps* Avoid resettlement* Avoid areas of special community interest
Depth of Sewerage Diffuser Pipe * Ensure adequate dilution* Ensure water quality standards in recreational beaches
Water Quality Predictions. Intensive current measuring efforts were carried out for over a yearacross the ocean front area of Cartagena. These measurements constituted the main input tohydrodynamic and w-ater quality mathematical models. Fatal flaw analysis (consideringsimultaneous adverse conditions for wind, current speed and direction, coliform concentrations,and low bacteria decay rates) for all outfall alternative sites at the end of the design period provedthat some outfall sites would not meet adopted standards. However, outfall location would befeasible at three of the proposed sites. Additional multi-objective analysis was necessary to selectthe final alignment of the outfall. The discharge site will guarantee a minimum 1:100 dilution
ratio in the mix zone with a current speed of 0.20 m/s (a very conservative estimate). However,prevalent average speeds (measured for over a year at the outfall site) will reach dilution levelshigher than 1:300 at the outfall exit.
Selected alternative. The decision making process is summarized in Figure 1. The analysis of
alternatives concluded that the most favorable alternative consists of an outfall with preliminarytreatment. The outfall will be located near the site of Punta Canoas, some 20 km north ofCartagena. The project will consist of:
* expansion and improvement of an existing pumping station
* land conveyance system, 20.85 km long pipe, 1970 mm diameter
* preliminary treatment works, micro-strainers and two vortex-type settling tanks
* marine outfall, 2880 m long and 20 m deep
* 0.5 km diffuser with 27 vertical pipes and 2 ports each for a total of 54 ports
After a five-year construction period (1999-2005), the operation of the outfall will beimplemented in 2 phases: Phase 1 (2005-2015) and Phase 11 (2015-2025). The first phase willinclude the pumping station, land conveyance system, preliminary treatment and marine outfall.The second phase will add an additional pumping station and an aerated flow-equalization tank atthe treatment site. During the interim phase (1999-2005) sewage will continue to be pumpedinto the Cienaga de La Virgen and the Cartagena Bay (through the existing, but rehabilitatedocean outfall) while the ocean outfall is being built.
Page 94
Transfer from the Bay sewerage system to the La Virgen system will not take place until theocean outfall is built. During this interim period the environmental conditions of some parts ofthe Cienaga will probably worsen because of concentrated sewage loads, although overallconditions will be similar to the present conditions. Improvements in the existing Bay outfall,and some preliminary treatment and chlorinating facilities in the feeder pumping station will befinanced by the IDB Loan.
Environmental Impacts
Water Qualitv. Project feasibilit, and environmental studies identified this as perhaps the mostimportant concem for the installation of an ocean outfall in Cartagena. Field studies andsubsequent dispersion modeling efforts and fatal flaw analysis indicate that the selected outfallsite and depth meets proposed bacteriological standards. Toxic materials and heavy metals inCartagena's wastewater, a major issue raided during public consultations, are well below nationaland international standards. Most of the heavy polluting industry in Cartagena is located in theMamonal industrial complex, outside the city limits and not connected to the city's seweragenetwork. Most of these industries discharge directly into the Cartagena Bay. The Ministry ofEnvironment (MinAmbiente) has signed a Clean Production Agreement with the MamonalFoundation (an association of Mamonal industries), in which pollution reduction targets areestablished for a 1 0-year period, and incentives for clean technology conversion are agreed upon.A recently passed regulation on pollution charges in Colombia will be initiated through a pilotprogram in Mamonal and enforced by CARDIQUE. The clean technology agreement hasproduced mixed results, obtaining significant reductions in some sectors but increases in others.Regardless of the low risk from toxic materials and heavy metals in sewage, the establishment ofnew industries within the city limits should be closely monitored and existing industrial andcommercial facilities connected to the sewerage network should reduce or eliminate harmfulsubstances.
Sedimentation of Organic and Inorganic Solids. Although the project will include preliminarytreatment facilities (micro-strainers and vortex-type settling tanks) to remove objectionable solidsand floating materials, the outfall discharge will create two zones of accumulation of solids. A
Figure 1. Steps in Outfall Decision Making Process(Bold: Selected alternatives at each step)
A. Sites for waste F. Land conveyance routes l G. Diffuser depthwater discharge .* Cienaga de La Virgen (2 routes) * 10 m* Cartagena Bay * La Boquilla (2 routes) * 15 m• Cienaga de La Virgen a Punta Canoas (4 routes) * 20 m* Caribbean Sea (selected route 3.2) * 30 m* Reuse / ir riation * Tierra Bomba Isle (I route)
B. Treatment E. Pipe materials H. Adopted Alternative. Preliminary . Reinforced concrete (steel casing) . Outfall to Caribbean Sea. Primary . Reinforced concrete (n. ste casing) * Preliminary Treatment. Secondary . Steel (micro strainers, vortex-type(conventional) . Fiberglass settling tank)
. Secondary (lagoons) . High Density Polyethylene * Outfall atPunta Canoas
. Nutrient removal * Reinforced concrete pipe (nosteel casing)
v Land conveyance: 20.850
C. Sites for outfall. D. Outfall pipe diameters * Outfall: 2.850 m.* Oceanfront of * 0 66" (1.68 m) * Diffuser depth: 20 mCienaga -v * o 72" (1.83 m) * Diffuser lenght: 540m, 27
* La Boquilla . o 72" (1.83 m) vertical pipes, 2 ports/pipe. Punta Canoas * 0 78" (1.97 m) for a total of 54 ports.* Tierra Bomba Isle .
Page 95
first area estimated at 42 hectares in which sedimentation of organic materials is expected to takeplace at a rate of 10 mm/year. A second area, surrounding and including the first one, of about150 hectares will accumulate solids at a rate of 0.5 mm/year. The magnitude and importance ofthese deposits are deemed negligible given the area's active sedimentation and solid depositionactivity caused by the Magdalena River, whose mouth is located at Barranquilla, some 120 kmeast of Cartagena. Deposition and scouring of solids are normal throughout the ocean areabetween Cartagena and Barranquilla. Underwater surveys at the outfall site showed that theentire area has poor benthal activity and almost non-existent biological resources. This situation,together with the low content of toxic materials and heavy metals in the effluent dischargepreclude the accumulation of toxic materials or the risk of biological assimilation.
Biodiversity Impacts. Principal concerns initially raised on the project's impact on biodiversityresources in the Cartagena area are related to the impacts on the Islas del Rosario National Park,the Cienaga de La Virgen Lagoon, and impacts on local fisheries. Water quality and oceandispersion models proved beyond any doubt that solids or nutrients from the outfall dischargewould not adversely affect the Islas del Rosario National Park. The distance from the dischargesite to the islands, and the predominant current and dispersion patterns ensure a very lowprobability of such impacts.
Impacts on the Cienaga de La Virgen wetlands will be mostly positive in nature. Theelimination of raw sewage discharge to the wetland will facilitate its recovery. The Bocanaproject will accelerate this process through a faster water renewal rate from unpolluted oceanwaters. However, the alignment of the conveyance system will go through surrounding wetlandareas and could, if unchecked, facilitate a faster encroachment of the mangrove areas throughinvasion and speculative land acquisition. This phenomenon has been exacerbated in recent yearsby immigration from unstable, violent areas in Colombia. The pipeline itself could foreclosedrainage canals into the Lagoon exacerbating its already poor hydrological-balance conditions.Project design and construction should guarantee proper drainage and canal crossings in order tomaintain water inputs from the watershed to the lagoon. In addition, ongoing agriculturalpractices in the Lagoon's watershed are the main cause of the presence of pesticides and otheragro-chemicals in bottom sediments in the Lagoon. The EA report concludes that unlessadditional environmental enhancement measures are put in place, the construction of the outfallby itself cannot guarantee the long-terrn survival of this wetland ecosystem.
Impact on fisheries was also deemed of low magnitude and importance. Most artisanfishing takes place in areas like the Cienaga de La Virgen Lagoon and the Cartagena Bay, and themajority of fishermen travel long distances to fishing areas that move according to seasonalvariations. Some lobster fishing takes place in specific areas well beyond the discharge site'sarea of influence. Biological activity in and around the outfall site is almost non-existent.Concerns over biological assimilation of toxic materials have been explained elsewhere. (Seesection on Organic and Inorganic Sediments) During consultation meetings most fishermenconfirmed the past high fish productivity in the Cienaga de La Virgen Lagoon, which has beengreatly diminished during recent decades. The restoration and conservation of the Cienaga de LaVirgen Lagoon was identified as necessary in order to reactivate and support local fishingactivities in the long term. A well-preserved Cienaga de La Virgen Lagoon could well become animportant urban wetland in a few years, providing important ecological, recreational and touristservices to the city. Nevertheless, restrictions on fishing, widely disseminated throughout localcommunities, in the mix zone of the discharge will have to be closely monitored during outfalloperation.
Construction Impacts. The construction of a pipeline and outfall of such length and diameter willentail potentially significant negative impacts on communities and surrounding natural habitats.
Page 96
The proper management of excavation materials, river and drainage crossings, and the reductionof nuisances such as dust, noise, increased traffic, pedestrian safety concerns, and the presence ofa large work force in or near small rural communities, will necessitate careful engineeringplanning, closed supervision, and a continuous and intense community information program. Allcommunities during the public consultation meetings identified environmentally and sociallyunfriendly construction practices in ongoing sewerage construction works in Cartagena as a majorconcern and a source of continuous friction between the communities and ACUACAR. Allenvironmental requirements for construction will be part of an Environmental ConstructionManual, including camp location and management guidelines, which will be enforced by anenvironmental supervision firm. These specifications will be disseminated and explained to localcommunities.
Social Impacts. In addition to the construction impacts discussed above, the EA report raisessome concerns about further encroachment of the wetland ecosystem and increased invasion offiscal lands facilitated by the pipeline corridor. Furthermore, land speculation accelerated by anew Cartagena-Barranquilla road through the northern part of the wetland area, left profoundresentful attitudes and skepticism towards large development projects in poor local communities.In addition, most of these communities still lack basic water and sewerage services. Influx ofdisplaced populations from other areas in Colombia has completely changed attitudes towardslocal natural resources. The lack of environmental awareness and complete disregard of naturalservices from wetlands and other ecosystems are evident in local communities. Careful selectionof corridor alignment and siting of pumping stations and treatment sites have avoided the need forthe resettlement of population. Further and more detailed discussion on social issues is presentedin the annex on Social Assessment.
Cultural Heritage. Cartagena is an UNESCO World Heritage Site. The colonial inner city,defenses, forts and churches are well preserved and attract tourists from over the world.However, urban sprawl has gone beyond the fortified city and has surpassed the Bay and itssurrounding areas. The project will not impact any historical sites. Although no archaeologicalsites have been reported for the northern part of Cartagena, rules for contractors will specifyprocedures for chance findings.
Community and Stakeholder Consultation
As required under Colombia's environmental law public hearings were held in eachcommunity which would be affected by the construction works associated with the seweragetransfer, treatment, and disposal system. The initial series of consultations were held in February1998 concurrent with the presentation of the first draft of the project pre-feasibility study. At thisworkshop, the terms of reference for the Environmental Impact Study were discussed and agreedupon by the workshop participants. Workshop participants included: representatives of theMinistry of Environment, ACUACAR, CARDIQUE, DAMARENA (the MunicipalEnvironmental Department), national and local environmental NGOs, municipal governmentagencies, community organizations, professional associations, community representatives, andthe private sector.
During preparation of the EA, public consultation meetings were held in the communitiesthat would be most affected by the project: Arroyo de Piedra, Manzanillo del Mar, La Boquilla,Sur Oriental Zone and Punta Canoas. Community concerns were registered and taken intoaccount in the preparation of the Environmental Management Plan. A final public consultationworkshop (with the same variety of participants as the first one) to review and discuss the finaldraft of the pre-feasibility study and the EA report was held in February 1999. The EA report hasbeen made publicly available in Cartagena. The EA report includes an annex that summarizes the
Page 97
consultation process including participants, a record of concerns, and agreements reached duringthe meetings.
Perhaps the most important result of the consultation process was the decision by theMunicipality to include a small yet important water supply component for the rural communitiesnorth of Cartagena. These communities are located near the path of the land portion of theconveyance system and will likely receive the major part of construction impacts and nuisances.However, these communities do not have water and sewage systems and would not haveotherwise any access to project benefits.
Environmental Management Plan
The EA report recommends the implementation of an Environmental Management Plan(EMP). The EMP proposes a number of measures to mitigate environmental impacts during theconstruction and implementation phases and establishes an organizational structure, set ofprocedures and a budget to implement activities under the EMP. The EMP has also identified aset of priority environmental activities that will enhance environmental conditions in Cartagenaand will assure achievement of the project's environmental objectives. The EMP is divided intwo parts: (i) management of construction activities; and (ii) environmental enhancement. Thegoal of these activities is to: (i) improve urban environmental quality; (ii) improve naturalresources management, particularly in highly sensitive areas such as the wetlands of the Cienaga;(iii) establish environmental education and public awareness for wastewater management andconservation of urban natural ecosystems. A firm will be hired to implement the activitiesdetailed in the EMP related to the construction phase.
Environmental Management during Construction. Two major activities will ensure that adequateenvironmental and social safeguards are implemented during the construction phase: (i)Environmental Supervision of the Construction; and (ii) Community and Public Awareness andCommunications. The environmental supervision will include the following activities:
* Establishment of a verification system to insure compliance with environmentalspecifications and procedures established in the EMP and environmental constructionmanual. A preliminary environmental manual is included in the EA report. Basiccomponents of the manual are: camp location restrictions, workers behavior,prohibitions for hunting and fishing, construction and waste management, control ofnuisances and traffic safety, work schedules, right-of-way revegetation plans. Thismanual will be further refined during the design phase of the project.
* Implementation of an environmental baseline program to monitor oceanographic,biological and ecological indicators; after construction, this program will be convertedto a long-term monitoring program.
Complementing the above verification system, the community public awareness andcommunications program will entail:
* Dissemination of environmental specifications and procedures related to theconstruction among affected communities.
* Implementation of a public awareness campaign focussing on the project and itsbenefits.
Page 98
* Establishment of guidelines and procedures for negotiation and acquisition of propertyand right of way
During the construction phase an Office of Environmental Management will beestablished. This Office will have responsibility for coordinating all aspects of the EMPincluding communications with all interested parties (i.e. community organizations, CARDIQUE,MinAmbiente, DIMAR, the World Bank, NGOs, and the Municipality of Cartagena). This Officewill also coordinate environmental inspections, environmental data collection, public informationand community awareness programs, and all aspects of the environmental infornation system.Weekly environmental inspections will be undertaken and recorded. Full environmentalsupervision reports will be prepared every 2 months.
Environmental Enhancement. The project will also include a component that will includeactivities designed to improve the overall environmental quality of the city and the area to thecity's North and ensure attainment of overall environmental objectives. The most importantactivities to be implemented include:
* Restoration, conservation and management of the Cienaga de La Virgen wetland ecosystems,to ensure the long-term sustainability of this ecosystem. The project will finance legal andtechnical feasibility studies to create a legally protected area, management plans,environmental education programs in surrounding communities, and awareness programsregarding solid waste disposal in water bodies, mangrove deforestation, and over-fishing.The proposed reserve will have natural and manmade limits such as the proposed road on thesouthern perimeter of the Lagoon and the pipeline corridor.
* Industrial and non-domestic pollution in municipal sewerage system, to control existing andfuture toxic discharges into the sewage system and hence in the outfall discharge. Theproject will finance an industrial pollution survey in the sewerage network, establishment or adatabase to be updated by both Acuacar and CARDIQUE, the preparation of regulations forindustrial and non-domestic sewerage connections, and the definition and dissemination ofpollution control and clean technologies for most significant sectors.
* Institutional strengthening program, to ensure institutional capacity to implement EMP. Theproject will finance training workshops, study tours and specialization courses forDAMARENA and CARDIQUE in topics such as wetland management, pollution control,water quality monitoring and environmental audits.
Final engineering designs will include the preparation of detailed measures to deal withcontingency plans (power black outs), additional site-specific environmental guidelines forconstruction, special construction practices for river and drainage crossing, ocean approach,demarcation of mix zone, undersea construction process, and right of way restoration andmanagement. These measures will be included in bidding documents.
Table 3 summarizes identified environmental issues, proposed management activities andinstitutional responsibilities to implement them. All activities are described in full detail in theEMP and have been budgeted in project costs. Some of them (industrial pollution control,monitoring) have been included as an independent stand-alone component of the project.
Environmental Assessment of Other Components. Other project components include theconstruction of water and sewerage networks, expansion of water storage and treatment systems,.pumping stations, and water intakes. All sites were screened for potential sensitive impacts suchas affectaticn of wetlands and other ecosystems, resettlement and nuisances for communities. Nosensitive issues were identified. An Environmental Data Sheet for each proposed infrastructure
Page 99
site was prepared and is available in project files. The water supply component for the northernarea will take water from an existing small, private reservoir. Complementary measures for theprotection of water quality in this reservoir were identified and included in project costs(reforestation in micro-watershed, land use restrictions to be included in land use plan). Finally,an environmental manual with specifications for the construction of water and sewerage networksand other water and sanitation infrastructure will be prepared and included in bidding documents.This manual will be modeled after the Bank-financed manual prepared under the Santa Fe IProject in Bogota. This manual will be available before negotiations.
Page 1 00
Table 3: Environmental Management PlanEnvironmental Problem Program/Activity Institutional
_Responsibility(A) Large-scale construction works to improve Restoration, conservation and management of the (i)Primarywater quality of the "Cienaga de La Virgen" Cienaga de La Virgen and the Juan Polo wetlands. :DAMARENAwould not be sufficient to halt encroachment from * Area will be declared "protected" with controlsurban expansion and assure long term survival of over land use and appropriate management (ii)Secondary:wetlands. This wetland is also threatened by: * Zoning with the establishment of the Ecological CARDIQUE ,NGOs,(i) invasion of wetland area Reserve including La Popa Hill Local Universities(ii) agrochemical contamination from agricultural * Design and implementation of organizationalareas in watershed structure for protected area management(iii) overfishing * Design of ecological and social planning(iv) overexploitation of mangrove forests mechanisms(v) disposal of solid wastes * Formulation of plans to control the use of agro-(vi)urban run-off and sewage overflow from chemicals and improve water managementpumping stations * Preparation of specific projects for national and
international financing(B) Social and environmental impacts in Preparation of an environmental construction and (i)Primary:communities directly affected by the construction supervision manual which defines norms, DAMARENA,of the project: specifications, procedures, control and monitoring ACUACAR(i) raising of expectations systems during the 5 years of project(ii) changes to the daily routine implementation: (ii)Secondary: Acuacar,(iii) reduced access to important community 0 Public awareness campaigns including Contractors,resources dissemination of legal rights of communities Environmental(iv) increased nuisances (dust, noise, traffic, * Establishment of community information Supervisor, Communitypedestrian safety) centers Organizations,(v) strong changes in real estate values and right * Operational manual describing procedures for Communities living inof way land acquisition and right of way and sectors: S-SE, La
procedures for arbitration and negotiations Boquilla and ZonaNorte (Manzanillo andPunta Canoas)
(C) Lack of community awareness regarding Environmental education in beneficiary communities i)Primary:environmental problems in natural bodies of water and affected communities. Topics will include: DAMARFNA
* Public health related to the urbani environment* Household level environmental improvement (ii)Secondary:* Ecological and economic importance aquatic Communities in S-SE,
ecosvstems La Boquilla y Zona* Green spaces for improved quality of life Norte (Mazanillo y
Punta Canoa)CommunityOrganizations,Environmental NGOs,Local Universities
(D) Lack of adequate or sufficient environtmental Environmental baseline data (currents, water quality, (i)Primary:information for: sediments, biological indicators) collection and DAMARENA,(i) ex-post evaluations of the ocean outfall and monitoring in: ACUACARother construction projects associated with the * The Cienaga de La Virgen-Juan Polo wetlandssewage treatment * Important watersheds which drain into the (ii)Secondary: National(ii) periodic adjustments in activities specified in Cienaga and/or regionalthe EMP * The Arroyo de Piedra and Marbella beaches research institutions(ii) make future decisions regarding additional * The Caribbean Sea in the area of the outfalltreatment technologies * Cartagena Bay
* Sewerage discharges(E) Insufficient information on toxic and * Industrial pollution survey; quantification and (i) Primary:radioactive waste currently disposed in sewerage classification of waste; preparation of database ACUACAR,systems, lagoons and other waterways. Dispersed * Preparation and adoption of regulations for Municipalityyet potentially significant small industries, vehicle industrial coinections to sewerage networkmaintenance shops, print shops, and medical * Design of a monitoring/audit program (ii)Secondary:CARDIQcenters. Lack of information on appropriate * Evaluation of options for management UE, DAMARENAmanagement systems for disposal of these waste including: (i) tariffs and fines; (ii) financialproducts. incentives (credits and technical assistance; (iii)
_________________________ _ pretreatment options
Page 101
D * Dissemination of clean technology options
(F) Institutional weakness and lack of capacity to Institutional strengthening of organizations which ACUACAR,implement environmental management plan will implement the sewage management plan for DAMARENAactivities associated with the cotnstructior. of the Cartagena: DIMAR, CARDIQUEsewerage system and ocean outfall * Public seminars and workshops CIOH, NGOs,
* Courses in urban sanitation and wetland Universitiesecology Contractors,
* Equipment, materials and infrastructure Consultants* International study tours to other operating Community
ocean outfall sites Organizations
Page 102
Annex 10Cartagena Sewerage and Environmental Management Project
Social Assessment Summary
Social Assessment (SA)
A social assessment was carried out during project preparation. Its main objectives were to: (i)assess the social impact of the project; (ii) assess social and economic conditions of the targetpopulation and establish a base-line for social monitoring and evaluation; (iii) consultbeneficiaries about their priority needs and views about the project; (iv) identify community-based organizations willing to support the project's implementation; (v) identify social obstaclesand risks; and (vi) prepare as required a mitigation program.
The social assessment carried out in two main distinct areas: (i) the urban neighborhoods locatedalong the Cienaga de La Virgen at the south-east of Cartagena (Olaya Herrera, San Francisco, ElPozon, and San Jose de los Campanos); and (ii) the rural communities at the north zone of thecity where the outfall will be built. A social survey was carried out in 222 households, including1,163 persons. The survey covered demographic variables, socioeconomic conditions andhousing matters. The survey also included questions related to community organizations, attitudestowards the project and willingness to participate. Additionally, four workshops in criticalcommunities were carried out (in El Pozon, San Jose de los Campanos, Olaya Herrera and LaBoquilla). The analysis was complemented with direct observation and interviews with keyinformants, community leaders and local authorities.
Socioeconomic Conditions
The population in Cartagena grew by 7% between 1996-97 reaching 694,582 inhabitants in 1997.The most populated areas are the ones located at the southeast zone, with 30% of the total city'spopulation, and the southwest zone with 25%. The population at the north zone, comprisingmainly rural black communities, represents 11% of the total population. In terms of sewerage andwater network^s, the project wouid benefit a population 300 000 inhabitants residing in theseareas, representing close to 50% of the city's population. The project would also benefit theentire population of the city in terms of treatment and disposal of wastewater.
According to the survey carried out during the SA, the young people, under 15 years of agerepresents 40% of the total population while another 30% is between the ages of 15-30 years.Because of this demographic structure, the level of dependency (relation of persons employed tonon employed) is very high, 45% per occupied person. Average illiteracy rate for the wholepopulation is 13%. However, in certain communities such as El Pozon, Olaya Herrera, SanFrancisco and Punta Canoa, it reaches over 50%. In average, only 44% of the target populationhas completed basic education.
The majority of the target population lives at the lowest levels of poverty (strata 1 and 2according to Colombian classification); that is a monthly per capita income between US$ 20-60for stratum I and US$ 100-270 for stratum 2. At this level of poverty, almost all the income isspent on food and transport. During the survey, many people recognized that they have in averageonly two meals a day; it was evident that many children suffer malnutrition. Moreover,unemployment affects around 20% of the active population, much higher than the average of 12%for Cartagena (1997). Most men are employed in low skills jobs such as street vendors (19%)construction workers (18%) or hand freight loaders (cargadores) (8%). Women are mainlyhousewives (59%) or domestic employees (30%).
Page 103
Lack of basic services is widespread and deficient sanitary conditions affect the population'shealth, especially the health of children. Therefore, it is not surprising that intestinal infection,influenza and intestinal parasites are among the ten top causes of morbility. In the southeastregion (around the Cienaga de La Virgen Wetland) many families do not have a bathroom anduse open air sites for excreta deposition. In San Francisco and Olaya Herrera this is the case in80% of the households; around 40% of the families in the urban areas have latrines while in therural areas septic tanks are more common (40% in average). Sickness such as diarrhea, skininfections and intestinal parasites are common and widespread.
Many families also lack in-house-water services, mainly in the north rural communities wherewater is supplied by cistern trucks. This is the case in 80% of the families in Punta Canoa andManzanillo del Mar, and 40% in La Boquilla. In urban areas, this percentage is lower, around20%, though higher than the city's average of 15%. However, the problem is critical in someneighborhoods such as El Pozon where 79% of the families buys water from cistern trucks.Although poverty is widespread in all population which would benefit from the project, it isimportant to note the differences between the south east urban population around the Cienaga deLa Virgen and the rural communities at the north zone.
(a) Southeast Urban Area
The southeast urban zone, around the Cienaga, has been populated mainly by ruralmigrants from Bolivar department affected by violence and increasing poverty. Themajority of this population arrived to Cartagena during the past 10 years and settledirregularly on wetland areas. However, migration has not stopped and continues even atpresent, creating new squatting areas. In San Jose de los Campanos for instance, 71% ofthe population has been living in the area for less than a year.
Presently, the older neighborhoods have consolidated and some improvements are visiblesuch as more brick-houses, a few paved streets and even street lighting in some barrios.However, housing conditions are critical; in some neighborhoods such as San Francisco,Herrera Olaya and El Pozon, around 50% of the families lives in shanties. Most families,of five members or more, accommodate in two rooms houses without basic sanitaryservices. The lack of legal land titles makes it difficult for these families to accesscommercial credit and/or housing improving programs. This situation contributes toincreasing insecurity and instability and this hampers incentives to improvements livingconditions.
Cultural conditions are also an indication of the marginalization of this population. Forinstance, a high percentage of the families are composed of unmarried couples or singleparents which leads eventually to social disintegration. In 1997, 47% of students droppedschool because of economic causes without finding afterwards a regular source ofemployment. As a result, youth gangs and violence are common, affecting not only thepoor neighborhoods but the whole city. In 1997 homicide was the second highest cause ofdeath in Cartagena, increasing to 7.16% from 6.0% in 1996.
(b) North Zone Rural Area
The rural area of the north corridor comprises old established black communities that have,lived there for at least three generations; immigration is minor and there is almost no landinvasion in this area because land is privately owned and well guarded by the landowners.
Page 104
Families living more than 30 years in the same community represent 67% of the totalpopulation in Punta Canoa; 40% in Manzanillo del Mar and 28% in La Boquilla.
Because of legal technicalities, the black communities in the north zone are not recognizedofficially as such under Colombian law. However, they live under the traditions and cultureof their ancestors and keep the structure of the rural families. Married couples familiesprevail living as extended families with strong family ties and close attachment to theirneighbors. This is a social strength that has helped these communities to survive under thepressure of economic growth. The recent construction of the new Cartagena-Barranquillaroad (Troncal del Caribe) has had a strong impact on the integrity of these communitiesbecause it spurred urban growth. Since its construction, the poorest inhabitants have beendisplaced under the pressure of higher land prices to give place to new residential andtourism sites which now impose a constant pressure on these communities.
Fortunately, the majority of the families in Manzanillo del Mar Punta Canoa, and to someextent La Boquilla, has legal documentation to prove property rights. Houses in general arein good conditions with separate bedroom, kitchen and bathroom. However, La Boquilla,the biggest community in the north zone (5,506 inhabitants) has a large number of verypoor households that requires special attention.
Social Impact
The social assessment proved that the project would have a positive impact by providing waterand sanitation services to about 300,000 of Cartagena's poorest population who at present lackthese services. The provision of these services will ameliorate the living standards of thispopulation by improving sanitary and health conditions of the poor neighborhoods therbycontributing to urban renovation of the entire city. Although recognizing the benefits of theproject, the community expressed concerns in relation to: (i) lacking the capacity to be able to payfor the services; (ii) possible land prices and taxes increases that might force them to leave theirland; and (iii) losing the subsidies established by the Colombian law s for populations of strata Iand 2.
Fortunately, as confirmed by the social assessment and the environmental impact evaluation,project works do not require the resettlement of any family, nevertheless construction willcertainly affect the daily life of certain neighborhoods. Though the communities accept thetemporary nuisance of construction, they also demand to be informed in advance aboutconstruction schedules, and require that contractors pay more attention during works to avoiddamaging family properties and/or community assets. They also require a prompt response totheir complains. These problems have been a source of conflicts with ACUACAR in the past.
The low population density in the north zone where the wastewater conveyance pipeline andsubmarine outfall will be located reduces the possibility of social impact. The pipeline has beendesigned to avoid damage to any property. Since the pipe will be buried, the land use along the 20km corridor is guaranteed by implementing minor protection measures. The selected site for theoutfall in Punta Canoa offers technical advantages (the shortest distance to deep waters) but alsoreduces a possible social impact. Punta Canoa is a small villages of only 500 inhabitants mainlyliving from fishing; there are no agricultural lands to be directly affected by the works.
In relation to the main project works the communities expressed concerns about possible leakageand "explosions" along the conveyance pipeline and/or in the pumping stations sites that mightaffect their neighborhoods. The project's technical team indicated that such accidents are unlikelyto occur and adequate measures to protect these facilities are included in the project design. The
Page 105
community also expressed concern about possible environmental impact, mainly on fishing,beach quality and soil contamination. The environmental impact assessment indicated that nomajor environmental impacts are expected from the project works, including the outfall. Neitherfishing, nor the quality of the beaches will be affected, on the contrary, one of the major outcomesof the project will be the cleanup of Cartagena beaches, the Bay and the Cienaga de La VirgenWetland. Mitigation measures and an extensive monitoring system would minimized anynegative environmental outcome.
As find out during the social assessment the project had initially faced community'smisunderstanding as a result of the following factors: (i) lack of an environmental conscienceamong the majority of the population; (ii) lack of accurate and/or partial information that affectthe judgement of various social groups; and (iii) the existence of social conflicts among societygroups that cause difficulties in reaching agreements. The community workshops carried out in1998 during the social assessment and the two workshops, with community leaders and mainstakeholders, carried out in February 1999, provided sufficient information, helped to dissipatesome doubts and to create a better understanding among stakeholders that improved theacceptance of the project. This participatory approach will be maintained along the project cycle.
Although the project will not produce any direct negative impact, it might have an undesirableside effect. The improvements might result in further squatting around the Cienaga de La Virgenwetland and/or promote the displacement of rural population in the north zone in favor of tourismand residential urbanization. This has been the trend for some years in Cartagena. The alternativeis to consolidate the existing urban areas as regular, formal neighborhoods under the care of thecommunities themselves, instead of public areas open to speculation and squatting. In the northzone it is necessary to increase community awareness and organization so that people can benefitrather than be affected by the inevitable changes arising, not only from the project, but from theconstant urban growth of Cartagena.
To address community fears, mitigate social impacts and reduce possible undesirable side effects,a Mitigation and Community Development Program has been designed as part of theEnvironmental and Social Component of the project. Under this component, social andenvironmental mitigation measures will complement each other to optimize benefits and reduceany negative impacts of the project.
Social Impact Mitigation and Community Development Program
The Social Impact Mitigation and Community Development Program's objectives are to: (i)mitigate the social impact of the project; (ii) strengthen community organizations to enable themto face the upcoming changes; (iii) consolidate urban and rural neighborhoods to prevent orreduce displacement; and (iv) optimize project benefits through participation. The Mitigation andCommunity Development Program consist of three main sets of actions: (a) Urban Rehabilitation;(b) Strengthening Community Organization; (c) Promoting Community Development; and (iv)Providing services to the north zone black communities.
(a) Urban Rehabilitation
These activities are intended to rehabilitate marginal urban areas around the Cienaga andconsolidate the rural communities at the north zone. Strong well integrated communities are theonly alternative to reduce squatting, avoid displacement of the poorer households and createincentives for continuos housing and neighborhoods improvements. These actions will build uponthe ongoing District's Urban Rehabilitation Program intended to regularize land property, toprovide alternatives for poor housing improvements and to enforce urban planning regulations.
Page 106
The project will support these efforts through the following actions: (i) promotion of communityparticipation in the ongoing Urban Rehabilitation Program; (ii) carrying out a pilot program tointroduce sanitary facilities in selected ,extremely poor, households (stratum l); and (iii)establishment and/or improvement of community centers to be the focal point for communityactivities, social integration and amelioration of urban conditions.
i. Urban Rehabilitation Program. Under the project, the Urban Rehabilitation program willbe supported through: (i) familiarization sessions to explain alternatives for land regularizationand housing programs for low income households; (ii) training and legal advise to access theprogram; and (iii) support to community organizations to participate in the program on regularbasis. Community-based organizations and leaders identified during the social assessment willbe the vehicle to disseminate the advantages of the program.
ii. Sanitary Services Pilot Program. In accordance with social assessment results, manyextremely poor households not consider sanitary services as a priority and/or might lack thecapacity to pay for these services. Therefore, a pilot project to provide in-house connectionsand basic sanitary facilities will be carried out in order to demonstrate their benefits andpromote participation in the project. Criteria to select pilot's beneficiaries has been agreedwith community leaders and District authorities. Under these agreements, participation in thepilot program will be confine to families within the area covered by the sewerage componentunder the following conditions: (i) lowest level of poverty (stratum 1); (ii) located in areassuffering critical sanitary conditions; (iii) living for a minimum of five years in the samehouse; (iv) active participation in community organizations and activities; and (v) willingnessto contribute money, labor and/or materials. Around 10% of the families living in suchconditions will benefit from the pilot program.
iii. Community Centers. The southeast and the north zones are located at a distance from thecity center (where all the services are provided) and lack amenities that promote socialintegration or serve as focal point for community activities. Existing community centers insome neighborhoods, have proved to have a positive impact, promoting communities toimprove their barrios and to build better relations. Six such centers, located in critical areas,will be up-graded and/or build with the support of the District and the beneficiariesthemselves. These centers will operate under self-sufficiency principles and communitycontributions for maintenance and operation with the District being the ultimate responsiblefor their operation and for providing adequate personnel.
(b) Strengthening Community Organization
Thesc actions are intended to promote communities self-sufficiency to face the expected changesand to make the best of the opportunities offered by the project. It consists of three mainactivities: (i) strengthening the capacity of community organizations; (ii) establishment of socialcontrol mechanisms to monitor the project's social and environmental impacts (veedurias); and(iii) promoting participation in the project to develop better sanitary conditions, a culture ofpayment for services and social responsibility.
i. Strengthening Community Organizations. This activity would incorporate training inaspects such as leadership and groups management; citizens legal rights and obligations;conflict resolution and other such activities conveying better relations among different groups.
ii. Socia7! Control Mechanisms. All community organizations expressed strong support toincorporate in the project social control mechanisms as prescribed in Colombian Participatory
Page 107
Law. The project will provide support to organize and train communities to establish suchmechanisms (veedurias) to be the main link with the Project Executing Unit and ACUACARto present complains, solve conflicts and participate in the project's Environment MonitoringSystem, as established in the environmental plan.
iii. Promoting Participation. These actions intend to inform communities about the benefit ofintroducing sanitary services and the need to contribute to their maintenance and adequateoperation. It will also explain the beneficiaries about the need to pay for services and tocontribute to payments for wastewater treatment. Under this activity, the misunderstandingsabout billing system and payments will be also addressed.
(c) Promoting Community Development
Community development activities included in the Mitigation Program, are specifically designedto support beneficiaries participation in order to: (i) improve sanitary conditions of their ownneighborhoods; (ii) support the project's cleanup efforts, mainly around the Cienaga; and (iii)promote community development through community groups which would carry out activitiescomplementary to the project.
i. Improving Sanitary Conditions: consists of beneficiaries' activities to support the projectobjectives such as protecting channels, cleaning common areas, collecting solid waste, andproviding technical assistance to develop small works.
ii. Cleanup of the Cienaga de La Virgen and other sites: The Program will supportcommunity initiatives for cleanup activities around the Cienaga and selected areas along thenorth zone according to the Environmental Mitigation Program and under the guidance of theSystem Monitoring Team and DAMARENA, the District's environmental unit.
iii. Special Community Groups. The program will support creation of community groupswhich would improve social conditions in all neighborhoods through cultural and sportactivities and would carry out income-generating activities related to the project's objectivessuch as recycling of solid waste, cleaning beaches, etc.
(d) Services to the North Zone Black Communities
Recognizing that the north zone would be the most directly affected by: (i) project construction;and (ii) the resultant urban growth and other possible changes, specific actions are taken tocompensate these impacts. To this end, additional investments have been incorporated in theproject to provide water and sanitation services to the black communities in the North zoneincluding: Manzanillo del Mar, Punta Canoa, Arroyo de Piedra, Portezuela and Bayuca. Theproposal to provide water to these communities has been proved technically and economicallyfeasible and its positive social impact has been acknowledged by potential beneficiaries.
Moreover, the north zone, including La Boquilla, will also benefit from a pilot program tointroduce sanitary services in the poorest households. Two of the above-mentioned communitycenters, one in La Boquilla and another one in Punta Canoa will be built to support the UrbanRehabilitation Program in the area and consolidate these communities.
Page 108
(e) Other Mitigation-Measures
In addition to the mitigation measures which form part of the project, complementary mitigationmeasures have been agreed upon with the District of Cartagena and ACUACAR and to addresscommunity' concerns related to the environmental impact of the project.
i. District of Cartagena Support: The District of Cartagena will support this mitigationprogram by: (i) including ino its Urban Development Plan a strategy to protect and consolidatethe urban integrity of the communities around the Cienaga and the north zone; and (ii)providing priority attention through its Citizens Participation and People DevelopmentProgram and its Urban Rehabilitation Program.
ii. ACUACAR Actions: ACUACAR will implement an Information and SocialCommunication Program to inform communities about construction schedule to reducenuisance during construction and respond promptly to community complains. Additionally, apublic relations campaign will be implemented to improve ACUACAR's relations with itscustomers.
iii. Environmental Concerns: The environmental concerns raised by the communities will beaddressed by the establishing an environmental experts team that will monitor the compliancewith the environmental plan. Under the environmental monitoring system the community willbe informed and trained about environmental issues. Additionally, upon request by thecommunity, and independent consultant from OMS would provide external support andadvise.
Participatory Approach
The project has been prepared under a participatory approach that began on February 1998 with afirst Stakeholders Workshops in which the first draft of the project feasibility study wasdiscussed. The social assessment and the environmental impact assessment also included aconsultation process with the main stakeholders. This process concluded in February 1999 with aSecond Stakeholders Workshop in which agreements were reached about the project's finaldesign, the environmental and social impact and mitigation programs, the monitoring process,and agreements about the role of the different actors.
This participatory approach will continue during implementation through the Social ImpactMitigation and Community Development Program. Under this Program, the communities willplay a major role in preventing negative impacts through the control mechanisms specified inColombian Law (veedurias). Community organizations will be strengthened to be able to face thechanges resulting from the project. Especial training and public education campaigns will becarried out for the communities to incorporate better sanitary conditions and thereby contribute tothe project's environmental cleanup objectives. All the activities under the Social ImpactMitigation and Community Development program involve commitment and active communityparticipation. Finally, the rehabilitation of Cienaga de La Virgen is based on community'sawareness about the importance of the environment and the importance of the community activeparticipation in the cleanup activities.
Page 109
Annex I IStatement of Loans and Credits
Status of Bank Group Operations in ColombiaOperations Portfolio
As of 15-Feb-99Difference Between
expectedOriginal Amount in US$ Millions and actual
Fiscal disbursements a/
Project ID Year Borrower PurposeIBRD IDA Cancellations Undisbursed Orig Frm Rev'd
Number of Closed Projects: 132
Active Projects
CO-PE-390B2 1999 INVIAS TOLL ROAD CONCESSION 137.10 0.00 0.00 100.00 -24.73 0.00
CO-PE-50576 1999 GOVERNMENT YOUTH DEVELOPMENT 5.00 0.00 0.00 5.00 .17 0.00
CO-PE-46031 1998 GOVERNMENT MAGDALENA MEDIO 5.00 0.00 0.00 3.38 -.70 0.00
CO-PE-46112 1998 GOVERNMENT OF COLOMBIA PASTO EDUCATION 7.20 0.00 0.00 6.43 .58 0.00
CO-PE-53243 1998 MINHACIENDA PEASANT ENTERPRISE Z 5.00 0.00 0.00 4.59 -.14 0.00
CO-PE-6861 1998 FINDETER URBAN INFRASTRUCTURE 75.00 0.00 0.00 75.00 3.34 0.00
CO-PE-6891 1998 GOV OF COLOMBIA ANTIOQUIA EDUCATION 40.00 0.00 0.00 40.00 3.57 0.00
CO-PE-40102 1997 GOVT OF COLOMBIA REG.REF.TA 12.50 0.00 0.00 11.69 3.20 0.00
CO-PE-6884 1997 GOVERNMENT OF COLOMBIA FIN MRKTS DEV TA 15.00 0.00 0.00 13.37 4.62 0.00
CO-PE-39291 1996 GOVERNMENT OF COLOMBIA URBAN ENVIRONMENT TA 20.00 0.00 0.00 13.66 9.98 0.00
CO-IE-6872 1996 BOGOTA DISTRICT GOVERNMEN URBAN TRNSPRT 65.00 0.00 0.00 48.20 26.38 0.00
CO-PE-6887 1996 GOVT OF COLOMBIA POWER MARKET DEVELOP 249.30 0.00 0.00 99.22 -13.83 -33.24
CO-PE-6894 1996 GOVERNMENT SANTAFE I (WTR/SUPPL 145.00 0.00 0.00 96.87 50.51 0.00
CO-PE-6880 1995 GOVERNMENT OF CLM AGRICULTURE TECHNOLO 51.00 0.00 0.00 43.27 23.55 0.00
CO-PE-6893 1995 GOVERNMENT OF COLOMBIA ENERGY TA 11.00 0.00 0.00 3.55 3.12 0.00
CO-PE-6866 1994 GOV. OF COLOMBIA SECONDARY EDUC 90.00 0.00 0.00 58.63 39.40 5.16
CO-PE-6868 1994 GOV OF COLOMBIA NATURAL RESOURCE NAN 39.00 0.00 0.00 20.29 10.66 9.26
CO-PE-6889 1994 GOVERMT OF COLOMBIA PUBLIC FINANCIAL MAN 30.00 0.00 0.00 6.60 5.03 0.00
CO-PE-6854 1993 GOV OF COLOMBIA IA MUNICIPAL HEALTH SER 50.00 0.00 0.00 31.28 25.77 13.91
CO-PE-6852 1991 GOVT OF COLOMBIA MUNIC DEVT 60.00 0.00 0.00 5.05 5.05 0.00
Total 1,112.10 0.00 0.00 686.08 175.53 -4.91
Active Projects Closed Projects Total
Total Disbursed (IBRD and IDA): 426.00 6,910.67 7,336.67
of which has been repaid: 12.08 5,552.34 5,564.42
Total now held by IBRD and IDA: 1,100.02 1,358.74 2,458.76
Amlount sold : 0.00 50.99 50.99
Of which repaid : 0.00 50.99 50.99Total Undisbursed : 686.08 0.00 686.08
a, Intended disbursements to date minus actual disbursements to date as projected at appraisal.
Note:Disbursement data is updated at the end of the first week of the month and is currently as of 31-Jan-99.
Page 110
Annex 11 (cont.)Statement of Loans and Credits
ColombiaSTATEMENT OF IFC's
Committed and Disbursed PortfolioAs of 3 1-Dec-98
(In US Dollar Millions)
Committed DisbursedIFC IFC
FY Approval Company Loan Equity Quasi Partic Loan Equity Quasi1963/90 Coltejer 6.32 0.00 0.00 0.00 6.32 0.00 0.001969/85/88/93/95 CF del Valle 0.00 7.43 0.00 0.00 0.00 7.43 0.001977/89/92/94/96 Promigas 13.50 1.13 0.00 39.80 13.50 1.13 0.001981/85/87/89/91/92/94 Leasing Bolivar 5.00 0.00 0.00 0.00 5.00 0.00 0.001987 PRODESAL 0.00 .59 0.00 0.00 0.00 .59 0.001990/92 ODC 5.78 0.00 0.00 13.56 5.78 0.00 0.001994/95 Corfinansa 3.50 1.43 0.00 0.00 3.50 1.43 0.001995 Corfinsura 13.06 0.00 0.00 0.00 13.06 0.00 0.001995/97 Icollantas 12.00 0.00 0.00 0.00 12.00 0.00 0.001996 Proyectos 9.94 5.00 0.00 0.00 2.44 5.00 0.001997 Suleasing 30.00 0.00 0.00 0.00 2.70 0.00 0.00
Total Portfolio: 99.10 15.58 0.00 53.36 64.30 15.58 0.00
Approvals Pending Commitment
Loan Equity Quasi Partic1999 SURENTING 0.00 5.10 0.00 0.00
Total Pending Commitment: 0.00 5.10 0.00 0.00
Page 111
Annex 12Country at a Glance
Colombia at a glance Yi28/98
Latin Lower-POVERTY and SOCIAL America middle--
Colombia & Crib. Income Development diamond1997Population, mid-year (mitlions) 38.1 494 2,285 Life expectancyGNP per capita (Affas method, US$) 2,280 3,880 1.230GNP (Atlas method, US$ billions) 86.8 1,917 2,818
Average annual growth, 1991-97
Population (%) 1.8 1.7 1.2 GNP GrossLabor force (%) 2.7 2.3 1.3 p Gross
per primaryMost recent estimate (latest year avalable. 1991-97) capita enrollment
Povery (% of population below national povety line) 18 Urban population (% of total population) 74 74 42Life expectancy at birth (years) 70 70 69Infant mortaliy (per 1,000 live births) 24 32 36Child malnutrition (% of children under 5) 8 Access to safe waterAccess to safe water (% of population) 76 73 84lliteracy (% of population age 15+) 9 13 19Gross primary enrollment (% of school-age population) 114 111 111 -Colombia
Male 115 116 Lower-middle-income groupFemale 114 113
KEY ECONOMIC RATIOS and LONG-TERM TRENDS
19?6 1986 1996 1997 Economic ratios
GDP (US$ billions) 15.3 34.9 85,8 95.7Gross domestic investmentVGDP 17.6 18.0 19.4 18.8 TradExports of goods and services/GDP 17.0 18.8 15.5 15,2 eGross domestic savings/GDP 20.7 24.8 16.4 15,8Gross national savings/GDP 18.7 23.2 13.3 12.8
Current account balance/GDP 1.1 1,5 -5.6 49 Domestic IvsmnInterest payments/GDP 1.0 2.8 2.0 1 S InvestmentTotal debt/GDP 25.7 44.0 33.6 33.2 SinTotal debt servicelexports 12,9 32.2 41.3 39.6Present value of debtlGDP .. .. 35.1Present value of debt/exports .. .. 193.3
Indebtedness1976-86 1987-07 1986 1997 1998-02
(average annual growth)GDP 3.5 4.1 2.0 3.1 37 -ColombieGNP per capita 1,1 2.5 -0.2 1.5 2.3 Lower-middle4lncome groupExports of goods and services 4,2 8.0 4.2 8.1 6.1
STRUCTURE of the ECONOMY1976 1988 1996 1997 Gor rate of output end Investment (%j
(% of GDP) roAgriculture 26.1 19.8 11.7 11.3 6 TIndustry 34.0 41.0 34.3 34.1 40 i
Manufacturing 26.7 25.5 17.6 17.7 20 f
Services 39.9 39.2 54.0 54.5 o1
Private consumption 71.1 65.3 67.5 67.8 -20 1 94 95 9 97General govemment consumption 8.2 9.8 16.0 16.3 -Grt -GDPImports of goods and services 13.9 12.0 18.5 18.2
(average annual growth) 1976-86 1987-97 1986 1997 Growth rates of exports and imports (%)
Agriculture 2.6 2.4 0.2 -0.7 so 0
Industry 3.6 2.8 -0.6 2.5 40tManufacturing 2.4 2.2 -2.7 2.6 30 /
Services 3.8 3.9 4.3 4.0 20
Private consumption 3.2 3.7 1.7 4.0 10 General govemment consumption 5.8 7.3 10.4 4.7 0Gross domestic investment 3.4 11.9 -1.5 3.5 92 93 94 95 96 97Imports of goods and services 4.0 15.7 3.0 9.6 -Exports --.-- mportcGross national product 3.1 4.3 1.5 3.2
Note: 1997 data are preliminary estimates.
The diamonds show four kev indicators in the countrv (in bold) compared with its income-rouo averaae. If data are missina. the diamond willbe incomplete.
Page 112
Colombia
PRICES and GOVERNMENT FINANCE1976 1986 1996 1997 ____
Domestic prices(% change) 130Consumerprices 20.2 18.9 21.6 17.7 120Implicit GDP deflator 25A4 29.2 18.6 19.3
Government finance t(% of GDP, includes current grants) o 4_-Current revenue .. 24.5 32.5 31.4 92 93 94 05 93 97Current budget balance .. 7.4 8.4 7 - GDP deflator -CPIOverall surplusldeficit .. -0.3 -2.6 -4.3 _
TRADE
(US$ millions) '1976 1986 1996 1997 mEioxport and Import levels (US nmillons)
Total exports (fob) 2,202 5,332 10,651 11,681 20,000Coffee 967 2,742 1,577 2,259Petroleum 84 619 2,892 2,707 15,000Manufactures 1,127 1,363 4,896 5,293
Total imports (cif) 1,654 3,409 13,684 15,411 10000
Food 1,440 1,728 hi i iFuelandenergy 40 130 229 239Capital goods 661 1,245 5,122 5,561 0 h ad i p
Export price index (1995=100) 3 28 106 126 91 92 93 94 9S 96 97Import price index (1995=100) 3 21 115 123 twExports mimportsTerms of trade (1995=100) 125 134 93 102
BALANCE of PAYMENTS
(US$ millions) 1976 1986 1996 1997 Current account btiince to GDP ratIo (ib)
Exports of goods and services 2,761 6,542 14,589 15,887 8Imports of goods and services 2,293 5,326 16,732 187756Resource balance 468 1,217 -2,143 -2,869 4
Net income -356 -1,371 -3,206 -3,426 2f j
Net current transfers 54 784 532 612 0
Current account balance 166 630 -4,817 -5,683 2 91 92 * i i iFinancing items (net) -216 872 6,299 5,653 4iChanges in net reserves 50 -1,502 -1,482 30 -0
Memo:Reserves including gold (US$ millions) 4,100 3,565 9,691 9,611Conversion rate (DEC, local/US$) 34-7 194.3 1,035.7 1,143.i
EXTERNAL DEBT and RESOURCE FLOWS1976 1986 1996 1997
(USS millions) Composition of total debt, 1996 (USS millions)Total debt outstanding and disbursed 3,944 15,362 28,859 31,777
IBRD 672 3,261 2,177 1,723 A:2,177IDA 22 17 10 10 G:5,884
Total debt service 374 2,268 6,442 6,968 D: 2,578IBRD 86 489 520 573IDA 0 1 1 1 E ,3
Composition of net resource flowsOfficial grants 17 26 80 45Official creditors 62 668 -111 -456Private creditors 88 967 1,554 1,456Foreign direct investment 25 674 3,322Portfolio equity 0 0 290
F: 16,472World Bank program
Commitments 80 640 334 75 A - IaRD E -silateralDisbursements 76 529 152 189 a- IDA D -Other multilateral F - PrivatePrincipal repayments 38 253 351 437 C - IMF G - Short-termNet flows 38 276 -199 -248Interest payments 48 237 170 137Net transfers -11 39 -369 -385
Development Economics 9128198
MAP SECTION
IBRD 30299
CARTAGENWAESUPYhOTSEWERAGE A ENVIRNMENAL A '_
-1 2' ' \\5 otr ,0 ( t{NRE'
Proec Loato PANAw 00 4 / o? uaa*n>*~'* >s
i 0; 00 0 0 i$0000>' /enc ( !3'tDE .,<V B R A Z I L
~~~~ '~~~~~~~
00 ~ ~ ~ CRTGN I 000 f00 ;DL 8 < t ~| .oi, <Sant Fuertlrz # *...
a~~~(Lk
0 0t: 0 t; v-~PXf CEAAR Marac'iba LA.&,*i
PA AM %ft I. -i t -i GUAVIARE { ><-
/ ~\M;;2oan . . C A Q U E ,tes _ / NORTEDE 70r
* Dcpariment Capitols < A M A Z O N A S | \ _ANTA_ p
SANTANr~~~~~~~~~~~~u~~~ ~This np csprodued by the ,Mcs Design Unit of The World Bonk.Th. b oundaries. enmino nd any othe Information~CORDOORkao sh otnh's epdo lot imply, onb-atfTh. World Bank
-.-.. etsdeseent or acceptance of such bBundaries.
Buc7r8Anq * 0A_ IQUIA 'S ANT DEE- ARAUCA VENEZUELA
a~~~~~~~~~~~~~~~e
N bd6* X~~~~~~~ CALDAS CA leuni C A ANAREC~~~ N R~~ISAIkAD unicas CUNDINAMARA Yopctl
/ nira QANTA F>f ~ t IH DC elba .~~~~DE PLGOTA
~~ O~~~~TN0lO &#:.~~0 Vllvi~cencio
J~~tALLE Ccli T 0 L I M ET A - ua,ciare uro scd
CIX AILCA/
12' ~~~~~Popoy6n* 0 AN
N' NAR IN 0 u _o' *Florencia o<v,Mte
5~~ 1'~~ CAQUETA ~ VAUPES
ECUADOR .N0
i... :::jet area AA O ADepartment Capitals AM Z N SB I
(@ National Capital
Deportment Boundaries International Boundaries PERU
0 50O 100 150 MILES
0 100 200 KILOMETERS
78' 74n 70'
JUNE 1999
IBRD 30300
COLOMBIA n ' t Faribberi 7C.ar ea
CARTAGENA WATER SUPPLY, Io-
SEWERAGE, AND ENVIRONMENTAL - ' j
MANAGEMENT PROJECT 3F,, \
SECONDARY SEWERAGE NETWORKS s > !
1 SEWERAGE NETWORKS IN CRESPO-EL ORO 3 5e Borgo / 5
SEWERAGE NETWORKS IN VARIOUS NEIGHBORHOODS /- W- ,-/
i!> SEWERAGE NETWORKS IN THE SOUTHEASTERN ZONE 3 , --
<, \>0 /(. U<, r, tPROJECT SEWERAGE NETWORKS: ,/ - '- -H
1 EL POZON AND VILLA ESTRELLA C ' A \ 92 SOUTHEASTERN ZONE E C DCR BRAZIL3 LA BOQUILLA / --4 SAN JOSE DE LOA CAMPANOS ,\ 5 SOUTHWESTERN ZONE / P E R U6 CRESPO-EL ORO z 1 75s S 2Jf7 PASEO BOLIVAR ;' , ______
de to
,. 7 Virgen
; - Rl Ii 2 -< -'-O
' . 2/ ' a - -L / , K t L O M E 2ERS
- - J .- l / 1< .$. Map Design Unitof The World 3ank
2,
4~~~~~~~~
0 t/~~~~~~~~~~~~~~~~/
- -- w'-) . < \ The boundaries colors d2e /2'!. .,22 2/!~~~~~~~~~N / ' ' n nohr nomto hwo
Tierra/ ,5yr 7
Bombaisland '~ /"
0 123
KILOMETERS
2' ~~~~~~~This map was producedl by the
Map Design Unit of The Worldi Bank.The boundaries, colors, denominations
If ~~~~~~~~~~~~~~~andi anyother informnation sho.n on7> 4\ | 9 -this map do not imply, on the part ofThe World Bank Group, any judgmentoni the legalstatus of any territory, or
.I 2 any endorsement or acceptance ofsuch boundaries.
JUNE 1999
IBRD 30301
COLOMBIA 7 0
CARTAGENA WATER SUPPLY, SEWERAGE, ANDENVIRONMENTAL MANAGEMENT PROJECT 10-
PRIMARY SEWAGE COLLECTION SYSTEM _ V N L
k)I. () I,A 2,I
NEW GRAVITY COLLE~~~~~~~TQR$, WORI ANK PROJEcT i ~~~~~~Santa P6
;X:D~~~~~~~~~~~~~~~~~~~COI,LECTOR~~~~~ ANI~~~ PRES$URE UNES, 1DB ?R~~~~~~JUNE199
~ PUMPunG CTTON iANCRYTAGEN
0 p~~~~~~~~~~~~~~~5
? 3~~~~
Tierro ~~~~~~~~~~~~~~~~~~~~~~KILOMETERSBombai ~~A This mop was produced by the Mop Design Unit of The World Bank.
The boundaries, colors, denominations and anyother information shownIslandi on this rnop do not imply, on the port of The World Bonk Group, any
judgment onthe legolstotus of any territory, or any endorsement orocceptornce of such boundaries.
JUNE 1999
IBRD 3030275° 70'
0 1 2 3 4 A
CartagencaI I .- KILOMETERS,
PA19A)A ,
', E ,,i t- - ' VENEZUELA,
50 , ! !Snta F. Wastewaterle Bogota o CANOAS Treatment
Plant
-N >c- .... , N --)} 4
ECUADOR r BRAZIL -W3D
p 4P E R U -- ,,.=J 1/
~~ Ii~ 3
COLOMBIACARTAGENA WATER SUPPLY, SEWERAGE, >I A ,
AND ENVIRONMENTAL MANAGEMENT N >< ,
PROJECT ,i7MAIN WASTEWATER CONVEYANCE SYSTEM, TREATMENT V "C \ 2B
INSTALLATIONS, AND SUBMARINE OUTFALL |, ) .',SUBMARINE OUTFALL (72") CONSTRUCTED / I
UNDER THE PROJECT /
ON SHORE CONVEYANCE SYSTEM (72")CONSTRUCTED UNDER THE PROJECT ii:
WASTEWATER TREATMENT PLANT CONSTRUCTED / ' 2AUNDER THE PROJECT
@ PUMPING STATION UPGRADED UNDER THE PROJECT
RIVERS
-- INTERNATIONAL BOUNDARIES (INSET) -7' i
Ciencsga
CARTAGENA < Vitgert ) 1 A
ParaisoI-,~ ,,,> i:tc'Pumping
7 Station --
2 o . X ~~~~~~~~~~~~~~~This mop was produced by the Mop Design Unit oF The World Bank.-- -- (<. i ~~~~~~~~~The 6oundaries, colors,denominations and runyother information shown
- - H1 Og ~~~~~~~~~~~~~~~on this mop do not imply, on the part of The World Bank Group, anyTierra Bomba -\ (,> \1 ~~~~~~~~judgment on the legQal satvs of any territory, or anny endorsement or
.sloand . '1 r
JUNE 1999
IBRD 30303
i I J )s,n, BY THE BANK~~~~~~~~~~~~~~~~~~~I
~~AGENA ~ COLOMBIACrbenCARTAGEN WATEH SUPPLY, O
SEWERAGE, AND ENVIRONMENTAL 10ragna
5,g0; < 0 0 ie//l) EXSIG1PtN
MANAGEMENT PROJECT A )PARALLEL WATER PIPELINE, DOLORES-ALBORNOZ
V/CENEZUELA
I 3 I C P I CDI\ T I\AO F INANEBYTCaPiedrtogeciAsW \ Tura > 9 EXISTKILOMETERS I NSata FL
6;_+ S \ l ~ ~ ~ X ACojona
\ idStorage Ta c Ii
Tierra boudrrie, olrs,enmirJton A // > f /Albo nozTiemra Treatmen Plant &Is/and Pumping Station o
Aicolis0
The World B~~~~an rru ayjdment BRocaZIL
Planye ndorsemnt Turaco EC19OR'
l <.g~~~~~~~~~~~~~~EU
75,
PARALLEL PIPELINE SECTION FINANCEDBY THE BANK1
PARALLEL PIPELINE SECTION FINANCEDBY THE DISTRICT OF CARTAGENA
e ~ ~~~~~~~~~~~~~~- EXISTING PIPELINE
rn N~~~~~~~~~~~~~~~~ TREATMENT PLANT FINANCED BY THEDISTRICT OF CARTAGENA
11 PUMPING STA-TON FINANCED BY THETur ona ~~~~~~~DISTRICT OF CARTAGENA
1A., ~~~~~~~~~EXISTING TELECOMMAND INSTALLATIONSEXISTING PU"APING STATIONS
*EXISTING TREATMENT PLANTS
~ ~Arjona
Gambat
Statian/
This mop was produced by theMap Design Unit of The World Bonk.The 6oundaries, colors, denominationsond ony other information shon on
thi mp do not irmply, aon the portofThe World Bank Group, any judgment Roaon the legol status of ainy territory, orany endorsement or acceptance of oessuch boundaries.
JUNE 1999
IBRD 30304
COLOMBIA Caribbean
CARTAGENA WATER SUPPLY, ' e aSEWERAGE, AND ENVIRONMENTAL -
MANAGEMENT PROJECT - K ,WATER SUPPLY WORKS / - VENEZUEL
VARIOUS WATER SUPPLY NETWORKS Santo ' -/
NEW POWER LINE TO ALBORNOZ PUMPING STATION ' ( /|deBogot6
WATER NETWORKS IN FALDA DE LA POPA s j / - >-} '
WATER NETWORKS IN INVASION AREAS , )
WATER NETWORKS IN THE SOUTHEASTERN ZONE ,'-// 2~~~~~~~~~0
TELECOMMAND INSTALLATIONS / )- ,
I . / / ECAOR . ' - BRAZIL
.. - -'; .; t \ ' 2 P E R
' ~ ~ > ,' - , no_g__a
''1,.,re,B'-q ,',{8' ,, ,, \, { .. 'jirgen
2 del 2
I j~~~~~~~~~~~~
PROJECT WATER SUPPLY WORKS , & ) 2 > , 3 . ,I CANAL JUAN GOMEZ (SEE IBRD 30303) -'r!\'t f2 PARALLEL LINE DOLOREZ-ALBORNOZ (SEE IBRD 30303)* ° 1 \&*"3 EXPANSION OF ALBORNOZ RESERVOIR 'z>i' 4 NEW POWER LINE TO ALBORNOZ PUMPING STATION ( tf' S WATER TREATMENT PLANT AND PUMPING STATION ' >r/ rr
ALBORNOZ-PHASE i (BY DISTRICT) ! 9 . . ., '.;< i3'7 356 SLUDGETREATMENTATELBOSQUE-PHASEf I 3Z/ / 1 2 37 LA LOMA RESERVOiR-PHASE 2 (BY DISTRICT) (v KILOMETERSs/' ti 8 RELOCATION OF THE 30' AMBERES PIPE 9t /v..,/KLMTR9 CONNECTING COLINAS TANK TO ALCALIS SYSTEM :9 ' " /1P0 WATER NETWORK IN EL POZON .This map ws produced by theI1 WATER NETWORK IN FALDA DE LA POPA (BY DISTRICT/ Map Design Unit of The World Bark.12 WATER WORKS PLAN BARRIO ,~C <'Tke 6oundrariess colors, denominations13 WATER NETWORK IN THE SOUTHEASTERN ZONE 14 WATER NETWORK IN MEMBRiLLAL R BY DISTRICT) Nhis map do not imply, on the part ofl WATER NETWORKS IN iNVASION AREAS (BY DISTRICT) t , \ r 4-t 1 The World Bank Group, any judgment16 PARTIAL REPLACEMENT OF SUPPLY PIPE TO COLINAS TANK (BY DISTRICT) on the legal sttus of any territory, or18 REPLACEMENT OF WATER NETWORK IN PASEO BOLIVAR (BY DISTRICT) TI) endKrIeteRS
12 WATER WORKS PLAN BARRIO ZN'- T~~~~~~~~~~~~~~~~~~suhe boundaries,.oosdnoiain
JUNE 1999
