FOR IMMEDIATI RFLHASI
World Bank
1818 H Street, N.W., Washington, D.C. 20433, U.S.A.* Telephone: (202) 477-1234
BANK NEWS RELEASE NO. 91/81LAC                  Contact: Ciro Gamarra
(202) 473-8721
WORLD BANK TO HELP CHILE IMPROVE WATER AND SEWERAGE SERVICES
WASHINGTON, D.C., May 31, 1991 -- The World Bank has approved a
$50 million loan to Chile to help finance a project that will improve water
supply and sanitary conditions in the greater Valparaiso area, the country's
third largest urban area. This is the first Bank loan to Chile since December
1989.
Chile has made significant progress in the last two decades in
expanding and improving its water supply and sewerage services to levels that
are now among the highest in Latin America. In the Valparaiso area, water and
sewerage services reach 95 percent and 85 percent of the population,
respectively.
However, the system suffers from serious deficiencies and
relatively high water losses caused by inadequate layout of the network,
bottlenecks, insufficient storage capacity, and leakage and bursts from old
pipes.
Moreover, large quantities of untreated sewage are discharged into
streams and the Pacific Ocean in an area that includes the sea resort city of
Vina del Mar. This creates a public health hazard and reduces the area's
attractiveness for recreation, fishing and tourism.
The project will improve the greater Valparaiso sewerage system,
which includes constructing an environmentally acceptable marine sewage
disposal system. It will also expand and improve the area's water supply
system. Institutional and operational improvements of ESVAL, the water and
sewerage services agency, are also part of the project.
A comprehensive marine monitoring program is included in the
project to ascertain whether the sewage disposal solution adopted will provide
the expected environmental results and to determine if any additional measures
need to be taken at a later stage.
ESVAL, which in 1986 received a World Bank loan of $6 million for
the first Valparaiso water and sewerage project, was transformed in June 1989
from a public sector company into a stock corporation entirely held by the
Republic of Chile.
NOTE: Money figures are expressed in U.S. dollar equivalents.


-2-
The first project, which was successfully completed in 1990,
included a major water treatment plant and other minor water supply
facilities, as well as the preparation of feasibility studies and designs for
the improvement and expansion of the water supply and sewerage systems of
Greater Valparaiso.
It is expected that the presently contaminated beaches in the
resort area of Vina del Mar will become clean and safe for public use. Other
benefits include ensuring uniform quality of the water service, which will
directly benefit the urban poor, public health improvements, and the provision
of local employment during construction.
The cost of the project is estimated at $141.5 million. ESVAL
will provide the balance of $91.5 million. A possible cofinancing loan of
about $40 million is being discussed with the Overseas Economic Cooperation
Fund of Japan.
The World Bank loan, to be disbursed over 6.5 years, was made to
the ESVAL with the guarantee of the Republic of Chile. The loan is for 17
years, including five years of grace, with a variable interest rate, currently
7.73 percent, linked to the cost of the Bank's borrowings. It also carries an
annual commitment charge of 0.25 percent on the undisbursed balance.
-0-