Document of The World Bank FLJRE COPY FOR OFFICIAL USE ONLY Report No. P-307 1-PA REPORT AND RECOMMENDATION OF THE PRESIDENT OF THE INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT TO THE EXECUTIVE DIRECTORS ON A PROPOSED LOAN TO THE REPUBLIC OF PARAGUAY FOR A SECOND RURAL WATER SUPPLY AND SANITATION PROJECT May 22, 1981 This document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contents may not otherwise be disclosed without World Bank authorization. CURRENCY EQUIVALENTS US$1.00 ˘ 126 ˘ 1.00 US$0.008 ˘ 1,000 US$7.94 % 1,000,000 US$7,937 WEIGHTS AND MEASURES Metric System ABBREVIATIONS CORPOSANA - Sanitation Works Corporation PAHO - Pan American Health Organization SENASA - National Service of Environmental Sanitation GOVERNMENT OF PARAGUAY FISCAL YEAR January 1 - December 31 FOR OFFICtAL USE ONLY PARAGUAY SECOND RURAL WATER SUPPLY AND SANITATION PROJECT LOAN AND PROJECT SUMMARY Borrower: The Republic of Paraguay. Beneficiary: National Service of Environmental Sanitation (SENASA) through the Ministry of Health. Amount: US$11.8 million equivalent. Terms: Repayable in 17 years, including 4 years of grace, at 9.6% interest per annum. Rekending Terms: Since SENASA is a government department, proceeds of the loan would be channeled through a project account with the Central Bank and passed on as grants to SENASA. SENASA in turn would pass on the funds in kind to the local communities who would contribute at least 22% of investment cost, 10% in advance, and through the provision of labor and materials and 12% through repayment over 10-20 years at 9.6% interest. In view of the beneficiaries' low capacity to pay, a portion of the Bank funds would be passed on as a grant. Project Description: Provision of basic sanitation services over a four-and-a- half-year period to villages in the southeastern part of the country. Project includes: (a) construction of water supply systems via household connections and stand- pipes; (b) construction of individual waste disposal solutions; (c) implementation of a community health education program; and (d) implementation of technical assistance and training program for SENASA. Project Risks: The main risk is related to the still limited implementa- tion capabilities of SENASA. However, SENASA's record under the previous project has been improving at a satis- factory rate and the risk in question is not excessive. To hold it to a reasonable level, a strong technical assistance program is included. In addition, the project has been scheduled to avoid overlapping with the project under Loan 1502-PA. This document has a restricted distribution and may be used by recipients only in the performance of their omcial duties. Its contents may not otherwise be disclosed without World Bank authorization. _ I _. - ii - Estimated Cost: US$ Thousands Description Foreign Local Total Construction Works (a) Water supply systems 4,654 3,312 7,966 (b) Sanitary units 816 1,029 1,845 (c) Equipment 308 51 359 Total Construction Cost 5,778 4,392 10,170 Engineering and Admin. Expenses 404 307 711 'Studies and Designs 29 112 141 Technical Assistance 706 54 760 Total Base Cost 6,917 4,865 11,782 Physical Contingencies 830 583 1,413 Price Contingencies 1,752 3,553 5,305 Total Cost of the Project 9,500 9,000 18,500 Interest During Construction 2,300 - 2,300 Total Financing Required 11,800 9,000 20,800 Financing Plan: US$ Million Equivalent Foreign Local Total Bank 11.8 11.8 Government - 5.3 5.3 Local Communities 3.7 3.7 Total Financing 11.8 9.0 20.8 Rate of Return: N.A. Estimated Schedule of Disbursements of Bank Loan (in US$'000) FY82 83 84 85 86 Annual 1.3 3.0 3.9 2.4 1.2 Cumulative 1.3 4.3 8.2 10.6 11.8 Staff Appraisal Report: Second Rural Water Supply and Sanitation Project (Report No. 3380-b-PA) dated May 22, 1981. INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT REPORT AND RECOMMENDATION OF THE PRESIDENT TO THE EXECUTIVE DIRECTORS ON A PROPOSED LOAN TO THE REPUBLIC OF PARAGUAY FOR A SECOND RURAL WATER SUPPLY AND SANITATION PROJECT 1. I submit the following report and recommendation on a proposed Loan to the Republic of Paraguay for the equivalent of US$11.8 million to assist in financing the Second Rural Water Supply and Sanitation Project. The Loan would have a term of 17 years including 4 years of grace, with an interest rate of 9.6%. PART I - THE ECONOMY 1/ 2. An economic mission visited Paraguay in November 1980 and the up- dating economic report, covering short- and medium-term developments, will be distributed to the Executive Directors shortly. The following discussion is based on the findings of this mission. The last economic report "Economic Memorandum on Paraguay" (2461-PA) was distributed to the Executive Directors in May 1979. Economic Performance 3. Paraguay is endowed with vast areas of unutilized lands well-suited for agriculture or livestock, and has substantial hydroelectric potential. Despite these natural resources, progress has been held back by weak public institutions in the development area, remoteness from foreign markets, scattered population, and a weak transport network. For many decades, per capita income and employment grew slowly and emigration served as an outlet for unemployed and underemployed manpower. More recently, however, the economy has been growing rapidly and many Paraguayans who had emigrated to neighboring countries have returned, responding to the expanded employment opportunities associated with the construction of the Itaipu dam. Furthermore, the expansion of the agricultural frontier has encouraged the immigration of farmers from abroad. Nevertheless, the country-s population density remains very low in relation to agricultural land (2.8 ha of cultivable land per capita). 4. The economic potential of the country began to be more fully realized during the 1970's. With the rapid expansion of land under cultivation, and the beginning of the exploitation of the enormous hydroelectric potential of the Parana River along the country's border with Brazil and Argentina, Paraguay's economy is now in the midst of a rapid transformation. A rise in external demand and favorable prices were instrumental in accelerating agri- cultural growth, while exploitation of the country's hydropower potential has 1/ This report is reprinted from the corresponding part of the President's Report for the Rural Primary Education Project (Education IV) (No. P-3037, dated April 20, 1981). - 2 - been made possible by treaties signed with Brazil and Argentina to form two binational authorities for the construction and operation of two hydroelectric plants, with a third in the planning stage, aggregating at least 17,000 MW. Construction of the Itaipu dam with Brazil, the largest ever built, is on schedule, and the Yacyreta dam with Argentina, supported by Bank financing, is about to begin. In the agricultural sector after an exceptional performance in 1977, a drought in 1978 affected production of soybeans, and in 1979 floodings led to low cotton yields. Preliminary results for 1980, indicate a recovery with an expected sector growth rate close to 9%. Expenditures related to the construction of the Itaipu hydroelectric project, which during the last three years (1977-79), on the Paraguayan side, averaged US$200 million equivalent to 30% of domestic investment have, in turn, stimulated the construc- tion (31% average annual growth over 1977-79) and services sectors (12% average yearly growth over 1977-79). As a result the Paraguayan economy has maintained a growth rate of over 10% during the last three years. 5. The effective supply response of Paraguayan agriculture has been assisted by improvements in transport and implementation of a set of programs designed to increase and diversify agricultural exports. The agricultural growth of recent years has brought about an improvement in the real incomes of the rural population, which comprises about three-fifths of the total. A significant share of production of cotton, and soybeans, which account for most of the recent expansion, is grown by small farmers many of whom have received land under Government and privately sponsored colonization programs. Moreover, rural wages have recently increased sharply in some areas where demand for agricultural labor has exceeded supply. Thus, the benefits of agricultural progress have been fairly widely shared. Per capita income grew at 5.3% per annum during 1972-79 compared to the 1.2% averaged during the previous 30 years. Growth in per capita incomes has been accompanied by other improvements in the standard of living, as life expectancy and literacy have increased, and child mortality has declined. Nutritional levels are comparable to those found in countries with higher per capita incomes. Furthermore, in recent years, the Government has started to carry out a series of programs aimed at extending social and other back-up services, financial support, and technical assistance to existing and new land settlements. These programs should help in spreading the benefits of growth even more effectively among the poorer segments of the population. 6. The high level of aggregate demand has affected the relative price stability that long characterized the economy. The rapid increase in the money supply generated by the large capital inflows associated with construction of the Itaipu dam and the buoyant domestic demand had resulted in the average inflation rate increasing moderately from 5% in 1976 to 10.6% in 1978. In 1979, however, inflation accelerated to 28.2%. Contributing to this result were the increases in oil prices, delayed readjustments in some prices such as urban transport tariffs, unfavorable weather that affected food crops, increases in beef prices (which weigh heavily in the price index) and the inflationary situation in neighboring Brazil and Argentina. The acceleration of inflation has occurred in spite of contractionary fiscal policies, whose impact was limited by the relatively small role of the Government in the economy. In view of these developments, in late 1979 and early 1980, the authorities adopted several measures to strengthen and improve the functioning of the -3- financial system. Both, active and passive interest rate ceilings were raised, reserve requirements for non-banking financial intermediaries were established, minimum capital requirements for banks and other financial inter- mediaries were raised, and other measures to restrict credit expansion were imposed. Inflationary pressures receded considerably in 1980 when the average rate was 22.4% (the CPI index measured from December to December went from 35.7% in 1979 to 8.9% in 1980). Main contributing factors to this slowdown appear to have been the cautious monetary policy, stabilization of food prices related to favorable climatic conditions, reduced beef exports and a reduced sale of construction services, and lower prices on goods imported from neighboring countries. 7. Fiscal policy has been characterized by a strict control of expendi- tures and revenue increases in line with GDP growth through 1979, resulting in an improvement of the savings position of the Central Government (the current account surplus increased from 2.8% of GDP in 1977 to 3.4% in 1979). Capital expenditures, which in 1977-79 averaged only about 2.7% of GDP reflecting the limited execution capacity of the agencies that have been unable to fully utilize budgetary appropriations, have permitted the Central Government to maintain an overall surplus, which increased from 0.2% of GDP in 1977 to 0.6% in 1979. However, growing demand for services stemming from increases in current and capital expenditures, coupled with revenues which have not grown in real terms, has reversed this trend resulting in a deficit equivalent to 0.9% of GDP in 1980. 8. High rates of economic growth in Paraguay resulted in registered imports in current prices increasing at an average annual rate of 33% between 1976 and 1979. Thus, despite exports growing at an average annual rate of 18.8% during 1976-79, the current account deficit has tended to widen. Although trading partner data suggest that these registered figures may be underestimated on the average by as much as 50%, there is no question that increased public and private capital inflows, mainly associated with the construction of the hydroelectric projects, have more than offset the current account deficit. Foreign exchange reserves thus increased from US$160 million at the end of 1976 to US$773 million by December 1980. Economic Prospects 9. Given the availability of still abundant land resources, a favor- able investment climate, a relatively favorable price outlook for major agricultural exports and the construction of the hydroelectric projects, Paraguay's prospects as regards the balance of payments and growth over the foreseeable future are good. 10. The country's development strategy aims at sustaining the growth momentum of agriculture and agroindustry, giving high priority to land settle- ment and to the provision of transport infrastructure to facilitate the flow of goods to domestic and foreign markets. The Government is carrying out a program to assist farm settlers in increasing their productivity, and is expanding credit for agriculture and agroindustries. In the case of small farmers, the emphasis is on the consolidation of existing colonization schemes and the establishment of additional ones. Through foreign private - 4 - investment and credit programs, the Government hopes to encourage the concurrent development of industries, particularly those with high value-added based on domestic primary production. 11. The authorities are aware that the continued expansion of private investment and high rates of GDP growth will call for greater public investment in supporting infrastructure as well as increased expenditures for education, health, rural development and other development-related services. The needed acceleration of public capital formation may require new tax measures, pending substantial transfers from power export earnings to the Central Government, to ensure the generation of the necessary additional internal resources. At the same time, higher current expenditures are needed to improve effectiveness and broaden the scope of public action in the social sectors. 12. The level and pattern of public investment that could be achieved during the next five years will also depend on the technical and administra- tive capacity of the public sector to prepare and implement projects. Although improvements have been made in the planning mechanism in recent years, a bigger public sector investment program would require a large number of well-prepared projects. There is a need, therefore, for upgrading the technical aspects of project identification and preparation, and for devoting increased attention to enhancing the administrative capacity of public sector institutions. A broader investment effort will require streamlining and decentralizing the decision-making process. Moreover, salaries of scarce professional staff need to be adjusted upwards to compete effectively with the increased demands of the private sector and the binational power companies for their services. Given the institutional difficulties and the urgent need for greater public investment to support higher levels of private economic activity, substantial external technical assistance will be needed to bolster the institution-building process. 13. With the expected expansion of agricultural acreage and continued construction of the hydroelectric projects, the economy could grow at an average annual rate of about 9% during 1981-85. This projected rate is lower than the average 10% of 1977-80 as a consequence of the expected decline of construction activity on Itaipu after 1981, restrictive policies to avoid both the acceleration of inflation and a deterioration in the trade balance. Because of agricultural growth and favorable international prospects for cotton and soybeans, real exports are projected to grow at about 13% a year during this period. Imports are projected to grow at a slower rate than in the past. The strong export performance is thus expected to reduce the resource gap from about 12% of GDP in 1979 to 5% in 1985. The current account deficit is expected to remain in the range of US$450-550 million until the late 1980's, when compensa- tion payments for electricity begin to accrue. Gross capital requirements to finance the current account deficit as well as to maintain an appropriate level of reserves are projected to total about US$3 billion during the period 1981-85. About US$1.2 billion of this is expected to consist of Itaipu and Yacyreta financing. Another US$1 billion may be expected in the form of private sector borrowing. Thus, only about US$0.9 billion may be needed on the public account of which US$384 million for amortization. Given the projected export performance, Paraguay is expected to maintain its current low debt service ratio and its creditworthiness for the amounts of external capital required to achieve the projected output growth rates. PART II - BANK GROUP OPERATIONS IN PARAGUAY 14. To date, Paraguay has received US$326.1 million (net of cancellations) of Bank loans and IDA credits. Of this amount, US$276.3 million has been in the form of 18 Bank loans, and US$49.8 million for eight IDA credits. As of February 28, 1981, the Bank and IDA held US$265.8 million, including US$136.1 million undisbursed. The amount held by the Bank and IDA as of December 31, 1979, was equivalent to about 20% of Paraguay's external debt, with a blend of about 24% IDA and 76% IBRD; this share is not expected to increase. The service on this debt amounted to 12.6% of total debt service in 1978 or about 1.2% of exports of goods and non-factor services. On a sectoral basis, Bank and IDA assistance to Paraguay to date has been 38% for agriculture, 33% for transportation; 13% for industry, 12% for education, 2% for preinvestment studies in various sectors, and 2% for water supply. Execution of these projects has, on the whole, been satisfactory. 15. IFC has had two operation in Paraguay. In 1974, it financed a wood processing project. Its participation, a US$5.4 million operation with FINAP, S.A., consisted of a US$4.0 million loan, an equity participation of US$1.0 mil- lion, and a contingent loan for the financing of cost overruns of US$0.4 million. The project has experienced critical financial and managerial problems, and efforts to restructure it have not succeeded. IFC is in the process of divest- ing itself from FINAP. Legal proceedings have been initiated against FINAP by the National Development Bank. In 1'980, IFC financed a US$1.2 million hotel operation in the city of Encarnacion. Annex II contains a summary of Bank loans, IDA credits and IFC investments, as of February 28, 1981, and notes on the execution of ongoing projects. 16. In addition to the proposed project, Bank Group lending to Paraguay in FY81 consisted of the US$30.0 million loan for a Livestock Development Project and the $17.0 million Rural Education Project. Preparation work is underway on projects in: ports and inland waterways, rural development, area development (including watershed protection and rural development), highways and urban development. 17. In lending to Paraguay, the Bank Group tries to assist the Govern- ment in achieving four major objectives, which are interdependent and com- plementary. One objective is to spread the benefits of growth more widely than before and, more particularly, to attack directly the problem of rural poverty. A second goal is to help Paraguay expand output, including exports, by supporting projects that directly or indirectly make large contributions to production and employment. A third objective is to support programs that will bring about improvements in the management of the economy and, parti- cularly, that will help to strengthen public institutions and financial intermediaries. A fourth goal is to help the public sector to increase its investments in support to the productive sectors and to expand perceptibly into the social sectors. - 6 - 18. Bank Group assistance for education, rural development and rural water supply is designed to help ease the rural poverty problem and to improve the living standards of the lowest 40% of the income distribution scale. Similarly, Bank Group lending for industry, agricultural development and livestock is aimed at increasing value added and exports of agricultural products, and at expanding marketing outlets, particularly for small farmers. Lastly, loans in the transport sector are designed to help improve institu- tional structures and policies of the sector, which play a vital role in supporting the production activities of the agricultural and industrial sectors. As agriculture constitutes the backbone of the Paraguayan economy, these operations are designed to support either directly or indirectly the development of that sector, by underpinning in particular the Government's efforts aimed at extending social and other backup services, financial support and technical assistance to existing and new agricultural settlements. In view of the increasing development potential of the southeastern region (as a result of the expanding agricultural frontier and the impact of the construc- tion of the large hydroelectric projects)--and the need to assure maximum possible results, the Bank lending program for Paraguay is to place increased emphasis on an articulate set of projects in that region. Preinvestment projects are aimed at supporting programs that help overcome institutional constraints, in particular in planning, economic management, and project preparation and execution. The proposed project is in line with the objec- tives of supporting the programs designated to improving living conditions in rural areas, emphasizing the growth of the southeastern part of the country, and the strengthening of public institutions such as the National Service for Environmental Sanitation. PART III - THE RURAL WATER SUPPLY AND SANITATION SECTOR Current Situation 19. About 97% of the population and at least 90% of economic activity are located in the southeastern half of the country. Although two rivers (the Parana and the Paraguay) which account for the bulk of the country's abundant river flow border this area, Paraguay relies mainly on groundwater for its water supply. Surface water resources are being used mainly for electricity generation and irrigation purposes. This situation is expected to continue over the next decades at least in the central regions of Paraguay where ground waters of good quality can be found in sufficient amounts to supply the existing and foreseeable demand. 20. At present, only 22% of the country's population has access to safe and adequate sources of water. Furthermore, levels of service vary greatly between urban and rural areas. Currently, some 41% of the urban population and only 10% of the rural population has water supply services. This compares with an average of 68% and 16% in urban and rural areas in Latin America, and 64 and 13% respectively in countries in the region with a similar per capita income as Paraguay. Moreover, only in Asuncion is the water treated; supply in other cities is based on raw water of dubious 1/ Communities with less than 400 inhabitants. - 7 - quality, without chlorination. Only some 60 villages (of about 200 communities of less than 4,000 inhabitants) have supply systems, either completed, partially completed or under construction. The rest of the people rely mainly on con- taminated surface sources, water holes and some inadequately protected wells. As a whole, service levels are among the lowest in South America. 21. The levels of service of sewage disposal facilities are even lower. At present, some 30% of the urban population is served by some sewerage system, mainly in Asuncion. Elsewhere, the population depends on individual solutions, mainly latrines. This compares with 36% of the urban population for Latin America as a whole, and 35% for countries in the region with an income level similar to that of Paraguay. Data on availability of rural sewage disposal facilities in these countries are sketchy; however, indications are that Paraguay s availability of such facilities is very low by the region's standards. 22. The social implications of this situation are predictable. In rural areas, low-income families have traditionally depended on unsafe sources of water supply and sanitation facilities. Similarly, in urban areas, while coverage of water supply systems has improved appreciably over the last ten years, the facilities have been largely based on individual house connections in the more affluent and middle-class neighborhoods, leaving the poor in the periphery of towns largely unserved. The result has been widespread incidence of waterborne or water-related diseases, particularly in the countryside. Diarrheal and enteric diseases are the second most common cause of mortality for all ages. The provision of safe water and sanitation facilities thus constitutes the single most important investment that could improve the health and productivity of the rural population, if properly integrated with educational efforts. Sector Organization 23. The Technical Planning Secretariat of the Presidency is in charge of overall water supply and sewerage planning. One of its officials sits on a high-level Coordinating Committee which includes representatives - and coordinates the activities - of the two major sector organizations, the Corporation for Sanitary Works (CORPOSANA) and the National Service of Environ- mental Sanitation (SENASA) 1/. 24. CORPOSANA, founded in 1954, is a financially autonomous agency of the Ministry of the Interior. It is responsible for initiating planning and providing sector services to cities with populations of over 4,000 inhabitants which represent 29% of the total population of the country. CORPOSANA now supplies water in Asuncion through 40,000 house connections (58% of the city-s population). CORPOSANA constructs and operates systems in other towns through local offices which form part of its organization. SENASA was founded in 1972 as a decentralized agency of the Ministry of Health. It is responsible for initiating planning and providing water supply and sewerage services to communities with less than 4,000 inhabitants 1/ A third organization is responsible for planning and providing sector services in the Chaco region. - 8 - as well as the remainder of the rural population. In the urban and rural areas, SENASA is also responsible for controlling industrial hygiene, food quality, solid waste disposal, vectors, insects and general environmental quality. However, the bulk of SENASA's activities are concentrated in the water sector. 25. SENASA constructs village water systems jointly with local Community Sanitary Committees ("Juntas") which are legally responsible for operating and maintaining them after construction. Each committee agrees to contribute cash and materials to initial costs, organize local unskilled labor, and collect connection charges and tariffs on agreed scales and applicable debt service payable to SENASA. The tariffs are designed to cover operating and maintenance costs as well as a portion of the capital costs. These arrangements have been working satisfactorily with a low rate of default. However, SENASA's management has lacked the necessary degree of administrative experience for executing a large-scale investment program. Moreover, SENASA's shortage of trained man- power in accounting and project management, as well as limited capabilities in carrying out basic health education programs have constrained its ability to discharge its required duties in full. The Bank's first Rural Water Supply and Sanitation Project (Loan 1502-PA of 1977) was designed to address these key issues and in particular to provide SENASA the necessary technical assistance helping to strengthen substantially the effectiveness of the implementing agency. Sector Objectives and Programs - 26. Prior to 1976, sector investments were made only by CORPOSANA. Asuncion received the benefits of by far the largest part of these invest- ments. Since that time, CORPOSANA, mainly with IDB support, has begun to increase its investments in urban areas outside the capital, and SENASA has begun to invest in rural water systems. SENASA's activities are financed by: (i) Government budget allocations; (ii) communities' repayments of principal and interest on loans and fees charged for maintenance services; and (iii) external loans and grants. Government contributions include allocations from the ordinary budget and receipts from a tax on beer consumption earmarked for SENASA's investments. External lenders have included, in addition to the Bank, KfW, and UNICEF. KfW is financing water supply facilities in thirteen communities in the San Pedro area, which is also receiving support from KfW in rural development. UNICEF is supporting communities of less than 500 inhab- itants. Possibly, the binational commissions for Yacyreta and Itaipu will provide water in some eight additional communities. 27. The Government of Paraguay has subscribed to the International Water Decade goals of providing potable water and sewerage services to 100% of the population by 1990. The absence of long- or medium-term investment programs, resulting from the lack of adequate sector programming, casts doubts on the country's ability to meet these objectives. 28. Two recent efforts are expected to help remedy the current lack of sector planning. The first of these is the creation of the Coordinating Committee, made up of representatives of the Technical Planning Secretariat, CORPOSANA and SENASA. The establishment of the Coordinating Committee should allow for more balanced overall planning. The second effort is the preparation -9- of a thorough sector analysis which is being undertaken by Pan American Health Organization (PAHO) consultants (partially financed under Loan 1502-PA) with the active participation of the Technical Planning Secretariat, CORPOSANA and SENASA. The aim is to identify major sector constraints and recommend measures to be taken to overcome them, so as to lead to a ten-year investment program. Bank Role in the Sector 29. As noted above, the Bank has participated in the sector mainly through the First Rural Water Supply and Sanitation Project financed by a US$6 million loan (1502-PA). Project implementation is proceeding satisfactorily. The project covered 50 communities in the "Central" zone, i.e. the minifundia rural areas surrounding Asuncion. The emphasis of the project was the provi- sion of safe water and the initiation, on a modest scale, of a program of construction of sanitary units. A technical assistance program was designed to strengthen SENASA's managerial capacity. Implementation of the project suffered a delayed start of works mainly because of administrative problems resulting partly from turnover of management. These problems have been partially resolved by the use of consultants, and it is expected that the project will be completed by August 1982, a delay of eight months over appraisal estimates. The educational and promotional programs have been prepared and execution has begun. During project implementation, SENASA's performance has been marked by improvements in the fields of promotion, construction supervision, operations and administration. These can be attributed in large part to the technical assistance program and the performance of the PAHO-sponsored Project Manager. The technical assistance program has been successful in introducing improved managerial and accounting practices but not much headway has been made in strengthening SENASA's staff. 30. The objectives of the proposed project correspond to the sector priorities assigned by the Government. Through execution of the proposed project, the Bank would contribute to the: (a) provision of water supply and sanitation services to low-income, rural populations in an area where major rural development efforts (some financed by the Bank) are taking place; (b) achievement of goals set by the International Water Decade in an area where need for basic services is great; and (c) strengthening of SENASA. Regional Development 31. As a result of the expansion of the agricultural frontier and the decision to build the large hydroelectric projects referred to above, the project area is the most rapidly developing area in the country. Previously existing flows of internal and external migration have intensified, the regional economy's resource base has been broadened and has been integrated more closely with the rest of Paraguay, as well as with neighboring Brazil and Argentina. The Government is attempting, with Bank assistance, to estab- lish a development strategy for the region, which calls for an integrated - 10 - approach through investments that are complementary in nature. Bank assis- tance to the area involves rural development projects, education and training projects, a major highway project linking the two main towns, Encarnacion and Ciudad Presidente Stroessner, and providing a comprehensive network of feeder roads to the area. An industrial and regional development Bank loan (Ln. 1866-PA) included assistance to small and medium scale industries in the area. An area development project in the southern part of the region is currently being appraised and a future urban development project is under preparation. Many of the locations selected under the project cover areas envisioned for future rural development projects so as to maximize the use of SENASA's resources. PART IV - THE PROJECT 32. The proposed project would be the second sector operation in Paraguay through SENASA. Since the Government's request for assistance in 1979, two missions have visited the country to assist SENASA with project identification and preparation. The project was appraised in December 1980. A report entitled "Staff Appraisal Report - Second Rural Water Supply and Sanitation Project" (No. 3380-b-PA, dated May 22, 1981) is being circulated separately. A Loan and Project Summary is being placed at the front of this report. Negotiations with the Borrower and the executing agency took place in Washington from April 30 to May 7, 1981. The Paraguayan delegation was headed by Ing. Guillermo Martinez Fleitas, Director of SENASA. A Supplemental Project Data sheet is presented as Annex III. Project Aims and Description 33. The proposed project would continue the efforts begun with the first project (financed by Loan 1502-PA) to improve public health in rural areas by providing a safe water supply and sewage disposal systems and promoting better hygiene standards. Thus, the project would assist in achieving a better balance in economic opportunities through the improvement of key elements of social infrastructure which support the country's agriculture based develop- ment. However, while the previous operation was concentrated in rural areas close to Asuncion, the proposed project would go deeper into the countryside by focusing on the southeast of Paraguay, including outlying agricultural areas. In this way the project would link up with the regional development efforts underway in this part of the country (referred to in para. 31). Lastly, the project would help strengthen SENASA, the country's sector insti- tution for rural water and sewerage, as well as the participation of local communities in the execution of this type of program. 34. Specifically, the project would consist of: (a) construction of new or extension of existing water supply systems; (b) installation of sanitary units; (c) provision of educational and promotional programs in the benefi- ciary communities; and (d) provision of a technical assistance program for SENASA in project management, and in operational and financial management. - 11 - 35. Village Water Supply Systems. The project would provide chlorinated- water to about 73,000 people in the project area by 1985 (representing about 10% of the area's rural population). Eighty percent (58,000 people) would be served by house or courtyard connections, and the remaining 20% (15,000 people) would be served by public standpipes. It is estimated that 60% of the families that would benefit from the project (40% of those receiving connections and 100% of those receiving access to public standpipes) belong to the poverty group, defined as those earning less than 25% of the national per capita income on the basis of a recently undertaken survey. This water supply coverage would be achieved by the construction of new or extension of existing water supply systems in 49 rural communities. A typical water system would include: (i) a drilled well, 100-200 m deep; (ii) pumping equipment and a chlorination system; (iii) a 10-100 m3 storage tank; and (iv) a distribution network with house connections serving about 80% of the population, and standpipes to serve the remaining population. 36. Waste Disposal Systems. This scheme would include assistance for the construction of latrines and septic tanks, as well as 2,000 sanitary units. Seventy percent of the families benefitting from the program belong to the poverty group as defined in paragraph 35 above. The design of this component is based on similar pilot experiments undertaken under Loan 1502-PA. 37. To carry out the village water supply and waste disposal systems, the project would include: (i) provision of equipment, tools and technical assistance for the construction of latrines and septic tanks; (ii) procurement of equipment and tools for regional laboratories and well drilling operations, and for community repair shops; (iii) procurement of trucks for SENASA's construction supervision. 38. Educational Programs. The purpose of the educational and promo- tional program is to stimulate village participation in the project, and to ensure that project benefits are fully realized. This program, a continuation of one begun under Loan 1502-PA, would include seminars for the Sanitation Committee members on basic administration including basic accounting and assistance in the formulation of tariff structures and operation of rural systems. It would also train operators. In addition, the program would provide seminars and lectures to housewives and school children in the village on water uses and benefits, and basic sanitation practices. 39. Technical Assistance. In view of SENASA's increasing responsibili- ties, extensive use of consulting services would be required. Feasibility studies and final designs for work corresponding to about 20% of the project works have been prepared by competent local consultants. For the remaining 80%, SENASA would use consultants to carry out the surveys in situ and prepare data, and would use its own staff to complete the final designs. Construction supervision is expected to be shared between consultants and SENASA's permanent staff. SENASA would be responsible for community promotion and providing assistance for the construction of individual excreta disposal systems. Other Ministry of Health personnel would provide assistance for the health-related - 12 - activities. The proposed project's technical assistance program would provide support to SENASA in meeting its immediate responsibilities and organize its development. This component would include: (a) services of three management consultants, for two to four years each, to advise the heads of SENASAs Departments of Planning and Engineering, Administration and Finance, and Operations; (b) consulting services for SENASA's headquarters staff in specific technical fields (well drilling, community systems operation and maintenance, accounting, etc.); (c) courses and seminars for SENASA-s field staff and community plumbers and inspectors; and (d) overseas training for SENASA personnel in such areas as hydrogeology and well drilling techniques. Institutional and Community Arrangements 40. SENASA will be responsible for executing the project. The qualifi- cations of its staff of over 190, particularly those of the engineers and specialized technicians are satisfactory. The start of operations of the systems financed under Loan 1502-PA and the execution of the proposed project will increase SENASA's responsibilities. After SENASA has executed the works, it will be in charge of overseeing the administration and major maintenance of the rural sanitation systems. SENASA will also be responsible for providing necessary technical support to the communities, which will be in turn respon- sible for the day to day operations of the system. These responsibilities will tax SENASA's limited resources, in spite of improvements in SENASA's ability to plan and execute the undertaking of small water supply and sanita- tion projects achieved during the last two years. SENASA agrees that an increase in the number of its higher level staff is needed to better cope with these expanded responsibilities. 41. Attracting more qualified staff will probably require improvement of compensation for the professionals in SENASA. This may be difficult since SENASA is part of the general public administration. Any changes in remunera- tion policies could have a chain reaction in the rest of the public sector that could result in an excessive burden on Government finances. A commitment has been obtained during negotiations that the Government and SENASA will present to the Bank not later than December 31, 1981, a comparative study of SENASA's remuneration vis-a-vis other Government agencies and the private sector. SENASA will also present to the Bank not later than June 30, 1982, a plan of action and schedule of implementation satisfactory to the Bank, which considering the above-mentioned constraints, effectively achieves adequate permanent staffing for SENASA and assesses the degree of reliance on the local consultants to support its operation (Section 4.03 of draft Loan Agreement). Terms of reference for this study and plan of action have been agreed upon during negotiations. This approach is consistent with similar commitments undertaken in various other sectors under Bank-supported operations approved for Paraguay over the last two years. 42. SENASA would conclude an agreement with the Junta (see para. 25) of each of the villages selected, based on standard models satisfactory to the Bank. SENASA would be responsible for construction of the system, including supervision of local contractors and voluntary labor, and for delivering the agreed number of house connections. It would also provide technical assistance for the installaltion of sanitary units and tile fields through the Juntas. The Huntas would be responsible for collecting connection charges and water - 13 - tariffs on agreed scales established and updated by SENASA, following the formula established below, as well as monthly installments for waste disposal solutions (paras. 47 and 48). Assurances have been obtained from SENASA during Loan negotiations that it will employ qualified consultants acceptable to the Bank to assist at the department level in project management, operation and maintenance, and finances and administration (Section 3.04 of draft Loan Agreement). Appointment of the management consultants would be a condition of loan effectiveness (Section 6.01 of draft Loan Agreement). These consultants are expected to assist SENASA in undertaking the staffing study mentioned above. 43. The following criteria would guide the selection of communities for SENASA sub-loans: (i) all communities would have populations of 400-4,000 inhabitants; (ii) all communities would be located in seven specified depart- ments; (iii) water supply subproject costs must have a per capita construction cost of less than US$130 in January 1981 prices; (iv) hydrogeologic studies demonstrating the possibility of developing easily and economically reliable sources of water must have been completed; and (v) a sanitation committee must be set up in each community to participate actively in the planning and construction of the system, and take responsibility for future administration, operation and maintenance of the system. Assurances have been obtained that the above criteria will be applied to all subprojects financed under the Loan (Section 3.02(b) of draft Loan Agreement). Priority would be granted to those communities which have expressed to SENASA the desire to obtain water supply and excreta disposal systems and have demonstrated the ability of the community to contribute to construction costs. A preliminary list of communities has been agreed upon with SENASA. Other funding agencies complementing the Bank- supported projects follow the same system and criteria. Costs, Financing and Recovery Plan 44. The total cost of the project, excluding interest during construction, is estimated at US$18.5 million in January 1981 prices, of which US$9.5 million represents the foreign exchange component. Interest during construction is estimated at US$2.3 million, administrative and engineering costs at 7% of the construction cost, physical contingencies at 12% of the base cost, and price contingencies at 40% of total project cost. Price contingencies for the local component were arrived at by using the following indexes: 1981: 21%, 1982 and thereafter 17%. Price contingencies for the foreign component were estimated at: 1981: 9.8%; 1982: 8.5% and 1983 and thereafter: 7.5%. About 110 man-months of consulting services are included for the technical assistance to SENASA (which are expected to be undertaken by foreign consultants at an average of about US$6,000 man-month). Completion of final engineering designs and construction supervision would require an additional 60 man-months of local consulting services (at about US$2,600 per man-month). The average man-month cost represents the rate billed by consulting firms for individuals and includes salaries, social costs, travel and the firms' overhead and profits. 45. The Bank Loan would finance the total foreign exchange component, and interest during construction. The Government of Paraguay has agreed to provide US$5.3 million, and the beneficiary communities would contribute the remaining US$3.7 million. The project's financial requirements that would be borne by the Central Government would be partially recovered from the villages and capitalized by SENASA. The Government has indicated that - 14 - it will meet the necessary financial requirements through budgetary contri- butions to SENASA (including a possible increase in the taxation of beer). The estimated required annual Central Government contributions during the project construction period has been agreed with the Government. In this context, the Government has also provided assurances that SENASA's operating budget will be suitably covered by budgetary contributions (Section 3.01 of draft Loan Agreement). Overall, during the next five-year period, SENASA's requirements entail 26% of administrative expenditures and 74% of capital expenditures. The Government's contribution is expected to amount to some 58% of SENASA's total budget. 46. SENASA will use these funds to construct and transfer the proposed water supply and waste disposal facilities to the communities. The local authorities benefitting from the project, in turn, will be required to set their charges at a level sufficient to cover their operating and maintenance expenditures, including equipment replacement expenses, as well as a portion of investment cost. The communities will cover at least 10% of investment cost through the initial contributions. The initial contributions will be 2.5% in cash (payable before the initiation of works) and 7.5% during the con- struction period in cash (at least 2.5%), labor or kind. The balance between the initial contribution and 22% of investment cost will be covered through tariffs and amortized over 10-20 years at 9.6% interest. Wherever possible, a larger portion of recovery of investments will be sought in such a way that repayments to SENASA will, on average, provide for 25% of total investment outlays. The remainder of the investment costs will be borne by the Government. Accordingly, a portion of the Bank funds would be passed on as a grant. These arrangements are the same as under the first project and reflect the fact that the beneficiaries' low capacity to pay does not permit a full recovery of the project capital cost. The tariff levels are based on the local ability to pay. A socio-economic study is made by SENASA in each community, to ensure that water charges represent a maximum equivalent to 7% of the average family cash income in the region. Tariffs are fixed at a basic amount for a patio connection plus an additional charge based on the number and type of sanitary fixtures used in each house. For the purpose of determining tariff levels, SENASA has prepared a table in which a unit is assigned to every sanitary fixture. The water charges are devised in such a way that there is a small degree of progressivity (about 50% difference between the minimum and the highest charge). These water charges have a revenue covenant which entials that they also have to serve the debt in an amount which combined with the initial contribution, amounts to not less than 22% of the total capital cost. The execution of these arrangements under the previous project is satisfactory. Assurances have been obtained from the Government that (i) the tariff system presently used by SENASA will continue to operate, unless SENASA and the Bank otherwise agree, (ii) SENASA and the communities will at least once a year review the tariff levels; and (iii) SENASA will cause the sanitary committees to take all necessary measures to produce revenues sufficient to comply with the revenue covenant. The revenue covenant is embodied both in the draft Loan Agreement and in the contracts between SENASA and the communities (Section 4.05 of draft Loan Agreement). The contract between each Sanitary Committee and SENASA would be satisfactory to the Bank (Section 3.03 and Schedule V of draft Loan Agreement). The costs of the sanitary units would be fully recovered (paragraph 48). - 15 - 47. Following basically the financial principles and requirements applied under Loan 1502-PA, for water works, SENASA would charge the communities an interest rate equal to the rate that the Bank would charge in the proposed loan. This onlending rate, although higher than the one charged under Loan 1502-PA, would still be negative in real terms given the current and expected, high inflation rates. The subsidy implied in the element of grant financing is, however, necessary to promote improvement of sanitary conditions in villages with lower than the country's average capacity to pay. 48. For sanitary units, SENASA would recover the full cost of the units in a period from 3-5 years at interest rates equal to the one charged by the Bank. People expected to benefit from these units, although not wealthy, have a higher capacity to pay than the rest of the community (Section 3.03 and Schedule V of draft Loan Agreement). Average monthly water charges are estimated at a maximum 7% of average family-cash income for house and patio connections. Charges to the lowest income group, for public standpipes, would be about 4% of the average family cash income. These levels are considered affordable. This is reinforced by experience under Loan 1502-PA, as the populations of beneficiary communities have demonstrated their willingness and ability to pay by signing onlending agreements, purchasing materials and providing labor. Procurement and Disbursements 49. All contracts for equipment and materials amounting to US$100,000 or more and for civil works of US$200,000 or more would be awarded on the basis of international bidding in accordance with Bank guidelines. Local suppliers would be granted a preference of 15% of the c.i.f. value, or an amount equivalent to the customs duty, whichever is lower. The Bank would have the right to prior review and approval of invitations to bid and proposals for contract award in the case of contracts for materials and equipment and for civil works exceeding US$100,000 and US$200,000, respectively. In addi- tion, the following arrangements have been agreed upon: (i) Contracts for the purchase of goods estimated to cost US$10,000 or more but which cannot be grouped in bid packges estimated to cost the equivalent of US$100,000 or more, and contracts for civil works estimated to cost US$10,000 or more but which cannot be grouped in bid packages estimated to cost the equivalent of US$200,000 or more, could be procured on the basis of competitive bidding, locally advertised, conducted in accordance with procedures satisfactory to the Bank, and up to a total cost of these items not exceeding an aggregate of US$2,000,000. (ii) Contracts for goods and for civil works estimated to cost less than US$10,000 could be procured in accordance with local procure- ment procedures satisfactory to the Bank; in this case the total aggregate cost of these items could not exceed US$100,000. (iii) Contracts for spare parts for equipment used for the project may be procured through negotiated purchases from established and reliable suppliers, with a total aggregate for the cost of these items not exceeding US$250,000. - 16 - It is expected that goods and services representing about 45% of total project cost would be procured through international bidding, and that 21% would be procured through local bidding; the remaining would entail technical assistance and force account expenditures. 50. Since a necessary conditions for the success of rural projects is community participation in the form of labor, materials, transportation, storage areas, cash contributions, etc., part of the civil works would be executed by small local contractors, combined with voluntary community work and force account methods. Well drilling would be carried out mostly by SENASA's own personnel using drilling equipment already owned by SENASA. SENASA personnel is working on similar tasks under the ongoing project and is being trained on site by a qualified consultant. Because the number of wells to be drilled under the proposed project is large. There is a possibility that private companies may be retained in some limited instances. 51. The contracts for management technical assistance to SENASA are expected to be won by foreign firms. The contracts for completion of final designs and for construction supervision are expected to be awarded to local firms, as are those for specialized technical assistance. Pipes and cement are expected to be supplied by local manufacturers. All other materials are expected to be imported. During negotiations, agreement has been reached on a procurement schedule for the proposed project for the second semester of 1981. The Bank would agree with SENASA on the yearly purchase program for project works beginning 1982; to that effect, SENASA would submit to the Bank the purchase program not later than October 31 of the preceding year (Section 3.06 of draft Loan Agreement). 52. The proceeds of the Bank loan would be disbursed as follows: (a) 100% of imported, or 35% of locally manufactured or imported goods locally procured, materials and equipment for the water systems and sanitary units; (b) 100% of the foreign expenditures or 35% of imported materials locally procured of other materials and equipment; (c) 100% of the costs of management consultants; and (d) 40% of the costs of training fellowships, community education, and other technical assistance and engineering. Disbursements would be completed by June 1986, six months after project completion. 53. In order to assure continuity with the project financed by Loan 1502-PA, well drilling equipment and materials would be procured prior to loan signing. Thus retroactive financing in an amount not to exceed US$100,000, would be permitted (Schedule I, paragraph 4 of draft Loan Agreement). A condition for initiating labor in the case of each Sanitary Committee would be that the Committee has made an initial cash downpayment of at least 2.5% of the construction cost of the water system (Section 3.03 and Schedule V of draft Loan Agreement). Accounting and Auditing Arrangements 54. As part of the technical assistance program financed under Loan 1502-PA, SENASA has developed a standard accounting system to record its operations. The system will permit SENASA to produce yearly balance sheets and income and cash flow statements. The system will also permit SENASA to keep project accounts separate from its other accounts. SENASA has started - 17 - to implement the new system and has produced its first annual statement of accounts (December 31, 1980). The project aims to continue to assist SENASA in the implementation of the new accounting system. Training of accountants and bookkeepers in the new accounting procedures would be part of the technical assistance program. 55. SENASA is audited by two different Government entities. The permanent auditors of the Ministry of Health carry out internal auditing once a year. The General Controllers Office, which maintains a permanent office in SENASA, checks all vouchers, and reports quarterly to the Minister of Health. In compliance with a covenant under Loan 1502-PA, an independent external auditor prepares an audit based on generally accepted accounting principles and sends the reports to the Minister of Public Health and to the Bank. The Gover:nment has agreed to have SENASA's financial statements audited by external auditors acceptable to the Bank and submit a report on the results of the audit to the Bank not later than four months after the end of each year. In addition, specialized personnel from SENASA's accounting department will audit the account of each community at least once a year (Section 4.02 and 4.04 of draft Loan Agreement). Justification, Benefits and Risks 56. The economic return on investment was not quantified because of the impossibility of assigning a monetary value to health benefits stemming from the project and because the overall project revenues -- a proxy for quantifiable benefits -- are negligible and do not represent a significant portion of the project's benefits. However, to obtain at least an approxi- mate value for the level below which the economic rate of return is not likely to lie, a calculation was made for two villages (of 8,000 and 2,800 inhabitants) of the present value of capital and operating costs, including complementary investment for a 10 year period, at an 11% discount rate, corresponding to the approximate opportunity cost of capital. In both cases, the net present value would be positive on the assumption that consumers assign a value equal to what they are now paying to vendors--or half that amount when they are carrying their water from nearby sources l/--for volumes consumed at present, and a value equal to 015/m for additional consumption. These sample calculations suggest that even without computing the value of public health and other benefits, the economic rate of return of the project is likely to exceed the opportunity cost of capital in Paraguay. Furthermore, the project represents the least cost solution and provides reasonable levels of service for Paraguayan standards. 57. The latrine component of the proposed project is justifiable in terms of its low cost and the reduction of public health hazards. The beneficiaries of the sanitary units would completely repay the costs in three to five years; the only element of subsidy would be the relatively low interest rate. 3 3 I/ Volumes up to 1.5 m /month per family valued at 01,000/m - 18 - 58. The main risk is related to the still-limited implementation capa- bilities of SENASA. However, the project has been prepared to reduce these risks at a reasonable level. To this end, a strong technical assistance program is included. In addition, the project has been scheduled to avoid overlapping with the project under Loan 1502-PA. PART V - LEGAL INSTRUMENTS AND AUTHORITY 59. The draft Loan Agreement between the Republic of Paraguay and the Bank, and the Report and Recommendations of the Committee provided for in Article III, Section 4(iii) of the Bank's Articles of Agreement are being distributed to the Executive Directors separately. 60. Special conditions of the loan are being listed in Section III of Annex III. A special condition of effectiveness (Section 6.01 of draft Loan Agreement) would be the appointment of management consultants for SENASA. 61. I am satisfied that the proposed loan-would comply with the Articles of Agreement of the Bank. PART VI - RECOMMENDATION 62. I recommend that the Executive Directors approve this proposed loan. Robert S. McNamara President Attachments May 22, 1981 By Moeen A. Qureshi -19 - ANNEX I Page 1 PARAGUAY - SOCIAL INDICATORS DATA SIIEET PARAGUAY R2FERENCE (nOuPS (WEICHTED AVE GES LAND AREA (TliOUSAhD SQ. KM.) - MOST RECENT ESTIMATE)- TOTAL 406.8 AGRICULTURAL 162.2 MOST RECENT MIDDLE INCOME MIDDLE INCOMF 1960 fb 1970 /b ESTIMATE /b LATIN AMERICA 6 CARIBBEAN EUROPE GNP PER CAPITA (USS) 250.0 390.0 1060.0 1562.9 2749.5 ENERGY CONSUMPTION PER CAPITA (KILOGRAMS OF COAL EQUIVALENT) 87.0 140.0 200.0 1055.9 1641.4 POPULATION AND VITAL STATISTICS POPULATION. MID-IEAR (MILLIONS) 1.6 2.3 2.9 URBAN POPULATION (PERCENT OF TOTAL) 35.6 37. 1 38.8 63.4 53.9 POPULATION PROJECTIONS POPULATION IN YEAR 2000 (MILLIONS) 5.0 STATIONARY POPULATION (MILLIONS) 9.0 YEAR STATIONARY POPULATION IS REACHED 2075 POPULATION DENS ITY PER SQ. EM. 4.0 6.0 7.0 28.1 77.2 PER SQ. KM. AGRICULTURAL LAND 12.0 15.0 18.0 81.7 129.5 POPULATION AGE STRUCTURE (PERCENT) 0-14 YRS. 46.0 46.1 44.7 41.4 30.6 15-64 YRS. 51.0 50.7 51.9 54.7 61.1 65 YRS. AND ABOVE 3.0 3.2 3.4 3.9 8.2 POPULATION RQOWTH IRATE (PERCENT) TOTAL 2. 6/e 2. 6/c 2.8 2.7 1.6 URBAN 2.9 3.0 3.5 4.1 3. 3 CRUDE BIRTH RATE (PER THOUSAND) 43.0 41.0 39.0 34.8 22.8 CRUDE DEATH RATE (PER THOUSAND) 13.0 9.0 9.0 8. 9 8. 9 GROSS REPRODUCTION RATE .. 3.2 2.8 2.5 1. 5 FAMIILY PLANNING ACCEPTORS, ANNUAL (THOUSANDS) .. .. 26. 0 USERS (PERCENT OF MARRIED WOMEN) .. .. 15.5 F00D AND NUTRITION INDEX OF FOOD PRODUCTION PER CAPITA (1969-71-100) 94.0 103.0 102.0 106.9 113.1 PER CAPITA SUPPLY OF CALORIES (PERCENT UF REQUIREMENTS) 109.0 121.0 122.0 107.4 125.3 PROTEINS (GRAMS PER DAY) 71.0 77.0 80.0 65.6 91.0 OF WHICH ANIMAL AND PULSE 40.0 42.0 46.0 33. 7 39.6 CHILD (AGES 1-4) MORTALITY RATE 16.0 10.0 8.0 8.4 4.3 HEALTH LIFE EXPECTANCY AT BIRTH (YEARS) 56.0 61.0 63.0 63. 1 67.8 INFANT MORtALITY RATE (PER THOUSAND) .. 64.0 .. 66.5 55. 9 ACCESS TO SAFE WATER (PERCENT OF POPULATION) TOTAL .. 11.0 13.0 65.9 URBAN .. 22.0 25.0 80.4 RURAL .. 5. 0 5.0 44.0 ACCESS TO EXCRETA DISPOSAL (PERCENT OF POPULATION) TOTAL .. 6.0 10.0 62.3 URBAN .. 16.0 28.0 79.4 RURAL .. .. .. 29.6 POPULATION PER PHYSICIAN 2300.0 2340.Ojd 2156.0 1849.2 1030.1 POPULATION PER NURSING PERSON .. 2310.0 2258.0 1227.5 929.4 POPULATION PER HOSPITAL BED TOTAL 430. 0 620.0 695. 0 480.3 289. 7 URBAN .. 240. 0 282.0 RURAL * 5830.0 6260.0 ADMISSIONS PER HOSPITAL BED .. .. .. .. 17.0 HOUSING AVERAGE SU2E OF HOUSEROLD TOTAL 5. Vs S. 4/f URBAN S. 3/e 5. 0/f RURAL 5. 7/j S. 7f .. AVERAGE NUMBER OF PERSONS PER ROOM TOTAL 2. 6/e 2. 4/f URBAN 2. 61s 1.7 .. RURAL .. 3. l .f ACCESS TO ELECTRICITY (PERCENT OF DWELLINGS) TOTAL 13.0/e 17. 5ff URBAN 33.2 41.5f RURAL 1. 21 1. 2/f ANNEX I - 20 - Page 2 PGUAY - SOCIAL INDICATORS DATA SHEET PARAGUAY R5ERENCE GROUPS (WEIGHTED AVERAjS - MoST RECENT ESTIMATE) MOST RECENT MIDDLE INCOME MIDDLE INCCM15 1960 /b 1970 /b ESTThATE k LATIN AMERICA & CAIBSBEAN EUROPE EDUCATION ADJiSTED ENROLLMENT RATIOS PRIMARY: TOTAL 98.0 109.0 102.0 99.7 105.9 MALE 105.0 115.0 106.0 101.0 109.3 FEMALE 90.0 104.0 98.0 99.4 103.0 SECONDARY: TOTAL 11.0 17.0 25.0 34.4 64.0 MALE 11.0 17.0 26.0 33.5 71.1 FEMALE 11.0 17.0 25.0 34.7 56.9 VOCATIONAL ENROL. (2 OP SECONDARY) 7.0 6.0 5.0 38.2 28.8 PUPIL-TEACRiER RATIO PRIMARY 28.0 32.0 28.0 30.5 29.4 SECONDARY 8.0 9.0 10.0 14.5 26.1 ADULT LITERACY RATE (PERCENT) 75.O/e 80.0 81.0 76.3 CONSUMPT ION PASSENGER CARS PER THOUSAND POPULATION 2. 0 7.0 7. 0 43.0 84. 6 RADIO RECEIVERS PER THOUSAND POPULATION 82.0 74.0 66.0 245.3 192.2 TV RECEIVERS PER THOUSAND POPULATION 15. 0 20.0 84.2 118.5 NEWSPAPER ('DAILY GENERAL INTEREST") CIRCULATION PER THOUSAND POPULATION .. 44.0 37.0 63.3 93.0 CINEMA ANNUAL ATTENDANCE PER CAPITA .. .. .. .. 5.7 LABOR FORCE TOTAL LABOR FORCE (THOUSANDS) 577.2 729.1 933.6 FDIALE (PERCENT) 21. 7 21.4 23.0 22.2 30.4 AGRICULTURE (PERCENT) 56.0 53.0 50.0 37.1 37.0 INDUSTRY (PERCENT) 19.0 19.0 19.0 23.5 29.3 PARTICIPATION RATE (PERCENT) TOTAL 32.5 31.7 31.9 31.5 40.9 MALE 51. 7 50.0 49.6 48.9 55.9 FEIALE 13.9 13.5 14.3 14.0 26.2 ECONOMIC DEPENDENCY RATIO 1.5 1.6 1.5 1.4 1.0 INCOME DISTRIBUTION PERCENT OF PRIVATE INCOME RECEIVED BY HIGHEST 5 PERCENT OF HOUSEHOLDS .. HIGHEST 20 PERCENT OF HOUSEHOLDS .. LOWEST 20 PERCENT OF HOUSEHOLDS LOWEST 40 PERCENT OF HOUSEHOLDS .. POVERTY TARGET GROUPS ESTIEMATED ABSOLUTE POVERTY INCOME LEVEL (TS$ PER CAPITA) URBAN .. RURAL .. .. .. 190.8 ESTIMATED RELATIVE POVERTY INCOME LEVEL (USS PER CAPITA) URBAN .. .. 260.0 474. 0 RURAL .. .. 260.0 332.5 385.8 ESTIMATED POPULATION BELOW POVERTY INCOME LEVEL (PERCENT) URBAN .. .. 19.0 RURAL .. .. 65.0 Not available Not applicable. NOTES /a The group averages for each indicator are population-weighted arithmetic means. Coverage of countries among the indicators depends on availability of data and is not uniform. /b Unless otherwise noted, data for 1960 refer to any year between 1959 and 1961; for 1970, between 1969 and 1971; and for Most Recent Estimate, between 1974 and 1978. /c Due to emigration of Paraguayans to neighboring countries (Argentina and Brazil), population growth rate is lower than rate of natural increase; /d Coverage unknown; /e 1962; Lf 1972. Most recent estimate of GNP per capita is for 1979, all other data are as of April, 1980. October, 1980 ANNEX I - 21 - Page 3 DEFINITIONS OF SOCIAL INDTCuTIti Noten: Alh-thnh the data ar dtawc Irn .. ce ga..neali judged the moat auh, ooead reliable, it shoold also ha .ctd that they say ne be Leet- ntoaly c-mparabie hecant of the lack of -todardli-d dtfinitlns and cctceptn ated by differntc1 noltin colleting the data. The data t,nn thels.... useful so d-scrth edees of magnitude, indicate trends, and -aace ls etain ma7nn dcff-r-ct h-e ..r coatoes The ref: ..ene grOaps ore (17 the s- -octy group of the t-hi rt conty and (2) a coutry grcp with sonrhat higher adeege tLcom than the santry sroap ct the sb)no -oaty f...ceFt for 'Capit-u S-loniu Oil pntn grop wher 'Otiddla I-onm Notch Aftlc and Middle E4at' is chosenb h..eaa of ene socl-rbtaral of mi.itino). To the ceforence group data the -.ger . ac -oua.neighted arith-ait meant foe each indicato and show only h.. at lean hafof the -oatrlon1 Ioagrop le:.atdabf-orthat iIndctor Sion the --overg of coutries ang the indic-t..n dep-nd or the --2lability nf daaadis not .nif._ ..aion. an-hoe-is-d inlelating oeralgen of one iodloat- En another. Tbh-n an-rges am olp useful in toacm-ing the vale at one indictor. at atine am9o th e cntr..Ly ond -ef--nc geops. LASND AREA (thon.o sq tm. Pooltion Ie Phynlci.a - P.oplation di'tdca by nehe 05 pranti.ni phy- Ioa-Total sur..c an cmpising land orna and inln ntr.niin-q fld from a medical school at anivarity leve. Aanicaltun - Etinman of agricsltrel area used tempornnily c- pemaetly Population pot Darin,~ g Pseon- oplaia diuided hy seae of prantitieg fce crps, pastorns, macho and littler gardens -o to lie lw 1977 data, moe end femlegrdaatenu a paticat art1 and assistantmass deN Fit CAPITA (1S0$) - ClNP per -apita siae cretsos crico.. -l- ahn n oa)dvddO hI eFei' ta efboaspled bab calated Op sae conversion method as Wlord loc Atlas .(19.-9 hae is); 1N6f, avai1,lah in pahic aod private geneel and spoiali.ad hospital and rs- 1970, and 1979 data.- hahlIit o. cetrs -npitsls see .atebl-hahtat panmany eaffad bp at len see. physician. Estshlish-ets e-avdisg princIpally candia ENERGT CONSUMP'TION PER CAPITA - Anneal c.onepFion cf c--tcial .enegy (coal caesenniosied. mRel heepitala. haw-e, innlldi b-deb and' added sod lignite, petrleum-, c gorla and hpdn- ro. ent1 end gecthe-l vim- canrsnt perasently staffed by a poFaician (bee hy a "indEe asaatt, trin ity) in lcilngrmn of .nl quvaot pencpitIa L91,0,19701,..ad 197f8ae mddeif., t.) which offer in-patiat araainsd preside a data. l~~~~~~~~~~~~imIted range of medical facilities Pan sttistical ptema ebsa bnie- tale inlde WHUO. principal general and apseimlaad beapisla., ad -asa POPULATION ANDfIPEAL. STATISTICS hospitals local er rors1 Ioapitala and madial and mternIty asiea Total Feoula.tin.Ki-ar(lios - An cf Daly 1; 19h0, 1970, and 1978 admIssions Den H-onita1 Bed - Tofa1 nonbeea a.dmlsiena es Os di-s -Btni dat. from hospitele divided hy the neher of hada Urhs ob lon loren ftot-i) - Rtatof aehan- tototal popalrlo-; dLffeesnt definitiono of arbse aeemy affect cnparahiliny of data OISN a -ag -tatoles;L19160, 1970, and 1978 dana. hoernas lies If Hf.an.hald (pr.ta... pee hoo..eheld) - tetal. orban.sa el foo inPo cton A ho-asitod consEts ofIagrasp of indinidnale ha s-nes lining qeetasa F-faiosi erDD - C.r.. oulto t p-je-tine are he..ed In 198$ end their main -e.In. A hoarder or lodger soy en may mat ha talad ltotl populatio by. age and nc and their m-aty and fertility rae, the hoo..ehold foL saeinlP-eP-s.. Projectionprseet a otality rais nonpriLo of thren lards. Atu .vea. - omh- of pto-- par room - total, urban, adrenal - Avet.ain- tog lift sopentancy or thrs inceasing wIsh ostp' a o capita com hnof Pe.... pen rant du, allbore, ad coral netopiad enm-,tioaa leve, nid female life enp ...anp s.biah .ig or 77.1 years. The pane- dclnu epoie..Dnlloogaeenlde nonP.-psnat eeeas meters for fertility eant sine hav. three I.vela asasing declin in unoccupied psota.. fntlirp. . acodIng to Lnc... leve and pantfamiy PLanning pe-for-nc- coe o lceiivicn t of dnlsa)-ntatl, arha 4m,d, -l - Each coutry is tAeo easigoed one tf thean ninecehoale of -etalIty Icovetio..al drllinga sith elstoirity in lWivig qaceenIs a p.reeg an fertilIt -reda I o psejenirn purposes, of mitd, arhac, and -oon dsmeliingsa-p-tivsly. .itioncypop'tioe-,naatatio....p pop.latios there is no growth ti-n the hilth rate Ia shoal en the desth rote, trd alec the ags atr...t... .e- ERICATION -ate corniestat. Thin in achieve.donly at.ca f-eniliny rates: dec1Lne to hdlaeteo inEd-Im t R.atios tha replacemet leve of oit cat -epraductic rre nthre ranh ge..eratins Proasay school - total, male and f-1ni - Grn.. ettl, male and fsaal of nne rplaeritesilffneotly. The stationary ppu iia -es eas enrollmet of all agen ar ths primary leva at proantaa ef nmpeatima esiaedn h h teo th pejennd chrcersisof th oaseo nnayeho-agef poultins noomall iscdesr ldran osgn f-il in the yearO 10. sd the rate of dcine of letilitip rate to rcplats- year bho ada'td I o difennelenthsa rmc dseia n mat level conre ithuirte ndunation mneolmsn any ea-ad 100 pas.tim lee tnetio...cy poDu1ation is reen.hed -The year her stationep population aInc som papiln are hales or above the affirin1 se.es. s.. s..ine hen bee r-ahad. Seodr col-tonal male and female -Coswed an "shas; ao Far te. km. - Mid-yea population Per eqa... kilomter (10) hectsren) cf prvdngnrqsl, oaina,r eehrnsmigiaentm-fcpai fete. h. aglclonl ad - Competed as above for agnialtral land usoly of12t 17..aofae oeepnae eessaeIeaal only. Vocationa.e.. ls ....ten on of se..odary - Von..ttenl imatiteti-a Foeolatilcr AMe St-acrore (Preant) - Children (0-14 pears), cokIng-age (15- include techolci.., Ed'nP al or It progr- mNtlb eparate lsdepe 1pa),ad ctrd h eased over; an percentages of nEd-peso pcpu- dertly or an dep-ri tne of ..ec.edary inanitatimna. latica; 1960, 1970, and 197N dat. . P.p1-tea.her ratio - -rimar. and aecoedern - Tsta1 atuann enrolld Ln Popultion Irowth lae (percent - corl - A-lus groanh lcona of tonal mid- primary end -scodary level divided by -obars of tabsohe is the peeppulaIn for IM91-C, 1N60-70, and 1970-7g.corendglvls F-rolatlo2r lesoith Rte (rst " -luban - Annua gron th ta of -nhan pnpc- Adult litnnecyvrses (Dances.t) - Literate ado1ta (nde to rad and -ritn) Loin fo19V10-Id 19H9-7,and" 1970-78. senIpencetnga of tonal aduliteplningd 13 yeen andser Crude Dcrth late Iran ohoatnd) - Anoano lo hitopn oo d of mid-year pcpo1ati"a; 1911, 1970, and 1978 dan. CONCSUMPTION Crade Doanh Rlee (pee thunerd) - A-ooa deaths Pen tho...and of -id-pear FaalP aefa rotn oeeln ...Pasasan tar -Weism anse poultIn 190 97,ad 1978 data. cennsing lees tha eight paa -; nldan ha.lanea, h.a--a ad dress.P t te dnicn R.,,e-Av...ngeco-bee of-daughters amma sIll hea in military '-hicle.. her - nomlerprnc.ativr peird if hb ePeie-e pree-t age-spatifin l en- fldit Rtieclvar (car thoasad pneeletion) - All types of aiasfee eedh tillity rts a-cli five-yea averages en,dfng In 1910, 197D, .ad 1977. bradats to gn..r-1 poblic Den thousand of popolaties, sniedas -mil- FamilyPlannng - cceptos, Aneal (heousads) - Annual comber of s--ptora crond cmieoi onno n nyaswe aitaime ag of hehce idaI.cen .. unde unie of nonlocal fasoly placoing program o i effect; data f. onrecet yas- may one he nomparbla sts flee family Plannin - sea -pecet of marriedrmo - K.crcg of maroled cutisaoihdlc tg woman of oh1id-hee... a,.,ge(15-4 years) rho uae blrth-co-n-o devoc- to T ..Ea Levae ,.Ir thosan ni lnin -TVnee..a a aigeant all saintd wme I snaggRo.p. g-e-rI public par thessne~d popolatiLon; e..nidee oelftra TY. ea.at-an PODA ANDfi NITRITII! In coutries end in peace when- geaieof Tf aetama in effast. Newpaer iroitlo (e tho..a.ad ceralatioa - Shee the -esaj nier-2- odme of Peed Fre1ducirprCpt,1197A)-Idno pen cePit. .-.a.I tier of 'deily genera Interet newPpe"dfidsaaaldiape- prodontiono l fond -nesdittee. Prodcccicnencladeenad and fend nod li-eti-n devoted primalily no recording ganra- nme In t c.osidas-d Is or calod1 pear hanin. Cewaditie..c...ee polmey goode (eg uaae i be daily. if in appearsI at leat fou nime a wek. Linatand of sugan) ehih ac edible and contain nunni-tf (eg cfe ad uaeaAnulAtk dnc e Cett par Tsa - based en nh. o f isa ar eeclded). Aggregate DroduoctLor of each coucry Ie bese o Icken sold dorlef the peso. intldieg adaisio.s no dete-in ola national average,producer. lpclcnreighI;19-A,97.ad197 dai.. PercaIt sppy f alris cecet of r-,icanoi) - Cenputnd fro n.mbl.uie eeng9ysqoivlelot of net Fool sopplie avilable in --nty penc -pine FnORPECE Perdy vilable eepplies coprise dom-tic pdocti-c, inpot lteen- Total Lobor Pooce (ihoonnds) - lEn..sinallp active parnt, tandigi norn notheogec In tick. fee uoppls eno -Iudr enlml fend, seeds, Iermed In mao and on-ployed hat ecuighoele,see ,ec qu-ntitiee und in food Process.iLo, and loners in dilatibutiLn. iRquire- lafnitti-n in various .. tcanisa are not cemparable; 1960 1970 sa aecie were estmated by FAt O..eed en phyniologicel -nds for norma act- 1978 dana. vicy aed hanli tho...idecing nnnostltempeer-n., body w-ight, age femal (peccat) - Femal lebc force as p-rcesrg. of itotl 1tima form. end ... distribution of pnpalatios, aed elsc 1 eren f"c nos.Iet Aniutaa(e ter I-Shnfneinf ig oety bann ad h-onehod lve-l; 1961-1 191170~, and 1907 deta. -ihn ecetg Io oa laborfrei 90 NDad17 es fa pcit. nuppl of peotei (grt Den- day) - Pro talc conten of Per capita Industry peer)- Labor force In mining, tornteutaneos, meafaresaita not supply cf food per day. eNt eupply of food to deftoed an above Is- aed ele tricty,etredgsa eneae fttllbrfoe hoir-ent for el nt .netablinhed bydUSIA provide for minimum 1970 end 1978 dana.t, leoeaof 60 grate a total peecie per dy mod 20 grams of aetnal end Participation mane fe--ene - total, male, and fana1a - factinipante an Doe. prrt,of ehich 10 frameghould he eniml protein. These. a-d- activity nones ler computed ned tonal, male, and P ami lab.e fernsm arda r loe hntoeof 75 gram of tots1 protein nod 23 gaSt I tancestn.e. of ntao male and fea1l popa1ation of atega epninly, anImalpnte en . .en aveag for the -mld, proposed bp PAO in the Third 11,17,ed17 aa hs r l' atrpns ae n ata cAccpd. Food Survey;p1,9j61-,19,1I9.70 and 1977 data. at-n nucrr of the peolTio-n1, adiengI p1tees .trand. A am ant-1 Pe cpta prtird upyfo aimal and Dulen-Pconadn supply of foo-'d:I- manaer foa nari lalaocce rtvvd from ,~ anaainae Dlar I can per day 1961-l 19cc197 977. dae gceeic epJ.nvRai - Rati.oef popolattan ogden ID -d 65 Andns Child ees 1-) St itel lane (pee thooaad) - Annua deafEn Pen thoo-sa in in. rho ntal. lebb ferns. age group 1-4 years, to hbildrn in thIs age g-ap; Lot motdvlpleg oo elee. data derived fco life rablan; 1960, 1N70 and 1977 dena. INCOtfI DIS¶RIeUTIAN HEALTH ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~~ enana o rvte Income (both in eah tad hind) - -i-rfed by rinhet .if~ a aennoa ub(er)-Aeaenthro er flf aana ecn, rlnheat 20 ereon, p_srt $8 pennant, -ad y-atm 40 pae-t K~h "'I k7l.g. -b-l -f It. -f lf. l-i-i of beans Iholds. at irth; 1980, 1970 and 1N7B data. Eaf_at ortality Rat plee theoaaod( - Ann-s deaths of infate under one yea FOVIITY TARGET GROUPS of se Pen theutand ILv birtbs. rsoae helt een nem sa US a ais-Vhma ta A_..ae to Info Wter feent of tirlaln) - total, arben and rora1 - N~Abeelees roer Once- lanai Ls thte Lneam lee sa sIRnbdel N-bahe of peoples (rn l.buh, and mIni.) ith reasonable encea. to eafe .tt.slI -.d.tpu .-i1- - .- water sapply (inludes tanned ucfaee estae on omn..eted hat onoratanioatd rafritdesly dqnsde lu aana a-ee mn .i a wate -hc Ia nthe from protncrtd borbhnle, pringe, end e.itsry amils sa tattatd Relative Povety IS.-m Lee-I (U75) psaceei)- o Aa Percenta.es of ntierspcev pouain . I at u-bn area a Public Rlar1 rlaltive povety ILotma leve isoetid tvra pesy fnannsio or atadprat loca.ted oar Isra than 200 meters from a house say heberonL oo nf the -eatry. Coben linea ie dee-d fee nta -ea -cond.....big iti ras bla -ccea of that boost. I ua rs ee rit ajut ment fo ibrcs nlvn subns reenhl aces onId Ini that the h-o..oif. rmnbr f ahoushold EsItimtedPraalo _el, taoist Penyiget tnel(a,) do ct hav no sped adisprop-tri... pac of the day to fetching the n el ecn ofP pboplato abnadeae)es s bseeps5 dip Is nparnegsof their repciepopulatine. E.oesn dIe- Eoo-sal and Sonini Dana Dil.isi pslmp Inclde the calarenad dispnaal, rOth -c itheatiramn ttoonain Analyst isa Peejantiem Dapeatsat of huma secrts end e-teI- eaner hy wate-hlore syate rceseo o 1960 eit privies end similarEselaoa - 22 - RC0lNDtIC IKDICATORE ANIEX I Population: 2.9 million (1979) Page 4 GNP For Capitat W01.060 (1979) AMount AverAge Annual Inereese (%) Share of GDP at Market Price (7.) Indicator lriltion USSerret) 19sgnint 1977 Dricei. (et current orice.) !19 l962-70 !970-75 !9~75-80 1965 190.95 1980 National Ac-ount. Gr... donstic product 3.415 4.4 6.2 10.4 100.0 100.0 100.0 100.0 Agriculture 1,073 1.6 6.1 7.2 36.7 32 1 36.9 30.9 Industry 756 6.0 6.5 15.3 18,1 19.6 19.6 22.7 Service 1,586 6.1 6.2 10.6 45.2 48.3 43.5 46.4 Conacoption 2,858 4 1 3.7 10.2 661 65.7 76.7 7e.0 Gross Inveatnent 976 6.0 15.9 20.0 15 1 14.7 24.1 2898 loporte of goods end X7PS 616 3.8 12.1 12.2 16,1 16.0 16.8 21.2 I.ports of goode end XFS 1,035 3.9 5.8 19.8 17.2 16.4 17.6 27.9 Gr.s. do.,etic -ving. 557 5.3 25.0 11.4 13.9 14.3 23.3 22.0 A-ount Average Annual Increase (7) Copoitin of Merchandise Trade (7) t.illion US0 current) (at cnsDtant 197l nrice1 (St currnt price) 1979 1965-70 1970-75 1975-80 1905 1970 975 19S0 Merchandise Trade Merhandiee enporte 520 3,6 16.4 9.6 Mer chadi.a inporta 863 5.3 6.0 19.9 100.0 100.0 100.0 100.0 Food 20 -1.7 -10.7 19.4 10,9 8.2 3.3 2.0 Petroleuo, 88 11.0 1.9 7.5 8.5 8.1 14.4 11.5 Machinery and equipe Dt 146 -0.5 14.0 13.8 26.7 24.2 22.2 16.5 Other 609 3.0 19.0 20.1 53.9 59.5 60.1 69.7 1975 1976 1977 1978 1979 Pri.s. and TomLgs ofrZd G.? defltor (1977-100) 87.2 91.6 100.0 110.4 133.1 Exchange rate (4/USS) 126.0 126.0 126.0 126.0 126.0 Enport prIee inde- 72.3 75.5 100.0 95.4 104.9 Import price iden 98.3 92.4 100.0 110.3 130.6 Ter=t of trade ioden 73.6 81.7 100.0 6 .5 80.3 A. X of GDP (at current price.) Pcblit Pinaece (Central AdMinitration) 1965 1970 1975 1979 Current revenue 10 4 11.7 9.4 10.1 Current enpenditure 8.4 10.2 7.6 6.7 S_rplue (+) or d.fitit (-) 1.9 1.5 1.8 3.4 Capital et penditcre 1.7 1.9 2.3 2.8 Financing (net) -0.2 0.4 0.5 -0.6 1962-70 1970-75 1975-80 1980-85 Other indicators GNP gro0th rocf (.) 4.4 7.0 10.5 9.3 GNP per capito groctrh rate (.) 1.7 4.1 7.6 6.4 ICOR 2 9 2.4 2.4 3.0 Marginal -aviugs rote 27.3 5330 24.5 23.4 Import elocticity 1.1 1.0 1.9 0.9 March 31. 1961 - 23 - BAAIMCE OF PAHMTM. EXTUNAL CAPITAL AND DEBT ANNEX 7 (Million 08$ at utrrent prices) Page 5 Population: 2.9 million (1979) GNP Per Capita: Us$1,060 (1979) Actual ./e Proiected 1976 1977 1978 1979 1980 1981 1992 1983 1984 1985 BALiaNCE OF PAYMENTS Net exports of goods end services -136.6 -190.8 -343.6 -434.4 -549 -465 -500 -566 -558 -557 Exports of goods awd servic.e 273.0 409.2 503.3 661.1 693 1,009 1,237 1,519 1,891 2,320 Import of goods and services 409.6 600.0 846.9 1,095.5 1,242 1,474 1,737 2,085 2,449 2,877 Net transfers 4.2 1.2 5.8 7.3 14 16 17 19 21 23 Current account balance -132.4 -189.6 -337.8 -427.2 -534 -450 -483 -547 -537 -534 Direct private investment 11.4 17.0 21.9 51.9 57 63 69 76 84 92 MOLT loano net 64.0 121.9 134.9 111.0 242 54 158 250 366 448 Official 50.0 47.6 89.6 38.9 115 44 69 76 75 80 Private 14.0 74.3 45.3 72.1 127 10 90 173 292 368 Other capital 107.1 159.6 349.7 432.8 403 371 300 280 148 65 Change in reserveu (- - increase) -50.1 -108.9 -168.7 -168.5 -167 -39 -44 -58 -61 -71 Interoational reserves 161.5 269.4 438.1 606.6 774 812 857 915 976 1,047 Reserveo as months of imports 4.7 3.4 6.2 6.6 7.5 6.6 6.0 5.3 4.8 4.4 EXTEEIAL CAPITAL AND DEBT Gross disburs.emnts 74.0 139.2 147.0 157.2 ..Cocces.ioal loslt 30.7 26.9 38.3 21.1 DAC 10.4 4.6 28.4 5.8 IDA 2.6 5.2 5.3 3.6 Other 17.7 17.1 4.6 11.7 Nos-concessienal loans 43.3 112.2 108.7 136.1 Official export credits 9.5 8.1 10.1 29.2 IaD 4.6 6.9 7.8 16.4 Other multilateral - - 9.6 4.3 Private 29.2 97;3 81.2 86.2 External Debt Debt outstanding and disbursed 280.6 393.2 520.6 628.7 Official 180.7 219.9 297.4 329.7 Privat. 99.9 175.3 223.1 299.1 Undisburoed debt 228.6 211.3 307.7 515.0 Debt service Total service payments 31.3 42.6 49.9 81.5 Interest 9.6 12,7 18,0 30.0 Paymests an 7. exports 11.5 10.4 9.9 12.3 Average interest rate on new loans () Official 5.6 6.6 6.6 6.5 Private 8.4 7.5 10.3 8.4 Average maturity ofsnew loans (ysara) Official 23.7 20,2 23,3 21.1 Private 7.0 7.2 8.4 10,7 As % of Debt Outsttnding at End of Most Ascent Year (1979) Maturity structure of debt outstanding MSturitien due itibin 5 years 34.6 Maturities due witbin 10 years 96.1 lotcre-t structure of debt sutstaLding Interest due vithin first year 3.1 March 31, 1981 /e Estimate. - 24 - ANNEX II Page 1 STATUS OF BANK GROUP OPERATIONS IN PARAGUAY A. Statement of Bank Loans and IDA Credits (February 28, 1981) 1/ -------(US$ million)------- Loan or Amount (less cancellations) Credit No. Year Borrower Purpose Bank IDA Undisbursed Eight loans and seven credits fully disbursed 2/ 35.8 45.8 3/ 1059 1974 Paraguay Highways IV 14.5 - .6 587 1975 Paraguay Preinvestment Studies - 4.0 2.8 1346 1976 Paraguay Rural Education 8.0 - 2.9 1418 1977 Paraguay Rural Development II 22.0 - 18.0 1419 1977 Paraguay Industrial Credit 10.0 - 2.4 1502 1977 Paraguay Rural Water Supply 6.0 - 3.5 1529 1978 Paraguay Highways V 33.0 - 17.6 1674 1979 Paraguay Livestock and Agricultural Development 25.0 - 13.3 1736 1979 Paraguay Highways VI 39.0 - 39.0 1780 1979 Paraguay Preinvestment Studies II 5.0 - 5.0 1866 4/ 1980 Paraguay Industrial Credit and Regional Development 31.0 - 31.0 Total (net of cancellations) 229.3 49.8 136.1 of which has been repaid 10.9 1.5 Total now outstanding 218.4 48.3 Amount sold 1.3 of which has been repaid 0.4 0.9 Total now held by Bank/IDA 217.5 48.3 Total undisbursed 136.1 1/ In April and May 1981, two loans (Livestock Development, US$30.0 million, and Fourth Education, US$17.0 million respectively) have been made but have not been signed yet. 2/ Includes Credit 509-PA and Loan 1252-T for which final disbursements have just been made. 3/ Includes exchange adjustment. 4/ Not effective - 25 - ANNEX II Page 2 B. Statement of IFC Investments - February 28, 1981 Type of (Amount in US$ million) Year Obligor Business Loan Equity Total 1974 FINAP, S.A. Wood Processing 4.4 1.0 5.4 1980 NOVOTEL (Encarnacion) Hotel Development 0.9 0.3 1.2 Total gross commitments less cancellat.ions, terminations, repayments and sales 5.3 1.3 6.6 Total undisbursed - - - - 26 - ANNEX II Page 3 Loan 1059-PA Fourth Highway Project, US$14.5 million, December 12, 1974; (Date of Effectiveness: March 11, 1975; Closing Date: June 30, 1981). Work on one project road (Mbocayaty-Colonia Independencia) was completed in July 1978; the other project road (Encarnacion-Pirapo) was completed in July 1980. The closing date of June 30, 1980 was extended until June 30, 1981 to allow for the use of the uncommitted balance of loan funds (US$1.1 million) for the purchase of spare parts for rehabilitation of mainte- nance equipment. The consulting firm engaged for assisting in highway mainte- nance and for preparing a study on maintenance needs has completed its task. The latter study was the basis for the subsequent highway loan (Fifth Highway Project - Loan 1529-PA). Credit 587-PA Preinvestment Studies Project, US$4.0 million, October 17, 1975; (Date of Effectiveness: April 15, 1976; Closing Date: December 31, 1981). The entire amount of the credit is now committed. Substantial progress on the institution building side has been accomplished on the basis of experience gained under this project, which has led to the preparation of a second operation, recently approved. The Closing Date was extended from December 31, 1980 to December 31, 1981 to permit making final payments to study consultants and finance additional technical assistance requirements. Loan 1346/ Third Education Project, US$4.0 million Credit and US$8.0 Credit 667-PA million Loan, December 22, 1976; (Date of Effectiveness: March 4, 1977; Closing Date: June 30, 1981). Project implementation is about six months behind schedule due to initial lack of counterpart funds. However, under a revised implementation schedule the project is expected to be completed by the present closing date of June 30, 1981. About 25 associated rural primary schools, 27 community learning centers, and 2 secondary schools are completed. Construction of 54 new rural primary schools as well as of five secondary schools are being completed. Satisfactory progress has been made in contracting technical assistance specialists and in implementing the textbook production and in- service teacher training programs. Total project cost is expected to be about 3% lower than originally estimated, due mainly to reduction of rural school construction specifications. 1/ These notes are designed to inform the Executive Directors regarding the progress of projects in execution, and in particular to report any prob- lems which are being encountered, and the action being taken to remedy them. They should be read in this sense, and with the understanding that they do not purport to present a balanced evaluation of strengths and weaknesses in project execution. - 27 - ANNEX II Page 4 Loan 1418-PA Second Rural Development Project, US$22.0 million, May 18, 1977; (Date of Effectiveness: January 17, 1978; Closing Date: December 31, 1981). In spite of initial delays, this project is now being implemented satisfactorily. Most contracts for major roads, community centers, health posts and centers have been awarded; the remaining works should be tendered for and contracts awarded before June 30, 1981. Completion of land titles, is about 95% of appraisal estimates. Crop production in the Project area is impressive, particularly the stands of soybean and maize. Seasonal loans, however, are down slightly from last year's level. This is attributed to farmers experience of relatively unattractive crop prices last season, to the increase in the effective interest rates from 12 to 18% charged by BNF for seasonal and medium-term loans, and to a shortage of administrative field staff to process all loan applications in good time. Loan 1419-PA Industrial Credit Project, US$10.0 million, May 18, 1977; (Date of Effectiveness: January 17, 1978; Closing Date: September 30, 1982). One of the main objectives of the Project was BNF's financial and institutional rehabilitation. Satisfactory progress has been made towards meeting this objective, for the first time since 1972. This was achieved in part due to a reduction in operating costs, a higher financial spread, and a capital contribution of ˘ 1.3 billion that the Government made under the Loan. BNF's debt recovery efforts, however, have not yet been sufficiently effective in decreasing the level of arrears. To accelerate the institutional improve- ments, on the other hand, the UNDP-financed technical assistance program has been expanded by incorporating experts in agricultural programming, portfolio management and electronic data processing systems. Regarding the financing of industrial projects under the Loan, BNF has submitted to the Bank over 46 sub- projects with small-scale enterprises accounting for most of them. Disburse- ments, however, were running somewhat behind schedule. Since BNF has already met the conditions for releasing the pending amounts under the Loan's second tranche (US$6.0 million), an additional US$4.0 million has been made available to finance subprojects. - 28 - ANNEX II Page 5 Loan 1502-PA Rural Water Supply Project, US$6.0 million, December 16, 1977; (Date of Effectiveness: July 13, 1978; Closing Date: June 30, 1982). Project implementation is now proceeding satisfactorily. A six month delay which had resulted from a late effectiveness may be reduced. Up to date 45 projects for the same number of community (91% of total) have been approved. Forty-four communities have currently signed contract with SENASA for the implementation of these projects. The second annual purchase program (1980) has been satisfactory carried out. As of February 28, 1981 loan disbursements amounted to US$2.50 million. The proposed new project has been designed so as to cover new areas with both water supply and sanitary facilities; special emphasis is being placed on the southeastern part of the country. Loan 1529-PA Fifth Highway Project, US$33.0 million, March 17, 1978; (Date of Effectiveness: December 5, 1978; Closing Date: June 30, 1983). Civil works on the repaving of Route 1 (Paraguari-Encarnacion, 303 km), on the basis of a revised pavement design, are expected to be completed by September/October 1981. Construction and supervision contracts for the Coronel Oviedo-San Estanislao road have been signed and work is well underway. Loan 1674-PA Livestock and Agricultural Development Project, US$25.0 million, April 6, 1979; (Date of Effectiveness: November 20, 1979 Closing Date: June 30, 1984). There is considerable variation in project implementation among the various components. As of December 31, 1980, FG had committed about 88% of the credit funds with highest percentage of disbursements among medium and small producers. Credit demand remains high and a new project is being proposed. The rural development component is only beginning. The major problems are lack of an adequate number of technicians in BNF and SEAC (the extension agency), failure to initiate the road building component, lack of vehicles for field technicians and failure of BNF to implement needed admin- istrative and organizational changes at the branch office level. The whole- sale market component is progressing well, the long term marketing advisor is now on the job, bids have been received and contracts awarded for the construction of the market as well as for supervision of the work. Prepara- tion for the agricultural census component is being carried out slowly. The Bank is disbursing for the purchase of 10 vehicles needed to begin field work for the census. - 29 - ANNEX II Page 6 Loan 1736-PA Sixth Highway Project, US$39.0 million, July 13, 1979; (Date of Effectiveness: December 5, 1979; Closing Date: June 30, 1985). The Government has received proposals from consultants to assist the establishment of Feeder Roads Unit, but the Bank has not yet received the recommendations for awarding of the contract. The Government's Feeder Roads Coordinating Committee has been established by Decree. Procedures for contract- ing the design of feeder roads are under way. Contracts have been awarded for the construction of the two sections of Route 6; works are scheduled to start in mid-1981. Loan 1780-PA Second Preinvestment Studies Project, US$5.0 million, December 19, 1979; (Date of Effectiveness: September 19, 1980; Closing Date: December 31, 1984). The technical assistance component, financed by UNDP with the Bank as executing agency is progressing well: advisors have been appointed to the Ministries of Finance, Public Works and Agriculture. The Financial Programming Division in the Ministry of Finance has initiated its activities and is actively involved in assessing the public sector's investment and financing needs for the medium-term., A pipeline of preinvestment studies has been prepared which is pending review by the National'Preinvestment Council. The National Projects Office has also reviewed some of the financial issues involved in the granting of subloans by the Preinvestment Fund and made recommendations to the Central Bank. The Executive Committee of the Preinvest- ment fund has been fully staffed. Loan 1866-PA Industrial Credit and Regional Development Project, US$31.0 million, June 26, 1980; (Closing Date: December 31, 1984). This loan has not become effective yet. - 30 - ANNEX III Page 1 PARAGUAY SECOND RURAL WATER SUPPLY AND SANITATION PROJECT Supplementary Project Data Sheet Section I - Timetable of Key Events (a) Time Taken to Prepare Project: 12 months (b) Preparation by: Government (SENASA) with PAHO and Bank assistance (c) First Presentation to the Bank: November 1979 (d) First Bank Mission: March 1980 (e) Appraisal Mission Departure: December 1980 (f) Negotiations: May 1981 (g) Planned Date of Effectiveness: September 1981 Section II - Special Bank Implementing Action Feasibility studies and detailed engineering for works representing some 40% of project costs have been completed. The procurement program for the second semester of 1981 has been agreed upon. A general outline of terms of reference for a study of SENASA's staff compensation which would lead to a plan of action to improve its staffing situation has been agreed at negotiations. Section III - Special Conditions of Bank Loan (a) A special condition of effectiveness would be the appointment of management consultants for SENASA (para. 42). (b) SENASA would present to the Bank, not later than June 30, 1982, the plan of action, satisfactory to the Bank, on the staffing of SENASA (para. 41). (c) SENASA would complete all final designs before December 31, 1981 (para. 39). - 31 - ANNEX III Page 2 (d) The contract between each Sanitary Committee and SENASA would be satisfactory to the Bank (para. 46). (e) The tariff system presently used by SENASA would continue to operate, and tariffs for each community would be reviewed each year and revised if necessary in order to comply with the revenue covenant (water charges have to serve the community debt in an amount which, combined with the initial contribution, amounts to not less than 22% of the total cost (para. 46). 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