D of The World Bank FOR OmCLAL tSE ONLY AA/ -Z 7 "7/-V Rqpit No. P-6233-NE ElORANDUM AND RECOMMATION OF THE PRESIDENT OF THE INTERNATIONAL BK FOR RECONSTRUCTION AND DEVELOPMENT TO THE EESCUTIVE DIRECTORS ON A PROPOSED WAL IN AN AMNT EQUIVALENT TO US$350 ML-ION TO BANCO NACIONAL DE OBRAS Y SERVICIOS PUIBLICOS WITH THE GUARANTEE OF THE UITED MXCAN STATES FOR A SECOND WATER SUPPLY AJD SAITATION SECTOR PROJECT NAY 16, 1994 MI CROGRAPHI CS Report No: P- 6233 MX Type: MOP This docueut has a restricted distribution ad may be osed by reclpients oly in the perfornce of teir official duties Its conten may not othebise be disclosed witbout World lank ahoriation . CURRECY EQUIVALEm curreny unit Peso (M.x$) US$1.00 3.3 P (a ofMay 1, 1994) ISCAL YEAR January 1 - December 31 UNllS OF WEIGHTS AND MWASURES Mrc US Equvln maer (m) 3.28 fet (ft) Ioneter (km) = 0.62 mle (nl) 1 kilogram () - 2.20 poun (hb) metric ton (m ton) 2205 pounds I liter ( 0.264 USg aIIn(pl) I hwtb @a) m 2.47 scm ABBREVIATIONS AND ACRONYMS BANOBRAS Natxial Devopment Bank for Pubic Work and Servimes (Banco Nadonal do Obms y Srviios Pdblcos) DOT Build, Operate and Trner CETES Mexican Govenmens Treur Bils (C erficados de I Tesorefa de I Nacidn) CNA Nonal Water (Comisida Nacina del Agua) CONAPO Nationl Popuyati Committo (Comin Nacioa do Palcifn) CONSOIDACION Tecnia A tnce for the development of Water Utilities EAS Association of Water Utlities ECU _ui Co Ui EIA Environmental Impactsmmn EIS E rm t Saement ICG inten cash Generaton JMTA Mexican IntitUte of Water Teclmhnoog (nsto Meuice do Tecnologfa del Agua) INE notite for EnvIonmenta Prdtectio (sito Nacional do 3cologfa) MU Memorandu of Undandin MIS Management Infonnation System NPWS Natial Program for Water and Sewm NPWQI Nationl hogram for Wate Qualiy Improvemat POA Anul Opatonal Plan SAIRH Secretaiat of Agricuanr and Hydalc Resourzc (Soretari do Agricum y Recuso H U)idico) SEDESOL Minidsy of Social Development (Secrerh de Desarrollo Socia SHCP Secretriat of Finance and Public Credt (Secretaa do Hacea y Cr&lito Pdblico) JPA General Infomtion System for the Wae and Sanitatio Sectr (Sitew do i6foma pam Agua Potable y Ak_cant ado) SOUDARIDA The Goverment Poverty Alleviation Program SWSS Stato Water Suply nd Santon Stubcommite (uomd do Agua Potable y Saneaeto) TA Tecbnical As _since WUs Autonomous Water Utilties and Opeating Agencis FOR OFFICIAL USE ONLY MEXICO SECOND WATER SUPPLY AND SANITATION SECTOR PROJECT LOAN AND PROJECT SUMMARY Borrower: Banco Nacional de Obras y Servicios PTblicos (BANOBRAS) Guarantor: United Mexican States Executing Agency: BANOBRAS, Comisi6n Nacional del Agua (CNA), and Autonomous Water Utilities (WUs) Beneficiaries: Autonomous Municipal and State Water and Sanitation Utilities Amount: US$350 million equivalent Terms: Repayment in 15 years, including 5 years of grace, with interest at the Bank's standard variable rate Financing Plan: (US$ million) Local Foreign Total IBRD 350.0 350.0 Government of Mexico 185.0 185.0 State Grants 120.0 120.0 WUs Internal Cash Generation (ICG) 115.0 115.0 420.0 350.0 770.0 Economic Rate of Return: 12% ERR: minimum return required for water and sewage projects Staff Appraisal Repori: Report No. 12340-ME dated May 13, 1994. Map: IBRD No. 25397 Poverty Impact: For water utilities located in municipalities of less than 80,000 inhabitants, federal and state grant funds would be allocated based on the Poverty Index. This docament has a resticted distribution and may be used by recipients only in the pefomance Of 6 official duties. Its contents may not othawise be disclosed without World Bank authoizatio. MEMORANDUM AND RECOMMENDATION OF THE PRESIDENT OF THE IBRD TO THE EXECUTIVE DIRECTORS ON A PROPOSED LOAN TO BANCO NACIONAL DE OBRAS Y SERVICIOS PUBLICOS FOR A SECOND WATER SUPPLY AND SANITAON SOR PROJECT 1. I submit for your approval the following memorandum and recommendation on a proposed loan to Banco Nacional de Obras y Servicios Publicos (BANOBRAS) with the guarantee of the United Mexican States for the equivalent of US$350 million to help finance a Second Water Supply and Sanitation Sector Project. The loan would be at the Bank's standard variable interest rate, with a maturity of 15 years, including five years of grace. 2. Background. In Mexico, water resources are unevenly distributed. Average rainfall ranges from 100 mm/year in the dry zones of the North to 5,000 mm/year in the tropical lowlands of the South. In addition, while 70% of the population and 80% of the country's industrial plant are located above the elevation of 500 m, only about 15% of the country's surface water is above that elevation. Moreover, a significant number of aquifers are being depleted and severe pollution has threatened and reduced the use of many nrvers and other surface bodies of water. Municipal water supply, the main subject of the proposed project, accounts for about 11% of the country's total demand for water resources. The lagest water user in Mexico is agriculture, accounting for about 80%. Industry accounts for only about 7%, with other uses accounting for another 2%. 3. Overall, water supply and sanitation services have improved during the past three years, following a decade of stagnation in the 1980s. In 1992, 84% of the population had access to piped water, compared to 70% in 1980. During the same period, access to sewers increased from 49% to 67%. In spite of this progress, services are still inadequate, and significantly below comparable countries in Latin America. Furthermore, the problem of insufficient coverage is aggravated by poor water quality. Largely as a result of this deficiency, gastro-intestinal diseases are still one of the principal causes of morbidity and infant mortality. 4. For the first time in Mexico, the current administration has established a coordinated legal, policy and institutional framework within which to manage the country's scarce water resources. As a result, Mexico now has a well conceived water management policy which is presented in a government policy statement issued in support of the proposed project. This policy is consistent with the Bank's operational policy guidelines on water resources management (OP 4.07) and its recent water resources management paper. Mexico's policy is based on the following elements: (a) integrated water management based on the development of river basins; (b) water pricing aimed at improving the efficiency of water use and the implementation of tariffs that cover costs and reflect scarcity values; (c) decentralized, efficient and financially-sound water utilites (WU) at the local level, together with greater participation of 2- communities; and (d) protection of the environment through: (i) incentive policies, such as pollution charges; (ii) expanding water and sanitation coverage to the poorest segments of the population; (iii) restoration and preservation of ecosystem and groundwater resources and regulation of extraction; and (iv) strict enforcement of environmental regulations. 5. Significant progress has been achieved on the legal front. Two important new laws, the National Water Law and the Federal Water Charges Law, were pa3sed in December 1992 and October 1991, respectively. The National Water Law provides for the development of water markets, private sector investment and water conservation. It also better defines water property rights, including concession renewals for periods of up to 50 years, and provides for changes in water use and the transfer of concession titles without p-ior government approval. The National Water Law also mandates the creation of "river basin councils" (consejos de cuenca), composed of government and user group representatives, to coordinate and manage water resources in an integrated manner. Furthermore, the law establishes that concessions for water and drainage systems can be granted to the private sector. The Federal Water Charges Law defines the charges to be applied to the consumption or extraction of federal watvrs, to the use of public infrastructure and to wastewater discharges. An existing law, the General Ecology and Environmental Law, passed in 1988, contains important provisions for the preservation of water quality. 6. Major efforts have already been made by the Government to improve the efficiency of the sector's institutional framework. Amendments to the Mexican Constitution, made in 1983, assigned to municipalities the responsibility for the provision of water supply and sanitation services. The majority are organized as autonomous WUs1, however, some municipalities still manage their water services directly, together with other services. Most of the states also operate some autonomous WUs. They operate small water systems for several municipalities in order to take advantage of economies of scale when individual municipalities are too small to run their own systems efficiently. The National Program for Water and Sewerage (NPWS), financed by the ongoing water sector loan, supported the development of financially autonomous municipal and state water utilities (WUs). 7. The federal secretariat responsible for water resource management, is the Secretariat of Agriculture and Hydraulic Resources (SARH) which operates through its agency, the National Water Commission (CNA). The Social Development Secretariat (SEDESOL) is responsible for the issuance of the official Mexican water norms and the evaluation of environmental impact assessments (EIAs). All other aspects of water management, including the enforcement of water effluent and environmental standards, are handled by 1. A WU is classified as autonomous if it has its own separate legal identity, its finances are independent of the municipality or the state, it has ownership of all its assets, proper commercial accounting and auditing, and a Board of Directors with final legal authority to mange its operation. - 3 - CNA. CNA has delegated to the Mexican Institute of Water Technology (IMTA), which is also under SARH, the design and implementation of the National Training Program for the sector. The creation of CNA in 1990, made possible a full integration of all aspects of national water resource management within one agency. To help coordinate federal and state activities in the sector, State Water Supply and Sanitation Subcommittees (SWSS) have been created in all the states. The SWSSs represent all sector-related federal and state agencies, and are the focal point for sectoral planning at the state level. 8. The main challenges facing water resource managemernt in Mexico will continue to be the implementation of existing legislation, the effective devolution of responsibilities to the states and municipalities, the implementation of river basin management, a more effective use of incentives and other indirect measures for pollution control, and encouragement of community participation. To meet these challenges, the CNA has prepared the National Program for Water Quality Irlprovement (NPWQI). This program aims at: monitoring water quality and assessment; development of effluent standards and discharge permits; strengthening of the financing system; development of sanitation and treatment infrastructure; better management of river basin pollution; and strengthening the sector's institutional capacity, with emphasis on enforcement including reliance on a credible self-repordng system for industries within both the public and private sectors. The strategy under NPWQI is based on the concept of integrated water management and it includes prescrbed actions, quantitative goals and estimates of investment needs. This program is fully supported by the proposed project. 9. Rationale for Bank Involvement. The proposed operation is consistent with the Bank's Country Assistance Strategy (CAS) for Mexico to be presented to the Board with the Northern Border Environment Project (eport No. 6287- ME) on June 9, 1994 in parallel with this project. The stategy aims at assisting Mexico to keept its economic restructuring process on track, while supporting programs that contribute to poverty reduction, improved environmental management and long-term sustainable economic growth and development, particularly through investments in human resources, infrstrucre and natural resource management. The strategy also aims to push the reform process downward to the subnational (state and municipal) level and support the further devolution of expenditure and revenue responsibilities to these local governments. Working within this strategy, the proposed project is specifically aimed at developing capacity to supply water and sanitation services, addressing environmental issues, at the local level, increasing services to the poor and protecting the country's scarce water resources. By providing technical assistance for the formulation of a well-defined regulatory framework, the proposed project also aims to promote a larger private sctor involvement in the supply of water and sanitation services. The Bank's past involvement in the water sector, puts it in a unique position to strongly support the ongoing process of decentalized water utilities, focusing on better management practice, improved water and sanitation service delivery and greater attention to water pollution problems. -4 - 10. Project Objectives. The objectives of the proposed project are to: (a) improve the quality and expand the coverage of water and sanitation services; (b) strengthen the institutional capacity of CNA to comply with its legal mandate to assist local water utilities (WUs) improve their operating and plaming capability, and train their personnel to properly manage and maintain their systems; (c) reduce subsidies- to the sector b- promoting the development of adequately sized WUs that are operationally and financially autonomous; (d) strengthen BANOBRAS' capacity to appraise and supervise sub-projects at its Mexico City headquarters and, especially, at its state offices; (e) encourage private sector participation by establishing the appropriate legal and technical framework to attract private investment; (f) improve the management of water resources and the environment by supporting water quality programs; and (g) strengthen the sector's capacity to enforce environmental regulations and carry out EIAs. 11. Project Description. The project would have three main components: (a) strengthening of the major federal institutions that play a key role in the management of water resources; (b) supporting the investment/operational plans of WUs; and (c) strengthening the WUs to make them viable and sustainable institutions. 12. Strengtening the Federal Agencies (USS 33.7 million). Under this component technical assistance would be provided to strengthen the capabilities of CNA, IMTA and BANOBRAS to provide assistance to the WUs, to evaluate and supervise the implementation of subprojects, to manage water resources and to develop cost-effective po!icies to prevent water pollution. 13. The Investment Support to Local Water Utilities component (US$722.8 mii;on) would provide credit to autonomous WUs to fund subprojects in full compliance with agreed eligibility criteria related to the technical, financial and operational viability of the WU and the subproject. Subloans could also be used to assist public companies to subcontract services to the private secto; by financing start up costs. In order to become eligible for Bank financing under the project, WUs would need to prepare master plans covering their investment, organizational and financial plans over a seven to ten year period. The actions to be takn in any one year would be recorded in an agreed Memorandum of Understanding (MU). The types of subprojects expected to be financed include: (a) expansion and rehabilitation of water supply and distribution systems such as: (i) surface water intakes; (ii) raw water pump stations; (iii) wells; (iv) storage tanks; (v) transmission mains; (vi) filtration plants; (vii) disinfection facilities; (viii) booster pump stations; and (ix) piping distribution networks; and (b) expansion and rehabilitation of wastewater collection and treatment facilities such as: (i) laterals; (ii) trunk sewers; (iii) pump statons; (iv) primary, secondary or advanced wastewater treatment plants; and (v) discharge outalls. This infrastruchte component would also include engineering for the preparation of detailed design documents and construction supervion. 14. Institutional Suport for the WUs (US$13.5 mMion). Under this component, technical assistance would be provided to WUs which do not -5- comply with the eligibility criteria and, therefore, cannot be included within the investment support to WUs component. Techiical assistance under this component would be onented to helping the WUs become ligible, and hence would be limited to: (a) preparing master plans; (b) preparing Environmental Impact Assessments (EIAs); and (c) implementing cetain institutional development programs, with particular emphasis on commercial and financial areas including tariffs, water metering and reduction of unaccounted-for-water losses. Most of the funds for this component would be provided as grants. 15. Project Costs and Filnancing. Total project cost is estimated at US$770 million. Financing for institutional development support for the federal agencies (US$33.7 million) will be channelled through BANOBRAS. Financing for investment support to Local Water Utilities (US$722.8 million) would be based on a combination of Bank loan and government (federal and state) grant funds also channelled through BANOBRAS. While the precise proportion of government grant funds will depend on the level of income and population of the states and municipalities in which the WUs are located, a provisional Mdicative estimate has been made. On average, the following proportions are expected: loans from BANOBRAS, 45 %; internal cash generation from the WUs, 15%; federal grnts, 25%; and state grants 15%. The institutional support to the local WUs (US$ 13.5 million) will be financed by state and federal grants (from 70% to 100%) with the difference being linanced under the proposed loan as a loan from BANOBRAS. All imvestments financed by loans are expected to be recovered through water and sewage fees and additional interal cash generation due to increased effliciency of the WUs. Estimated project costs and the proposed financing plan are provided in Schedule A. 16. Up to 10% of the total loan would be eligible for retoacive financing to ensure continuity of technical assistance and infrastructure investments as all funds from the ongoing water supply operation have been committed. All retroactive financing would be in accordance with Bank guidelines and would apply to expenditures incurred after July 7, 1993. 17. Project bnplementation. The Borrower and executing agency for the proposed project would be BANOBRAS, which will be reonsible for overall project execution. CNA, as the government agency responsible for the water sector, will serve as the technical agent. The WUs will be the main executors of the subprojects approved for financing under the proposed loan. The smte governments will allocate the grants to the selected subprojects. CNA will be responsible for ensuring that a judgement on the preliminary ElAs prepared for subprojects under consideration is issued and that additional ations, as required in connection with the subprojects (such as the need to issue an Environmental Impact Statement), are taken. 18. BANOBRAS, in order to better coordinate, supevise, and monitor all water and sanitation projits that it finances, would appoint a Task Manager, who would work within the newly created Executive Coordinating Unit (ECU), using the resources of the existing division in charge of Financing Potable Water and Sewerage Projects. Operating regulations have been designed to guide -6 - project implementation and monitoring. Support to the federal agencies would be implemented by the respective federal agencies. Master plans would be the responsibility of the WUs. CNA would be available for advice. Each subproject would have its own financing, cost recovery, and implementation scheme in accordance with agreed criteria. Performance indicators for the sector were developed during appraisal. In addition, performance indicators would be developed for each WU in their respective master plans. These performance indicators will be monitored by CNA, BANOBRAS, and by Bank/Government missions in the context of semi-annual and mid-term reviews. 19. Project Sustainablilty. By strengthening the sectoral framework for water resources management as well as the local institutions that deliver water and sanitation services, the project is expected to contribute to a sustainable institutional development process. This is reinforced at the local level by requiring a minimum internal cash generation as part of the financing plan of the WUJs, in addition to a minimum rate of return of 12% for each subproject. 20. Lessons Learned from Previous Bank Involvement. Bank involvement in the water supply and sanitation sector started in 1973 with the approval of the first water supply loan. To date, six loans have been made amounting to about US$675 million. The only ongoing project in this sector, (Loan 3271-ME, US$300 million, 01/18/1991) is 95% disbursed and 100% committed. It is expected that this project will be completed and closed by mid 1994, two years ahead of schedule. 21. The key lessons learned from the previous operations in Mexico, which have been taken into account in the design of the proposed project, may be summarized as follows: (a) the preferability of having one agency take the leadership role; (b) the importance of subproject design and preparation; (c) the desirability of decentralized decision making and greater participation of beneficianres; (d) the need to have adequate supervision from BANOBRAS and CNA; (e) the need to give the beneficiaries a real sense of ownership of the project; and (f) the importance of coordination among the various agencies. 22. Actions Agreed. During negotiations, agreement was reached on the following main conditions: (a) eligibility criteria for the participating autonomous WUs and onlending conditions; (b) indicators to measure project implementation and impact; (c) reporting schedule and semi-annual reviews; (d) timing of the project mid-term review; (e) a methodology regarding the procedure to verify and implement the EIA process; (f) schedules for reporting, with quantitative indicators including status of river basin studies and the status of the national targets to increase the volume of treated wastewater; and (g) annual reviews of the national program for training in the sector. 23. Conditions of loan effectiveness would be that: (a) the Guarantor and BANOBRAS shall provide the Bank an executed contract, satisfactory to the Bank, descrbing the Guarantor/BANOBRAS transfers and relending procedures; and (b) BANOBRAS shall have (i) the MIS fully operetional; and the Executive Coordinating Unit (ECU) legally established. -7 - 24. Environmental Aspecs. The proposed project, which is a category B project, would help improve evironmental conditions in the prqect areas by reducing water pollution and minimizing the danger of water-related diseases. It would assist Mexico in improving its water pollution control policies by providing CNA with added capacity to develop pollution oontrol strategies, to monitor water quality and to enforce environmental regulations. Each WU's master plan would contain a preliminary E1A for all the aetivities proposed. Prior to funding, individual investments would be recorded in the annual Memorandum of Understanding and would have ELAs in accordance with existing SEDESOL guidelines. The current legislation also allows for the possibility of dispensing with an EIA by submitting a prior notice demonstrating that the activity in question will not cause negative environmental impacts, or exceed the limits and standards defined by technical regulations. 25. Intenational waterways. Mexico shares intenaional waterways with Belize, Guatemala and the United States. Interational waterays as defined in OD 7.50 include not only rivers or other bodies of waters that form a boundary between countries but also rivers or bodies of surface waters that flow through two or more states and tributaries or other bodies of surface water that are a part or a component of any such waterways. The proposed project is national in scope and under its investment component local improvements in water supply treatment and sanitation may be financed through subloans in areas that could affect Mexico's international waterways. While both the Mexican authorities and the Bank belies -at, because of the nature of the project, these improvements would only have beneficial effects, if any, on other riparians, it is too early to determine the possible impacts on neighboring countries until the actual imvestments have been identified and appraised. After discussion of this matter with Mexico, and at the request of Mexico, it was agreed that the Bank would inform the neighboring countries of the proposed project, which was done. 26. Official communications from each of the three neighboring counties have been received. In light of the procedures for selection and appl of subprojects to be financed under the proposed loan, as well as the expected benefcial effects of such subprojects on the affected waterways, Belize expressed its full support for the project. The United States encouraged the Bank to continue with the preparation of the project and stated that it would review the project at the time of its presentation to the Exeutive Directors. Guatemala said it would assure itself dtrough its bilatl treaty arrangements with Mexico that the interests of both Mexico and Guatmala will be protcted with respect to subprojects. In light of these statements, no special provisions for subprojects that may affect teational ter*ays with Belize, Guatemala and the United States have been included in the project documents. (Copies of the responses of Belize, Guatemala and the United States are attached as Annex 1,. 27. Progam Objective Category. By imprving the operions of water utilities at the local level, the project is expected to etend coverage of basic -8 - water supply and sanitation services to the poorer areas of the communities that these utilities serve. As a result, the quality of life in these poorer areas should improve substantially. The project is also aimed at encouraging private sector participation by establishing the appropriate legal and technical framework within which to attract private investment. 28. ProJect Benefits. Improved water quality can be expected to contribute to the control of cholera and significant reductions in other gastro-intestinal diseases, which are especially prevalent in the poorer areas of Mexico. The project is expected to uirectly benefit about 10 million people. In addition, the project would: contribute to the ratonalization of sector investments; promote water conservation through the implementation of more rational tariffs and the reduction of unaccounted-for-water losses; stimulate intemal sector savings; reduce the sector's dependence on Government funding; promote the adoption of cost-effecdve policies to achieve environmental improvements; and encourage investment in human resources in the environment field. 29. Project Risks. The technology involved in the proposed investments and the required technical assistance do not pose any unusual risks. However, continued ieform of sector policies and institutions is a complex undertaking which is subject to various political and other changes. Although major reform measures were taken under Loan 3271-ME, the following risks remain: (a) inadequate counterpart funds due to Government delays in distributing its revenue-sharing contribution to the states and municipalities; (b) failure to give the beneficiaries a real sense of project ownership due to pressures from a more politically powerful CNA and SEDESOL; and (c) lack of coordination between other federal programs, such as SOLIDARIDAD, dtt may introduce policy changes affecting overall implementation of sector policies agreed to in the context of the project. The frm commitment shown by Government in the eparation of this project and its track record in this and other sectors gives confidence that whatever problems that arise in implementation can be overcome.The curent design of the proposed project, including the agreements reached with the Government, also reduces these risks to a minimum, acceptable level. 30. Recommendation. I am satisfied that the proposed loan would comply with the Articles of Agreement of the Bank and recommend that its Executive Directors approve it. Lewis T. Preston Preident Attachment Washington, D.C. May 16, 1994 -9 - Schedule A Mexico Second Water Supply and Sanitation Sector Project Estimated Project Costs (US$ Million) Component Local Foreign Subtot.* % of Total I. Strengthening Sectoral Federal Institutions CNA 4 5 16.4 20 2.7 Institutional Strengthening 0.9 1.5 2.4 0.3 Technical Assistance to WUs 0.9 5.0 5.8 0.8 Water Quality Program 2.7 9.9 12.7 1.6 IMTA 0.5 6.6 09 Institutional Strengthening 0.3 1.5 1.9 0.2 Technical Assistance to WUs 0.2 4.5 4.7 0.6 BANOBRAS 1Z9 1.2 31 0 Institutional Strengthening 1.9 1.2 3.1 0.4 Subtotal I * 7.0 23.6 30.6 4.0 II. Investment Support to Local Water Utilities Water Supply & Sewerage Works 313.0 301.1 614.1 79.8 Studies and Design 21.9 21.1 d3.0 5.6 Subtotal Il * 334.9 322.2 657.1 85.3 III. Institutional Support for Water Utilities Preparation of MPs & ElAs 2.1 2.7 4.8 0.6 Help w/ "CONSOLIDACION" 6.0 1.5 7.5 1.0 Subtotal III 8.1 4.2 12.3 1.6 Subtotal Project Cost 350.0 350.0 700.0 90.9 Taxes 70.0 70.0 9.1 Total Project Cost 420.0 350.0 770.0 100.0 * Note: Subtotal anounts may not add exeoay due to rounding. PROJECT FINANCING PLAN (US$ Million) Sources of Funds Loa _rei n Total % of T IBRD 350 350 45 Government of Mexico 185 185 24 State Grant 120 120 16 WUs' Internal Cash Generation 115 115 1S Total Pro3ect 420 350 770 100 - 10- Schedule B Page 1 of 2 Mexico Second Water Supply and Sanitation Sector Project Procurement Arrangements (US$ Million) catgory ICB LCB O0r NSF c/ Total Works A. Civil Works 75.8 496.9 22.1 a/ 594.8 (34.1) (223.6) (9.9) (267.7) Goods B. Equipment/Materials 15.5 49.0 24.0 a/ 2.8 91.3 (7.0) (22.1) 110.8) (39.8) Service and Consultancy C. Engineering services - Master Plans & ElAs 5.3 5.3 (4.8) bl (4.8) D. Subproject design & consolidacion^ studies 23.6 32.0 56.6 (21.2) b/ (21.2) E. Consulting trainit:g & technical assistance 18.4 4.6 23.0 (16.5) b/ (16.5) tOW Project Cost 91.3 545.9 934 39.5 770.0 (41.11 (245.7) (63.31 (350.0) Noe: Fium In pwanthesse ae mut expecte to be finwe by th Dan a/ Shopping from at least three suppliers (civil works and equipmentlmaterlals) b/ Proposals from short lists of consultants, according to Bank Guidelines for the Use of Consutant cl Not Bank financed Fsti ed Dsbursement (US$ Millions) , . - . - i m............ .i m . BANK FY 1994 199S 16 1997 199 19 1 Annual 0 S0l 110 100 50 10 I Cum ve 0 80 190 290 340 1. Inchd diabute" d to US$5m aedi bued ater 3*7, 19 and Em WUdAl itb to Spea AeWAL. - 11 - Schedule B Page 2 of 2 Mexico Second Water Supply and Sanitation Sector Project Initial Allocation of Loan Proceeds (UJS$ Million) Project Expenditures Component AMlocatdon of to be Disbursement Catigony/ No. In the Loan Amount fianced Description General Cost (US$ MUmon) 1%) Table a/ bi 1 Equipment, materials, and civil works, 11 271.0 60 for the Investment Support to Local Water Utilities Component 2 Consultant services for preparing 11 and [i1 22.6 100 design documents and for providing TA and preparing MPs to WUs 3 Equipment and materials for 1 5.9 80 Institutional Strengthening of Federal Institutions Component 4 Civil Works for the Institutional 1 0.4 80 Strengthening of Federal Institutions Component 5 Consultant Services for the Institutiona! I 15.1 100 Strengthening of Federal Institutions Component 6 Unallocated 35.0 Total for Al Categories 350.0 e/ Component 1: Strengthening Sectoral Federal Institutions Component II: Investment Support to Local Water Utilities Component 1I: Institutional Support for Water Utilties b/ The expenditures to be financed exclude an taxes and also IVA. - 12 - Schedule C Mexico Second Water Supply and Sanitation Sector Project Tlmetable of Key Project Processing Event (a) lime taken to prepare: 14 months (b) Prepared by: BANOBRAS/CNA and consultants with Bank assistance (c) Pirst Bank Mission: Febnruy 28, 1993 (d) Ap Mission Deparme: October 17, 1993 (e) Negodation: February 21, 1994 (f) Planned date of Effectiveness: September, 1994 (g) List of Relevant PCRs and PPARs Loan No. Pect PCR Date No. 909-ME Mexico City Water Supply Project June 83 4623 1186-MB Medium Cities Water Supply and Sewerage Project Dec. 92 11448 1913-ME Second Medium Size Cities Water Supply and Sewerage Project Dec. 92 11448 2281-ME Third Medium Size Cities Water Supply and Sinaloa State Water Project Dec. 92 11448 3101-ME Water, Women and Development June 92 10819 - 13 - Schedule D Page 1 of 3 STATUS OF BANK GROUP OPERATIONS IN MEYICO A. STATEMENT OF BAN LOANS (A of Marh 31, 1994) Amount In US$ ilion le" ssnooelation) Credl Fisl LOn No. Year Borrower Pumooe Bank IDA Undrlsbured 107 loars fully dibursed 13,414.72 Of whhih SECALm, SALs, Program Loans, and Interet Suport a> Ln. 1929ME 1981 ANOBRAS Railway IV 149.08 Ln. 2331 -ME 1983 8ANCOMEXT Export Development 349.33 Ln. 2882-ME 1988 BANCOMEXT Trade Polcy Loan 00.00 Ln. 291 -ME 1988 NAFIN A ultral Sectot Loan 300.00 Ln. 3169-ME 1090 BANCOMEXT Interest Support Loan 1,200.00 Ln. 3207-ME 1990 8ANOBAAS Road Taport & Teecorm. 360.00 Ln. 3087-ME 1989 NAFIN Indust Seatof Polcy 497.51 Ln. 2745-ME 1807 8ANCOMEXT Trade Policy Loan 1 498.03 Ln. 3080-ME 1989 NAFIN Public Entwpdrs Reorm 499.39 Ln. 2777-ME 1987 BANCOMEXT Export Development U 248.37 Ln. 219-ME 1OS NAFIN Fefilae Sctor 240.20 Ln. 3309-ME 1991 BAICOMEXT Export Secor 25.00 Ln. 33574ME 1991 NAFIN Agdrcltural Sector A4. U 400.00 Subtota 5,340.31 Ln. 2520-ME 1905 NAFIN Chapa Agdrcdtur 0ev. 60.00 3.22 Ln. 2575-ME 1985 BANOLRAS RaIlwavs V 300.00 3.29 Ln. 2056JE 1980 NAFIN Ariultur 0ev. ProderthU 80.30 39.39 Ln. 20666-E 1980 IANOBRAS Muncipal Strenrteoning 40.00 17.34 Ln. 20094ME 1980 BANOBRAS Soid Wwat Managent Piot 25.00 10.91 Ln. 2824ME 1087 3ANOBRAS Urban Tranport 90.99 24.49 L n. 286-ME 1907 NAFIN d lidustry IV 100.00 20.14 Ln. 2876-ME 1987 BANOBRAS Highway Mshntsn 135.00 2.70 Ln. 2910-ME 1988 NAUIN Ste1e Sector Restructuuhng 321.01 e9.27 Ln. 29408ME 1988 BANOBRAS Port RPaheblltatlon 60.00 4.17 Li. 30474ME 1989 NAFIN Ibnutri Restrucr 260.00 33.51 Ln. 30834-E 1989 NAFIN Hydroeltdo rievelopent 400.00 89.9f Ln. 3085-AE 1989 BANOCOMEXT Financl Sector A4uetnent 497.14 0.73 Li. 31156ME 108 NAFIN Foesr Devlowpnt 46.60 35.90 L. 3140-ME 1900 BANOBRAS Low4nome Housing 350.00 40.13 Ln. 3141-ME 1990 NAFIN Agdicturl Marng U 100.00 0.49 Lin. 3160ME 1990 NAFIN Transrission & Ditrbuton 450.00 106.06 Ln. 320-ME 1090 BANOBRAA Teloomm Technia Asitac 22.00 3.50 Ln. 3271-ME 1991 BANOBRAS Wat Supply & Sanitation 300.00 21.27 Ln. 3272-ME 1991 NAIN Baslc Health Cwr 180.00 04.16 Ln. 3310-ME 1991 NAFIN DntRallOn S Regional Delp. 360.00 111.00 Ln.3 584ME 1991 NAFIN Technical Taining 11 1.00 101.42 Ln. 3359-ME 1901 NAIN Ming Sector Resuctudng 200.00 114.39 Ln. 34074ME 1992 NAFIN Pdnrmy Education 260.00 14.28 Ln. 34190ME 1992 NAFIN Irdgtion & Drab" Bectr 400.00 234.84 Lni. 3481-ME 1992 BANOLRAS Er6vronmentatural RPuree 60.00 37.64 Ln. 3485-ME 1992 NAFIN Agdriul Technlo 150.00 141.21 Ln. 3475-ME 1902 NAFIN Scee&TechnoogyWrasut 189.00 117.42 Ln. 3497-ME 1992 BANOBRAS Housing Met Deeopment 40.00 231.13 Ln. 3E10-ME 1993 NAFIN Idtl Educaton 00.00 71.99 Ln. 3542-ME 1993 NAFIN Labor Maket & Prod. EnhaWmen 174.00 145.70 Ln. 3543ME b> 1993 NAIN Trnport Air Polluton ContrU 220.00 220.00 Ln. 3559-ME 1993 BANOBRAS Medium Cm" Traport 200.00 188.01 Ln. 3020-ME 1993 BANOBRAS Highway Rehab. & Trafc Safety 480.00 406.05 Ln. 3704-ME b> 1994 NAFIN On-amS Minor Iigti Netwro* 200.00 200.00 Ln. 3722-ME b> 1984 NAFIN PrmryEducaton 42.00 4 2.0 Total 21,224.5 8,554.40 Of Wich has been repoad 490.4A Totel now held by the Bank 14734.22 Amount ld : 92.34 Of whbh ha ben repaid. 92.34 Totel Undsbureed 3.,64.40 3,554.40 *> Approved during or aftwr FY00 and fty dibuad SAL, SECAL. or Proa m Loan unde Impl_emenatIon. b> Notyateffetdh MdeS: LA2CI Fil: WB03-94.xe 14-Aprt.4 & s E!,!! [iI iU ''I'g EfIjitEgg !wI £ 33IIn!g ! | I~ |tp [ ft, 'i,Thr 1.! | i || e | !i|||1 !q ;It! 3|W1 34i! ti aE a W ' 8| S W ' 4g!gE|0goAogo0XSogeeubbh{o S g g O gg {Sl g 8 g b oOg g I §@ It I I I IS I I I II It I I I II I _ m g Sg g *,_ t lXS0 * 44* , a a as ' ~ ' ass '~3~~ 'e ' ' ' ' 'U a ~ 8~ '3 ~ t 'as ' ' ''' '~~~~~~- ' -'''''oa''''''|'''''''''' - 15 - MEXCO Schedule D SUMMARY OF IFC INVESTMENTS Page 3 of 3 as d Mauch31,t904 uiniworn V#Ommxiwn FMi uffi oi y IunaINws@ Fiscal YeWIGIFC Patl- by Patlol- #ndlu,,ng Co_Mb d Comay Type Bud_sin Loan Ei pt TOWl IFC pats ParWc ft) 1002 Bmnco Muran dd Norte. SN.C. Development Finane 20.00 - - 20.00 20.00 - 10.30 1002 Mexdo City Toua Tol Road Trarpt & Stwage 13.5 - - 13.75 9.76 - - 1993 Mastrpak UA do C.V. TextilesRaoag 12.00 - 28.00 40.00 12.0 25.03 2.00 1003 CelulyyDerhadoSA.deC.V. TeUxlaaclaging 11.00 - 26.00 37.00 11.00 24.07 1.00 190034 Orupo Opaador de Terminales Marma" SA (GOTM) Indusil Savicu 4.00 2.00 6.00 12.00 6.00 - 2.24 1004 Gke" Chwmkels S Pocdwalcals 15.00 8.00 42.80 6$.0 23.00 42.50 57.50 1004 Auum Hdler Finnil Sevice - 0.98 - 0.98 0.08 - - - 0*4 le idts .8 - .-ii.O. - 0.2 flu *,10A : . . > Les: Cancelidoins Terminatons. Repaymsnt & Sales 501.42 74.71 530.17 1,106.30 Pondag CommW a: Indelpro, BA de C.V. III Chemicals & PetochemdIals - - 6.00 6.00 Kapta Devopment Fiance - 9.85 - 9.85 Bancow Mot DevelopmentFinance - 0.15 - 0.15 edasa III Auto Chtasi 18.00 0.00 24.00 48.00 CTAPV Inra*uotwe 5.00 2.00 - 7.00 Inlreouamc CramIcT Hsa 21.00 - 17.50 38.50 a/ Invedments %*kh have ben hfu canceled, tsrminated. wlsn-of, sokL redeemed, or repadl W US$25,000. ol Excludes phac nt d$30.0 mlion (Apasco), $20.0 million odrq),and$19.8 mUllon (Condumex) 4! Consiab of apprved and signed projctds ncluding underming. but exluding srnp tansions I.e., Banca Sofin US0.5 millon IndeIpro $0.0 millor Banamex $40.0 millon and Grupo Posadu 11 $6.5 millon). #1 Hold Commntnts c*nsW of dcsbumed and undlsbursd hvesments. -16- Annex I Page 1 of 3 ERRMENT OF 8ELI E ;fMnistru of FnWneo -~~ . U Q S 1200/C/02/94 (13) 7 Aprll, 1904 Stan. Robo R. De cotrat Zxecutiva Director fta World *auk lose R Stru.t P. W. Vashington D.C. 20433 U.S.A.> -Pax. No. 202-477-4155 Dear Mr. ie Cotret ,s.Lj.għetŽOa at.ratioa I. . .au Thank you for your letter of 4 April, 1994 noxttfyit the Government of "alize that a World Bank Loan to Xexico presently under preperatiLn would finance projects'tbat would have impacts on the vaterways along the Be1ize/Zaxico boarder or flowing from Mexico into 3.li;e. The Gvrnment of Delize has had an opportunity to revlew the llro ect ThformatLon ooDmst attadbe4 to your l.tter. In vitw the provisions for the sele:tion and approval of sub-projocts itncd under the Loan as v.ll as the expected beneficial effects su4b subw projects on the affeoted watenmays, the Gcoverent of ReliU-e lr.ds Its full ;upport to the Project. JO WAtGMTI o tnahvial 8ratry cc, YP.. MLnistry of Economic Development P.S. Ministwy of the Invironment T*L 08-22162. 22I8. 2216Z 22169 %aet fLoo,aa - 17 Annex 1 Page 2 of 3 MINISTE:RIO DE FINP9NZAS PUBLICAS GUATEMALA. C. A. O/DWP/245/94 . - 12 de mayo 1994.- URGE NTE DIZRSCM UECUTIVO SAaO MUWIAL WASHINGMt, D.C. Seiffor Director: En sguimiento a nuestra carta del 15 de abril sobre el Segundo Proyecto Sectorial de Abastecimiento de Aguw y Saneramiento en MHxico, trasledo a usted coentarios adicionales en relaci6n a la posici6n del Gobierno de Guatemala. HEmos considerado el tema de nuevo y el Gobierno de Guatemla estima conveniente el desarrollo del Proyecto por parte de J*xico. De conformidad a la naturaleza, funcionumiento y atribuciones de la Copiisi6n Internacional de Limites y Aguas (CZLA) entre Guatemala y M.ixico, organiamo Binaciona. que tiene bajo au jurisdiccifn todo lo relacionado a las aguas internacionales y rios limdtrofest el Gobierno de Guatemalat se asegurarS que a trav6s de la participci6n de la CILA, se 8alvaYarden los interese4 de ambos pat Sin otro particular, re swcrib i . /~~~~~E D- A..e,Z,.vg~mm -18 - Annex 1 Page 3 of 3 DEPARTMENT OF THE TREASURY 0 WASHINGTON Apr1l 25, 1994 Mr. Rdib>erto L. Segura Director, Country Departaent II Latin America and the Caribbean Region The World Bank 1818 N Street, N.W. Washington, D.C. 20433 Dear Mr. Segura: This is to acknowledqe receipt of your letter of March 16, 1994. This letter notifies the United States of the two proposed World Bank loans to Mexico which could have an impact on waterways along the U.s.-Mexico border or flowing from Mexico into the United States. I appreciate the information that you provided and encourage the Bank to proceed with its project preparation. The United States looks forward to reviewing these projects when they cone before the Board of Directors. Sincerely, Susan B. Levine Deputy Assistant Secretary International Development, Debt and Enrironmet Policy cc: Wancy Katz, OUSED/IBM ito IBRD 2535 /.0ei 7?MEXICo SECOND WATER SUPPLY AND r--C- SANITATION PROJECT 8A(IFOANIA Aa/ten 30. / - 30~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~3 $ 00P A 1~~~NV $ t~~~~? A" 4. c ~a o , ,N ,.. ' National cpstal IA ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~State capitol$ HA/A ~~~~~~~~~~~~~~~~~~~~~~0AHVI0 KPnipalp cities 01 towns CAUIFOMNA 4.- Ditidd highways Sul Y. Selected oWn mods.. 1. _ t Rojlroods 4. PrIncipal airports ----Staos boneddwis a. ~ ~ ~ ~ 4 Pm .f 5l3,,don o / ZAA CR m6 bo~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~torido. , = ,= Tsw*4at S HON~~~~~~~~~DUN R AS x YUC.tAP. u ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~~~~~~~~~0 $.~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~e.o It~~~~~~~~~~~~~~ooc 7 BLZ OLOJtOlOR$ 0 100 300 300 400 000~~~~~~~~~~~~i MILUO tOO 300 300 fl3/> / 7>.,~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~ ~~~ ~ ~ ~ ~ GUATEMALA 4~~~~~~~~~~~~~~~~VN Bent. ~~~oor. Th~~danonsk,nOonn nosci and the bonn on tirE.~~~Leo n,~~ OOnnt laSsOs an tO. por OH lisa Vthrtd Bank G,n.p~~~~~~~~~~~~ any lndg,naat~Nk an the ingot .toOsa at any tenOaryar any endanernant or Onoeptano.nH~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~ anal, boandorbo. HONDURAS~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~a ttor tOt? t0 ~~~~~~~~~~~~~~~~~~~~~~~uti