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Report No. PT-3a

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INTATIONAL BANK POR RECONSTRUCION AND DVELOPMT

INTERNATIONAL DEVELOPMENT ASSOCIATION

APPRAISAL OF

THE ZIHUATANEJO TOURISM PROJECT

MEXICO

December 7, 1971

Tourism Projects Department

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CURRENCY EQUIVAIENTS

Currency UUnit = PesoUS$ 1.00 = 12.5o pesos1 peso (Mexo) - us$ o.081 million pesos u US$ 80,000

UNITS OF WEIGHT AND MEASURES: ?ETRIC

Metric: British/US Equivalente

m2 = 3.28 ft.1 m = 10.76 sq. ft.1 km = 0.62 mi.1 km2 = 0.386 sq. mi.1 ha = 2.5 acres1 m ton = 0.98 lg ton

1.1 US sh ton

PRINCIPAL ABBREVIATIONS AND ACR0TNY1S UBED

IDB = Inter-American Development BankINFRATUR = Fondo de Promocion de Infraestructura TuristicaSOP é Secretaria de Obras PublicasSRm - Secretaria de Recursos HidraulicosILO = International Labor OrganisationRAMSA = Radio Aeronautica Mexicana, S.A.ASA = Aeropuertos y Servicios AuxiliaresNACOA Nacional de Combustibles de Aviacion

FISCAL YEAR

January 1 - December 31

APPRAISAL OF THE ZIHUATANEJO TOURISM PROJECT

TABLE OF CONTENTS

Page No.

SUMARY i

1. INTRODUCTION 1

2. BACKGROUND 1A. The Economy 1B. The Tourism Sector 2

3. THE PROJECT 6A. Background 6B. Description 7C. Fhysical Planning 9

Environmental Factors 10D. Cost Estimates 11

Amount of the Loan 12Diabursements 12Procurement. 13

E. Execution 13F. Organization for Operation 15

4. SUPPORTING SERVICES 16Housing 16Training 17

5. JUSTIFIChTIOII 17A. Market Demand 17B. Hotel Development 19C. Econonic Justification 20

Economic Return 20Emiployment and Income E*fects 21Direct Balance of Paymente Effect 22

6. FINANCIAL ASPECTS 22

7. RECCMENDATIONS 25

Th$s report is based on the findings of a projeot appraisalmisaion consisting of Mesars. Sinmona, Vera, Duarte (Conaultant), Zetter-otrom, Thys, Willians, Menezes, Iizuka, Ru.fini (Central America andCaribbean Department) and Paraud. Desk evaluationa of certain elementeof the project were made by Mesars. Ribi, Le Moigne, Nalkaní and DeLima.

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Table of Contenta (Cont'd.)

STATISTICAL APPENDIX Page No.

Tables 1 - 25 28

ANNEXES Annex No.

Market Demand 1Infratur 2Airport Development 3Water Supply, Sewerage and Storm Water Draínage Project 4Economic Justification 5

CHARTS Chart No.

Sahedules of Duplementation, Expenditures andDisbursement 1

MAPS Map No.

Ixtapa-Zihuatanejo Tourism Project Location and Land Use 1Existing Zihuatanejo Airport, Topographic Obstructions 2Coacoyul International Alrport, Master Plan 3Coacoyul International Airport, Approach Termndal

Procedures, Airport Sfrfaces and Terp's Safety Areas 4

i o*¿sv

APPRAISAL OF THE' JIHUATANEJO TOURISUI PROJECT

STMI ARY

i. This report appraises a project to provide the infrastructuresrequired for a new tourist resort near Zihuatanejo on MexicoWs Pacificcoast (see Map 1). The resort would in ite first atage covering aperíod of 8 to 9 years provide 3,500 hotel roorns and 500 single familyhouses, but its ultinate capacity wjould be about 10,000 hotel roomsand 1,500 houses. The project is one of two now being developed by

the Federal Governnent. The Inter-American Development Bank made aloan of US$ 21.5 million in August, 1971, for the second, located on

the coast of Yucatan.

ji. International tourism has developed rapidly in Mexico in thelast decade. Visitor numbers increased three-fold over the decade to

reach 2.2 million in 1970. Foreign exchange earnings from tourismincreased by 14% annually, more than double the growth in earningsfrom conmodity exporte. Tourismn is now Mexico's largest single sourceof foreign exchange earnings.

iii. The principal destinations of foreign visitors, apart from bor-der towns, have been Mexico City and Acapulco. Acapulco is alreadybecoming congested and it, like smaller tourist centers on the Pacificcoast, suffers from serious deficiencies in infrastructure which canbe put right only after careful planning ard with heavy investmente.To meet the prospective growth of demand for beach based tourism --traffic is expected at least to double by 1980 -- the Mexican author-ities selected t'jo new resorts for early development, while the neces-sary planning for Acapulco and other established centers could bepushed forward.

iv. The little torm of Zihuatanejo is located on the Pacific coast

about 180 km north-west of Acapulco. It lies on a deep bay surroundedby green hills. Mountains rise inland and beyond the bay extensivepalm-fringed beaches of fine sand stretch to the north and south inter-

apersed with rocky headlands and with a number of emall islands off-shore. The focus of the tourism development will be a beach about 5 kmnorth-west of Zihuatanejo, where there ¡a apace to develop in a settingof great natural beauty, hotels and private homes shopping centers,golf courses, a marina and ancillary facilities. )The proposed projectcomprises three main components. The first includes the principalinfrastructures -- roads and streets, water and sewerage systems, qlec-tric power and telephones -- needed to develop the resort itself.X/Thesecond consists of the principal infrastructures in the tawn which willbe developed as a service center for the main resort, but also as a

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secondary tourist attraction. The third main component of the project wíllbe an international airport about 10 km south-east of Zihuatanejo, designedto cater for non-stop flights from major U.S. cities. The project includes,in addition, provision for training of hotel personnel and for further stud-les of tourist resort areas.

v. The justification for the proposed investment in infrastructure ¡athe expectation that private investora will subsequently build hotela andhomes. Investnent in hotela in Mexico has yielded attractive returns inthe past, and a strong interest in the new development has been expressedby potential developera though no binding cammitmenta have yet been made.There are, however, risks involved in investing in a new resort whichrapidly diminish once it ¡e established. In these circumatances, the Fed-eral Government has agreed that it will, if necessary, take steps, includ-ing the provision of finance, to ensure that 750 hotel rooms will be builtand operating not later than 1976.

vi. The project is estimated to cost US$ 44 million aquivalent, inclucí-lng contingencies. The proposed Bank loan of US$ 22 million would cover50% of the total project cost. The balance of the required financing wouldbe provided by the Federal Government.

vii. Contracts for construction and equipment to be financed by the Bankwould be awarded after international competitive bídding, except for smallcivil works contracts where it ia proposed that national bidding only berequired. The foreign exchange component of the total project cost woulddepend upon the outcome of international bidding. Assuming, however, thatMexican contractors were to win the major construction contracts, as islikely, the foreign exchange ccmponent of the total project cost would beabout 30% or US$ 13.3 million.

ViiI. As the project is part of a larger program of investments, includ-ing hotela, ita econmmic evaluation has been made in terma of this largerprogram. Net benefita would be measured by expenditures of visitors to theresort leas the cost of operating all the facilities, including the hotels,With an estimated economic life of the project of 25 years, the internaleconamic return on the whole program would be 13.1%, if labor is valued atprevailíng wage ratea. Since the program would employ many unskilledworkers who are now under-employed or unemployed, unskílled labor has beenpriced at 70% below current wage rates. On this basis, the internal eco-nomic return would increase to 19.4%. Net foreign exchange earnings areestimated at US$ 36 million in 1980 and US$ 53 million in 1986 when all3,500 hotel rocis are in full operation.

ix. The project la suitable for a Bank loan of US$ 22 million eqt'iva-lent for a term of 25 yeara including a grace period of 5 years. The bor-rower would be Nacional Financiera, S.A.

l:EXIc O

APPRAISAL OF TIE ZIHUATANEJO TOURISM PROJECT

1. IIlTRODUCTION

1.01 In 1968, the Government of Mexico indicated an interest in obtain-ing assistance from the Bank in financing the infrastructures requiredfor meti tourism developments. Early in 1969 the Government suggestedthat the Bank consider three sites for development along the Pacificcoast -- Puerto Vallarta$ S4anzanillo and Zihuatanejo. Subsequently, inthe course of project identification and preparation missions in 1969and 1970, agreement was reached that attention should be focussed on oneproject at Zihuatanejo, located on the coaut about 180 km north-west ofAcapulco.

1.02 The project consists of the infrastructure required for the devel-opment of a new resort near Zihuatanejo which in its first atage wifll com-prise hotels with 3,500 roons and 500 private houses. The infrastructureincludea an internationrl airport, roada and streeta, water and seweragesystems, electric power, telephones and ancillary services.

1.03 Due to its complexity the project has required about two years forits preparation, during iuhich time it has been substantially modified.For the samre reason, an unusual nunber of Bank staff were involved in itaevaluation. The appraisal mission itself consisting of Messrs. Sinmons,Vera, Duarte (Consultant), Zetterstromr, Thys, Williams, Menezes, Iizukaand Ruffini completed its field work in June 1971. Mr. Paraud hadearlier evaluated the road elementa of the project. Deak evaluations ofcertain elements of tlie project were made by Mesera. Ribi, Le Moigne,Malkani and DeLima.

1.04 This would be the first Bank loan for tourism in Mexico.

2. BACKGROUND

A. The EconopZ

2.01 lMexico has achieved a fast rate of economic graoth (7.1% p.a.) inthe past ten years. Ita population of 50 million has been growlngrapidly, by 3.5g annually. The gross domestic product at current marketprices was estimated at US$ 34 billion equivalent in 1970 and per capitaincome at about US$ 670.

2.02 lIexicols economny is quite diversífied with manufacturing contri-butimng about a quarter of GDP and services almost a half. Fast rates ofgrowth have been achieved in various branches of industry some of which

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have enjoyed high tariff protection. The rapid growth of GDP in the1960a has been accompanied by a growing demand for imports, mainlyinvestment goods, fuels and raw materialas. Earnings from tourism havefinanced a growing share of the country's imports.

2.03 If past GDP growth rateo are to be maintained, imports will needto grow by about 9-10 percent annually. Because of the importance ofagricultural exporte with a li:iLted growth potential, merchandiseexporta are not expected in the longer run to maintain the past decadetsgrowth trend. In this context the fast growth in tourism receipts wouldbe particularly important for the future development of the ecomomy.

2.04 Notwithstanding the marked growth of the economy in the past dec-ade, widespread unemployment and under-employment of labor persista.Moreover, the regional imbalance in unemployment levels íe accompaniedby longatanding dispar-tiee in levela of income between the leas andmore developed regions of the country. Tourism requires lees capitalinvestment to create one job opportunity than most other productive sec-tors in Mexico (Table 1), and as many areas of tourism potential arelocated in the poorer regionB of the country, their development couldcontribute substantially to alleviating regional disparities in employ-ment and income.

B. The Tourism Sector

2.05 MXexico, with beautlful and dramatic scenery, a warm climate,extensive and largely undeveloped beaches on both the Caribbean andPacific coasts, remarkable archaeological sites, particularly of theToltec, Aztec and Mayan cultures, a wealth of Spanish colonial archi-.tecture and cultural traditions in the arta, music and dance ofextraordinary variety and color, offera attractions for the tourietwhich can be matched bmr few other countries. These assete, togetherwith the country's proximity to the U.S., with which it ahares a2,000 mile border, have attracted an increasing flow of visitora inthe past and constitute an lmportant potential for the future.

2.06 The rapid growth in tourism has been mainly a phenomenon of thepast decade, although even in 1946 Mexico received more than a quarterof a million foreign visitors. Growing prosperity in the U.S. andCanada, the provision of direct air access to various destinations inMexico and the rapid expansion in accomodation combined to make thisgrowth possible. Visitor numbers increased three-fold over the decadeto reach 2.2 million in 1970 (Table 2). These visitors tour the inte-rior of the country and are to be distirguished from the Mexican-U.S.border traffic, estimated at more than 70 million visitors in 1970.

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2.07 Mexico's gross foreign exchange earnings frcmn tourism amountedto US$ 575 million in 1970, excluding visitor transportation and bor-der traffic, second only to Spain among the developing countries.The growth rate averaged 14$ per annum in the past decade, as comparedwith a growth rate of 6.5% annually in earninga from commodíty exporte.As a proportion of total receipta from ex,ports of goods and servíces,tourism receipta rose frem 11% to 18% over this períod. With the highproportion of visitors (87%) from the U.S. (Table 3), average visitorexpenditures are relatively high, about US$ 21 per day, with even higheraverages (US$ 31 a day) for visitors arriving by air.

2.08 litth regard to employment, recent studies estinatu tlhat forevery million dollars apent by visitors to Máxico, 585 persona findemployment directly and indirectly. On this basis, it is estimatedthat the tourism sector in Mexico currently employs approximately340,000 persons, 2% of the economically active population.

2.09 In the past a majority of foreign visitors arrived by road, thebulk from border states, Texas, California, Arizona and New Mexico.This is gradually changing and road transportation is ylelding to avia-tion as the dominant mode of transportation of visitors as more dia-tant destínations are opened up and the costs of air travel decline.The growth of air traffic to destinations such as Acapulco and PuertoVallarta has been particularly rapid since international airportswere opened at these cities which permitted direct flights fram theU.S. (Annex 1).

2.10 Climatic conditiona make Mlexico an all year round destination,and visitor flows to Mexico show only a minor degree of seasonality(Table 4). The small peaks in June through August and Decemberreflect partly the vacation perioda in the U.S. and partly the differ-ences in cltrnatic conditions in the two countries. As a result, tour-ist facilities generally experience relatively high occupancies, muchabove those prevailing in most other touriet destinatione.

2.11 The high occupancies have made investment in new capacityattractive, and Mexico la one of the few ímportant tourist-receivingcountries where the sector has until now received no significantincentives or subsidies from the state. Until the end of the 19601s,the supply of accommodation grew more elowly than demand, but in thepast three year8 there have been very large additions to capacity,particularly in Mexico City and Acapulco, and occupancy rates havedeclined. In 1970 there was a drop in the rate of growth of visitorarrivals to Mexico, probably reflecting in part the recession in theU.S., but average room occupanices in Mexico City were atill above60% and will rise again as traffic grows, since further additions tocapacity are likely to be amall in the next several yeare (para. 2.13).

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2.12 Apart from towns near the U.S. border, Mexico City and Acapulcohave been the principal visitor destinations in Mexico. These two cit-¡es have only a quarter of accommodation capacity in the country whichtotals 133,000 rooms (Table 5), but approximately a half of all capac-ity in hígher category hotels (3M,000 rooms) which are mainly used byforeign visitors. Capacity of the latter has approximately doubled inthe past decade. Destinations attracting much smaller nmnbers offoreign visitors include resorts on the Pacific coast, such as PuertoVallarta and Manzanillo, and Guadalajara, Mexico'a second largest city.

2.13 Shile complete data on planred additions to capacity in all ofMexico are limited, projecte underway will add some 2,000 rooms in Aca-pulco, increasing by 25% capacity in higher category hotels there inthe next year. There are líkely to be only small additions to capacityin Mexico City during this period, but there should be sufficient capac-ity in these two centers together with minor additions elsewhere tomeet the likel¡ growth of demand in the early 1970's.

2.14 In the longer term, further additions to capacity will berequired. New hotels will be needed in Mexico City as the principaldestination of foreign visitors. Further expansion at Acapulco wouldbe possible, but it would need to be on a better planned basis thanheretofore. In some respecta Acapulco is already becoming congestedand there are serious problems resulting from inadequate infrastruc-ture and pollution. The Méxican authorities are aware of these prob-lems and of the potential threat to one of the country's principaltourist asset9. Studies are required and the Bank has been asked forasaistance on the technical aspecta. Even though solutione wlll befound, it would be quite unrealistic to assume that in the longer-runthe groilng demand for beach-based tourism could be met mainly in Aca-pulco. In these circumstances the lbxican authorities have rightlyconsidered the need to encourage development at other sites on thecoast. In 1969 the Federal Government authorized the Bank of Mexicoto create an organization -- Fondo de Promocion de InfraestructuraTuristica (Infratur) -- to promote the development of infrastructuresneeded for the tourist industry (Annex 2).

2.15 In view of the difficulty and slowness of planning and imple--menting major improvements in existing centers where there are estab-lished interests, Infratur has until nouj concentrated its efforta indeveloping two new sites, one at Zihuatanejo on the Pacific coast andthe othor near the north-eastern tip of the coast of Yucatan. Inselecting these areas for early development, the authorities took intoaccount both the exceptional touristic attractions of the sites andthe fact that both are located in poorer regions of the country, wherethe social and economic impact of the projects would be relativelyenhanced. Both projects are approximately equal in size, each involv-ing the provision of about 3,500 hotel rooms over the next ten years

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plus a number of private residences. The Inter-American DevelopmentBank has recently approved a loan of US$ 21.5 million for the projectin Yucatan. In the future, further geographical diversification willbe required to tap other segments of the market (para. 2.17) and withthis in view the Bank has been asked for assistance to study tourismzones in the Baja California area and in the State of Oaxaca on thePacific coast.

2.16 Among other measures recently taken by the Federal Governmentto assist the growth of tourism have been:

(a) the gradual adoption of a positive aír transporta-tion policy, including the lowering of air faresand a more liberal policy on sir charter operations,which will have a significant impact on the growthof tourism;

(b) the liberalization of legislation governing the leaseof coastal land to foreignera;

(c) the channell-ng of some funda of large private finan-cial institutions into the export sector, includingthe tourism sector;

(d) the establishment of a Commission charged with pre-paring short-, medium- and longer-term programs forthe sector;

(e) the establishment of a Coomrission to study ways toensure easier acceso of visitors to IMexico, includ-;ng easy entry and lowering air fares.

2.17 The advantages of I.exicots tourism assets and favorable marketlocation are such that with vigorous development policies, foreignexchange earnings from tourism should at least double in the nextdecade. IWJith the growth of the travel market in the U.S., this shouldbe possible even if Mexico does no more than maintain ite share of theU.S. foreign travel market. Careful consideration ahould, however, begiven to expanding tourism for the middle income market in the U.S.Given the distances involved this would require the further develop-ment of incentive air fares and hotel prices subatantially below U.S.levels, particularly in the off-season. In this context developmentsin trans-Atlantic air fares will clearly affect Mexico's competitiveposition in the ahorter-term, but the country'e proximity to the U.S.and low domestic cost levels will be of greater importance in thelonger-term.

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3. THE PROJECT

A. Background

3.01 The little town of Zihuatanejo is situated about 180 km north-west of Acapulco on Mexicols Pacific coast. The sito of the town i8one of great natural beauty. It lles on a deep bay surrounded bygreen hIlla . Mountains rise inland and beyond the bay extensive palm-fringed beaches of fine sand stretch to the north and south, inter-apersed with rocky headlands. The climate i8 comparable to that ofAcapulco with day-time temperatures in the winter months averagingabout 250C (Table 6). In summer (the wet season) temperatures areslightly higher (28 0 C) and the humidity greater, but the climate ísstill comfortable. The coastal waters are extraordinarily clear andthe water warm throughout the year. All types of water sports arepossible and there is excellent fishing, both deep sea and along thecoast.

3.02 At present accese to Zihuatanejo i8 difficult. Its small air-strip is capable of taking only light planes, and, being surrounded byhills, it cannot be expanded (Map 2). There is no direct road toMexico City; the visitar must come by way of Acapulco and thence alongthe coastal highway. Though the coastal road is being reconstructed(with the assistance o£ a loan from the IDB), the distance i3 too greatto allow Zihuatanejo to be served from the Acapulco airport.

3.03 The town of Zihuatanejo itself, though set in beautiful surround-ings, i¡ undistinguished. Ita population is at present about 7,000.The standard of amenities and urban services provided aro either verylaw or notable for their absence. There are several small hotels, builton hills overlooking the bay, which have attracted an increasing flow ofvisitors in recent years.

3.04 The principal tourism zone would be located at Ixtapa about 5 kmfrom the town of Zihuatanejo, centered on a beach of fine white sand3 km in length with hilis and rocky promontories at either end (Map 1).The Master Plan for the area envisages a broad boulevard some 200 meterawide, behind and parallel to the beach, giving acceas to sites forhotels and condominiums. Pablic access to this beach would be providedat three points. Additional sites for hotels would be developed on thesmall bays and promontories adjoining the main beach. The nearby hillswould be developed for single family homes, many sites having extensiveviews of the ocean and surrounding mountains. Behind the boulevardthere would be a golf course and commercial center, and possibly at alater stage a convention center. Provision ie to be made ror a firestation, health cliníc and police station adjoining the comnercial cen-ter. A small marina for pleasure boats would be constructed at the

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north end of the main beach in the second stage. To provide space for ttleboulevard, golf course and commercial center, drainage, flood control andreclamation works would be needed in a swampy area behind the main beach.

3.05 The total area required for the project by Infiatur will amount to1,200 ha. It ís envisaged that over a twenty year period, this area couldbe developed to provide approximately 10,000 hotel rooms and 1,500 singlefamily residences. The development would be ataged. The first atage tobe implemented over 8-9 years envisages the provision of 3,500 hotel roorsand 500 residences together with ancillary facilities.

3.06 While the principal investment will be in Ixtapa and the airport,both for economic and for social reasona it is considered necessary tomake provision for the development of the town of Zihuatanejo. Itwould be politically and socially unacceptable to develop what will be,by local atandards, a luxury resort area while making no provision forthe existing domestic population. Furthermore, developmenit will alsobring a great increase in that population, for which provisíal nDLst be*,ade. With 3,500 hotel romas and 500 faTily residences, the directemployment created is expected to be not leas than 4.,5co. Experiencein Acapuleo suggests that with indirect employment effects and takingaccount of dependents of those in employment, the resulting populationle lI^l:zy to be not less than 50,000. These cannot be accommodated atIxtapa; the logical alternative is to make provision for housing thebulk of them at Zihuatanejo. It ís not intended, however, that Zihua-tanejo should serve only as a "dormitory" for workers at Ixtapa. Asatated above, tourism has already developed there in a small way, andthe natural beauty of Zihuatanejo bay with ite several attractivebeaches offers the potential of developing the area as a secondarytourist attraction, with 8mall hotels, Mexican-style restaurante,specialty stores and other facilities catering to the visitor. Thiswíll require an upgrading of the town with the enforcemnent of a well-conceived, if simple, urban plan and the provision of adequate infra-structures.

B. Description

3.07 The project consists of the following elemento:

(1) the infrastructures within the touríst zone atIxtapa comprising the boulevard and other etreeta,the land reclamation and drainage works, the elec-tric power distribution network and public light-ing, telephone connectiona, the water, sewerageand storm water drainage systems, beach works, thecommercial center and golf course;

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(2) the infrastructures at Zihuatanejo comprising theimprovement and expansion of principal streets,the electric power distribution network and publiclighting, and the provision of water, sewerage,and storm water drainage systems;

(3) a new international airport, located about 10 kmto the south-eaat of Zihuatanejo, designed tocater for non-stop flights from major U.S. cities;

(4) training programa for hotel personnel;

(5) feasibility studies for 2 new tourism zones andfor the possible expansion and upgrading of infra-structure facilities in Acapulco.

3.08 The airport will have a single runway of 2,500 a in length and60 m width with a parking apron for two DC8-63 or four Boeing 727-100aircraft. It will be equipped with night landing lights, and the nec-essary navigational alda, visual aids and communicatione equipment.Mhe terminal building which will serve domestic and internationalflights 18 designed to proce8s up to 330 arriving or departing paseen-gers in a peak hour. The location of the airport and the approach anddepartuure procedures will keep noise at Ixtapa and the town of Zihuata-r.ejo to a minimum. The airport is described more fully in Annex 3.hssurances were obtained during loan negotiations that the new airportwill be declared a co-terminal for international flights with Acapulco.This would allow airlines presently serving Acapulco to fly al8o toZ'ihuatanejo without having to negotiate additional traffic rights there.

.309 The principal road connection from the airport to Zihuatanejo andExtapa l8 part of the coastal highway now being reconstructed to astandard which will with some minor imprcvements be adequate to servethe estimated tourist traffic until 1985. This section of the coastalhighway i8 not included in the project. A road will be built givingacces fro= the coastal highway to the tourism zone. This road, which

-uill be included in the proJect, will be supplemented later by furtheraccess roads and should then be closed to truck traffic. During nego--,lations it was agreed that Infratur and the Bank would consult on theappropriate tining of construction of the new access roads.

3410 The source of electric power will be the national system of theFederal Power Com~ission. A new interconnection between Acapulco andgenerating plants on the Rio Balsas, about 80 km north-west of Zihuata-nejo, la now uxnder construction, and this interconnection will betapped to supply Zihuatanejo and the tourism zone. Included in theproject will be the neceasary substations and the distribution systemswithin the tourism zone and the town.

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3.11 The water, sewerage, and storm water drainage systems for thetourism zone at Ixtapa and for Zihutanejo will initially be separate.-Adequate water sources have been faund to supply both consumption cen-ters for the first 5 yeara. At the end of that time if the populationof Zihuatanejo grows as projected a new water source will be neededfor the totvm. This is likely to be the water source supplying Ixtapaand an interconnection crossing difficult terrain, would then be jus-tified. The topography precludes a linked seweragi/aystemo Under theclimatic cornditions prevailing stabilization ponds_ provide an effec-tive and cheaper solution than sewage treatment planta. These will belocated at sites away from the towçn and the tourism zone. The effluentwíll not be piped into the sea in order to avoid pollution of bathingbeaches and may ultimately be used for irrigation. At present Zihuata-nejo has no sewerage systerm and some pollution of the bay has resulted.The water supply, sewerage and storm drainage ccmponent ís describedmore fully in Annex 4.

C. Physical Planning

3.12 For the tourism zone at Ixtapa, land use has been atudied first,in terms of the likely pattern of activity of people in the resort; andsecond, in terms of space requirements and the needed physical facil-ities or improvements to the land to acconmodate these activities. Forthe town of Zihuatanejo, apecial attention was paid to the expectedatructure and functioning of the town's economy and to the special dis-tribution of urban functions -- its residential areas, its industrial,commercial and retail business districts, and the apaces set aside forpublic purposes and leisure-time activities. The land use plans forIxtapa and Zihuatanejo are based on carefully atudied estimates offuture land requirements for urban renewal and expansion, showing howdevelcpment in both areas should proceed to ensure the best possiblephysical environnent, the most economic use of land, md the properbalance from a cost-benefít point of view.

3.13 The proposed zoning regulationa for both Ixtapa and Zihuatanejoappear suitable instruments for guiding the development of privately-owned land in these areas. As is normal in the case of such regulatíonsthey deal with matters such as the use of land and buildings, the den-sity of population, the coverage of lots, the bulk of structures, etc.One of the main objectives of zoning in the Ixtapa area ja to preventthe development of the hotel districta in a haphazard and unplanned

1/ These are open basins 6 feet deep which utilize solar energy totreat sewage.

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manner as has occurred in other parte of Mexico and in other countries.The proposed zoning will not preclude high density buildinga but triesto combine this high density with the best use of the land and with thepreservation of the area's natural attractions. It was agreed duringloan negotiations that the adoption of a land use plan and zoning regu-lations for Ixtapa, satisfactory to the Bank, would be a condition ofeffectivenesa of the proposed loan. In the case of Zihuatanejo one ofthe main objectives is to prevent development of isolated residencesand hotels as well as the haphazard erection of primitive shelters bythe low income population likely to be attracted to the town, particu-larly on the steep hill sides where the provision of even rudimentaryinfrastructure would be prohibitively expensive.

Environmental Factors

3.14 The development of the coastal zone of Zihuatanejo for tourismactivities has raised several types of environmental problema: 'ípublichealth -- which was given major consideration in tema of maintenanceof sea water quality and marine life, treatnent of wastes and a mosquitocontrol program -- and the specific question of dealing with a largemangrove swamp in the Ixtapa area and with a mud-flat located in the cen-ter of the town of Zihuatanejo. Ecological studies of these aspects werecarried out by Infraturia consultants. Sewage pollution problems werecarefully analyzed and the solutions adopted (para. 3.11) will not harmthe great diversity of marine life of the area. The study of the man-grove at Ixtapa included a detailed analysis of ite animal and vegetableife, which is in fact relatively small due to the amount of tannin in

the water. A dike i8 planned to divide the mangrove into sectors offresh and salt water and to connect the latter with the ocean by a chan-nel. The mud-flat in Zihuatanejo contains polluted water because itrecelves sewage frcm the town, A careful control of sedimentation andpolluting effluents la necessary before opening the connection of themud-flat with the bay. During loan negotiations assurances were obtainedthat studies for the elinination of the mud-flat would be completed with-in one year of the date of the proposed loan and the Government and theBank would then agree Qn what action should be taken to this end, Assur-ances were also obtained that the Government would take action to preventthe pollution of the Ixtapa zone by industrial plants to be constructedin the future, and that atudies would be completed wíthin two years frcmthe date of the proposed loan of possible damage to the Ixtapa zone fromthe silting of the Ixtapa river. These atudies would be reviewed withthe Bank to determine what action, if any, should be taken.

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D. Cost Estimates

3.15 The detailed estimated costs and foreign exchange component ofthe various parta of the project are given in Tables 7-11 and are sum-marized below:

Mexican Pesos US Dollars % of(millions) (millions) Base-

LineLocal Total Local Foreign Total Costs

1. Ixtapa Tourism Area:Land Acquisition 21.0 21.0 1.68 1.68 4.6Civil Works 102.6 45.0 147.6 8.22 3.60 11.82 32.5Equipment 6.9 11.3 18.2 o.56 0.90 1.46 4.0Prof. Services 11.6 0.7 12.3 0.93 0.06 0.99 2.7

2. City of Zihuatanejo:Civil Workca 40.4 17.7 58.1 3.23 1.42 4.65 12.8Equipment 1.3 2.2 3.5 -0.10 0.18 0.28 0.8Prof. Services 7.3 7.3 0.58 o.58 1.6

3. International Airport:Land Acquisition 8.4 8.4 0.67 0.67 1.7Civil Works 63.7 28.0 91.7 5.09 2.25 7.34 20.2Equipment 5.7 9.2 14.9 0.45 0.74 1.19 3.3Prof. Services 13.2 13.2 1.06 1.06 2.9

4. Training & Feasibil-i-ty Studies: 5.5 8.2 13.7 0.44 0.66 1,10 3.0

5. Promotional x : 6.8 11.2 18.0 0.58 0.86 1.44 4.1

6. Project Admitistra.tion: 26.4 26.4 2.11 2.11 5.8

- - - - - - -~~- ,

Base-Line Costa 320.8 133,5 454.3 25.70 10.67 36.37 100.0

7. Contingencies:Price Increase(14.0%) 31.1 15.7 46.8 2.47 1.27 3.74 10.3

Physical Increase(14.5%) 32.4 16.1 48.5 2.57 1.32 3.89 10.7

TOTAL PROJECT COST 384-3 165.3 549.6 30.74 13.26 44.00

Interest and OtherCharges during Con-struction (a) 28.9 28.9 (a) 2.3 2.3

(a) No interest will be charged during construction on funda providedby the Federal Government.

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3.16 Construction costa have increased by 7% per year since 1962.While price inflation has been moderate, it seems prudent to asaumethat the increase will continue at about the same rate, and appropri-ate provision has been made for such increases in building and site-work costs during the construction period. In addition, an allowanceof 14.5% of the construction and sitework costs has been nade to coverphyaical contingencies, This la appropriate in view of the extent ofworks for which precise estimates must await the final desígn atage.The detail8 of the allowances provided for price increases and contin-gencies for other ccmponents of the project are shown in Table 12.The overall provi8ion for contingencies would amount to 21.0% of base-line costa or 17.3% of total project cost.

3.17 Moat building materials, electrical equipment and pipelinesrequired for the project are locally produced (some royaltie8 are paidfor manufacturíng foreign-patented produicts). Heavy equipment to beused in constructing roads and earthworka and the airport navigationand electronic aids would be imported. The foreign exchange componentof the total project cost would depend upon the outcome of interna-tional bidding. The size of major construction contracta would belarge enough to attract foreign bids. Assuming, however, that Mexicancontractors were to win the bida as ia likely, the foreign exchangecamponeqnt of the total project cost would be about 30% or US$ 13.3million.

Amount of the Loan

3.18 The proposed loan of US$ 22.0 nillion would cover the foreignexchange costa of the project, estimated at Us$ 13.3 mnillion equiva-lent, and would provide about US$ 8.7 m$llion equivalent for localcurrency financing, or approxímately 28% of local currency costa ofthe project.

Disbursements

3.19 The loan would be disbursed on the basis of appropriate percent-ages (up to 76%) of major civil worls cortracta, contracts for the pur-chase of equipment, and technical assistance. These percentages wouldbe adjusted as neceasary so that withdrawals would be distributed overthe project implementation period. A number of agencies will be respon-sible for implementing different elementa of the project (c.f. paras.3.21-3.27 below and Table 13). For ease of administration it is proposedthat the proceeds of the Bankl' loan should be disbursed for selected ele-ments of the total project, chosen with reference to their estimatedforeign exchange component and to the need to limit the number of agencieswith which the Bank has to deal. On this basis it ia proposed thatdisbursement should be for selected works to be carried out by Infra-tur at Ixtapa, by the Secretariat for Public Works at the airport, and

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by the Secretariat for Hydraulic Resources at Ixtapa and Zihuatanejo.In addition relatively small amounts would be disbursed for hoteltraining programs for which the Department of Tourism and the Secre-tariat for Educatimn would share responsibility, and for studies tobe carried out by Infratur and the Secretariat for the National Pat-rimony (Tables 8-11, 13). The estimated schedule of disbursements ofthe loan ia shown in Table 19. Applications for disbursement wouldbe channelled through the borrower, Nacional Financiera, S.A.

Procurement

3.20 Major civil works contracts and contracts for most equipmentwould be awarded under international competitive bidding. Itemswould be grouped to the extent practicable to encourage such competi-tive bidding. The proposed project is within the capacity of theMexican construction industry to implement, but it i expected thatforeign contractors would submit bids for the larger contracts. Thewater supply and sewerage elementa of the project and certain worksat Ixtapa and the airport (e.g. fencing, street signo, etc.) wouldinvolve a number of contracta which would be too small to attractforeign bids. Local contractors are capable of executing the workefficiently, and it ¡a therefore proposed that for these contractsnational campetitive bidding be required. The total value of suchcontracta is estimated at US$ 3.5 million equivalent. Contractototalling US$ 200,000 for the electric and telecommunicatíon linesfor the airport would be awxarded through direct negotiationa withthe companies providing these services. In evaluating bids, Mexicanmanufacturera would be allowed a preferential margin of 15% of theCIF costa of competing importe or the level of customa duties gen-erally applicable, whichever í8 the lower.

E. Execution

3.21 Infratur would be responsible for implementing all works withinthe t mrism zone at Ixtapa, asaisted by consultant architects and engi-neera, acceptable to the Bank. Technical designs and apecífications ofhydraulic worke, and of the water, aewerage and storm water drainagesystems would be subject to approval by the Secretariat for HydraulicResources, designa for the telephone system by the Secretariat of Com-municatimns and Transport and designs for the electric power system bythe Federal Power Commission. Infratur would cori,ract wlth the FederalPower Commiaslan to construct the main transformer station and transmis-sion line to Ixtapa. During loan negotiations aseurances were obtainedthat adequate power supplies would be provided at Ixtapa and Zihuatanejo.A project unit has already been established within Infratur for the can-structimn of the part of the project at Ixtapa. The project unit would be

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responsible, inter alia, for preparing and issuing tenders, evaluatingbids and awarding contracts. A full-time director of the project unithas been nominated, who ia acceptable to the Bank. The project unitwould also include engineers, an architect, a procurement officer,accountants and other staff. A field unit would be established atIxtapa for the direct supervision of the work in the tourism zone andto keep in touch with the progress of implementation at Zihuatanejo andat the airport.

3.22 The execution of the project within the tourism zone will dependupon Infratur's obtaining title to 1,050 ha. and the right to develop afurther 157 ha. of 'ejido" land (see para. 3.25). Infratur has so faracquired 700 ha. The acquisition of the remaining 350 ha. and of theright to develop the ejido land would be a condition of effectivenessof the proposed loan.

3.23 Within the urban area of Zihuatanejo, the Secretariat for Hydrau-lic Resources (SRH) will be responsible for the design and constructionof the water supply and sewerage systems. SRH will employ consultantsto design the systems, and will supervise construction directly. Itsstaff is qualified for this work. Final designa for the water supplyand sewerage systems would be approved by the Bank.

3.24 Responsibility for the construction of the electric power andstreet systems in Zihuatanejo, for environmental sanitation and possi-bly the implementation of the urban plan will be assumed by the NationalBank for Public Works (BNOSP). This bank is charged with financíng andexecuting a variety of infrastructures in urban areas using fundsprovided by the Federal Government. The bank has on ita staff engineersand other specialists capable of supervising the execution of the work.The designs of the electric power system would have to be approved bythe Federal Power Cominisasion. The contract between the Federal Govern-ment and the National Bank for Public Works would be approved by theBank.

3.25 The greater part of the area which uall become the township ofZihuatanejo is at present ,ejido", land, i.e., public land of which theoccupiera have the use but may not sell. Only the Federal Governnentmay change the use of such land. The execution of the project withinZihuatanejo requires that this ejido land be declared an urban area bythe Federal Governnent and that a suitable urban plan (plan regulador)be adopted after approval by the appropriate State and Federal author-ities. A request for the declaration of sai urban area has been submit-ted by the Governor of the State of Guerrero to the Federal Governmentand an urban plan with draft r'egulations, acceptable to the Bank, hasbeen submitted to the Federal authorities by Infratur. The declara-tion of the urban area and the promulgation of the urban plan would beconditions of effectiveness of the proposed loan.

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3.26. Responsibility for the design and construction of the new air-port would be that of the Secretariat for Public Works (SOP) assistedby various Federal Agencies responsible for caomunications and airnavigation (RAiBA), airport operations (ASA), and by the company whichsupplies aviation fuels (NACOA). SOP has designed and supervised theconstruction of a number of major airports in Mexico and is competentto execute the project. Final designs for the airport and the terminalbuilding would be approved by the Bank.

3.27 While direct responsibility for the execution of the principalcomponents of the project will rest with five agencies, a considerablenumber of other agencies at the Federal, State and local levels willalso be involved. Hence there will be complex problema of coordinatingthe execution on schedule of all parte of the project. Infratur willbe in charge of coordination at the operating level. To help in obtain-ing the full cooperation of SOP and SRH and other agencies, the Secre-tariat of the Presidency will have ultimate responsibility for coordina-tion. During negotiations, aseurances were obtained that SOP, SRH, andBNOSP would prepare in cooperation with Infratur a critical path planacceptable to the Bank for carrying out all parte of the project. Thepreparation of this critical path plan would be a condition of effective-nese of the proposed loan. Aseurances were aleo obtained that the crít-¡cal path plan would be reviewed by all parties concerned at least everyaix months and the resulte of such reviews would be promptly communicatedto the Bank.

F. Organization fLr Operation

3.28 Responsibility for operation and administration of the facil-ities to be provided at Ixtapa, Zihuatanejo and the airport winldevolve upon various agencies.

3.29 In the tourism zmne at Ixtapa, Infratur will be responsible formaintaining the public areas, for administering the public services andfor selling or leasing sites to private investors. Infratur plana ini-tially to lease shopa in the shopping center and beach facilities.These may subsequently be sold to private investors, as may the golfcourse when it beccmes a profitable operation. In the case of electric-ity and telephone services responsibility for operation and maintenancewill be assumed by the Federal Power Cormiesion and the private nationaltelephone company respectively. The source of supply of water to Ixtapawill be outside Infratur'e area of control. Thus tho Secretariat forHydraulic Resources will be responsible for the water system to theboundary of Infraturl' zone and will deliver water in bulk for retícula-tion by Infratur.

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3.30 The town of Zihuatanejo is at present so small and ite reveniuesso limited that ít is not able to provide public services or to under-take financial obligations in respect of services to be provided whenthe project la implemented. In view of this, the responsibilíty forproviding and maintaining most basic services will rest with varíousFederal authorities. Gradually, however, as the tawn develops in thelonger term the municipality will undertake certain responsibilities.

3.31 Within Zihuatanejo, responsibility for operating and maintainingthe electric power system will be assumed by the Federal Power Commis-sion. The operation and maintenance of the water supply and seweragesystems will be the responsibility of the Secretariat for HydraulicResources. The maintenance of streets and public aquares in Zihuatanejo,including trash collection and mosquito control, will be the responsibil-ity of the National Bank for Public Works under an agreement to be con-cluded with the Federal Goverrnent. This will be in accordance withestablished practice in iMxico.

3.32 The new airport at Zihuatanejo will be operated by the variousagencies responsible for operating other airports in Mexico. Theseare described in Annex 3.

4. SUPPORTING SERVICES

Housin

4.01 The project does not include housing for hotel workers in thetown of Zihuatanejo. Hotels situated outside towns and enuloying morethan 100 workera are required by recent legislation to provide housingfor their employees. How such housing can be financed is not yet clearbut varicus arrangemente are now under atudy. Hotel workers will, how-ever, be only a part of the population of Zihuatanejo. Many peoplewill be attracted there who will not work in hotels and will be toopoor to obtain housing loans under any existing schemes. Such peoplein other towns have built the simplest type of shelter which they tryto improve as circunstances permit. Federal authorities are unwillingto finance in Zihuatanejo public housing which they are unable toprovide elsewhere in Mexico, but with the provision of essential infra-atructure in the town and the enforcement of the urban plan, a betterframework for "self-help" housing will exist there than in many othertowns and cities of the country. To rely wholly on t'self-help," how-ever, la likely to prove inadequate in securing an urban developmentcompatible wíth the development of the tourism project, and assuranceswere obtained during negotiations that the Federal Government woulddevise means acceptable to the Bank of providing assistance for "self-help"' housing in Zihuatanejo,

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TrainijE

4.02 Training of hotel staff is largely provided as "in house" train-ing by hotel operators. EThile in the better established tourism cen-ters such as Mexico City and Acapulco, the standards of skill and serv-ice are satisfactory, in newer resort areas these standards are frequentlydeficient. Training facilities have been established by the Governmentand also by the trade unions in Mexico City and other centers, and a newhotel school is being established in Acapulco. Without further develop-ment these facilities will not be adequate to meet the very largeincrease in numbers of skilled personnel required in the next decade,when the projecta at Zihuatanejo and Yucatan alone will need between10,000-1,000 trained staff. tIhile private hoteliera will continue toprovide much of the necessary training, an expansion of public trainingfacilities will be needed. The proposed loan includes a small trainingcomponent for this purpose. The ILO has expressed its willingness tocooperate in working out with the responsible Mexican authorities appro-priate training programs and in recruiting teachers. During negotiationsassurances were obtained that the Mexican authorities will within oneyear after the proposed loan ia made submit a program to expand hoteltraining facilities on a basis acceptable to the Bank.

5. JUSTIFICATION

A. Market Demand

5.01 The main market for the new resort at Ixtapa-Zihuatanejo will bein the U.S., though it is estimated that there will aleo be considerable -nuumbers of IMexican visitors. Access for foreign visitora will be predomi-nantly by air, and experience at other resorts in Mexico including Aca-pulco and Puerto Vallarta, has demonstrated that to attract large numbersof foreign visitors by air requires the provision of direct flights fronmajor departure points in the U.S. A principal factor affecting the vol-ume of foreign vacation travel is the level of income. VarLous studiesof the likely growth of family income in the U.S. have been made, andbased on past trends there is every probability of a rapid increase inthe number of households with incomes in excess of US$ 10,000 (at con-stant prices). This number was 9 million in 1960 (at 1 prices), 17million in 1967 and is estimated at 34 million in 1980.1 1 The ratio

1/ Data used here is based on an appraisal of past trenda and representlow to moderate forecasts made by the National Industrial ConferenceBoard on data supplied by the U.S. Department of Comerce and theNational Planning Association.

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between Americano travelling abroad and those with family incomes exceeca-ing US$ 10,000 has been slowly rising, and on this basis the 5 milliontravell.ing abroad in 1967 (excluding Canada) ahould at least double by1980. In the light of experience in the past tlree years, however, sucha projection appears highly conservative. Already by 1970, almost 8 mil-lion Americano travelled abroad (Annex 1).

5.02 Infratur has based ita market projection for Ixtapa on the assump-tion that the new resort will be competing with Acapulco, Hawaii andselected Caribbean islanda for beach holiday traffic from the U.S. Extra-polating past growth trends to these several destinations, Infratur hasconcluded that the proposed development at Ixtapa would abaorb aoout 5pof the estimated traffic to all these destinationa in 1981. This number-- 420,000 -- would represent about 10% of the projected total visitorflow to Mexico in that year, assuming a growth rate in the next ten yearsof 7.1% annually (as compared with 11.5% in the past decade). These pro-jections are based on the assumption that Mexico will continue to maintainita ahare of the U.S. market for travel abroad. It would represent about20% of projected air arrivals, assuming a continued gradual rise in theproportion of foreign visitors arrivíng by sir. None of these ratiosappears overly optimistic from the side of demand. However, it la possi-ble that the build up of traffic to Ixtapa will be slower than forecastby Lifratur in view of the time required to complete the basic infrastruc-tures and build the first hotels.

5.03 While the majority of visitora to Acapulco have been foreigners inrecent yeara, very large numbers of Mexicans have also visited the resort.In 1969, the latter numbered 414,000 as compared with 466,000 foreign visí-tors. Infratur in ita projections for Ixtapa-Zihuatanejo has not forecaata similar ratio between domestic and foreign visitors, but has rather con-servatively estimated that domestic visitora would number about 20% oftotal tourists. As the majority of domestio visitora to Acapuleo travelby road, and as acceso to Zihuatanejo from Mbxico City by road will bevia Acapulco in the foreseeable future, it is likely that domestie traf-fic will continue to favor Acapulco. Hence a conservative projection ofdomestic visitora to Zihuatanejo seems justified.

5.04 At present foreign visitora arrivíng by air apend on average muchmore per day than visitora arriving by road. In 1969, the former sperit onaverage US$ 31 per day. With the expected rise in prices, estimated at 5%a year and ecual to the average increase in the past five years, averagedaily expenditures at Ixtapa by visitors are estimnated at US$ 41i5 in 1975when the first hotels are expected to be in operation. The breakdown ofthis amount ia calculated to be as follows:

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Item AxAmount (US$) Percentage (%)

Accomnmodation 14.44 34.8

Food and Beverage 11.29 27.2

Entertainnent 4.44 10.7

Local Transport 4.32 10.4

Purchases 4.98 12.0

Other 2.03 4.9

TOTAL 41.50 100.0

Source: Bank of' Mexico; figures adjusted by Bank.

Some of the tourists are likely to visit the area only, while othersare expected to visit it as well as other destinations in IMexico.The average length of stay ¡a asaumned to be 4 days, somewhat leasthan in Acapulco, but greater than in Puerto Vallarta.

B. Hotel Development

5.O5 The justification for providing infrastructure at Ixtapa andZihuatanejo is the prospect that private investora and hotel companieswill be prepared to buíld and operate hotels as envisaged by the spon-sors of the project. Infratur projecte a gradual build up of hotelcapacity and development of private houses as follows:

Ixtapa ZihuatanejoYear Hotel Rooms 0uces _Hotel Rooms

1 750 10 -

3 l,500 60 450

9 3,500 500 600-800

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5.06 While discussions with potential hotel developers and investorshave confirmed a 8trong interest in building at Ixtapa, no binding com-mitmente have been made by private investore. This could not be expectedat the present stage of the project's development where specific hotelSites cannot yet be delineated, and work on implementing the project hasnot yet begun. Neverthelees, the prospects for hotel investment are con-sidered highly favorable. Investment in hotels has yielded attractivereturns in the past. Mhile most hotels are Mlexican-owned, the largeU.S. hotel companies including Hilton, Sheraton, Western International,Holiday Innrs and Mariott have entered the market either primarily asoperators or with sizeable lnvestments. The operating conditions forhigher category hotels have been favorable with prices aligned withprices in the U.S., high average occupancies and relatively low operat-ing costs, particularly for labor. These favorable conditions arelikely to continue, though large additions to capacity could haveadverse effects on occupancy levels in the short-term.

5.07 Besides the favorable environment for investment, the generalconcept of the project is expected to be attractíve to investors.Prospective hotel developers will find a planned area with all infra-structures provmded, with adequaté zoning and controla over neighbor-ing developments and with common amenities provided such as the golfcourse, shopping center and at a later etage marina and conventionfacilities. By comparison with existing resort areas, where infra-structure i9 often inadequate and zoning controls weak or lacking, theseadvantages, common to both the Zihuatanejo and Yucatan projects, areexpected to be powerful attractions.

5.08 Nevertheless, the risks involved in starting a new resort aregreater than in expanding one already established. There is an un$er-standable reluctance among hoteliers to be alone in a new resort.Y'Once several hotels are built attracting others is easier. For thisreason it seems appropriate to envisage special arrangements, if suchare needed to get the firat hotels established. Hence, during nego-tiations the Federal Government agreed that it would, if necessary,take steps, including the provision of finance, to ensure that 750hotel rooms, costing an average approximately US$ 20,000 per room,would be built and operating not later than 1976.

C. Economic Justification

Econamic Return

5.09 The net benefits to the econemy will consist of expendituresmade by visitore in the Zihuatanejo-Ixtapa area, less the cost of

1/ There are special category hotels or holiday villages -- e.g., thoseof the Club Mediterranee -- where this is not so.

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operating all the facilities to be provided. The relevant investmentis the capital cost of the infrastructure project itself, plus theinvestment costa of hotels in Ixtapa and Zihuatanejo. The additionalinvestments that are likely to take place in local transport, enter-tainnent and shopping facilities have also been taken into account,although they are estinated to be relatively smalU. Although properlychargeable to the program of investments, revenues and costa associatedwith private residences and of international and domestic air travelhave not been taken into account, except those directly related to theairport.

5.10 With an estimated economic life of the project of 25 years, theinternal economic return on the program of investments would be 13.1%.This calculatiun, however, does not take into consideration the realeccnomic costa of labor. Since the construction and operation of theproject is expected to employ considerable numbera of relativelyunskilled workers from the surrounding region who are currently under-employed or unemployed, the evaluation of the investment calla for someof the labor inputs to be priced below the current market wage-rates.Accordingly, unskilled labor was priced at 70% below current marketwage-rates. On this basis the internal economic return would be 19.4%and may be considered the Ilbest estimate.11 The rate of return wouldbe sensitive to changes in occupancy levels and delays in the openingof hotels. With varying asaumptiona about occupancy levela and open-ing dates, and with shadow pricing of unskilled labor the internaleconomic return would range from 15.6% to almsot 20.8%.

5.11 Improved infrastructure facilities in the town of Zihuatanejoconstitute an important benefit to the local population. The aboveanalysis has not taken into account these benefits, because of thedifficulties of separating that part of the investment which willbenefit local population frca investment that la needed for the devel-opment of tourism, both in Ixtapa and Zihuatanejo. It ¡a realistic toasaume, however, that ovaer half the investmenta in infrastructure inZihuatanejo would benefit the local population rather than the tourismsector. On this basis the economic rate of return on the tourísm pro-gram as a whole would increase to more than 20%. The economic justifi-cation of the project la discussed more fully in Annex 5.

Employment and Income Effecta

5.12 The proposed projectts area of influence ia expected to extendto 32 t"municipiosl l/ in the states of Michoacan and Guerrero, with atotal population of about 675,000. These Umuniciplos' are amongst

1/ A small administrative district.

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the poorest aresa in Mexico with per capita GDP about half the nationalaverage and with high rates of unemployment and under-employment.Between 1960 and 1970, it ia estimated that while total population inthli zone increased by 37%, the economically active population remainedatatic at 160,000 and in relation to total population decreased from32.1% to 23,.6 in 1970. When in full operation it is estimated thatthe project will provide einployment directly and indirectly for a mini-mium of 26,000 persona and will increase the value of output in the areaof influence by about 30% as compared with 1970.

Direct Balance of Paymenta_Impact

5.13 The proposed project i8 expected to increase gross foreignexchange earnings by about US$ 7 milllon in 1975 when the first hotelsopon up and by TU$ 62 million when the project becomes fully opera-tional in 1986. This compares with US$ 575 million earned by tourismin Mexico in 1970. Becaume of the high proportion of foreign touriítsthat are expected to visit the area and the low import content of oper-ating costs, the estimated net foreign exchange earnings of the projectare relatively high. At present, only 10% of every tourist dollarearned goes out of the country to pay for importa, technical services,interest, dividenda, etc. With regard to the program of investmenta inthe Ixtapa-Zihuatanejo zone, the proportion is likely to be somewhathigher, since half the cost of infrastructure would be financed fromthe proposed loan. On this basis» net foreign exchange earnings wouldamount to US$ 36 million in 1980 and US$ 53 million in 1986, which com-pares with the estimated foreign exchange component of the proposedproject of US$ 13 million, including price contingencies, and theforeign exchange component of superstructure of about US$ 25 million.

6. FINANCIAL ASFECTS

6.01 The total estimated financlal requirements of the project areUS$ 44 million equivalent. It ís proposed that the Bankls loan shouldcover about half of total project costa. The balance would be providedby the Federal Government. Assurances were obtained during negotia-tiona that the Federal Government would meet any cost overruns, andwould make arrangements satisfactory to the Bank to provide capitalfunds for the project as needed.

6.02 As the project consists of different infrastructure elements,some revenue earning and othera not, no overall financial calculationwould be meaningful. Nevertheless, financial projections have beenmade for the operation of the tourism zone at Ixtapa, for the water andsewerage project outside the tourism zone and for the airport. Thesefinancial projections are shown in Tables 1 and 2 of Annex 2, Table 2of Annex 3, and Table 3 of Annex 4. The charges levied by the Federal

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Power Commission both at Ixtapa and at Zihuatanejo will be the standardcharges for the different classes of service applied throughout Ma1oxico,

6.03 Infratur 1s a development agency; its primary purpose i8 not tomake profits (Annex 2). It is expected however to recover the invest-mente made, and the Federal Governnelit expects it to repay with inter-est monies advanced. Its operating policies, e.g., on financial objec-tives, on the acquisition and sale of land, on land prices, on annualcharges to hotel investors, have not yet been formalized. Understand-ings on such policies are desirable and aseurances were obtained duringnegotiations that a policy statement would be prepared after consulta-tion with the Bank within one year of the signing of the proposed loan,

6.04 The financial projectiona for Ixtapa cover the investment expendi-tures on developing the site at Ixtapa, revenues fram the sale and leaseof lots, the shopping center and the golf course, revenues from the saleof services and expenses of operating and maintaining such services.

6.05 Revenues from the sale of lots and from selvice charges have beenestimated on the basis of a price of US$ 20 per m for hotel sites(US$ 81,000 per acre) and US$ 6-8 per mZ for houwe sites (US$ 4,50o-6,00oper lot) in 1972 rising by about 9% annually thereafter, and of amualcharges of US$ 65 equivalent per hotel room and US$ 271 per house lot.These values are substantially below canparable prices in Acapulco andare designed as incentive prices for investors. The resulting revenueprojections are conservative. Experience may show that higher pricescan be charged once the resort area le established. Revenues will alsobe obtained from rents of shops and the golf course, though Infraturhopes to sell these facilities, as mentioned above (para. 3.29).

6.06 The costs of operating the services which Infratur will provideat Ixtapa -- maintenance of roads and street8, environxental sanitation,street lighting, water and sewerage, conmuniLty services (fire protection,police, clinic) etc. -- are substantial and with the exception of waterand sewerage are not closely geared to the gradual increase in hotelrooas and private houses. In ita projections Infratur expects to incurdeficits on operating account until about the seventh year of operationa.As the proposed annual charge per hotel room le very low, however, a sub-stantial increase seems feasible. A charge of US$ 200 would stillrepresent a very emall fraction of total hotel operating expenses. Onthis basís a small surplus on operating account would be achieved in thefifth year of operationa, and the financial rate of return to Infraturwould be 5.3% as caapared with 1.6% on the basis of the charges proposedby Infratur. The proposed charges which will be applied frcm 1975 arenecessarily very tentative, but during negotiatior.s aseurances wereobtairned that the basis for fixing annual charges would be agreed withInfratur within one year of the signing of the proposed loan.

-24 -

6.07 All Infraturla capítal fund8, whether obtained from the FederalGovernment or from the proposed Bank loan would be repayable over anextended period of 20-25 yeara. Infratur would pay 8% on funds pro-vided by the Federal Goverrment and interest on the proceeds of theproposed Bank loan plus a commission, expected to be 0.25%, charged byNacional Financiera. Infratur expecta to sell land to developera out-right or with deferred payments or in exchange for equity shares or tolease sites. Hence revenues from the sale or lease of land cannot beprojected with any precision and the Federal Government has agreed thatInfratur ahould not be held to a fixed amortizat4on achedule. The Fed-eral Government would make itself responsible for repaying the proposedBank loan (para. 13 and 14 of Annex 2).

6.08 Though the direct financial return on the investment in the proj-ect at Ixtapa ia modest, the Government ¡a expected to receive substan-tial tax revenues from hotela, beginning in the third year of operations.Over the period to 1991, total revenues from profits tax on hotels atIxtapa (at a rate of 450) are estimated at US$ 44 million equivalent.In addition, the Government will receive revenues from individual incometaxes, import duties and sales tax which cannot be estíated with anYprecision. Taking account only of the profits tax on hotels, and rnkingno adjustmente in Infratur'a projectiona of net operating revenues andland sales, the internal financial rate of return to Governnent on theinvestment at Ixtapa would be 10.7%.

6.09 The water and sewerage undertaking which will serve Zihuatanejo,supply bulk water to the tourism zone and provide treatment for the sew-age from Ixtapa, will charge water rates which will discriminate betweenthe two principal categories of ccmsumer8 -- visitors and residenta. Asthe bulk of the permanent population of Zihuatanejo will be poor, theproposed water rate for residente in the to'n would be about half therate charged to hotels in Zihuatanejo and to hotels and villas at Ixtapa.On the basis of the rates proposed, projected revenues would, threeyears after the ccmpletion of the project, cover operating and mainte-nance costa and depreciation of the water supply and sewerage systems.Subsequently, they would also provide a surplus for financing a reason-able portion of future expansion of such systems. The maintenance of arate structure adequate to achieve these objectives was agreed duringloan negotiations. Agreement on the schedule of initial charges forwater and sewerage services would be a condition of effectiveneas of theproposed loan. At Ixtapa, the rates currently under consideration wouldcover the coat of purchased water together with costs of operating andmaintaining the water and sewerage systems in the tourism zone after thefifth year of operation. The capital investnent in the water, sewerageand 8torm drainage systems at Ixtapa would be recovered in the prices ofland sold to hotel developera and house owners.

6.10 Based on the projected flow of traffic through the airport overthe period 1974-1990 and applying the standard landing fees and othercharges levied at other airports in Mexico, revenues are expected to besufficient to cover costa of administration, operation and maintenancefrcm 1977 but will only meet capital charges from 1983. The totalinvestment ia expected to be recovered by the early 19901s, and theinternal financial rate of return would be about 9%.

6.11 Accounts and financial statements in a form acceptable to theBank would be kept by Infratur both in respect to the tourism zone atIxtapa and for all ita operations, by SRH in respect of the water andsewerage undertaking serving Ixtapa and Zihuatanejo and by SOP and ASAin respect of the new airport. Audited financial statements in a formacceptable to the Bank would be presented to the Bank within fourmonths of the close of the financial year.

7. RECOMENDATIONS

7.01 During loan negotiations, ornitnents werc obtainod that

(i) the new airport at Zihuatanejo would be declareda co-terminal for international air services withthe airport at Acapulco (para. 3.08);

(ii) Infratur would consult with the Bank in order toagree on the timing of construction of additionalacceso roads to the tourism zone at Ixtapa, andat such time the first acceas road included in theproject would be closed to truck traffic (para.3.09);

(iii) atudies satisfactory to the Bank for the elimina-tion of the mud-flat at Zihuatanejo would be com-pleted within one year of the date of the proposedloan and agreement would then be reached betweenthe Government and the Bank on the action to betaken to this end (para. 3.14);

(iv) the Governnent would take action to prevent the pol-lution of the Ixtapa zone by industrial planta to beconstructed in the future (para. 3.14);

(v) the Government would ensure that atudies would becompleted within two years of the poesible damageto the Ixtapa zone resulting from the silting ofthe Ixtapa river. These studies would be reviewedwith the Bank to determine what action, if any,should be taken (para. 3.14¿);

- 26 -

(vi) conaulting architects and engineers, acceptable tothe Bank, would be appointed as needed to completethe design of the project (para. 3.21);

(vii) a project unit would be operated within Infratur forthe execution of the project at Ixtapa under theauthority of a full-time Project Director assistedby engineers, an architect, a procurement officer,accountants and other staff, as needed (para. 3.21);

(viii) adequate power supplies would be provided at Ixtapaand Zihuatanejo (para. 3.21);

(ix) final designs for the airport and terminal building,the water supply and sewerage systems, and the shop-ping center and other common facilities at Ixtapawould be submitted for approval to the Bank (paras.3.23 and 3.26);

(x) the contract between the Federal Government and theNational Bank for Public Works for the execution andmaintenance of works in Zihuatanejo would be submit-ted to the Bank for ite approval (paras. 3.24);

(xi) the Federal Government would cause SOP, SBH and BNOSPto prepare in cooperation with Infratur a criticalpath plan acceptable to the Bank for carrying out allparts of the project. The Governnent would coordinatethe progreso of the project according to the criticalpath plan which would be reviewed at least every sixmonths, and the results of such reviews would bepromptly communicated to the Bank (para. 3.27);

(xií) the Federal Governnent would devise meana acceptableto the Bank for providing assistance for self-helphousing in Zihuatanejo (para. 4.01);

(xiií) a program to provide hotel training facilities on abasis acceptable to the Bank to meet the likelydemand for trained personnel at Ixtapa would be sub-mitted within one year of the signing of the pro-posed loan :zd ccrried out (para 4.02);

(xiv) the Federal Government would take such steps as maybe needed to ensure that 750 hotel rooms will bebuilt and operating at Ixtapa by 1976 (para. 5.08);

(xv) the Federal Government would make arrangements satia-factory to the Bank to provide funds for carrying outtlhe project, as needed (para. 6.01);

- 27 -

(xvi) Infratur would prepare and adopt a statement of oper-ating policies in consultation with the Bank withinone year of the signing of the proposed loan (para.6.03);

(xvii) the basis for determining annual levies on hoteis andhouse sites made by Infratur would be agreed with theBank within one year of the signing of the proposedloan (para. 6.06);

(xviií) charges levied for water at Zihuatanejo would beadjusted as necessary to caver the operating and main-tenance costa and depreciation of the water supply andsewerage systems and provide a surplus for financing areasonable portion of the future expansion of such aya-tema (para. 6.09);

7.02 Conditiona of effectiveziesa of the proposed loan would be:

(i) the adoption of the land use plan and zoning regula-tions for Ixtapa (para. 3.13);

(i) the appointment of a full-time director to the projectunit established within Infratur for the execution ofthe project at Ixtapa and the coordination at the work-ing level of the other elemento of the project (para.3.21);

(iii) the completion of acquisition of land or rights to landby Infratur at Ixtapa (para. 3.22);

(iv) the declaration of the urban area and the adoption ofthe urban plan for Zihuatanejo (para. 3.25);

(v) the preparation of the critical path plan for the execu-tion of the project (para. 3.27).

(vi) agreement on the schedule of ínitial charges for waterand sewerage (para. 6.09).

7.03 With the indicated assurances, the proposed project provides asuitable basis for a Bank loan of US$ 22 million for a term of 25 yearsincluding a 5-year grace period.

- 28 -

STATISTICAL APPENDIX

Table No.

Capital Required to Create One Job Opportunity 1Growth of Foreign and Domestic Visitors to Mexicoo, 1960-1970 2Foreign Visitors to Mexico by Nationality, 1966-1969 3Seasonality in Visitor Traffic to Mexico, 1960-1969 4Distribution of Acoamnodation According to Type and Category,

1961-1970 5Metereological Cmnditiona of Itnportant Tourist Destinations

in the Pacific and the Caribbean 6Breakdown of Total Project Costa 7Cost of Infrastructures and Superetructures - Ixtapa

Tourism Area 8Cost of Infrastructures - City of Zihuatanejo 9Cost of Infrastructures and Superetructures - Zihuatanejo

International Airport 10Training and Feasibility Studies 11Contingency Allowances 12Estimated Annual Expenditures by Agencies 13Estimated Schedule of Expenditures of Infratur by Quarters

and Years 14Estimated Schedule of Expenditures of the Secretariat of

Hydraulíc Resources (SRH) by Quartera and Years 15Estimated Schedule of Expenditures of the Natioíal Bank

of Publio Works and Servioes (BNOSP) by Quartersand Years 16

Estimated Schedule of Expenditures of the Secretariatof Public Works (SOP) by Quarters and Years 17

Estimated Schedule of Expenditures by Quartera andYears - Training and Feasibility Studies 18

Estimated Sohedule of Disbursements 19Estimated Sehedule of Disbursements by Quartera and Yeara 20Estimated Schedule of Disbursements by Quarters and Yeara -

Ixtapa Touriam Area 21Estimated Schedule of Disbursements by Quartera and Years -

City of Zihuatanejo 22Estimated Schedule of Disbursements by Quarters and Years -

Zihuatanejo International Airport 23Estimated Schedule of Disbursements by Quarters and Years -

Training and Feasibility Studies 24Estimated Annual Financial Requiremente of Agencíes 25

TABLE 1

MEXICO

Capital Reguired to Create One Job %pjortunity

(at 1960 Prices)

Pesos

Agriculture 8,668Mining 74,650Petroleum 237,162Food & Beverages 59,162Textiles 21,718Wood Products 40, 307Chemical Products 65,452Non-Metal Products 50,410Metal Products 130,538Manufacture of Machinery 37,737Construction 15,662Electric Power 359,683Commerce 48,552Transport 120,026Services, including Tourism 24,346

Source: Banco de Mexico, S.A., Departamento de EstudiosEconomicos.

October 1971

TABLE 2

MEXICO: ZIHUATANEJO TOURISM PROJECT

GROWTH OF FQREIGN AND DCWESTIJ VISITORS TO MEXImO. 1960 - 1970 -/

Year International Index Domestio - Index Total IndexVisitors (000) Visitors (000) Visitors (000)

1960 690.4 100 69.9 100 760.3 100

1961 717.3 104 84.6 121 801.9 105

1962 833.9 121 106.4 152 94o.3 124

1963 945.7 137 117.2 168 1,062.9 140

1964 1,077.6 156 135.9 194 1,213.5 160

1965 1,199.5 174 151.9 217 1,351.4 178

1966 1,328.5 192 169.7 243 1,498.2 197

1967 1,445.1 209 183.5 263 1,628.6 214

1968 1,664.5 241 215.4 308 1,879.9 -247

1969 1,817.8 263 246.8 353 2,064.7 272

1970 3/ 1,984.3 287 261.2 374 2,245.5 295

1/ Excludes border visitor traffic2/ Mexicans residing abroad.2/ Preliminary estimates

Souroe: Department of Tourism

Octobcr 1971

TABLE 3

MEXICO: ZIHUATANEJO TOURISM PROJECT

FOREIGN VISITORS TO MEXICO BY NATIONALITY, 1964-1969(Percentages)

Nationality 1964 1965 1966 1967 1968 1969

U. S. 87.5 87.4 86.9 86.6 86.3 87.4

Ganadian 2.5 2.9 2.8 3.2 3.2 3.2

Central American 3.4 3.2 3.1 2.8 2.8 2.8

Cuba and the Antilles 0.1 0.1 0.1 0.2 0.2 0.2

European 3.4 3.6 4.0 4.2 4.7 3.9

South American 2.4 2.0 2.4 2.5 2.0 2.0

Others 0.7 0.8 0.7 0.5 0.8 0.7

Total 100.0 100.0 100.0 100.0 100.0 100.0

Source: Departaent of Tourism

October 1971

TABLE 4

MEXIGO: ZIHUATANEJO TOURISM PROJECT

SEASONALITY IN VISITOR TRAFFIC TO MEXIGO, 1960 - 1969

(In Thousands)

Month 1960 1965 1969-/ Percent of Total

January 58.2 105.8 144.3 7.0

February 62.0 105.3 154.3 7.4

March 52.4 91.2 171.3 7.6

April 59.5 106.5 160.2 7.6

May 53.1 93.7 147.2 6.5

June 73.5 123.0 195.5 9.6

July 90.2 153.6 213.1 10.9

August 80.0 143.2 235.6 11.0

September 50.7 89.5 110.6 6.4

October 47.9 91.1 162.0 7.1

November 52.0 100.3 171.6 7.7

December 80.8 148.1 231.4 11.2

Total 760.3 1,351.3 2,097.8 100.0

1/ Preliminary estimate

Source: Department of Tourism

October 1971

TABIE 5

MEXICO: ZIHUATANEJO TOURISM PROJECT

DISTRIBUTION OF ACCDOMODATION IN MEXICO ACCORDING TO TYPS AND CATEGORY, 1961 - 1970 1/

- 1 9 6 1 - 6 1)65 - - 1y o -

Type of Number of Percent Number of Percent Number of Percent Number of Percent Number of Percent Number of Percent

Accoinmodation Establishments of Total Rooms 1 Suites of Total Establishments of Total Roons & Suites of Total Establishments of Total hooms se Suites of Total

Apartments 177 5.3 2,185 2.4 228 6.6 2,336 2.4 340 7.1 4,178 3.2

Guest Houses 699 21.1 7,800 8.6 866 25.1 10,203 10.6 1,381 29.0 16,019 12.12/

Motels 195 5.9 4,240 4.7 371 10.7 8,205 8.5 510 10.7 12,127 9.1

Hotels 2,243 67.7 76,666 84.3 1,987 57.6 75,909 78.5 2,534 53.2 100,377 75.6

Total 3,314 100.0 90,891 100.0 3,452 100.0 96,653 100.0 4,765 100.0 132,701 100.0

Category

"AA" 121 3.7 6,267 6.9 233 6.8 10,994 11.4 398 8.3 21,008 15.8

"A" 35b 10.7 14,713 16.2 739 21.4 26,o47 26.9 711 14.9 23,069 17.4

Sub-Total 475 14.4 20,980 23.1 972 28.2 37,041 38.3 1,109 23.2 44,077 33.2

"tB" 419 12.6 13,278 14.6 478 13.8 14,170 14.7 714 15.0 22,3y2 16.9

Sub-Total 896 27.0 34,258 37.7 1,450 42.0 51,211 53.0 1,823 3d.2 66,469 50.1

",C"l 382 11.5 10,564 11.6 347 10.1 8,862 9.2 846 17.d 23,526 17.7

"D" 942 28.4 26,541 29.2 846 24.5 20,814 21.5 1,218 25.6 27,118 20.4

`E` 1,096 33.1 19,528 21.5 809 23.4 15,766 16.3 87d 18.6 15,588 11.8

Total 3,314 100.0 90,891 100.0 3,452 100.0 96,653 100.0 4,765 100.0 132,701 100.0

1/ Surveys ending May 31 of each year.2/ Sometines defined as motels and sometimes as tourist camps.

Source: Departnent of Tourism

September 1971

TABLE, 6

MEXIGO - ZIHUATANEJO TOURISM PROJECT

METEREOLOGICAL IJNDITIONS OF IHPORTANT TOURIST DESTINATIONS

IN THE PACIFIC AND THE CARIBBEAN

Average Number of TemperaturesTourist Annual Rainy CentigradesDestinations Rainfall Das maximum minimum mean

(D11s118) ( )m

Zihuatanejo 1,285 61 32.7 20.6 26.7

Acapuleo 1,470 66 31.6 23.7 27.7

Honolulu 556 99 27.7 21.0 24.4

Hilo 3,470 284 27.0 18.6 22.8

San Juan 1,524 209 28.2 22.9 25.6

Bahamae 1,178 114 28.3 21.1 24.7

Sources: Direccion de Meteorologia, Secretaria de Agricultura y Ganaderia.Weather Bureau, U.S. Department of Commerce.

September 1971

TABLE 7

MEXICO: ZIHUATANEJO TOURISM PROJECT

BREAKMM OF TOTAL PROJECT COST

Cost figumes in thousands of Mexdcan pesos (M$OO0)

Rate of Exchange: M$12.49 * US$1 .00

Cost of Cost of Cost of Cost of Cost of Cost of Cost of Cost of Cost ofLand Siteworks Construction Squipment Professional Physical Facilities Promotional Pro ject Techn.ical TOTAL PROJECT COST

Project Items Acquisition Se-rviCes Expenses Administration AssistanceM$ (000) M$ (000) M$ (000) M$ (000) M$ (000) M$ (000) US$ (000) M$ (000) M$ (000) M$ (000) M$ (000) UsS (000)

I. Ixtapa Tourism Area 21,000 101,249 46,361 18,200 12,308 199,118 15,942.2

18,000 19,591 236,709 18,951.9

II. City of Zihuatanejo n.a. 44,404 13,652 3,536 7,292 68,884 5,515.1 n.a. 6,777 75,661 6,057.7

III. Zihuatanejo International Airport 8,350 10,137 81,549 14,918 13,202 128,156 10,260.7 n.a. n.a. 128,156 10,260.7

IV. Training and Feasibility Studies 13,739 13,739 1,100.0

Total Gost Before Contingeneies 29,350 155,790 141,562 36,654 32,802 396,158 31,718.0 18,000 26,368 13,739 454,265 36,370.3

Price Increase 21,811 19,818 5,132 46,761 3,743.9

Physical Increase 22,638 20,570 5,326 48,534 3,885.8

Total Contingencies 44,L449 40,388 10,1458 95,295 7,629.7

GRAND TOTAL 29,35° 200,239 181,950 477,112 32,802 491,1453 39,3347.7 18,000 26,368 13,739 549,560 44 ,000.0

Foreign Exohange Component

Peroentage 30.5% 30.5% 62.0% 2.1% 29.8% 29.8% 62..4% 60.0% 30.2% 30.2%

Total 61,o61 55,486 29,219 688 146,454 11,725.7 11,235 8,244 165,933 13,258.8

October 1971

TABLE 8

HEXIOO ZIHUATA8JO TOtURI5N PROECT2

I. IXTAPA TOUI. k8E

OST OF INFPALTR800TUR8 AÁND SUPS5TRUCTURE3

Total TOTA.L COST Fóroip.Code Total Sitewor8B Oonatr-atoton Equipaent TOEhange !yar 1 Iear 2 rear 3L:tter (m 2) (40OO (000002 M3;( . us$ (000> 2 - 268(000) m .N00O)

A. Prolíinairy Worlot 1/ n.a. 2,261 200 2,1461 197.0 858 2,461B. Tupopray B 2ildtg / 323 3,202 1,517 5,0142 °3. 7 1,137 5,ó42e. Rarth 1i7ring n.a. 17,54i4 i7754, 1 ,404.6 5,789 7,018 10,526B. Roa&B.elar2d n.a. 26,859 26,859 2,150.4 8,863 8,784 12,397 5,678E. k&doaulo WookaA/ n.a. 990 19,381 20,371 1,631.0 5,781 8,380 7,418 4,573p. Seq&e Troat.ent 2/ n.a. 8,601 1,650 1,496 11,747 940.5 3,409 2,926 8,8210. Stoe iWater Draegae S. n.a. 5,790 5,790 463.6 1,716 2,842 2,9488. Wat.or Suppl.y Sy>tat 2 t 925 7,665 465 1,567 9,697 776.4. 3,120 6,525 3,172I. ~ wibrxnentalt mitation -1 n.a. 2,782 3,781% 6,566 525.7 2,224 3,671 886 2,009J. aeetr1cty 2z n.a. 7,911 12,093 2,400 22,IJ04 1,793.8 9,020 2,350 13,702 6,352K. Teonami.ationas / 300 5,260 600 1 230 7,090 567.7 2,460 3,821 3,269L. Golf Couree md Club House 1,795 8,293 2,752 4,104 15,149 1,212.9 5,680 12,315 2,83424. Oer.cial Conter 2,786 658 3,227 30 3,915 313.4 595 1,513 2,402N1. Co.aurnity Servtaes 1,082 839 1,300 1,872 14,011 321.1 2,515 4,0110. 3treets of tie Residential DUstrict n.a. 4,143 4,113 331.7 511 788 3,355P. Beach Developmnt 400 1,330 1,691 3,021 241.9 303 596 2,425

Sub-Total 101,249 46,361 18,20J 165,610 13,275.41 53,931 37,706 76,255 51,849

contingencia.,:Prico Inazeo (7.0% ann.uaaly) 23,213 1,858.5 7,557Fhy*st4al Inereaee (14.5%) 21.0914 1,929.1 7,844Total ContingenIeas 17 ,37 3,787.6 15,101

Pro:rsaional 8eervicaa 2/.Dens.i ( 6 4.5% ) 7,107 569.0 688Supervlaion ( 6 4.0%) 5,201 416.41.Total Profaesional Serqioes 12,308 985.4 688

Land AcquIaition / 21,000 1,681.3ProJect Unlit, Mexaco CIty 2 14, 08 1,185.6Projact Onit, Ixtp 1/ 11,560 925.5PrzaDtlonal Expeneoa T/ 18,000 1,441.2 11,235

G02NO TOTAL 290,793 23,282.0 81,305

1/ Oot to bo finanead by ths L1a

2/ Onludes sone aork to be imple-ented hy other gorerent,t gencies

Deotnber 1971

TABLE 9

MSXICO: ZIHUATANEJO TOURISM PROJECT

II. CITY OF ZIHUATANEJO

COST OF INFRASTRUCTURES

Total TOTAL COST ForeignCode Area Siteworks Conatruction Equipment Exchange Year 1 Year 2 Year 3

Letter ( 2) M$ M$m (000) M$ (000) USm (000) M$ (000)OO(° M$ (000) m$ (00)

A. Sevferage System 2,874 9,304 4,366 1,745 15,415 1,234.2 3,509 4,494 10,921B. Envirozmenta Sanitation 1/ n.a. 800 800 64.O 427 290 70 440

C. Water Supply Szstem n.a. 4,065 2,935 991 7,991 639.8 1,664 614 3,752 3,625D. Electricity 1/ n.a. 5,781 5,781 462.9 2,023 3,470 2,311E. Stoz, Water Drainage System 10,763 10,763 B61.7 3,552 1,182 4,604 4,977F. Streets 1/ 35,320 20,272 570 20,842 1,668.7 7,503 873 5,338 14,631

Sub-Total 4,4014 13,652 3,536 61,592 4,931.3 18,678 2,959 21,728 36,905

Conti-ngencies:Price Inercase (7.0% anually) 8,623 690.4 2,615

Physical Inciease (14.5%) 8,950 716.5 2,714

Total Contingencies 17,573 1,406.9 5,329

Professional Services -/:Design ( ± 4.5% ) 2,772 221.9Supervision ( + 4.0% ) 2,464 197.3Master Plan Preparation 2,056 164.7

Total Professional Services 7,292 583.9

GRAND TOTAL 86,457 6,922.1 24,007

1/ Not to be financed by the Loan

October 1971

TABLE 1o

14EXICO: ZIHUATANEJO TOURIEX PROJECT

III. ZIHUkTANIJO INTRRNATIONA1L AIRFORT

GOST OF INFRASTRUCTURES AND SUPERSTRUCTURES

Ceode Area Siteworks Construction Equipjent TOTA COST Xcege Year 1 Year 2 Year 3Letter (m 2) M$ (000) m$ (°00) M$ s (000) m$ (21 M$ ) M$ (OOO)

A. Manxvering Area and Access Road 469,369 7,952 62,639 5,129 75,720 6,062.5 28,833 9,689 40,917 25,114

B. Buildinga 29,491 1,684 14,425 3,530 19,639 1,572.4 6,794 11,258 8,381

0. Visual Aida and Electricity n.a. 128 1,148 2,174 3,450 276.2 1,369 1,500 1,950

D. Fuwl Storage and Supply n.a. 193 1,736 1,866 3,795 303.8 1,352 3,000 795E. NBav Ada d C~omunications n.a. 180 1,601 2,219 4,000 320.2 2,403 1,480 2,520

Sub-Total 10,137 81,549 14,918 106,604 8,535.1 40,751 9,689 58,155 38,760

Contingencies:Pries Increase (7.0% annually) 14,925 1,195.0 5,705

Phaical Increase (14.5%) 15,490 1,240.2 5,921

Total Contingencies 30,415 2,435.2 11,626

Professional Seraie Y1/tDesign ( ± 5.0% ) 5,281 42Z.8Sup.rvision ( ± 7.4% ) 7,921 634.2

Total Profeasional Services 13,202 1,057.0

Land ACquisition 1/ 8,350 668.5

ORUID TOTAL 158,571 12,695.8 52,377

1/ Not to be finmiced by the Loan

October 1971

TABLE 1 1

MEXICO: ZIHUATANEJO TOURISM FROJECT

IV. TRAININO AND FEASIBILITY STUDIES

TOTAL COST ForeignCodo Exchange Year 1 Year 2 Year 3

Letter M$ (000) USlt 000) M M ( K$ (000)

A. Technical Training 6,245 500-0 3,747 3,122 3,123B. Feasibility Studies (2) 4,996 400.0 2,998 2,498 2,498C. Tecluinal Asaistaice 2,49B 200.0 1,499 1,249 1,249

GRAND TOTAL 13,739 1,100.0 8,244 3,747 6,869 3,123

October 1971

TABLE 1

MEXICO: ZIHUATANEJO TOURISM PROJECT

CONTINGEDCY ALLWANCFS

Land Acauisition Siteworks Construction Equipment Professional Proeotional Prject TechnicalSeWrveesEpese Acninietrat~ion A7T¡~¡istce ~ TOTALLocal Foreign Local Poreign Local Foreign Local Foreígn Local Foreign Local Foreign Loca' Forr L oc_i

Allovances forPhysical Increase n.a. 14.5% 114.5% 14.5% n.a. n.a. n.a. n.a.

Allowances forPrice Increase n.a. 14.0% 114,0% 14.0% n.a. n.a. n.a. n.a.

Total Project Coet BeforeContineencies 2.35 8.67 3.80 7.87 3.46 1.12 1.82 2.57 o.o6 0.5h 0.90 2.11 0.144 0.66 36.37

Allowances forWi sic al mrease n.a. 1.26 0.55 1.15 0.50 0.17 0.26 n.a. n.a. n.a. n.a. 3.89

Sub-Total 2.35 9.93 4.35 9.02 3.96 1.29 2.08 2.57 0.06 0.54 0.90 2.11 0.1o1. 0.66 40.26

Allowances forPrice Increase(US$millions) n.a. 1.21 0.54 1.11 o.48 0.14 0.26 n.a. n.a. n.a. n.a. 3.74

TOTAL, IncludingContingencies 2.35 11.14 4.89 10.13 4.44 1.43 2.34 2.57 o.o6 0.54 0.90 2.11 0.44 0.66 44.00

October 1971

TABLE 13

MEXICO: ZIHUATANEJO TOURISM PROJECT

ESTINATED ANNUAL EXPENDITURES BY AGENGIES

YEAR I YEAR II YEAR III TOTAL

M$ (000) Us$ (000) M$ (000) us$ (000) M$ (000) us$ (000) M$ (000) us$ (o)

INFRATUR

Ixtapa Tourian Area 62,904.6 5,036.4 115,886.0 9,278.3 80,238.5 6,424.2 259,029.1 20,738.9

Feasibility Studies 2,498.0 200.0 2,493.0 200.0 4,996. 1400,0

Total 65,402.6 5,236.4 118,384.0 9,478.3 80,238.5 6,424.2 264,025.1 21,138.9

SEORETARY OF RIYDRAULIC RESOURCES (SIff)

Ixtapa Touriem Area 7,160.5 573.3 3,603.4 288.5 10,763.9 861.8

City of Zihuatanejo 2,685.3 215.0 18,568.9 1,486.7 27,831.5 2,228.3 49,o85.7 3,930.0

Total 2,685.3 215.0 25,729.4 2,060.0 31,434.9 2,516.8 59,849.6 4,791.8

NATIONAL BANK FOR PUOBLIO WORYS AND SERVICES (BNOSP)

City of Zihuatanejo 1,261.5 101.0 12,345.1 988.4 23,764.7 1,902.7 37,371.3 2,992.1

Total 1,261.5 101.0 12,345.1 988.4 23,764.7 1,902.7 37,371.3 2,992.1

S3 ARY OF PUBLIO WOllRKS (SOP)

Zihuatanejo International Airport 1/ 13,654.1 1,093.2 81,948.1 6,561.1 54,618.8 4,373.0 150,221.0 12,027.3

Total 13,654.1 1,093.2 81,9J48.1 6,561.1 54,618.8 4,373.0 150,221.0 12,027.3

DE1PAMENT (F IWRSM

Technical Training 3,122.5 250.0 3,122.5 250.0 6,245.0 500.0

Total 3,122.5 250.0 3,122.5 250.0 6,245.0 500.0

SECRETAR OF NATIONAL PATRIMONY (SPN)

Technical Asasitance (Acapulco) 1,249.0 100.0 1,249.0 100.0 2,498.0 200.0

Total 1,249.0 100.0 1,249.0 100.0 2,498.0 200.0

GOANO TOTAL 84,252.5 6,745.6 242,778.1 19,437.8 193,179.4 15,466.7 520,210.0 41,650.1

1/ Excluding land acquisition

October 1971

TAsLZ 14

MEXICO: ZIHUATANEJO TOURISM PROJECT

ESTDUITED SCHEOULE OF EYPENDITURES OF DWRATUR BY QUARTBRS ANDIF.AYRS

(In Thousand US Dollar5)

CodeLetter Quarter 1 Quarter 2 Quarter 3 Quarter 4 YEAR I Quarter 5 Quarter 6 Quarter 7 Quarter 8 YBAR II Quarter 9 Quarter 10 Quarter 11 Quarter 12 YlAR III TOTAL

I. IXTAPA TOURISMN AREA 1/

A. Preliminary Works 7.8 147.4 89.2 244-4 244.4B. Tenporary Buildings 40.4 245.7 215.2 501.3 501.3C. Lrth Moving 40.3 687.3 72. 409.1 318.2 181.9 181.9 1.091.1 1,818.7D. Road-Boulevard 88.5 351.1 526.5 966.1 204.6 340.9 340.9 477.4 1.363.8 329.1 295.5 62 2,954.5E. ñydraulio Works 97.7 329.7 494.5 921.g 326.4 244.8 163.2 81.6 8166 93.0 93.0 93.0 224.1 2,241.0F. Sewage Treatnent 17.0 20.7 111.1 111.1 259.9 205.2 227.5 227.5 102.2 762.4 1,022.3G. Storm Water Drainage System 29.5 71.2 99.7 114.0 314. 104.8 91.7 65.6 64.1 326.2 640.6H. Water Supply System 31.1 73.4 102.8 117.5 324.8 44.6 39.0 27.9 48.5 160.0 484.8J. Enviromental Saitation 10.5 395.6 406.1 24.5 24.5 24.5 24.5 1.0 59.9 52.4 37.4 72 6 22 726.4J. Electricity 42.6 215.9 258.5 301.5 452.2 452.2 301.5 1 507.4 181 0 158.3 113.1 246.5 me 2,464.8X. Telecommunicatlona 42.3 84.5 126.8 169.1 4227 113.3 99.2 70.8 78.4 361.7 784.4L. Golf Course and Club House 272.5 408.7 408.7 272.5 1,362.4 102.1 43.8 167.6 1,675.9M. C«a~ rcial Center 16.7 33.5 50.2 66.9 16T.j 89.0 77.8 55.6 43.3 267 433.0N. Cowmunity Services 119.8 159.7 119.8 44.4 443.7 443.7O. Streeta, Residential Distri, 31.7 47.5 9.2 73.9 118.3 103.5 41.7 337. 416.6P. Beach Developnent 26.4 39.5 6 58.7 94.0 82.2 33.4 268.3 334.2

Project Unit, Mexico City 98.8 98.8 98.8 98.8 395.2 98.8 98.8 98.8 98.8 395.2 98.8 98.8 98.8 98.8 395.2 1,185.6ProJect Unit, Ixtapa 34.7 48.6 55.6 92.5 27 92.5 92.6 992.5 2.5 37d 92.5 92.5 83.3 55.6 3 925.5

Promotional Expenses 14.4 7.9 180.8 180.8 383.9 189.5 188.0 131.3 131.2 640.0 123.4 123.4 123.4 47.1 417.3 1,441.2

TOTAL-'/ 475.7 548.4 1,320.4 2,691.9 5,036.4 2,056.0 2,452.0 2,442.8 2,327.5 9.278.3 1,889.1 1,864.9 1,469.5 1,200.7 6,424.2 20,738-91'

IV. TRAD¡Mf AND STUDIES

B. Feasibility Studies 30.0 40.0 60.0 70.0 200.0 70.0 60.0 40.0 30.0 2Q00 400.0

GRAND TOTAL 505.7 588.4 1,380.4 2,761.9 5.236.4 2,126.0 2,512.0 2,482.8 2,357.5 9.478.3 1,889.1 1,864.9 1,469.5 1,200.7 6.424.2 21,138.9

1/ Excludtng land acquisition

October 1971

TABLE 1 5

MlEXICO: ZIHUATANEJO TOURISM PROJECT

ESTINATED SCHEWEE OF EXPENDITURES OF TNE SECRETARIAT OF NIDRAULIC RESOURCES (SRI) BY QUJRTERS UND YE9S

(In Thousand US Dollars)

CodeLetter Ql Q2 Q3 Q4 YEAR I Q5 Q6 17 Q8 YEAR II Q9 Q10 Ql1 Q12 YEAR III TOTAL

I. IXTAPA TOURISM AREA

F. Sewage Treatmnent 37.7 56.5 56.5 37.7 188.4 36.4 36.0 29.0 101.4 289.8

H. Water Supply System 77.0 115.4 115.5 77.0 384,9 52.0 46.7 31.2 57.2 187.1 572.0

TOTAL 114.7 171.9 172.0 114.7 573.3 88.4 82.7 60.2 57.2 288.5 861.8

II. CITY OF ZIHUATANEJo

A. Sewerage System 124.1 173.7 198.5 426.3 259.0 414.3 362.6 170.2 1 206.1 1,702.4

C. Water Supply System 27.6 41.4 69.0 42.2 63.3 147.5 168.7 421.7 127.0 111.2 79.4 89.8 l 898.1

E. Stonm Water Drainage 36.5 51.1 58.4 146.0 85.3 113.7 142.2 227.5 - 192.7 168.6 120.5 133.0 614.b 1329.5

TOTAL 36.5 78.7 99.8 215.0 127.5 301.1 463.4 594.7 1,486.7 578.7 694.1 562.5 393.0 2,228.3 3,930.0

GRAND TOTAL 36.5 78.7 99.8 215.0 242.2 473.0 635.4 709.4 2,060.0 667.1 776.8 622.7 450.2 2,516.8 4,791.8

October 1971

TABLE 16

MEICO: ZIHUATANEJO TOURISM PROJECT

ESTIM&TED 8CHEDJLE OF EXPNDITURES OF THE NATIONAL BANK OF PUBLIC IDRKS AND SERVIES (BNOSP)BY QUARTERS AND YEARS

(In Thousand US Dollars)

CodeLetter Ql Q2 Q3 Q4 YAR I Q5 Q6 Q7 Q8 YEAR Il Q9 Q1o Qll Q12 YEAR III TOTAL

II. CITY OF ZIHUATANEJO

B. Enviromrental Sanitation 1.5 1.8 3.3 0.2 0.2 0.2 0.2 0.8 0.7 1.4 1.5 1.3 4.9 9.0D. Electrloity 39.0 156.0 195.0 39T 90.9 77.9 52.D 39.0 125.o 6149.8F. Streeta 39.1 58.6 97.7 89.6 119.5 1149.14 239.1 :6 498.8 573.3 332.6 233.3 1,i5 2,333.3

GRANO TOTAL 40.6 60.4 101.0 89.8 158.7 305.6 1434.3 988.4 590.4 652.6 386.1 273.6 1,902.7 2,992.1

October 1971

TABLE 1?

MEXICO: ZIHUATANSJO TOUBISN PROJECT

ESTIfATED SCOREDLE OF EXPNDrITURES OF TSE SEORSARIrAT OF PURIJO WIPXS (sJpl RY oITA14V Aun VR&gS

(In Thousand US Dollars)

CodeLetter Ql Q2 Q3 Q4 YEAR I Q5 Q6 Q7 Q

8YEARII Q9 Qi1 Qíl Q12 YEA1 III TOTAL

III. ZD!UATANEJO AIRPORI T/

A. Maneuvering Areas & Boad 437.3 655.9 1.093. 692.5 923.3 1,384.9 1,615.7 4 616.4 791.6 692.7 494.8 854.3 2j83 8,543.0B. Buildings 127.0 228.6 365.8 548.7 1_270.1 289.6 253.4 t81.0 221.6 945.6 2,215.7C. Visual Aids & Electricity 42.3 59.2 67.7 162 72.4 63.4 45.3 38.9 220.0 389.2D Fuel Storage & Supply 50.8 71.9 100.7 115.0 338.4 46.9 42.8 8 142a.1E. Nav Aids & Cuunications 25.0 35.5 49.7 56.8 i3L.0 83.7 95.7 59.8 45.1 2.3 451.3

TOTAL 1/ 437.3 655.9 1,093.2 895.3 1,301.6 1,960.3 2,403.9 6,561.1 1,284.2 1,105.2 823.7 1,159.9 4,373.0 12,027.3 1/

1/ Exoluding land acquisition

October 1971

TABLE 18

MEXICO: ZIHUATAMEJO TOURISM PROJECT

TRAININO AID FEASIBILITI STUDIES

ESTIM&T1D SCHE11,LE OF DISBURSEIIENTS BY QUARTERS AID YEARS

(In Thousand US Dullars)

CodoLetter Q Q2 Q Q IEAII 9 Q10 QQl Q12 YEAR III TOTAL

DEPAR~IT CF TOURISI

IV. TRAINII AND STUDIES

A. Technical Training 25.0 56.3 78.7 90.0 250.0 90.0 78.7 56.3 25.0 250.0 500.0

SECRTA OF NATIONAL PATRDMONY (SPN)

IV. TRAIND<G AND STUDIES

C. Technical Asaistance(Acapuleo Renewal) 25.0 35.0 40.0 100.0 40.0 35.0 25.0 100.0 200.0

October 1971

TABLFE 19,'

MEXICO: ZIHUATANEJO TOURISM PROJECT

ESTDIATED SCHEDULE OF DISBURSEMENTS

Cumulative DisbursementIBRD Fiscal Year and Quarter at End of Quarter

US$ Millions

1972-1973March 31, 1972June 30, 1972 -September 30, 1972 0.7December 31, 1972 0.8

1973-1974March 31, 1973 2.6June 30, 1973 4.4September 30, 1973 6.6December 31, 1973 9.3

1974-1975March 31, 1974 11.8June 30, 1974 14.5September 30, 1974 17.4December 31, 1974 19.9

1975~1976March 31, 1975 22.0

October 1971

TABLE 20

HEXICO: ZIHUATANEJO TOURISH PROJECT

ESTIMATED SCHEDULE OF DISBURS4E2NTS BY QUARTERS AND YE&RS 1/

(In Thousand US Dollars)

Ql Q2 q3 Q4 DEAR I Q5 Q6 Q7 Q8 YEA II Q9 QiO Ql Q12 YEA. III Q13(TR 1n) TOTAL

I. IXTAPA TOURISM AREA 408.8 a 408.8 1,297.7 1,067.0 1,218.4 1,192.3 4,775.4 1,210.5 1,068.2 1,150.4 1,054.7 4,4B3.8 911.1 10,579.1

II. CITY OF ZIHUATANEOJ 54.3 54.3 57.6 79.1 179.7 294.3 610.7 316.7 402.1 619.1 536.7 1,874.6 292.8 2,832.4

III. INTERATI0FAL AIRORT 8.6 238.7 247.3 391.6 540.6 731.5 1,058.0 2,721.7 964.0 1,147.3 1,098.7 800.8 4,010.8 926.7 7,906.5

IV. TRAINING AND STUDIES 18.6 40.3 58.9 117.8 68.2 83.7 93.8 89.1 334.8 74.4 55.8 48.8 34.9 213.9 15.5 682.0

TOTAL 18.6 48.9 760.7 828.2 1,815.1 1,770.4 2,223.4 2,633.7 8,442.6 2,565.6 2,673.4 2,917.0 2,427.1 10,583.1 2,146.1 22,000.0

1/ Eixcludin and acqait&ion

October 1971

TABLE 21

MEXCO: ZfINUATANEJO TOURISM PROJECT

1. IXTAPA TOURISM AREA

ESTIMATED SCEULE OF DISBURSEMENTS BY QUARTERS AbD YEARS

(In Thousand US Dollars)

CodeLetter Q1 Q2 Q3YE;AR I 5 Q Q. Q YEARu II Q2 Q10) Ql Q2U YEAR TTT 013(YRIV) TOTAL

C. Farth Moving, Stuks. 539.6 253.6 197.3 112.8 1.103.3 124.1 124.1 1,227.4

D. Road-Blvd., Stmks. 204.4 U" 276.0 126.9 177.3 177.3 757.5 296.0 204.0 219.9 194.0 913.9 1,675.8

E. H3rdraulic Works, Stwks. 27.7 Lr41.6 63

Constr. 176.7 176.7 265.0 202.4 151.8 101.2 720.1 50.6 57-7 57.7 57.7 235.1 1,355 9

F. Sevage Treatment, Stwks. 33.9 33.9 60.3 12. 52.4 98.7 126.5 135.9 -m 601.6

Constr. 11.6 32.3 36.9 23.1 . 11.6 115.5

Equipm. 14.0 43.6 £. 28.3 t9.8 7 104.7

G. Storm W. Drain3ge, Stwks. 18.3 44.1 61.8 1.2= 70.7 65.0 56.9 40.7 233.3 405.0

H. Water Supply, Stwks. 67.0 106.1 108.5 21 80.8 26.8 32.6 25.6 .8 88. 536.3

Constr. 4.9 4 9 13.0 9.8 4.9 27.7 32.6

Equipm. 11.0 21.9 32.9 26.8 23.3 15.6 11.0 76. 109.6

I. Envirorm. Sanitation, Stwks. 15.2 15.2 15.2 15.2 6 15.2 15.2 51.7 51.7 133.8 194.6

Equipn. 21.9 17.3 116.7 13I9 108.8 264.7

J. Electricit;, Stwks. 133.9 96.5 62.1 54.5 347.0 55.3 60.4 90.7 206.4 553.4

Constr. 126.8 111.0 79.3 317.1 82.3 109.5 124.5 121.8 I T 90.8 846.o

LEquir. 26.4 44.1 66.2 136 3. 34.2 170.9

L. Golf Course & C.H., Stwks. 116.0 185.7 162.5 464.2 23.2 34.9 58-0 580.3

Constr. 23.1 34.7 57.B 46.2 34.7 20.8 13.8 11.5 19.2 192.5

Equipm. 67.2 75.2 43.9 37.6 2 63.2 287.1

M. CQnaeercial Ctr., Stwks 10.4 13.1 8.8 32. 4.6 9.2 138 46.1

Constr. 28.6 42.8 71. 46.1 39.5 32.9 13.3 22.6 225.8

Equipm. 1.0 1.1 2.1 2.1

N. Coni5y Serv., Stwks. 21.1 18.4 13.2 52.7 1Q 58.7

Constr. 20.5 32.7 28.7 81.9 E 91.0

Equipm. 40.8 61.3 10í6! 28 130.9

0. Streets of the R.D., Stwke. 19.6 19.6 60.3 72.4 60.3 48.3 24.3 290 289.9

P. Beach Developt., Stwks. 16.4 1:3 26.2 22.9 16.4 -U 11.2 93.1

Corntr. 33.9 38.8 24.3 97-° 21.3 118.3

TOTAL 408.8 408.8 1,297.7 1,067.0 1,218.4 1,192.3 4,775.4 1,210.5 1,068.2 1,150.4 1,054.7 4.483- 911.1 10,579.1

October 1971

TABLE 22

MEXICO: ZIHUATANUO TOURISM PliJECT

II. CITY OF ZIHUATANEJO

ESTIMATED SCHEDULE OF DISBURSENENTS BY QUARTERS AND YEARS

(In Thousand US Dollara)

Ltter Ql Q2 Q3 Q4 YEAR I Q5 Q6 Q7 Q8 RÁ II Q9 QiO Ql1 Q12 IIARII Q13(YR IV) TOTAL

A. Severage Systea, Stwks. 70.0 76.9 146.9 81.1 109.6 175.4 153.5 519.6 74.1 740.6Canstr. 37.7 37.7 38.6 54.8 87.6 76.7 252.1 347.5

29.5 47.3 41.3 20. 138.9C. Water Supply, Stlks. 21.4 23.0 23.5 38.0 105.9 42. 4 32.9 52.6 46.o 173.2 49.4 329.2

Constr. 3.2 15.7 46.5 6ç4 51.9 33.9 29.7 21.2 l36.7 35.7 237.8Equipu. 7.0 7. 10.3 15.7 25.2 22.0 73.2 80.2

E. Stora Drainage, Stwks. 54.3 54.3 36.2 52.9 70.5 88.2 2 4 92.4 125.7 201.3 l76.0 9_ 956.2

TOTAL 54.3 54.3 57.6 79.1 179.7 294.3 610.7 316.7 402.1 619.1 536.7 1,874.6 292.8 2,832.4

October 1971

TABLE 23

MEXICO: ZIHUJATANEJO TOURISP PROJECT

III. ZIHUATANEJO INTERNATIONAL AIRPORI

ESTIM&TED SCHEDULE OF DISBURSWENTS BY QUARTERS AND YEARS

(In Thousand US Dollars)

Code _1i Q I TLetter Ql Q2 Q3 Q4 YEAR I Q5 Q6 Q7 Q8 YIARII Q9 Q10 Q11 Q12 IZARIII Q13(YRIV) TOTAL

A. Maneuv. & Road, Stwks. 8.6 16.1 24. 20.7 34.0 47.6 54.4 156.7 56.4 70.3 112.5 98.4 337. 70.8 589.8Oonstr. 222.6 íÉ 370.9 370.9 469.2 667.3 1.378. 508.5 591.6 517.6 369.7 1 4 557.5 4,645.8Equipo . 32.7 32.7 52.3 99.9 87.4 62.5 302.1 45.7 38J.5

B. Buildinigs, Stwcs. 18.6 26.0 29.7 30.3 5.2 15.0 5 124.8

Oonstr. 7B4.3 1040 118.9 297.2 133.2 178.8 204.4 127.8 6 128.4 1,069.8

Zqui4n. 36.5 36-5 59.8 5. 5 44.2 31.6 186.1 261.9

C. V.Aids & Electricity, Stwks. 8.2 ? 1.3 1.3 9-5Conotr. 15.7 33.5 liE.2 11.0 8.8 5.9 2.7 10.2 85.1Zqni. 18.7 30.8 49.3 43.1 71419 193 161.2

D. Fuel Storage, Stj¿ke. 9.5 2.9 12.4 2.0 ±90 14.4

Constr. 19.2 37.8 44.9 101.9 11.4 15.4 26.8 12d.7Equ5pu1 12.0 12.0 19.1 22.7 36.2 31.7 123.71 16.6 138.3

E. Nav Ai.ds & Canmn., Etulce. 4.6 6.9 11.S 1.9 1.9 13.4

Constr. 9.5 13.2 13.9 36.6 19.4 29.1 19.4 Z 14.2 113.7

Eqtip_ 14.2 1=.2 38.7 44.2 27.7 15.1 12j7 21i 164.6

TOTAL 8.6 238.7 247.3 391.6 540.6 731.5 1,058.0 2,721.7 964.0 1,147.3 1,098.7 800.8 4,010.8 926.7 7,906.5

October 1971

TABLE 24

MEXIGO: ZfAI.TASEJO TOURISM P}OJECT

IV. TRAINflG AND FEABIBILITY STUDIES

ESTIMATED SCHEDUIE OF DISBURS8X82<TS BY QUARTERS AED YEARS

(In 'Thousand,JS Dollras)

CodeLetter Ql Q2 Q3 Q4 R 1 Q5 Q6 Q7 Q8 YEAR II Q9 Q10 Qll Q12 YEAR III Q13 (YR IV) TOTAL

A. Technical Training 15.5 34.9 48

.8

99.2 55.ó 55.8 48.8 34.9 1 15.5 310.0B. Feasibility Studies 18.6 24.8 37.2 4 43.4 43.4 37.2 24.8 148.8 18.6 248.0C. Technical Assistance 15.5 21.7 37.2 24.8 24.8 21.7 15.5 m 124.0

TOTAL 18.6 40.3 58.9 117.8 68.2 83.7 93.B B9.1 334.8 74.4 55.8 48.8 34.9 213. 682.0

October 1971

40Ico 0ZIHUIT7ANEJO TOIURISM PR0J0flT

r T1 D ANUlAL FIIWCOIAL RHQUIHEI21S or ACiBOlS

1BM I YRAR II _ 1BAR III

TOTAL 8886K 11 FISCAL PillO TOTAL 98ANK LAN FISCAL PURD3 SOTAL ~1K LOA1 1

XtO-O t'0 obs' tisoC oo os ~USVOOO ISO800us UJioOO 'lNs! 000 o$¡~ 00 twni US'O SOF l''O '0 cO

xtxpt Tori.nl1.. A8 1/ 62^901..6 5,036.b 21,31L.2 1,706.5 b1,590.4 3,329.9 115,886.0 9,278.3 55,159.6 4,416.3 60,726.b 4.862.0 80,238.5 6,4.24. 50,016.2 4.00.5 30,222.3 2.1b9.7

'iiiillt5 y S¡di« 2.b98.0 200.0 1.58.8 12b.0 9b9.2 76.0 2.b9h.0 200.0 1.548.8 12b.0 9849.2 76.0 - -

To"l 65,b02.6 5.236.4 22.h63.0 l.h30.5 42,539.6 3.b05.9 llb.3b.0 i.u78.3 56,10h.b 4.54.03 61.675.6 4,93b.0 60,236.5 6.b2b.2 50,016.2 4.004 5 0222.3 2.

qW,,ToRT or HIO AIULIC U30w7 u (SHR)

lx To.lM Af. . - - - - 7,160.5 573.3 3,396.0 271.9 3,76h.5 301.b 1,603.h 28h.5 2,247.0 179.9 1,356.4 108.6

00ty or 2ibhlinrijo 2.685.3 215.0 950.5 76.1 1.734.b 138.9 18.568.9 1.1466.3 6,526.5 522.7 12.040.4 964.0 7.,831.5 2.228.3 12.b58.6 97f5 15.372.7 1.230.b

ToIla 2.685.3 215.0 95M.5 76.i 1.73h.6 138.9 25,729.4. 2,060.0 9.92b.5 791.6 15,80i.9 1.265.4 11,434.9 2.516.B 1.705.8 1.177.b 16.729.1 1.339.4

N*TION$L 8ATK POR PUb8LIOC UKS AbD S RVICBS (iSP)

eity of Ziheoojo 1.261.5 101.0 417.1 35.0 814.4 61.2 12.3bS.1 9bb.4 b.335.3 317.1 8,009.0 641.3 23,761.7 1.9M2.7 10,656.5 853.2 13,10b.2 1.0&69.

T_t_l 1.261.5 121.0 1.7.1 35.b 811.1. 65.2 12,345.1 988.1. 4,335.3 347.1 6,009.8 641.3 ?3,76b.7 1902.7 10.6s6.5 653.2 13,108.2 1.0b9.5

MH6T2R6 O Pl8LIC 6ORKS (SOP)

'~t.-J.Iiirlatir Airp>rt 1/ 13,65b.1 1.093.2 7,979.9 63B.9 5,674.2 454.3 ol,948.1 6.501.1 41,143.3 3.V4.1 40,804.c 3,267.0 54,618.8 4,373.0 49,629.0 3.973.5 L,S9 98 399-5

T)ooi o13,654.1 1.093.2 7.979.9 63B.9 5,674.2 454.3 b 1,948.1 6,%51.1 41,113.3 3,294.1 40,b.5 3.267.0 5S,618.8 4.373.0 b9.629.0?? 3.973.5 b,Sb9.8 399.5

2*¶P~T O? T704R2I2

Twsh.lsal Tfrdning - 3,122.5 250.0 1,936.0 155.0 1,186.5 95.0 1,172.5 250.0 1,936.0 155.0 1.186.5 95.0

T7. - -- - __ - 3,122.5 250.0 1,936.0 155.0 1.186.5 95.0 3,172.5 250.0 1.936.0 155.0 1.186.5 7

M-!s-RT OF lATl0ll8AL PATRII~Y (SF1)

TOChoIo.1 AZsUstOce (Ac80íl.0) 1.249.0 100.0 774.4 62.0 474.6 38.0 1,2bs9.D 100.0 771.4 62.0 4174.6 38.0 _ _ . -

7o00. 1.249.0 100.0 774.4 62.0 474.6 36.0 1,249.0 100.0 774.4 62.0 1.74.6 38.0 -

DIUNO TOTAL 84.252.5 6,745.6 33.011.9 2.J43.3 51.237.6 4.102.3 242,77b.1 19,437.b 114.821.9 9.193.1 127.955.2 10.244.7 lS3,179.b 15,466.7 126,943.5 10.163.6 66.235.9 5.303.1

VI 8601odig lind oqi0.Ii-or.

(b t-obr 1971

Annex 1Page 1

inPPRAISAL OF THEI ZIHUATAUJO TOURISM PROJECT

i9IRKErT 1A

Introduction

1. Mexico, with its numerous attractions for tha visitorS is in anadvantageous position to participate in a rapidly expanding travelmarket. The main market for the new resort at Ixtapa-Zihuatanajo will bethe U.S., though it is estimated that there will also be a fair numberof Mexican vísitors. Specifically, the proposed project ia expected tocompete particularly with Acapulco, Hawaii and selected Caribbean desti-nationa for beach holiday traffic from the U.S. and elsewhere.

(a) The U.S. Travel Market

2. The U.S. ia olie of the rmost dyn c travel generating markets inthe world. According to a recently released Department of Commerce cen3us,about 108 million people in 38 million houaeholds in the U.S. took at leastone trip in 1967. Altogether, 183 million trips were taken (consisting ofone or more persons from the housahold) or 361 million person-trips. Thiscompares with 275 million person-trips in 1963, a 319 increase. Moreimportant is the increase in long-distance travel. Tripa over 500 miles,for example, grew from 10 of the total in '963 to about 171 in 1967, muchof the increase being by comercial air transport. Of significance forthe Zihuatanejo project is the fact that about half of the total person-trips in 1967 were generated in tha Southern and Westarn atates of theTJ.S. (status ncaúest i>,eico) anJ.tht 'alnost 158. Mil]idn pers¿n-tripsihvolvea travel on vacation.

3. Apart from the growth of family income, an important factor thatís influencing travel is the total leiswre time available. Longer paidvacations, the four-day work week, national holidays fixed on Mondays, andearlier retirement add considerably to total leisure time available.

4. án official analysis of the length of paid vacations shows asharp rise in the length of paid vacations offered by companies between1964 and 1967 (Table 1). Companíes ara aleo offering longer vacationaafter shorter qualifying perioda (Table 1).

Amnex 1Page 2

Tabla 1: Lenwth of Paid Vacatioras in the U.S.: 1964-1969

Jistribution of U.S.Paid Vacationa Workers on Payroll of

Offered bv ComPanies these Companies

No. of After Average TypeWeeks No. of Years of 5 YearVacation Servica Worker 1 Gain

2 or more 3 Office 98 99 + 1Plant 93 97 + 4

3 or more 5 Office 6 16 +10Plant 5 12 + 7

3 or mora 10 Office 50 71 +21Plant 41 58 +17

3 or more 15 Office 81 87 + 3Plant 71 78 + 7

4 or more 20 Office 47 67 +20Plant 38 53 +15

5 or more 25 Office NA 13 NAPlant NA 12 NA

Note: Distributiorp are cumulative. Thus the proportion eligible for2 weeks paid vacation inclules those aligible for longer periods.

Source: U. S. Bureau of Labor Statistics.

5. This trend is likely to continme. Some companies are alreaay

adopting the four-lay work week. Aboreover, as the length of paid vacations

increases, greaber numbers of people are taking more than one vacation a

year.

(b) The Market for Foreign Travel

6. With ragar. to foreign travel, U.S. citizens travelling overseas

(eaxcluding Canada) increased from 2.2 million in 1960 to over 7.9 million

in 1970, growing at a rate of about 149 per year on average. U. S. visitorexpanditures for travel abroad increasel from US$2.6 billion in 1960 to

US$6.2 billion in 1970.

Annex 1Paye 3

7. A principal factor aEfecting the volume of foreiín travel is thelevel of income. Various studies of the likely growth of family incomein the U.S. have been made, and based on past trenls there is every pro-bability that there will be a rapid increase in the number of householdswith incomes in excess of US$10,000 (at constant prices). In fact, fewdevelopments will have greater impact on the spending patterns of the1970's than the almost dramatic reshuffle of family income that isexpectec to take place. 1/ In the mid-sixties, leas than 30% of allfamilies in the U.S. had earnings of $10,000 or more a year. By 1980,the proportion is projected to exceed 559 measured at constant 1966 prices.In the mid-sixties about 55- of all family income acerued to the US$10,000and over bracket. By 1980, this proportion is projected to be 80%. Theconsequences of these changes on the demanM for foreign travel will be sub-stantial.

3. Since family income ¡s a principal factor influencing U.S. travelabroad, the potential travel market may be defined to be those familiesearning US$10,000 or more a year. On this basis the table below correlatesthe growth of U.S. visitor flows to foreign countrias (excluding Canada)with the number of U.S. I?wmilies earning more than 410,000 a year atconstant 1967 prices.

Table 2: U.S. Family Ixicome and Foreign Travel: 1960-67

Number of U.S. Number of U.S. citi- Nunber of U.S. citizensfamilies earning zens going abroad, going abroad as a per-$10,000 or more (excluding Canadian centaga of number of U.S.in constant 1967 travel over land families earning 410,000

Year Dollars boraers) or more000) (000) (>)

1960 8,977 2,235 25.0

1965 13,825 4,078 29.5

1966 15,255 4,568 29.9

1967 16,329 5,093 30.3

9. Table 2 shows a gradually increasing ratio of travellers goingabroad to families earning $10,000 or more. This trenw may be expectad to

/ Data used here i8 based on an appraisal of past trends and represent lowto moderate forecasts mado by the National Industrial Confer'enca Boardon data supplied by the U.S. Department of Commerce anil the NationalPlanning Association.

Arnex 1P ag eW,

continue in the future. As a minimum the proportion will remain at 30%.Consaquently, in 1980, of the total 34 mi]7iiion familíes thlt are foruecastto have incomes over $10,000 (at constant 1966 prices), the potentialU.S. market for travel abroad In that year is likely to be at least10 million persons.

10. Studies of the growth In "discretionary' income in the U.S.(defined as annual earnings accruing to individual families in excessof US$10,000) indicate that the potential market for travel abroad maybe more than 10 million persons. In the closing years of the 19501s,discretíonary income as defined above totalled $50 billion, or sllghtlyover 10% of total personal income. By the mid-19601s such income hadmore than doubled, and represented about 17% of total personal income.In the decade of the 1970's, discretionary income is forecast to growto $350 billion by 1980. (at constant 1968 prices), and could thenrepresent 30% of total family income.

11. The table below correlates the growth in discretionary incomewith the nLmber of U.S. visitors going abroad, Between 1960-1967 withevery increase in total discretionary income, the numbers going abroadincreased more than proportionately. Thus in 1960, for every milliondollars in discretionary income in the U.3. 37 persons travellel abroad.By 1967 the numbers going abroad had increased to 44 for every milliondollars of discretionary income. Extrapolating this trend, by 1980 thenumbers golng abroad for every million dollars of discretionary incomewould at least increase to 50 persons. On this basis the total potentialU.S. market for travel abroad in 1980 would be arourd 17-18 millionpersons.

Table 3: U. S. Jiscretionary Income and Foreign Travel:1960-80

Number of U.S. citi-Number of U.S. citizens zens going abroaA per

Discretionary going overseas (exclud- million dollars in dis-Year _ncome___ ing Canada) cretionary income

(billions US$) (000)

1960 60 2,235 37

1963 78 3,199 41

1965 100 4,078 41

1967 115 5,093 44

1980 350 17,500 50(projected)

Annex 1Page 5

12. Coupled with these devolopment9 in inccnes, major changes aretaking place in the marketing of travel in the U. S. The Civil AerorauticsBoard is gradually easing restrictions on air charter operations in theU. S. and the trend seems to be in the direction of openirig up new destina-tions to air charter carriers. Travel agencies are also moving in thisdirection. Thomas Cock ia already offering tour Dackages using chartercarriers and American Express for the first time is considering doing thesame.

(c) Travel to Mexico and.Zihuataneo

13. Considering the size of the U.S. travel market, the numubersvisiting Mexico are still relatively very small. Mexico and Canada arethe only two countries that U.S. visitors can drive to and yet In 1970Mexico received only 1.8 million U.S. visitors, compared to Canada's 14million. Nevertheless, U.S. visitora to Mexico have more than doubled inthe past decade, increasing by 11.5% a year, and in view of the projectedgrowth in foreign travel by U.S. citizens in the next decade, a furtherdoubling of travel to I:exico in that period wauld appear a very conservativeprojection.

14. Mexico is a good example of the changing role of various modes oftransportation in tourism development. In the past, with increased owner-ship of automobiles in the U.S. and improvement in land communications, af-Lrly large proportion of visitors drove into Hexico in private cars.This is changing, and although not dramatically, road transportation isyielding to aviation as the dominant mode of trarsportation of visitors(see Ta'ole 4). Thus, between 1963 and 1969, use of air-transportationincreased at a rate of 13.6%, while that of automobile-transportation grewat a rate of less than 10%. The main factors encouraging the use of air-transportation has been the cor.struction of new airports in tourist desti-nationa in Mexico, the establiíhmnent of direct air-links and a decline inthe costs of air-travel.

15. More than 50,5 of all U.S. visitors to Mexico originate from the4 border atates of Arizona, California, New Mexico and Texas (see Table 5).Most of these visitors (73`) drive into Mexico, although their expenditureand length of stay patterns vary enormously. The visitor from California,Lfor example, stays on the average about 18 days and apends US$360, whilethe Texan stays for only 3 days and spends US$126 per day. This patternis gradually changing, however, as can be seen from the fact that increaseduse of air-transportation holds true both for border and non-border statevisitora.

16. Foreign vis-tors to PIexico spent an average of 13.6 days in 1969.The average length of atay vanied, however, depending on the mode of trans-port used and the country or state of origin. Generally, visitors arrivingby automobile stay longer than those coming by air, except in the case ofthe State of Texas. If Texas is omitted, the average length of stay ofall other visitors jumps to about 18 days. While this is true for thecountry as a whole, the average length of stay at arny one destination inPIexico is lese. In Acapulco, for exaznple, it is estimated to be about6 days.

Armex 1

Table 4: MEXICO: ZIHUATANEJO TOURISM PROJECT

MEANS OF TRANSPORTATION USED BY FOREIGN VISITORS TO MEXICO 1963-1969(percentages)

Means ofTransportation 1963 1964 1965 1966 1967 1968 1969

Private Car 51.9 54.7 54.6 50.6 49.3 47.7 47.4

Plane 37.9 35.3 36.0 39.8 41.8 42.3 43.5

Rail 2.6 2.5 2.2 2.2 2.0 2.2 2.3

Bus 6.0 6.4 6.2 6.2 5.9 6.5 6.1

Boat 0.4 0.3 0.3 0.4 0.4 0.7 0.4

Not Specified 1.2 0.8 0.7 0.8 o.6 0.6 0.3

TOTAL 100.0 100.0 100.0 100.0 100.0 100.0 100.0

SOURCE: Departnent of Tourism

Annex 1Page 7

Table 5: MEXICO: ZIHUATANEJO TOURISM PROJECT

Origin of U.S. Visitors to Mexico by Mode of_Transport1969

VisitorsTotal Visitors Percentage Visitors Percentage Arriving Percentage

Origin of Visitors Number of Arriving of Total Arriving of Total by Other of TotalVisítors bv Air Visitors by Car Visitors Modes Visitors

(000) 000%) (000) (%) (000) (%)

Arizona 108.9 12.4 11.4 84.6 77.7 11.9 10.9California 279.2 135.1 48.4 130.3 46.7 13.8 4.9

Florida 28.4 22.1 77.8 6.2 21.8 0.1 0.4

nlhinois 120.0 74.2 61.8 38.1 31.8 7.7 6.4

Louisiana 24.3 13.9 57.2 10.4 42.7 - -

Michigan 31.7 17.9 56.5 12.2 38.5 1.6 5.0

New Jersey 20.6 18.3 88.8 2.3 11.2 - -

New Mexico 38.6 2.6 6.7 26.1 67.6 9.9 25.6

New York 88.8 80.5 90.7 8.1 9.1 0.2 0.2

Ohio 23.5 14.7 62.5 8.5 36.2 0.3 1.3

Pennsylvania 18.4 14.8 80.4 3.5 19.0 0.1 0.5

Texas 530.4 107.5 20.3 352.9 66.5 70.0 13.2

Othersa/ 492.3 348.6 70.8 134.3 27.3 9.4 1.9

Total 1,805.1 862.6 47.8 817.5 45.3 125.0 6.9

e,/ "1Others" include perEonF from other states in the U.S. and the rest of the vorld.

,OURCF: Bpnco de Merico, 3.P. (Specií1 Survey)

Annex 1Page 8

17. The remarkable development of tourism to the Pacific Coast ofMexico is attributable basically to two factors: the provisíon of directair accesa from the U.S. and the supply of first-class accommodation.Acapulco, for example, was a tourist destination almost 45 years ago.However, it was not until the international airport was built in 1964that the rapid rise in visitor arrivals bagan. Since then foreign visitornumbers increased on an average by more than 199 per year compared to anaverage growth rate of only 5, per year between 1960 and 1963. The growthin visitor arrivals was accompaniel by an increase in first-class accommo-dation which expandel by 189 per yaar between 1963 and 1970.

18. The experience of i4azatlan and Puerto Vallarta on the PacificCoast is similar and demonstrates the important role played by infrastruc-tural and other facilities. Air accesas is of particular significanca, sinceit will be many years before the coastal area gets an adequate road network.

19. Zihuatanejo will offer beach holidays which will be particularlyattractive for U.S. visitors during the winter months. It irlí be compet-ing with winter resort areas such as Acapulco, Hawaii and selected Carib-bean islands which can offer equally attractive climatic and scenicattractions at that time of the year. It will have the advantage overHawaii and the Caribbean, enjoyed by Acapulco, of offering a combinationof a beach holiday with visits to i.lexico City and other centers where therich archeological, historical and cultural attractions of the country canbe enjoyed.

20. On the assumption that Zihuatanejo will share in the beach holi-day market outlined above, Infratur has projected this market at about8 million in 1980, of wihom more than 2 million are expected to visitHawaii. Excluding visitors to Hawaii who count as domestic travellers inU.S. statistics, this figure would represent about the same proportion oftotal foreign travel in 1980 on the projection outlined in para. 11 above,as these destinations represented in 1970. The traffic flow forecast toZihuatanejo in 1980 - 420,000 - would. represent about 51 of the projectedtotal market for Acapulco, Hawaii and selected Caribbean destinations andabout 101 of the projected total visitor flow to Aexico in that year,assuming a growth rate in the next ten years of 7.1% annually as comparedwith 11.5% in the past decade.

21. In tems of accommodation, the project's share of total and first-class accommodation in IMexico would be only 1.6, and 6.2% respectively in1983, assuming that total accommodation woull grow at the same rate as inthe past ani that the growth rate in the supply of first-class accommoda-tion would be substantially reduced in view of the very large recent additionto such capacity an, in view of the need to cater for more midile-incomevisitors.

22. While the majority of visitors to Acapulco have been foreignersin recent years, very larga nimbers of Mexicans hava also visited theresort. In 1969, the latter numbered 414,000 as compared with 466,Oo

Annex 1Pagn Q

foreign visitors. Infratur in its projections for Ixtapa-Zihuatanejo hasnot forecaet a similar ratio between domestic and foreign visitora, but hasrather conservatively estimated that domestic viaitors would number about20% of total tourists. As the majority of domestic visitore to Acapulcotravel by road, and aB acceso to Zihuatanejo from lMexico City by road ui1lbe via Acapulco in the foreseeable future, it i8 likely that domestictraffic will continue to favor Acapulco. Tlence a coneervative projectionof domestic visitora to Zihuatanejo seems justífied.

23. The bulk of visitors to Zihuatanejo will arrive by air. Atpresent, foreign visitors arriving by air spend on average much more perday than visitors arriving by roal. In 1969, the former spent on averageUS$31 per day. With the expected rise in prices, estimated at 5% a yearand equal to the average increase in the past five years, average dailyexpenditures at Ixtapa by foreign visitors are estiíated at Us$41.50 in1975 when the first hotels are expected to be in operation. The breakdownqf this amount ¡8 calculated to be as follows:

Item .u4ount (US$) Percentage (%)

Accoammodation 14.44 34.8

Food and Beverage 11.29 27.2

Fntertainment 4.44 10.7

Local Transport 4.32 10.4

Purchases 4.98 12.0

Other 2.0 4.9

TOTUL 41.50 100.0

Source: Dank of Mexico3 figures adjusted by Misíion.

Some of the tourists are likely to visit the area only, while others areexpectel to visit it as well as other destinationa In Mexico. The averagelength of stay ¡a assumed to be 4 days, somewhat leas than in Acapulco butgreater than in Puerto Vallarta.

ANEX 2Page 1

MEXICO

APPRAISAL OF TI£ ZIHUATAiEJO TOURISM PROJECT

FONDO DE PROMOCION DE INFRAESTRUCTURA TURISTICA

1. The Fondo de Promocion de Infraestructura Turistica (ILfratur)was established as a trust ftnd by agreement between the Federal Govern-ment and the Bank of Mexico in June 1969. Ita purposes as set out inthe Trust Agreement are:

"(i) The promotion and carrying out of infrastructureprojects in the tourist sector, supplemented byother Federal Government investmenta, whosedesírablity may have been decided upon in tech-nical atudies entrusted to the Banco de Mexico,S.A., the conclusiona of which have been approvedby the Department of the Treasury and PublicCredit.

"(ií) The encouragement of private investment to supple-ment the above-mentioned ínfrastructure invest-menta.

"(iii) The purchase, urban developnent, subdivision, saleand rental of real property, subject to conditionaor general requirements approved by the TechnicalCoimnittee of this Trust.

"(iv) Collaboration with Departmenta of the Federal Admin-istration and with the Governmente of States andMunicipalitíes, for the purpose of developing thetourist industry as.a whole.e

2. The aum of Mex$ 30 million was provided initially by the FederalGovernrnent as Infratur'a capital and by September 1971, the Federal Gov-erment had provided an additional Mex$ 22 million. This amount had beenapent mainly on the purchase of land for the projects at Zihuatanejo onthe Pacific coast and at Cancun on the Caribbean coast, on constructionwork at Cancun and for the preparatory atudies of the two projects.

3. While the legal powers of Infratur in ite day to day operations-- such as the power to make contracta, to acquire property, to engagestaff -- are exercised by the Bank of Mexico as Trustee, the overallsupervision of the operations of Infratur is the responsibility of a

ANNEX 2Page 2

Technical Comnittee of three members, one appointed by the Departmentof the Treasury and Public Credit, one by the Bank of Mexico and oneby Nacional Financiera. The powers of this Cominttee are:

"(i) To approve the Trustta programa of general andregional activities, and lay down guidelines forsuch activities.

"(ii) To lay down the general basis on which agreementsand contracta are to be made for the execution ofinfrastructure projecte in the tourist sector,and for the provision of related services.

"(iii) To lay down the conditions or general requirementagoverning the purchase, urbanization, subdivision,lease or sale by the Trusteo of real property, andfix the renWial, price of sale and any other require-mente that it may deem expedient with respect tosuch operations.

11(iv) To approve the annual budget of expenditure.

"9v) To settle any questiona that may be submitted to itby the Trustee, and exercise any other powers thatmay subsequently be conferred upmn it by the Trustorin the form of a written communication from theDepartment of the Treasury and Putblic Credit to theTrustee."

4.0 No written statements of policy in aerms of these powers haveyet been issued by the Technical Conmittee, but policies have evolvedas progrese has been made in the preparation of the projecta at Zihua-tanejo and Cancun. During loan negotiationa, agreement should bereached that a policy statement should be prepared within one year ofthe signing of the loan aLter consultation with the Bank. Subjectato be covered in such a statement should include the financial objec-tives of Infratur, policies on the acquisition, sale and lease ofland, policies in financing operating costa, and other mattersreferred to in para. 3 above.

5. In developing new tourism infrastructures, Infratur has to workwith existing governnental institutiona at the Federal, State andlocal level as wjell as with private investora, and it has autonomy onlywithin those areas of land which it can acquire by purchase. WhileInfratur could advise on development in existing resorts, it la notclear that it could implement any programa In such areas withoutacquiring aizeable property there. Its role is comparable in someaspects to that of a private land developer, but it is likely to be

ANIF,Pag,

able to mobilize larger resources and to operate on a larger scale thanmost private developers in Mlexico and to achieve closer coordinationwith those state agencies which have responsibility for providing infra-structures external the resort area, such as airporta, main accessroads, electricity and water.

6. Infratur, financed by the Federal Government and using otherfunds available to it as authorized by the DepartLlent of the Treasuryand Public Credit will be responsible for developing all the infrastruc-tures within its own land, though it will have to observe technicalstandards as laid down by the responsible goverrinental agencies. Infra-tur i9 seen as having a developmental role; its primary purpose is notto make profits. In the conduct of ita operations however it lsexpected to recover its investments, and the Federal Governnent expectsit to repay monies advanced plus interest.

7. In endeavoring to establish new resort areas, Infratur expectsto have to offer substantial incentives to attract the fírst investors.Among the incentives will be the assured provisicn of all needed infra-atructures and the advantage of investing in an area with adequate zon-íng and controls over neighboring developments0 The principal incen-tive is, however, likely to be in the price of land. Infratur expectsto offer sites for the first hotels at Ixtapa at prices which will below by comparison with establisned resort areas auch 2as Acapulco. Theínitial prices are expected to be about US$ 20 per m for hotel sitesand from USI 6-8 per m for house sites, rising by 9-10% annuallythereafter on the most concervative projection. It is recognized that`he alinual increase could be substantially higher once the resort isestablished and closer to the historical rise in Acapulco where from1965 to 1970 prices of house sites rose on average by about 20%annually. Recent land prices for hotel sites in Acapuleo have been ashigh as US$ 280 per m2.

8. lJhile the initial price of land is low ln relation to presentprices in Acapulco, it is doubtful whether higher pric s could becharged in a completely new area and even US$ 20 per mi may be highviewed as an incentive price. The price estimnated by Infratur in the9th year ¡s US$ 100 per m2 which would be high given the assumptionson average room rates and investment costa of hotels made in thereport. Such a price could probably be realized only if there ís acontinuing inflation in average room rates which would justify higherinvestnent costa.

9. The financial projection made by Infratur for revenues fromland sales contains the implicit asaumption that sales will be "cash"sales, i.e., the land will not be leased or sold on deferred paymentterms. On this basis, sales of hotel and house sites which will be

ANNEX 2Page 4

developed in the firat atage of the project (i.e., for 3,500 hotel roomaand 500 houses) will yield US$ 8.7 million. Wlth very little furtherinvestment, additional sltes could be so.ld for an estimated US$ 12.4 mil-lion in 1981, and Infratur proposes to retain for sale in the 18th-20thyears an area along the main beach at Ixtapa wliich will be developed inthe first atage. This would allow Infratur to obtain the benefit of thelong-term rise in land prices, and these later sales are estimated toyield a further US$ 12.0 million. Thus over a twenty year period, Infra-tur expects to recover the US$ 23 million investaent in the first atagedevelopment at Ixtapa.

10. Infratur will also incur expenses in operating and maintainingcommon services and facilities at Ixtapa. It proposes to levey chargeson hotela and house to cover part of the costa of these services, Theprojection of operating revenues and costa made by Infratur 1B shown inTable 1. Annual charges for water and aewerage will be sufficient tocover the operating and maintenance costa of these services. The annualcharges to be levied on hotela and house lote of US$ 65 per hotel rocmand U5$ 271 per house lot are intended to be incentive prices. On thisbasis, substantial operating deficita are projected by Infratur duringthe first seven yeara of operations.

11. While the need to offer incentive prices to attract investora inthe early years la clear, the annual charges particularly on hotels pro-posed by Infratur appear low. The proposed per room charge would be avery amall fraction of total annual operating costa of the hotela andincreasing the charge to US$ 200 a year might be feasible. On this basisa amall surplus on operating account would be achieved in the 5th year ofoperationa and substantial surpluses thereafter (Table 2). D(alegnegóttznttons agreement was reached that the basis for the annual harzgesfcr hotels cnd house altos uould be a~eed withln one year o£ thb aigningof the proposed loan.

12. On the basis of the charges proposed by Infratur, the internalfinancial rate of return Qn the (lst stage) project at Ixtapa would be1.6%. If the annual charge per hotel room were to be US$ 200, thefinancíal rate of return would be 5.3%.

13. Infratur will pay 8% on funds provided by the Federal Governmentand interest on the proposed Bank loan plus the service charge, expectedto be ó.25%, levied by Nacional Financier¿l. The Federal Goverrment willbe responsible for repaying the Bank's lomn. Although Infratur laexpected to repay all capital funda, no fixed repayment schedule hasbeen established in view of the uncertainties of projecting revenuesfrcm the sale or lease of land. In Table 3, 25-year loans with 5 yearsgrace have been assumed. Qn this basis with an annual charge of US$ 200per hotel room., revenues fran operations and from the sale of land inthe first stage of the project would not be adequate to meet debt serv-ice charges in full.

ANNEXPage 1

14. Infratur presently expects to develop the second and third stagesof the project at Ixtapa in 1982/83 and 1986/87 respectively. The invest-mente in infrastructure at the second and third stages will be lower perhotel room than in the first stage. As a result the financial profit-ability of the second and third stages will be greater, and Infraturexpects in the long run to cover deficita on the first stage from thesurpluses earned on the second and third stages. To cover the earlierdeficits shown in Table 3, adjustments might be made in the debt repay-ment schedule, or in the timing of land sales. These adjustments would£robably be adequate, but in the last five years of the maturity of the

oans a cumulative deficit of US$ 7.0 million í8 incurred. Thi8 couldonly be covered by surpluses earned on atages 2 and 3.

Staffing

15. Infratur's professional ataff now numbers 27 excluding the Direc-tor and his two principal assistanta. The breakdown of the total ia asfollows:

Engineers 12Economist8 5Lawyera 3Accountants 6Airport adviser 1

16. A large inerease in staff will be needed to supervise the execu-tion of the projects at Ixtapa and Cancun. A project unit has been estab-lished within Infratur to execute the project at Ixtapa. A director ofthe project unit has been nominated who is acceptable to the Bank.

Financial Position

17. Frora the interest earned on ite initial capital, Infratur was ableto cover its operating expenses during 1969 and 1970. In 1971, however,it has invested heavily in land at Cancun and Ixtapa, it has undertakensubstantial on-site works at Cancun and the expenses of preparlng the twoprojecta have risen sharply. These resulta are reflected in the summaryBalance Sheet attached (Table 4).

18. The Balance Sheet as at September 30, 1971, shows a large excessof current liabilities over current assets, pending the transfer toInfratur of additional fiscal funde. It i8 necessary that Infraturahould have adequate liquid resources to meet current obligatione inorder, ínter alia, to secure more favorable príces from contractora, andassurances were obtained during negotiationa that the Federal Governmentwould provide Infratur with capital funds for the project as needed.

Annex2

MEXICO ZIRUATAAEJO TOURlSM PROJECT1/

I;.rlATUR: PROJ2ECTED 07UTEINM INhC0 AI;D EXPN'SES AT IXTAPA -

(in Eax.$ 000)

Isar 1975 1976 1977 1978 1979 1980 1981 1982 1983-1991

Operatíng Year 1 --- 39-17

Revenues:Annual Charges: Hotels 611 814 1,221 1,628 2,035 2,239 2,242 2,6146 2,o14Y

Annual Charges: besidences 34 102 203 339 509 729 1,000 1,322 1,695

Annual Charges: Other 102 136 204 272 340 374 408 441 476

Water Charges 415 629 893 1,200 1,562 1,987 2,486 3,053 3,883

Commercial Center Renta 70 140 245 327 467 653 840 887 -

Golf Course Rent *437 664 927 1,259 1,637 2,079 _ _ _

Total 1,669 2,485 3.Q22 5,025 6,550 8,061 7,176 8,349 8,903

Expenses:Road Mtaíntenance 655 682 655 1,123 599 626 599 1,122 599

Hydrauilic Works Maintenance 142 142 142 142 142 142 142 142 142Water and Sewage 567 744 1,005 1,263 1,601 1,946 2,354 2,813 3,480

Sanitation 1,376 1,171 1,171 901 901 632 740 740 740Public Lighting 164 164 164 164 164 164 164 164 164

Golf Course 1,510 1,510 1,510 1,510 1,510 1,510 - - -

Coa.mercial Center 83 83 83 83 83 83 83 83 -

Fuel Service 558 558 558 558 625 563 563 563 563

Residential Street Maintenance 168 168 168 257 149 149 149 257 _149

Beach Development 344 344 344 344 344 344 344 344 344Promotioan 2,500 2,500 2,500 2,500 2,500 2,500 2,500 - -

Adninistration 500 500 500 500 500 500 50o 505 500

Sub-Total 8,565 8,800 9,345 9,118 9,159 8,138 6" 2S 6,681

Contingeacy (15%) _t,285 1a¿65 1,320 1,402 1,368 1,374 1,221 1,009 1,002

Total 9,852 9,851 10,120 0,7147 10,486 10,533 9,359 7,737 7,683

Surplus (or Deficit) beforeCapital Charges (8.183) (7,366) (6,427) (5,722) (3,936) (2,472) (2,183) 612 1,220

1/ Excluding income fran sale of land erd c -1Hotels: annual charge of IHex. $2,500 (or > per roor.-Residential lot, annu21 charz- nf R:o.3,'90 (or UZi271) Prr an aver're lot ( n60 m

2).

Water, charges, Vex.$2.40 (or TUS$0.19) per m3, to cover cost of purchased wat,r and operating costs for water distribution and sewage system in the tourist zone.

2/ Reavy maintenance expenditures are made in every fourth year.

Sourcet Infratur

Annex 2Table 2

MEXICO ZIHUATANEJO TOURISM PROJECT

INFRATUR: PROJECTED OPERATING INCOME AND EXPENSES AT IXTAPA -

(In Mex.$ 000)

Year 1 1976 1977 1978 1979 1980 1981 1982 1983-1991Operating Year 3Y 35B

Revenues:Annual Charges: Hotels 1,875 2,500 3,750 5,000 6,250 6,815 7,500 8,125 8,750Annual Charges: Residences 34 102 203 339 509 729 1,000 1,322 1,695Annual Charges: Other 102 136 204 272 340 374 408 441 476Water Charges 415 629 893 1,200 1,562 1,987 2,486 3,053 3,883Commercial Center Rente 70 140 245 327 467 653 840 887 -Golf Course Rent 437 664 927 1,259 1,637 2.079 - - _

Total 2,933 4,171 6,222 8,397 10,765 12,697 12.234 13,828 1L.8o

Expenses:Road Maintenance 655 682 655 1,123 599 626 599 1,122 599Hydraulic Works Maintenance 142 142 142 142 142 142 142 142 142Water and Sewage 567 744 1,005 1,263 1,601 1,946 2,354 2,813 3,480Sanitation 1,376 1,171 1,171 901 901 632 740 740 740Public Lighting 164 164 164 164 164 164 164 164 164Golf Course 1,510 1,510 1,510 1,510 1,510 1,510 - - -Comuercial Center 83 83 83 83 83 83 83 83 -Fuel Service 558 558 558 558 625 563 563 563 563Residential Street Maintenance 168 168 168 257 149 149 149 257 149Beach Development 344 344 344 344 344 344 344 344 344Promotion 2,500 2,500 2,500 2,500 2,500 2,500 2,500 - -Administration 500 500 500 500 500 500 5°0 500

Sub-Total 8,67 8,566 8,800 9-345 9,118 9,159 8,138 6,728 6,681

Contingency (15%) 1,285 1,285 1,320 1,402 1,368 1,374 1,221 1,009 1,002

Total 9,852 9,851 10,120 10,747 10,486 10,533 9,359 7,737 7,683

Surplus (or Deficit) beforeCapital Charges (6,919) (5,680) (3,898)9 (2,350) 279 2,164 2,875 6,091 7,121

1/ Excluding ¡neome frca sale of land and capital charges.Hoteis: annual charge of Mex. $2,500 (or US$200) per room.Residential lot, annual charge of Mex.$3,390 (or US$271) per an average lot (760 m2

).Water, charges, Mex.$2.40 (or US$0.19) per m

3, to cover cost of purchased water and operating costs for water distribution and sewage system in the tourist zone.

Source: Infratur with revenue projectiona adjusted by Bank mission.

October 1971

HEXIGO. ZIHATANEJO T0URISM PROJEOT T.bil 3

I8JFRATUR OPERATION AT IXTAPAILLUSTRATIVE CASH FLOW

(in M...$ million)

Year 1972 1973 1974 1975 1976 1977 1978 1979 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 199. 1995 1996

F8N1 PROVIDED BY:

fflwal.2Funde 62.6 60.7 30.2 - - - - - - - - - - -- - - --

IBiLL1oeno 21.3 55.1 50.0 - - - - - - - - - - - - - - ---

Total 83.9 115.8 80.2 - - - - - - - - - - - - - - ---

Net Operating innome - - - ~~~~~~(6.9) (5.7) (3.9) (2.4) 0.3 2.2 2.8 6.1 7.1 7.1 7.1 7.1 7.1 7.1 7.' 7.1 7.1 7.1 7.1 7.1 7.1 7.1

Land Sales 11.3 4.7 lo. 12.1 14.0 10 12.5 15.3 18.5 131.5 - 8.6 - - - -- 38.1 42.5 68.8 -

To tal 11.3 4.7 10.4 5.2 8.3 6. 10.o1 15.6 20.7 134.3 6.1 15.7 7.1 7.1 7.1 7.1 y.1 45.2 49.6 75.9 7.1 7.1 7.1 7. 7.1

Tot-al Funds 95.2 120.5 90.6 5.2 8.3 6.2 10.1 15.6 20.7 134.3 6.1 15.7 7.1 7.1 7.1 7.1 7.1 45.2 49.6 75.9 7.1 7.1 7.1 7.1 7.1

APPLICATIONS:

Investaenteñrojet xpenses 0. 98.3 66.0 o - - - - - - - - - - - - - - - -

Lend kquislt4on 21.0 - - - - - - - - - - - - - - - - - ------

pro3ectUlt (Hexio0) 4.9 4.9 4.9 - - - - - - - - - - - - - -- -----

Pr3ect lnít (Ixt.apa) 2.9 6.6 4.0 - - - - - - - - - - - - - - - - -----

Pr~tion 4.8 -- 8.0 5 .2.....

Total 83.9 115.8 80.1 - - - - - - - - - - - - -7 - -

Debt ServiceFis-cal ui - - 15.5 15.5 15.5 15.5 15.5 15.5 15.5 15.5 15.5 15.5 15.5 i5.5 15.5 15.5 15.5 15.5 15.5 15.5 15.5 15.5IBED Ioens 12.3 12. 122 1.3 3A 12.3 12.3 12.3 12. 23 1 23.3 3.j. jL 12.3 12.3 12.3 12 .3 12.3 12.3 12.3

Total - - - - - 27.8 27.8 27.8 27.8 27.8 27.8 27.8 27.8 27.8 27.8 27.8 27.8 27.8 27.8 27.8 27.8 27.8 27.8 27.8 27.8

Total Aorplicationa 83.9 115.8 80.1 - - 27.8 27.8 27.8 27.8 27.8 27.8 27.8 27.8 27.8 27.8 27.8 27. 27.8 27.8 27.8 27.8 27.8 27.8 27.8 27.8

BY ler 11~ 3 .7 lo 5 5 3 * (J <16< <1¿) (12.21 (7~j 1 fi5 (21 7 (12.1) (20~L (2) (n 7) ()2 207 ( (20.7 173 4 21.8 48.1 (2.)(Qf 2,) (2o0) (20.7

Aooaolated 11.3 16.o 16.5 31.7 40.0 18.4 0.7 (11.5) (18.6) 87.9 66.2 54.1 33.4 12.7 (8.0) (28.7) (h9.4) (32.0) (10.2) 37.9 17.2 (3.5)' (24.2) (44.9) (65.6)

Annex 2Table 4

MEXICO: ZIHUATANEJO TOURISM PROJECT

INFRATUR

STATEMENT OF FINANCIAL POSITION, 1969-1971

(in Mex. $.000)

December 31 Sept. 30

1969 1970 1971Current Assets

Cash - Banco de Mexico 24,813 12,798 4,986Cash - Banco Comercial

Peninsular, S. A. 2,250 164 47Accounts Receivable - 22 146

Total Current Assets 27,063 12i984 5,179

(Less)Current Liability

Account Payable -_43 20,044 /Net Working Capital 27,063 12,941 (14, 8 65)

Fixed and Other Assets:

LIand - 19,487 25,982Buildings - 345Other construction 31,849Furniture and Equipment - - 210Deferred Expenses 4,112 19,890 12,862

Equity 31,175 52,318 56,383

Represented by:

Capital from Federal Govern-ment 30,000 52,175 60,068

Retained Earnings (or Deficit) 1,175 143( 3,685)

31,17S 52,318 56,383

2/ Short-term advances from the Bank of Mexico.

Source: Infratur

Annex Page 1

NJVCICO

APPRAISAL OF THE ZIYUATAMEJO TOURIS PROJECT

AIRPORT D-EVLOPMENT

1. The existing ailport at Zihuatanejo (see Map 2) is unacceptablefor any but light aircraft and the site is incapable of a practical develop-ment to international standards. A substitute site just south of Coacoyulhas been identified and found to meet all pertinent internatíonally acceptedcriteria for airport development. The total investnent in this part of theoverall project will amount to 154 million pesos (US$12 .3 million) and willbe disbursed over the firat two and one half years of the project.

1. Descrjjtion of the Airport Project

2. The airport project consista of the provision of a runway andtaxiwayo with lighting, heavy and light aircraft parking apronrs, terminalbuilding,control tower and technical block, fire station, fuel atorage areaand apron hydrant system, parking lot and acceso roads, navaids, visualaids and comiimication equipment. The various elements oa the project arefurther described below and shown on the Airport Master Plan (see Map 3).

a. Airport Delopent

3. First stage development of the runway will be 250Om long on analignment of 08/26 magnetic to provide 95% wind coverage and to allow opera-tion of DC-8-63 aircraft non-stop to New York. Future growth to 35OOm ¡8wíthin the site capability. Pavement width will be 60m and thickness willbe .82m consisting of .30m selected subgrade, .25m sub-base, .20m base and.07m asphaltic concrete surface. There will be tu-rning bulbs at each endof the runway. Standard high intensity edge lighting will be provided.

4. Taxiways stubs will be constructed of Portland Cement concrete, 23mwide and .27m thick over a .20m sub-base and .3Om selected subgrade. Mediumintensity edge lighting will be provided.

5. The heavy aircraft apron will consist of the same pavement as thestub taxiways. The light aircralt apron and ite connecting taxiway willbe the same as the heavy apron except the surface will be .O4m asphalticconcrete instead of .27m Portland Cement concrete. Thi8 will allow futureuse as a heavy apron after only inereasing the thickness of the surfacecourse. Medium intensity edge lighting will be provided.

6. Storm drainage will be collected in open ditches along the edgesof the flight strip, taxiways and aprona. Culverts will be provided wherethese ditches pass under paved areas.

Annex 3Page 2

7. The runway aligrnent will pase over a lagoon formed by storm sur-face drainage which cannot pase over the sand dune along the edge of the sea.This partícular lagoon overflowa into an adjacent lagoon when the water levelia sufficiently high. The second lagoon does have an opening to the sea.A chamnel between these two lagoong will be dredged to assure easy paesageof water from the airport area through the lagoons to the sea. Since partof the first lagoon will be on the land sade of the runway after it i8constructed, large culverta must be provided under the runway to allow passageof water back and forth to relieve any damming action the runway might create.

8. Visual approach alope indicator lights (VASI) will be installed atthe threshold of Runway 26.

9. A fuel atorage area will be constructed just outside of the terminalarea and will be connected to jet fuel hydrants on the heavy apron. Gasolinefuel will be dispensed by tanker trucks.

10. A VOR/DME navigational aid will be installed on the airport for useas an enroute aid as well as a terminal approach aid.

b. Terminal Building

11. An international terminal building will be constructed utilizingas much as possible the general aesthetic theme accepted for the rest of theproject buiíldings. Flows within the building will be designed to keep thevarious conflicting categories of passengers separated, i.e. arriving anddeparting domestic and international. The design i8 based on the forecastof 250 arriving or departing international paesengers and 80 arriving ordeparting demestic pasaengers per peak design hour in 1978, but will allowincremental expansion of ticketing areas, airline offices, wçaiting andbaggage areas, and inspection areas to accommodate demands through at least1990.

c. Other Buildinga

12. A control tower will be constructed with a one story technical blockadjacent to it. All necessary communication equipment will be provided.

13. A fire atation of four equipment bays will be constructed. It willinclude space for dormitory, dining, food preparation, training, storage andoffices. The fire fighting equipment will be provided under the normal equip-ment replenishment budget of the national airport operator (ASA).

d. Access Roads

1h. A 6.lom wide acceso road consisting of .04m asphaltic concretesurface, .20m base and .30m sub-base will be constructed from the mainZihuatanejo-Acapulco highway to the terminal building complex. Otherconnecting roads of the same construction but of narrower widths in accordancewith intended use will be provided within the airport complex.

Alnex 3'P-e 3

e. Utilities

15. The electrical services will be brought from the main distributionsubstation in Zihuatanejo to the airport substation as part of the airportproject. Distribution within the airport will be under various contractsdepending upon the ultimate use.

16. Potable water will be provided through the use of bore holes andunderground storage tanks. Presaure for the domestie system will be providedby pneumatic tanks. High pressure pumps will be provided for the fire hydraltring system.

17. Sewage disposal will be accomplished by meana of septic tanks anidleaching fields. Aircraft sewage wastes will be passed through a trituratorand industrial treatment plant to neutralize the antiseptic solutions priorto introduction into the airport sanitary system.

18. Industrial wastes will be passed through the industrial treatmentplant to remove oil and other non-water soluble material from the wastesprior to introduction into the sanitary system.

19. Solid wastes from the aircraft and airport will be incinerated ina gas fired furnace having at least two chambers to burn all material com-pletely so that no smoke will be discharced. The practice enployed at otherMexican airports of dumping or burying these wastes will not be continuedat Coacoyul International Airport.

f. Aeronautical Con iderations

20. Procedures have been approved by Civil Aeronautics (DCGA) based onthe VOR/DME for both approach and departure from the airway and the airport(see Map 4). The transfer of the existing NDB from Zihuatanejo to Coacoyul willprovide a means for aircraft not equipped with VOR/IME to navigate and land atthe new alrport.

21. In the future, either end of the runway could be fitted with ariinstrument landing system (ILS). Such installation should be seriouslyconsidered as soon as heavy aircraft begin to use the airport in any quantity7The reason for this í8 that vertical and lateral guidance during landingapproaches 18 highly desirable for large jet aircraft.

22. The existing bi-lateral air agreements between Mexico/Canada andMexico/United States do not list Zihuatanejo as one of the points to be served.Since these two countries are the major sources for the tourist supply forthis project, the Goverrnent has taken steps to add Zihuatanejo to the agree-menteas a co-terminal with Acapulco. Thia will allow either non-stop ormultiple-stop flights from Canadian and United States cities to CoacoyulInternational Airport.

Annex 3Page 4

g. Engineeripg Services

23. Alh engineering work aseociated with the airport project will beaccomplished by Secretariat of Public Works (SOP) with technical aseistanceprovided by Secretariat of Communication9 and Transport (SCT) Airports andAuxiliary Services (ASA), Aeronautical Radio of Mexico (RAMSA5, and NationalCompany of Aviation Combustibles (NACOA). SOP has designed and supervisedthe construction of many airports in the past and ¡a fully competent to exe-cute this project.

h. Environmental Considerationa

24. The topography around the airport site reduces the probabilityof noise problema for the village of Zihuatanejo and the tourism developmentarea in two ways. First, because of the relatívely high terrain to the northand east of the airport, approach procedures will carry aircraft over the oeafor safe descents. Takeoffs to the west will follow this same path whiletakeoffs to the east will be away from the project areas. Second, the highterrain between the airport site and the village will tend to deflect groundnoise away from the populated areas. Noise over the beach areas to the southof the airport site should not be a problem because these beaches are notparticularly attracti.e from the development point of view because of theirsteepness, narrowness, and short, very strong breakers.

25. The leaching fields asacciated with the sewage disposal system willintroduce a pure effluent directly into the ground water with no harmfuleffecta, Aircraft and induetrial wastes will be treated prior to theirintroduction into the sanitary system to remove all harmful elements.

26. Solid wastes will be incinerated in a furnace designed to releaseno unburned material into the air. Ashes will be buried in a landfilU areaon the airport.

27. The provision of a channel connecting the shoreline lagoons lowersthe depth of the lagoon at the airport and reduces the possibility forinsect and disease producing stagnant w^ater to collect.

2a. The development of the airport at this site will require the des-truction of up to 5,000 coconut-producing palm trees and the relocationof up to a maximum of ten families (squatters).

B. Cost Estimate

29. The cost estimates and their breakdown are shown below in sumnmarizedform per contract. Detailed cost estimates for the airport project are shownin attached table.

Annex 3Paíe5

Table 1

Pesos (000) US$ (000)Local Foreign Total Local Foreien Total

Land Acquisition 8,350 - 8,350 668.5 - 668.5

A. Maneuvering Areas &Access Road 46,887 28,833 75,720 3,754.0 2,308.5 6,062.5

B. Terminal, OtherBuildings &Utilities 12,845 6,794 19,639 1,028.4 544.0 1,572.4

C. Visual Aida & Elec-trical Supply 2,081 1,369 3,h5o 166.6 109.6 276.2

D. Fuel Storage &Supply 2,443 1,352 3,795 195.6 108.2 303.8

E. Navigational Aids& Coammunications 1,597 2,403 4,000 127.9 192.3 320.2

ContingenciesPhysical (9.8%) 9,569 5,921 15,490 766.1 4 74.1 1,240.2price (9.4%) 9,220 5,705 14,925 738.2 456.8 1,195.0

Engineering (3.3%) 5,281 - 5,281 422.8 - 422.8

Supervision (5.0%) 7.921 - 7,921 634.2 _ - 634.2

Total AirportProject Costs 106,194 52,377 158,571 8,502.3 4,193.5 12,695.8

30. The cost estimates were developed by SOP and are based on quantitiesobtained from field survey data and architectural preliminary drawings. Theunit costa used are comparable to costa of similar work designed and con-structed under the supervision of SOP, and are considered reasonable. Con-atruction is expected to take two years.

31. An item for contingencies, amounting to approximately 17% of thetotal airport project, has been included to allow for variations in the scopeof work and price increases. Considering the construction costa alone, 10%was added to allow for physical increases in the worle and 7% per year wasadded to allow for equipment price risaes and increases in labor costa.

Anmex 3Page 6

C. Procurement

32. A high percentage of the material required for the project ¡a pro-duced locally. While contractors for building conetruction are fairly numar-ous in Mexico, contractors for large earth moving are not. The fuel systeminstallation will be done by foreign contractora as well as the manufactureand installation of the commmnicationa equipment. All of these contractswill be awarded through international competitive biddlng in accordancewith the Bank's "Guidelines for ProcurementIl after a prequalification acreen-lng of interested contractora.

33. A portion of the Navaid equipment will be obtained from WilcoxElectric Conpany, Division of American Standard, Kansas City, Milsouri.The co0t of this procurement will be about US$ 160,000 and will consi8t ofthe manufacture and installation of a Wilcox VOR/DME. There ía ample justi-fication for purchasing this equipment from this sole manufacturer. AllVOR's in Mexico (41) are Wilcox, supply support ls based on this ene typeof equipment, the electronic maintenance technicians are trained for thisequipment, test equipment for this specific VOR la available in quantityin the country, the only DME 't in Mexico (11) are Wilcox and the WilcoxDME la specífically designed to mate with the Wilcox VOR.

D. Disbursement

34. Disbursement of the proposed loan would be made on the basis of76% of the expenditures of contracts. Disbursementa are expected to takeplace over a 2-1/2 year period from tne third quarter of 1972 to the firstquarter of 1975 (seo Table 23). Since this la a combined project, any sur-plus loan amounts for this portion should be applied against possible under..estimates in the other portiona of the total project.

E. Aviation Administration

35. The responsibility for the administration and operation of avia-tion in Mexico falls under four organizationa. The design and supervisionof construction of airports and their buildings ia the responsibility oftwo divisions within SOP. After construction, the maintenance of the air-field works ís the responsibility of SOP except for fíeld lighting. Theresponsibllity for the operation and maintenance of the terminal buildings,maintenance of the field lighting and collection of landing and rentalcharges i that of ASA. RAMBA la responsible for the operation and main-tenance of the navaida, communication gear and their operation areas (con-trol tower, etc.) and i in complete control of enroute and terminal airtraffic. Directorate General of Civil Aeronautics la in charge of estab-lishing air routes and procedures, licensing, negotiating bilateral airagreements and other policy type matters. DGCA is a Governmental agency

5age 7

and reports to SCT. RA2LSA also reports to SCT but i3 a private corpora-tion which is partially owmed by the Governmer. and the airlines servingMexico. ASA, the airport operator, Js a Goverrmentenal agency but reportsto neither SOP nor SCT. It reports directly to the Secretariat oL thePresidencia.

36. A fifth organization operates tne fuel services. NACOA is apartially Governnent owned private corporation which operates under veryexacting standards. The fuel being processed is continually under testto assure the airlíres that the fuel meets their specifications. Sincethe fuel being processed actually belongs to the airlnes involved, theonly income NACOA realizes is derived from a through-put charge. Thischarge is established by SCT, not by NACOAL

37. The various other charges are alio estabáiihed by SCT, althoughsome are upon the recommendation of the operating services. For example,enrioute comnunication chiarges and navigational alá user charges are estab-lished by SCT upon the recomniendations el' DrGC ard RAZBA; landing chargesfor each category of airport (4) and terminal building rental charges areestablished by SCT upon reconm.endations of ASA. The responsibility forcollecting these charges rests with RAMSA and ASA respectively. As aresult, a pilot is required to obtain departure clearances from bothorganizations prior to take off.

38. Fragmentation of authority for aeronautical affairs such asexists in H-Iexico creates many difficult problems. H-ioever, correction ofthis situation is not vital to the successful conclusion of this project.

E. Financial Projections

Income from Operations

39. Revenue would be earned from.

(a) Landing fees for conmercial aircraft.(b) Landing fees for general aviation aircraft.(c) Fees for use of flight aprons and remaining

overnight.(d) Participation in the sale of aviation fuel.(e) Rertal fees aná concessions.(f) Sundry services.

40. In order to calculaze rzke income resultirig frcm conmercial air-plane landing fees, the yearly .aovement of passen-ers by flight sectors,and the use factor of trhe differe.nt types of aircraft were taken intoconsideration. Based upor. the acove as we1` as the historical experienceof the Acapulco and Mexico CÍty airports, dlferent ccmbinatioris of air-craft wera corisidered fcr tila nati.nal arn =ternational flight sectors,with the percentage of t Ie ¿ir flees .-pa'ic4£patiorA progressively chang-ing in each one of tn-e years irn the forecaet.

Page8

4W1,. Landing fee tar~ffs 'or the period beginning in 1972 have been setby a deoree of the 24th July, 1969. The tariffs are determined accordirig tothe following schedule:

Class of Aireraft

I Up to 2,)C00 kgII Frcm 2,401 to ,sOOO kgIII Ercm L,001 to 10,000 kgIV Fom 10001 to 20,000 kgV From 20,001 to 40,000 kgVI Fro' 4O,0,C1 to 60,000 kgVII Frcmi 60,001 to 100,000 kgVIII Fron 100,001 to 125,000 kgIX Fron 125,001 to 150,000 kgX F~rom 150,001.

Landing Pees by Type of Airplane (Pesos)

Type of Airplane TWeight In Kg. 1972

DC-9-30 48,924 1,650B-727-100, B-727-200 78,000 2,615B-737 48,471 1,650DC-8-50 143,000 5,975DC-8-63 158,550 6,515DC-10 233,295 11,015L-101 1 185,277 8,135B-747 308,000 15,455B-707-320-C 151,120 6,095Twin Otter 5,223 190Hawker Siddeley 748 20,200 1,035

In considering the types of airoraft currently in use and the plans ofairline companies, airoraft were grouped according to weight and numberof seata. The traffic projections were translated into the probable useof different types of aircraft and their probable flight schedules,assuming certain load factors.

42. An average landing fee for general aviation was projected forsmall plane landings correspomding to domestic and international flights.It was assumed that the percentage of domestio and international flightsof general aviation would each be 50C at the opening of the airport, butthat the proportion of international flights would gradually increase.

Annex 3Pare 9

43. Income from the u 2 oparking aprons, barre in fuel sales, leasesand various services was ca1ceLated on the basís o£ íncome earned fron eu¿hservices during 1970 at Puerto Vallarta and Acapulco, with an appropriateadjustnent for the conditions likely to be met at Zi1uatanejo.

Operation and MIainten2nce Gosts

44. In calculating annual operating and mainterance costs, operatingand maintenance cost data for the airports of Acapulco and Puerto Va"lartaduring the year 1970 were used. The maintbenance cost of the mareuveringarea (runways, taxiways and platforms), v7a calculated at 3.25% per annumof the invesctment in these facilities taRIng into consideration also tMtureenlargements. The recormended figure of 2.% per arnum was increased inorder to cover such elemente as the hot climate and the early introductionof large capacity aircraft. The cost of upkeep and cleaning of the terminalarea, incIudLng buildings, services, parking lots, etc. was calculated onthe basis of data from Acapulco and Puerto Vallarta. Sim'ilarly wages andfringe benefits and the costs of equipment and supplies were calculated onthe basis of data from Acapulco and Puerto Vallarta, after making allowancefor the increases planned by LSA. Year'y indirect costs were calculatedon the basis o£ the share of general expenditures of ASA allocated to eachairport.

Annex 3Table 2

2MICO ZIHUATANEJO INTERNATIONAL AIRPORT

PROJECTIED OPEIG DICOME AUn EXPENSES

(in Mex. * °o°)

rear 1975 1976 1977 1978 1979 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991

Operating Year 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17

Rweven ugiig feo for comercial aircraft 2,271 4,163 6,340 8,802 11,825 14,426 17,564 20,558 24,288 26,713 29,646 32,916 35,856 40,091 43,963 48,616 53,836

Landing fee for general aixtraft 301 329 359 392 428 467 510 556 607 662 722 787 859 937 1,021 1,114 1,215

Fee for use of platfozm 65 73 82 92 100 108 122 136 152 161 170 181 192 204 217 232 247

Sale of avation fuel 25 36 45 53 60 70 171 280 399 466 539 618 703 799 896 1,005 1,123

Rental fe. and concession 240 300 365 430 480 549 726 918 1,127 1,245 1,372 1,511 1,660 1,828 1,999 2,189 2,396

Sundxy service 41 56 62 70 81 101 155 213 276 311 349 391 436 487 538 596 658

Total Revenue 2,943 4,957 7,253 9,839 12,974 15,721 19,248 22,661 26,849 29,558 32,798 36,404 39,706 44,346 48,634 53,752 59,475

Exe= SDirect cost

Maitenae of operational area 2,485 2,505 2,525 2,550 2,575 2,600 2,688 2,775 2,878 2,930 2,990 3,050 3,119 3,196 3,274 3,369 3,463

Upkeep& oleaning of tenainal 934 992 1,049 1,110 1,167 1,184 1,313 1,410 1,514 1,574 1,638 1,707 1,782 1,867 1,954 2,048 2,152

Wages and benefit 744 801 857 917 973 1,029 1,117 1,212 1,315 1,373 1,436 1,505 1,577 1,662 1,748 1,840 1,942

Equipaent and suppliesa 313 340 369 396 422 W49 491 537 586 614 644 677 712 752 793 837 886

Miacellaneous 42 52 63 79 86 97 113 132 152 163 175 188 202 218 235 253 272

Sub-Total 4,51B 4,690 4,863 5,052 5,223 5,359 5,722 6,o66 6,445 6,654 6,883 7,127 7,392 7,695 8,004 8,347 8,715

Indirect coutAdinistration expense for A.S.1. 306 358 409 469 516 568 648 735 830 883 941 1,004 1,072 1,148 1,226 1,312 1,406

Total Expense 4,824 5,048 5,272 5,521 5,739 5,927 6,370 6,801 7,275 7,537 7,824 8,131 8,464 8,843 9,230 9,659 10,121

Operating Profit (or LOas) beforeCapital Cnargee (1,881) (91) 1,981 4,318 7,235 9,794 12,878 15,860 19,574 22,021 24,974 28,273 31,242 35,503 39,404 44,093 49,354

3eptenber 1971

Page 1

M3tICO

APPRAISAL CF THE ZIHUATANEJO TOURISM PROJECT

THE WATER SUPPLY. SEWJERAGE AJD STORW WATER DRAINAGE FPROJECT

A. Scope of Proiect

1. The development of the Ixtapa tourist resort by Iifratur, where3,500 rooms and 500 private residences are to be built will trigger a rapiddevelopment of the nearby town of Zihuatanejo. The population of theZihuatanejo area is expected to increase in ten years to about 50,000inhabitarts. This represents more than a ten-fold increase over the presentpopulation.

2. The pro ject will provide wjater supply, sdwerage and storm drainagefor the first phase of this growth, and the facilities are thus designedto supply 20,000 irliabitants of Zihuatanejo as well as the Ixtapa tourismzone.

3. Tnio entities will be responsible for the construction and operatiorof' the various elements of the project. Secretaria de Recursos Hydraulicos(SHR), a federal agency, will undertake all water supply, sewerage and stormdrainage works for Zihuatanejo as well as the Ixtapa water supply worksand sewerage treatment facilities. Inside the Ixtapa tourist zone, Infraturwill construct the water distribution system, together with the sewagecollection network (including pumping equipment) and storm drainage works.

B. Description of Project

WTater SuiPly - Ixtapa

4. The project vTill provide the :xtapa tourism zone with water fromthe Ixtapa Valley aquifer situated some 6 ka to the north of the touristzone. The facilities incluce:

(i) t,hree wells auqipped. it:1 ;p=pz and electrical motorsard chlor-r.atior. ecq-,en-

(U) 1.8 ki of l01 1,-.pel-úzes connecting the wells with thetransm:,isjion m.a-~n;

(iiíi a taan5.:__r. raizr of as_to. cercz-it 18" and 20"1in diameter a.-d ',7.o w -L ern4g-. .;

(iv) a 'coa,ter p-r&, n-" 3tat-co. to e_-ver 127 1/aec througha '.7 i. ~. r.a-i t o a~ 10Cçx m> S'9at tank sítuated

the lwxa',a zc,-c

Arnex>4Page 2

(V) the d',tributl ,+em lr.s,le .le Ixtapa zone,includíng a sm' - tank, small boosterstation te surn'y +*i c ` .1 gronds around the golfcourse, a nou,t 10?.0 e>s -^f str-ibution lines,house c,onnec.-mrs ad -ve - "tior equipment.

5. The transmission maíns -apacít+. -s designed so that, when thelocal sources of Zihuatanejo are f':lly deveionec, another 100 l/sec couldbe supplied from the Ixtapa valley sources by ex.ending the transmissionmain to Zihuatanejo. i.it+,4rg th§s adc ional .nacity now is cheaper inpresent value costs than building a nara Ie 'ire in 1979 at discount ratesup to 25%.

6. Elernents (i) to (ÑV) are to be built by SRH, while the distributionsystem will be constructed by Infratur.

Seweraie - Ixtali

7. Sewage collected from the hotels, the residences and the comercialdistriet will flow to a pumping stationr and be punped to stabilization pondsbuilt by SRH outeide the Infra-Ir nroperty. The pond effluent would be usedfor irrigation.

8. The length of sewers to be installed is about 16,500 m. Sewerlines will be made of concrete pipes in diameters varying from 8" to 24"and in reinforced concrete for diameters of 30" to 60".

Storm WJater Drainace - IxtalDa

9. Storm water drainage in Ixtapa will protect the residential sectioil..drain the hotel boulevard, and discharge storm waters into the lagoon. Some7,500 m of lateral drairis, 3,500 mn of in',erceptors and 200 m of outfallswill be constructed.

Water Supnlv - Zihuataneio

10. Water from the Zihuatanejo aquifer which has a potential capacityof 75 l/sec will be developed by construction of 3 new welle.. The distri-bution systen will be desigred to serve a population of about 20,000 in-habitants, the total new area to be supplied amounting to about 110 ha.Distribution works include the construction of a 1,500 m3 reservoir, 37.5 knof 2½9" diameter pvc pipe and 17.5 hm of asbestos cement maíns ranging fromU" to 12" in diameter, two booster pumping stations, chiorination equipmentand the supply and installation of 2,000 connections wn.th domestic watermeters.

Annex 4±'ag,e

Sewerage - Zihutaneojo

11. The sewerage system of Zihuatanejo will serve the area suppliedwith water (110 ha) including the separate section of the town in theLas Brisas beach developnient. Sewage fram Las Brisas will be pumped overthe mountain separating this area from Zihuatanejo. It will then flow bygravity to Zihuatanejo's putnpíng station. Sewage from Zihuatanejo and LasBrisas will then be pumped to stabilization ponds situated 1 ln outsidethe town's limits. Sewerage and sewage disposal works include: 38 km oflateral sewers of 8" diameter, 7 km of collectors rangíng in diameter from10" to 24", two pumping stations, two force mains of 4.8 kn and 1.9 km withrespective diameters of 18" and 12", the stabilization ponds, and the hauseconnections (15 km of 6" pipe).

Storm Drainage - Zihuatanajo

12. Storm water drainage consists basically of a main interceptorarnd four secondary lines discharging into the bay. The diameters of theconcrete storm water drains vary between 24" and 60" and their lengthtotals about 9.7 kn.

C. Cost Estimates of Project Elements

13. The estimated cost of the water supply, sewerage, sewage disposaland storn drainage component of the Zihuatanejo-Ixtapa tourism project issumnarized in the following tables. The first table is for works undertakerby SRH, the seccnd for works undertaken by Infratur. Cost estimates by geo-graphical area are given in Tables 8 and 9 of the Main Report. Cost esti-mates were prepared by SRH and Estudios y Proyectos (consultants to Infra-tur). Urit costs are based on the Mexican cost of gocds and civil worksand appear reasonable. A price contingencies allowance of 7% per year andtechnical cor.tingencies of 15% per year have been assumed, and these provi-sions should be adequate. Design costS are estimated at 4% of constructioncosts.

D. Procurement

14. All contracta for the supply of equipment would be subject tointernational competitive bidding. In view of the fact that numeroussmall civil works contracts will be required for construction of the worksand that only local contractora are likely to submit bids, it is proposedthat for civil work contracts only national competitive bidding be required,

E. Administration of Project

15. Both Infratur and SRH will employ consultants for the design oftheir respective parts of the project. Supervision of construction willbe done by SRH's own engineers and technicians, and by Infratur's new divi-sion of works in the tourist zone.

Annex h

F. Financial Aspects

16. Financial projectiona were made for tne water supply and seweragecomponents of the project in the form of Income Statement forecasts for SRHand Infratur respectively Sor the years 1972-84. The projections for Infraturare included in the consolidated statement of operating revenue and expen-diture shown in Table 1 o£ =nnex 2. The projectiona -efr SM.I ,reshown in Table 3 of this Annex. The two statements are not on an identicalbasis. For the SRH operation (bulk water supply to the tourist zone andretail supply and sewerage in Zihuatanejo) the table takes into accountoperating expenses, depreciation, and a return on capital; for Infratur(water distribution and sewage collection in the tourist zone), depreciationand return on capital are not included, since these are assumed to be recoupedin the sale price of land in the tourist zone.

17. These differences in presentation are suggested by the differingnature of the two developments; for the tourist zone, capital outlaysrepresent a once-for-all expenditure to be sold to developera as a package,with operation and maintenance covered by inclusive consumer charges, wqhereasin Zihuatanejo there ¡a an established community, and costs would have tobe recovered through water rates.

18. For the SRH operation, rates of Mex $1.60 per m3 for bulk supplyto the tourist zone, and of Mex $1.20 and 2.40 for retail distribution inZihuataneJo (the lower rate for residences and the higher for hotels) would,three years after completion of the project, cover costs including depreciationand provide a return on net fixed assets rising to about 9% in 1984. Thissurplus arises predlominantly from the bulk supply to the tourist zone. Forsales in Zihuatanejo the forecast covers only the population which can beserved by the first stage works - i.e., using Zihuatanejo own wells.

19. Within the tourist zone, an average resale price of Mex $2.40 permi3 for the water purchased in bullk from SRMH would cover Infratur's distri-bution costs over the period, together with sewer operating costs, but(as indicated above) not depreciation or any return on capital.

20. For these projections, water sales in thle tourist zone were basedon forecasts of tourist inflows (at an average of 4 days each) and rooasavailable, indicating occupation rates of betwieen approximately 60% and90 of hotel capacity. Per capita demand was assuned to be 600 lcd, less15% water losses in distribution. To the results were added estimates ofresidential consumption in the zone.

21. For Zihuatanejo, sales were based on population forecasts, lessa deduction for those not connected (50%, falling gradually to 27% at thepoint where Zihuatanejo's resources are fully used). Those connected wereasaumed to require 360 m3 per year per connection, at 7 persons per connection,plus an allowance for losses in transmission. As stated, calculations were

Annex 4Page5

made only to the point in population growt,h which can be supplied fromZihuatanejo's own resources (reached in 1979). Further demand could besupplied from Ixtapa bulk supply, and the supply system is designed forthis (see paragraph 5 above); but extensive distribution and sewerageworks in the town would also be requlred and these are not allowed for inthe projections at this stage.

22. Other as8umptions included the following:

(a) Operational personnel costs were based on detailedestimates supplied by the Mexican authorities.Administrative costa for Zihuatanejo distributionwere assumed to rise in proportion to the nunber ofconnections.

(b) Maintenance expenses were assumed to rise graduallyto a level of roughly 1% per annum of fixed assets(0.3% for sewers).

Annex 4Table 1

MEXICO: ZIHUATANEJO TOURISM PROJECT

GOST OF W1RKS TO BE UNDERTAKEN BY SRH

Local Foreign Total Local Foreign TotalItem Thousand Mex $ Thousand US$

1. Ixtapa Bulk Water SupplyConstruiction 3,307 1,998 5,305 265 160 425Design and Contingencies 1,147 692 1,839 92 55 147

Sub-Total 4,454 2,690 7,144 35'7 215 572

2. Ixtapa Sevage TreatmentConstruction 2,166 428 2,594 173 35 208Design and Contingencies 856 169 1,025 69 13 82

Sub-Total 3,022 597 3,619 242 48 290

3. Zihuatanejo Water ,pply 7Construction 6,327 1,664 7,991 507 133 640Design and Contingencies 2,380 542 2,922 191 43 234

Sub-Total 8,707 2,206 10,913 698 176 874

4. Zihuatanejo SeverageConstruction 11,906 3,509 15,415 953 282 1,235Design and Contingencies 4,664 1,374 6,038 373 110 483

Sub-Total 16,570 4,883 21,453 1,326 392 1,718

5. Zihuatanejo Storm DrainageConstruction 3,986 1,963 5,949 319 157 476

Design and Contingencies 1,387 683 2,070 111 55 166

Sub-Total 5.373 2,646 8,019 430 212 642

TOTAL SRH 38,126 13,022 51,148 3,053 1,043 4,o96

October 1971

Annex 4Table 2

MEXICO: ZIHUATANEJO TOURISM PROJECT

COST OF WORKS TO BE UNDERTAKEN BY INFRATUR

Local Foreign Total Local Foreign TotalItem Thousand Mex $ Thousand US$

1. Ixtapa Water DistributionConstruction 2,404 1,988 4,392 193 159 352Design and Contingencies 910 753 1,663 73 60 133

Sub-Total 3,314 2,741 6,o55 266 219 485

2. Ixtapa SewerageConstruction 6,172 2,981 9,153 494 239 733Design and Contingencies 2,438 1,178 3,616 195 94 289

Sub-Total 8,610 4,159 12,769 689 333 1,022

3. Ixtapa Sto=n DrainageConstruction 4,074 1,716 5,790 326 138 464Design and Contingencies 1,661 575 2,236 133 46 179

Sub-Total 5,735 2,291 8,026 459 184 643

TOTAL INFRATUR 17,659 9,191 26,850 1,414 736 2,150

October 1971

Annex 4Table 3

MEXICO: ZIHUATANEJO TOURISM PROJECT

SECRETARIA DE RECURSOS HIDRAULICOS - WATER SUPPLY AND SEWEBAE

PROJECTED INCOME STATEMENT (1972-84)

Fiscal Year Ending December 31 1972 1973 1974 1975 1976 1977 1978 1979 1980 1981 1982 1983 1984

- --------------------- ---- - ----------------Thousandm ….-

Water Output

Frnm Ixtapa Sources:Bulk Supply to Tourist Zone - - - 202 308 437 589 764 974 1219 1490 1809 2089

From Zihuatanejo Sources:Supply to Zihuatanejo 153 176 235 460 650 860 1260 1530 1530 1530 1530 1530 1530

Less Unaccounted for Water 23 26 35 70 97 132 191 230 230 230 230 230

Retail Sales in Zihuatanejo 130 150 200 390 553 728 1069 1300 1300 1300 1300 1300 1300

------ - -------- ------------------------ Thousand Mex $ -- _-_ _ _ _

Revenues

Water Sales:Tourist Zone (Bulk) Mex $1.60/m

3 - - - 323 493 699 942 1222 1558 1950 2384 2894 3342Zihuatanejo (Retail) @ Mex $1.38/m3 -/ 179 207 276 538 763 1005 1475 1794 1794 1794 1794 1794 1794

179 207 276 861 1256 1704 2417 3016 3352 3744 4178 4688 5136

Expenses

Ixtapa Production Personnel - - - 170 180 190 195 205 220 230 240 250 265Zihuatanejo Personnel & Admin. 50 55 60 165 250 330 440 500 500 500 500 500 500Maintenance - Water 14 15 15 50 100 150 200 200 200 200 200 200 200Maintenance - Sewerage - - - 33 43 53 63 63 63 63 63 63 63Chernicsls 1 2 3 8 11 16 22 28 30 33 36 40 43Power 3 5 7 60 90 120 170 210 220 232 245 260 275Depreciation - Water 37 37 38 263 489 489 489 489 489 489 489 489 489Depreciation - Sewerage - - - 215 430 430 430 430 430 430 430 430 430

105 114 123 964 1,593 1,778 2,009 2,125 2,152 2,177 2,203 2,232 2,265

Net Operating Income 74 93 153 (103) (337) (74) 408 891 1,200 1,567 1,975 2,456 2,871

Average Net Fixed Assets - Water 1,143 1,107 1,069 9,947 15,600 18,110 17,622 17,132 16,644 16,154 15,665 15,176 14,688Average Net Fixed Assets - Sewerage _ - - 10,512 21,017 20,587 20,157 19,727 19,297 18,86 18,437 18,007 17,577

Total Average Net Fixed Assets 1,143 1,107 1,069 20,459 39,617 38,697 37,779 36,859 35,997 35,021 34,102 33,183 32,265

Net Operating Income as % Return 6.5 8.4 14.3 - - - 1.1 2.4 3.3 4.5 5.8 7.4 8.9

1/ Average rate, assuming approximately 85% sold at domestia rate (Mex $1.20) and the remainder at hotel rate (Mex $2.40).

October 1971

AnnePage 1

MEXICO

APPRAISAL OF THE ZI~CALAZ¿0 TOURIa PROJECT

ECONOMIC JUSTIFICATION

Introduction

1. The net benefits to the economy will consist primarily of expendi-tures of visitors in the Zihuatanejo-Ixtapa area, 'ess the cost of operatirgall the facilities to be provilded. The relevant investment is the capitalcost of the infrastructure project itself, plus the investment costs ofsupplying hotel accommodation in Ixtapa and Zihuatanejo. The additionalinvestment that is likely to take place in local transport, entertainmentand shopping facilities have also been taken into account, although theyare esthmated to be relatively small. Although properly chargeable to theproject, revenues and costs associated with private villas, and with inter-national and domestic travel have not been taken into account, except thosedirectly related to the airport. The revenue and cost assumptions are

explained below.

Revenue and Cost Assxlnptions

2. As the nroject is part of a larger whole, including the hotels,its economic evaluation has been made in terms of this larger whole. Soneof the facilities to be provided wrould serve and be paid for directly by the

tourist, while others would be compensated for only indirectly. Accordingly,the costs and the benefits have been carefully analyzed so as to avoid arny

double counting.

3. A l.arge portion of the benefits from the program of investinentswould consist of expenditures by visitors to the area on food, lodging,entertainment, local transport, purchases and other minor items. Inaddition, the airport would earn revenue which is directly related toinvestment in the project. There would aleo be expenditures within theproject area by persons living in private villas and in condominiumsa, butthese have not been taken into account because of the difficulty ofestimating them.

4. It is assured zhat visitor expenditures in Ixtapa would not bevery different from currenrt daily average expenditures of air-visitors toItiexico, which were estialated to be US$31 in 1969. Given past trenda intourism prices, however, these average expernditures have been inflated by5% p.a. until 1975. Accordingly, ufhien the firet hotel opens in 1975,average expenditures are forecast tv be about US$38 a day. They would bea little higher in thXe Icta-3pa area (Z3$h,I . O and considerably lower inthe Zihuatanejo zone (US$20.75) where cheaper acconmodation would beavailable. Consistent with current expen<diture patterns, it is also

Annex 5Page 2

assumed that more than two-thirds of these expenditures will be spent inhotels (US$ 27.76), on accommodation, lood etc., while the rest will bespent on local transport (TJS$ 4.32), snopping (UTS3 4.98) and sports andother recreation (US$ 4.44). These expenditures can be considered con-servative when compared to actual expend-1a-^s of air visitors to Mexicostaying from 1 to 5 days, who spent US$ 46 a day on the average in 1969.Revenues frcm the airport are relatively small and nost of the economicbenefits are derived frca hotel operatLons.

5. In projecting project revenues it was assumed that the averagelength of stay of visitors to Zihuatanejo-Ixtapa would be 4 days and thatthe projected increase in additicnal hotel acconmodation would achieve aIevel of room occupancy of 75% in four years, with a first year occupancyof 40%. Occupancy of 1.8 persons per room is assumed to remain the sanethroughout the economic life of the project. These asaunptions are con-sistent with the projected potential size of the market for the projectand would be more than adequate to financially compensate private hotelinvestors.

6. Economic costs are derived frcm the project's financial accountsand are based on the actual experience of maintaining and operating simi-lar facilities elsewhere in Mexico. Some of the operating costs havebeen indirectly estinated. Thus, for example, the operating costs ofproviding electricity and telephone services have been taken from hotelaccounts, and are therefore notdirectly reflected in the operating cost'sof these itema of infrastructure (see Tab'es 1 to 3).

7. Investment costs include the capital costs of constructing infra-structure facilities in ixtapa and Zihuatanejo, and also the costs ofconstructing the airport. In addition, costs of constructing hotels andother superstructure facilíties have been taken into account. Hotelinvestment costs are assumed to average US$ 20,000 a room in Ixtapa andUS$ 10,000 in Zihuatanejo. Investment costa of infrastructure reflectthe price increases expected over the next four years while the invest-ment costs of hotels are calculated at 1975 prices. To the extent thatinvestnents in infrastructure if calculated at 1975 prices would begreater, this would be compensated by the tendency of prices in the tour-ism sector to rise faster than the general price level. Investment inprivate villas which eventually could be substantial, has been omittedfrom the calculations. The costs and revenues of the project are sum-marized below:

AnnexJ-.Page 3

(US$ Ivállion)

InvestmentCosts Investment Other TotalInfra- Costs Investme2t Investment Operati

Year structure Hotels CostsL Costo Costa- Revenues

1 - - 3.73 3.73 -

2 5.37 - - 5.37 -

3 16.59 6.6o _ 23.194 13.45 11.90 - 25.35 -5 3.83 7.60 1.00 12.43 8.38 9.246 - 10.90 1.00 11.90 12.48 15.527 - 10.60 1.00 11.60 19.29 25.328 . 8.90 1.00 9.90 26.74 36.999 - 5.60 1.00 6.60 34,08 47.00

10 - 5.90 - 5.9o 39.24 55.2511 _ 5.60 - 5.60 44.23 63.0412 - 3.90 - 3.90 48.34 69.6013 _- - 52.57 76.o914 to24 - - - - 56.00 82.00

1/ Includes investnent in land and an assumed figure for vehicles, boats,buses, etc.

2/ Operating costa and revenues for year 14 to 24 have been averaged forsimplicity of presentation. Revenues and operating costs after thatyear have gradually been reduced, asauming that the first hotelsopened close down after 20 years of operation.

Annex 5Page 4

8. The net benefits reaulting from the main categories of averagevisitor ezpenditures are shown below:

Average Gross Daily NetEpeBnditure Item Visitor Exenditure Benefits

-- s$) --(US )

Accommodation, food, beverage andother expenditures in hotels 27.76 9.72

Sports and recreational activities 4.44 0.89

Local transport 4.32 0.86

Purchases -4.98 0.50

41.50 11.97

9. The project facilities and equipment have varying economic lives,but as a whole it ¡a estimated that the project would have an economiclife of about 25 years. The need to make modest provision for sornereplacement expenditures during this period la considered to be offsetby the life of the main assets beyond 25 years.

Rates of Return

10. Based on the aboye estimates, the internal economic return on theprogram of investments would be 13.1%. This calculation, however, doesnot take into consideration the real economic costs of labor. Since the-construction and operation of the project ¡8 expected to employ consider-able numbers of relatively unskilled workers from the surrounding regionwho a.re currently under-employed or unemployed, the evaluation of theinvestnent calls for some of the labor inputs to be priced below the cur-rent market wage-rates. Accordingly, unakilled labor was priced at 70%below current market wage-rates. On this basis the internal economicreturn would be 19.4% and may be considered the Ilbest estimate."|

11. Improved infrastructure facilities in the town of Zihuatanejo con-atitute an important benefit to the local population. The above analysishas not taken into account these benefita because of the difficulties ofseparating that part of the investnent which will benefit the local popula-tion frcm investment that ia needed for the development of tourismr, bothIn Ixtapa and Zihuatanejo. It i9 realistic to assure, however, that overhalf of the investnents in infrastructure in Zihuatanejo would benefitthe local population rather than the tourism sector. On this basis the

Annex 5Page 5

economic rate of return on the tourism program as a whole would Inereaseto more than 20%.

Sensitivity Analysis

12. The rate of return would be sensitive to changes in occupancylevels and delays in the opening of hotels. With varying as8umptionaabout occupancy lev-ele and opening dates., and with shadow pricing ofunakilled labor the internal economic return would range frcm 15.6% toalmost 20.8%. Results of this sensitivity testing are ahown in the fol-lowing table:

Resulting Rate of Return.

(i) Opening dates (2 year clelay) 15.6

(i) Decrease in occupancy level andrevenues by 10% 18*0

(iii) Increase in occupancy levels andrevenues by 0l%' 20.8

(iv) No shadow-pricing 13.1

(v) Best estinate 19.4

It is clear that the rate of return is most sensitive to a change in thevalue of labor and, to a lesser extent, to delays in opening dates ofhotels.

Employment and Income Effects

13. The proposed programi's area o£ influerce is expected to extend to32 "municipiosí"l/ in the states of lúchoacan and Guerrero, with a totalpopulation of about 675,0CO. These "1sunicipiosi are anongst the poorestareas in Mexico with per capita G0? aDlout half -"e nat4r 4 al average andwith high rates of urempLoyaier.t and under-emp1oymeerit.

14. Between 196C and 19'70, it ís estiiated that whiie total populationin this zonae ncreasad by 37%, tne economicaly active population remained

1/ A ama-1 administrative oistriet.

Annex .7

Page o.

etatic at 160,000 and in relation to total population decreased from32.1% to 23.6% In 1970. Of the economically active population, onlyabout 30% are engaged in industry and services (8.5% and 22.3% respec-tively), while the remainder are engaged ín agriculture and otherprlmary activtieas (69.2%).

15. Investment in the proposed project la expected to increaseincome and employment in the area. When in full operation it la esti-mated that the project will provido direct and indirect employment fora lnimnum of 26,000 persona and will Increase the value of output inthe area of influence by about 30% as coirnared with 1970. Directemploynent ia estimated to be provided fJr more than 4,500 persona.

Direct Balance of Payments Impact

16. The proposed project ia expected to increase gross foreign exchangeearnings by about US$ 7 million in 1975 when the first hotels open up andby UB$ 62 million when the project becomes fully operational in 1986.This compares with US$ 575 million earned by tourism in Mexico in 1970.Because of the high proportion of foreign tourista that are expected tovisit the area and the low import content of operating costs, the esti-mated net foreign exchange earnings of the project are relatively high.At present, only 10% of every touriat dollar earned goes out of thecountry to pay for imports, technical services, interest, dividends,etc. With regard to the program of investments in the Ixtapa-Zihuatanejozone, the proportion ¡a likely to be scmewhat higher, since half the costof infrastructures would be financed from the proposed loan. On thisbasis, net foreign exchange earnings would amount to US$ 36 million in1980 and US$ 53 mil-Uon ín 1986, wqhich compares wíth the estimatedforeign exchange component of the proposed project of US$ 13 million,including price contingencies and foreign exchange component of super-atructure of about US$ 25 ndllion.

MEXICO

Summary of Operating Costs - Ixtapa, Town of Zihuatanejo and the Airport

(US$ Millions)

Year Operating Costs Operating Costs Operating Costs Total OperatingIxtapa only / Town of Zihuatanejo Airport / Costs

only /

1 7.20 0.79 0.39 8.382 11.09 0.99 O.4o 12.483 17.16 1.71 o.42 19.294 24.24 2.06 0.44 26.745 30.83 2.79 o.46 34.086 35.66 3.11 0.47 39.247 39.90 3.83 0.50 44.238 143.65 14.15 0.54 148.3149 47.12 4.87 0.58 52.57

10 48.59 5.18 0.60 54.3711 49.37 5.32 0.63 55.32

12-20 50.07 5.46 0.774 56.27

1/ See Table 2 of this Annexg See Table 3 of this AnnexL3/ Operating Costs averaged after Year 12 - sínce it assumes that the project will be in full operation

at that level after that.

H3:

MEXICO

Summary of Operating Costs - Ixtapa & Zihuatanejo 1/

(US$ Millions)

Cost of Providing Cost of Providing Cost of Providing4/ Cost of Providing Other Operating TotalAccommodation, Food Recreational and Local Transport 4 Shopping Gooda Costs O' Operating Costsand other Services Sport Activities 3_ and Services _

Year 1xtapa Zihuatanejo Ixtapa Zihuatanejo Ixtapa Zihuatanejo Ixtapa Zihuataneio Ixtapa Zihuatanejo

1 4.19 o.42 0.70 0.07 o.68 o.o6 0.88 0.09 0.74 0.15 7.20 0.792 6.50 0.53 1.20 0.10 1.17 0.09 1.49 0.12 0.73 0.15 11.09 0.993 10.20 0.97 1.92 0.18 1.88 0.18 2.43 0.23 0.73 0.15 17.16 1.714 14.42 1.17 2.80 0.23 2.73 0.22 3.53 0.29 0.76 0.15 24.24 2.065 18.42 1.62 3.62 0.32 3.52 0.31 4.57 o.40 0.71 0.15 30.83 2.796 21.24 1.79 4.26 0.36 4.16 0.35 5.38 0.46 0.69 0.15 35.66 3.117 23.76 2.23 4.82 0.4s 4.69 0.44 6.08 o.57 0.56 0.15 39.90 3.838 26.o8 2.41 5.31 o.49 5.17 0.48 6.71 0.62 0.39 0.15 43.65 4.159 28.19 2.84 5.75 0.58 5.59 0.57 7.25 0.73 0.35 0.15 47.12 4.87

10 28.90 3.01 5.95 0.63 5.79 o.61 7.51 0.79 0.44 0.15 48.59 5.1811 29.31 3.10 6.07 o.64 5-90 0.63 7.66 0.81 0.44 0.15 49.37 5.32

12-20 29.51 3.18 6.13 0.66 5.96 o.64 7.73 0.83 0.74 0.15 50.07 5.46

1/ Revenaes and operating costa have been gradually reduced after Year 20, on the assumption that the first hotels opened close down after 20 years ofoperaticn, except in the case of "other operating costs", which remain at approximately the sa~e level.

2/ See Table 4 of this Annex. <

'/ Gross operating cost assamed to be 80% of revenues from this item.i/ Gross operating cost asusmed to be 80% of revenues from this iten.

Gross operating cost assamed to be 90% of revenues from this item.-/ Operating cost of providing street lighting, road maintenance, etc. (See Table 1 of Annex 3).

Note: Assumptions made with regard to average gross operating margins have been based on a financial survey of existing hotels in Mexico City, Acapulcoand Puerto Vallarta and on information provided by Infratur. The assumptiona are considered conservative.

Aanex 5Table 3

OPERATINO HOTEL FROJECTIoN F0R IXTAPRO TOURISO DEVEDPMET

(in U,S. $ .000)

Operating Year 1 2 3 4 5 6 7 s 9 10 11 12

1. Roomo/DOcupancy (40%) 750 Ros 250 Rms 500 Rm s 500R 500 Rms 250 Rms 250 Rrs 250 Rms 250 Rmss-

Occupancy (65%) - 750 Rms 250 Rms 500 Rms oRms 500 Rms 250 Rms 250 Rms 250 Rms 250 Rms!Occupancy (75%) _ - 750 Rms L 1,500 Ros 2,000 Ros 2,500 Rms 2750 3,000 Rs 3250 Rs 3,500 Ros

Total Rooms 750 Rms 1,000 Rros 1,500 Rms 2,000 Rms 2,500 Rms 2,750 Rms 3,000 Rms 3,250 Rms 3,500 Ros 3,500 Rms 3,500 Rms 3,500 Rms

2. Number of Occupied Roosper day 300 Ros 513 Ros 825 Ros 1200 Ros 1,550 Roo 1,825 Ros 2,063 Ros 22,275 Roms 2,1463 Ros 2,550 Ros 2,600 Ros 2,625 Ros

per year 109,500 Ros 187,245 Rms 301,125 Rmo 438,OO Rm s 565,750 Ros 666,125 Rm 752,995 R.s 830,375 Ro 898,Q95 Ros 930,750 Ros 949,000 Ros 958,125 R.s

3. Average Room Occupancy 40.0% 51.3% 55.0% 60.o% 62.0% 66.4% 68,6% 70.0% 70.4% 72.9% 74.3% 75.0%

Revenue

P'oodi 2,847 4,864 7,829 11,387 14,710 17,320 19,574 21,591 23,370 24,201 24,675 2L4,913

Boverage1,296 2,211 3,559 5,177 6,687 7,8714 8,899 9,8i6 l0,625 11,002 U1,218 1-1,326

Telephone 933 1,592 2,563 3,729 4,8114 5,669 6,1407 7,068 7,651 7,922 8.078 8,155

Other 28 144 71 103 133 156 176 1914 210 218 222 221478 134 214 312 401_ 472 534 589 638 660 673 679

Total Revenue 5,278 (10.0) 8,845 W.o) 14,236 (OMo) 20,708 (lO.0) 26,745 (tOO.O 31,491 W0.0) 35,590 (X-0) 39,258 p0.) 42,0494 .O0) 44,003 ho) 44,866 00.0) 45,297 40)

OPerotin0L Cost and Expenses

Direct Cost

Beverage 453 775 1,248 1,812 2,340 2,755 3,114 3,435 3,718 3,85o 3,925 3,962

Telephone 234 399 6140 933 1,203 1,1417 1,601 1,766 1,912 1,979 2,018 2,037

Qthesao 21 37 57 83 107 126 1143 158 171 177 180 182

W&ter & Eaect. 148 82 128 186 2140 283 320 353 382 395 1402 1406

207 354 569 8310 1,0470° 1,260 1,424 35311,7021 1,761 1,796 1.813

Sub Total 963 (16.6) i,647 (18.6) 2.642 (18.6) 33,844 (18.6) 4,960 (18.5 5,841 (18.5) 6,602 (18.6) 7,283 (18.6) 7,884 (18.6) 8,162 (18.6) 8,321 (18.5) 8,400 (1B.5)

Othar ExpensesP~yr t1 atCot 1,785 (314.5) 2,725 (30.8) 14,260 (29.9) 5,988 (28.9) 7,636 (28.6) 8,769 (27.8) 9,786 (27.5) 10.727 (27.3) 11,591 (27.3) 11,859 (27.0) 12,013 (26.8) 12,089 (26.7)

Pstratio n 390 520 779 1,038 1,295 1,425 1,555 1,685 1,815 1,814 1,814 1,813roat, Light, Power 156 208 312 416 520 572 6214 676 728 72B 728 728

ha,Pia & MariitePowce 87 116 174 232 290 319 348 377 406 406 406 406Repair &itnc234 312 467 622 775 853 931 1,309 1,387 1,087 1,086 1,085

Other 570 973 1,568 2,279 2,943 3,465 3,916 4,32r, 4,676 _ 4,842 _ 4,937 4,984

Sub Total 3.222 (62.2) 4,854 (54.9) 7,560 (53.1) 10,575 (51.1) 1-3,45 (5C.3) 15,403 (48.9) 17,160 (48.2) 18,794 (47,9) 20,303 (47.8) 20,735 (47.1) 20,984 (46.8) 21,105 (46.6)

Total Cost & Ricpenses 4,185 (80.8) 6.501 (73.5) 10,202 (71.7) 14.419 (69.6) 18,419 (68.9) 21,2244 (67.5) 23,762 (66.8) 26,077 (66.4) 28,187 (66.3) 28,897 (65.7) 29,305 (65.3) 29,505 (65.1)

993 (19.2) 2,344 (26.5) 4,o034 (28.3) 6.289 (30.4) 8,326 (31.1) 10,247 (32.5) 11,828 (33.2) 13,181 (33.6) 14,307 (33.7) 15,106 (34.3) 15,561 (34.7) 15,792 (34.8)

MEXICO TOURISM PROJECT

SCHEDULES OF IMPLEMENTATION, EXPENDITURES, AND DISBURSEMENTS

YEARS 1 11 llV

QUARTERS Ql Q2 03 Q4 Qs QÓ Q7 as 09 Qio Qll Q12 Q13 Q14 015 Q16

IXTAPA AREALIAIILITY PERIOD

SITEWORKS _ _lIllIllIl ItIIlIII

CONSTRUCTION _ _llIllIll l 1 nnuumumu lilI¡Ili

EQUIPMENT - - - - - -_ _ lIlIllIll _ IllIllIlhl

TOWN OF ZIHUATANEJO

SllEWORKS _ _ _ _ _ _ _ _ _ Ulilililill L;ABILLAIPERIOD

CONSTRUCTION _i_liIIIiii UlihllM lIihllil

EQUIPMENT - _ - -_ _ tIIIll Riililil litilialill

INTERNATIONAL AIRPORT -IABI-T -

SITEWORKS _ _ _ _ __ _ _ _ l E R OiDNii

CONSTRUCTION _ _ _ lIlhl lIl l IIIIMII

EQUIPMENT _ _ _ _ _ _ Uumuuuum

TECH-N_CAL _ _ _ __ ASSI STA NCECL N

_ ~ ~ ___ ___ __ DATECLOSING

LOAN AGREEMENT _

SIGNING DATE

EXPENDITURES(IN U.S. DOLLARS) 6,745,600 1 ',437,800 1 ,466,700

RATE 16.2% 46.7% 37.1%

DISBURSEMENTS(IN U.S. DOLLARS) 828,200 8,442,600 10,583,100 2,146,1 00

RATE - 3.7% 38.4% 48.1% 9_8%

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ZIHUATANEJO

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COACOYUL INTERNATIONAL AIRPORTAPPROACH TERMINAL PROCEDURES AIRPORT SURFACES (ICAO) AND TERPS' SAFETY AREAS

DEPARTURE AR

t ~~~~~~~~~~AP~RACH RA -

APROACH PROCEDURE (VOR) RUNWAE OR

NOTE: CONTOUIS AT 50 METER INTERVALS 5996(R)