Document of

The World Bank

FOR OFFICIAL USE ONLY

Report No. 2415-EC

ECUADOR

GUAYAQUIL URBAN DEVELOPMENT PROJECT

STAFF APPRAISAL REPORT

November 9, 1979

Projects DepartmentLatin America and the Caribbean Regional Office

This document has a restricted distribution and may be used by recipients only in the performance oftheir official duties. Its contents may not otherwise be disclosed without World Bank authorization.

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CURRENCY EQUIVALENTS

1 Sucre (S/l) = US$0.04Us$1 = S/25

WEIGHTS AND MEASURES

1 meter (m) 2 = 39.37 inches

1 square meter ) = 10.76 square feet

1 cubic meter (m ) = 35.31 cubic feet1 kilometer (km) = 0.62 mile

1 hectare (ha) = 2.47 acres

1 liter (1) = 0.26 US gallon

ABBREVIATIONS AND ACRONYMS

BEV - Banco Ecuatoriano de la Vivienda - Ecuadorian Housing Bank

CEDEGE - Comision de Estudios para el Desarrollo de la Cuenca del

Rio Guayas - Commission to Stuey the Development of the

Guayas River Basin

CENAPIA - Centro Nacional de Pequena Industria y Artesanía -

National Small-Scale Enterprise and Artisan Center

CENDES - Centro de Desarrollo Industrial - Center for Industrial Development

DECE - Departamento de Construcciones Escolares - Department of School

ConstructionEMAG - Empresa Municipal de Alcantarillado de Guayaquil - Sewerage

Company of the Municipality of Guayaquil

EMAP - Empresa Municipal de Agua Potable - Water Company of the

MunicipalityFODERUMA - Fondo de Desarrollo del Sector Rural Marginal - Development

Fund for the Marginal Rural Sector

FONAPRE - Fondo Nacional de Preinversion - National Pre-Investment Fu"-

IBRD - International Bank for Reconstruction and Development

IDB - Inter-American Development Bank

IEOS - Instituto Ecuatoriano de Obras Sanitarias - Ecuadorian Institute

for Health WorksIESS - Instituto Ecuatoriano de Seguro Social - Ecuadorian Institute

for Social SecarityINECEL - Instituto Ecuatoriano de Electrificacion - Ecuadorian Electrical

CompanyJUNAPLA - Junta Nacional de Planificacion - National Planning Board

JNV - Junta Nacional de la Vivienda - National Housing Board

PREDAM - Plan de Rehabilitacion de las Areas Marginales de Guayaquil -Plan for the Rehabilitation of the Marginal Areas of Guayaquil

SECAP - Servicio Ecuatoriano de Capacitacion Profesional - Ecuadorian

Professional Training ServiceUNICEF - United Nations Children's FundUNDP - United Nations Development Program

UNO - Uniao Nordestina de Assistencia as Pequenas Organizacoes -Union of Assistance to Small-Scale Enterprises

USAID - United States Agency for International Development

WHO - World Health Organization

FISCAL YEAR

January 1 - December 31

FOR OFFICIAL USE ONLY

ECUADOR

GUAYAQUIL URBAN DEVELOPMENT PROJECT

STAFF APPRAISAL REPORT

Table of Contents

Page No.

I. URBAN POVERTY BACKGROUND .................................* 1

A. Urban Growth and Urban Poverty in Guayaquil .... ...... 1B. Previous Policy Response ..... ........................... 3C. New Policy Directíons ...... .................. ......... 5

II. PROJECT COMPONENTS, COST AND FINANCING ....................... 7

A. The Project ..................................... 7B. Project Costs ............ * ................... .. ..... .. 10C. Financing .................................................... 0........ 10

III. DETAILED PROJECT DESCRIPTION ...................... *.o . ....... 13

A. Support to Small-Scale Enterprises ......... .. ............ 13B. Services to Low-Income Areas ..... ........................ 16C. Housing Loans ............................................ 23

IV. EXECUTING AGENCIES ....... ................................... 26

A. Banco del Pacifico and CENAPIA . . 26B. Municipalíty of Guayaquil ................................ 28C. BEV/JNV ................................................ 31

V. PROJECT IMPLEMENTATION ....................................... 34

A. Implementation Schedule ...... ............ ............... . 34B. Procurement . . .............. ...................o.... 34C. Disbursement ............................................. 36D. Monitoring and Evaluation ........... ................... 37

VI. FINANCIAL ANALYSIS . ................. *. 38

A. Cost Recovery ............................................ 38B. Affordability ........ .................................... 43C. Replicability ....... .................. ......... .......... 45D. Cash Flow Analysis ..................................... 45

This report is based on the findings of an appraisal mission that visitedEcuador in December 1978. The mission consisted of P. Patel (Chief ofYlission), D. Beckmann, G. Gattoni, M. Etcheverry (IBRD), and D. Hellinger,J. RackL and J. Ladd (Consultants). The report also includes informationfrom a follow-up visit by C. Jones in April 1979. Mr. Beckmann had primaryresponsibility for the report.

This document has a restricted distribution and may be used by recipients only in the performanceof thcir oflcial duties. Its contents may not otherwise be disclsed without Worid Bank authorization.

Table of Contents (Continued) Page No.

VII. ECONOMIC ANALYSIS ............. 46

A. Economic Benefits . ............ .... . . .................. 46B. Economic Rates of Return *.............. 47C. Urban Poverty Impact .. * ................. ........ 49

VIII. AGREEMENTS AND RECOMMENDATION ..... ..................... .... 50

ANNEX 1: Selected Documents and Data Available in the Project File

MAPS

DkAWINGS

PROTOGRAPRS

I. URBAN POVERTY BACKGROUND

A. Urban Growth and Urban Poverty in Guayaquil

1.01 Guayaquil is the center of commerce and industry in Ecuador, yet thecity is also characterized by widespread poverty. Employment possibilitieshave swelled Guayaquil's population, but the distribution of income is skewed,and neither public agencies nor the banks have provided much support to thebustling informal sector. The poor have generally settled in cane houses onpoles over swampy areas of the city. Sanitary conditions in these neighbor-hoods are bad, and the death rate from sanitation-related diseases is high.Public housing agencies have failed to address the shelter requirements ofGuayaquil's low-income population on any significant scale. The Municipalityhas frequently given away public property and basic services in response topressures from residents in squatter areas, but has seldom recovered thecosts. Partly because of this, its finances are depleted, and even the citycenter is poorly maintained.

Guayaquil's Growth and Incomes

1.02 Of Ecuador's 7.8 million people, 3.3 million (42%) live in urbanareas, 750,000 in Quito and about 1 million in Guayaquil. AlthoughGuayas Province (Guayaquil) represents 13% of the national population, itcontributes over 30% of gross domestic product and over 50% of GDP attribut-able to commerce, manufacturing, and finance. For over a decade Guayaquil wasone of the fastest growing cities of Latin America, but its industrial boom inthe 1950's and 1960's has given way to the petroleum boom of the 1970's. Theresulting growth in public sector employment has been felt more in Quito. Thepopulation growth rate of Guayaquil has fallen to 4.6%, still higher than inEcuador as a whole (3.4%) or all urban areas (4.4%), and high enough to implythat the population of Guayaquil should double by the year 2000.

1.03 An estimated 75% of all industrial employment is generated by smallenterprises. The city center is characterized by thousands of little shopsand workshops. Some informal sector businesses are quite profitable, butthey receive inadequate support from public agencies and the banking system.They must rely on suppliers' credits at interest rates of 25-40% per year orborrow from money-lenders at 10-20% per month. Government programs designedto assist them have only begun to achieve the coverage necessary.

1.04 On the other end of the economic spectrum, there has been substan-tial investment in capital-intensive production processes. The averagecost for new jobs during the early and mid-1970's was on the order ofUS$22,000 per job (in 1979 prices). Income tax and custom duty exemptions,low real interest rates for bank credit, and undervalued foreign exchange allfavor capital-intensive investment and reinforce the dualism of Ecuador'seconomy.

1.05 Although Ecuador's incoimes have risen rapidly due to petroleumexploítation, they are still low compared to most of Latin America; incomesin Guayaquil, although generally higher than any place else in Ecuador except

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Quito, are low too. About 37% of families earn too little income (belowUS$394 per capita per annum) to be able to afford a calorie adequate diet.Moreover, the income distribution of Guayaquil is highly skewed. The poorest40% enjoy less than 20% of the city's income, and approximately 26% of house-holds, those with less than US$324 per capita per annum, are below the rela-tive urban poverty threshold (defined as a third of the national averageincome adjusted for Guayaquil prices), This skewness, too, is characteristicof the nation as a whole.

Residential Development

1.06 Guayaquil became economically important because it is a port city,but its physical growth has been constrained by the Guayas River, an estuary,hills, and seasonal flooding. Thus, the cil:y has expanded westward intoswampland. Low-income settlers have built homes on poles over the swamp,usually settling in the pattern of city blocks. The western swamps, knownas the Suburbio, were mainly municipal property, and squatters' cooperativesoften obtained permission, if not legal tenure, from sympathetic officíals.The squatters gradually obtained landfill, through their own efforts or bypressuring public authorities. Much of the landfill used has been garbage;the Sanitation Department of the Municipality has deposited the city'sgarbage around blocks and as a base for streets in certain areas. Residentsgenerally approve of this system, because the garbage eventually forms asemistable landfill. Authorities have followed up by providing limitedpublic services.

1.07 The Suburbio grew at a rate of 9.1% per annum during the intercensalperiod 1962-1974 and now includes at least 450,000 people, nearly half ofGuayaquil's population. The older areas of the Suburbio, those closest tothe city center, are relatively well consolidated. Nevertheless, the tenuresituation is complex, services are limited (no sewerage for example), and someswampy areas inside blocks have never been filled. At the western edge of theSuburbio settlers are still putting up temporary houses on poles and livingwithout public services. This process is coming to an end, however, as theSuburbio extends out past the swamp and down the banks of the estuary itself.

1.08 Because of the geographical constraints, Guayaquil is exceptionallycompact. Net density in the city center is over 600 people per hectare.Offices, institutions, commerce, and light industry in the city center gener-ate about 50% of the employment in Guayaquil. About 200,000 people live inthe city.center, many of them in slum apartments called the central tugurios.Many of these dilapidated residences are being torn down, largely to makespace for new shops and office buildings.

1.09 As a result, squatter invasions have begun in the northern andsouthern parts of Guayaquil. These had been areas of upper- and middle-classsettlement, with some industry in the north. The land is mostly privatelyowned. In the north, invasions are settling on the steep hills near olderlow-income settlements such as Lotizacion M1apasingue and Duran. The mostrapidly growing invasion is in the south in an area called Guasmo, mostly onmunicipal property. This area is low and subject to seasonal flooding, but

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during the latter part of 1978 a succession of invasions more than doubled thepopulation of squatter settlements there. The problem of invasions has becomean urgent priority for the public authorities, in part because virtually allmunicipal land has been exhausted. Several recent invasions have been onprivate land, as are likely to be future invasions.

1.10 Due to rapid growth, widespread poverty, inadequate planning, andthe special geographical problems of Guayaquil, a substantial proportion ofthe population lacks adequate urban services. Nearly a third of the house-holds in Guayaquil depend on tanker trucks for their water, although truckedwater is less sanitary and costs 25 times as much per liter as piped water.Half or nearly half of the city's population needs landfill, better drainage,and sewerage service. There is only one health center or sub-center for every41,000 people in low-income areas. Only about 70% of school-aged children areenrolled in school, most of them in poor-quality private scbools.

1.11 These levels of service, although inadequate, are comparable toQuito and better than in the rural areas and secondary cities. Guayaquil'sproblem is unique, however, because of its inhospitable geography and tropicalclimate. The rates of infant mortalíty and of fatality due to infectious andparasitic diseases are higher for Guayaquil than for other urban areas inEcuador. The leading causes of death in Guayaquil are enteritis and otherdiarrhetic diseases. The fatality rate for these diseases is 132 per thousandin Guayaquil, that is, 1.2 times higher than in Ecuador as a whole and 1.3times higher than in Quito. It compares to World Health Organization (WHO)estimates of an average rate of 103 per thousand for thirteen selected coun-tries in Latin America.

B. Previous Policy Responses

Employment and Incomes

1.12 Spurred by petroleum revenues, Ecuador's economy has been growingrapidly. Open unemployment is low, with Quito in particul'ar benefiting fromincreased job opportunities. Overall management of the economy has beenrelatively good, but more attention needs to be given to the nation's seriousincome distribution and poverty problems.

1.13 During the past decade, Central Government has become stronger vis-a-vis the private sector and local authorities. A variety of special fundsand local government revenues were centralized in 1971 in the Fondo Nacionalde Participaciones, which now allocates investments from a national perspec-tive. Within the Suburbio several small employment generation programs areunderway, including labor exchanges, production companies, training centers,and workshops. One national Government policy toward the special problemsof Guayaquil has been to encourage regional planning and decentralized growthas an alternative to further growth in Guayaquil. The Governnent's Comisionde Estudios para el Desarrollo de la Cuenca del Rio Guayas (CEDEGE) wasestablished to formulate projects to develop the region as a whole, partlyin order to slow further migration to Guayaquil.

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1.14 Compared to the generous incentives which large, capital-intensiveindustries receive in Ecuador (para. 1.04), small-scale enterprises get littlesupport. Yet small-scale enterprises are normally based on more appropriatetechnologies and provide relatively more emp:Loyment to the poor. Ecuadorianlaw distinguishes between small-scale industries (10 or more workers, morethan US$12,000 in fixed assets) and artisans (even smaller industrial enter-prises). Both small-scale industries and artisans are exempted from mosttaxes. Several agencies under the Ministry of Industries assist small-scaleindustries, but few of their services reach artisans.

1.15 The Central Bank offers incentives for commercial bank lendingto both small-scale industries and artisaíl,; cediscounting such loans at 3%interest through its Fondos Financieros; this low cost rediscount facility isonly intermittently available, however. Comnercial banks are lending readilyto small-scale industries, a healthy development to be supported by an IBRDsmall-scale industry project now being prepared. To date, however, only twobanks have substantial programs of lending to artisans. The state-owned BancoNacional de Fomento has been lending to artisans for more than a decade, butthis program is hampered by administrative problems and delays. A privatebank, the Banco del Pacifico, operates a new and growing program of lendingto artisans.

Management of Urban Growth

1.16 The management of urban growth and provision of urban servicesis primarily the responsibility of the Municipality of Guayaquil. It waslong-standing municipal policy to tolerate the process of settlement andreclamation of the Suburbio. The Municipality has gradually provided landfill,some modest roads, piped water, and sometimes other services to low-incomesettlements, but on an ad hoc and irregular basis. There has seldom been anycost recovery, and, as a result, the services provided have been very limited.

1.17 Past policy has resulted in a very confused land tenure situationin Guayaquil. The Municipality has been following three different policiestoward land in the three parts of the city where invasions are in proceso:(1) at the end of the Suburbio the Municipality has encouraged cooperativesand provided free landfill in what is called the Plan Piloto; (2) in Guasmothe Municipality offered property for sale to squatters at cadastral value,then at the nominal price of S/10 (US$.40) per square meter, and then fixeda minimum price of S/100 (US$4.00) per square meter, only to be overruled by adecree of Congress setting the price at S/10 again; and (3) to the north ofthe city, where squatters have settled on privately owned, hilly land, theMunicipality has not reacted at all. Such inconsistency encourages invasions,"and forces the low-income households involved to submit to the risk andtrouble of threatened eviction.

1.18 During the last decade considerable progress has been made at themunicipal level in the organization and extent of water supply and sewerage/drainage. In 1970 the Municipality established an autonomous water company,EMAP (Empresa Municipal de Agua Potable). EMAP is executing IBRD's GuayaquilWater Supply Project (Loan EC-1030), including the extension of water supply

to the more consolidated part of the Suburbio and to other unserviced neigh-

borhoods in the city. The municipal sewerage/drainage company, EMAG (Empresa

Municipal de Alcantarillado de Guayaquil), was established in 1967, and IDB

financing for a Suburbio sewerage project was obtained. Beginning with the

IDB project, the sewerage company will begin to recover all capital costs from

beneficiaries, but on very soft terms. The project will provide landfill and

secure tenure, as well as sewerage and storm water drainage, to much of the

same area of the Suburbio which is being served by the IBRD water supply

project. Extension of water and sewerage connections to the remainder of the

Suburbio will be expensive and technically difficult; it is a low-lying area,

so sewerage would have to be pumped out, and past use of garbage as landfill

might cause the pipes to be unstable.

1.19 During the 1974-77 period the Government attempted a national

housing program to increase the housing supply and meet the housing demand

of lower-income groups. The major housing institutions (Instituto Ecuatoriano

de Seguro Social, Banco Ecuatoriano de la Vivienda/Junta Nacional de la

Vivienda, and the savings and loan associations) were mobilized, and special

incentives were given to the private construction sector. The 98,000 units

constructed during that period were still not sufficient to keep up with

population growth. The housing deficit increased from 398,000 to 485,000units, and official estimates of a qualitative deficit in housing are

approximately 60% higher. During the next five years, the demand for housing

is expected to increase by about 54,000 units per annum, of which 9,000 per

annum will be required in Guayaquil.

1.20 The formal sector has not addressed the demand for low-income hous-

ing on a significant scale. The national social security system, Instituto

Ecuatoriano de Seguro Social (IESS), invests nearly US$3 million in Guayaquil

annually to provide houses for sale to its members, but to date has not built

houses for less than US$10,000. A savings and loan association (mutualista)has been established in each province, and the system has been expanding

dramatically, but the average value of the homes financed through the

mutualistas is more than US$12,000. The Banco Ecuatoriano de la Vivienda

(BEV) and its twin organization, Junta Nacional de la Vivienda (JNV), have

also been expanding their output rapidly to the present average of about

4,000 new houses a year. A few of these have cost as little as US$1,000, but

nearly all have been in the US$4,000-US$18,000 range. The most economical

BEV-JNV houses in Guayaquil as of appraisal had cost US$7,000. The Munici-pality of Guayaquil, like other municipalities in Ecuador, has establishedinappropriate urban development regulations, which virtually preclude the

development of formal sector housing which would be affordable to the poor.

C. New Policy Directions

Origins of the Project

1.21 This project will represent a substantial shift in public policy.

Before its preparation, there had been protracted discussion and a series of

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studies about the problems of low-income people in Guayaquil, but with littlepractical effect. Only about 14% of the public investment program inGuayaquil 1974-79 could be considered poverty-oriented investment. Initialdiscussions between IBRD and the previous management of BEV broke down overquestions of standards and cost recovery. Meanwhile, the mayor of Guayaquilwas mobilizing support for a massive, 50,000-lot sites and services project.A 50,000-lot project would, in fact, be needed to cope with the growth ofthe low-income population during the next five years and meet the backlogof demand in Guayaquil. No other agency in the world, however, has yetimplemented a sites and services project of that size, and the Municipalityhad no experience or proven capacity for this sort of development.

1.22 IBRD agreed with the Municipality to finance, from the SecondTechnical Assistance Loan (S-006-EC), a consultants' study of the feasibilityof their ambitious urban development plans. At the same time, IBRD missionsbegan to assist the Municipality in the preparation, based on previous studies,of this first Guayaquil Urban Development Project. This project was tailoredto existing implementation capacity, excluding, for example, the large andcomplex task of upgrading the unconsolidated part of the Suburbio. It wasdesigned to include manageable components of sites and services development,slum upgrading, and credit to small-scale enterprises in order to expandimplementation capacity for each of these types of poverty-oriented invest-ment.

1.23 Some progress in developing institutional capacity has been madeduring project preparation. A core of technical staff in the Municipalityhas gained experience in project design and been formed into a project unit,and the Municipality has .for the first time expropriated land for low-incomeshelter development. BEV-JNV has committed itself to serve low-incomehousing needs on a much larger scale than before. The IBRD appraisalmission suggested a ceiling of S/100,000 (US$4,000) for units to be includedin the project, and, following appraisal, BEV-JNV built 210 houses at aboutthat cost with their own funds. Also following appraisal, the nationalplanning ministry (JUNAPLA), Central Bank, and UNICEF together sponsoredseveral seminars to foster better coordination among various public agencieswhich are or should be involved in marginal areas of Guayaquil.

The New Government

1.24 Negotiation of the project was delayed during the middle part of 1979as the result of the transition between administrations. The Government whichcame to power in August 1979 has treated the shelter situation of the poor inGuayaquil as one of its first priorities. The new President promised to addressthe problems of Mapasingue and Guasmo in his inauguration speech. During thefirst week of his administration, he personally visited these areas. The newMinister of Finance has assured IBRD in writing that public counterpart fundswill be made available for this project.

1.25 The new management of BEV-JNV has announced a dramatic change inBEV-JNV's orientation, more toward the needs of the poor. An ambitiousBEV-JNV shelter program for low-income people in Guayaquil has been outlined.

* Uo

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It includes this project, and the new management of BEV-JNV is also promising theconstruction of 10,000 houses at about the cost of the 210 which were builtafter the IBRD appraisal. They have also indicated their intention to chargemore realistic interest rates on small loans, another issue which had beenunder discussion between IBRD and BEV's previous management for several years.At the time of negotiation of this project, BEV-JNV proposed IBRD considerationof a national popular housing project, in addition to the future urban developmentproject in Guyaquil which may result from the study financed from the SecondTechnical Assistance Loan (para. 1.22).

II. PROJECT COMPONENTS, COST AND FINANCING

A. The Project

Objectives

2.01 This first Guayaquil Urban Development Project was designed, usingexisting data and in advance of the longer-term consultants' study (para.1.22), to initiate large-scale programs of employment generation and resi-dential development of benefit to low-income families in Guayaquil. It shouldbe of immediate benefit to about 10% of Guayaquil's population. Its primeobjective, however, is institutional and policy development. It should:

(i) expand the support which banks and the Government's technicalassistance agency are giving to very small-scale enterprises;

(ii) strengthen the Municipality's efforts to serve low-incomeareas by developing its technical capacity, improving itsfinancial management and cost recovery practices, provokingmore realistic development norms, and assisting in theregularization of land tenure;

(iii) allow the national housing bank, much better organized,larger-scale experience in financing housing which isappropriate and affordable for low-income families.

Components

2.02 This is an integrated urban development project, consisting of threerelated sub-projects as shown in this summary cost table:

Summary of Costs(including contingencies)

US$ MillionEquivalent %

Support to Small-Scale Enterprises 10.8 21Services to Low-Income Areas 24.2 47Housing Loans 16.6 32

TOTAL 51.6 100

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Support to Small-Scale Enterprises

2.03 An existing líne of credit for arltisans from a commercial bank,Banco del Pacifico, would be increased in scale and expanded to includepetty commerce and services. Other commercLal banks which qualify may par-ticipate. The small-scale entrepreneurs who receive loans would be eligiblefor a coordinated, expanded program of technical assistance from CENAPIA(Centro Nacional de Pequena Industria y Artesania). The whole program wouldbe city-wide, but would specifically cover the low-income residential areasin the project. A total of about 6,400 loans would be made during the three-and-a-half year program. The average loan size will be US$1,113 in 1979,increasing with inflation during the project period. About 5,200 enterpriseswill be assisted, involving about 16,000 individuals (owners and workers),many of them on poverty wages. Investing in these labor-intensive enterprisesshould improve profits and tend to raise productivity and wages, as well asallowing for the creation of thousands of additional jobs in the enterprisesinvolved.

Services for Low-Income Residential Development

2.04 (a) Squatter Upgrading. Thís component would provide securetenure, landfill, basic infrastructure, and orderlydensification in two substandard settlements, LotizacionMapasingue and Guasmo North (see Map 14138 showing projectsites). Community residents and their associations will haveopportunity to participate in planning and implementing theseupgrading measures. Lotizacion Mapasingue is typical ofolder, consolidated informal settlements in Guayaquil; GuasmoNorth is typical of newer, generally even poorer settlements.The improvements included under the project would be affordableto more than 90% of the 3,600 families presently living inthese two areas. Existing industries in the areas would alsobe provided with basic services.

(b) Serviced Plots. In parallel with upgrading of existingsubstandard areas, the project would provide about 3,700new serviced plots, 3,200 in Alegria and 500 in FlorestaPilot (again see Map 14138). The 3,200 plots to be developedby the Municipality in Alegria would be minimally servicedwithout any superstructure, and affordable to about 86% ofGuayaquil's population. Industrial land adjacent to thesite (9 ha) would also be serviced. The other site, FlorestaPilot, would permit the Banco Ecuatoriano de la Vivienda(BEV) to offer levels of service far below the costs of mostof their previous programs. The options in Floresta Pilotwill be affordable to between 70% and 80% of the city'spopulation.

(c) Off-Site Infrastructure. A mininmal amount of off-siteinfrastructure essential in servicing the upgrading areasand new sites is also included under the project.

(d) Administration. Funds for the operational costs of theMunicipality's project unit, vehicles, and equipment areincluded in the project. A small part of these funds maybe used to initiate computer services to the Registryof Property office.

(d) Technical Assistance. The project also includes consultants'services for detailed design, engineering, tendering andsupervision of construction; a study to improve financialmanagement of the Municipality, including debt collection,accounting, and planning; monitoring and evaluation; andpreparation of future projects.

(f) Community Facilities. Community facilities would beprovided for the upgrading areas and serviced sites: fiveprimary schools, three health centers, and five communitymarkets. These facilities would bring project sites up tothe same levels of service which prevail in similar areasof Guayaquil. The planning and building standards usedare modest. In addition to these facilities, land has beenreserved for nurseries, secondary schools, open spaces, andadditional medical facilities which may be provided over time.

(g) Community Development. Social promoters will work withresidents in the project sites to initiate innovative programssimilar to those being used by the Fondo de Desarrollo delSector Rural Marginal (FODERUMA) among the rural poor. Grantsand credits will be provided for programs such as training inthe production of goods and services in demand locally, employmentcenters, and other programs selected in consultation with communityresidents.

Housing Loans

2.05 Small loans for house improvement and/or construction of new houseswould be provided by the Banco Ecuatoriano de la Vivienda. The program wouldinclude the four areas to be serviced by the project and families with legaltenure in the Suburbio and other low-income areas of Guayaquil. Loan sizes,based on affordability and cost estimates for minimal structures, would nearlyall range from about US$200 to US$2,600. A few loans in the Floresta Pilotsites and services area would be somewhat larger, up to US$3,900. The entireloan program is expected to include on the order of 9,700 loans averagingUS$1,414 in current prices. BEV would also receive modest technical assistancefor long-term financial planning, for project preparation, and in the provisionof titling assistance where necessary.

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B. Project Costs

Project Costs

2.06 Total project cost is estimated at S/1,291.0 million (US$51.6 mil-lion) in mid-1979 prices, of which 13% (about US$6.8 million) is foreignexchange. Project costs are detailed in Table II.1.

2.07 Cost estimates for site preparation and infrastructure are basedon detailed layouts for representative parts of the project, with the resultsextrapolated to the remainder of the project for which preliminary layouts aredone. Estimates for housing loans are based on BEV and mission estimates ofcosts and affordability. Costing of the small-scale enterprise component wasderived from the Banco del Pacifico's ongoing program of artisan loans.

C. Financing

2.08 The proposed Bank loan of US$31.0 million will finance 60% ofproject costs, all foreign exchange costs and US$24.2 million in local costs.The loan will not finance taxes, which are estimated at US$500,000. It willhave a term of 17 years, including 4 years of grace, at an interest rate of7.95% per annum. Local entities would provide the remaining 40% of projectcosts.

2.09 Spending decisions are highly decentralized in Ecuador, with acomplicated system of earmarking and inter-agency transfers to adjust expend-iture needs'to resource availability. There has been considerable progresssince the early 1970s to streamline this complicated system. Nevertheless,the system cannot now accommodate the drastic reallocation of funds that wouldbe required to finance a substantial share of the serious effort to combatextreme poverty of which the project under consideration is an important part.Therefore, a substantial share of local cost financing has been recommended,while at the same time IBRD is engaged in an active dialogue with the Ecuadorianauthorities to support their efforts at reforming the system of public financesso as to make it possible in the future to channel a large amount of fundsinto poverty-oriented projects and programs.

2.10 The following table shows sources of funds for the project:

Sources of Ftnds(US$ Mlillions)

Support to Small Services to HousingScale Enterprises Low-Income Areas Loans Total

IBRD 4.3 15.5 11.2 31.0Government 0.3 0.9 - 1.2Banco del Pacifico 2.7 - - 2.7SSE Revolving Fund 2.2 - 2.2Small-scaleEnterprises 1.3 - - 1.3

BEV - 0.4 5.4 5.8Municipality - 7.4 - 7.4

TOTAL 10.8 24.2 16.6 51.6

ECUADOR

FIRST GUAYAQUIL URBAN DEVELOPMENT PROJECT

Table II-1: Summary of Project CostsMid-1979 Prices

S/Million US$ MillionLocal Foreign Total Local Foreign Total

A. Support to Small-Scale Enterprises

1. Projects Financed 135.0 77.5 212.5 5.4 3.0 8.5

2. Technical Assistance to Enterprises 10.0 2.5 12.5 0.4 0.1 0.5

3. Consultants' Services 0.9 3.8 4.7 0.0 0.2 0.2

Subtotal 145.9 83.8 229.7 5.9 3.3 9.2

B. Services to Low-Income Areas

1. Land (Alegria) 50.2 0.0 50.2 1.9 0.0 1.9

2. Land (Floresta Pilot) 4.0 0.0 4.0 0.2 0.0 0.2

3. Upgrading (Lotizacion Mapasingue) 121.1 3.7 124.8 4.8 0.2 5.0

4. Upgrading (Guasmo North) 33.4 1.0 34.4 1.4 0.0 1.4

5. Sites and Services (Alegria) 88.3 2.7 91.0 3.5 0.1 3.6

6. Sites and Services (Floresta Pilot) 12.6 0.4 13.0 0.5 0.0 0.5

7. Off-Site Infrastructure 5.0 0.1 5.1 0.2 0.0 0.2

8. Vehicles and Equipment 2.9 1.0 3.9 0.1 0.1 0.2

9. Municipal Project Unit 18.0 2.0 20.0 0.7 0.1 0.8

10. Technical Assistance for Municipality 2.5 10.0 12.5 0.1 0.4 0,5

11. Community Facilities 58.6 19.5 78.1 2.4 0.8 3.2

12. Community Development Program (Central Bank) 10.0 0.0 10.0 0.4 0.0 0.4

Subtotal 406.6 40.4 447.0 16.3 1.6 17.9

C. Housing Loans

1. Improvement Loans in Upgrading Areas (3,000) 97.0 3.0 100.0 3.9 0.1 4.0

2. Housing Loans in Alegria Sites andServices (3,200) 117.0 3.6 120.6 4.7 0.1 4.8

3. Housing Loans in Floresta Sites andServices (500) 22.3 0.7 23.0 0.9 0.0 0.9

4. Improvement Loans in Suburbio (3,000) 93.6 2.9 96.5 3.7 0.1 3.9

5. Technical Assistance for BEV 0.4 2.2 2.6 0.0 0.1 0.1

Subtotal 330.3 12.4 342.7 13.2 0.5 13.7

Physical Contingencies _ 47.4 3.6 51.0 1.8 0.2 2.0

Price Contingencies -/ 192.3 28.3 220.6 7.6 1.2 8.8

TOTAL 1,122.5 168.5 1,291.0 44.8 6.8 51.6

1/ 15% of Items B3-7, and Bll.2/ Average of 22% on all items except B1-2. Price escalation derived by applying expected inflation rates on

projected annual expenditures at 12% for 1979, 11% for 1980, 10% for 1981, 9% for 1982 and 8% for 1983-84.

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2.11 The Government of Ecuador will be the borrower. Supplementaryagreements will be signed by Central Bank with each of the implementingagencies and between BEV and the Municipality (para. 8.01). The Government'sshare (US$1.2 million) includes US$0.3 million for CENAPIA's program, US$0.8million counterpart for the Ministry of Health and Ministry of Education,and US$0.1 million Central Bank counterpart for its community developmentprogram. The financing of recurrent expenditures for schools and clinicsis also being incorporated into the budgets of the Ministry of Health andMinistry of Education (para. 8.02). Banco del Pacifico will finance its sharefrom private funds, providing US$2.7 million in loans over the three-and-a-halfyear start-up period. During the same period an estimated US$2.2 millionwill be lent from the Central Bank revolving fund established by the project(para. 3.05). Small-scale enterprises themselves will contribute an estimatedUS$1.3 million toward the projects financed. The Municipality and BEV willfinance their shares with loan funds from Government on the same terms as theIBRD loan. A letter from the Government confirming the availability of publiccounterpart funds has been received. Annual confirmations of necessarybudgetary approvals are to be made throughout project implementation (para.8.02).

2.12 The IBRD loan would be channeled through Central Bank to the threemain implementing agencies (Banco del Pacifico, Banco Ecuatoriano de laVivienda, and the Municipality of Guayaquil) and to Government (for CENAPIA,the Ministry of Health, and the Ministry of Education). The Government willabsorb the administrative costs and foreign exchange risks. By Ecuadorianlaw, foreign exchange risk cannot be passed on to the ultimate borrower, andthe Government is particularly willing to absorb financial costs for thisproject because of its high poverty content and otherwise thorough plan forfull cost recovery (para. 6.01). The funds for Banco del Pacifico and otherparticipating banks will be made available at the interest rate of the IBRDloan on a rediscounting basis through a special annex of the Central Bank'sFondos Financieros (para. 3.04). The terms of repayment for BEV and theMunicipality to Central Bank will be the same as the IBRD loan. The Govern-ment, however, will absorb the IBRD commitment charge and the financial costof interest during construction for the Municipality, because the Municipality'sproject unit will have a number of unrecoverable expenses (para. 6.26).

2.13 Nearly all costs (97%) will be recovered from the ultimate benefi-ciaries (para. 6.01). Most allocable costs will be recovered at 12% interestover 15 years. The three exceptions to this rule (BEV, CENAPIA, and CentralBank's community development program) are explained in paras. 6.04, 6.16 and6.17. Inflation was 13.0% in 1976, 12.3% in 1977, and 10.8% in 1978, declin-ing with the end of the petroleum boom and Government anti-inflation efforts.Inflation in 1979-81 is expected to fluctuate around 11%, held up by agricul-tural price increases following upon the drought of this last year. Thus,an interest rate of 12% would be positive in real terms. The maximum legalinterest rate in Ecuador is 12%. The public mortgage loan institutions(Social Security and Banco Ecuatoriano de la Vivienda) presently chargebetween 4% and 12% accordíng to size of loan, generally over 25 years. Thenormal rate for lending programs targeted to serve priority and low-income

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sectors (Fondos Financieros, FODERUMA) is 9%. For the Third DevelopmentBanking Project (1359-EC) Government agreed to allow commissions of 2-4% formedium- and long-term industrial loans. For a recent, more poverty-orientedcredit program, loans to small farmers in the Tungurahua Rural DevelopmentProject (1644-EC), Government agreed to an interest rate of 11%.

III. DETAILED PROJECT DESCRIPTION

3.01 Central Bank has appointed a project coordinator, acceptableto the Bank, who will oversee the various components of the project forGovernment and, in particular, facilitate cooperation between theMunicipality and BEV (para. 8.02).

A. Support to Small-Scale Enterprises

3.02 The sub-project will begin to open the commercial banking systemto very small-scale enterprises. It will build on a successful artisan creditprogram developed by a progressive commercial bank, Banco del Pacifico (paras.4.03-4.06), expanding it and possibly including other banks in the future.The program will be complemented by an expanded program of technical assis-tance to small-scale enterprises from CENAPIA (paras. 4.07-4.08).

Loans from Banco del Pacifico

3.03 Beneficiaries and types of loans. In keeping with the Banco delPacifico's past experience, enterprises must have no more than six workersand fixed assets of less than US$5,000 to qualify for a loan under thisprogram. To date only industrial enterprises (mostly woodworkers, shoemakers,dressmakers, and tailors) are eligible, and loans are made only for fixedassets and working capital. The program will now include very small commercialenterprises and services as well (mechanics, carpenters, barbershops, beautysalons, small shops, etc.), and construction loans will be available forworkshop expansion. Cooperatives are eligible, but loans will be made totheir individual member enterprises.

3.04 Terms and conditions to the beneficiaries. The interest rate willbe raised from the current 9% to the normal commercial lending rate in Ecuador,12% (paras. 2.13 and 6.02). The maximum terms and sizes of the three types ofloans will be as follows:

Maximum Term Maximum Size

Working capital 2 years S/50,000Fixed assets 5 years S/60,000Workshop construction 12 years S/80,000

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The 12-year term for workshop construction loans will normally include aone-year grace period. Borrowers will normally make payments semi-annually.No collateral will be required for working capital or fixed assets loans,only good credit references and a co-signer. Workshop construction loanswill be secured by mortgages.

3.05 Terms and conditions to the commercial bank. Central Bank willopen a new anexo to one of its Fondos Financieros, through which they willrediscount loans to very small enterprises under this program. The rate ofinterest will be the same as that of the IBRD loan. They will rediscount 70%of loan volume, which is, based on past experience, approximately equivalentto 60% of project costs. Documentation required from participating commercialbanks will be kept to a minimum in order to facilitate the rediscount ofsmall loans in large numbers. Banks need submit only statements of recipients'names, loan amounts, and intended credit uses. They need not detail theinvestment plan for each loan. CENAPIA, acting as Central Bank's agent, willoccasionally check that representations made to the Central Bank are correct.The anexo in Central Bank is to be opened with a US$300,000 revolving fundprovided by Government and replenished by IBRD funds and reflows. The anexois expected to continue for at least the seventeen years of the IBRD loan.

3.06 The anexo will be open to other banks which are financially sound,have Guayaquil prograns of lending to enterprises with assets of less thanUS$5,000,-and are acceptable to IBRD. The Banco Nacional de Fomento has anartisan lending program, but its procedures are cumbersome and slow. TheBanco de Pichincha and the Banco de Cooperativas have recently initiatedsmall artisan lending programs and may become interested in and eligible forthe anexo.

3.07 The on-lending interest rates legally allowed for banks using theanexo will be 11% plus commissions of 2-4% for longer-term lending, or thenormal 12%. The Banco del Pacifico prefers not to use the commissions forthis particular program, but rather to charge the maximum legal interest(para. 6.02).

3.08 Project size. An estimated 6,400 loans will be made to about 5,200artisans during the first three-and-a-half years. The total cost of thecomponent is expected to be US$10.8 million, of which about US$3.2 millionwill be reflows. These estimates are based on the experience of the Banco delPacifico to date. During the pilot year of the Banco del Pacifico program,1977, 180 loans were made in Guayaquil. During 1978 the program expanded toinclude about 600 enterprises and US$490,000, growing to nearly 70 loans permonth by the end of the year. During 1979 the program is to be expanded to1,100 loans totalling US$1 million. Midway through 1980 the bank should reachits targeted lending plateau of about 180 loans per month. The average loansize will also increase somewhat as the bank begins to make constructionloans, because they are expected to be about twice the size of equipment andworking capital loans.

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3.09 Loan Administration. Other banks which begin to use the new anexo

may have other procedures, but Banco del Pacifico will, for the most part,

continue to use the procedures which have worked so well for its ongoing

program. To identify potential borrowers for this program, the bank relies

primarily on part-time student interviewers. Each student works 20-25 hours

a week in one area of the city, contacting potential borrowers after first

checking their reputations within their neighborhoods. An increasing number

of borrowers, currently 15-20%, hear about the program and come to the bank's

office on their own initiative. CENAPIA and the Federacion de Artesanos will

also begin to refer potential clients to Banco del Pacifico (para. 4.09>.

3.10 A potential client, once identified, comes to the bank's office

with identification documents, credit references (pay drafts), and a co-signer.

A staff member normally helps the entrepreneur fill out a standard application

and discusses it with him. The program manager (or the assistant who will

join him in 1980) reviews each loan request, calls former creditors, and

arranges for a site visit by a field inspector. From the receipt of applica-

tion until disbursement usually takes about 30 days. To date the bank has

approved 82% of completed applications, but this figure is likely to drop as

the program expands and more enterprises approach the bank on their own.

3.11 Disbursements are made in the form of deposits to a savings account

opened at the Banco del Pacifico in the name of the borrower. For working

capital loans, the entire amount is deposited upon loan approval. For tools

and equipment, and now for construction loans, the borrower may withdraw half

of the loan immediately and the balance upon presentation of invoices.

3.12 More experienced student workers supervise loans through periodic

site visits. The supervisor files brief status reports and may provide minimal

management assistance. CENAPIA will also be contributing to the supervision

of some of the loans through its program of managerial, financial, and tech-

nical assistance.

3.13 Repayment is normally made semi-annually, according to an amortiza-

tion table given each borrower at the time of loan approval. A reminder is

sent to each artisan shortly before every due date. This process has workedwell, with arrears of only about 2%. If a payment is late, two collection

letters are sent (after seven and after fifteen days); personal contact is

then made with both the borrower and co-signer before legal action begins.

Technical Assistance to Enterprises

3.14 CENAPIA will expand its existing program of technical and managerialassistance in order to reach all of the borrowers under this program who

desire CENAPIA's services. CENAPIA teaches basic accounting, financial plan-

ning, enterprise organization, inventory control, machinery placement and

maintenance, product quality, and marketing. Its method is to offer seminars,

with each artisan in attendance receiving at least one follow-up visit at his

work place (paras. 4.07-4.08).

3.15 The program in Guayaquil will be expanded to provide a seminar andsite visit to an estimated 85% of the 5,200 clients under this program. Based

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on CENAPIA's present experience, about 25% cof those will request and requiremore than one site visit. CENAPIA will play no role in screening applicationsto participating banks. The banks will present to CENAPIA lists of recentborrowers grouped by líne of work, all of whom will be invited to attend aCENAPIA seminar. The content of CENAPIA's seminars will be adjusted inconsultation with participating banks and the Federacion de Artesanos.

Consultants' Services to CENAPIA

3.16 Funds have been included in the project to provide 37 man-months ofconsultants' services (at an estimated average cost of US$5,000 per man-month)to CENAPIA for three purposes:

(1) a feasibility study for a proposecl artisan market inwhich CENAPIA, Banco del Pacifico, and the Federacion deArtesanos are all interested;

(ii) a two-year consultant to improve CENAPIA's program ofassistance regarding the technical and collective aspectsof marketing;

(iii) short-term consultancy. services in 1980 and 1981 to evaluatethe small-scale enterprises sub-project (para. 5.08).

B. Services to Low-Income Areas

Land

3.17 Inconsistent policies and archaic procedures have led to anexceptionally confused tenure situation in :Low-income areas of Guayaquil.Nearly all well-situated land is privately owned, and there are fewprecedents for expropriatíon for low-income residential development.Addressing the land tenure problems of the poor in Guayaquil is a crucialpart of the project. The sites included in this first project werechosen partly because the tenure situations they represent are typicalof the different sorts of problems which must be solved as low-incomeresidential improvement continues.

3.18 Substantial progress has already been made as part of projectpreparation. The Municípality has virtually completed expropriation of theAlegria site, and the legal steps which remain in order to deliver title tobeneficiaries were agreed at negotiations (para. 8.01). The Government andMunicipality have also taken several actions since appraisal which shouldfacilitate BEV's housing loan program in the Suburbio (para. 3.20(c)).

3.19 Considerable legal and technical work has also been done forthe two areas to be upgraded, Guasmo North and Lotizacion Mapasingue.IBRD intended to agree with Government and the Municipality at negotiationson a plan and timetable for regularizing tenure in these two areas. Butin October 1979, just before negotiations, the national Congress passed a

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decree which aimed to resolve the land tenure problems of all marginalareas in the north and south of Guayaquil, granting residents of more thanone year rights to buy their land at the nominal price of S/10 per squaremeter. If this decree goes into effect, it would put project efforts inGuasmo North and Lotizacion Mapasingue in a new legal context. Thus, it wasagreed to delay preparation of a land tenure plan for these two sites untilthe President responds to the new decree. IBRD will not disburse for civilworks in Guasmo North or Lotizacion Mapasingue until a feasible timetablefor regularization of land tenure in the site in question has been received(para. 8.01).

3.20 The details of the current land tenure situation for each site areas follows:

(a) Floresta Pilot. The land is BEV property, and title will betransferred to individual families according to normal BEVprocedures. There is no problem.

(b) Alegria Sites and Services. The Municipal Council declared the siteto be of public utility on April 3, 1979, and notified the owners oftheir intention to expropriate, offering the cadastral value of theland in compensation. The Council has since then augmented itsdeclaration twice to rectify errors in the technical reports onwhich its original declaration was based. Construction of infra-structure could begin immediately on 92% of the site, but severalappeals must be resolved to begin on the remaining 8%. The expro-priation and title process, detailed at negotiations, should becompleted before the infrastructure is finished. BEV could thenbegin to finance the sites and housing for the families selected.Mechanisms for transferring title are being defined in the imple-mentation agreement between BEV and the Municipality (para. 8.01).

(c) Suburbio. Perhaps 6,000 families (there are no adequatestatistics) hold donated titles, but previously these were notmortgageable. On January 5, 1979, the Municipal Council passeda resolution allowing donated titles to be mortgaged. Thisis already substantial progress. A decree, drafted by theMunicipality and sent to Government for consideration, willobviate the necessity for each family to return, one by one,to the Municipality and the Registry of Property to have thetitle's mortgageability noted on their document and the publicrecord. The registration process will be facilitated forthousands of additional families who do not yet hold donatedtitle by special efforts being made in conjunction with theIDB-financed Suburbio sewerage project (para. 1.18). Adecree designed to speed up this process by allowing suchproperties to be recorded in a separate book was passed bythe Supreme Council of Government in July 1979.

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(d) Guasmo North. The area is municipal property, so works couldlegally begin immediately, and the transfer of title to residentsshould be relatively straightforward. It has also been agreedthat, when BEV makes a house improvement loan, BEV will assume thefirst mortgage and responsibility to repay the Municipalty forupgrading the lot. However, the price and mechanisms by whichthe Municipality will initially seLl the land to the people whooccupy it have not yet been settled. The Municipality haddecided to sell the land at S/100 (US$4) per square meter at aminimum. In August 1979 the new Congress decreed that theMunicipality should sell the land at S/10 (US$.40) per squaremeter instead, but the Municipality replied that Governmentshould, in that case, reimburse them for the difference. In itsOctober decree Congress reiterated the S/10 price for Guasmoland and authorized a special commission to oversee the landsales in Guasmo and other marginal areas included in the decree.It is not yet clear exactly how this decree will be implemented.Government is to submit a plan and timetable for regularizationof land tenure in Guasmo North before IBRD disburses for theconstruction of civil works to upgrade the area (para. 8.01).

(e) Lotizacion Mapasingue. The former owner sold a few lots(10%) in this urbanization. The Municipality then ruled thatservices were inadequate to meet city standards, but the ownercontinued to sell lots. The great majority of "owners"have bills of sale, but not legal title. Many of these lotswere later "invaded" under the organization of several coopera-tives. The strategies which had been evolved for dealing withthis complex problem at the municipal level would be outdatedif the October decree comes into effect. Lotizacion Mapasinguewould be one of the areas where actual residents would haverights to buy the land at S/10 per square meter, under thesupervision of the new commission which would be established.IBRD will not disburse for civil works in Lotizacion Mapasingueuntil a feasible plan for legalizing the situation is received(para. 8.01).

3.21 Providing legal tenure to significant numbers of the poor inGuayaquil is, without doubt, the most difficult aspect of this project.Negotiations were delayed several months, mainly to wait for expropriationof the Alegria site, and additional progress may be expected in responseto the tenure-related conditions of disbursement for Guasmo North andLotizacion Mapasingue. In addition, the Muunicipality project unit willhave a legal department, and the project includes funds for both theMunicipality and BEV to hire legal counsel or other necessary consultants'services. Agreement has been reached between the Municipality and theRegistry of Property to use some project funds to index the city's propertyrecords by computer, thus making the titling process more efficient inorder to cope with the increased titling load this project will create.

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3.22 If some delay occurs in preparing the timetable for the residentsof Guasmo North, only a minor portion of the project (3%, the cost of civilworks in Guasmo North) would be affected. Upgrading for Lotizacion Mapasingueis scheduled toward the end of the project. If titling is seriously delayedin either upgrading area, BEV could disburse its housing loan funds amongfamilies in other low-income areas of the city.

Upgrading (Lotizacion Mapasingue)

3.23 Site description. Mapasingue comprises 147.3 ha and has 1,820households. It is north of the city, 6 km from the city center, locatedin a major industrial and residential growth area. It is a 10-15 year oldsettlement, selected because it is similar to the more consolidated partof the Suburbio. The settlement is small enough to be manageable withina first project and will provide experience relevant to future upgradingprojects. The area is quite mixed: industry of various sorts and sizes,some fairly well-consolidated homes, some cane shacks. Some lots haveno services, while others have individual water connections, undergrounddrainage, or even sewage connections.

3.24 Site layout and land use. Residential densities are very low(40 houses per net hectare), because lots are awkwardly deep and large (typi-cally lOm x 40m). As part of the upgrading, mid-block pedestrian streets(4-6m) will bi constructed and owners encouraged to subdivide to minimumlots of 100 m . Subdivision will be optional, but owners who choose to sub-divide will have the benefit of the rental or sale. Vacant land will be2serviced so as to allow subdivision down to a minimum sized lot of 100 mthere, too. If all potential subdivision were to take place, another 4,200lots would be created. It is estimated that about 30% of the plot-holderswill opt not to subdivide, so that about 2,900 new lots will actually becreated. Landfill will be provided and streets resurfaced. The water,sewerage, and storm water drainage systems will be completed, with individualconnections for water and sewerage. Infrastructure standards are modest,based on minimal functional requirements and affordability to the presentpopulation in Lotizacion Mapasingue. Standards are detailed in the staffWorking Documents, which are available in the Project File.

Upgrading (Guasmo North)

3.25 Site description. Guasmo North comprises 57.5 ha and has 1,735households. It is south of the city, 8 km from the city center, locatedbetween the Agriculture Faculty of the University and the port. It is in alow lying area requiring extensive landfill and has no services. A gravelroad provides access, and potable water is brought in by tanker trucks.Although presently isolated, it is at the center of one of the industrial andresidential growth areas of the city. It has socio-economic and physicalcharacteristics similar to the periphery of the Suburbio, but is a smaller,discrete, and thus more easily upgradable area. Guasmo North, the originalinvasion to the south of the city center, has proven to be the bridgehead fora large and on-going invasion of adjacent land. Unlike Lotizacion Mapasingue,Guasmo North includes virtually no existing industry.

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3.26 Site layout and land use. When Guasmo North was first invaded, theresidents settled in blocks to facilitate the future introduction of publicservices and reserved space for community facilities. An inefficient originallayout and the need for landfill make upgrading expensive. The layout will berationalized as far as possible: circulation reduced somewhat, reserves forcommunity facilities brought down to standards consistent with the rest of thecity, and mid-bloc1 pedestrian culs de sac (4m width) introduced to encouragesubdivision to 81m minimum lot sizes. The number of plots could double from1,735 to 3,470, but it is estimated that 30% of owners will opt not to sub-divide, so about 1,200 new lots will be created. Standards will be minimalto make upgrading affordable without subsidies which would stimulate moreinvasions nearby. Roads, pedestrian ways, community facilities, standpipes,and public lighting will be provided, but landfill within private lots andthe construction of pit latrines must be left to the initiative of individualfamilies with possible financing available from BEV. Design details will befinalized in conjunction with a program of public information and consulta-tion with community residents.

Sites and Services (Alegria)

3.27 Site description. The Alegria site (68.8 ha) is in a major indus-trial zone along the highway to Daule to the north of the city center.City planners recommend extensive low-income residential development inthe northern part of Guayaquil, and the Alegria area is a close-in, logicalfirst site. Job opportunities in the area and transport to the city centeráre good. Neighboring residential areas include both high-income and low-income housing. Current invasions nearby indicate that this is a "pressure"area for low-income settlement. It is near trunk infrastructure for water anddrainage. Trunk infrastructure for sewerage is a problem: no sewer trunksserve the site, and the hills on the site slope away from present and proposedsewage treatment plants along the Guayas River. The problem, however, istypical of all the vacant land now being developed to the north of the city.

3.28 Site layout and land use. Alegria has been designed so as tomaximize efficiency of land use and minimize infrastructure costs. Of thetotal site area utilized for residential purposes, over 60% has been allo-cated for residential plots, 16.7% for circulation and the remainder forsupport facilities and amenities. Access to the majority of plots in Alegriais from 4m wide pedestrian loop roads and some culs de sac. Access is alsotaken off 6m and lOm local distributor roads. These connect to primaryroads proposed in the city's metropolitan master plan, which connect to thehighway to Daule. There will be 3,166 residential plots in A egria. Ofthese 125, located on the primary road network, will be 125 m pl9 ts formixed commercial/residential use. The remaining lots will be 90m each.The net density will be 103.0 houses per hectare. A narrow strip of the sitewhich falls next to a proposed main road will be serviced and sold at a profit(para. 6.06) for industrial usage. Infrastructure standards are detailed inthe staff Working Documents. The layout is shown in Map 14139.

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Sites and Services (Floresta Pilot)

3.29 Site description. Floresta Pilot is a small area within a largepiece of BEV property to the south of the city center. The site is near amajor road. Water pressure is low in the south of the city, but the stand-pipes planned are within EMAP's allocation to BEV developments in the south.Sewage treatment facilities for this area are also overloaded, necessitatingconstruction of an oxidation pond. The Floresta property was being-held forfuture development, but it is adjacent to the Guasmo invasions and was itselfinvaded in November 1978. BEV ejected the squatters, but invasions havecontinued nearby, and BEV decided to develop their Floresta property quicklyfor lower-income housing. Using their own funds, BEV/JNV has already constructed210 houses in Floresta, all of lower standards than the units BEV/JNV hadbeen building in Guayaquil before. BEV-JNV will construct another 500 low-costunits in Floresta with IBRD-financing.

3.30 Site lay-out and land use. Of the entire Floresta development, 61%has been allocated to residential plots, 24% to circulation, and 15% to openspace and community facilities. Access to the plots is mainly from 4.5mpedestrian paths, with some 6.0m paths. Vehicular 5oads have 12m rights ofway. The 500 sites and services plots average 90 m in size, giving a netdensity of over 100 units per hectare. Infrastructure standards are shownin the Working Documents.

Off-site Infrastructure

3.31 Only the little off-site infrastructure essential for servicing twoof the project areas has been included: a 16" water main (1,520 m) to GuasmoNorth (to be tendered and supervised by EMAP) and a trunk access road to Alegria.

Municipal Administration

3.32 Three components have been included to strengthen the municipalproject unit: vehicles and equipment, a budget for the unit's operatingexpenses, and technical assistance. The technical assistance will includeabout 122 man-months of consultants' services (at an average of US$5,000 perman-month) for detailed design, engineering, tendering, and supervision ofconstruction; a study to improve financial management of the Municipality(para. 4.16); monitoring and evaluation (para. 5.07); and limited funds forthe preparation of future projects.

Community Facilities

3.33 Primary schools. The number of primary schools to be constructedin the three project areas is based on national planning standards as statedby DECE (?epartamento de 9onstruccciones Escolares) and JNV. DECE normallyallots 6m of land and 3m of building per pupil, with an average of 50 pupilsper classroom. The pupil population to be served by the schools is based on

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the age distribution in Guasmo and Mapasingue adjusted to a realistic enroll-ment ratio of 70%. For the purpose of estimating demand for community facilí-ties, it is assumed the populations of the upgraded areas will increase 50%due to subdivision; the population is expected to increase 70%, but a conser-vative estimate was used to avoid overbuilding of community facilities. Theproject will include two schools in Alegría, two in Guasmo North, and one inLotizacion Mapasingue. All schools will be double-session. Additional usemay be made of school buildings for non-formal, community-organized educationprograms. Floresta Pilot will be served by schools to be constructed withinthe larger Floresta development.

3.34 The costs of the construction and equipment of schools are estimatedby DECE and the Subdireccion de Educacion, two branches of the Ministry ofEducation. The capital cost per pupil is S13,917 (US$157) and the annualoperating cost is S/1,696 (US$68) per pupil per annum. DECE will be respon-sible for designing economical schools, tendering, supervision, and equipment.The Subdireccion de Educacion will operate, maintain, and staff the schools(para 8.02) with the cooperation of community residents.

3.35 Health centers. A health center will be constructed in each of thethree main project areas to serve a total population of 54,000. The centers2in Guasmo and Mapasingue2will have a construction area of approximately 500mthe one in Alegria, 600m . Each of the three will be built on a plot of2,500-3,00Om to allow for future upgrading of the centers into health centerhospitals. Capital costs are S/371 (US$15) per capita; recurrent costs are

S/91 (US$3.60) per capita per annum. National standards for the design ofhealth centers are avaílable in the Instituto Ecuatoriano de Obras Sanitarias,a branch of the Ministry of Health. The centers will be operated by theMinistry of Health (para. 8.02) and coordinated with community primary-care programs where they exist. Floresta Pilot will be served by healthfacilities within the larger Floresta development.

3.36 Markets. Five public markets (each 2,000-2,500m) in the threelarge project areas will be designed, constructed, operated, and maintainedby the Mercado Central, a department of the Municipality. Each stall will beapproximately 2m x 3.5m, to be rented at a cost recovery price (para. 6.15).

Community Development Program (Central Bank)

3.37 At appraisal Government proposed that an innovative community develop-ment program be included in the project. It would be administered by CentralBank, repeating in marginal areas of Guayaquil the approaches which Central

Bank's Fondo de Desarrollo del Sector Rural Marginal (FODERUMA) has been usingin rural areas (para. 4.19). Like FODERUMA, this program will be targeted atbasic needs. It will involve a high degree of community participation, withpriorities and appropriate technologies to be identified in consultation withcommunity groups. About 75% of the costs of the program of grants and loanswill be recovered from the ultimate beneficiaries, so that successful effortsshould be replicable. Central Bank will seek written agreements with therelevant ministries and public agencies, securing their participation in thesepilot efforts with a view to replication within the normal programs of Government.

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3.38 The component was positively evaluated by a post-appraisal mission.The process actually got underway in Guayaquil in March 1979, with assistancefrom UNICEF. A seminar of organizations involved in marginal areas of Guayaquilreviewed ongoing and planned projects in Guayaquil, as well as approachesFODERUMA was implementing in rural communities. Projects -i. such areas asskills training, employment services, and appropriate building technologieswere identified.

3.39 The new Government has given some consideration to moving FODERUMAfrom Central Bank to some other agency, but at negotiations Government confirmedits preference that Central Bank be the institution to initiate similar programsin marginal urban areas.

C. Housing Loans

3.40 The Banco Ecuatoriano de la Vivienda/Junta Nacional de la Vivienda(BEV/JNV) will make small loans available in all project areas and in theSuburbio for modest houses and the upgrading of existing houses.

Terms and Conditions

3.41 Central Bank will on-lend IBRD funds to BEV at the terms of the IBRDloan. Until appraisal BEV had a graduated scale of interest rates, between 4%for very small loans up to the legal maximum of 12% for large loans. Becausethis project will, for the first time, involve BEV in making a substantialinvestment in small loans to low-income people, BEV has agreed to IBRD'ssuggestion that interest rates be raised to realistic levels. The new scaleis 7-12% nationwide (para. 8.02). In accordance with the intentions of BEV'smanagement, all loans under the project will be made at an interest rate of10%, and the maximum term of these loans will be 15 years rather than BEV'snormal term of 25 years. All loans in the project will be secured by mortgagesagainst the existing property (serviced land in sites and services areas, landand existing dwelling in upgrading areas) as well as new construction.

Loan Sizes and Sub-project Size

3.42 The estimates shown in the summary of project costs (Table II-1) arebased on calculations for each project area of the proportion of householdslikely to take loans and a plausible distribution of loan sizes (according toaffordability and the cost of various types of construction). These calcula-tions are indicative only. BEV/JNV will respond to effective demand withinthe eligible income group in project areas.

3.43 BEV loans for house construction in Alegria will range from S/12,500(US$500) to S/57,000 (US$2,280). The lower figure would be adequate for awell-built, one-room cane structure. In Floresta Pilot the loans for thehouses (in addition to land and infrastructure) will range from S/26,000(US$1,040) to S/66,000 (US$2,640), allowing a range of modest permanentstructures. In upgrading areas loans will range from S/5,700 (US$230) to

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S/57,000 (US$2,300). The low figure might allow for a service connection orinternal sanitary fixtures.

Selection Procedures

3.44 Administrative arrangements for this project have been modelledafter present BEV/JNV procedures, but modified to allow for a much greaternumber of small loans to low-income people than BEV/JNV has handled in thepast. Procedures will be somewhat different for Floresta Pilot, Alegria,and the upgrading areas.

3.45 Floresta Pilot. Procedures here will most closely follow the normalBEV/JNV pattern. The BEV/JNV project unit will develop the area, includingcore units, and announce availability to the public. The BEV/JNV project unitwill receive applications (S/200 fee for each applicant). Applicants mustmeet the following criteria:

(i) monthly family income between S13,000 and S/6,000;

(ii) at least two years of residence in Guayaquil;

(iii) a savings account in BEV;

(iv) no other property in Guayaquil (certified by the applicanthimself, not by title search).

The BEV/JNV project unit will conduct a computerized lottery from among applic-ants who meet these criteria. Those pre-selected by lottery (slightly morefamilies than there are plots) will be invited to an interview to documenttheir eligibility, choose among three standard plans according to preferenceand affordability, sign a contract, pay S/1,100 for property registration andnotary, and obtain access to their unit. If some documentation is not inorder, they may have to return for a second interview. Some of those pre-selected will prove ineligible or will, for some reason, not complete theirapplications. Should there be too many eligible applicants, priority will begiven, following BEV's established policies, according to how long they havehad savings accounts at BEV.

3.46 Alegria. Administrative arrangements will be finalized in theagreement between the Municipality and BEV (para. 8.01). As envisioned inthe draft agreement, the Municipality project: unit would develop this site,advertise the availability of serviced sites, and receive applications.It would follow the same criteria as does BEV for Floresta Pilot, except thatapplicants need not have a savings account with BEV until after approval for aloan. The Municipality project unit would receive applications, collect theS/200 fee, and conduct the computerized lottery (with BEV as observer). For.beneficiaries who want BEV loans, the Municipality would issue letters ofdocumentation allowing BEV to transfer title to the beneficiaries so theapplicants would thereafter need to deal with only one agency, BEV. BEV'sloan disbursement would normally be made in two tranches. If some familiesprefer to build very modest homes with their own resources and not borrow fromBEV for house construction, the Municipality would issue title, but BEV could,for a small fee, assume collection responsibLlity.

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3.47 Upgrading areas. There are already thousands of families in theSuburbio with legal tenure. In Guasmo North and Lotizacion Mapasingue theMunicipality project unit will coordinate the legalization of tenure. Plot-holders in all three areas will apply at BEV/JNV project unit site officesfor upgrading loans. To be eligible, they must meet only two criteria:

(i) monthly family income between S/2,500 and S/6,000;(>i) at least two years of residence in Guayaquil;

They must also present plans and cost estimates for the intended upgradingof their shelter. Low-level technical staff from the project unit will beavailable to visit plots and prepare the necessary plans and estimates. BEVis not willing to lend to landlords to expand rental space, but otherwise anyupgrading project is allowable.

3.48 Assistance and supervision during construction. The BEV/JNV projectunit will maintain depots on all sites (including the two upgrading sites andthe Suburbio) for the storage of selected building materials. Security riskswill be minimized by keeping long-term storage at JNV's central Guayaquilwarehouse, with only enough supply at the site depots to do business. Bor-rowers will be free to acquire their materials elsewhere, individually or incooperatives. The depots will mainly stock key materials like cement whichBEV/JNV could normally provide more cheaply and conveniently than familiescould procure them individually. On the Alegria site, the depot will makeavailable the materials necessary to construct the first room according tostandard plans, so that a family can complete a habitable, lockable unitbefore having to assume responsibility for storing materials. BEV/JNV tech-nical officers will visit houses and house improvements under constructionbefore each disbursement, and most loans will be broken down into two or threedisbursements. These technical officers will also be available on-site foradvice and assistance upon request.

3.49 In Alegria no one will be required to build according to a standardplan, but a variety of standard plans (see sample drawings) will be available,and an approved plan will be required to obtain a BEV loan for house construc-tion. On the Floresta Pilot site, JNV will complete the infrastructure andcore units (modifications of their V-13 house type), leaving families to theirown resources to complete the lower-cost options. In the Floresta development,JNV is experimenting with different approaches to low-income housing, includingdirect administration and self-help construction as well as competitivebidding.

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IV. EXECUTING AGENCIES

4.01 This integrated urban development project will involve a number ofagencies, reorienting each to better meet the needs of Guayaquil's low-inconepopulation. The capacity of each agency and the relationships among them aredetailed below.

A. Banco del Pacifico and CENAPIA

4.02 Initially, the primary agency in this subproject will be the Bancodel Pacifico. CENAPIA will receive periodic lists of Banco del Pacifico'sprogram clients and offer them technical assistance. The Federacion Provincialde Artesanos del Guayas will help promote the program and offer suggestionsand reactions from the artisans' point of view. A committee of participatingbanks, CENAPIA, and the Federacion will meet quarterly to review progressand coordinate efforts. This subproject will serve the residential areasinvolved in the other two subprojects as well as other low-income areas ofGuayaquil, but no explicit coordination with the project units in the Munici-pality and BEV will be necessary.

Banco del Pacifico

4.03 Of all the financial institutions in Guayaquil, Banco del Pacificohas the best reputation among artisans. It is also the fastest growing bankin the country. Selected financial data are shown in Table IV-1.

4.04 The bank began in 1972 with a net worth of S/39 million (US$1.6million), growing to S/352 million (US$14.1 million) as of June 30, 1978(up 803%). The number of its shareholders has more than doubled (from 447to 1,054), with no shareholder holding more than 10% of shares. Demanddeposits, which represent about 80% of all deposits, increased over 50% peryear 1972-1977 before leveling out in 1978 owing to Government credit re-straints. Further growth is expected with the opening of new offices in twocities in 1978 and another two in 1979. Banco del Pacifico currently standssecond among Ecuador's 21 commercial banks with total assets of US$286 mil-lion and deposits of all types of US$110 million. Its arrears rate (only3.6%) is the lowest of any Ecuadorian bank, even though its lending has in-creased more than 50% per year over the past four years. Of this lending,22% has been directed to borrowers in Government-designated priority sectors.Net profits reached US$3 million in the first half of 1978, 45% generatedin Guayaquil. The bank's operating margin increased from 28% in 1976 to 30%in 1977 to 32% during the first half of 1978. Although highly leveraged,Banco del Pacifico is operating within the norms of the Superintendency ofBanks and is well-regarded by the authorities. Its accounts are subject toannual external audit.

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Table IV-1: Selected Data

Banco del Pacifico (December)(millions of sucres)

1972 1973 1974 1975 1976 1977 1976/1978

Capital & Reserves 37 44 73 113 131 215 300Profit 2 13 20 24 42 73 52

TOTAL 39 57 93 137 173 288 352

DepositsSight 156 244 405 852 1,453 2,054 2,066Time 72 114 224 258 473 623 690

TOTAL 228 358 629 1,110 1,926 2,677 2,756

Disposable Funds 101 205 370 746 1,426 1,761 1,656LoansOutsanding 161 191 304 710 1,121 1,742 1,856Arrears 2 14 18 35 50 47 69

TOTAL 163 205 322 745 1,171 1,789 1,925

% Arrears 1.3 6.6 5.5 4.7 4.3 2.6 3.6Guarantees,Acceptances 131 291 531 714 1,080 1,465 2,161

4.05 Banco del Pacifico has established a successful program of artisanlending, one of its original priorities. The program began in March 1977,after a visit by two of the bank's senlor staff to the UNO micro-enterpriseprogram in Recife, Brazil. Since that time, loans totalling almost US$600,000have been granted to about 800 artisan enterprises in Guayaquil. Arrearageis low and administrative costs are falling (para. 6.03). The Guayaquiloffice is responsible for over 70% of the bank's artisan lending nationwide.

Although the bank has not utilized the rediscount facility of the FondosFinancieros for its artisan lending, it has abided by the Fondos' 9% interestceiling, so the program has been less profitable than the bank's normal 12%commercial lending. Their deepening involvement has been partly due to themanagement's sense of responsibility to this sector and an understanding ofthe long-term returns from cultivating new clients, new savers, and a respon-

sible and innovative public image.

4.06 Since a bankwide reorganization in October 1978, the artisan lend-ing program is one of five activities within the bank's credit department.Its manager, presently working two-thirds of his time on the program, willcontinue, either full-time or with additional assistance from his fieldinspector. The current support of clerical staff and field workers will morethan double (para. 8.02) by the time the program reaches its expected plateauof 2,000 loans per year in 1981. The artisan credit team will probably moveto a new office in the Suburbio at about the time IBRD participation begins.

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CENAPIA

4.07 The Centro Nacional de Promocion de la Pequena Industria y Artesania(CENP"IA), created in December 1975, provides technical assistance to smallindustry and artisans. Appropriations to CENAPIA's nationwide programtotalled only S/14 million (US$560,000) in 1978, so the Guayaquil office,which receives less than 15% of CENAPIA's total funds, is quite small. Itstecnicos visit and assist enterpreneurs, more than two-thirds of whom areartisans. Most of their extension work is in the areas of management,accounting, and financial administration.

4.08 CENAPIA is presently weak and poorly staffed relative to its respon-sibilities. It is undergoing restructuring and a major expansion of its program.CENAPIA will be participating in four internationally financed projects, UNIDOis providing technical assistance to upgrade the quality of its services, andthe IBRD small-scale industry project (para. 1.15) is likely to include furthermeasures to strengthen CENAPIA. By January 1979, the agency expects to have abudget of some S/25 million (US$1 million) and expanded staffing. In order toexecute its role in this project CENAPIA will establish a small project unitin its Guayaquil office, beginning with a project manager and three profes-sionals, and building to a staff of seven professionals in 1981 (para. 8.02).

4.09 CENAPIA has close relations with the Federacion Provincial deArtesanos del Guayas. The Federacion's local artisan associations helparrange for entrepreneurs in need of assistance to meet with CENAPIA. TheFederacion will help to promote the proposed sub-project and provide somefeedback to Banco del Pacifico and CENAPIA during implementation. Artisansare exceptionally well-organized in Ecuador. Twenty-seven local artisangroups, with a total membership of approximately 15,000 (about 90% of whom arein Guayaquil), elect delegates to the provincial federation. Each province,in turn, sends delegates to a national confederation.

B. Municipality of Guayaquil

4.10 The Municipality project unit will be primarily responsible forthe provision of services to low-income areas. Schools and clinics will beconstructed and maintained, according to nearly routine procedures, by theresponsible national ministries (paras. 3.34 and 3.35). The Municipality'sproject director will liaise with Central Bank's community development staffin Guayaquil. The provision of infrastructure, as well as housing loans, inFloresta Pilot will be entirely BEV/JNV responsibility.

Municipality of Guayaquil

4.11 The Municipality is a long-established and powerful institution.Its effectiveness has been limited, however, by political instability. Duringthe past five years Guayaquil has suffered a rapid succession of mayors, fourof them just during the preparation for thLs project. Almost each mayormade significant staff changes, and the Muunicipality did not have any clearand steady policy direction. In October 1978, an elected mayor finally tookoffice for an expected five-year term.

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4.12 The Municipality is also notoriously inefficient. Many of itssystems of operation are outdated. For example, people must come to theMunicipality in person and queue at street-level windows to pay their taxesand water bills. Staff is poorly paid; morale and discipline are low. Thewater and sewerage utilities are now better managed than before, simplybecause they were almost completely separated from Municipality administra-tion and finances by the formation of EMAG and EMAP in 1967 and 1970.

4.13 Municipal finances. Summary financial statements for the period1976-1978 are shown in Table IV-2. Changes in the current position reflectthe debilitating effects of frequently changing leadership. Cash is down fromUS$3.2 million to US$300,000; receivables, mostly taxes due the Municipality,are up from US$16.4 million to US$25.9 million; and current liabilities havegrown from US$400,000 to US$6.3 million from December 1976 to July 1978.

4.14 Long term debt at year end 1977 (US$26.8 million) is not high inrelation to total resources (US$98.2 million) and net worth (US$60.0 million).The major constraint on municipal finances is the low level of income. Cur-rent revenues from taxes and all other sources were only US$12.5 million in1976 and US$14.6 million in 1977. Total revenues, including Government loansand transfers, were only US$33.3 million and US$39.1 million for these sameyears. With a city population of about one million, annual municipal revenuesare less than US$42 per capita. This low level of revenues explains in partthe poor quality of services in Guayaquil.

Table IV-2: Comparative Balance SheetsMunicipality of Guayaquil

(in millions)

As at December 1976 December 1977 July 1978Sucres Dollars Sucres Dollars Sucres Dollars

AssetsCash Banks 80 3.2 25 1.0 9 0.3Receivables 412 16.4 470 18.7 647 25.9Fixed Assets 1,471 58.9 1,515 60.6 1,541 61.7Other 469 18.7 447 17.9 996 39.8

2,432 97.2 2,457 98.2 3,193 127.7

LiabilitiesCurrent 11 0.4 172 6.9 158 6.3Long Term Debt 713 28.5 671 26.8 507 20.3Other 164 6.5 114 4.6 1,217 48.7Net Worth 1,544 61.8 1,500 60.0 1,311 52.4

2,432 97.2 2,457 98.3 3,193 127.7

4.15 Another aspect of municipal finances worthy of note is the highdegree of dependence on the Central Government. Nearly 60% of total funds1976-1978 were Government loans or transfers. Most Government funds areearmarked for public works (81% of the 1978 budget of US$12.8 million, forexample), but under existing budgetary procedures every service of theMunicipality is to some extent dependent on Government financing.

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4.16 Recognizing the inadequate state of municipal finances, the MunicipalDirector of Finance recommended to the Mayor a major component of technicalassistance as part of this project. The objectives are to improve collections,implement more efficient systems, and review revenue policies. The programwill be carried out by national and international consultants in two stages.First, consultants will be invited to do a three-month diagnostic study. Theywill recommend:

(i) an achievable timetable of targets for improved collections;

(ii) especially problematic policies and procedures for immediatereview;

(iíi) a program of possible reforms, including draft terms ofreference for the second, implementation stage of tech-nical assistance.

The study is to be completed by June 30, 1980. The Municipality will, as partof the project agreement (para. 8.02), review its recommendations in consult-ation with IBRD and agree with IBRD on a timetable of targets for improvedcollections and a program of financial reform.

4.17 Urban development norms. The Department of Urban Planning recognized,in the course of preparing this project, that present development regulationsare unrealistic and effectively exclude the poor from legal housing solutions.They are thus preparing revised norms for consideration by the MunicipalCouncil by early 1981 (para. 8.02). The revised norms would probably allowpublic agencies (BEV and IESS, as well as the Municipality itself) to developsites and services/upgrading projects without special permission each time.

4.18 Organization for project implementation. A special project unit wasestablished by resolution of the Municipal Council in December 1978. In May1979 the Mayor appointed its director and heads of divisions, and authorizedthe use of funds advanced by Central Bank for the unit's administrativeexpenses until the IBRD loan becomes effective. The unit is to have aninitial staff of 14 (including the team from the Department of Urban Planningwhich prepared the project), growing to 43. Staff can opt for special employ-ment status, allowing higher salaries. The unit will be divided into fourdivisions: technical, community development, finance and legal. Its staffand structure are detailed in the Working Documents (Project File). A MunicipalProject Advisory Committee, consisting of several city counsellors and repre-sentatives from JUNAPLA and Central Bank, vill assist the Mayor in supervisingthe project unit. Continued staffing and facilities for the unit will beconfirmed in the project agreement (para. 8.02). The unit may be the nucleusfor a future municipal company for low-income housing similar to existingwater and sewerage companies.

Central Bank's Poverty Investment Program

4.19 Central Bank has recently assumed the role of innovator and promoterfor poverty-oriented investment in Ecuador. Its Fondo de Desarrollo del SectorRural Marginal (FODERUMA) was established by the Junta Monetaria in March 1978,

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with approval by the Supreme Council of Goverrment in May 1978. FODERUMA hasassets of over US$12 million (mostly contributed by the Ministry of Finance).Its programs are supervised by the Director General of Central Bank togetherwith the President of JUNAPLA. During its first nine months of operationFODERUMA disbursed nearly US$1.6 million to projects in over 60 rural communi-ties. Projects are targeted at basic needs and planned in consultation withcommunity groups. Community participation in both planning and implementationis an essential element in the FODERUMA methodology. Projects are carefullyand consistently evaluated. To date FODERUMA has developed significanttraining programs for primary-level health workers, credit to productioncooperatives, and a wide variety of smaller projects (basic public services,agriculture, small-scale industry, pre-school education, appropriate technologyresearch). About 75% of FODERUMA's investments in community projects t dateis to be recovered from the ultimate beneficiaries (para. 6.16). CentralBank's pivotal position in Ecuador's economy allows it considerable leveragein eliciting the participation and cooperation of Government ministries andpublic agencies, allowing for an integrated approach to poverty problems andreplication of successful innovations. Based on FODERUMA's success, Gr ernmentsuggested that, as a component of this project, Central Bank should now _nterurban marginal communities with a similar methodology. The first initiativesalong these lines in Guayaquil have already been taken in close cooperationwith UNICEF.

C. BEV/JNV

4.20 The Banco Ecuatoriano de la Vivienda (BEV) and the Junta Nacionalde la Vivienda (JNV) are sister organizations under one president. BEV isresponsible for banking and other financial aspects, JNV for national housingpolicy, construction, and other technical aspects. Whenever JNV develops ahousing project, BEV provides the financing, and a team with staff from bothsides of the organization is responsible for implementatic The presidentof BEV/JNV is a cabinet-level official, responsible for the -using sector.

4.21 Within this project, BEV/JNV is primarily responsible for housingloans. The Municipality is uniquely suited to modify official developmentnorms, regularize tenure, levy a cost-recovery monthly tax in upgradingareas, and also has good experience in the provision of infrastructure. TheMunicipality would not be able, however, to make and collect loans nearly aseffectively as BEV. A legal agreement between the two agencies will specifytheir respective responsibilities (para. 8.01).

4.22 BEV/JNV is sound financially, administratively, and technically,but has provided little housing for low-income people. Its strong interestand willingness to modify past policies was confirmed at appraisal. In fact,they proposed to develop a large sites and services project on their land inthe south of Guayaquil within this project. That was judged infeasible at theappraisal stage, but the mission agreed to recommend a 500-plot pilot in thearea. In Floresta Pilot BEV/JNV will develop core units at about half the

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cost of the most economical house in their previous Guayaquil program, facil-itating a continuing dialogue between IBRD and BEV/JNV on standards. In viewof BEV's authority in the housing sector, national scope, and proven imple-mentation capacity, this project's contribution to a stronger poverty focuswithin BEV may have important ramifications throughout Ecuador in coming years.

4.23 BEV finances. Since reorganization and the establishment of JNV in1973, BEV has grown dramatically. Summary Financial Statements in Table IV-3attest to this growth. Total resources are over six times what they were in1972; the annual investment in housing is up 18 times; the number of housingcompletions is up from 664 in 1972 to 4,925 in 1977, an increase of 640%; andprofits, S/109 million (US$4.4 million) in 1977, are 14 times higher than in1972.

4.24 The position at October 31, 1978, shows a strong institution withtotal resources of S/6,667 million (US$266 million) and a debt equity ratioof only 2:1, low for financial institutions. Cash and short-term assets totalS/561 million (US$22 million) vs. short term liabilities of only S/210 mil-lion (US$8.4 million). The current ratio is 2.5:1, showing adequate workingcapital and liquidity at present volumes. Assets are invested primarily inhousing loans, S/3,028 million (US$121 million), and work in progress, S/2,237million (US$89 million). Loan payments in arrears are less than 3% of thesecured loan portfolio. Investments are S/303 million (US$12.1 million), ofwhich half is in support of BEV's own ten-year bonds, and half in variousindustrial companies, mostly a new (Selva Alegre) cement project. BEV accountsare externally audited.

4.25 BEV owes its financial strength largely to Government capitalcontributions, averaging about S/300 million (US$12 million) annually overthe past five years. In addition, various Government regulations have madepurchase of BEV obligations compulsory by both the public and private sector.Compulsory deposits and loans from Government agencies total about S/1,200million (US$48 million), 18% of resources; BEV's ten-year bonds (compulsorypurchases for private banks and insurance companies), S/713 million (US$29million), 10% of resources; and savings deposits from the public (which arerequired to be eligible for BEV loans and access to JNV-developed housing) afurther S/1,146 million (US$46 million), 17% of resources. In addition, BEVwas financed in the late 1960's by USAID and IDB at heavily subsidized rates(2.5% and 2%) in order to create the national savings and loan system. In1978 S/410 million (US$16 million), or 6% of BEV's resources, were from inter-national agencies.

4.26 These resources have gone mostly to middle income housing. Forexample, the average house financed by BEV in 1977 cost S/232,000 (US$9,280),affordable at cross-subsidized interest rates to families with monthly incomesof S/9,750 (US$390), nearly twice what families at the urban poverty thres-hold (S/5,515 (US$220)) can afford. In 1976 and 1977, 4,833 of 10,564 (45%)of house completions were below S/150,000, affordable by the poor at subsidizedinterest rates; however, only 24% of BEV's investment program was directed tothis segment of the market.

4.27 BEV interest rates were established by Cabinet decree in 1974 at4-12%, depending on the size of the loans. The smaller the loan, the lowerthe interest rate. The average loan in 1977 was at 9%, which rate allowed BEV

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to recover costs and show a modest profit, given its low cost of funds (para.6.17). However, BEV was effectively restrained from increasing the volume oflow-cost housing solutions under those interest rate policies. The problemwas two-fold. BEV could not increase lending at the lower rates withouteroding profitability; and, on the borrowing side, BEV had nearly exhaustedthe Government's capacity to provide it with subsidies above the plateaualready achieved.

Table IV-3: Summary Balance Sheets

BANCO ECUATORIANO DE LA VIVIENDA (BEV)(millions of sucres)

1972 1973 1974 1975 1976 1977 Oct 1978

ASSETSCurrent Assets 137 263 662 643 664 534 561Loans Receivable 429 479 632 984 1,362 2,130 3,028Work in Progress 187 357 789 1,246 2,164 2,334 2,237Investment, Fixed Assets 140 120 64 141 313 223 366Other 149 155 173 66 62 130 475

TOTAL 1,042 1,374 2,320 3,080 4,565 5,351 6,667

TLIABILITIESCurrent Liabilities 61 48 76 112 209 224 210Sight Deposits 7 118 311 682 1,275 1,639 1,992Bonds 248 332 314 391 563 529 713Long Term Debt 410 427 450 609 564 720 770Other Liabilities 64 87 342 134 349 194 744Capital & Reserves 252 362 827 1,152 1,605 2,045 2,238

TOTAL 1,042 1,374 2,320 3,080 4,565 5,351 6,667

KEY INDICATORSCurrent Ratio 2.2 5.5 8.7 5.7 3.2 2.4 2.5Debt: Equity 3.1 2.8 1.8 1.7 1.8 1.6 2.0Arrearage (% of Loans) 4.2 3.3 4.0 2.4 2.0 3.1 2.6Profit (S/millions) 7.8 22.2 66.9 79.7 121.7 109.5 NAProfit (% of Equity) 3.2 6.5 8.8 7.4 8.2 5.6 NAHousing Investment (Slmil) 55.0 87.5 511.9 617.4 1166.9 832.3 1,000.OEHousing Completion (Units) 664 969 3,323 4,427 5,639 4,925 NA

4.28 In recognition of these problems BEV agreed to take a fresh lookat its interest rate policies. As a first step, BEV eliminated the lowestrange of interest rates nationwide. Their scale is now 7-12%. The ceiling,12%, is the legal limit in Ecuador. As an exception to this national scale,all loans financed by this project are to have an interest rate of 10%. Inaddition, BEV may, as part of the project, undertake during 1980 a study ofpossible sources of long-term financing. This study will include the mortgageinterest rate structure in Ecuador, the social security system in Ecuador,and housing finance systems in selected other Latín American countries.

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4.29 Organization for project implementation. The project will alsorequire administrative changes. A project unit, with staff from both BEVand JNV, has been established (para. 8.02). Its director, already appointed,is expected to report directly to the president of BEV and JNV.

V. PROJECT IMPLEMENTATION

A. Implementation Sc'hedule

5.01 Overall project implementation will take about five years, fromthe beginning of 1980 to the end of 1984, as shown in the chart on the follow-ing page. All infrastructure will be completed in about three years, buthousing consolidation and loans should continue another two years. Detaileddesign and engineering can proceed in the last quarter of 1979. Phasing ofcommunity facilities will be coordinated with infrastructure construction toensure completion of the facilities in time for the settlement phase. Theartisan support component will begin implementation at the beginning of 1980and expand for about three-and-one-half years.

5.02 Government has requested approval of US$470,000 in retroactivefinancing, including: (a) US$120,000 in IBRD financing for an estimatedUS$200,000 in Municipality project unit administrative expenses andconsultants' services after May 1, 1979, and (b) US$350,000 in IBRD financingfor an estimated US$500,000 in site preparation and infrastructure costs inBEV/JNV's Floresta Pilot. The start-up expenses for the Municipalityproject unit are essential to continue design and other project preparationwork, and beginning Floresta Pilot work makes sense because of its urgencyand the time it will take for landfill to settle.

B. Procurement

5.03 Procurement in this project will follow international competitivebidding procedures and local procedures which are acceptable to the Bank.Chapter VI, Article 45, of the national guidelines for public procurement,"Ley de Licitaciones y Concurso de Ofertas," April 1978, states that for workfinanced by international sources, procurement practices will be amended totake into account conditions established in the loan agreement. The localconstruction industry in Ecuador, and especially in Guayaquil, is well devel-oped and active. Most of the contracts under this project are expected to beawarded to Ecuadorian firms due to the nature of the work to be performed--labor intensive and in relatively small tendering packages. Civil workscontracts will be grouped so that awards can be made in large or small pack-ages, whichever is more economic. Contracts of less than US$250,000 for civilworks or building materials may be procured on the basis of local competitivebidding up to an aggregate of US$6 million. Vehicles and equipment forproject administration which cost less than US$7,500 may be procured inaccordance with local procedures up to an aggregate of US$100,000. All civilworks contracts above US$500,000 and equipment contracts above US$50,000 willbe subject to prior approval by the Bank.

ECUADORFIRST GUAYAQUIL URBAN DEVELOPMENT PROJECT

Implementing Schedule

1979 1980 1981 1982 1983 1984

3 4 1 2434 1 2 3 4 1 2 3 41 2 3 4 1 2 3 4

A. SUPPORT TO SMALL-SCALE ENTERPRISE jjBdP Loans a *a y _ _ _ _ _ CENAPIA Technical Assistance _ _ _ _ _ _ _ _ _ I_* *"*

B. SERVICES TO LOW-INCOME AREASUpgrading: Guasmo aU Y AJE WW IP %ffWUpgrading: Lotizacion Mapasingue * m 9iiiE

Serviced Plots: Floresta Pilot 1P Iw: YI

Serviced Plots: Alegria [ _ E *YAlegria 1i mal mi l

C. HOUSING LOANSUpgrading loans: Suburbio- -- - - - - - - - - - - -Upgrading Loans: Guasmo _ _ _ = _ - = = = =

and MapasingueHousing Loans: Floresta

Alegria---------STUDIES

Study of Municipal Finance - mMonitoring and Evaluation -P - I m I í _*

M M _Selection of Consultant/Design and Engineering¡smmm mllTendering

vz- zA ConstructiongLo Loan Program

a m a Ongoing Smalí-Scale Enterprise Loans Based on Reflows. Worid Bank - 20035

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5.04 Contracts for the preparation and servicing of plots totallingUS$16.3 million will be tendered and supervised by the Municipality. Thecontract for the water main to Guasmo North would be tendered and supervisedby EMAP, the rest of the works by the Municipality's project unit. IBRD hasagreed that US$1.6 million worth of infrastructure and basic housing units maybe constructed by JNV itself, since they have proven and unutilized capacityto do this relatively small job quickly; the new management is likely, however,to opt for international competitive bidding for its Floresta development.Contracts for the construction of community facilities totalling US$2.9million would be tendered and supervised by DECE and the Ministry of Health.Materials and labor for about US$10.5 million of housing construction will beprocured by beneficiary families. Building materials worth about US$5.0million will be procured by BEV for sale at on-site depots. Small-scaleenterprises will procure equipment, materials, and labor on their own withthe US$10.0 million loaned to them by the Banco del Pacifico.

C. Disbursement

5.05 Disbursement of funds for the loan will be made on the followingbasis:

(a) 70% of amounts disbursed for small-scale enterprise loans,equivalent to about 60% of the cost of small-scale enter-prise projects financed;

(b) 70% of expenditures for civil worlcs; administrativeexpenses, vehicles, and equipment for the Municipalityproject unit; and community facilities;

(c) 67% of amounts disbursed for housing loans;

(d) 40% of CENAPIA's administrative expenses for this program;

(e) 70% of grants and loans made as part of Central Bank'scommunity development program in Guayaquil;

(f) 100% of foreign expenditures and 60% of local expendituresfor consultants' services.

Disbursements for housing loans, small-scale enterprise loans, and operatingcosts financed by the project will be made against certificates of expendituresfor which documentation would be retained for independent audit and forinspection by the Bank during supervision. All other expenditures will befully documented. An estimated schedule of disbursements of the Bank loan isgiven in Table V-1.

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Table V-1: Estimated Schedule of Disbursement(US$'000)

Cumulative CumulativeQuarter Ending Amount Disbursement Disbursement

1 March 31, 1980 90 90 -2 June 30, 1980 290 380 13 September 30, 1980 980 1,360 44 December 31, 1980 1,470 2,830 9

5 March 31, 1981 1,860 4,690 156 June 30, 1981 2,290 6,980 237 September 30, 1981 1,850 8,830 288 December 31, 1981 1,850 10,680 34

9 March 31, 1982 1,990 12,670 4110 June 30, 1982 2,090 14,760 4811 September 30, 1982 2,080 16,840 5412 December 31, 1982 2,100 18,940 61

13 March 31, 1983 2,200 21,140 6814 June 30, 1983 2,150 23,290 7515 September 30, 1983 2,150 25,440 8216 December 31, 1983 2,150 27,590 89

17 March 31, 1984 810 28,400 9218 June 30, 1984 860 29,260 9419 September 30, 1984 860 30,120 9720 December D1, 1984 880 31,000 100

D. Monitoring and Evaluation

5.06 Each implementing institution will be responsible for routinemonitoring and evaluation of its own activities. Each will provide IBRDwith a quarterly report, the format of which will be designed in consultationwith IBRD staff. The Municipality and BEV will report on design, tendering,costs, construction, allocation, size and number of loans, housing consolida-tion, and cost recovery. Banco del Pacifico will report to CENAPIA on thenumber, sizes, and uses of loans and on the characteristics of recipients, andCENAPIA will in turn report to IBRD on the entire small enterprise component.Central Bank will describe and detall the evolution of its pilot communitydevelopment programs, channelling its reports through the Municipality.Progress reports from the Ministry of Health and Ministry of Education willalso be forwarded to IBRD through the Municipality. The Central Bank's projectcoordinator may further centralize the reporting process.

5.07 In addition, there will be a number of special evaluation arrange-ments. The Municipality will have two evaluation consultants. The first willassist its official evaluation efforts: quarterly reports, occasional studieson important or problematic issues, and liaison with the consultants' team

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preparing future projects (para. 1.22). He will advise the director of theproject unit. The second evaluation consultant will be much less involved inthe actual implementation of the project. He will líve in project areas asa participant-observer for extended periods of time over the next five years.He should have previous experience both as an anthropologist and as an adminis-trator. This consultant will be able to evaluate the project from the view-point of particular individuals and small groups, a perspective which willcomplement statistical monitoring.

5.08 Studies of important or problematic aspects of BEV's work will beundertaken by the BEV project unit with the assistance of BEV's Department ofSocial Research and occasional consultants. CENAPIA's technical assistancefunds allow for short-term consultancies to review the small-scale enterprisecomponent, focusing on a sample of enterprises to determine the program'seffect on them and its poverty impact. By March 31, 1981, Government willformally review progress on this innovative component, together with Bancodel Pacifico and CENAPIA and in consultation with IBRD (para. 8.02).

VI. FINANCIAL ANALYSIS

A. Cost Recovery

6.01 The overall cost recovery frameworlk for the project investment isas follows (in US$ million):

Total CostIncluding PercentContingencies Recovery Recovered

Support to Small-Scale EnterprisesLoans from Banco del Pacifico 10.0 10.0 100%CENAPIA Assistance to Enterprises 0.6 0.2 26% /1Consultants' Services to CENAPIA 0.2 - -

10.8 10.2 94%Services to Low-Income Areas

Land 2.2 2.6 119% /2Site Infrastructure (all upgradingand sites and services areas) 15.0 17.5 116% /2

Off-Site Infrastructure 0.3 - -Vehicles and Equipment/MunicipalProject Unit 1.2 1.2 100%

Technical Assistance 0.6 - -Community Facilities 4.4 1.3 30% /3Community Development 0.5 0.4 75% 7T

24.2 23.0 97%

Housing Loans 16.6 16.6 100%

TOTAL 51.6 49.8 97%/1 See para. 6.04.72 For community facilities the cost of land and infrastructure not recovered,

but for industrial lots cost plus 25% recovered (paras. 6.06 and 6.15)./3 Cost of markets, but not of schools and clinics, recovered (para. 6.15).7Z- Estimate.

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Support to Small-Scale Enterprises

6.02 Banco del Pacifico. The interest rate will be raised from 9% to12%. This is the maximum legal interest rate in Ecuador, the normal ratefor commercial lending, and positive in real terms (para. 2.13). Duringpreparation of this project, IBRD pressed for an increase from the present9% rate. Central Bank was willing to agree to either (i) using 12%, thenormal commercial lending rate, for all loans in this program or (ii) using11% plus commissions to encourage longer-term lending (para. 3.07). Banco delPacifico opted for the 12% rate. Their experience in lending to this type ofenterprise for 2-3 years at a time has been good, partly because a series ofshort-term loans allows for closer supervision than one long-term loan. Anestimated 80% of the loans under this project, all except the loans forworkshop construction, will be short-term.

6.03 The costs of this type of lending are higher than the costs oflarge-scale commercial lending. The risk has proven remarkably small: only2% of payments are in arrears, so even in an expanded program defaults shouldnot exceed 1%. Administrative costs of Banco del Pacifico's program arecurrently about 7% of lending, but should fall as the program grows. Most ofBanco del Pacifico's funds come from demand deposits (for which they pay nointerest) backed by shareholders' equity. Thus, they have been able to showa profit on their artisan lending program, but could have used the funds moreprofitably for other operations. IBRD money, more dependable than otherFondos Financieros (para. 1.15), will supplement commercial banks' normalsources of funds. It should encourage them to expand lending to very small-scale enterprises, including new types of loans (services and commerce,workshop construction) which local banking regulations do not otherwiseencourage.

6.04 CENAPIA. The main source of CENAPIA's funds for this program willbe direct subsidy within the Government budget, about S/17 million (US$.7 mil-lion) over three-and-one-half years (of which S/10 million, that is US$.4million will be IBRD loan). Following nearly normal procedures, Governmentwill also pay CENAPIA 1.5% of the value of each new loan. In addition, whenan entrepreneur receives more than one site visit, he will be charged for part(US$52 for a typical package of services costing US$172) of this individualizedassistance. This will be the first time CENAPIA has charged for its services.

Services to Low-Income Areas

6.05 Existing municipal systems of cost recovery, especially in low-incomeareas, are inadequate. The tariffs which the water, sewerage, and electricitycompanies charge are relatively adequate in recovering off-site capital costsand recurrent costs for those services. In formal-sector housing developments,the developer recovers on-site capital costs by including them in the costs ofthe houses. When the Municipality provides residential services, however,there is normally no direct cost recovery.

6.06 In this project the Municipality will recover all allocable capitalcosts (including administration, design, physical contingencies, and interestduring construction) from beneficiaries over 15 years at 12%. In upgrading

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areas the monthly charge will be a betterment tax on all households. Where

BEV makes improvement loans, the Municipality tax will be incorporated intothe monthly repayment. In the Alegria sites and services area, too, BEV willassume the financial liability to the Municipality when it makes a houseconstruction loan, so that beneficiaries will remit payments for land andinfrastructure, as well as house construction, to BEV. Even for Alegriaallotees who do not take BEV loans, BEV is willing to act as collection agent

for the Municipality on a cost-recovery fee basis. The Municipality willrecover the costs of developing industrial lots plus 25%: existing industriallots will be charged cost plus 25% amortized over 15 years at 12%, while the

new lots to be developed on the Alegria site will be sold outright by the

Municipality at cost plus 25% (paras. 3.23 and 3.28).

6.07 The Municipality's history of not recovering the costs of serviceswill make collection difficult, so the Finance Division of the project unit,somewhat insulated from normal practices and pressures, will be responsiblefor monitoring the collection of project-related charges (para. 8.02).

6.08 Cost recovery methods for this sub-project are summarized inTable VI-1 and detailed in the paragraphs below.

Table VI-1: Direct Cost Recovery for Land, Services, and Community Facilities

Off-site On-siteCapital Costs Recurrent Costs Capital Costs

1. Land Not significant Not applicable Project charges /1

2. Water Tariffs Tariffs Project charges3. Sewerage Tariffs Tariffs Project charges

4. Electricitya. Connections Tariffs Tariffs Project chargesb. Street-lighting Tariffs Municipal Tax Project charges

5. Site clearance,landfill, androads Not significant Municipal tax Project charges

6. Street-cleaningand garbagecollection Not applicable Municipal tax Not applicable

7. Schools and clinics Not applicable None None8. Markets Not applicable Stall rents Stall rents9. Community development Not applicable Not applicable Project charges

/1 See para. 6.09.

6.09 Land. The Municipality and BEV are both empowered to buy land at

cadastral value, and this financial cost of sites and services developmentis to be included in the project-specific monthly charges. In the case ofFloresta, BEV acquired the property years ago at an abnormally low price, buta normal cadastral value will be charged to the beneficiaries, so that the

project is replicable. The land in Guasmo North was seized and settled some

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time ago; the price at which the authorities finally sell it is a politicalissue, and IBRD has mainly pressed that a firm decision be made, so thattenure regularization can proceed. In Lotizacion Mapasingue the great majorityof "owners" paíd privately for the land, and invaders have occupied their lotsfor years; no additional cost recovery is planned (para. 3.20).

6.10 Water. Existing water tariffs are high enough to yield EMAP (Empresade Agua Potable) a positive financial return on recurrent costs and off-sitecapital costs. Tariffs will also be charged to standpipe users in GuasmoNorth and Floresta Pilot, with the project units of the Municipality andBEV/JNV assisting EMAP in the organization of the collection and waste controlsystem. Beneficiaries will, in addition, pay for on-site infrastructurethrough the project-specific monthly charge. Connection charges will be paidby the individual families, with financing available from BEV.

6.11 Sewerage. Households with individual connections are required topay initial connection costs, plus a 30% surcharge added to their monthlywater bills. This surcharge is adequate to cover EMAG's recurrent costs.Project beneficiaries will pay for on-site infrastructure through the project-specific monthly charge.

6.12 Electricity. Virtually all households in Guayaquil enjoy electricityconnections, and the electricity company (in which the Government corporation,INECEL, now has a majority interest) is profitable. The electricity companybills the Municipality for the recurrent costs of street-lighting, which theMunicipality partially recovers through a street-lighting tax (paras. 6.13-6.14). In a new urbanization the distribution network (including streetlights and connecting line) is normally financed and built by the developer,the electricity company assuming responsibility for maintenance and operation.Since the company is allowed only 9.5% profit and must forfeit any earningsabove that to the Government, it is willing to finance the costs for thedesign of the whole network and of the connecting line in low-income areas.

6.13 The Municipality does not directly recover allocable costs forlandfill, roads, street-lighting, street-cleaning, or garbage collection.The only municipal revenue associated with these services comes from propertytaxes and associated charges. Property values are reassesed every five years,and public works in an area are eventually reflected in higher property taxes.In addition, two proportional surcharges are added to property taxes: astreet-lighting/street-cleaning charge added to the tax of all property owners,and a pavement/maintenance charge added only in areas served by paved roads.There are several serious problems with this system. First, much of the cityis not included in the cadastre, and as many as 70% of registered propertyowners do not pay the property tax and associated charges for which they arebilled. Nearly two years worth of property taxes are in arrears. Municipalauthorities may follow up on larger tax bills eventually, but the accumulationof small debts is virtually ignored. Second, street-lighting/street-cleaningand pavement/maintenance charges are not high enough to cover expenses, evenif collections were improved. Finally, it is inequitable and inefficient tohave so little correspondence between services rendered to a particularhousehold and charges.

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6.14 The project-specific monthly charge will recover all allocablecapital costs, including site clearance, landfill, and roads. These costsare also charged in formal-sector, higher-income developments. The projectareas will not be burdened with project-specific charges for the relativelyminor recurrent costs of road maintenance, street-lighting, street-cleaning,and garbage collection. The Municipality will provide these services inproject areas as elsewhere (para. 8.02), and residents of the project areaswill pay the same taxes as the rest of the city. The project-financed reviewof municipal finances (para. 4.16) will include scrutiny of municipal taxstructure and collections.

6.15 Schools, clinics, and markets. There will be no direct cost re-covery for schools and clinics, nor for the land and infrastructure allocableto community facilities. The capital costs of markets, however, will be re-covered by raising the normal monthly rent for a market stall from S/60 toS/300.

6.16 Community development. Central Bank will follow the cost recoverypolicy used for FODERUMA in rural areas. Some investments, especially inhealth care and education, are not being recovered, but about 75% of investmentin community projects is being recovered at 9% interest. This is the normalinterest rate for socially oriented projects in Ecuador. It is acceptable forthis small program development component, because substantial costs of innova-tion and learning will be charged to the participants, even though the benefitswill be widely shared.

Housing Loans

6.17 Government regulations and assistance have kept BEV' s cost of capitalto a little over 5%, thus allowing them to lend at an average rate of 9%. Inconjunction with this project, BEV agreed to revise its interest rates upwardsin order to greatly expand its low-income clientele. Rather than insist onfull cost recovery for this component only, without any change in BEV's costrecovery practices elsewhere, during preparation IBRD pressed for substantialnationwide change in BEV's interest rates. BEV agreed to revise interestrates for all its progrars from 4-12% to 7-12%. In addition, the previousmanagement of BEV agreed with the appraisal mission that the interest ratesto be used by BEV in this project would be somewhat higher than normal (8%for sites and services and 10% for upgrading). IBRD tentatively agreed tothe 8% rate for some loans, because a significant change had been conceded inBEV's nationwide interest rate structure, and because the 8% and 10% rateswould have been sustainable over the medium term. The new management of BEV,however, has instead agreed to charge 10% for very small loans, including allloans in this project. This represents a significant improvement in thereplicability of the project.

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B. Affordability

Support to Small-Scale Enterprises

6.1'8 The following data, averages for Banco del Pacifico's presentclientele, demonstrate that the loans are affordable to very small businesseswhose employees earn incomes below the poverty line:

Average number of workers (including owner) 3Value of machinery and equipment S/27,830 (US$1,113)Monthly production S/37,430 (US$1,498)Monthly net income S/ 7,259 (US$291)Average monthly wage of regular employee S/ 2,272 (US$91)

The increase in interest rate to 12% will raise the average semi-annual repay-ment only about US$12, not appreciably affecting affordability.

Services and Housing Loans

6.19 Table VI-3 shows the estimated income distributions for Guayaquiland the settlements to be upgraded. The target for design was that theAlegria sites and services area should be affordable to about 90% of thehouseholds in Guayaquil (those with incomes above S/2,770 (US$111) per month),and that improvements in Lotizacion Mapasingue and Guasmo North should beaffordable to about 90% of the households presently living there (those withincomes above S/2,250 (US$90) per month).

Table VI-3: Household Income Distributions forGuayaquil and the Neighborhoods to

be Upgraded (1979 sucres)

Guayaquil 1/ Guasmo North 2/ Lotizacion Mapasingue 2/

0-2,250 6.1 10.1 12.12,250-4,500 16.9 34.9 30.04,500-6,750 30.4 32.9 27.46,750-9,000 16.8 12.1 12.89,000 + 29.8 10.1 17.6

1/ Fajardo and German de Valiz, Distribucion del Ingreso en el AreaUrbana de la Ciudad de Guayaquil (University of Guayaquil, 1977).

2/ 1978 Survey, Departamento de Planificacion Urbana.

6.20 Table VI-4 shows the actual outcome of design work. The per plotcost estimates shown include allocable land costs to be recovered: forAlegria and Floresta Pilot over 15 years at 12%, for Guasmo North at S/100 per

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square meter over 25 years at 12%. They also include physical contingencies,administration, and interest during construction. They do not include thecost of infrastructure allocable to industrial lots or community facilities.The mlnimum housing loan is the cost of one well-built cane room. Also shownare the resultant monthly charges and the income groups able to afford them.It has been assumed that families can afford up to 20% of income, the propor-tion which renters normally pay in rent. As Table VI-4 shows, the afford-ability targets were met or nearly met in all cases. Charges will be accord-ing to plot size, thus encouraging (but not forcing) subdivision and moreefficient use of the services provided.

6.21 In the sites and services areas, the payment for serviced land andthe loan for the house itself will all be part of one mortgage repayment. Inthe upgrading areas, the monthly payment for the capital costs of services isa betterment tax, which all households must pay. Households in upgradingareas will also be eligible for BEV loans, but families which cannot affordloan repayments in addition to their monthly payment for services need notapply. They already have their present shelter, however inadequate.

Table VI-4: Affordability of Services and Minimum Housing Loans(mid-1979 sucres)

Alegria Floresta Pilot Mapasingue GuasmoA B

Per plot allocable capitalcostsServiced lot 41,400 33,952 33,952 38,400 44,206Minimum housing loan 14,100 46,048 66,048 - -

TOTAL 55,500 80,000 100,000 38,400 44,206

Minimum monthly chargeServiced lot 497 330 330 460 509Loan repayment 155 506 725 - -

TOTAL 662 836 1,055 460 509

Income level at whichaffordable 3,260 4,180 5,275 2,300 2,545

Percentile of Guayaquilincome distribution 14th 21st 34th 6th 8th

Percentile of neighborhoodincome distributionwithout subdivision N.A. N.A. N.A. -lth 15th

Percentile of neighborhoodincome distribution aftersubdivision N.A. N.A. N.A. 5th 6th

Percentage of Eamilies belowabsolute poverty thresholdthat can afford monthlypayment 63 44 8 84 78

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6.22 Monthly bills for electricity, water, and sewerage are likely tobe the same as, or lower than, what people are paying now for a lower levelof service. Monthly electricity bills are expected to average S/61 permonth, but the great majority of low-income households already have electri-city connections. Water bills are expected to average the minimum, S/30 permonth, plus an additional S/9 (30%) for households in Alegria and LotizacionMapasingue with sewerage connections. The sewerage charge w.ll be extra forfamilies which already have individual water connections, but most of thefamilies in these areas now rely on tanker trucks for water and pay about S/94per month for minimal amounts of water. An individual connection will meanthat they can consume eight times as much water, acquire sewerage service,and still save S/55 per month.

C. Replicability

6.23 The binding constraints on the replicability of this project arepolitical will, lack of successful experience, and limitations of administra-tive capacity. Institutional development--Banco del Pacifico and BEV poverty-oriented lending on a more significant scale, and the evolution of an agile,reliable project unit in the Municipality--should make the replication of thistype of project possible in Guayaquil and in other urban areas of Ecuador, too.

6.24 The 12% interest rate on loans to small-scale enterprises mayattract other banks to this type of lending, but further increases in theinterest rate will be necessary to fully open the banking system to small-scale borrowers. Similarly, the 10% which BEV will charge for sites andservices and upgrading loans is a considerable improvement over presentpolicies, but even higher rates might be necessary if BEV continues to expandlending for low-income housing.

6.25 Since the Municipality project unit will recover all costs at 12%over 15 years, its intended policies would be adequate even on a much largerscale. The project unit will be operating entirely with loan funds from IBRDand Government, however, and it should be capitalized if it were to become amunicipal company.

D. Cash Flow Analysis

6.26 Cash flow analysis for the Municipality's project unit is shown inthe Working Documents. Several aspects of the cash flow are worthy of note.The unit is not required to pay the IBRD service charge or interest duringconstruction (para. 2.12) and will earn some profit due to its interest ratespread and the mark-up on industrial land (para. 6.06). The sale of the newindustrial land on the Alegria site will give the unit a cash surplus in1982, which could be invested in easily convertible assets at an assumed 10%rate of return. These arrangements allow the unit to break even despitecollection losses and its unrecoverable expenses for technical assistance,offsite infrastructure, and the land and services for community facilities.During the implementation of this project the unit will depend for itsliquidity on a US$1 million revolving fund in Banco Central, established forit by Government.

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VII. ECONOMIC ANALYSIS

7.01 The benefits to be derived from the proposed project are two-fold: those flowing directly to the participating households as a resultof the actual operation of this project, and those to be gained in thelong run from the planned institutional improvements already underway. Thelatter will result from the introduction of more realistic development normsand cost recovery policies, appropriate technologies for low-income residentialdevelopment, and the establishment of credit systems for the urban poor. Theexpansion of the small enterprise credit program will continue to createemployment long after the three-and-a-half year start-up period. Similarly,the increased involvement of BEV/JNV and the Municipality of Guayaquil in thedesign and implementation of shelter programs for low-income groups is crucialto the development of future projects of this type and will result in benefitsbeyond the direct impact of this project.

A. Economic Benefits

7.02 The project has been designed to fulfill the objectives of theGovernment in improving the living conditions of the urban poor by extendingessential services, increasing the availability of credit, increasing pro-ductivity, and providing basic employment. The project will benefit on theorder of 17,700 households, which represents approximately 10% of the popula-tion of Guayaquil. The impact of each of the components will be as follows:

Estimated Beneficiaries

Component Households

Urban services, community facilitiesand security of tenure:

Sites and Services 3,700Upgrading areas 6,000 /1

Small-scale enterprise support 5,000 /2

Housing loans in the Suburbio 3,000

Total 17,700 /3

/1 This figure includes a 70% subdivision of lots.7- This figure is a rough approximation of the number of new jobs

created in the enterprises receiving loans. A total of about16,000 individuals (owners and workers) will be involved inparticipating enterprises. Employment will also be generatedby the construction of residential services and housing.

/3 There may be some double-counting between the artisan supportand other components.

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B. Economic Rates of Return

General

7.03 The overall rate of return for all components of the project whichhave quantiflable benefits (70% of project investment) is 18%.

Services for Low-Income Residential Development and Housing Loans

7.04 Benefits for the proposed infrastructure components are based onimputed rental values, according to market values for housing and environ-mental improvements. The expected average annual increase in rent for housingunits in upgrading areas is S/2,400 (US$96), which represents a 20% increaseover the existing rental value. Imputed rental values for the new houses inthe upgraded areas where plots subdivide and for those in the serviced siteareas are based on comparable rental values for the entire city. The typesand sizes of houses likely to be built were estimated on the basis of theloans that will be available and the income distributions in each area.

7.05 The estimated rates of return for the various project areas (Guasmo,Mapasingue, Alegria, Floresta Pilot, and the Suburbio) vary from 17-19%. Sen-sitivity analysís (15% over- or underestimation of benefits) results in apossible range from 15-23% for the various sites.

Industrial Plots and Markets

7.06 Twenty-two percent of the land in Alegria, Mapasingue and Guasmowill be used for industrial purposes: 4.5% new industrial lots to be soldat cost plus 25%, the remaining 95.5% existing industries in the areas whichwill be charged cost plus 25% for public services amortized over 15 years at12% (paras. 2.04 and 6.06). The financial rate of return for the industrialland is 18%.

7.07 The Mercado Central of the Municipality will recover the costs formarkets through the rental of stalls at S/300 (US$12) per month per stall.The financial rate of return for the markets is 15Z.

Credit to Small-Scale Enterprises

7.08 A rate of return estimate has not been made for the small-scaleenterprises component, but the enterprises now receiving loans from Banco delPacifico are getting a return on capital of about 35%. This figure wasderived in two ways. First, loan applications in Banco del Pacifico's filesindicate the assets, wages, and expenses of all the enterprises which havereceived loans to date. It was possible to estimate the rates of return ontotal assets in a random sample of fifty of these enterprises. Second, theenterprises which will get loans from this program routinely pay 25-40% forsupplier's credits or, if they must borrow from money lenders, 10-20% a month.

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Community Facilities and Community Development

7.09 Costs and benefits of schools, health centers, and Central Bank'scommunity development program have been excluded from the calculation ofoverall project rates of return. These represent a minor part of the projectcost and, though the benefits are important to the well-being of the communi-ties involved, they are unquantifiable. The primary schools and the healthfacilities will be designed and constructed on a least-cost basis according toexisting national standards. Central Bank's program should, in fact, developlower-cost technologies for meeting basic needs than are presently availablein Guayaquil.

Technical Assistance

7.10 Though unquantifiable, the benefits to be derived from technicalassistance to CENAPIA, the Municipality and BEV, will have a direct impact onthe implementation of this project and on the feasibility of further projectsof this type. The possibility of repeating such a project rests in a majorway on the development of the institutions involved. Technical assistance toCENAPIA will determine the feasibility of the proposed artisan market, improvethe quality of CENAPIA's marketing advice, and allow for outside evaluation ofthe small-scale enterprise component. Technical assistance will be especiallyhelpful to the Municipality in improving financial management, helping theproject unit grow into its important task, and evaluating the project overall.Technical assistance to BEV will help them in addressing the need for low-income housing on a larger scale and in evaluating long-term sources offinance other than Government budgetary allocations.

Risk

7.11 The major risks associated with the implementation of the projectare, at the same time, the major opportunities--institutional developmentand resolution of land tenure problems. There is some risk that BEV mighthave difficulty implementing innovative aspects of the project, but thisrisk has been minimized by adapting project design to BEV's present experienceand procedures. The Municipality's technical and administrative weaknessespresent a more serious risk, but there is no way to resolve the problems ofinadequate urban services for the city's poor without strengthening theMunicipality. The risk to the project has been minimized by: establishinga relatively independent project unit (para. 8.02); providing adequate fundsfor technical assistance; and agreeing on schedules of reform in the areas ofland tenure, finance, and development regulations (para. 8.02).

7.12 Inordinate delays in regularizing tenure in project sites couldpostpone civil works in Guasmo and Mapasingue and part of BEV's loanprogram. This risk has been minimized (paras. 3.17-3.22) by: insistingon expropriation of Alegria before negotiations; agreeing at negotiationson a plan and timetable for the remainder of the necessary legal processin Alegria; making the presentation of feasible land tenure plans for

- 49 -

Guasmo North and Lotizacion Mapasingue conditions for disbursement in thosetwo areas; technical assistance to both the Municipality and BEV toparticipate in the resolution of land tenure problems; and agreement withthe Registry of Property to use some of these funds to prepare a computerizedindex of property-owners and improve the Registry's overall efficiency.Should civil works in Guasmo North be delayed, only US$1.4 million in civilworks would be at stake, and BEV could disburse housing loan funds in otherlow-income areas of Guayaquil. Lotizacion Mapasingue is the last sitescheduled for upgrading, giving authorities extra time to resolve landtenure problems there.

C. Urban Poverty Impact

7.13 Approximately 37% of the households in Guayaquil have incomes solow (below US$2,645 per household per year in 1979 prices for an averagelow-income family of 6.7 members) that they cannot afford calorie adequatediets. The project is targeted to serve primarily this population below theabsolute urban poverty threshold.

7.14 About 88% (US$35.9 million) of the investment for services inlow-income areas and housing loans will benefit the poor. All the servicedsites, improvements in existing areas, and housing loans will be affordable tohouseholds below the poverty line. The Alegria sites and services area willbe affordable to 63% of the poverty group, and the upgrading will be afford-able to about 81% (Table VI-4). The project will upgrade only about 8% of thebacklog of poorly serviced lots in Guayaquil, and new sites and services (notincluding subdivision in the upgraded neighborhoods) will meet 16% of thedemand for new housing among the lower half of the income distribution duringthe implementation period. To provide similar sites and services developmentadequate for all the new growth in the lower half of Guayaquil's incomedistribution over the next five years (including loans for a variety oflow-cost housing standards, community facilities, and all overheads) mightrequire on the order of US$80 million in additional investment. The cost ofupgrading the backlog of inadequately serviced neighborhoods is more difficultto estimate. Nearly all costs from this project will be recovered (para.6.01), so that the approach would be replicable on the necessary scale asimplementation capacity expands.

7.15 In addition, the entire investment in small-scale enterprises(US$10.8 million) will create jobs at a very low capital cost per job.The capital cost per job will be about US$1,700, compared to a nationalaverage cost per job of about US$8,700 and an average cost for new jobscreated in the early to mid-70's of US$22,000.

- 50 -

VIII. AGREEMENTS AND RECOMMENDATION

8.01 As a condition for disbursement for the relevant components,supplementary agreements are to be signed between Central Bank and Banco delPacifico, the Municipality, and BEV/JNV, and between the Municipality andBEV/JNV (paras. 2.11 and 4.21). As a condition of disbursement forcivil works in Guasmo North and Lotizacion Mapasingue, Government willpresent a feasible plan and timetable for regularizing land tenure onthe site in question (paras. 3.19-3.20).

8.02 At negotiations, the following assurances and agreements were made:

(a) From Government:

(i) that IBRD will receive annual confirmation that counter-part funds for the year are at the disposal of eachpublic agency involved (para. 2.11);

(ii) that funds will be on-lent by the Central Bank to BEVand the Municipality on the same terms as the IBRDloan, except that the commitment fee and interest during

construction will be paid for the Municipality by Govern-ment (para 2.12);

(iii) that funds will be rediscounted to banks participating inthe small-scale enterprise program at the same rate ofinterest as the IBRD loan (para. 2.12);

(iv) that land tenure will be regularized in the project sitesaccording to an agreed plan and timetable (paras. 3.17-3.22);

(y) that Central Bank will appoint a project coordinatoracceptable to the Bank (para. 3.01);

(vi) that schools and clinics built under the project willbe operated and maintained by the appropriate ministries

(paras. 3.34-3.35);

(vii) that progress on the innovative small-scale enterprise

sub-project will be formally reviewed by March 31, 1981,together with CENAPIA and Banco del Pacifico and inconsultation with IBRD (para. 5.08);

(b) Prom each of the participating agencies:

(i) that necessary organizational arrangements will be made,with adequate staff and facilities for project imple-mentation (paras. 4.06, 4.08, 4.18, 4.29);

- 51 -

(ii) that separate project accounts will be kept and promptlyaudited;

(c) From the Municipality of Guayaquil:

(1) that financial management policies will be reviewed anda timetable of reforms to be implemented furnished to theBank by June 30, 1980 (para. 4.16);

(ii) that the finance division of the project unit will monitorthe recovery of allocable capital costs through projectcharges, following plans and timetables submittedto IBRD for each site with their first application fordisbursement against construction on that site (paras.6.06-6.07);

(iii) that criteria and procedures for selection of familiesfor the Alegria Sites and Services area will be acceptableto IBRD (paras. 3.46-3.47);

(iv) that urban development norms will be reviewed by March 31,1981, considering amendments that would promote slum upgradingand sites and services development (para. 4.17);

(v) that public services provided under the project (markets,water and sewerage infrastructure, street-lights, androads) will be operated and maintained by the appropriateauthorities (paras. 3.36 and 6.10-6.15);

(vi) that families selected for Alegria will not be requiredto borrow from BEV for the construction of their houses,but will be allowed to construct their homes with otherresources (para. 3.46);

(d) From BEV/JNV:

(i) that BEV interest rates nationwide will be maintained atleast at the 7-12% scale, with lending under this projectat no less than 10% (para. 6.17);

(ii) that criteria to determine eligibility for loans will beacceptable to IBRD (paras. 3.45-3.47).

8.03 With the assurances and conditions indicated above, the project issuitable for a Bank loan of US$31.0 imillion equivalent.

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ANNEX 1

ECUADOR

GUAYAQUIL URBAN DEVELOPMENT PROJECT

Selected Documents and Data Available in the Project File

A. Selected Reports Prepared by Participating Ecuadorian Institutions.

Al. Primer Proyecto de Desarrollo Urbano. Department of Urban Planning,Municipality of Guayaquil, Guayaquil, 1978.

A2. Floresta: Proyecto BIRF, Volumes 1-3 and Documentos Complimentarios.BEV/JNV, Guayaquil, 1979.

A3. FODERUMA. Banco Central, Quito, 1979.

A4. Programa de Credito Artesanal del Banco del Pacifico. Banco delPacifico, Guayaquil, 1978.

A5. Legal Documentation. Department of Urban Planning, Municipality of

Guayaquil, Guayaquil, 1979.

B. Working Documents. Bank Staff and Consultants, July 1979.

C. General Documents.

Cl. El Otro Guayaquil: Servicios Sociales del Suburbio. AccionInternacional Tecnica, Guayaquil, 1976.

C2. Estudio de Mercadeo de Productos Alimenticios para Guayaquil,Volumes 1-3. Accion Internacional Tecnica, Guayaquil, 1974.

IBRD 1413781 E0C 79- ' MARCH 1979

E COLOMBIA

First Guayaquíl Urban Development Project Via son Lorenzo

}. * Project area a S \ \ - -

Paved roads

Gravl roads

----- Earth roads o

Railroods

4. Ports

4. AírportS Roso Zárate Atuntoqu

---------- Rivers -ova Ora

* -*-* International boundary

0'

0 < <- { \ ~~~~~~~~QUIT0O /

Pi a c i ¡ t c C,armen anto Domi ngo

: 0( \,/ y / 2 / S~~~~~~~~~~~~~~~~~~~angolqui

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et por to wfrch lt ¡s an.fbed. ) p - ATre» deinarlons usad anf theh Jipijapa ,/bouees shown on |/ o3@peb not ~npv en (hepert o( r/,Worid neor ndtset offitetes, e Vinces Peblove jo Gur anda

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IBRD 14138

MARCH 1979

ECUADOR

First Guayaquil Urban Development ProjectPROJECT SITES ¡ LAND USE

\j :j9Upgrading areas

ç 2 ; A~~LEGRIA k Sites and services

Ç | l | | ii ) ) 9 < 0 t 3 ~~~~~~~~~~~~~~~~~~Industrial4r,Wf-e,',-: ;li - e 0 4 9 jjlillR jllj;~~~~~~ Commercial

. / i ~~~~~~~~~~t\ «> 59 E;~~~~~~~~~~~~uilt-up areas:

/ \ VL X 0 - v-:, ~~~~~~~~~~~~~Densely populatedLess densely populated

Main access roads- - Railroad

LOTIZACI Ai,po / - > ,1= = X *- Rívers andstreams

Ee~~~~~~~~~~~~~~~~~~~~~~~ N

A f u Wi X t PE ,'/ V/ X S ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~tPo °novn enience of tShe reotdfeCrs odfad -S e X a * ,i" ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~7The denem,natiens úsed rnd the

(~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~d no imp /y,rRT & bondresio ntOe ponr of thesiSS @°zÑ i97 /,- Ni>£9f llb \ ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~WorldBErnk enhd ¡te sizlietrlt. oJ

gi\__~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~e> >; -)) |mteriteVry ranyendersement

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¡BR) ¡4139

MAC. 1979E C U A DOR

First Guayaquil Urban Development Project

SITES AND SERVICES,£\egría ' _

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iiIillCoroorc ¡al resodent.ol loto. | | Proposed ¡od o Irl al a reos -: ' ¡ \

OXIDAT ON

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ECUADORFIRST GUAYAQUIL URBAN DEVELOPMENT PROJECT

Standard House Plans for Alegria: First Sample

2m lml 3m 2m 4m

E~~~~~~~~~~~~~~~~~~~

LO EE

E 1 ~~~~~~~~~EEE O¡

2m m 3m 3m 3m 3m 3m

6m Phase VPhase I 2I Enclosed Area: 6Im2

Phase 1: Alt. B Enciosed Area: 39m2 Covered Area: l2m 2

Enciosed Area: 4m2 Covered Area: 9m2

Covered Area: 14m2 3m

E~~~~~~~~~~~~~~~~~~~

E- E~~~~~~~~~LO~~~~~~~~~~L

E~~~~~~~~~~~~~~~~~~~~

E~~~~~~~~~~~~~~~~~~~~~ .lE~~~~~~~~~~~~~~~~~~~~~~~~~~~~

2m 1m| 3m 3m , 3m 3m

Phase ll: Phase IV

Phase 1: Alt. A Enciosed Area: 30m2 Enciosed Area: 48m2

Enclosed Area: 4m2 Covered Area: 6m2 Covered Area: 12m2

Covered Area: 5m2

ECUADORFIRST GUAYAQUIL URBAN DEVELOPMENT PROJECT

Standard House Plans for Alegria: Second Sample

2m 1mrn 3mn 3m 3m

7~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~

¡ _g g XE E

E

E E

E

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N~~~~~~~~

El

lm| 2m | 3m 3m 3mn Phase IV: Alt. B_ .Phase lil Enciosed Area: 64m 2

P Am Enciosed Area: 46m 2Covered Area: 1lm 2

lhase 1: Alt. B Covered Area: 14m 2

Enciosed Area: 3m22m 4Covered Area: 22m2

2m 4m

p _ 1 u --r E

Irn~~ Phs 1 Pas I: lt

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ÇPhsIIPhase IV: Alt. A CvrdAe:1l2CvrdAe:1m

Enciosed Area: 3m2Covered Area: .1 m2

Worid Bank-20114

-~~~~~~M

SUBURBIO: Aerial view of the periphery indicates varying levels ofconsolidation and new growth along the banks of the river.

MAPASINGUE EAST: Aerial view shows mixed land use and industrial zones.28% of the land -in Mapasingue is used for industrial purposes.

~~~~S ____~~~ ~ , -# - E ' a

_# F RmE ~~~~~~~~~~~~~~~~~~~~' *1

MAPASINGUE: New invasions are appearing on the hi13~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~s forming the northern~~~~~~~~~~~~~~~~~~boundary.~~ ~ ~ Elcrciyi teolyaalal erie

-M + 9 , X

MAPAINGE:iew finvaseions re aperigo the Sbbia thill foritygcthenrthr

L~~~ -,...

are ,= une cLntrct.n

1,0-ePriit ha enpovddt hs oeya i nai

Gradual consolidation takes place prior to street fill.

" 1 F o " _ _,S,~~~~~~~~ 1

RNI i _ S

Residents without running water must depend on water trucks to filltanks for 25 times the cost of running water.

-- l l s l- - -~~~~~~~~u-

UPPER LEFT: Garbage, which is provided to residents of the Suburbio as land-fill, is typically sorted for recyclable materíals. UPPER RIGHT: Many invasionsare formed by groups organized in cooperatives.

Fishíng is the principal income-generator for the residents of this newly-formedinvasion ín the Suburbio.

It is estimated that 25% of the homes in lower-income areas are used asplaces of employment. LEFT: An artisan uses his home as a workshop.RIGHT: It is also typical for people to sell soft drinks or food fromtheir home.

The overcrowded school (aboye) and the small health dispensary (below) aretypical of those built by cooperatives in new invasions.

9~~~~~~~~~