Document of

The World Bank

FOR OFFICIAL USE ONLY

Report No. P-2277-PE

REPORT AND RECOMMENDATION

OF THE

PRESIDENT OF THE

INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT

TO THE

EXECUTIVE DIRECTORS

ON A

PROPOSED LOAN

TO THE

REPUBLIC OF PERU

FOR A

WATER SUPPLY AND POWER ENGINEERING PROJECT

October 18, 1978

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 authorition.

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CURRENCY EQUIVALENTSCurrency Unit = Sol (S/.)

Calendar 1977 October 10, 1978

US$1 = S/.80 179.10S/. I - US$0.0125 0.0056

FISCAL YEAR

January 1 to December 31

ABBREVIATIONS

AID U.S. Agency for International Development

COFIDE Corporacion Financiera de Desarrollo(National Development Bank)

ELECTROLIMA Electricidad de Lima (Lima Power Company)

ELECTROPERU Electricidad de Peru (National Power Company)

ESAL Empresa de Saneamiento de Lima(Lima Water Company)

IDB Inter-American Development Bank

KfW Kreditanstalt fuer Wiederaufbau

MVC Ministerio de Vivienda y Construccion(Housing and Construction Ministry)

FOR OFFICIAL USE ONLY

PERU

WATER SUPPLY AND POWER ENGINEERING PROJECT

LOAN AND PROJECT SUMMARY

Borrower: Republic of Peru.

Beneficiary: Empresa de Saneamiento de Lima (ESAL) for the watersupply component (US$4.9 million).

Amount: US$8.8 million.

Terms: Repayable in 10 years including 2-1/2 years of gracewith interest at 7.35 percent. Each of the loan's twocomponents would be refinanced by any future loan for aproject prepared under that component.

RelendingTerms: The Government would onlend US$4.9 million to ESAL

on the same conditions as the Bank loan. Moreover,the National Development Bank (COFIDE) -- which would, onbehalf of the Borrower, be a party to the subsidiary loanagreement -- would receive a commission from ESAL of 0.75percent per annum for administering the subloan andsupervising a financial rehabilitation program for ESAL.ESAL would bear the foreign exchange risk.

ProlectDescription: The project would lay the basis for a long-term solution

to Lima's water supply problems and update studies for amajor hydropower plant. Its elements are:

The ESAL Component

Assessment of water resources and demand in the LimaMetropolitan area -- including a leak detection, correctionand metering program; development of a water supply andsewerage master plan; preparation of a future watersupply project; and strengthening of ESAL's organization,management and finances.

The Mantaro Component

Completion of studies for the Mantaro transfer and Shequehydroelectric projects which would expand generatingcapacity in Peru's Central Region and assure Lima'swater supply in the long term.

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

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Special The project faces no special risks although ESAL wouldRisks: have difficulties in providing counterpart funds for the

ESAL component and in servicing its sub-loan if waterrates were allowed to decline in real terms. Specialprovisions in the Loan, Project and Subsidiary LoanAgreements are designed to assure that ESAL's revenueswill remain at adequate levels.

EstimatedCosts: ------US$ million------

ESAL Component Local Foreign Total

(a) Leak detection, correctionand metering 0.41 1.98 2.39

(b) Water and Sewerage MasterPlan 0.41 1.63 2.04

(c) Organization, managementand financial studies;project management 0.10 0.40 0.50

0.92 4.01 4.93Contingencies: Physical 0.09 0.40 0.49

Price 0.22 0.49 0.71

Subtotal 1.23 4.90 6.13

Mantaro Component

Studies 0.80 3.20 4.00Contingencies: Physical 0.08 0.32 0.40

Price 0.19 0.38 0.57

Subtotal 1.07 3.90 4.97

Total Project Cost 2.30 8.80 11.10

FinancingPlan: Bank - 8.80 8.80

ESAL 1.23 - 1.23Government 1.07 - 1.07

Total 2.30 8.80 11.10

EstimatedDisbursements: Bank FY 1979 1980 1981

Annual 1.20 6.20 1.40Cumulative 1.20 7.40 8.80

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Rate of Return: Not Applicable

Consultants: 1,100 man/months of technical and supporting personnel,including a project manager for the ESAL component.The average cost of consulting services, excludingcontingencies, is estimated at US$7,000 per man/month.

Appraisal Report: None

INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT

REPORT AND RECOMMENDATION OF THE PRESIDENT OF THE IBRDTO THE EXECUTIVE DIRECTORS ON A PROPOSED LOAN TO

THE REPUBLIC OF PERU FOR A WATER SUPPLYAND POWER ENGINEERING PROJECT

1. I submit the following report and recommendation on a proposed loanto the Republic of Peru for the equivalent of US$8.8 million to help financea Water Supply and Power Engineering Project. The loan would have a term often years, including two and a half years of grace, with interest at 7.35 per-cent per annum. The Government would relend part of the loan to Empresa deSaneamiento de Lima (ESAL) on the same terms and conditions as the Bankloan plus a commission of 0.75 percent per annum to the National DevelopmentBank (COFIDE) for administering the loan. ESAL would bear the foreign exchangerisk. In accordance with the normal procedure for preinvestment loans, theloan would be refinanced by any subsequent project loans arising out of thisengineering project.

PART I - THE ECONOMY

2. A report entitled "Economic Position and Prospects of Peru"(No. 655-PE) was distributed to the Executive Directors on March 3, 1975.A basic economic report on Peru is now being completed. The following para-graphs are based on this report and on the findings of several visits to Peruduring the course of this year. Country data sheets are attached as Annex I.

3. Peru, the fourth largest country in Latin America, is divided bythe Andes mountains into three distinct regions. The Costa, about 10 percentof the country's territory, is a narrow belt of dry plains, intermittentlyirrigated valleys and Andean foothills, where 46 percent of the populationlives. Modern economic activity is concentrated in the Costa, particularlyin Lima. The Sierra, with 44 percent of the country's population, encompassesthe highlands above 2,000 meters which occupy about one-fourth of the country.The remaining two-thirds of the area is occupied by the sparsely populatedSelva, vast tropical lowlands east of the Andes. The rugged topographylimits trade between the three regions.

4. Peru has abundant natural resources. These include the largedeposits of varied minerals located mainly in the Sierra and the southerncoast. Another major natural resource asset is the large fishing potentialof the offshore waters, although the magnitude of this potential is subjectto sharp fluctuations. In contrast to mining and fishing, agricultural landis limited. Most of the soils suitable for intensive agriculture (3.5 millionha or 3 percent of the country's total area) are already being farmed. Theremaining land with good agricultural potential is concentrated in higherparts of the Selva, with high costs of access and clearance. It would alsobe possible to expand the arable land in the Costa, but this would requiredrainage and salinity control or high-cost irrigation schemes. Although

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Peru's water resources are abundant, their geographical and seasonal distri-bution is unbalanced. East of the Andes, an extensive river system carriesan immense water flow into the Amazon basin. West of the Andes, most of therivers are seasonal streams that swell in the summer months. Future manage-ment of water resources will require heavy investments to maximize the useof westward flowing rivers.

5. Since the military came into power in 1968, the Government hasfollowed a development strategy directed toward linking economic growth witha transformation of society to achieve broader popular participation in thecountry's economic, social and political life. This strategy aimed at narrow-ing the sharp differences in wealth and opportunities between income classesand geographical regions. The Government has tried to correct these imbalancesby expanding the role of the State in the economy, changing the pattern ofasset ownership, reducing foreign ownership of national resources, orientingindustry and agriculture toward producing essential goods for the domesticmarket, stimulating the deconcentration of economic activity out of Lima, andreforming the educational system to make it more responsive to local economicand social needs. Through nationalization and creation of new enterprises,the State has taken direct control of over 150 enterprises in key economicsectors, and its share in total capital formation has risen from less thanone-fourth in 1968-70 to over one half in 1974-76. Finally, through complexlegislation, the Government has imposed strict controls on the operations ofthe non-public sectors.

6. As a result of these actions, the pattern of asset ownership in theeconomy has changed drastically. Through nationalization, the share of assetsowned by foreigners fell sharply. A sweeping land reform redistributed45 percent of the country's best farmlands to workers' cooperatives benefit-ting some 25 percent of all rural families. Through other laws, the industrialworkers were given shares in the firms which employed them and those in themining sector a share in profits. The Government has also given a strongautarkic orientation to its agricultural and industrial sector policies andstrenghened the incentives for industries outside of Lima. At the same time,the groundwork has been laid for an important reform of the educational system.

7. One of the most significant achievements of the Government was thepromotion of the cultural and political integration of the country. Owingin great part to the land reform, the rural population has become betterorganized to communicate its priorities in a more forceful and articulate way.

8. While the Government's programs have benefitted large numbers ofPeruvians, they have not reached the poorest half of the population whichcontinues to live in abject poverty. It is estimated that 70 to 75 percentof rural families, including the "minifundistas" (those farming less than2 ha) and the seasonal landless workers, have not been reached by socialprograms. The Government imposed controls on prices of a number of domestic-ally produced goods, and heavily subsidized imported petroleum and foodstuffs.Most of the subsidized products, however, were not important in the consump-tion basket of the poorest groups. Moreover, price controls in some caseshurt the poor as producers.

9. Through 1977, the Government followed expansionary fiscal and creditpolicies. The rapid increase in spending by the public sector was not matched,however, by a parallel increase in revenues. Pricing, interest rate andforeign exchange policies encouraged consumption and discouraged savings andexports. As a result of these policies, aggregate demand considerably exceededaggregate supply. This excess demand, in turn, led to widening external gapsand to strong inflationary pressures, with a resulting loss of internationalreserves and a massive build-up of external debt. This imbalance was aggravatedby circumstances beyond the control of the authorities. Anchovies, the fishingindustry's principal catch, disappeared, and copper and sugar export pricesdropped to extremely low levels. Furthermore, petroleum reserves turned outto be far less than expected and with high access cost, which made the rise inoil prices militate against and not for the Peruvian economy.

10. Public sector savings dropped steadily in relation to GDP from 4.6percent in 1970 to dissavings of 2.8 percent in 1977. A major cause for thiswas a massive erosion of the tax base owing to excessive tax holidays, exemp-tions and weak enforcement. At the same time, there were rises in the budget-ary cost of subsidies for foodstuffs and petroleum products, and sharp increasesin non-developmental expenditures. Much of public investment, furthermore,has been increasingly concentrated on capital-intensive projects with longgestation periods which have so far contributed little to the growth of outputor employment.

11. Inflation acceierated from 5 percent per year in 1970 to 38 percentin 1977. Interest rates on domestic banking system loans, however, remainedsubstantially negative in real terms, discouraging financial savings andstimulating capital flight. The exchange rate, furthermore, remained prac-tically constant between 1968 and 1975, thus contributing to the overall dis-equilibrium. National savings fell dramatically from 16 percent of GNP in1970 to 8 percent in 1977, financing only about one-half the level of invest-ment in this last year. These trends inevitably exerted an effect on economicgrowth which progressively declined in real terms. Following a period ofrapid expansion in 1968-74 during which GDP grew by more than 6 percent peryear, the growth rate dropped progressively and became negative in 1977.

12. The growing disequilibrium described above was reflected in thebalance of payments. The cumulative current account deficit averaged US$1.1billion per year in 1974-77, equivalent to nearly 9 percent of GNP. To financethis deficit, Peru accumulated a massive external debt. Peru's total privateand public external debt--including short-term debt-as of year-end 1977 wasalmost US$8.3 billion, equivalent to two-thirds of GDP and 4 times exports.Much of this debt was contracted on fairly short maturities. For example,three-fourths of the public sector long-term debt outstanding as of year-end1977 was scheduled to be repaid over the 1978-82 period.

13. Beginning in 1975, successive economic teams made several effortsto cope with the mounting economic crisis. A major stabilization programwas initiated in June 1976, when the Sol was devalued from St. 45 to S/. 65per U.S. dollar and fiscal and credit policies were tightened. While thisprogram was initially successful in reducing the fiscal deficit and the loss

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of foreign exchange, it was abandoned later in the year. Further attempts

to stabilize the economy were initiated in March, July and September 1977.A stand-by arrangement was negotiated with the IMF and approved on November 18,1977, but its targets were not met. While these successive efforts were notfully carried through, they succeeded in reducing, somewhat, the gap betweennational savings and investment from a peak of 11.5 percent of GNP in 1975 to8.5 percent in 1976 and 7.4 percent in 1977.

14. By mid-1978 the economic crisis had reached grave proportions. Thedrop in GDP had intensified, inflation had further accelerated to an annualrate approaching 60 percent, the private sector was finding it increasinglydifficult to open letters of credit for new imports, the banking system's netinternational reserves had dropped to a negative level of US$1.2 billion and

it had become clear that the public sector was fast approaching the pointwhere it would no longer be able to fully service its external debt.

15. To deal with this worsening situation, a new economic team was

named in May to manage the crisis. During the past five months the Governmenthas adopted a number of important measures aimed at strengthening publicfinances, stimulating exports and stemming the loss of international reserves.The exchange rate was moved from S/. 130 to S/. 150 to the U.S. dollar and asystem of frequent small devaluations was instituted. Most subsidies were

eliminated, thus closing an important drain on public savings. As a resultof this action, prices for edible oils were increased by 130 percent, for

dairy and wheat products by 40 to 65 percent, and for petroleum products byan average of 60 percent. The prices of a wide range of other products andservices sold by the public sector were raised as well. In addition, a number

of tax measures were adopted, including a 10 percent import surcharge on mostgoods, an increase of 2.5 percentage points in the tax on traditional exports,and increases in the value-added and automobile registration taxes. Austeritymeasures were adopted to restrain the growth of government expenditures and

interest rates on bank loans were raised from 24 to 36 percent per year.Peru also reached agreement with foreign commercial banks to reschedule US$185

million of principal payments due in July/December 1978 until January 1979.Finally, it negotiated a new stand-by arrangement which was approved by theIMF on September 15.

16. To lay the basis for future economic recovery, the Government is

in the process of formulating a medium-term development program. This program,which will complement the stabilization effort already underway, is expectedto (i) further strengthen public finances through tax reform; (ii) redirectpublic investment toward projects with high economic yields and short gesta-tion periods; (iii) stimulate recovery of private savings and investment;(iv) facilitate the growth of non-traditional exports; and (v) improve resource

allocation and stimulate the growth of output and employment.

17. As part of the economic recovery program, the Government is seekingto reschedule or refinance part of its debt service obligations in 1979 and 1980.As regards the public sector medium- and long-term debt owed to foreign commer-cial banks, Peru is seeking to refinance 90 percent of the principal payments

due in 1979 and 1980 (equivalent to approximately US$350 million each year)

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plus the US$185 million of principal payments originally due in 1978 butrescheduled for 1979. Altogether, the debt relief sought from commercialbanks amounts to some US$880 million. Peru has also requested a conveningof the Paris Club in early November to consider its request for refinancing90 percent of the principal payments due on bilateral loans and insuredsuppliers' credits in 1979 and 1980. This is equivalent to some US$230 millioneach year. Successful completion of these debt relief operations, plus somerefinancing of Peru's short-term debt (estimated at over US$2 billion) wouldbe essential to the viability of the stabilization program. Finally, Peruhas requested the Bank to support its development program with a program loan.This request is currently under consideration.

18. The strong measures adopted since May 1978 have begun to havebeneficial effects on the country's financial situation. If Peru succeedsin the implementation of the difficult stabilization program, in obtainingthe debt relief it seeks, and in formulating and implementing a sound economicrecovery program, its creditworthiness would gradually be restored.

19. The proposed loan because of its small amount, would not addmaterially to the Bank's exposure in the country or to Peru's external debtburden.

PART II - BANK GROUP OPERATIONS IN PERU

Bank Operations

20. The Bank has made 33 loans in Peru for a total amount of US$552.3million, net of cancellations; of these, US$308 million, had been disbursed asof August 31, 1978. About 40 percent of the Bank lending to Peru has beenfor transportation (mainly highways and ports), 19 percent for agriculture,19 percent for electric power, 14 percent for mining and industry, and about 8percent for an education project and a sites and services project. In thepast, the main problem affecting World Bank projects has been Peru's weakimplementation capacity. Given current fiscal difficulties, lack of counter-part funds has begun to hamper project execution; the Government is, however,making a special effort to provide adequate allocations for Bank projects.The Bank is monitoring this situation closely. Annex II contains a statementof Bank loans as of August 31, 1978, and notes on the execution of ongoingprojects.

21 IFC commitments to date have been US$24.0 million (US$15 million tothe Southern Peru Copper Corporation for the Cuajone Copper Mining Project) ofwhich US$13.0 million is held by the Corporation. A summary statement of IFCinvestments as of August 31, 1978 is presented in Annex II.

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22. The main objectives of Bank lending to Peru have been to assist in

(a) the creation of a physical and social infrastructure capable of sustainingand fostering development; (b) the expansion of productive capacity in crucialsectors; (c) the consolidation of structural and institutional changes, parti-cularly land and educational reforms; and (d) the strengthening of agencies toimplement and operate projects effectively. In the past, Bank lending has

concentrated on infrastructure in the transportation and power sectors. Morerecently, in the face of mounting economic difficulites, the Bank's emphasis

has shifted to more directly productive fields -- mining, agriculture and

industry -- to aid Peru in surmounting the current balance of payments problem.

23. In addition to this loan, project preparation is continuing so as to

maintain a pipeline which could be reactivated when economic conditions permit

a resumption of normal lending. Future project lending would give priority to

agriculture to help increase food production, raise the living standard of therural poor and strengthen the relatively weak institutions operating in this

field. Rural development and irrigation rehabilitation projects are now being

prepared for this purpose. Bank lending would also be designed to address theproblem of the explosive growth of Peru's cities. In the past, the Bank has

made one loan for slum upgrading and two for power distribution in urban areas;

further urban development projects are planned. In addition to preparing anexpansion of electric generating capacity, the proposed engineering loan willlay the groundwork for dealing with Lima's long-term water supply problems

which are particularly acute in the slums. Future small scale industries

lending would be designed to provide employment to the urban poor, while a

rural development program in the Andean highlands would aim, inter alia, at

mitigating rural flight to the cities.

24. Bank loans to Peru constituted about 7.4 percent of total outstand-

ing debt, including undisbursed, at the end of 1977, and absorbed about 3.7percent of the country's external debt service in 1977. Assuming improved

economic management, a successful debt-relief operation and increased re-

course to long-term bilateral and multilateral aid, by 1985 the Bank's sharein the country's outstanding public foreign debt could reach 12 percent andits share in debt-service would be around 8 percent.

25. The other principal aid agencies lending to Peru--IDB, AID and KfW--

are expected to continue giving special attention to agriculture with IDB

emphasizing agricultural credit, AID rural development and KfW irrigationprojects. Total loan commitments to date by the principal agencies are

summarized in the following table:

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IBRD IDB AID KfW /1--------- (US$ millions) --------

Transport and Telecommunications 219.2 54.0 15.2 14.6Agriculture 107.5 112.9 103.0 34.1Power 102.5 46.9 5.8 -Industry and Tourism 37.5 76.3 4.3 -Mining 40.0 39.4 - 41.0Water Supply and Health - 75.9 - 16.6Housing and Urban Development 21.6 36.6 23.2 -Others 24.0 82.9 18.0 6.7

Total 552.3 524.9 169.5 113.0

/1 Converted to US$ at exchange rate prevailing at time of loanapproval.

PART III - THE WATER SUPPLY AND POWER SECTORS

THE WATER SUPPLY SECTOR

Background

26. In the past 25 years, Peru's population more than doubled from 7.3million in 1950 to 15.4 million in 1975. Demographic growth is expected toslow down somewhat in the future but Peru's population is still expected tobe over 23 million inhabitants by 1990. The problem of rapid populationgrowth is even more pronounced in the cities, particularly Lima. The urbanpopulation grew from 3.3 million in 1950 to 8.7 million in 1975 and isprojected to reach 15.6 million in 1990. Metropolitan Lima alone nearlyquadrupled its population over the last 25 years to 4.1 million in 1977.Projected growth rates for Lima's population vary widely but they indicatethat the capital's population will increase to at least 6 million and possiblyas many as 9 million people by the end of the next decade. Supplying water tothis rapidly expanding population has proved difficult in the past and evenmore serious problems lie ahead as easily accessible water resources are beingexhausted.

Organization and Service Levels

27. The Ministry of Housing and Construction (MVC) determines nationalpolicies for the water supply and sewerage sector. Until now, rural watersupply was the responsibility of the Ministry of Health, but its functionsin the sector are being transferred to MVC. The majority of urban water andsewerage systems are owned and operated directly by MVC. There are also,however, about 40 independent municipal systems. In the country's threelargest cities--Lima, Arequipa and Trujillo,--semi-autonomous, government-ownedcompanies provide water and sewerage service. Four of their six board membersand their general managers are appointed by MVC.

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28. In 1975, service levels for the urban areas of Peru were 72 percentfor water supply (56 percent with house connections and the rest with accessto standpipes) and 51 percent for sewerage. Service levels in the rural areasare considerably lower and are estimated by MVC to be 15 percent for water andless than 2 percent for sewerage.

29. Investment in water supply and sewerage systems operated by MVC hastotalled US$112.2 million since 1962. Another US$21 million has been investedin rural water supply during the same period. Nonetheless, there is a consider-able backlog of investment requirements and most systems are inadequate andpoorly maintained. The problem is most pressing in the Lima metropolitan area,which is threatened by serious water shortages.

30. Sector deficiencies have been primarily due to institutional prob-lems -- poor planning and operational difficulties -- owing, in great part, toexcessive concentration of sectoral responsibilities in Lima. This has beenexacerbated by inadequate government investment funds and by low tariffs,which have made it difficult to raise the large capital sums needed for newworks.

Water Supply in Lima

31. The Empresa de Saneamiento de Lima (ESAL) was created in 1970 andis the institution responsible for providing water and sewerage in the GreaterLima Metropolitan area. ESAL, a government agency, is under the aegis ofMVC, which approves its annual budget, tariffs, number of employees, and salarylevels. It has a degree of freedom in its day-to-day operation but littleautonomy otherwise. Its financial management and interdepartmental liaisonneed to be strengthened and its staff, 2700, is large in relation to thenumber of connections. In addition, tariffs have been too low to allow ESALto operate efficiently and maintain its water supply/sewerage network whilemeeting its financial obligations. Measures would be taken under the proposedproject to strengthen ESAL, particularly in the area of financial management(paragraphs 45 and 56).

32. In 1977, ESAL provided water and sewerage services to about2.9 million people, or 71 percent of the Greater Lima population, through295,200 house connections. About 230,000 people in surrounding communitiesand the main industrial areas of the city are served by private wells notincorporated into the ESAL system. An. estimated one million people do nothave access to piped water or sewerage services and depend on water deliveredby trucks or from public standpipes.

33. Between 1973 and 1976, ESAL invested about US$70 million in itswater supply and sewerage system. At present the water distribution networkis being extended into Lima's slums with the help of a US$12.3 million equiva-lent credit from KfW and a US$14.5 million component of the Bank's sites andservices loan of October 1976 (1283-PE). Despite these efforts, the watersupply system is not expected to keep pace with population growth and thenumber of people without adequate water and sewerage services is likely togrow by 1980.

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34. In 1976, Metropolitan Lima was supplied with approximately 20 m /secof water. Of this amount, 14.4 m3/sec were supplied by ESAL mainly from theRimac river (9.1 m3/sec) and from groundwater (5.3 m3/sec). The rest wasprovided by approximately 900 private wells about which little is known andestimates of supply from this source are subject to a wide margin of error.Accounted for water consumption is considerably lower than production.ESAL's sales amounted to only 7.0 m3/sec or 48 percent of its estimated supply;the rest was lost either through leakage in the distribution system or throughillegal use.

35. Lima's rapidly expanding population will lead to a vast increase ofwater consumption. If, for instance, supply were to grow at the same pace aspopulation, and if there were no improvements in the efficiency of distribution,about 40 m3/sec would have to be provided by 1990, and ESAL's supply wouldhave to approximately double to around 30 m3/sec. Supply from existing sources,on the other hand, is approaching its limit. The Rimac river's average flowat Lima during the dry season reaches only 10 m3/sec in years of below averageprecipitation, while falling water tables at many wells suggest that groundwatersources will have to be carefully exploited in future.

36. To head off a water crisis, the Government has explored a numberof long-term solutions. Storage of surplus flows during the wet season,diversion of other coastal rivers, reuse of treated sewage, and de-salting ofsea water were considered. But two studies carried out in 1970 and 1976 byBinnie & Partners, a British consulting firm, with financing by grants fromthe British Overseas Development Ministry concluded that transfer of thewaters of the Mantaro river across the continental divide to Lima (see map andplan following Annex III) would, if combined with a hydroelectric project, bethe most economic way of obtaining large amounts of additional water. Inthe shorter term, however, existing resources may well be able to supply thecity's growing needs if they are used optimally. A preliminary groundwatersurvey suggests that it is possible to increase production from wells. Wellshave so far been dug where water was needed, without regard to an optimal useof groundwater, leading to sinking water tables in some industrial and resi-dential districts. However, the aquifers have not been tapped in many areasof the Metropolitan region. Another means of obtaining additional water is byreducing losses in the distribution system. Finally, unified control of waterresources could result in more rational water management and in significantfurther savings. Thus, the city could be supplied primarily from surfacewater from November to May, the rainy season, when the Rimac carries anaverage of over 40 m3/sec, allowing groundwater resources to build up. Wells,on the other hand, might provide most of the water supply during the drymonths when the Rimac's flow is insufficient to meet Lima's water demand.

THE POWER SECTOR

Organization

37. The Ministry of Energy and Mines determines national power sectorpolicies, whereas operations fall under the responsibility of Electricidaddel Peru (ELECTROPERU), the national power company, and several local power

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companies owned by ELECTROPERU but operating with varying degrees of independ-ence. In addition, the large mining companies maintain captive power plantswhich are usually independent of the public systems. Peru does not possessa national power grid but the many isolated systems are beginning to growinto regional networks. Among these, the Central System--with Lima at itshub--is by far the most important, accounting for about 65 percent of thecountry's generating capacity and 70 percent of consumption. The LimaMetropolitan area is served by ELECTROLIMA, a large and well-managed publicutility.

Lima Power Supply Situation

38. Until recently, ELECTROLIMA supplied the capital's power needs fromits own hydropower stations on the Rimac and its tributaries (see Map followingAnnex III). During the 1966-76 period, demand in the Lima system grew at anaverage of 8.4 percent and new generating plants were built in time to meetdemand. The Bank supported ELECTROLIMA's expansion programs with five loanstotalling US$100.4 million. ELECTROLIMA's largest hydropower plant, built inthe early sixties (financed by Loans 260-PE and 365-PE), already dependspartly on water which is diverted by the Transandean Tunnel across the con-tinental divide to the Santa Eulalia river, a tributary of the Rimac. Withthe creation of ELECTROPERU in 1972, ELECTROLIMA relinquished responsibilityfor development of new generating capacity to the national power company.ELECTROPERU today supplies about one third of ELECTROLIMA's electricity needsfrom its 455 MW Mantaro power plant, 200 km to the southeast of Lima.

39. Additional generating units will raise the capacity of the Mantaroplant to 800 MW over the next two to three years, assuring Lima's supply untilthe early 1980s. A planned 217 MW extension of Mantaro, the Restitucion hydro-power station, should be completed by 1983. But additional generating capacitywill have to be brought into operation by 1984 or 1985, at the latest, toensure continued supply to the central region, which by then will be inter-connected with the industrial areas along the northern coast. Since construc-tion of a large hydropower project in the Peruvian Andes requires at leastfive to six years, it is likely that some thermal capacity will have to beinstalled to meet demand in the interim.

40. A comprehensive survey of the country's hydro power potential iscurrently underway supported by a German Government grant and funds from theBank's most recent power loan (1215-PE). This survey's conclusions will beused in the preparation of a power sector master plan to determine an optimalsequence for investment in new generating and transmission facilities.Financing for the master plan is also provided under Loan 1215-PE. Thecontract for the plan's preparation was recently signed and its results shouldbecome available in 1980. One project which is being considered in the masterplan is the Sheque hydropower station (600 MW) on the upper reaches of theSanta Eulalia river (see map and plan following Annex III),-for which feasi-bility studies, financed by Loan 511-PE, were prepared in the early 1970s.Sheque would require increased flows through the existing Transandean Tunnelwhich would have to be obtained by pumping water from the Mantaro river, atributary of the Amazon. If this scheme were selected, the water transferfrom the Mantaro river would also ensure Lima's water supply until at leastthe end of the century.

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PART IV - THE PROJECT

41. The objective of the proposed project would be to lay the groundworkfor a long-term solution to Lima's water supply problems and for an expansion ofthe electric generating capacity in Peru's central region. The project evolvedfrom preparations for a Lima Water Supply Project which was separated intoan engineering and a construction component after it became clear that projectpreparation would be too large a task, in terms of time and cost, to be easilyaccommodated in the framework of a single project loan. Since 1976, variousBank missions have visited Peru in connection with the Lima Water Supply Project;the engineering loan was prepared by a mission in January 1978. Negotiationswere completed in Washington on September 8, 1978. The Peruvian delegationwas headed by Mr. Ulises Montoya Alberti, Deputy Director of Public Credit andby Ing. Augusto Bedoya Reyes, President of ESAL and of the Mantaro Commission.It included representatives of the Government, the National Development Bank(COFIDE) and ESAL. There is no separate appraisal report for this project.Annex III contains a supplementary Project Data Sheet.

Project Description

42. The project would achieve its objective (i) through studies andprograms which would lay the groundwork for a more effective water distributionand sewerage system for Lima; and (ii) by determining the technical andeconomic feasibility of transferring water from the Mantaro river across thecontinental divide to Lima. Effective distribution of water resources wouldbe the objective of the project component which would be the responsibility ofESAL. How to supply the needed amounts of water -- through optimal use ofexisting resources and eventually by opening up new sources of water -- wouldbe studied under the project's Mantaro component for which the inter-sectoralMantaro Commission would assume responsibility.

ESAL Component

43. The first part of this component would consist of studies whichwould assess the volume of water available from all the existing sources inthe Lima Metropolitan Area, including those sources presently under privatecontrol. Since neither production nor use by large consumers is measured atpresent, large water meters would be installed to provide this information.A survey would be made of the distribution network to identify losses ofwater from defective pipes or unauthorized connections. ESAL would alsocarry out a leak repair program.

44. A second part would aim at producing a water supply and seweragemaster plan for Lima. Drawing on the results of the water optimization study(see paragraph 47) the plan would propose a framework for the expansion ofLima's water distribution and sewerage system. Detailed engineering wouldbe prepared for priority improvements in Lima's water distribution network,sewerage system and basic sanitation. These improvements would constitutethe core of a possible future Bank project.

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45. A third part would consist of studies to identify the organiza-tional and financial measures which are needed to enable ESAL to administerwater resources effectively and to carry out a major expansion program. Inthe financial area, where ESAL is particularly weak, consultants would assistthe company in improving its accounting system and financial reporting. Inthe process, they would help update ESAL's financial statements and projec-tions.

46. A project manager to coordinate the different elements of the ESALcomponent would be financed under the proposed loan. A candidate, satisfac-tory to the Bank, has already been identified for this position and attendedthe loan negotiations.

Mantaro Component

47. The Mantaro Component would address the question of how Lima's long-term water needs could best be met. An optimization study would explorepossibilities for stretching existing water resources by such means as unifiedmanagement of surface and groundwater and reuse of sewage. But it isexpected that the bulk of future needs will have to be met from new sources.Earlier studies have pointed to the Mantaro Transfer (see paragraph 36)as the most economical source of large amounts of additional water. Thetransfer would entail pumping of up to 32 m3/sec from the Mantaro Riverthrough the existing Transandean Tunnel to the Santa Eulalia river whereit would be used for power generation and to supply water to Lima. Severalstudies exist for the transfer and for the Sheque hydroelectric plant butthey will have to be revised and in some cases expanded since they do not yetprovide adequate elements for an investment decision. The question of scaleand timing, for instance, will have to be reviewed based on the results of theoptimization study and of the investment needs in the power sector. Otherissues which will have to be addressed include ecological aspects (particularlycontrol of the Mantaro's heavy pollution from mine water discharges) and theimpact on existing and proposed power stations downstream on the Mantaro,Santa Eulalia and Rimac rivers, which together account for the bulk of thecountry's hydroelectric capacity. Additional geological investigations at theproject sites and more detailed design of some components should, finally,allow firmer cost estimates.

48. Since the Mantaro water transfer would be closely interrelated withdevelopment of the power sector in the Central Region, an investment decisionon the transfer would have to be taken in the context of the power sector'soverall development. The German and Bank-financed power master plan mentionedin paragraph 40, which would be developed simultaneously with the Mantarostudies, would help provide this context. So far, work on a hydropowersurvey, whose findings would be incorporated in the master plan, is advancingsatisfactorily, but there were delays in engaging consultants who would carryout surveys of other energy sources, of transmission needs, and of existingfacilities to prepare a complete investment plan for the power sector.A contract for these studies was, however, recently signed and their resultsshould be available in 1980.

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Prolect Execution

49. ESAL would execute its component with the assistance of consultantsand under the supervision of COFIDE (Sections 2.04a and 2.03 of the draftProject Agreement). Satisfactory terms of reference for each of its elementsare being drawn up by ESAL with Bank assistance. To assure sdequate coor-dination and supervision of the component, ESAL would hire, on terms andconditions satisfactory to the Bank, the project manager referred to inparagraph 46 (draft Project Agreement, Section 2.05). The proposed loan wouldprovide funds for this purpose. Hiring of the project manager is a conditionof effectiveness of the Loan Agreement (draft Loan Agreement, Section 6.0ib).

50. Peruvian legislation entrusts jurisdiction over all groundwateruse to the Ministry of Agriculture, but the Ministry agrees that ESAL shouldhave control over all non-agricultural use of water in the Lima area. TheGovernment has, therefore, committed itself to grant, at ESAL's request, tothe water supply company the exclusive right to drill new wells and to revokeconcessions of existing private wells in ESAL's favor whenever the companywishes to assume management of these (draft Loan and Project Agreements,Sections 4.04). Control would be transferred gradually district by districtas ESAL builds up its capacity to exercise this new function. In the meantime,a decree will give ESAL's representatives the right to visit and inspectexisting private wells. This will assure that the studies under the projectcan be carried out. Passage of such a decree is a condition of the loan'seffectiveness (draft Loan Agreement, Section 6.01(c)).

51. The Mantaro transfer studies would be carried out by consultantsunder the supervision of the Mantaro Commission which was created within MVC.The Commission, which is chaired by the President of ESAL and includes thePresidents of ELECTROPERU and ELECTROLIMA as well as representatives ofvarious ministries, reflects the project's multisectoral character. Its maintask so far has been to select consultants to carry out the studies. Theselection was recently completed and the British firm which did the originalMantaro studies, Binnie & Partners, has been selected to carry out the transferstudies which this loan would finance. Contract negotiations are currentlyunderway.

52. Until recently the Mantaro Commission has depended on staff secondedto it from other public agencies for specific tasks. As preparation workis expected to begin soon, however, the Commission is now setting up a projectunit to supervise execution of the studies (Section 3.03 of the draft LoanAgreement). Its staff would be complemented, as necessary, by personnel fromthe two power companies, ELECTROPERU and ELECTROLIMA. Before authorizingdisbursements for the Mantaro component, the Bank would satisfy itself thatthe project unit is adequately staffed for supervising the consultants (draftLoan Agreement, Schedule 1, para. 4b).

53. Since the two project components are interdependent but are beingexecuted by different agencies, working groups would be set up to assureadequate coordination on the studies' different aspects. These workinggroups, which would be constituted by January 31, 1979, would include the ESALProject Manager and representatives of the Mantaro project unit and of COFIDE(Section 3.02 of the draft Loan Agreement).

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54. The Government has selected COFIDE to act as financial agent for theproject and to administer the proposed loan on its behalf. Since COFIDE willlikely be involved in financing the projects expected to grow out of theengineering loan, the Government decided to associate it with this operationat an early stage. For these reasons, COFIDE would also be a party tothe Project Agreement.

55. Part of the proposed loan (US$4.9 million) would be on-lent by theGovernment to ESAL under a subsidiary loan agreement which would be concludedbetween COFIDE, acting on the Government's behalf, and ESAL. The subloan wouldcarry the same terms as the Bank loan and ESAL would bear the foreign exchangerisk. For its services, COFIDE would receive a fee of 0.75 percent p.a. ofthe amount on-lent to ESAL.

56. As was mentioned in paragraph 31, ESAL's finances require improvement.In the past the company's revenues have been insufficient to service debt andproperly maintain the existing water/sewerage system. The subloan to ESALwould, therefore, be tied to a financial rehabilitation program requiring thecompany to meet from revenues (i) its normal operating and maintenance expen-ditures; (ii) debt service payments; and (iii) the counterpart funds neededfor the ESAL component (para. 5(i) of Schedule 2 to the draft Project Agree-ment). Since the financial studies envisaged under the ESAL component wouldalso be important for the restructuring needed for ESAL to eventually carryout the large water supply project to be prepared under this engineering loan,the hiring of consultants to help ESAL strengthen its financial managementwould take place no more than 60 days after the signing of the subsidiary loanagreement (para. 5(ii) of Schedule 2 to the draft Project Agreement). COFIDEwould supervise the execution of the financial program. To this end, it wouldmonitor the adequacy of ESAL's financial performance on a quarterly basis(Section 4.03(i) of the draft Project Agreement) and the Government hascommitted itself to approve water tariff increases requested by ESAL if thesequarterly reviews point to any shortfall in revenue (Section 4.03 of the draftLoan Agreement).

57. COFIDE is the Government's principal development finance institu-tion and assists both public and private firms in Peru. It has had wideexperience in raising and channeling external resources to support projectsin diverse sectors. COFIDE received a US$35 million development banking loanfrom the Bank in 1977 (Loan 1358-PE). In connection with that loan, COFIDE'scapabilities for resource allocation and supervision were analyzed and foundto be satisfactory (Report 1195-PE of December 6, 1976). Since then, al-though the Sol has undergone a rapid devaluation and economic conditions havedeteriorated, COFIDE's performance has continued to be satisfactory. At theend of 1977, its total assets stood at about US$400 million equivalent andits financial structure was within the 5:1 debt-equity limit agreed with theBank when Loan 1358-PE was made. With a qualified professional staff of morethan 150, COFIDE has demonstrated its ability to administer a large and variedloan portfolio and is considered capable of supervising the financial rehabili-tation of ESAL.

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Cost and Financing

58. The project's total cost, net of taxes and duties, is estimatedat US$11.1 million. Foreign exchange costs are estimated at US$8.8 million.The proposed Bank loan would cover the foreign exchange component. TheGovernment would contribute US$1.07 million through MVC's budget to coverlocal costs for the Mantaro component. The balance of the project's localcosts, US$1.23 million, would be provided by ESAL through its internal cashgeneration. Price contingencies were based on a disbursement profile ofthirty-four months starting in early 1979. Worldwide inflation was estimatedto reach 8 percent in 1979, 7.5 percent in 1980 and 7 percent in 1981. Ahigher price contingency (16, 15 and 14 percent for 1979, 1980 and 1981respectively) was provided for local costs to provide a margin of safety incase exchange rate adjustments lag behind domestic inflation.

Procurement and Disbursement

59. Expenditures for consultants are expected to account for aboutUS$9.4 million or 85 percent of project costs. ESAL and the Mantaro Commissionwould retain an estimated 1,100 man/months of consulting services at an esti-mated cost of US$7,000 per man/month excluding contingencies. Studies underthe project would be carried out by qualified consultants selected in accord-ance with Bank guidelines. Foreign firms, possibly associated with localconsultants, are expected to be selected for all major studies.

60. The remainder of project costs, US$1.7 million, would consist ofequipment purchases (US$1.3 million) and civil works (US$0.4 million) inconnection with the water metering and leak repair programs under the ESALcomponent. Equipment and meters would be procured under international com-petitive bidding, except in cases, such as pipes and fittings for the leakrepair program, where contracts would be too small to make internationalbidding practical. When international bidding is used, local manufacturerswould be allowed a margin of preference of either 15% of the CIF price or theapplicable import duty, whichever is lower. Contracts of less than US$50,000equivalent would be awarded according to ESAL's normal procurement procedures,which require at least three quotations. Such directly procured items wouldbe subject to an aggregate maximum of US$500,000. Civil works for leak repairhave to be carried out in close coordination with the leak detection programand with operation of the water system. Since it would be difficult to usecontractors efficiently under these circumstances, they would be executed byESAL's own maintenance crews under force account procedures. These civilworks would not entail foreign exchange expenditures and would not, therefore,be financed under the Loan.

61. Disbursements from the loan account -- expected to be spread overa period running from February 1979 to December 1981 -- would be made against:(a) the foreign cost of consultant services including the cost of professionalservices by Peruvian consultants; (b) the cost of equipment and materialspurchased from abroad; and (c) 63 percent of expenditures for materials andequipment purchased locally such as pipes and fittings, which corresponds totheir estimated foreign content. The Bank would refinance each of the loan'scomponents with any future loan for a project arising out of that component.

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Project Justification and Risks

62. The proposed loan would help lay a sound basis for long-termsolutions to Lima's needs in the water supply and power sectors and preparetwo projects -- the expansion of Lima's water supply system and the MantaroTransfer -- for possible Bank financing. It would also support organizationaland financial improvements in ESAL which are preconditions for urgently neededinvestments if Lima's growing population, particularly in the slums, is to beadequately supplied with water and sewerage services.

63. The Mantaro transfer, including its power component, would be both atechnically complex and a large project -- total costs could be in the orderof magnitude of US$800 million -- and the government has indicated that itintends to look to the Bank for direct financing and for help in assembling itsfinancial package. Given the number of issues involving various sectors whichhave to be considered in reaching an investment decision, preparation ismore complex than is usual for power or water supply projects. Bank involve-ment at an early stage through the proposed loan would play a useful role inassisting this preparation effort.

64. The local cost of the project's first component would be borne byESAL whose finances would have to improve for it to fulfill the financialobligations arising from the project. The success of the financial reform ofESAL, therefore, constitutes a special risk. The financial conditions inCOFIDE's subsidiary loan agreement with ESAL and in the Loan Agreement, whichare described in paragraph 56, are considered adequate to protect the Bankfrom this risk. The execution of a subsidiary loan agreement, satisfactory tothe Bank, by ESAL and COFIDE, acting on the Government's behalf, would be acondition of effectiveness (draft Loan Agreement, Sec. 6.01a).

PART V - LEGAL INSTRUMENTS AND AUTHORITY

65. The draft Loan Agreement between the Bank and the Republic of Peruand the draft Project Agreement between the Bank, ESAL and COFIDE and the Reportof the Committee provided for in Article III, Section 4(iii) of the Articlesof Agreement are being distributed to the Executive Directors separately.

66. The draft Loan and Project Agreements do not differ from the usualpattern and do not impose unusual obligations on the parties. Special condi-tions of effectiveness of the loan will be the hiring of a project managerby ESAL (paragraph 49), issuing of a decree granting ESAL's representativesthe right to visit and inspect private wells (paragraph 50) and the executionof a subsidiary loan agreement between COFIDE, on behalf of the Government,and ESAL (paragraph 64). In addition, a condition of disbursement for theMantaro component is the setting up of an adequately staffed unit to supervisethe Mantaro transfer studies (paragraph 52).

67. I am satisfied that the proposed loan would comply with the Articlesof Agreement of the Bank.

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PART VI - RECOMMENDATION

68. I recommend that the Executive Directors approve the proposed loan.

Robert S. McNamaraPresident

Attachments

October 18, 1978Washington, D.C.

ANNEX ITABLE 3A

PERU - SOCIAL INDICATORS DATA SHEET Page 1LAND AREA (THOU KM2) ----------------------------------- _-----____

--------------- PERU REFERENCE COUNTRIES (1970)TOTAL 1285.2 MOST RECENTAGRIC. 369.1 1960 1970 ESTIMATE CHILE MEXICO SPAIN**

__ …… ---------------------- _ _ _ _ _ ------------

GNP PER CAPITA (UsS) 280.0 500.0 830.0 780.0 660.0 1630.0

POPULATION AND VITAL STATISTICS_______________________________

POPULATION (MID-YRR MILLION) 10.0 13.4 16.5 9.4 50.4 33.6

POPULATION DENSITYPER SQUARE KM. 9.0 10.0 13.0 12.0 26.0 67.0PER SQ. KM. AGRICULTURAL LAND 33.0 36.0 45.0 58.0 52.0 105.0

VITAL STATISTICSCRUDE BIRTH RATE (/THOU, AV) 44.5 42.9 41.0 32.9 43.8 21.0CRUDE DEATH RATE (/THOU,AV) 21 2 14.7 11.9 11.0 10.2 9.9INFANT MORTALITY RATE (/THOU) 93,2/a 6551/a ,, 79.0 68.s 27.9LIFE EXPECTANCY AT BIRTH (YRS) 48.5 58.0 55.7 60.6 62.4 70.5GROSS REPRODUCTION RATE 3.1/b 3.0 2.9 2.2 3.1 1.4

POPULATION GROWTH RATE (%)TOTAL 2.1 2.8 2.9 2.4 3.5 1.1URBAN 4.7/c 4.7 4.5 3.5 4.B 2.0

URBAN POPULATION (X OF TOTAL) 47.4 52.5 56.5 76.0 58.7 59.1

AGE STRUCTURE (PERCENT)0 TO 14 YEARS 43.3 al 45s0/a 44.5/a 39.0 46.2 27.8

15 TO 64 YEARS 52.9/ 51 .91T 52.4 56.3 50.1 62.565 YEARS AND OVER 3.8/a 3.177l 3.1 7a 4.7 3.7 9.7

AGE DEPENDENCY RATIO 0.9/a o.9/a 0.9/a 0.8 1.0 0.6ECONOMIC DEPENDENCY RATIO 1.57j

1 5/a 1.6 1.6 2.0 1.1

FAMILY PLANNINGACCEPTORS (CUMULATIVE, THOU) ,. ,, 12.Q0 403.5 55.5USERS (% OF MARRIED WOMEN) .. .. .. ..

EMPLOYMENT

TOTAL LABOR FORCE (THOUSAND) 3100.O0a 4300.0/a 4600.0 2900.0 13000.0 11900.0LABOR FORCE IN AGRICULTURE (%)

4 1. a 45.07a 40.0 21.0 45.0 25.0

UNEMPLOYED (x OF LABDR FORCE) 3.0 5.9Ed 8.7 d 4.1/a 1.ILa

INCOME DISTRIBUTION

X OF PRIVATE INCOME RECOD BY- IHIGHEST SX OF HOUSEHOLDS 6 .

2 8.8/e 31.0 27.9

HIGHEST 20% OF HOUSEHOLDS - _ .. 58.67e 55.8 58.3LOWEST 20% OF HOUSEHOLDS 2- G 3 4.9 3.4LOWEST 40% OF HOUSEHOLDS 8* .. 9. __ 13.0 10.5

DISTRIBUTION OF LAND OWNERSHIP

% OWNED BY TOP 10% OF OWNERS 93.0 .. 50.0/f . 37.1% OWNED BY SMALLEST 1o% OWNERS 0.1 .. 2.07Y .. 0.3

HEALTH AND NUTRITION

POPULATION PER PHYSICIAN 2 2 0 0 .0/e 1920.0 1760.0/e 2210.0/b 1480.0 74 0.0/bPOPULATION PER NURSING PERSON 3620.07e 3200.0

2320.07F, 5830.675 1620.0/a

POPULATION PER HOSPITAL BED 490.0fF 470.0 500.0 270.0- 960.0 220.0

PER CAPITA SUPPLY OF -CALORIES (% OF REQUIREMENTS) 97.0 99.0 100.0 101.0 115.0 107.0PROTEIN (GRAMS PER DAY) 61.0 62.0 61.7 71.0 65.0 91.0

-OF WHICH ANIMAL AND PULSE 25.0L& 24.0 25.3 32.0 28.0/b 40.0

DEATH RATE (/rHOU) AGES 1-4 .. .. 6.2 3.9 9.9 0.9

EDUCATION

ADJUSTED ENROLLMENT RATIOPRIMARY SCHOOL 83.0 107.0 111.0 107.0 104.0 123.0SECONDARY SCHOOL 18.0 37.0 46.0 39.0 22.0 57.0

YEARS OF SCHOOLING PROVIDED(FIRST AND SECOND LEVEL) 12.0 12.0 10.0 12.0 12.0 11.0

VOCATIONAL ENROLLMENT(X OF SECONDARY) 2 0 .h 17.0 23.0 33.0 24.0 20.0

ADULT LITERACY RATE (X) 61.0/i .. 72.0 90.0 76.0 94.0

HOUSING

PERSONS PER ROOM (URBAN) 2.0 ,, .. 1.3 2.2OCCUPIED DWELLINGS WITHOUT

PIPED WATER (X) 85.0_, 62.0/h 40.0/c 61.0/CACCESS TO ELECTRICITY

(X OF ALL DWELLINGS) 26.0 *- 34.9/h *- 59.0RURAL DWELLINGS CONNECTED

TO ELECTRICITY (%) 4.0 .. .. .. 28.0

CONSUMPTION

RADIO RECEIVERS (PER THOU POP) 101.0 134.0 131.0 143.0 276.0 214.0PASSENGER CARS (PER THOU POP) 9.0 17.0 s 18.0 24.0 71,0ELECTRICITY (KWH/YR PER CAP) 265.0 415.0 5iL.u 806.0 567.0 1634.0NEWSPRINT (KG/YR PER CAP) 1.7 3.7 4.7 5.0 3.2 5.8

SEE NOTES AND DEFINITIONS ON REVERSE

Page 2

Unl.n otherwjee noted, dots for 1960 refer to any yeer batLeac, 1959 aLnd 1961. for 1970 between 1969 and 1971, and for Moat Recent Eatinete between£93 end 1976.

-- Spain bee bean selectad ee an objective country beocause its econonmic arbi"evanets could care-8 as ngoal for Pane.

PERU 1960 Ia Excluding Zodiac j ungle population; fb 1960-65 avecage; /c 1956-61; /d 1isreonal monte, within lebor foroce; /j 1964;If 1962; La 1960-61; lb Inc.luding evening achoole; 7?i i7 years and over; LI Inside only.

1970 Ia Excluding main jungle, population; /b 1961-70; fl Ratio of population under 15 end 65 end ovr to tote1 labor force;Ld Lima ooly.

MOST fXfCiT ESTIMATE: Ia Excluding Indian jungle population; /b RAtio of population under 15 end 65 and over to total labor force;fl 1975 only; Id 1977; Li 1972; ji. Atebel land, 1972; LI Including midwivee; /h percentageof populatio..

CHILE 1970 /a iran Seotiago; fb Personnel in government servires; le lnside only.

?MEICI 1970 /a eclding Assetanteo ners; lb 1964-66; La Enaide only.SPAIN 1970 1.Ipinymoct office estimate; /b Riegiacered, not all practicing In tue country.

R7, July 26, 1978

IEPI9IITIOIS OF SOCIA INDICATORS

lard Area jtj,ou k00 Ponueioan Per nrlgeun-PopuIacion divid,d by nonb.r of pr-rricIn;rT.C; - intl surfare area coprising S.An area end friend watero. nalesd female gaduate nutee, 'trelnod" or cer1tified" noroe , andtoxc. toniL rCeet ectiacate of egricolturel area cooed temporarily or pen-- euxiliery Personnel with trointng or eoperier,c-rootly for cropo, pastrorc, market & kRtchen gardena or to lie Sallow. Ponuletion nor hoptal --bed - Populati.n divided by nmaber of hospiutal udo

aveileble in public end prio-ta gene ral and pecialioed hoapitrol nadCNP ocr cur; ta fUSS) - GNP par capita es tiostes et COrreot market priree, rehabilitation -enere ; excludes -uring homee end aecablisir..nt, for

o1-ntoard by one conersion mahod as world Reek Atlec f1975-77 basic); nuetodie1 end prevetive rare.1960. 19f and 1977 data. htr canite sorely of calorlee ft of reurencnts - Cnpured fr_o noe-gy

equielent of met food eapte vilbein coun.try per ..pit., per d,y;Porulation ned vital statistics svailabla s uppiRes compriec do nectic productIon , Sporte l.ees rporta, eodfPorl.,tin n.id-yeac n ~irn - As of July first: Rf not avilblehl, overage chengea in stock; nor ouppiee exclude canmel feed, oeede, qu...titlian u-d

of run e-d-ye- estitbvar; 1960, 1970 and 1977 dora. in food Proceesnlg and lessee in dietribetion; reqoiresnente warn rortnotrdby FA0 booed or, phycisiogicel needs for norma activity and br,elth coauid-

Pocciatior- dencity p-or egere Ia - Mid-yea populetRon par equare kilometec ering envirooneentat temperature, body weights, ege ard am ditrrihtlons of(0 hecrt-es) nf total area. population, cad allowing 102 for -are at hou-hoid love.

i?Ol.otIar ' dIetails -Per evueca kc of curio, land - Computed ae eboram for Pr "Prit' 50P0l. nE protein igra oar doe) - Pratala content of per -epiteliiulv oa ed onip. noat sopply of fund per day; net suppiy of food is defined ee abovo, require.

mete for ell countries established by USDA Economic Re...erhSeb lovicoVftal -ata -isrco provide for a ninianen allowance of 60 gromB of total proteio per day, andC-ode birch race pear hahusend. average - Annual Live birth, per thousend of 10 gras of animalI end puLee proteic, of which 10 gran should ho noinci

Md-y-a population; tee-year erltimsetic averges ending in 1990 and 1970, protein; these atndards se lower than choer of 15 gram of total protnirend five-year averag.encding in 1915 for most recent estimate. end 23 grase of sofas

1protsin as an everge far the world, propoo-d by FAO

Crude death rate R.ar chouasad. average - Aznnul deetha pot thow 1and of mid-year in the Third World pond Survey.popalatir; te-yea r arithntic enerages ending in 1960 end 1970 and five- her tapirs Protein aupply frau animal aid ruler - Prortei supply of fondyear average ending In 1975 for moot receat estimate. derivsd from animals ad pulsee in gramsn per day.

Iafaot "onrtelirr rte f/thou) - A .noal deethsoef infants under one, year of ag. eckh rate f/thou) age, 1-4 - Anuaol dentho per thoueand ta age grop 1-4per thoceand live birth.. years, to children In this age group; suggested .c en indioator of

Life -rr-tanry at birth ferol - Average somber of ysers of life remeaiing at malnutrition.birth; --clly five-year averages ending in 1960, 1970 end 1975 for develop-leg countriet. Elldoae non1-1

G--o reproduction .tar - Av-rag.enob-r of live deughtere a wman wil ea Aiute enrllment rai e'oyshol-SrtIlmeot of all agee as Pe-in iher .-r-I reproductive period if -he aepociancee Present ge-apa-ifia cetags of Primoary echool-ag. populattom; inctudee children aged 6-li ya-rfertility ratee; oauelt., five-year averges ending in 1960, 1970 and 1975 but adjusted for different lengths of primary eduction; for -atorrin with

f-r d--16ping marries. ~~~~~~~~~~~universal education, enroiLent may ex.e.d 10O. since soar, Pppli ore belowFPopulation rnt r ei(1 tt - Compound annual growth ractn of pld-year or above ths official schonS age.pop~Uition for 1950-60, 1960-70 cod 1970-75. Adiunted enrollment rto-scnayaho -t Computed an above; secon.dary

Pooatn erowth rate (S-urban-Cmue i rot aeo oa education requireseat leant four yearu of approved primary ins-truton;pepuietier; different definitions of urban -ara nay affect comparabIlity of provides, general, vocational or teacher training inotruntionn for Pcpilsdate among couJntries. of 12 to 17 yeara of age; correapondance o-ras are generally erclrded.

Orbancolcinf.ofcrl - RatIo of urban to total population; different Tear of sth-11ia provided fLrat and aei'd leves frciL peer. atciefioltions of urban .re. may affect ctomparbility of data saomnS cousntriaa. shoigatensdry level, vocationl na! cimmybeprilyocompietely encludad.

Axe sructue frocent)- Children (0-14 Neare), working-age (il-64 yecre) Voctoa noletf o eodr"-Vctonlieiuin eSdand retired (61 years and over) as parceostagee of old-year popolecion. tehie , induttlal or other-1 prgr whichtopeate indeptut dencipurde

fcc epenecoyrato - Katie of population under 15 end 65 and ove to those departmsents of aecondary ir-titotione.of aRea 1S through 64. A%dult literacy rere (5) - Literate adolta (able to read and write) an pe-

LCoooIc nnenrrai - Ratio of perneitioma undar 15 end 65 and ovr to centage of total adolt oa...lstioa aged 15 y00cc a d over.ihe Sabor foros In age grocp of il-64 ypeer.

Family planning -ocetr c, ltv.thonl - Csaclativa, momehe of acce.ptors houcinof birc h-control devices under .u.pi.e nf nati0osi family plsnning progr Pernama oar room (urban) - Averag nnbor of per-ns Pot room In occupiedainm. inception. camnenionl dwsellings In orbac er..e; dunilioge -ocide . -enocFamilyP olnoia- er 1Lo marriedwomen) - ercantagec of married woapn of srctuesand unoccupied peto.

chl-haing age (15-Ac years) who un 4trtb-controi devices to .15 married Onuiddualing wihot ee wtr Ml - Occupied conentinc" ueligwiene in anne ae group, in urban and rural arnee nithdout i-side or tuide piped wator facilities

aa pe,r.centag.e of ail on-piod dwellingeinaiovSMat Acstoe ctricit (7 faldelns ace,toldclawt

Toallbo focefhouaand) - funomica11y active persona, Includin.g anmed electricity in liigqatrsd ecn o oa wlingsin urananfoce ed unePloyed hot excluding honeewives, atudenrs, etc.; definitions rural arse.. st .p~. ftt1delnsi r. n

in varie... .oentria. are nat comparable. Rursl dwellingscon tetolcrityf) - Computed as ab... fur coraLabo furr Inagriuitue it -Agcicultutal labor forte (to farming, forstry, dwellings only,

hooccicc and flnking) As percetage of total labor force.Smaoulevad(7. f labr fore) - omoployed ar usually defined as parsons whoO.pto

are bleend illng t iee ajob, nut of a job am a gives day, remained out RaiAeeiesZetro oo l rYpen of receirer. for radio broadcastsnf a job, and Seekong work for a specified Ininimu period nor exceeding one tognrlpbi e hcad af population eccldee unlicensd re-lc-reweek; nay not be comparable between councriea d.s to diffeteat definition, in oocntriea and In year. when reitainof redin arts weIaffeir;af namploynd and source cf data, e.g. , soployment offire tataiatica, sample data for recent yoara nay nor hr comperble sino na :nre abe1lfhod

ouvye -opulI-ry uneployment inuac.lic..a.log.

111- dIlib-tio Z4~~~~~~~~~~~Psenorcoe pr ho nn - Pnosarsec tarn compriur motor caro eentiegSeasn d&trloetnc 1f'rtc.tags of private Iacoe (bnth i. cock and kind) lees than eight perauna; eacIudoc ambulence, hearnee sod millteryt...oLv,i by richoar 52, richtest 202, Ponrest 207., and poorst 402 of honses- vehicies.holdosRetiir k hv rtcp Acres1. constuPLIOn of induetrial, caeril

Tbiarlbtic oflan owersilo Pecenage ofIsodownd b welthest102publlr and private electricity In kilosutt hours per capita, gecorllyftrt.r.Se. f loa owne by -Ithi,t 10%baesed on production dote, wichouc all1e-ce for losese in itida 1-ut alie.-sod ponruoc lit of lend owners. lng for imports aod exports af electricity.

IL-Itl~ ~ ~ ~ ~~~~~~~~~~~~~~~~be rnt(gyrnrde -Per capita annual. cona-pri-c in ktiugram_lire 4th end Nutrition ca~~~~~~~~etimated from d-setic producticn pIca -er inpurto of mewn print.

pocu;erlc nrocifn - Population dioided by reeker of practicingphyici-n qu aliid from a modica1 ahoul or unloreriy level.

COUNTRY DATA - ANNEX Ipage 3 of 4

GROSS NATIONAL PRODUCT IN 1977 ANNUAL RATE OF GR0iTiH (f , constant prices)

US $ Min. % 1968-72 1972-77 1977

GNP at Market Prices 12,568 100.0 6.5 3.5 -1.5

Gross Domestic Investment 1,934 15.4 8.1 3.0 - 22.4

Gross National Saving 1,007 8.o 7.4 8.5 - 19.3

Currenit Account Balance - 927 - 7.4Exports of Goods, NFS 2,012 16.0 1.0 - 3.3 13.3DInports of Goods, NFS 2,519 20.0 .7 5.3 -5.6

OUTPUT, EMPLWDYENT ANDPRODUCTIVITY IN 1976

Value Added Labor Force V.A. Per WorkerUS $ Mln. X &,-* % US x %

Agriculture 1,768 13.0 2.1 43.7 842 29.7

Industry 4,079 30.0 1.0 20.8 4,079 14.0

Services a/ 7 751 57.0 1.7 35.4 4 559 160.9

Total7Average1 598a lO O .O : z O.

GOVERNMENT FINANCF

General Government Central Government(S Mill.)- ____jk of _GDP (S Mi.U % of GDP1277 1,977 1,977 1977 1977 1972

Current Receipts 190,120 18.1 19.1 154,052 14.6 15.5

Current Expenditure 219 729 20.9 17.4 193 092 )8.3 14.4Current Surplus -- 29bO -7; -17 - -;7 TTCapital Expenditures 44,893 4.3 4.9 40,103 3,8 4.8

MONEY, CREDIT AND PRICES1973 1974 1975 1976 1977 1978 June(Millions of Soles outstanIng and period7

Money and Quasi-Monley 87,506 107,012 126,174 151,062 195,967 235,156Bank Credit to Public Sector 20,811 19,773 43,567 901142 152,354 168,064

Bank Credit to Private Sector 60,361 73,152 95,788 131,449 196,439 289,352

(Percentage or Index Numbers)

Money as % of GDP 22.4 21.7 21.0 18.0 16.5

General Price Index (1963-100) 273.1 318.5 382.5 513.2 707.8Annual percentage changes in:

Gerural Price Index 14.6 16.6 20.0 34.2 37.9

Bank credit to Public Sector 77.0 - 5.0 120.3 106.9 69.0Bank credit to Private Sector 18.0 21.2 30.9 37.2 49.4

a/ Gross National ProductNot applicable

ANNEX IpaSe 4 of 4

BALANCE OF PADMENTS MERCHANDISE EXPORTS (AVERAGE 1975-1977)

1974 1975 1976 1977 us $ Mln. j(Millions US-$)

Exports of Goods, NFS 1,719 1,536 1,616 2,012 Mining Products 645 46Imports of Goods, NFS 2,279 2,824 2,466 2 519 Fish Products 198 14Resource Gap (deficit--) -560 -1,288 -850 -507 Agricultural Products 346 25

Manufactured Products 170 12Interest (net) -168 -249 -324 -372 Petroleum and Derivatives 33 2Other Factor Income (netl -124 - 50 - 47 -105 Total (FOB) 1,392 iwNet Transfers 45 49 58 57Balance on Current Account -807 -1,538 -1,163 -927 EXTERNAL DEBT, DECEMB4ER 31, 1977

Us $ Nln.Direct Private Foreign

Investment 144 316 171 54 Public Debt, imi. gwaranteed 4,660Net N.L.T. Borrowing Non-Guaranteed Private Debt 1.480

Disbursements 1,146 1,166 953 1,107 Total outstanding and Disbursed 6,140Amortization 391 347 381 481Subtotal 755 819 572 626 NET DEBT SERVICE RATIO FOR 1977 b/

Other Capital (net)and capital n.e.i. 190 -174 -448 -103increase in Reserves (+) 282 -577 -868 -350 Public Debt, incld. guaranteed 38.4

1 Non-guaranteed Private Debt 4.9Gross Reserves (end year) 966 468 368 457 Total outstanding and Disbursed

Petroleumn Imparts a/ 185 239 261 269Petroleum Exports P/ 3 21 29 48

o ERD/IDA LENDrNG CAugust 31, 19781 (Million US 4)RATE OF EXCGANGE (SELLING)

IHED IDAAnnual Averages End Period

1976 1977 Januarv-Julv 1978 1 Outstanding and Disbursed 180 -US $1.00 - Soles 5577 1,-9-Y 140,17 162,18 Undisbursed 244 _

Soles 1.00 - US$ .0179 .0122 .0071 .0062 Outstanding incl. Undisbursed 424

Crude and derivatives./ Debt Service net of interest earned on foreign exchange reserves as a percentage of Expats of Ooods and Non-Factor Services.

ANNEX IIPage 1 of 5

THE STATUS OF BANK GROUP OPERATIONS IN PERU

A. STATEMENT OF BANK LOANS (as at August 31, 1978)

---- US$ million----Amount

Loan (less cancellations)Number Year Borrower Purpose Bank Undisbursed

24 loans fully disbursed 243.2

933 1973 Banco de Fomento Agropecuario Agriculture 25.0 0.5949 1973 Republic of Peru Education 24.0 19.1

1025 1974 Republic of Peru Roads 26.0 6.21196 1976 Republic of Peru Transport 76.5 73.91215 1976 Republic of Peru Power 36.0 26.21281 1976 CENTROMIN Mining 40.0 37.61283 1976 Banco Vivienda Urban Dev. 21.6 21.51358 1977 COFIDE Industry 35.0 34.31403 1977 Republic of Peru Agriculture 25.0 25.0

Total 552.3of which has been repaid 128.0

Total now outstanding 424.3

Amount sold 18.3of which had been repaid 18.3 _

Total now held by Bank 1/ 424.3

Total undisbursed 244.3

Note: No IDA credits have been made to Peru.

1/ Prior to exchange adjustments.

ANNEX IIPage 2 of 5

B. STATEMENT OF IFC INVESTMENTS (as at August 31, 1978)

Type of Amount in US$ millionYear Obligor Business Loan Equity Total

1960 Industrias Reunidas, S.A. Home Appliances 0.3 0.3

1960 Luren S.A. andLadrillos Calcareos, S.A. Bricks 0.3 0.3

1960 Durisol del Peru, S.A. Building Materials 0.3 0.3

1960;1962 Fertilizantes Sinteticos, S.A. Fertilizers 4.1 4.1

1962;1968 Cemento Andino, S.A. Cement 2.2 0.2 2.4

1964;1967 Cia. de Cemento Pacasmayo Cement 1.1 0.5 1.6

1975 Southern Peru Copper Corp. Mining 15.0 15.0

Total gross commitments 23.3 0.7 24.0less cancellations, terminations,

repayments and sales 10.6 0.4 11.0

Total commitments now held by IFC 12.7 0.3 13.0

Total Undisbursed - -

ANNEX iIPage 3 of 5

Loan 933-PE: Agricultural Credit Project; US$25.0 million Loan ofSeptember 12, 1973; Effective Date: December 12, 1973;Closing Date: December 31, 1978.

Although the project had a slow start, progress is now satisfactory.The small remaining balance is expected to be disbursed by the end of theyear, one year after the original closing date.

Loan 949-PE: Education Project; US$24.0 million Loan of December 5, 1973;Effective Date: March 5, 1974; Closing Date: June 30, 1979.

The project is experiencing serious difficulties and is now about39 months behind schedule. In the first 3-1/2 years after effectiveness,there was little progress in project execution owing to delays in establish-ing and staffing the Project Unit, weaknesses in the unit itself, and diffi-culties in drawing up satisfactory curricula for the project's 16 uppersecondary schools (ESEPs). Some of these obstacles have been overcome, butproject implementation is still being hampered, this time by a shortage oflocal counterpart funds, cumbersome implementation procedures and continuedweaknesses in the Project Unit. Because of substantial cost overruns andthe shortage of local counterpart funds, the possibility of reducing theproject scope and increasing the Bank's disbursement percentage is beingexplored.

Loan 1025-PE: Sixth Highway Project; US$25.0 million loan of July 1, 1974;Effective Date: August 21, 1974; Closing Date: June 30, 1980.

Loan 1025-PE finances improvement of the Lima-Pucallpa highwaywhich connects the Amazon basin to the Pacific Coast. In view of the un-usually difficult terrain and the limited implementation capacity, the projectwas divided into two stages which are financed by separate loans, 1025-PE and1196-PE (see below). Because of initial delays and substantial cost increases,the scope of the project was reduced in February 1978 (see President's memo-randum R78-36), and the Closing Date postponed to June 30, 1980. Constructionis now well advanced and should be completed next year.

Loan 1196-PE: Lima-Amazon Transport Corridor Project; US$76.5 million Loanof May 27, 1976; Effective Date: August 18, 1976; Closing Date:December 31, 1980.

While the project's river ports component is progressing satisfac-torily, there have been serious delays in contracting for civil works under

1/ These notes are designed to inform the Executive Directors regarding theprogress of projects in execution, and in particular to report any pro-blems which are being encountered, and the action being taken to remedythem. They should be read in this sense, and with the understanding thatthey do not purport to present a balanced evaluation of strengths andweaknesses in project execution.

ANNEX IIPage 4 of 5

the road component because of slow procedures and limited Government imple-mentation capacity. In the meantime, the Government's financial difficultieshave led to a reduction of funds available for road works which will furtherdelay the road component to an unacceptable degree. Proposals are now beingdiscussed with the Government to restructure the project, concentrating onmost urgently needed components, particularly on road maintenance andeliminating improvement of those road sections which cannot be completedwithin a reasonable time.

Loan 1215-PE: Fifth Power Project; US$36.0 million Loan of September 20, 1976;Effective Date: November 18, 1976; Closing Date: December 31,1979.

The slowdown of ELECTROLIMA's power market in the wake of thecurrent economic difficulties as well as procurement problems have delayedsomewhat the project's power distribution component (Part A) and completionis expected about a year behind schedule. Despite tariff adjustments inJanuary and May 1978, accelerating inflation and increases in the cost ofpurchased energy are likely to prevent ELECTROLIMA from meeting its covenantedcontribution to expansion this year. More serious delays were experienced inthe technical assistance program of the loan; most consultants have, however,now been retained, and it is expected that the program will progress normallyin the future.

Loan 1283-PE: Urban Sites and Services Development Project: US$21.6 millionLoan of October 12. 1976; Effective Date: January 10, 1977;Closing Date: June 30, 1980.

Administrative difficulties, particularly the need to reconcilePeruvian procedures with the Bank Guidelines for Procurement have delayedthe project by about one year. Project execution has now begun; however,its pace could be slowed by the shortage of local counterpart funds.

Loan 1281-PE: Centromin Mining Project; US$40.0 million Loan of December 6.1976; Effective Date: May 24, 1977; Closing Date: December 31,1980.

Because of the difficult fiscal situation and the project's largerequirements for local counterpart funds, the Government is now determiningwhether to proceed with the copper mining component which amounts to about90 percent of total project cost. A decision is expected before the end ofthe year. There is a possibility that the Inter-American Development Bankmay help cover part of the financing shortfall created by the Government'slack of counterpart funds. Engineering and procurement activities on thispart of the project have meanwhile been suspended. Construction of the mine-water treatment plant had been delayed but is now advancing satisfactorily.

ANNEX IIPage 5 of 5

Loan 1358-PE: Industrial Credit Project; US$35.0 million Loan of January 28,1977; Effective Date: March 30, 1977; Closing Date: June 30,1981.

Since Peru's economic recession has led to a contraction of invest-ment and to lower than anticipated demand for the loan, disbursements arelagging behind schedule. In view of this, the Borrower -- the NationalDevelopment Bank (COFIDE) -- has recently agreed to finance projects identi-fied by commercial banks and other financial institutions, which would alsoguarantee these loans and provide some loan servicing. The initial responsehas been encouraging, and it is hoped that the credit line will be drawn downmore rapidly in the future.

Loan 1403-PE: Irrigation Rehabilitation Project; US$25.0 million Loan ofMay 20, 1977; Effective Date: August 2, 1977; Closing Date:June 30, 1983.

PLANREHATIC, the executing agency, has completed the design forcivil works in two of the six valleys where irrigation systems are to beimproved and construction has started. The project's implementation isproceeding on schedule.

ANNEX IIIPage 1 of 2

REPUBLIC OF PERU

WATER SUPPLY AND POWER ENGINEERING PROJECT

SUPPLEMENTARY PROJECT DATA SHEET

Section I: Timetable of Key Events

(a) Time taken to prepare project: Project evolved in late 1977from earlier discussionsregarding a Lima Water SupplyProject.

(b) Project prepared by: Mantaro Commission and ESAL.

(c) Date of first presentation toBank and date of first Bankmission: November 1977.

(d) Date of departure of AppraisalMission: January 16, 1978

(e) Date of completion ofnegotiations: September 8, 1978

(f) Planned date of effectiveness: February 1, 1979

Section II: Special Bank Implementation Actions

None.

Section III: Special Conditions

1. Hiring of a project manager acceptable to the Bank by ESAL(Condition of Effectiveness, para. 49).

2. Issuing of a decree giving ESAL's representatives the rightto visit and inspect private wells (Condition of Effectiveness,para. 50).

3. Conclusion of an acceptable subsidiary loan agreement betweenCOFIDE, on behalf of the Government, and ESAL (Condition ofEffectiveness, para. 64).

4. Subloan to ESAL to be conditioned on a financial rehabilitationprogram for ESAL (para. 56).

ANNEX IIIPage 2 of 2

5. Water tariff increases if these become necessary to enableESAL to comply with the financial rehabilitation program(para 56).

6. Hiring of consultants to help strengthen ESAL's financialmanagement within 60 days of the signing of the subloan toESAL (para. 56).

7. Establishment of an adequately staffed Droiect unit underthe Mantaro Commission to supervise studies for the project'sMantaro component (Condition of Disbursement, para. 52).

8. Establishment, by January 31, 1979 of working groups--includingthe ESAL project manager, representatives of the Mantaro projectunit and of COFIDE--to ensure coordination between both projectcomponents (para. 53).

&*a~~~~~~~~~~~~~~~~~~~~~~~~~~~~ ~~~~~~f E P L

.iW- ; -- ' eMANTARO TRANSFER PROJECT-. ,. i. ' ! -. ,, 1 ,_ _ AND ASSOCIATED HYDROELECTRIC PLANTS

PF F '' Sectional View

h.... .... b, h..

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I- 15011 E LsAHANC r.r r OWRT IN 139

KOMETERS bVERTICAL SCALE - __ D0

~* MOYOPAPA POWER STATION 888.l

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j30Mw C _LA ATARJEA TREATMENT WOR 24m I / C IEXPANSION) / ,

E A IV L I M A KILOMETERS c:. tn

220 C X0 _5 90' 1E0 170 160 150 140 130 120 110 100 9O E0 70 60 50 4,0 30 2E 10 0 :C

220 210 20I10 O8 170 100 150 140 130 120 110 100 90 80 I'0 60 40 310 25 -C0

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~~~~~~~~~~~~~~~~~~~~~0 ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ 0

130 CAAS .VC'~~~~~~~~~~~~D

AFFECPLATED HYR PWRTTIN

PLARTSPLANTS

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DAMS 3

\-Iwo--- CONTOURS (Intervals everyl1000meters) 40~~-- RIVERS

DEPARTMENT BOUNDARIES

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KILOMETERS

750~~~~~~~7 6