Document of FILE COPYThe World Bank

FOR OFFICIAL USE ONLY

Report No. P-2403-HO

REPORT AND RECOMMENDATION

OF THE

PRESIDENT OF THE

INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT

TO THE

EXECUTIVE DIRECTORS

ON A

PROPOSED LOAN

TO THE

EMPRESA NACIONAL DE ENERGIA ELECTRICA

WITH THE GUARANTEE OF THE REPUBLIC OF HONDURAS

FOR THE

NISPERO POWER PROJECT

November 1, 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 authorization.

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CURRENCY EQUIVALENTS

L2.00 (lempiras) = US$1.00

L1.00 US$0.50

L1,000,000 = US$500,000

UNITS AND MEASURES

kW - kilowattmW - megawatt - 1,000 kWkWh = kilowatt-hourGWh = gigawatt-hour = 1,000,000 kWhkV = kilovolt

ABBREVIATIONS

CABEI - Central American Bank for Economic IntegrationCOHDEFOR - Corporacion Hondurena de Desarrollo Forestal

(Forestry Development Corporation)CONSUPLANE - Consejo Superior de Planificacion Economica

(National Planning Council)E.NALUF - Empresa Nacional de Luz y Fuerza

(Nicaragua's National Power Company)ENEE - Empresa Nacional de Energia Electrica

(National Electrical Energy Company)FIV - Venezuelan Investment FundIDB - Inter-American Development BankUSAID - United States Agency for International Development

FISCAL YEAR

January 1 - December 31

FOR OFFICIAL USE ONLY

HONDURAS

NISPERO POWER PROJECT

LOAN AND PROJECT SUMMARY

Borrower: Empresa Nacional de Energia Electrica (ENEE)

Guarantor: Republic of Honduras

Amount: US$30.5 million

Terms: Payable in 20 years, including 5 years of graceat 7.35% interest per annum.

Project Description: The objectives of the project are to meet Honduranpower load requirements which will exceed presentgenerating capacity by 1980, to strengthen ENEE'smanagement and planning capacity and to improveenergy sector organization and planning. Theproject comprises the construction of the 22.5

MW Nispero hydroelectric plant, and the 30 MWPuerto Cortes diesel plant; studies of energysector organization and ENEE's management systemand organization, a national electrification masterplan, preparation of a hydropower inventory updating,a prefeasibility study of the Piedras Amarillashydro project, and a training program for ENEE.The project faces no special risks except for thecomplex geology of the Nispero hydro component siteand the possibility of limited internationalcontractor interest in this component because ofits small size.

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

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Estimated Cost:

US$ (millions)Local Foreign Total

Nispero hydro power plant 5.5 10.8 16.3Puerto Cortes diesel plant 1.9 13.1 15.069 kV line to Puerto Cortesplant 0.1 0.1 0.2

Distribution expansion 1980-81 1.9 2.3 4.2Studies 0.4 1.3 1.7Training 0.1 0.3 0.4Engineering and administration 1.7 2.5 4.2

Total Costs 11.6 30.4 42.0

Contingencies: Physical 1.4 3.3 4.7Price 1.4 3.0 4.4

Subtotal 14.4 36.7 51.1

Special price contingency 1/ 0.5 1.4 1.9

Subtotal 14.9 38.1 53.0

Interest during construction - 5.0 5.0

Financing Requirements 14.9 43.1 58.0

Financing Plan:

US$ (millions)

Bank - 30.5 30.5CABEI _ 3.5 3.5Suppliers Credit - 6.7 6.7ENEE 14.9 2.4 17.3

Total 14.9 43.1 58.0

Estimated Disbursements:---- US$ million by Fiscal Year ----

Bank FY 1979 1980 1981 1982 1983

Annual 7.7 10.2 9.1 2.6 0.9Cumulative 7.7 17.9 27.0 29.6 30.5

Rate of Return: 9 percent

Appraisal Report: Report No. 2074a-HO dated October 17, 1978.

1/ To cover projected higher cost of Nispero component in case of lack ofcontractor interest.

INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT

REPORT AND RECOMMENDATION OF THE PRESIDENT

OF THE INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENTTO THE EXECUTIVE DIRECTORS ON A PROPOSED LOANTO THE EMPRESA NACIONAL DE ENERGIA ELECTRICA

WITH THE GUARANTEE OF THE REPUBLIC OF HONDURASFOR THE NISPERO POWER PROJECT

1. I submit the following report and recommendation on a proposedloan to the Empresa Nacional de Energia Electrica with the Guarantee of theRepublic of Honduras for the equivalent of US$30.5 million for the NisperoPower Project. The loan would have a term of 20 years, including a graceperiod of 5 years, with interest at 7.35 percent per annum.

PART I - THE ECONOMY 11

2. A report entitled "Memorandum on Recent Economic Development andProspects of Honduras" (1856-HO) was distributed to the Executive Directors onJanuary 10, 1978. The main findings of the Report are summarized below.Country data sheets are attached as Annex I.

Long-term Development Trends

3. The long-term growth rate of the Honduran economy has been exceed-ingly low. Between 1950 and 1975, real per capita GNP grew by only 1 percenta year. Honduras' per capita GNP in 1977, US$450, is one of the lowest levelsin the Western Hemisphere. Honduras' poverty is also evident from a variety ofindicators. Malnutrition is severe: about three-quarters of pre-school childrenare believed to suffer from protein and caloric deficiencies, and infant mortalityis estimated at 118 per thousand live births. It is estimated that roughly 60percent of the population has no access to piped water and about 80 percentlives without any form of sanitary waste disposal. Furthermore, these arecountry averages which conceal substantial regional disparities, as livingconditions in the rural areas, which account for about two-thirds of thepopulation, are much poorer than in the cities.

4. A major reason for Honduras' poor growth performance has been thecontinued dependence of the economy on the production and export of a fewagricultural commodities, especially bananas, whose prices depend on afluctuating world market situation and whose output may be greatly influencedby domestic weather conditions. The latter was dramatically illustrated whenextensive destruction of the banana plantations by Hurricane Fifi in 1974reduced the volume of bananas exported in 1975 to about one-half the level of1973 and contributed to a drop in per capita income of about 3 percent.

1/ This section is substantially unchanged from the section on the economyin the President's Report for the Guayape Regional Development Project(P-2320-HO) dated May 4, 1978.

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5. There are many reasons for the continued dominance of bananas inthe Honduran economy. Known mineral deposits are not extensive. A seriouslack of basic infrastructure and deficient development policies in the pasthave left Honduras' agricultural resources underutilized. In addition,the mountainous topography of the country has made the expansion of the roadnetwork slow and costly. There has been progress, however, since 1960, andmajor achievements include the establishment of a basic transportation net-work connecting the main population centers, and a considerable expansion ofelectric power service.

6. Much land suitable for agriculture is still available, and thecountry has sizeable forest resources, but agricultural output only grew atabout 2 percent yearly between 1950 and 1975. Uneven land distribution anddeficient credit, technical services and development programs have keptagricultural growth far below its potential.

7. Manufacturing industry, which is highly concentrated in the citiesof San Pedro Sula and Tegucigalpa, now accounts for about 16 percent of GDPand provides employment to about 10 percent of the labor force. During the1960s, the manufacturing sector grew at a low annual rate (3.8 percent) owingto the small size of the domestic market, the lack of infrastructure, and theinability of domestic firms to take advantage of the opportunities offered bythe Central American Common Market. Manufacturing growth, however, almostdoubled in the 1970s (during 1970-76, real value added grew at an annual rateof 7 percent) because of the increase in both domestic and foreign demand andthe consequent expansion and modernization of existing and new plants.

Government Development Efforts

8. Since 1972, development efforts have increased substantially andseveral measures have been taken to lay the basis for the current improvedeconomic outlook over the longer term. A land reform program which beganin December 1972 aims at greatly improving land utilization as well asincreasing the income and employment of the poorest peasants through thetransfer of unutilized or poorly utilized land from large landowners tolandless rural families. Another major policy development was the national-ization of timber rights in January 1974. A new forestry law establishedguidelines for private sector participation in forestry development andcreated the Corporacion Hondurena de Desarrollo Forestal (COHDEFOR). COHDEFORis in charge of all forest industry policies and activities, and is expectedto exploit forest resources more rationally, increase lumber exports, andprovide more employment for rural Hondurans. The third major achievement wasan improvement in Government planning and executing capacity, particularly ininfrastructure, which has resulted in a substantial increase in public fixedinvestment from 3.3 percent of GDP in 1972 to 6.6 percent in 1974 and arecord 8 percent in 1977. The Government has also made an effort to increaseinvestment in the social and productive sectors and strengthern public financesthrough tax reforms and better tax administration. A 1975 tax reform made thetax on coffee exports an ad-valorem tax with marginal rates ranging from

1J p i.uuc , Li p E epunding on coffee prices, substituted a 3 percent

value added tax for the sales tax, and raised the tax rates on beer, cigarettesand liquor.

ReceLnt Econemic Deuelopments

9. vae nEuras was adversely affected by one of the worst hurricanesin its history in 19-4, it also had to contend with the oil price rise of thatyear and the later OECD recession. As a result, during 1974-75, total GDPremained almost stagnant, severe balance of payments difficulties arose andthe country's savings capacity was seriously reduced. Import prices grewalmost three times as rapidly as export prices, and the terms of tradedeteriorated by about one-fifth. The resource gap, which was equal to about1 percent of GDP during 1972-73, averaged 11.6 percent during 1974-75. Therise in consumer prices, which had averaged 2.7 percent a year between 1966and 1973, accelerated to 13 percent in 1974 before declining to 8 percent in197T.

10. A high level of public investment, the gradual recovery of bananaproduction and the doubling of coffee export prices were the major factorsresponsible for as im-provement of the economic situation in 1976. Real GDPgrew at about 6.6 percent and the price level increased by only 5 percent.Merchandise export earnings grew by about 32 percent in current terms over1975, about half of it as a result of higher coffee prices. Government taxrevenues increased from 10.8 percent of GDP in 1972-73 to 12.8 percent in 1976and, while there was a substantial increase in public current expenditures,public savings were estimated at 2.7 percent of GDP in 1976 compared to anaverage 2.2 percent in 1972-73. However, as investment expenditures forhurricanie reconstruction and development purposes were stepped up considerably,the oLv;ra'l de ficit of the Central Government increased from 2.5 percent ofGDP ir. 19i( to i.9 percent in 1976.

11. Ir. 197, economic expansion continued with real GDP growth estimatedat 8 percent, duet mainly to the expansion of export volumes (about 30 percentin current prices` and public investment (about 17 percent), and to a doublingof coffee) prices from the 1976 level. The rate of inflation accelerated to8.6 percent owiog no higher liquidity brought about by coffee sales, risingimport ,ntices and poor domestic crops of basic grains. The balance of paymentshad a accoa. ncoint deficit of US$121 million, above the US$109 recorded in197b, d , tl dlmo the rapid increase of imports, and the retention of coffeesale6 in tIn sŽnool semester of 1977. Foreign exchange reserves, however,increased bv about US$40 million, as a result of larger coffee and bananaexporn earnings, as well as greater inflows of foreign loans. With regardto the public sector, Central Government current revenues reached 16.4percent of GDP, while public savings increased to 3.3 percent of GDP. Thetotal tax bLurdon increased to 14.5 percent of GDP.

Growth ?P :D i tS

12. Thie groch prospects for 1978-82 are good. Real GDP is expected toincrease at an annual rate of about 6 percent, barring natural disasters. Realexports shoold ha able to grow at about 7 percent a year, reflecting continuedrecovery of baoian. p-oduction from the September 1974 hurricane, increased

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coffee production owing to higher yields and new plantings, expansion of sugarproduction, an increase of lumber exports made possible by the currentlyplanned expansion of sawmill capacity, increased beef production (also theresult of an ongoing program), expansion of fruit and vegetable productionfor export and promotion of tourism. Coffee prices, although declining fromthe unusually high 1977 level, are expected to remain above the 1976 levelthis year and to be somewhat below in 1979. In addition, the Government plansto accelerate economic growth over the medium-term through an ambitious publicinvestment program designed to alleviate the most significant bottlenecks tothe country's development process. The presently designed development strategycalls for large public investments in infrastructure, in export diversificationthrough forestry development and tourism, and in agriculture to implement theagrarian reform program and increase productivity.

13. The expansion of the public sector's investment expenditures togetherwith the necessary increase of complementary current expenditures creates aneed for additional increases in taxes and the tariffs of public enterprisesin the 1979-82 period as well as for careful control of other current expendi-tures. The Government is considering a series of proposals to mobilize addi-tional domestic resources in support of its development program.

14. While real exports are expected to increase at about seven percent ayear during 1978-82, Honduras' terms of trade are expected to deteriorate. Asthe import needs of the economy expand, in particular the imports related tothe investment program, the current account deficit is expected to increase toUS$200 million by 1981 and US$250 million in 1985, and large capital inflowswill be required. The bulk of the external financing requirements will haveto be met through public borrowing. Honduras will require an estimated totalgross capital inflow of US$900 million for the six-year period 1977-82, ofwhich about US$255 million will be disbursed from commitments made through theend of 1976.

15. Honduras' public external debt repayable in foreign currency is esti-mated to be US$418 million at the end of 1977, US$766 million if undisbursedcommitments are included. In the past, Honduras managed to keep its externaldebt service ratio fairly low, because foreign loans were almost all onconcessionary terms. It is important that the country continue to borrow onreasonably soft average terms, in view of the country's poverty, the factthat it will continue to depend on exports of a few commodities with volatileprice prospects, and because, historically, natural disasters have sharplyreduced the volume of exports every few years. Even if Honduras is successfulin obtaining about two-thirds of the financing it needs for its investmentprogram on terms similar to those offered by the international lending agencies,the debt service ratio is likely to rise from about 6.5 percent in 1977 toabout 13 percent by the mid-1980s. Continued maintenance of Honduras' credit-worthiness will depend on the efficiency with which it chooses and implementsits major public investment projects; careful, continued demand management,including cautious use of nonconcessionary borrowing; and on export promotionpolicies. The Bank will be carefully monitoring Honduras' performance inthis regard; a mission is scheduled for January 1979 to review necessaryGovernment actions and policies in these fields.

16. Although the IDB was Honduras' largest creditor as of December 31,1977 with loans outstanding -- including undisbursed -- totaling US$269.6

million, 71 percent of this estimated total is repayable in local currency, sothat IDB's share of the public debt repayable in foreign currency of US$766 isabout 25.1 percent. The Bank Group holds 27.5 percent of the public debtoutstanding -- including undisbursed -- repayable in foreign currency. CABEIaccounts for 16.2 percent of the total, the US Government for 15.0 percent,Venezuela for 6.6 percent, privately held debt for about 7.2 percent andother debt for 2.4 percent.

17. In terms of the sectoral thrust of lending by the principal externalagencies apart from the Bank, AID has concentrated on agriculture and educa-tion, IDB on transport, agriculture and forestry, health, education andhousing, and CABEI on transport, industry, power and housing. It is expectedthat AID and CABEI will continue lending primarily in the same sectors in thefuture, while IDB would concentrate on agriculture, forestry, transport,industry and power. The lending of the external agencies during 1950-1977 wasas follows:

IBRD IDA AID IDB CABEI TOTAL

Total Gross Lending 1950-1977 177.5 53.2 113.4 294.7 199.2 838.0

Gross Lending 1950-1965 25.9 12.5 26.7 27.2 8.1 100.4Gross Lending 1966-1977 151.6 40.7 86.7 267.5 191.1 737.6

Sectoral Lending 1966-1977

Transport 88.3 5.0 - 32.1 74.7 200.1Power 60.3 9.5 - - 20.9 90.7Telecommunications - - - 14.7 10.1 24.8Education 3.0 3.0 10.5 17.4 - 33.9Health - - 2.6 33.2 10.2 46.0Housing - - 5.0 12.5 16.5 34.0Agriculture and Forestry - 23.2 48.5 155.4 4.1 231.2Industry - - 5.0 2.2 33.2 40.4Other - - 15.1 - 21.4 36.5

PART II - BANK GROUP OPERATIONS IN HONDURAS

18. Beginning with a loan of US$4.2 million for roads in 1955, Hondurashas to date received seventeen Bank loans totalling US$187.7 million and tenIDA credits totalling US$57.6 million, both net of cancellations. In 1978,the Bank approved a US$5 million credit for education and the US$10.5 millionGuayape Regional Development Loan. As of August 31, 1978, a total of US$80.7million remained to be disbursed on thirteen operations for ports, power,roads, agriculture, education and regional development. The proposed loanwould raise the total of Bank Group assistance from US$245.3 million toUS$275.8 million. Execution of projects financed by the Bank Group has, onthe whole, been satisfactory. Annex II contains a summary statement of Bankloans, IDA credits and IFC investments as of August 31, 1978, as well as noteson the execution of on-going projects.

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19. In the past, Bank Group lending was heavily concentrated in trans-port and power, where inadequate facilities hampered the development ofthe country. The First Livestock Development Credit approved in 1970, how-ever, marked a first step towards the diversification of our lending. Sincethen, there have been operations for a Second Livestock project; a FirstEducation project, which included as major components primary and secondaryteacher training schools, support for vocational training centers and thenational agricultural secondary school; a First Agricultural Credit projectto finance livestock and crop development with emphasis on assisting agrarianreform settlements and a substantial technical assistance program; a SecondEducation Project to help finance rural primary schools and agriculturalvocational education; and the Guayape Regional Development Project to assistsmall farmers and agrarian reform settlements in the Guayape Valley.

20. In future lending to Honduras, we plan to support thie priorities ofthe Government's investment program by giving increased emphasis to investmentin agricultural and rural development to support the agrarian reform. Wewould also help finance activities to strengthen the balance of payments,while continuing to lend for physical infrastructure where there are stilldeficiencies to be overcome. A follow-on to the First AgricuLtural CreditProject and additional rural development projects, now being identified, areplanned. Bank Group support is also being considered for an industrial creditproject, COHDEFOR's pulp and paper project, and the development of Honduras'tourism potential. In transport, we plan to place emphasis oni assisting theconstruction of a network of feeder and access roads to support the Government'sagricultural program. We also hope to continue financing power developmentthrough participation in the large (about US$490 million) El Cajon hydroelec-tric project which is scheduled to come on stream in the mid-1980s. The latterproject, which is discussed in paras. 34-36, has been identified as the mosteconomic means of meeting Honduras' long-term demand for power. It also wouldgenerate excess energy that might be sold to neighboring count:ries in theearly years of its operation. It is expected that the Bank, IDB and CABEIwill contribute to the El Cajon effort, and the Bank has beerL helpingHonduras contact bilateral sources to seek additional concessional financing.

21. It is expected that the Bank Group share of total external publicdebt disbursed and outstanding will drop from 29.2 percent in 1976 to 26.4percent by 1981 because of increasing lending by other external agenciesand a slight increase in commercial borrowing. The IBRD share of debt servicein 1976 was 23.4 percent and is projected at about 24.3 percent by 1981.

22. Until recently, IFC's activities in Honduras included a 1964 loanand a share subscription, of US$295,000 and US$82,500 respectively, in atannery, Empresa de Curtidos Centroamericana, S.A. (ECCASA); and a US$75,000share subscription in a pilot promotional company, Compania Pino Celulosa deCentro America (COPINO) in 1969. COPINO was established to develop an indus-trial project based on timber from the Olancho Forest Reserve, but a seriesof obstacles to project development arose, and efforts to go forward with it

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were virtually halted in 1971. While current plans for the Olancho forest

industries project do not include a role for COPINO, the IFC is assistingthe Government in creating an organizational structure for the project and

selecting a technical partner. In December 1977 the Executive Directorsapproved a US$9.0 million loan, and up to US$1.0 million equity nvestment,for Textiles Rio Lindo, S.A. de C.V. for plant expansion aimed at almostdoubling its production capacity.

PART III - THE SECTOR

Energy Sector

23. Honduras uses four primary energy resources: petroleum (all of whichis imported), hydro power, wood/charcoal and bagasse. Commercial energy

in 1976 amounted to about 466,000 tons of petroleum equivalent (TPE), of whichabout 22 percent was provided by hydroelectric power stations, and the balanceby petroleum products. The role of hydro power has grown rapidly since 1970,

and will expand further with the completion of the Rio Lindo Power Plantextension, the proposed project and the El Cajon project. However, Honduraswill continue to be heavily dependent on fuel imports. The existence of

domestic fuel resources in commercial quantities has yet to be proven.Government and private efforts have recently focussed on exploring for coal incentral and western Honduras and for petroleum and gas offshore in theCaribbean. For coal, results have not been encouraging, and petroleumexploration has been very limited so far.

24. Several alternative sources of energy are being studied with Bankassistance under the Fifth and Sixth Power Loans. Areas which appear to havepotential for geothermal development are now being evaluated, and it isexpected that by early 1979 more will be known about geothermal resources.The country's forests represent a resource which has not yet been fullytapped. COHDEFOR has proposed the use of waste wood produced by the country'ssawmills for fuel, and a study has been contracted to determine whether modernmethods of pelletizing woodwaste would make steam power plants economicallyfeasible. These plants would be mainly in rural areas and would help toprovide earlier access to electricity in such areas. The study is financedpartly by the Sixth Power Loan.

25. Honduras has large hydroelectric power resources, with a theore-tical annual potential of about 35,000 GWh (present annual needs are about600 GWh). About one third of this potential has already been inventoried,and sites aggregating about 2,000 GWh annual production have been studiedat feasibility level, including the large El Cajon (1,300 GWh per year)

project on the Humuya river which is proposed as the country's next majorpower project. Further work is needed to update the existing inventory and

to prepare a prefeasibility study of a promising site on the Patuca river, forpotential development after completion of El Cajon. These studies are included

in the proposed project. The Empresa Nacional de Energia Electrica (ENEE) isalso studying possible small hydroelectric projects to expand the optionsavailable for future supply to rural areas.

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26. Honduras does not now have a coordinated energy policy nor adequateorganizational arrangements to develop and execute such a policy. The Govern-ment agencies with responsibility in the energy sector are the Ministry ofNatural Resources, the Ministry of Economy (petroleum product distributionand pricing), the Ministry of Public Works and Communications (transportcompanies), COHDEFOR (wood and charcoal production) and ENEE which is respon-sible for electricity generation and distribution. The Government, recognizingthe weakness in the sector, has agreed that a study is necessary to establish anenergy sector policy and the basis for coordination of energy sector activities.This study is included in the proposed project.

Power Sector

27. ENEE has sole responsibility for management of the power sector inHonduras. There is no regulatory agency. ENEE is a Government-owned,autonomous institute which, since its creation in 1957, has acquired most ofthe privately-owned and municipal systems, and now provides almost 100 percentof public electricity service in the country. ENEE has two hydro power plantsusing water from Lake Yojoa which provides annual storage. Canaveral,installed in 1963, has a capacity of 30 MW, and Rio Lindo, the first two unitsof which were installed in 1970, has recently been expanded to 92 MW capacity.Additionally, ENEE has diesel units with 50.6 MW of total capacity and two gasturbines with a capacity of 28 MW.

28. ENEE currently services mainly urban areas, reaching about 21percent of the total population mainly via its interconnected system. Overall,ENEE supplies electricity to about 0.6 million people or about 75 percent ofthe inhabitants of the areas served. With its annual consumption of electricenergy of about 158 kWh per capita (1974), Honduras ranks lowest in CentralAmerica.

29. Since about 64 percent of the Honduran population lives in ruralareas and many are in remote areas, it is difficult and costly to providethem electricity. ENEE has been carrying out a rural electrification programsince 1971, and has built about 270 km of 35 kV rural lines. Most of theselines have been financed by the Bank under the Fourth, Fifth and Sixth PowerProjects. ENEE is now undertaking with assistance from USAID the electri-fication of the Aguan Valley, where the Government is presently implementingan extensive rural development program. In addition to agro-industry andsawmills, the Aguan Valley Rural Electrification Project will benefit 25,000low-income families.

30. Including supply to Nicaragua, via the interconnection constructedunder the Fifth Power Project, the energy generated by ENEE during 1977amounted to 622 GWh--an increase of 11.3 percent over the 1976 total. Thecurrent load forecast, which was completed in mid-1978, projects an annualaverage increase in total sales during the 1978-1984 period of 12.1 percentwhich appears reasonable. About 70 percent of ENEE's load is industrial-commercial which contributes to the high annual system load factor (about0.65). By the end of the project period, ENEE expects to make electricityavailable to about 30 percent of the population, as a result of the distri-bution facilities and rural extensions being built and those included in the

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proposed project. In order to increase the number of electricity users, ENEEhas implemented the following measures:

(a) A low monthly minimum bill of US$1.25 has been established,

whi i gives the customer the right to use up to 20 kWh.This price makes electricity competitive with other sourcesof lighting.

(b) A connection policy is being applied under which new customerswill not be charged a connection fee whenever the costis less than US$150. When this amount is exceeded,the customer may amortize, without interest, the excess over24 months. Similarly, new population centers requestingconnections are only charged when connection costs exceed$150 per consumer; they may also pay over 24 months.

(c) For the areas where potential customers exist, but have notbeen connected to the system due to their lack of funds, ENEEhas financed the cost of interior wiring, which is recoveredwithout interest over a period of 18 months.

The Borrower

31. ENEE is directed by a board consisting of the Ministers of PublicWorks, Natural Resources and Planning and representatives of the NationalDevelopment Bank and the Chamber of Industries and Commerce (on behalf of theprivate sector). ENEE is administered by a General Manager, assisted by threeDeputy Managers. Its organization is well structured along functional lines.It needs strengthening, however, to prepare for the large expansion programentailed in the construction of the El Cajon project. Improvement is neededin its management and information systems, its insurance practices and itscontrols on accounts receivable. ENEE's management has been strengthened inrecent years by Bank-supported management consultants and training programs.However, further efforts in these areas are still required, and the projectincludes a Management and Organization study and provisions for furthertraining of ENEE management and staff.

32. While ENEE's financial structure is generally sound, its financialperformance over the last five years has not been totally satisfactory becauserevenues have not kept pace with costs (see para. 54). ENEE also needs toconsider restructuring tariffs in order to obtain a more progressive systemand to achieve a better correlation of tariffs and marginal costs. Althoughmost of ENEE's tariffs fall within Central American averages, tariffs forlarge industrial consumers are about the lowest in the region. Consultants(SOFRELEC-France) are now completing, under the Sixth Power Project, a studyof ENEE's tariff structure based on long term incremental-cost criteria. Theproposed loan will finance portable metering equipment for load surveys andmanagement.

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Power Sector Development and Strategy

33. ENEE's objectives in the power sector are:

(a) the use of national hydro power resources to substitutefor fuel imports by (i) developing projects both for theinterconnected system in Honduras and for interconnectionwith neighboring countries, and (ii) installing small hydrostations in isolated areas to reduce, or eliminate, the useof small, high-cost diesels;

(b) the rehabilitation of systems in areas recently incorporatedinto ENEE's main interconnected system; and

(c) the continued extension of the main system and creation ofregional subtransmission systems to expand service in ruralareas as rapidly as is economically feasible.

34. The investment program planned for 1978-1981, including interestduring construction and estimated increases in working capital needs, amountsto US$321.5 million. El Cajon is the largest component of the program,representing some 62 percent of the total. The investment program alsoincludes completion of the Fifth and Sixth Power Projects and additionalinvestment in rural transmission and distribution.

35. The Nispero Power Project would meet requirements until about1983 while El Cajon is being built. Interim additional thermal generationwill be required to provide for the growth of demand in 1984-85. El Cajon isthe most economical hydro alternative for meeting energy requirementsbeginning in 1985, with about 300 MW initial (and possibly 600 MW final)capacity. An Optimization and Tariff Study was carried out under a technicalassistance loan from IDB to determine the most economical pattern of systemexpansion for development with- and without-pooling of facilities through aninterconnection with the Nicaraguan Power Company (ENALUF). The study alsoprovides a suitable basis for a decision on the prices to be charged forinternational power and energy interchanges. The study confirmed El Cajon'sselection as the least cost alternative for the interconnected ENEE-ENALUFsystem expansion and recommended that El Cajon be built as soon as possible.Sales to ENALUF would expand the use of the existing interconnection,inaugurated in October 1976. Since then, ENALUF has supplemented itsgeneration of electricity by purchases from ENEE. In view of the potentialsubstantial savings from a coordinated system expansion (US$6.2 millionannually on average), ENEE and ENALUF have been discussing the needed revisionof their interconnection contract to take into account the possibility ofENALUF purchases from El Cajon.

36. The El Cajon project was appraised earlier this month. ENEE'scontacts with various financial institutions and a Bank-sponsored meeting ofbilateral as well as other international lending agencies in July 1978,indicate broad interest in providing financing for El Cajon.

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37. In view of the above mentioned objectives and developments, partic-ularly in connection with the El Cajon project, ENEE realizes the need

for a comprehensive updating of its transmission and distribution systemplanning for the medium and long term. It therefore plans to prepare, as

part of the proposed project, a National Electrification Masterplan, whichwould be partly based on the results of the Optimization and Tariff Study.The project also includes a review and updating of ENEE's hydro power inventory,

along with a prefeasibility study of a promising hydro development site inEastern Honduras. ENEE would revise its transmission system additions programin the light of the results of the Masterplan promptly after the Bank's reviewof this plan (see Section 3.04 of the draft Loan Agreement).

Bank Participation in the Sector

38. The Bank Group has made six loans and two credits to the electricpower sector, totalling more than US$80 million, which have financed a

substantial part of the power sector development program to date. The firstfour projects 1/ have been successfully completed. Together, they provided for(a) 94 MW thermal and hydra generation additions, including the first two

stages of the Lake Yojoa-Rio Lindo hydroelectric development; (b) transmissionexpansion (particularly under the Fourth Project); and (c) distributionexpansions. The Project Performance Audit Reports for ENEE's Third and FourthPower Projects 2/ indicate that both projects were implemented without note-worthy problems and that the purposes of both projects were fully achieved.The provisions of the proposed loan for training and improvements in ENEE'smanagement are consistent with the findings of these Reports.

39. The Fifth Power Project (Loan 841-HO of June 28, 1972) -- whichincluded 26 MW of diesels, an interconnection line to Nicaragua, a loaddispatch system, studies and training -- is about 90 percent completed. ENEEwas unable to reach agreement with ENALUF on jointly contracting a consulting

firm to design the load dispatch systems for the Honduran and Nicaraguan powercompanies, and therefore, contracted independently (R.W. Beck-USA) for thestudy and design of an expanded load dispatch and communication component to

provide for its needs through the 1980s. Because the cost of this componenthas increased substantially since appraisal, additional financing of US$1.7million was obtained from the OPEC Special Fund. The 138 kV lines for theAguan Valley have been deleted from the Fifth Project in the light of theUSAID-financed comprehensive rural electrification project for the Valley.

40. The last loan (No. 1081-HO of January 27, 1975) for the Sixth PowerProject finances the 46 MW extension of the Rio Lindo hydroelectric plant,distribution system improvements, rural electrification works, studies and

training. The plant extension went into operation in March 1978, ahead ofschedule. Some US$2.5 million of the loan proceeds, realized from lower than

1/ Loan No. 226 of May 19, 1959; Loan No. 261 of June 28, 1960; Loan No. 541/Credit 116 of May 28, 1968 and Loan 692/Credit 201 of June 16, 1970.

2/ Sec M75-411 of May 30, 1975 and Sec M78-489 of June 5, 1978.

- 12 -

expected steel prices and other cost reductions, will be used, with Bankagreement, 1/ to finance the extension of 35 kV lines to serve rural areas inwestern Honduras from the proposed Nispero power plant. The Sixth Project isexpected therefore to be completed by 1981, two years later than originallyestimated.

PART IV - THE PROJECT

41. A Staff Appraisal Report entitled "Nispero Power Project"(No. 2074a-HO dated October 17, 1978) is being distributed separately to theExecutive Directors. Supplementary data are contained in Annex III. Theproject was identified as the least-cost solution to ENEE's expansion require-ments in a consultant's study and subsequent feasibility report completed inApril 1978. The project was appraised in February 1978. Negotiations wereheld in Washington from July 31 to August 3, 1978; the delegation from Honduraswas led by the General Manager of ENEE.

Project Objectives

42. The main objectives of the project are to meet Honduras' electricityrequirements during 1980-83; to strengthen ENEE's management and planningcapacity; and to improve energy sector organization. The failure to constructthe facilities included in the project would lead to curtailments of supplywhich would be costly to the economy and reduce industrial growth.

The Project

43. The project would consist of the following items:

(a) Nispero 22.5 MW hydroelectric plant in western Hondurasand its substation connection;

(b) Puerto Cortes 30 MW diesel plant and its connection at thePuerto Cortes substation;

(c) Extension of ENEE's primary distribution system in new areasin Tegucigalpa, San Pedro Sula, La Ceiba, Tela, El Progresoand Puerto Cortes, and installation of capacitors to reducetransmission and distribution losses; provision of meteringequipment for load surveys and management;

(d) Study of energy sector organization; study of ENEE managementsystems, organization and training needs; a national electri-fication master plan; hydropower inventory updating; and aprefeasibility study of the Piedras Amarillas hydro project; and

(e) Training of ENEE management and staff.

The estimated completion date of the project is January 1, 1982.

1/ "Semi-Monthly Report to the Executive Directors on Bank/IDA Operations",R78-181, July 20, 1978.

- 13 -

Project Costs and Financing

44. The total project cost is estimated at Us$53.0 million of which

US$38.1 million represents foreign costs. Interest during construction

on foreign loans would add US$5.0 million, bringing total financing require-

ments to US$58.0 million, of which US$43.1 million represents the foreign

component. The proposed Bank loan of US$30.5 million would cover 71 percent

of the foreign costs of the project, plus about US$3.3 million required

for interest during construction and other charges on the Bank loan. The

financing of the interest is designed to help alleviate the financial burden

of ENEE's large investment program. The loan also includes a special contin-

gency allowance of US$1.4 million (see para. 62 below). Suppliers credits of

US$6.7 million equivalent have been negotiated to help finance the diesels

and generators for the Puerto Cortes plants, and CABEI is expected to pro-

vide two loans totaling US$3.5 million equivalent for the Nispero hydro

project engineering studies and distribution works for the 1980-81 period.

The CABEI loan for studies has been approved; and the loan application for

distribution works was declared eligible for financing in August 1978. The

latter is expected to be approved in November 1978. ENEE would itself finance

the remaining US$2.4 million equivalent of foreign costs, and the US$14.9

million equivalent of local costs. Evidence of the approval of the CABEI (or

satisfactory alternative) loans and acceptable arrangements regarding the

additional foreign exchange financing would be a condition of effectiveness of

the Bank loan.

45. A summary of project costs is set out in the Project Summary above

(see page ii). Costs of the Nispero hydro and the diesel plants were updated

in September 1978 on the basis of bid level design estimates and awarded

contract, respectively. Other costs are based on prices of September 1977,

adjusted to mid-1978 levels. All include provisions for future price increases.

Physical contingencies for the Puerto Cortes diesel plant and transmission are

10 percent of the base cost. Provisions for Nispero's physical contingencies

are 15 percent for civil works, 25 percent for water conductor, and 3 percent

for electromechanical equipment and transmission lines. Consulting services

would cost an average of US$5,400 per man-month.

Procurement

46. All equipment, materials and services financed by the proposed loan

would be procured through international competitive bidding, following the

Bank's Guidelines. Local suppliers would be given a margin of preference of

15 percent, or the applicable import duty, whichever is lower. Locally

produced wood poles for transmission and distribution lines are expected to be

competitive. The cost of the poles to be financed by the Bank is estimated at

about US$50,000.

47. To avoid delaying the installation of the Puerto Cortes diesels,

which are required to avoid possible curtailment of supply in 1979/80, the

Bank agreed in mid-1977 that ENEE could initiate their procurement, and bids

under ICB were received in November 1977. ENEE awarded the contract to

Alsthom (France) in August 1978. Retroactive financing of payments under the

- 14 -

contract made after August 1, 1978 (expected to be about US$2.2 millionequivalent) is therefore recommended. Retroactive financing of up to US$0.2million is also recommended for payments made for design and engineeringconsulting services after February 15, 1978.

Disbursements

48. Disbursements from the loan account would be made for:

(a) 100% of foreign expenditures for imported equipment (includinginstallation and supervision) and materials for Puerto Cortesdiesel plant;

(b) 100% of foreign expenditures for imported equipment andmaterials or 85% of the ex-factory cost (i.e., excluding localtaxes) of locally manufactured equipment and materials for otherproject elements;

(c) 100% of foreign expenditures for civil works and installationfor the Nispero and Puerto Cortes plants and the 69 kV lineto the Puerto Cortes plant;

(d) 100% of expenditures for consultants' services;

(e) 100% of foreign expenditures for the training program; and

(f) interest and other charges on the Bank loan during projectconstruction.

Project Execution and_Manaement

(a) Hydro, diesel and transmission

49. Major project components are expected to be completed by April 1981.For the Nispero plant, the manufacture, delivery and installation of theturbine and generator unit and access road improvement are on the criticalpath. Bids on the turbine and generator have been evaluated. The implementa-tion of the Puerto Cortes diesel plant and switchyard would be under a turnkeycontract. Diesel plant erection and testing are expected by late 1979.

50. ENEE's own staff will carry out the engineering and supervision ofconstruction for the transmission and distribution expansion during 1980-1981.This is acceptable because ENEE has proven experience in similar works recentlycompleted or now under construction. As in present practice, ENEE personnelwould install the substation and distribution equipment and build the trans-mission and distribution lines at 69 kV and lower voltages.

(b) Studies

51. The studies to be undertaken will be carried out by consultants andunder terms of reference approved by the Bank. ENEE would submit a schedule,satisfactory to the Bank, for the implementation of all studies as a conditionof effectiveness of the proposed loan. Among these, the Government has

- 15 -

approved the outline terms of reference for the Energy Sector Organization Study(see para. 26), which would be carried out under the direction of its PlanningCouncil (CONSUPLANE). The Bank is helping to identify the areas in whichconsultant assistance would be needed and to prepare detailed terms of referencefor this study. Prior to disbursemenits for consultants' services for the study,ENEE would submit proposals satisfactory to the Bank for the disbursement andrepayment arrangements with CONSUPLANE (see Section 3.01(b) of the draft LoanAgreement). The recommendations of the study would be furnished to the Bankfor comment by June 30, 1980 (see Section 3.04 of the draft Guarantee Agreement).

52. ENEE will undertake a Management and Organization Study to helpprepare for its large expansion program. This study, for which terms ofreference are already agreed, will concentrate on an examination of ENEE'sorganizational structure particularly regarding measures to strengthen thecompany for El Cajon; ENEE's personnel practices; procurement operations; andENEE's system for collection of information as well. The study would alsoidentify staff training needs and produce recommendations for a trainingprogram and its implementation. Disbursements for the training program wouldnot be made before the Bank and ENEE have agreed on a detailed plan (see para.4b(ii) of Schedule 1 to the draft Loan Agreement), based on the study findings.By March 31, 1979, ENEE would present to the Bank the preliminary findings ofconsultants concerning the organizational arrangements for El Cajon; and afull draft Management and Organization Study report three months later.ENEE would exchange views with the Bank on the study's recommendations;introduce modifications and additions resulting from this exchange; and agreeon a timetable to carry out these recommendations (see Section 3.06 of thedraft Loan Agreement).

53. ENEE has also engaged consultants (R.W. Beck - USA) to study itscommercial functions. A report of their recommendations and ENEE proposalsfor carrying them out would be submitted to the Bank for comment byMarch 31, 1979 (see Section 3.05 of the draft Loan Agreement).

Financial Analysis

54. ENEE's financial performance has suffered in recent years becauseof delays in adjusting its tariffs to offset fuel price increases. Between1972 and 1977, annual fuel costs went from US$0.4 million to US$6.8 million.Load growth in 1974-77 was below expectations because of the 1974 hurricaneand the impact on Honduras of the world economic slowdown. The application ofa fuel adjustment clause and a 25 percent tariff increase in 1975 were notsufficient to enable sales revenues to keep pace with operating costs. As aresult, ENEE's operating income was 38 percent lower on the average thanprojected. ENEE's rate of return on assets revalued as of end 1973 was 7.7percent in 1975, 7.5 percent in 1976 and 8.9 percent in 1977, as compared withthe 10 percent return stipulated under previous Bank loan agreements. Lowerthan expected internal cash generation led to the need for additional borrow-ing, which increased debt service obligation further. Consequently, debtcoverage during the 1974-77 period was also less than projected (averaging 1.3times, compared to the 1.8 expected when the Sixth Power Project was appraised).

- 16 -

55. Present financial projections assume that tariffs will be adjustedto enable ENEE to achieve an 8 percent return on annually revalued assets.With this, ENEE would be able to maintain acceptable debt service coverageand debt equity and current ratios through the program period, and make a14 percent contribution to its overall investment program for this period.This figure is considered acceptable in view of ENEE's large, lumpy investmentprogram during this period which, with El Cajon and other projects, willsatisfy capacity requirements through the late 1980s. If ENEE had opted forthe second best alternative to El Cajon (construction of diesel plants), itwould have been able to finance more than 30 percent of its investment require-ments with its net internal cash generation. ENEE and the Government haveagreed that, starting in 1978, ENEE's fixed assets will be revalued annually,and that tariffs will be maintained at levels sufficient to achieve an8 percent return on the revalued net assets (see Section 5.06(a) of the draftLoan Agreement). ENEE increased its tariffs an average of 10 percent effectiveJune 1, 1978 and plans additional increases in 1979. Proposed tariff structurerevisions, designed to promote the most economic pattern of consumption, willbe identified through the tariff study (see para. 32).

56. In order to complete the financing plan for the 1978-1981 program,mainly for the El Cajon project, ENEE will require US$49.7 million in equitycontributions from the Government, which are expected to come from budgetaryappropriations and from long term loans to the Government under the economiccooperation agreement ("oil facility") with the Venezuelan Investment Fund(FIV). The balance is expected to come from loans under discussion with theBank, IDB, CABEI, bilateral sources and suppliers credits. In view of itslarge expansion program, ENEE has agreed to inform the Bank on any major newpower investments until completion of the project, and to provide to the Bankreports showing that such investments are economically justified and adequatelyfinanced (see Section 5.07 of the draft Loan Agreement). The draft GuaranteeAgreement (see Section 3.05) provides that the Government shall (1) take allaction necessary to coordinate power sector expansion and operations in orderto prevent waste of energy, duplication of facilities and unnecessary invest-ment; (2) ensure that such expansion is based on economically justifiedprograms and would be financed on appropriate terms; and (3) ensure also thatthis expansion is within ENEE's capacity and will not adversely affect anyBank-supported power project.

57. As under previous loans, it has been agreed that ENEE would retainall earnings for investment in its facilities. ENEE would also obtain theBank's concurrence before borrowing if its internal cash generation is lessthan 1.4 times its maximum annual future debt service requirement (see Section5.05 of the draft Loan Agreement).

Economic Analysis

58. Studies by ENEE and its consultants (updated by the Bank) have shownthat the project would be the least cost alternative to meet load growthrequirements from 1980 to 1983 at discount rates up to 11.4 percent, usingworld fuel costs (which are about 13 percent higher than what ENEE currentlypays). A sensitivity analysis shows that an increase in the construction costsof 8 percent (about equal to the proposed special contingency allowance) would

- 17 -

reduce the equalizing discount rate between the project and the next bestalternative from 11.4 percent to 10 percent. With a 2 percent annual realincrease in fuel costs, the discount rate rises to 13.3 percent. With an

estimated opportunity cost of capital in Honduras of between 9 and 11 percent,

the above sensitivity analysis indicates that the project components have beenselected on an economically sound basis. The second best alternative would

consist exclusively of thermal plants. The project has the added advantagethat, as a result of Nispero's location, 35 kV facilities can economically beextended to serve many small western towns.

59. The rate of return for the project was estimated as the discount

rate which equates the present values of the streams of costs and benefitsassociated with the project. Benefits were measured in terms of revenues atprojected average 1982 tariffs deflated to mid-1978 values. The rate of return

would be: (a) Puerto Cortes diesels- 8 percent; (b) Nispero hydro plant-10 percent; and (c) for the whole project- 9 percent. If the Nispero investment

costs increase by 10 percent, the return on the Nispero plant would decreaseto 9 percent and for the project as a whole to 8 percent. These equalizing

rates probably understate the real economic rate of return as electricitytariffs may not fully measure some of the social benefits to users or thebenefits to industry and commerce. The range of rates of return obtainedindicates that, while ENEE's tariffs cover the marginal cost of supply, theywill have to be periodically revised to ensure that they continue to do so.The size of such increases would be based on a longer term financial plan,to be developed for the El Cajon project.

Environment

60. There are no major environmental risks associated with the project.The Nispero reservoir is very small; only about 10 families will need to berelocated, which ENEE is preparing to accomplish. The diesel plant would beremoved from population centers of Puerto Cortes and its fuel would be pipedto small, daily storage tanks to reduce fire hazards. ENEE has been urged tobegin as soon as possible erosion protection and other precautionary measuresin the area of the access road and transmission line to Nispero which itwill begin building shortly. It would prepare a program satisfactory to theBank by March 31, 1979 covering resettlement and employment of area inhabitants,as well as a series of largely environmental measures, e.g. sedimentationreduction and control, mosquito and snail vector control (see Sections 3.10and 3.11 of the draft Loan Agreement).

Project Risks and Uncertainties

61. The physical contingencies provided should be adequate to cover theproject risks associated with the proposed works, which include rather complexgeology at the Nispero site. The Nispero dam, dikes, intake canals and otherstructures are relatively small and should not give rise to concern abouttheir safety. Nonetheless, ENEE would monitor and inspect at least annuallyall structures based on a program to be presented to the Bank by March 31,1979 (see Section 4.04 of the draft Loan Agreement). In this connection, sinceENEE's insurance coverage is insufficient, ENEE has agreed to engage consultantsto renew its insurance policy; and would put the recommendations resultingfrom this review and agreed with the Bank in effect by September 30, 1979 (ref.Section 4.03 of the draft Loan Agreement).

- 18 -

62. The major risk on the Nispero hydro plant implementation would bethe possible low level of interest by international contractors in bidding onthe civil and erection works because of their small size. If ICB does notproduce satisfactory bids, delay of project completion could result from theneed to negotiate an acceptable contract. While expectations that El Cajonwill go forward soon may produce greater interest than might otherwise beexpected, a US$1.4 million contingency amount has nevertheless been includedin the loan, to be used if ENEE is not able to obtain responsive bids withinthe Nispero cost estimate. It would be cancelled if it is not required.

PART V - LEGAL INSTRUMENTS AND AUTHORITY

63. The draft Loan Agreement between ENEE and the Bank, the draftGuarantee Agreement between the Republic of Honduras and the Bank, and theRecommendations of the Committee provided for in Article III, Section 4(iii)of the Articles of Agreement are being distributed to the Executive Directorsseparately. The draft agreements conform to the normal pattern of loans forpower projects and their more important features have been included in Part IVand summarized in Section III of Annex III of this report. Special conditionsof effectiveness of the Loan Agreement are the assurance of the availabilityof a total of US$10.2 million of co-financing for the project and an agreedimplementation schedule for the project studies. There are two specialconditions of disbursement under the Loan Agreement: (a) for the EnergySector Study, that disbursement and repayment arrangements with CONSUPLANEacceptable to the Bank are adopted; and (b) for the training component, thatENEE adopt a training program acceptable to the Bank based on proposalsdeveloped from the Management and Organization Study.

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

PART VI - RECOMMENDATION

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

Robert S. McNamaraPresident

Attachments

November 1, 1978

- 19 - ANNEX I

TABLE 3AHONDURAS - SOCIAL INDICATORS DATA SHEET

REFERENCE GROUPS (ADJUSTED AVERAGESHONDURAS a

LAND AREA (THOUSAND SQ. 1RM.) - MOST RECENT ESTIMATE)

TOTAL 112.1 SAME SAME NEXT HIGHER

AGRICULTURAL 28.7 MOST RECENT GEOGRAPHIC INCOME INCOME

1960 lb 1970 Lb ESTIMATE /b REGION /c GROUP /d GROUP Le

GNP PER CAPITA (US$) 170.0 260.0 450.0 1066.7 432.3 867.2

ENERGY CONSUMPTION PER CAPITA(KILOGRAMS OF COAL EQUIVALENT) 155.0 247.0 232.0 911.1 251.7 578.3

POPULATION AND VITAL STATISTICSTOTAL POPULATION, MID-YEAR

(MILLIONS) 1.9 2.5 3.0

URBAN POPULATION (PERCENT OP TOTAL) 23.0 26.8 31.4 57.9 24.2 46.2

POPULATION DENSITYPER SQ. KM. 17.0 22.0 27.0 25.6 42.7 50.8

PER SQ. KM. AGRICULTURAL LAND 69.0 89.0 104.0 77.6 95.0 93.3

POPULATION AGE STRUCTURE (PERCENT)0-14 YRS. 47.8 48.1 48.1 42.0 44.9 42.9

15-64 YRS. 49.7 49.2 49.1 52.2 52.8 53.5

65 YRS. AND ABOVE 2.5 2.7 2.8 3.7 3.0 3.5

POPULATION GROWTH RATE (PERCENT)TOTAL 3.0 2.7 /f 2.7 /f 2.7 2.7 2.5

URBAN 5.3 & .. 5.1 4.3 8.8 4.7

CRUDE BIRTH RATE (PER THOUSAND) 54.0 51.5 49.3 35.8 42.2 37.8

CRUDE DEATH RATE (PER THOUSAND) 26.5 19.1 14.6 9.1 12.4 10.8

GROSS REPRODUCTION RATE .. 3.4 3.3 2.6 3.2 2.5

FAMILY PLANNINGACCEPTORS, ANNUAL (THOUSANDS) .. 12.7 23.0

USERS (PERCENT OF MARRIED WOMEN) .. .. .. 15.1 14.2 20.0

FOOD AND NUTRITIONINDEX OF FOOD PRODUCTION

PER CAPITA (1970-100) 82.7 100.0 *- 102.1 104.3 107.3

PER CAPITA SUPPLY OFCALORIES (PERCENT OF

REQUIREMENTS) 84.0 99.0 90.0 103.9 99.5 105.3

PROTEINS (GRAMS PER DAY) 53.0 58.0 56.0 60.3 56.8 63.0

OF WHICH ANIMAL AND PULSE 21.0 25.0 .. 26.7 17.5 21.7

CHILD (AGES 1-4) MORTALITY RATE 14.0 10.0 9.0 8.7 7.5 8.0

HEALTHLIFE EXPECTANCY AT BIRTH (YEARS) 41.0 49.4 53.5 62.6 53.3 57.2

INFANT MORTALITY RATE (PERTHOUSAND) .. .. 118.0 56.9 82.5 53.9

ACCESS TO SAFE WATER (PERCENT OF

POPULATION)TOTAL 34.0 41.0 60.7 31.1 56.8

URBAN .. 99.0 99.0 78.0 68.5 79.0

RURAL .. 10.0 13.0 34.9 18.2 31.8

ACCESS TO EXCRETA DISPOSAL (PERCENTOF POPULATION)

TOTAL .. 24.0 .. 61.1 37.5 30.9

URBAN .. 64.0 .. 80.3 69.5 45.4

RURAL .. 9.0 .. 25.4 25.4 16.1

POPULATION PER PHYSICIAN *- 3600.0 /h 3140.0 1899.3 9359.2 2706.8

POPULATION PER NURSING PERSON 19120.0 Li 8930.0 7680.0 j 1220.1 2762.5 1462.0

POPULATION PER HOSPITAL BEDTOTAL

6 2 0.0_/i 570.0 630.0 422.3 786.5 493.9

URBAN *- 150.0 .. 258.2 278.4 229.6

RURAL *- 11810.0 .. 2281.6 1358.4 2947.9

ADMISSIONS PER HOSPITAL BED .. .. 24.0 25.6 19.2 22.1

HOUSINGAVERAGE SIZE OF HOUSEHOLD

TOTAL 5.7 .. .. 5.2 .. 5.2

URBAN 5.5 .. .. .. .. 5.0

RURAL 5.7 .. .. .. .. 5.4

AVERAGE NUMBER OF PERSONS PER ROOMTOTAL 2.4 .. .. 2.0 *- 2.0

URBAN 1.8 .. .. 2.1 2.3 1.5

RURAL 2.7 .. .. 2.7 .. 2.7

ACCESS TO ELECTRICITY (PERCENTOF DWELLINGS)

TOTAL 15.0 .. .. 51.2 28.3 64.1

URBAN 56.7 .. .. 77.3 .. 67.8

RURAL 2.0 .. .. 12.8 10.3 34.1

- 20- ANNEX I

TABLE iAHONDURAS - SOCIAL INDICATORS DATA SHEET

REFERENCE GROUPS (ADJUSTED AVERIAESHONDURAS /a

- MOST RECENT ESTIMATE)SANE SANE NEXT HIGInR

MOST RECENT GEOGRAPHIC INCOME INCOME1960 Lb 1970 Lb ESTIMATE Lb REGION /c GROUP /d GROUP Le

EDUCATIONADJUSTED ENROLLMENT RATIOS

PRIMARY: TOTAL 67.0 90.0 103.5 75.8 99.8FEMALE 67.0 88.0 102.9 67.9 93.3

SECONDARY: TOTAL 8.0 12.0 16.0 37.2 17.7 33.8FEMALE 7.0 12.0 13.0 37.9 12.9 29.8

VOCATIONAL (PERCENT OF SECONDARY) 24.0 18.0 14.7 7.4 12.8

PUPIL-TEACHER RATIOPRIMARY 32.0 35.0 35.0 32.8 34.3 34.9SECONDARY 10.0 17.8 23.5 22.2

ADULT LITERACY RATE (PERCENT) 47.0 53.0 74.9 63.7 71.8

CONSUMPTIONPASSENGER CARS PER THOUSAND

POPULATION 3.0 5.0 5.0 26.9 7.2 12.4RADIO RECEIVERS PER THOUSAND

POPULATION 68.0 57.0 54.0 173.5 71.1 104.5TV RECEIVERS PER THOUSAND

POPULATION 1.0 8.0 16.0 69.4 14.1 28.1NEWSPAPER ("DAILY GENERALINTEREST") CIRCULATION PERTHOUSAND POPULATION 21.0 35.0 72.8 16.3 45.2CINEMA ANNUAL ATTENDANCE PER CAPITA 4.3 1.6 4.6

EMPLOYMENTTOTAL LABOR FORCE (THOUSANDS) 570.0 700.0 /k 760.0 /k

FEMALE (PERCENT) 12.5 12.8 13.3 21.4 28.0 25.7AGRICULTURE (PERCENT) 67.0 62.3 60.3 37.8 54.1 46.2INDUSTRY (PERCENT) 10.6 12.5 14.7

PARTICIPATION RATE (PERCENT)TOTAL 31.5 30.6 29.8 30.8 37.8 33.8MALE 55.3 53.5 51.8 47.2 50.3 48.1FEMALE 7.8 7.8 7.9 13.2 20.9 17.3

ECONOMIC DEPENDENCY RATIO 1.6 1.5 1.8 1.7 1.3 1.4

INCOME DISTRIBUTIONPERCENT OF PRIVATE INCOMERECEIVED BY

HIGHEST 5 PERCENT OF HOUSEHOLDS 28.0 A .. 28.9 19.5 23.6HIGHEST 20 PERCENT OF HOUSEHOLDS 60.6 1 .. 57.7 48.9 52.3LOWEST 20 PERCENT OF HOUSEHOLDS 2.5 L .. 3.2 5.9 4.3

LOWEST 40 PERCENT OF HOUSEHOLDS 8.4 /1 10.7 15.7 13.1

POVERTY TARGET GROUPSESTIMATED ABSOLUTE POVERTY INCOMELEVEL (US$ PER CAPITA)

URBAN 251.9 155.9 191.9RURAL 105.0 200.6 97.9 193.1

ESTIMATED RELATIVE POVERTY INCOMELEVEL (US$ PER CAPITA)

URBAN 155.0 403.1 143.7 319.8RURAL 111.0 258.0 87.3 197.7

ESTIMATED POPULATION BELOW POVERTYINCOME LEVEL (PERCENT)

URBAN 15.0 24.8 22.9 19.8RURAL 70.0 65.2 36.7 35.1

Not availableNot applicable.

NOTES

/a The adjusted group averages for each indicator are population-weighted geometric means, excluding the extremevalues of the indicator and the most populated country in each group. Coverage of countries awng theindicators depends on availability of data and is not uniform.

/b Unless otherwise noted, data for 1960 refer to any year between 1959 and 1961; for 1970, between 1969and 1971; and for Most Recent Estimate, between 1973 and 1977.

/c Latin America & Caribbean; /d Lower Middle Income ($281-550 per capita, 1976); /e IntermedisteMiddle Income (S551-1135 per capita, 1976); /f Intercensal growth rate (1961 and 1974 censuses; dueto emigration of El Salvadorean residents in HBnduras, the population growth rate is lower than rateof natural increase; L& 13 important urban centers; /h Registered, not all practicing in the country;/i 1963; /I Personnel in government services only; /k Aged 10 years and above; /1 1967-68, percapita income.

September, 1978

- 21 - ANNEX I

KEY TO COUNTRIES BY REGION AND INCOME EROUPIs

Lanutat burplus

Regi.ne/l1-tne Group Lou inn-ne/b Lower Middle Inneroediate Middle Upper Middle High InTotoef Countries

Inwoms/n Tntomeld nntaaefe Oil Exporters

Benin Mlaolai Angola Chars Djibouti Cabon

Burundi Mali Bonmoana Ivoty Coast Reunion

Ceetral A1Erian Enp. Nosambique Cameroon -auritiusChad Niger Cape Verds Nsntbia

Comora R.ands Congo, P.R. UynbellosErhiopie Sierrs Leone Equatorial Guinea

AFRICA SOUTH Gambia, The S o_alIa LiberiaOF SAHARA Guinea Taneania Mauritacia

Tuinea-Bisa.. Togo NigeriaKen-y Uganda Rhodes iaLesotho Upper VUlat S.a Tome & Prin-ipeM.adagasnar Gzain Sednega

SudaBwaeilaedEsetbia

Egypt MNrawna Algeria Bahrein lersol KuwaitNORTh AFRICA YUnee AR. Jordn Iran Oman Lubva

AND MIDDLE Gene PIDB. Sonr- ASR. Iraq QbEarEAST Tunisis Lebanon Usudi Arabia

United Arab mir.

Afghanietes MaldivesBangladesh Nepal

SOUTH ASIA b_ugan Padisian

Buns. Sri LamkbIndi.

Cambodia New ebrides Cbina, Rep. of Giji nenitan sos

ndonesia P-pus Net. Guinea fGilbert Islands Bong Kong BrureL EAST ASTA Leo P.D.R. Philippina- Kores, Rap. of Frencb Polyne-i

USoleqqn Islands Thailand Matan CTwai

Viet Nen Touga Nalamele NeO CaledoniaWestern S-aoa Trent Territory of the PaUifit lingS pors

Haiti Bolivia Antigue Guatemala Argentina b h-:alEl Salvador Be1ice Jamaica Barbados BeenudaGrenada Cbile Menino Brasil Csnal Osue

LATIN AMERICA Guyana Colombia Niteragus FPennh Guiana MNrtinique

AND CARIBBEAN H-ndua- Coats Rim Paragray CnadlIope Vsne.ue.

St. Vinent Dntinica Peru Netherlonds Vntilie Virgin laIand. (U.S.)

DCninticn Rep. St. Kitt,s-NHvi PanaEctuadt SU. Lunia Puerto Rlco

UsuinaiseTrinidad & TubaguCrug say

Tu.lty CyrsChannl Ilads

EUROPE MaIta Cibra1t71Portugal En-et

. R~ossanuia ICiroenland

Yugoa lvia Spain

A.ntnelia Finl.ed Italy Norway United SmatesENDUSTRIALIZUD u-ar ia Prana Japsn South Africa

COUNTRIES BSlgiun Gnany aFd. Rep. of Lunepboung Unedan

Cna=da Icehnd Nethtanlenda Sit-elandDenasnrk I-elsnd Ne Zseisnd United Kingdo=

Albhnie G.e-an Den Rap. USSRBulgaria Hungary

CENTRALLY PLANNED China P.R. f gores Den. Rp. ofECONOMIES Cuba Mongolia

Cse-hnsl-mekia Pslsnd

Is .assd en 1976 GNP per wapita in 1976 US dollars.7T i2BU or lee penr .. p i

/c $281-550 par spita.7d $S51-1135 per wapita.

T. $1136-2500 par -pite. FPDFSIf onir 52500 pen n-pita.

-22- ANNhEX I

DEFINITIONS OF SOCIAL INDICATORS

Not":! Although tho data are drawn from sources generally judged the most authoritative and reliable, it should also be noted th.t they may not be inter-

meriianally comparable beo... a of the lack of standardized definitions and concepts used by different countries in collecting the data. The data are, nonetheless.

ueful to describe orders of magnitude, indicate trends, and characterize certain major differences between countries.

The ad iouLed group averag-es for each indicator are populstion-weighted geasetric means, excluding the extreme values of the indicator and the most

populated rontr7 in each group. Coverage of countries among the indicators depends on availability of data and ia not uniform. Due to lack of dais,

group averages for Capital Surplus Oil Exportera and indicators of access to water and excrete disposal, hous.ing, inome distribution and poverty are

simple population-weighted geometric means without the omilusion of extreme, values.

LAND AREA (thousanid sq. kon) Population per hospital bed - total, urban, and rural - Population (total,

Total - Total surface area comprising land area and inland waters, urban, and rural) divided by their reapective number of hospital bads

Arcltural - Moat recent estimate of agricultural area used temtporarily available in public and private genteral and specialized hospital and re-

ar permnently for crops, pastures, markat and kithebn gardens or to habilitatiou centers. Hospitals are establiabments permanently staffed by

lie fallow, at least one physician. Establishments providing principally custodialcare are not included. Rural hospitals, however, include health and medi-

GNP PER CAPITA (UgS) - GNP per capita estimates at current market prices, cal centers not permanently staffed by a physician (but by a medical as-

calculated by same conversiou method as World Bask Atlas (1975-77 basis); sistant, nurse, midwife, etc.) which of fer in-patient accomqodation and1960, 1970, and 1977 data, provide a limited range of medical facilities.

Admissions por hospital had - Total number of admissions to or discharges

ENERGY CONSUMPTION PER CAPITA - Annual consumptiom of commercial energy from bospitals divided by the number of beds.(coal and lignite, petroleum, natural ge and hydro-, nuclear and geo-thermal electricity) In kilograms of coal equivalent per capita. RODSING

Average size of household (persons per household) - total, urban, end rural-

POPULALTION AND VITAL STATISTICS. A household consists of a group of individuals who share living quartersTotal population ai- r (millions) - As of July 1; if not "avalable. end their main meals. A boarder or lodger may or may not be included inaverage of two en-year estimates; 1960, 1970, and 1977 date, the household for statistical purposes. Statistical definitions of bouee-

Urban population (percent sf total) - Ratio of urban to total popula- hold very.tion; different definitions of urban areas may affect comparability Averas* number of Persons per roam - total, urban. and rural - Average mom-

of dat a mog cnountries. bar of persona per room In all, urban, and rural occupied conventional

Population density dwellings, respectively. Dwellings exclude non-permanent structures end

Fm s.h.- M(id-year population par square kilometer (100 hecteree)uncpidprsof total sarea. Ac=css to elet1rinit (peren of dwellings) - total. urban. and rural -

Per sq. hm. agriculture lend - Computed'as' above for agricultural lend Conventional dwellings with electricity In living quarters as percentage

only, of total, urben, and rural dwellings respoectively.Populationse stucture (peren)- Children (D-14 years), working-age

(1-64 years,an rtire (65 yearsen aw ver) as percentages of mid- DOCATIONyear population. Adjusted enrollment ratios

Population growth rate (paerent -total, end uniban - Compouod annual Primary school - total,* and femsale - Total and female enrollment of all agesgrowth rates of total and urb an id-year populAtions for 1950-60, at the primary level as percentages of respectively primary school-age1960-70, and 1970-75. populations; normally includes children aged 6-11 years but adjusted for

Crude birth rate (per thouesad) - Annual live births par thouaand .of different lengths of primary education; for countries with universel adu-

mid-year population; tem-year arithmetic averages, ending in 1960 "An cation enrollment may exceed 100 percent since some pupil. are below or

1970 and. five-year average ending toa 1975 for most recant estimete. above the official school age.Crude death rate (per thoueend) - Anumal deaths par thoeuaid of mid- Secondary ischool - total. sad female - Computed an above; secondary educe-

year popuain e-eraiheitvea nigi 90ad17 icon requires at least four years of approved primary instruction; pro-

and five-year average ending in 1975 for most recent estimate. -video general vocational, or teacher training instructions for pupils

Groas reproduction rats - Average number of daughters a woman will bear .usually of 12 to 17 years of age; correspondence courses are generallyin her normal reproductive period If she *xperisnces present age- excluded.specific fertility rates; usually five-year averages ending in 1960, Vecational snrollmmnt (Percent of secondary) - Vocational institutions in-

1970, end 1975. cluds technical, industrial. or other programs which opsrate independpntly

Family planning - acemewtrs. * snmal (thousands) - Annual number of or as depart men ts of secondary Institutions.acceptors of birtb-coetrol devices under auspices of national family Pupil-teacher ratio - primary. and secondary - Total studante enrolled in

Planning; program. primary end secondary levels divided by numbers of teachers in the corre-Family planning - umar (percet omarewmn)-Percentage of - ponding levels.earried woome of chil-bearing agel (--4yer)who wee birth-control Adult literacy rae" (pevent) - Literate adults (able to read end write) asdevices to all married women in sema age group, a percentage of total adult population aged 15 years and over.

POOD AND NUTRITION NSMIOIndex of food production feracpita .(19170-100) - Index nmaber of paressnertre(pe thousand population) - Passenger cars comprise motor carscapita aunnual productionof all fdcoinmdities. "sating less then eight persons; "exludes ambulances, heaeers and military

Per capite sUDDply of calories (:pecent ofaresuiremtent) - Computed from vehicles.energy equivalen of net foo enpl avalable in country par capoita Rqdior*&eivars .(pr thousand porulatian) - All types of receivers for radio

per day. Available supplies comprise domestic production. imports less ~ r. dcats to gnral public per thousand of population; excludes unlicensedexports, end cheangs in stock. Net supplies exclude enimel feed, seeds, receivers in countriesa nd in years when registration of radio stet wee In

quantities used in food processing, end losses in distribution. Re- effect; data f or recent years say not be comparable since most countriesquirements inre estimated by FAO based on physiological needs for nor- abolished licensing.mel activity and health considering environmental temerature, body TV receivers (per tho"usad population) - TV receivers for bpro"adcat to gemer&

weights, age and sex distributions of population, and allowing 10 per- public per thousand population; excludes unlicensed TV receivers in coun-

cent for waste at household level, tries and in years when registration of TV sets was in effect.Per capita suply of. protin (grams Per day) - Protein content of per Newspaper circulationg (Per thousand population) - Shows the averagoecircula-

caPita net upyo f9tsod par day. Net supply of food is defined as tin f dil gnral interest newspaer,defined as a periodical publi-above. Requirements for all countries established by USDA provide f or cation devoted primarily to recording gensral news. It is considered to

a minimam allowance of 60 grams of total protein par day and 20 grams be "daily" if it appears at least four times a week.of animal end pulse protein, of which 10 grea should be animal protein, Cinsga ennual attendance per capita per year - Based on the number of ticketsThese standards are lower than thoes of 75 grams of total protein and sold during the year, including admissions to drive-in cinemas and mobils25 grams of animal protein as an average for the world, proposed by units.PAO in the Third World Pond Survey.

Per caPits protein supply from animal. and pulse - Protein supply of food ENPIOThEUTderived from animals and pulses in grmam per day. Total labor force (thousands) - Economically active persons, including armed

Child (axes 1-4) mortality rate (per thousand) - Annual deaths per thous- forces and unemployed but excluding housewives, students, ertc. Defini-

and in age group 1-4 yrears to children in this age group. lions in various countries are not comparable.Pealel (percent) - Femnale labor force as percentage of total labor force.

REALTH Agriculture (percent) - Labor force in farming, forestry, hunting and fishingLife expect,ancy at birth (years) - Average number of years of life as percentage of total labor force.

remaining at birth; usually five-year, averages ending in 1960, 1970, Industry (percen.t) - Labor force in mining, construction, manufacturing and

and 1975. electricity, water and gas as percentage of total labor force.

Infant mort ality rate (per thousand) - Annual deaths of infants under Participation rate (percent) - total, male. and female - Total, -lal, and

one year of age per thousand live birbts. female labor force as percentages xf their respective populations.

Access two safe water (percent of population) - total, urban. end rural - T'hese are 10.0's adjusted participation rat.. reflecting Age-aex

Number of people (total, urban, and rural) with reasonable access to structure of the population, dnd long tine trend.

safe water supply (includes treated surface waters or untreated but Eomoxic dependency ratio - Ratio of population under 15 and 6) and over to

uncontaminated water such as thet from protected boraholes, springs, the labor force in age group of 15-64 years.end sanitary wells) as percentages of their respective populations.In an urban area a public fountain or standpost located not more INCOME DISTRIBUTIONthen 200 motare from a house may be considered as being within tea- Percentage of private income (both in cash and kind) received by richest Ioa-ble access of that house. In rural areas reasonable access would percent, richest 20 percen.t. poorest 20 percent, and poorest 40 percent

imply that the housewife or mambere of the household do not have to of households.spend a disproportionate part of the day in fetching the family'swater needs. POVERTY TARGET GROUPS

Access to excrete. disposal (percent of poplation) - total, urban, and Estimated absolute pov-rty income level (USS per capita) - urban and rural-rural - Number of people (tota l, urban, ad rural) served by excrete Absolute poverty income level is that income level below which a minimal

disposal as percentages of their respective populations. Excrete nutritionally adequate diet plus essential non-food requirements is not

disposal may include the collection and disposal, with or without affordable.treatment, of human excrete and waste-water by water-borne systems Estimated relative poverty income level (,,SI per capita)as- urban end rural-or the use of pit privies and similar installations. eatvporyinmelelstht inom level les teon-third

Population per physiciat - Population divided by number oi practicing per capita personal income of the country.physicians qualifiid from a medical school at university level. EStimated population below poverty incono leve (percent) - urban and rural-

Population per nursing person - Population divided by number of Percent of population (urban and rural) who aet either "absaolute po~or" or

practicing male and female graduate nurses, practical nurses, and "relative poor" whichever is greater.

asnistant nurses..Ec-onoic and Docial Data Division

- ---- ~~~~~~~~~~~- ~~Economic Analysis and Projections Department

-023 - ANMI IHOliDDRAS

ECNCII E-EiMNT DATA

(Aounts . illions of US dollars)

Ac c a t 1 ProjEcted G r o w th Rat es 1976 Shere1965 1970 1973 1976 1977(p) 1981 1985 1965-1973 1973-1976 1976-1981 1981-1985 of GODP

NATIONAL ACCOUNTS (1)(M1llioco of US$ at 1967-69 Prices)

GrooO DOoootio Product 549.2 678.1 764.8 834.8 904.1 1106.7 1315.2 4.2 3.0 5.8 5.0 130.0Gatos froe Teras of Trade 8.4 -6.0 -7.9 -15.7 21.1 -27.0 -45.2Gross Domestic I00omm 557.6 672.1 756.9 819.1 925.2 1d79.7 1300.0 3.9 2.7 5.7 4.8 98.1I.ports 144.9 222.5 210.5 249.7 285.5 342.5 405.0 1.8 5.9 6.5 4.3 29.9Ervort- Volume -138.9 -184.9 -210.4 -233.1 . 9 -327.5 -409.8 5.3 8.5 7.0 5.8 27.9Rxport- TT.Adjssted -147.3 -178.9 -202.5 -217.5 sO -300.5 -364.6 4.1 2.4 6.7 4.9 26.1Re3vrce -Gap - TT.Adju-t.d -2.4 43.5 8.0 32.2 43 12.0 40.1 3.9Total Co.m tioo n 472.6 569.1 629.8 688.3 fisk 883.0 1033.4 3.7 3.0 5.1 4.0 32.5

nnoteent 82.6 146.5 135.1 163.0 RI6.3 238.7 307.0 5.3 6.5 7.9 6.5 19.5Noticl Saviogo 75.1 88.4 108.6 116.2 017.8 163.0 210.0 4.7 2.3 7.0 6.5 1Dosostic Sariogo 85.1 103.0 127.1 13n.8 W63.8 196.7 266.6 5.1 1.0 8.5 7.9 .5.7

GDP at Correct US$ 508.7 711.8 899,0 1213.6 1470.0 2256.4 3595.1 7.4 10.5 13.2 12.3

Sector Output(Shbr. of ODP at 1967-69 Prices)

Agr'ilturo 0.375 0.358 0.360 0.281 0.290 0.290 0.287lCOdtry 0.201 0.218 0.226 o.239 0.239 0.250 0.251

Sercic.. 0.424 0.424 0.414 0.459 0.471 0.460 0.462

M-rcsaodis Trads Actua Pr o c tio(Mls. of Current 790) 1970 1973 1975 1976 097 1970 1979 1950 1901 1905Iorts1. ood 1.3 21.5 45.0 37.7 39.1 44.6 48.6 52.8 57.5 72.41.2 Other Coonsar Goods 53.9 42.9 49.8 65.2 92.5 90.3 102.2 113.2 131.1 186.12. Pstroleue,Otl,Lubricant3 14.7 25.5 68.5 48.2 64.0 77.4 89.0 102.3 117.7 195.43. Other Ictcr-ediate Gods 814.5 100.2 135.9 175.7 109.1 238.3 271.7 309.R 3l3.1 30n.0

. Capital Goods 55.3 79.5 110.8 138.8 169.6 184.0 223.0 239.2 269.0 443.35. ITotal Goode (cif) 222.7 269.6 410.0 465.6 564.3 634.6 734.5 817.3 928.4 1427.25.2 Total Goods (fob) 203.4 243.6 377.6 127.0 550.5 591.1 675.7 751.9 854.1 1313.06. Noc-Factor Ser_icee 40.9 62.8 76.7 82.0 95.0 99.0 108.0 117.3 131.4 208.47. Tct01 Good, aud NFS 244.3 306.1 454.3 509.0 645.5 690.1 783.7 869.2 985.5 1521.4

5 5l. rs 75.3 94.0 61.5 106.7 125.1 149.3 167.2 181.0 201.5 307.51.2 Coffee 25.9 48.5 56.9 100.3 168.0 166.8 146.3 141.9 142.4 143.31.3 lumber 16.2 39.1 38.8 38.0 47.5 53.T 63.5 87.5 127.1 242.11.4 Beef 9.7 21.9 18.3 25.6 22.4 27.8 33.6 40.4 43.7 B4.71.5 Sugar 1.2 - 7.0 2.2 4.0 12.0 16.2 18.8 20.6 37.41.6 Petroloos Dior--ti-eo 6.2 4.1 12.3 1.1 0.2 2.7 2.9 3.1 3.3 1.32. l11 other goode 43.6 60.6 113.1 129.6 152.3 171.6 092.0 218.9 249.5 441.53. Toisi Goods (fob) 178.1 268.2 307.9 103.5 519.8 583.9 621.7 691.6 788.3 1260.8h -. Soc-Fctor Soe-ic.s 18.4 26.3 36.6 39.6 53.0 50.3 57.8 66.5 76.h 130.05. Total Goode md NFS 196.5 294.5 344.5 113.1 572.8 634.2 679.5 758.1 064.7 1390.8

Prices (1967-69 * 100) A0 t 0 1 ProIeted Growth RoteoYo5 ±Y7 ly±( 191 1111(p) r7 T i

9t l65-1973 1973-1976 1976-1901 1981-1905

Eoport Price Iodex 99.81 106.26 139.98 190.09 236.82 264.03 339.39 4.3 10.7 6.8 6.5Ieport Prico IcdeX 94.08 109.82 145.56 203.84 218.42 287.74 375.70 5.6 11.9 7.1 6.9Torno of Trade Codec 106.08 96.78 96.17 93.25 108.42 91.76 90.30 -1.2 -1.0 -0.3 -0.4GOP Deflator (US$) 92.62 105.41 117.55 l15.38 062.61 203.89 267.00 3.0 7.3 7.0 7.0Anro-l Average Eocha-go Rate 2.00 2.30 2.00 2.00 2.00 2.00 2.00

Selected Iodicot-e 1965-73 1973-76 1976-81 1981-85 lbor o d Output Pr Worer Value dded Per Worker- Total labor Foroe (1976 V ricee as

0Rocimoge Rate)0COd 1.08 5.82 3.91 4.36 Io ei9iion0I h od Total In 02 dolro 6 4yO2vt

Ieport Elastlcity 1.14 1.97 1.12 0.86 197ot i97 1976Goorage Notiool lavioge Potoe 3.11 0.14 0.15 0.16 Agriculture O0S StY StYlargi=al Noticed Sovingo aotc 0.17 0.15 0.18 0.21 Indostry 0.119 1l.8 2529 186.5oport/GDP(Pic currect p0:2) 09 0.41 0.42 0.43 Services 0.199 21.9 2352 173.5Cc--ctceot/0DP 3.18 0.20 0.21 0.22 Total 0.803 105 100.0Re-o-rco Gap/SGDP 0.02 0.05 9.03 0.03

Detailc Public So,tor Inrseet_.t PrograM(Ui-ed)Public Financc Selocted Irdicotors 1965 1970 1973 1976 1977 1901 Asperc1nta1e of 1tot aCentrol Ococ-rnoct Correct 1969-73 1975-76 1977Revecues/GDP 10.9 13.2 11.0 15.0 16.1 16.4 Social Gecttrs z.6

Tax Recocoeo/OOP 9.6 11.1 10.7 12.8 14.5 15.4 Agriculture 3.8 4.9 6.4Correct Eipenditures/GDP 9.2 10.1 10.6 14.5 14.4 14.0 Foretry - 2.1 9.5Correct S-vings/ODP 1.7 2.1 0.4 0.6 2.0 2.5 Pooer 22.7 22.0 36.2Corcuct Ssvi Es/Investm3nt Lope. 96.0 45.7 61.3 10.0 32.3 53.7 Transport acdComcouicatiorm 52.9 38.7 29.3

Public Cop:tal Foprrditucr9

'07 2.5 7.5 3.6 8.5 9.4 10.6 Otberpoclic Oavoopo/PcGlic Capital Rope. 90.3 42.6 62.0 34.7 53.9 33.3 Tot . 100.0 100.3

Publico Sctor SOvings 39.9 3.4.4 44.oCapital R.eceor 4.3 1.0 1.9Ext. Fin-occog (cot) 40.4 60.0 49.1Ict. Sorroelog (net) 15.4 3.8 5.0

Total 100.0 000.0 000.0(1) Com-oc-oto Oay nct add op b-caco of -oc-cdlg.

(P) Prclii-ary.

- 24 -

ANNEX IHONDEIA5IS

BALkNCE OF PASSENTS, EXTERNAL ASSISTANCE AND LEBT

(In eillioos of US dollars at current prices)

1970 1973 1975 1976 1977

(p) 1978 1979 19160 29b'1 19M2 195

Sumsary of Balance of Payments

1. Exporto (incl.NFS) 196.5 294.8 344.5 443.1 572.8 634.2 679.5 758.1 864.7 973.6 1390.82. Importo (iosl. NFS) 244.3 306.4 454.3 509.0 645.5 690.1 783.7 869.2 985.5 1o96.5 1521.43. Resoarce Balance -47.8 -11.6 -139.8 -66.0 *72.7 -55.9 -104.2 -111.1 -120.8 -122.9 -130.64. Net Factor Service Incane -22.6 -30.1 -27.5 -56.2 -61.8 -66.0 -80.0 -90.0 -98.0 -105.0 -149.0

a. Net Interest Payments -2.5 -5.6 -10.1 -15.1 -20.0 -23.0 -28.7 -36.6 -42.5 -48.7 -89.0b. Direct Investeen.t Ioco- -20.0 -21.3 -16.9 -4i.1 -41.8 -43'.0 -51.3 -53.4 -55.5 -56.3 -60.0c. Other - 0.1 - 3.2 - 0.5 - - - - - - - -

5. Curreot Transfero (net) 6.6 6.3 17.7 13.2 13.4 14.0 15.2 16.0 20.0 23.0 30.06. Balance on Current Account -63.8 -35.4 -119.6 -108.9 -121.1 -107.9 -169.2 -185.1 -198.8 -204.9 -249.67. Private Direct Iovestment 8.4 5.5 10.9 7.6 10.0 20.0 25.o 30.0 35.0 40.0 60.o

Public M1 & LT loans

8. Di5burseaeets 28.7 18.1 99.2 84.2 104.6 117.7 154.5 153.5 170.7 186.0 249.59. Amortisation 3.1 5.6 6.4 13.3 21.5 25.4 27.4 31.3 38.5 48.7 97.7

10. Net Disburosemnts 25.6 12.5 92.8 70.9 83.1 92.3 127.1 122.2 132.2 137.3 151.8

Other N & LT Loans

11. Net Disbursements 2.4 -3.5 10.3 11.7 17.5 30.8 27.6 29.5 31.0 33.2 50.012. Other 4.3 20.3 12.2 18.5 - - - - - -13. Use of IMF Resources 6.3 -7.5 - - -14. Short-Toem Capital (net) 5.0 - 0.9 24.3 44.615. Allocation Of SIR.l 3.2 - - - -1S. Capital Transactions 0.1.e. 0.9 11.5 9.4 -1.1 -16.217. Change in reser-es (-increase) 7.7 -3.4 -16.9 -23.0 -39.4 -35.2 -10.5 3.4 0.6 -5.6 -12.218. Net Foreign Exchange Reserves

(end of period) 9.0 30.0 48.7 71.7 111.1 146.3 156.8 153.4 152.8 1586.4 170.6

Grant aod Loan Commi-sents Ac t u a IMedium- and Ljg-Te-n (Disbursed 1970 1973 1975 1976 1977Mp

1. Official Grants 8.2 1.7 7.0 7.1 2.8 o2. Total Public M & LT Loans 22.7 50.1 182.0 145.0 207.0 a a Debt Oust. (DOD end of period) 90.1 133.6 264.1 334.9 418.0

a. I3RD 5.5 18.8 38.0 35.0 12.0 Public Debt Service 5.6 11.2 16.6 28.5 41.5b. IDA 8.1 6.6 - 19.O 5.0 Interest 2.5 5.6 10.2 15.1 20.0c. Other eultilateral 9.1 6.5 85.3 38.1 162.0 Amortization 3.1 5.6 6.4 13.4 21.50. Governevts - 6.2 53.2 29.7 16.0 Other 14 & L Debt Servise - - - - -e. Of hich Centrally Planned E-onomie- - - - - Total Debt Service 5.6 li.? 194 2P.5 41.5f. Supolie-s - 7 8 - 11.2 -R. Fiiacial Institutions - 4.1 5.6 17.0 12.0 Debt Burden

Debt Service Ratio 2.9 3.8 4.8 6.4 7.0Me.orandum. Items Debt Service Ratio /1 13.1 11.3 9.7 15.7 1.4.o

Debt ServIce/SIP 0.8 1.2 1.6 2.6 2.81. rc,nt Elwment of Total Commitments 45.5 29.7 19.6 26.7 Public Debt Service/Oovernment Revenue 6.0 9.9 10.9 15.1 17.22. Average Interest (percent) 4.1 5.8 7.9 6.1 Temns3. Average Maturity (years) 29.6 25.2 18.9 22.3 Interest on Total DOD/Total DOD 2.8 4.2 3.9 4.5 4.8

Exter-I Ea~~~~~~Rttnated Debt Total-Debt Dervice/Total DOD 6.3 8.94 6.3 6.5 9.9Eaternal Debt (Disbursed Only) OutstancdTng Dec. 31, 1977 Dependeny Ratios f M i L Dbt

Ac.unt PercesotageDpnec aio o 4&IDbT1NRD 8.0 - Oross Disbursements/InVorts(aith NFS) 11.7 5.9 21.8 16.5 17.0BRan Gromr 119.2 28.5 Net Transfers/Iports 2.7 2.1 3.9 2.9 2.2Other Muloilate,nl 115.1 27.5 Net Transfers/Oros. Disbursements 23.0 34.8 17.8 i4.8 12.8Go-ernments 131.1 31.4 ExosueSuppliers' Credits 15.8 3.8 bT sbUrseents/Gross Total Disb. 34.7 42.2 13.3 15.5 22.0Finanoial Inotltutions 36.8 8.8 Bakn Grous Disbursements/Groso TotalTotal M & L Public Lebt 418.o 100.O Disbur-soent 41). 54.0 15.2 17.7 23.9Total M & L Public Debt (Incl. ITED DOD/Total DOD 33.2 30.0 21.4 20.1 20.8

undisbursed) 766.0 183.3 IBTD Debt Service/Total Debt Sere. 38.5 40.9 35.1 23.9 21.0Bank Group DOD/Total DOD 50.1 49.3 32.3 29.2 28.5Bank Grouo Debt Sen/Total Debt G.e-. 39.6 43.5 37.1 24.6 22.2

/1 Debt Se-ite and Direct 1-veetwovt Iocome.

(p) Prelimary.

ANNEX II_25 -

THE STATUS OF BANK GROUP OPERATIONS IN HONDURAS

A. STATEMENT OF BANK LOANS AND IDA CREDITS 1/ (Net of Cancellations)(As of August 31, 1978)

Loan orCredit US$ million amount

No. Year Borrower Purpose Bank IDA Undisbursed

Fourteen loans and credits fully disbursed 52.1 24.0

767 1971 Emp. Nacional Ports 9.0 - .1

Portuaria841 1972 Emp. Nacional de Generation and

Energia Electrica Transmission 12.3 - 1.0

896 1973 Honduras Roads 18.8 - 1.2434 1973 Honduras Second Live- - 6.6 2.0

stock Dev.452 1974 Honduras Education - 3.0 0.1

954 1974 Honduras Education 3.0 - 2.0

1081 1975 Emp. Nacional de Generation andEnergia Electrica Transmission 35.0 - 5.5

628 1976 Honduras AgriculturalCredit - 14.0 11.9

1341/2 1976 Honduras Highways 35.0 - 27.4

1395/6 1977 Honduras/Emp.Nacional Portuaria Ports 12.0 - 12.0

696 1977 Honduras Ports - 5.0 2.2

777 1978 Honduras Education - 5.0 5.0

1576 /2 1978 Honduras RegionalDevelopment 10.5 - 10.5

Total 187.7 57.6 80.7

of which has been repaid 24.7 0.8

Total now outstanding 163.0 56.8

Amount sold 4.5of which has been repaid 2.5 2.0 -

Total now held by Bankand IDA /1 161.0 56.8

* Total undisbursed 59.6 21.1 80.7

/1 Excluding exchange adjustment.

/2 Not yet effective.

- 26 ANNEX II

B. STATEMENT OF IFC INVESTMENTS(As of August 31, 1978)

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

1964/66 Emp. de CurtidosCentroamericanaS.A (ECCASA) Tannery 0.30 0.08 0.38

1969/70 Cia. Pino Celulosade Centroamerica(COPINO) Pulp and Paper - 0.07 0.07

1977/78 Textiles Rio Lindo, Textiles 9.00 1.00 10.00S.A. de C.V.

Total gross commitments 9.30 1.15 10.45less cancellations,termination, repaymentsand sales 6.30 0.15 6.45

Total commitments now heldby IFC 3.00 1.00 4.00

Total undisbursed 3.00 1.00 4.00

/1 Prior to exchange adjustments.

_ 27 _ ANNEX II

C. PROJECTS IN EXECUTION 1/

Loan/Credit No.

Ln. 767 Second Port Project: US$6.0 million Loan of June 25, 1971,and US$3.0 million Supplemental Loan of July 30, 1975;Date of Effectiveness: February 22, 1972; Closing Date:December 31, 1978.

The project consisting of the expansion of Puerto Cortes on theNorth Coast of Honduras, and the construction of the new portof San Lorenzo, has been almost completed. The PuertoCortes expansion was completed in March 1975, but the SanLorenzo port was delayed about 18 months as a result ofGovernment reconsideration of its location. The Bank providedadditional financing of US$3.0 million, which was necessary tocover the increased cost of the San Lorenzo port resulting fromthe high level of inflation during the period of the delay.Construction of this port is now proceeding satisfactorily andshould be completed shortly.

Ln. 841 Fifth Power Project: US$12.3 million Loan of June 28, 1972;D&te of Effectiveness: December 1, 1972; Closing Date:June 30, 1979.

About 90 percent of the project has been completed with theinstallation of the La Ceiba diesels, the interconnectionto Nicaragua and other project works and studies. Its fullcompletion will be delayed by about 3 years beyond the originalestimate, resulting from the slow preparation of an expandedload dispatch and communication system for control of energytransfers with Nicaragua and from the addition of a geothermalresource study. Project costs have increased by 14.3 percent(about US$2.3 million) and will be financed by a loan from theOPEC Special Fund and internal cash generation of the Borrower.

Ln. 896 Sixth Highway Project: US$18.8 million Loan of May, 30, 1973;Date of Effectiveness: August 27, 1973; Closing Date:December 31, 1978.

The project's main objectives have been achieved. Theconstruction of the Tegucigalpa-Talanga Road, the main projectcomponent, has been completed. The Comayagua-La Libertad Road,

1/ These notes are designed to inform the Executive Directors regardingthe progress of projects in execution, and in particular to report anyproblems which are being encountered, and the action being taken toremedy them. They should be read in this sense, and with the under-standing that they do not purport to present a balanced evaluationof strengths and weaknesses in project execution.

28_ ANNEX II

Loan/Credit No.

80 Km of feeder roads, and technical and economic studies for430 Km of feeder roads have also been finished. Preparation ofengineering studies of rural roads has delayed completion ofproject works until late 1978, about one and one-half yearsbehind schedule.

Cr. 434 Second Livestock Project: US$6.6 million Credit of October 29,1973; Date of Effectiveness: January 18, 1974; Closing Date:June 30, 1979.

The Government has largely achieved the objectives of thisproject. All funds have been committed. However, difficultiesin implementation of two major sub-loans (Isletas agrarianreform banana plantation and the Tegucigalpa abattoir) aredelaying final disbursements.

Ln. 954 First Education Project: US$3.0 million Loan and US$3.0 millionCr. 452 Credit, both of January 9, 1974; Date of Effectiveness:

April 8, 1974; Closing Date: June 30, 1979.

Implementation of this project is proceeding in a satisfactorymanner. The agricultural training centers are completed andcourses for small farmers and their wives will begin in early1979. The construction of the extension to the agriculturalschool at Catacamas and of INFOP's vocational training centersat San Pedro Sula and Tegucigalpa should be completed shortly.All teacher training facilities are in operation, except oneteacher training school and three related primary applicationschools which should be completed by the closing date or soonthereafter. Funds for technical assistance and fellowshipshave not been completely used, due to delays in selecting andapproving candidates, but efforts are being made to acceleratecommitment of these funds.

Ln. 1081 Sixth Power Project: US$35.0 million Loan of January 27, 1975;Date of Effectiveness: May 5, 1975; Closing Date:December 31, 1981.

The Rio Lindo Power Plant extension was completed about2 months ahead of schedule. All river diversion works havebeen finished albeit with some delays. The project is ex-pected to be completed at slightly above appraisal costestimates but two years later than originally forecastbecause of the addition, with Bank approval, of new ruralelectrification works.

-29- ANNEX II

Loan/Credit No.

Cr. 628 First Agricultural Credit Project: US$14.0 Million Creditof July 2. 1976; Date of Effectiveness: November 30, 1976;Closing Date: June 15, 1981.

This credit, which includes funds for agrarian reform settle-ments as well as for individual farmers, is proceeding satis-factorily. As of June 30, 1978, some 45 subloans valued atUS$4.0 million had been granted. Commitments of about US$3.5million have been made for the provision of technical servicesunder agreements with the National Agrarian Institute and thePan American Agricultural School.

Ln. 1341/ Seventh Highway Project: US$35.0 million Loan (including1342 US$7.0 million on Third Window Terms) of December 16, 1977;

Date of Effectiveness: March 16, 1977;Closing Date: December 31. 1981.

The project is proceeding satisfactorily. The three majorconstruction contracts have been awarded and work begun,and contracts have been awarded for the purchase of mainte-nance equipment. Preparation of the Highway Master Planis complete; consultants in maintenance operations havebeen retained.

Ln. 1395/ Third Port Project: US$12.0 million Loan (including US$5.01396 million on Third Window Terms) and US$5.0 Credit, both of

Cr. 696 April 22. 1977; Date of Effectiveness:December 22, 1977; Closing Date: December 31, 1980.

This loan finances the construction of Puerto Castilla on theNorth Coast and the expansion of San Lorenzo in the south.The civil works contract for Puerto Castilla has been awarded;the extension of the pier at San Lorenzo is nearing completion.

Cr. 777 Second Education Project: US$5.0 million credit of April 6,1978; Date of Effectiveness: August 15, 1978;Closing Date: June 30, 1982.

The Government recently satisfied the conditions foreffectiveness and is beginning to carry out the project.

Ln. 1576 Guavape Regional Development Project: US$10.5 million loan ofJune 16, 1978; Terminal Date for Effectiveness: November 1,1978; Closing Date: April 30, 1983.

The Government is expected to meet the conditions ofeffectiveness shortly.

- 30 ANNEX III

HONDURAS

NISPERO POWER PROJECT

SUPPLEMENTARY PROJECT DATA SHEET

Section I - Timetable of Key Events:

(a) Time taken to prepare project: approximately 11 months(May 1977-April 1978)

(b) Project prepared by: ENEE with the help of consultants

(c) First presentation to the Bank: June 1977

(d) Departure of Appraisal Mission: February 1978

(e) Completion of Negotiations: September 14, 1978

(f) Planned Deadline for Effectiveness: February 27, 1979

Section II - Special Bank Implementation Actions:

None.

Section III - Special Conditions

(a) Prior to March 31, 1979, ENEE would begin reporting to the Bankon measures recommended in a study for improving its managementand organization; would transmit the remainder of suchmeasures by June 30, 1979; would exchange views with theBank on the study's recommendations; and agree on a timetablefor carrying these out (para. 52). By March 31, 1979, ENEEwould also submit to the Bank for its comments recommendationsof consultants regarding its commercial functions and put theminto effect afterwards (para. 53).

(b) ENEE would revise its current transmission system addition programin the light of the recommendations of the National ElectrificationMasterplan and promptly after the Bank's review of this plan(para. 37).

(c) Prior to March 31, 1979, ENEE would prepare a program for theresettlement and employment of residents whose lands will beflooded, and would put such program into effect according toa timetable satisfactory to the Bank; and ENEE and theGovernment would take a series of ecological and environmentalmeasures in accordance with timetables which have beenagreed with the Bank (para. 60).

- 31 -ANNEX III

(d) Until the project is completed, ENEE would inform the Bank ofany proposed major new power investment and would furnish to theBank a report for comments showing the economic and financialjustification of such investment; the Government has agreed to takeall action to prevent duplication of facilities and unnecessaryinvestment, and to ensure that any major power investment isbased on economically and financially justified proposals andwill not adversely affect any Bank-financed power project (para.56).

(e) ENEE would revalue its fixed assets annually and, starting with 1978,would maintain electricity tariffs at levels sufficient to achieve an8 percent return on ENEE's revalued net assets in operation (para.55).

(f) ENEE would monitor and inspect at least annually all dams, reservoirmargins, associated structures, earthways and waterways based ona program to be presented to the Bank by March 31, 1979 (para. 61).

(g) ENEE would put into effect, not later than September 30, 1979,the recommendations of consultants regarding improvements ofits insurance policies agreed with the Bank (para. 61).

(h) As a condition of effectiveness for the Loan, ENEE wouldprovide assurances of the availability of a total of US$10.2million from other external financing sources for thisproject (para. 44); and agree with the Bank on a schedulefor implementation of all project studies (para. 51).

(i) As a condition for disbursement for the Energy Sector OrganizationStudy, the Bank would be furnished with satisfactory ENEE proposalsfor the disbursement and repayment arrangements for this component(para. 51);

(j) As a condition for disbursement for the training program component,ENEE would agree with the Bank on a detailed plan based on therecommendations developed in its Management and OrganizationStudy (para. 52).

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