Document of The World Bank

FOR OFFICIAL USE ONLY

Report No: 29293

IMPLEMENTATION COMPLETION REPORT(SCPD-3625S CPL-36250)

ON A

LOAN

IN THE AMOUNT OF US$26.0 MILLION

TO THE

INSTITUTO COSTARRICENSE DE ACUEDUCTO Y ALCANTARILLADO COSTA RICA

FOR THE

SECOND WATER SUPPLY AND SEWERAGE PROJECT

June 25, 2004

Finance, Private Sector and Infrastructure Country Management Unit 2Latin America and the Caribbean Region

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

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CURRENCY EQUIVALENTS

(Exchange Rate Effective June 2, 2004)

Currency Unit = Costa Rican Colon Colon 1.00 = US$ 0.002294386

US$ 1.00 = Colon 435.75

FISCAL YEAROctober 1 September 30

ABBREVIATIONS AND ACRONYMS

ARESEP Regulatory Authority of Public Services (Autoridad Reguladora de los ServiciosPublicos)

ASADAS Aqueduct and Sewer Service Administrative Associations (Asociaciones Administradoras de Acueductos y Alcantarillados Sanitarios)

ASAPS Water and Sanitation Sectoral Analysis (Analisis Sectorial de Agua Potable y Saneamiento)

AyA Costa Rican Water Supply and Sewerage Institute (Comites Administradores de Acueductos Rurales)

CAARS Rural Aqueduct Administrative Committees (Comites Administradores de Acueductos Rurales)

CAI Core Accountability Implementation Completion ReportERR Economic Rate of ReturnFRR Financial Rate of ReturnID Institutional DevelopmentIRR Internal Rate of ReturnMINAE Ministry of Environment and Energy (Ministerio del Ambiente y Energia)MS Ministry of Health (Ministerio de SaludOCS Operational Core ServicesPAHO Pan American Health OrganizationPR President's ReportPSP Private Sector ParticipationQAG Quality Assurance GroupSAPS Water and Sanitation System (Sector Agua Potable y Saneamiento)SAR Staff Appraisal ReportSCI Integrated Business System (Sistema Comercial Integrado)SIFS Integrated Financial and Supply System (Sistema Integrado Financiero y Suministros)SJMA San Jose Metropolitan AreaSNE National Electricity Service (Servicio Nacional de Electricidad)TT Task TeamUFW Unaccounted-for-WaterWPA Work Program Agreement

Vice President: David de FerrantiCountry Director Jane ArmitageSector Manager Danny Leipziger

Task Team Leader/Task Manager: Menahem Libhaber

COSTA RICACR WATER SUPPLY

CONTENTS

Page No.1. Project Data 12. Principal Performance Ratings 13. Assessment of Development Objective and Design, and of Quality at Entry 24. Achievement of Objective and Outputs 65. Major Factors Affecting Implementation and Outcome 156. Sustainability 177. Bank and Borrower Performance 188. Lessons Learned 209. Partner Comments 2210. Additional Information 23Annex 1. Key Performance Indicators/Log Frame Matrix 24Annex 2. Project Costs and Financing 26Annex 3. Economic Costs and Benefits 29Annex 4. Bank Inputs 30Annex 5. Ratings for Achievement of Objectives/Outputs of Components 33Annex 6. Ratings of Bank and Borrower Performance 34Annex 7. List of Supporting Documents 35Annex 8. Borrower's ICR 36Annex 9. Letter on Government Policy to the Sector 53Annex 10. Maps 55

Project ID: P006941 Project Name: CR WATER SUPPLYTeam Leader: Menahem Libhaber TL Unit: LCSFWICR Type: Core ICR Report Date: June 25, 2004

1. Project DataName: CR WATER SUPPLY L/C/TF Number: SCPD-3625S; CPL-36250

Country/Department: COSTA RICA Region: Latin America and the Caribbean Region

Sector/subsector: Water supply (75%); Sewerage (15%); Central government administration (10%)

Theme: Other urban development (P); Other financial and private sector development (S)

KEY DATES Original Revised/ActualPCD: 03/31/1988 Effective: 07/27/1993 10/27/1994

Appraisal: 07/15/1992 MTR: 10/10/1997Approval: 06/17/1993 Closing: 06/30/2000 12/31/2003

Borrower/Implementing Agency: INSTITUTO DE ACUEDUCTO Y ALCANTARILLADO/AYAOther Partners: None

STAFF Current At AppraisalVice President: David de Ferranti Shahid S. HusainCountry Director: Jane Armitage Ediberto SeguraSector Manager: John Henry Stein Ricardo A. HalperinTeam Leader at ICR: Menahem Libhaber Augusta DianderasICR Primary Author: Menahem Libhaber; Herbert

Farrer

2. Principal Performance Ratings

(HS=Highly Satisfactory, S=Satisfactory, U=Unsatisfactory, HL=Highly Likely, L=Likely, UN=Unlikely, HUN=Highly Unlikely, HU=Highly Unsatisfactory, H=High, SU=Substantial, M=Modest, N=Negligible)

Outcome: S

Sustainability: L

Institutional Development Impact: SU

Bank Performance: S

Borrower Performance: U

QAG (if available) ICRQuality at Entry: S

Project at Risk at Any Time: Yes

3. Assessment of Development Objective and Design, and of Quality at Entry

3.1 Original Objective:The three objectives established in the SAR [1] and in the Loan Agreement [2] were: (i) to help the government and the Costa Rican Institute of Water Supply and Sewerage (AyA) to improve the institutional framework for the provision of water and sewerage services in the country, including promotion of private sector participation, and to develop and implement sound sector policies; (ii) to support AyA in carrying out an institutional and financial restructuring, to increase efficiency in operations and achieve and consolidate financial viability. Key elements of the restructuring program include reduction of operating costs (especially of personnel), increase tariffs and improve tariff structures, measures to increase private sector participation through the use of service contracts and decentralization of AyA’s actual organization; (iii) to improve the operation of the existing water supply system in the San José Metropolitan Area (SJMA), by reducing water losses, defining pressure zones better and increasing storage capacity in the distribution system. These actions would also help reduce operating costs and postpone large capital investments that would otherwise be required; and (iv) improve the SJMA sewerage service, mainly to address the environmental conditions of poor urban areas.

3.2 Revised Objective:The project objectives were not revised during project execution; however, on May 2, 1997, the Loan amount was reduced by US$10 million, from US$26 million to US$16 million. This drastic reduction in the Loan amount deserved a revision in project objectives, but such revision was not undertaken.

3.3 Original Components:

Component Appraisal Estimated

(March 1993)

Reprogrammed (May 1997)

At Closing (December 2003)

A. Institucional Strengtening 2.80 3.15 4.22B. UFW Program 12.30 9.18 9.43C. SJMA Water Supply 9.90 9.11 7.28D. SJMA Sewerage Rehabilitation 3.00 3.12 2.16E. Operation and Mintenance 1.70 0.80 0.72Base Cost (December 1992) 29.70 25.36 23.82Phyical Contingencies 4.30 1.78 0.00Price Contingencies 6.00 0.00 0.00Total Project Cost 40.00 27.14 23.82

3.4 Revised Components:Reduction of the Loan amount. In March 11–14, 1997 during a visit of a Bank Mission, the Costa Rican Water Supply and Sewerage Institute (Instituto Costarricense de Acueductos y Alcantarillados, AyA) and the Bank agreed to reduce the amount of the loan by US$10 million (from US$26 million to US$16 million), and this was made official in a note signed by the Bank, the country’s Ministry of Finance and the AyA on May 2, 1997. The project objectives were left unchanged, and the reason for the reduction in the loan was that AyA was lacking the capacity to carry out the project as it had been originally conceived, even though three years remained before

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the originally scheduled closing date. At the time of reprogramming the Loan it would have been possible to reschedule the project execution plan and continue implementation using the original Loan amount. The Government’s Health, Planning and Finance authorities did not take part in those discussions and decision to reduce the Loan amount. This decision was in large part the reason for not having achieved under the project the target of reducing the level of unaccounted-for-water, which remained constant throughout the period of project implementation, at roughly 46 percent, since the proceeds reduced from the Loan essentially corresponded to reducing the funds which were made available for Component B: Unaccounted-for-Water Reduction Program, thereby substantially reducing the purchase of domestic meters, canceling the preparation of the consumer cadastre in the SJMA and diminishing the replacement of water service connections and the replacement of secondary water networks.

Modifications in project components resulting from the reduction in the Loan amount. The following changes were made to the original components as a consequence of the reduction in the loan. Part A: Institutional Strengthening, unmodified. Part B: Unaccounted-for-Water Reduction program, the dates for compliance were changed, the number of water meters to be acquired with loan proceeds was reduced, and the components for consumer cadastres and service connection replacements in the SJMA were eliminated. Part C: Water Supply and Distribution System in the SJMA, all the investment components were reduced, except for the drilling of two wells for water production. Part D: Rehabilitation of Sewerage in SJMA, the number of connections to incorporate in the system through rehabilitation and the number of rehabilitated pumping stations were reduced; and Part E: Operation and Maintenance, the dates for compliance were changed. The original project components and the changes introduced on May 2, 1997, when the loan amount was reduced, are as follows (the changes introduced appear in italics):

Part A: Institutional Strengthening:

1. Development and implementation of:a) Sector policies, especially sound investment and cost recovery policies; and b) A better institutional framework for water supply and sewerage service in Costa Rica.

2. Improvement of the Borrower’s corporate planning, including: a) The development and implementation of a budgetary process with programmatic

content, and b) The development and implementation of a long term corporate plan.

3. Improvement of the Borrower’s financial management, including: a) The development and implementation of an integrated accounting system b) The reform of the water tariff structure; and c) The development and implementation of sewerage rates to be applied in the SJMA and

other urban areas.

4. A program to increase decentralization and private sector participation in the supply of water and sewer services run by the Borrower, through the development and implementation of a decentralization model and a model for private sector participation, including the respective training activities.

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Part B: Unaccounted-for-Water Reduction Program

1. Investments related to water metering, including the installation of approximately 86,300 new meters, the replacement of approximately 25,000 old meters and the repair of approximately 13,000 meters, and installation of macrometers to control water production in the SJMA. This was modified to the installation of 45,000 new meters, the replacement of 40,000 old meters and the installation of production macrometers in the SJMA.

2. Development and implementation, within the Borrower’s organizational structure, of:a) An integral commercial system linked to the accounting system.b) A commercial management information system, and c) Special procedures for the control of consumers with high usage.

3. Updating of consumer cadastres, including the incorporation of illegal water connections, and the development and implementation of the pipes cadastre. This component was eliminated.

4. Development and implementation of an operational control system to improve the efficiency of the SJMA water supply system.

5. Replacement of approximately 8,000 water connections in the SJMA. This component was eliminated.

Part C: SJMA Water Supply and Distribution System

1. Installation and operation of approximately 19 km of primary distribution pipes and approximately 57 km of small diameter pipes in the SJMA distribution system. This was modified to installation of 19 km of primary distribution pipes and approximately 26 km of small diameter pipes.

2. Construction of 10 storage tanks to be located in Curridabat, San Isidro, Belo Horizonte, San Juan de Dios, Pizote, Mata de Plátano, and two each in San Pablo and Coronado. This was modified to construction of four tanks to be located in: Santa Ana, Belo Horizonte, San Juan de Dios and Mata de Plátano and to the rehabilitation of two tanks: La Pelota and Tibás.

3. Construction of production facilities consisting of two wells in Potrerillos and two in Zona Norte.

4. Construction of four water pumping stations. This was modified to construction of two pumping stations.

5. Technical assistance for the final designs of the above mentioned works and supervision during construction.

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Part D: SJMA Rehabilitation Sewerage Works

1. Rehabilitation, reconstruction and/or interconnection of sewage collectors to incorporate approximately 6,500 sewerage connections into the system. This was modified to incorporate approximately 3,000 sewerage connections into the system.

2. Installation of approximately 27 km of secondary sewage collectors to improve the environmental conditions of the neighborhoods Los Guido and La Paz.

3. Rehabilitation of seven sewage pumping stations. This was modified to four pumping stations.

4. Technical assistance for the final designs of the above mentioned works and supervision during construction.

Part E: Operation and Maintenance

1. Purchase of equipment for the operation and maintenance of the sewerage systems.

Consultancy services, equipment and civil works required for the vulnerability study and maintenance of the Orosi pipeline.

3.5 Quality at Entry:Prior to project preparation a sector study of the water and sanitation sector in Costa Rica was prepared by the Bank (Report 10070-CR, December 30, 1991). This was an extensive sector study and the project was basically an outcome of the recommendations of this study and was structured to respond to them. That ensured that the quality at entry was of a high level. The project objectives and components were well suited to improve the performance of a public utility. A previous Bank project focused on implementing large scale works for augmenting the water production to San Jose, whereas the current project concentrated on institutional improvements, in addition to execution of smaller scale works. The preparation of the institutional improvement measures was of high quality. Prior to initiation of project activities, AyA did not have management instruments, technology, financial management capacity and long term planning ability. The project was conceived to modernize AyA and introduce to it all these new instruments. The concept of Private Sector Participation (PSP) is mentioned in the project preparation documents, but it is a different concept than PSP as it is understood today. The project was prepared during the years 1991-1993 and at that time PSP was not as developed and referred basically to service contracts. Another aspect that was different at the time of project preparation and has not received much attention is environmental protection and safeguards. That was the common practice then, and the project was perhaps deficient in terms of environmental assessment. However, the works that were financed under the project were urban works which did not have significant long term environmental impacts, so the project outcome from the environmental standpoint has not been deficient.

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4. Achievement of Objective and Outputs

4.1 Outcome/achievement of objective:The original project objectives were clear, appropriate and realistic, as well as consistent with both the country’s development strategies and the Bank’s policies. They were geared to the development of a national sectoral policy and the improvement of the institutional framework for provision of the services; the improvement of operational efficiency and the consolidation of the Borrower’s financial viability; and the improvement of the quality of existing water supply operations and sewerage service in the SJMA.

Objective 1: Help the Government and AyA to improve the institutional framework for the provision of water and sewerage services in Costa Rica, including promotion of private sector participation, and develop and implement sound sectoral policies

The institutional structure of the water sector in Costa Rica did not change much during the project implementation period, except in the area of regulation through transformation of the National Electricity Service (Servicio Nacional de Electricidad, SNE) into the Regulation Authority of Public Services (Autoridad Reguladora de los Servicios Públicos, ARESEP). This change in itself is quite meaningful, in the sense that AyA needs now to justify request for tariff increase, and its financial, technical and management performance are controlled to a certain extent by an independent professional regulator. In spite of the impression that not much has been achieved in improving the institutional framework, a meaningful and important change has occurred in the sector during the project implementation period. During the first years of implementation, there was a resistance within AyA to any change both at a sector level and within AyA, and lack of understanding of the need for change. During the period 1992-2002 the Government authorities (the Ministries of Planning and Economic Policy, Heath and Finance) showed little interest in developing the sector.

However, overtime the position within AyA and in the Government has changed, and to a large extent, this change was brought about by the project. In a review meeting of the ICR held on March 2004 with participation of the AyA personnel which was involved in project implementation, the consensus was that the history of AyA can be divided in two parts: the old history before the project and the new history after the project. The new history is totally different since through the project AyA entered the era of technology and modern management instruments. The project opened the mind of AyA’s personnel to new horizons and thought it that there is a need to modernize the structure of AyA in order to keep abreast with the modernizing world, and that AyA’s staff needs to stop opposing to changes.

A sectoral study on water and sanitation in Costa Rica was prepared under the project in 2002 [5]. This study proposes a meaningful institutional restructuring of the sector, and was extensively disclosed nationwide in early 2003. The implementation of the study and the adoption of its conclusions demonstrates the development process of the sector. During the initial years of project implementation, even thinking about modernization was prohibited, while towards project closing, ideas about reform, modernization, restructuring and even PSP in its current meaning, have been developed and are seriously considered.

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The new government that took office in 2002 became very much involved in the needs of the water sector, is committed to undertake necessary reforms and has a positive position towards PSP in the sector. This is manifested by its willingness to continue with a follow up project based on more profound reforms. In a letter of request for a new Bank operation (see Annex 9) the Government, represented by the Ministers of Health and Finance, sets the policy for the sector and AyA by stating:

“As was preliminarily established, the proposed project will asist in defining the vision and the strategy for the water and sanitation sector, and in initiating a process of institutional reform of the sector and a transformation of the Costa Rican Water Supply and Sewerage Institute (AyA) in the following manner:

Institutional reform of the sector and AyA: This will include (i) the development of a strategy and a plan of action concerning the proposed national policy for the provision of water and sanitation services in the country along with the respective investment plan, the preceding based on the results of the recent sectoral analysis, (ii) the separation of the roles of sector policy maker and operator currently performed by AyA, (iii) the corporatization of the AyA operator resulting from the separation of roles, and (iv ) provision of support for the policy maker and for the National Water Council (Consejo Nacional del Agua). Obviously, the implementation of this reform will depend on modifying the current legislation, which will be promoted during the implementation of the proposed project.

Improvement of the water and sanitation services: This would be carried out through (i) liberating AyA from the responsibility over the rural sector, along with updating and modernization of the funding mechanisms for the water sector; (ii) incorporating a specialized operator to manage the commercial system of AyA; (iii) operating the San José sewerage system by a specialized operator under a “Design Built Operate (DBO)” modality; (iv) incorporating specialized operators to manage the water and sanitation systems in five medium size cities, and (v) strengthening the environmental management capacity in the sector.”

Considering the mentioned change of mentality in AyA and at the Government level, as well as the actions undertaken, it is considered that the objective of helping the Government and AyA to improve the institutional framework was met.

Private sector participation, as defined in the project documents, referred only to service contracts (construction, cleaning services, security, maintenance, installation of new service connections, etc.) and not at private participation in system management. AyA complied with that PSP concept.

Objective 2: Support AyA to improve operational efficiency and consolidate the Borrower’s financial viability

The borrower’s commercial and financial management improved considerably with the implementation of the integrated commercial and financial management systems under a SAP

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platform. Domestic metering effective coverage reached 82 percent (with 93 percent of total coverage). The user cadastre in the SJMA was not updated under the project (it was updated last time in 1990). The Borrower’s financial viability remained weak due to authorization by the regulator of only small tariff increases which were sufficient to compensate only for inflation. Fulfillment of this objective is considered satisfactory because of the achievements in implementing the modern commercial and financial accounting systems.

Objective 3: Improve the quality of water supply operations and sewerage service in the San José Metropolitan Area

Water supply system. Operational control of the water supply system improved significantly with the installation of bulk meters on all the water sources, and with the improvement of the operational control center in the SJMA, which made it possible for the Borrower to generate timely operational information such as the production flows, water levels in the storage tanks and more. The level of unaccounted-for-water (UFW) remained unchanged, at 46 percent, throughout the course of project implementation, mainly because project investments were insufficient to offset the physical and commercial losses that require considerable investments to replace pipelines, manage demand, control leaks, etc., programs for which the borrower is lacking in technology, financial resources and qualified personnel. The goals set for UFW reduction were overly optimistic and were not consistent with the investments needed to reduce UFW. By the end of the project, the borrower was facing the challenges of a water shortage and rationing in most of the systems that he managed, including in the SJMA. The reduction of the loan amount affected the achievement of this objective.

Sewerage system. The target of providing sewerage services in the poor neighborhoods of Los Guido and La Paz were met with the construction of the sewerage networks as planned. The installation of sewerage systems in other sectors of the SJMA was completed as well. The rehabilitation of four sewage pumping stations had little impact on the problems in the SJMA sewerage system, which is in an overall state of severe deterioration.

In summary, the achievement of this objective is considered satisfactory. The improvement in the water supply system operation was meaningful and the installation of sewerage systems in the poor neighborhoods of SJMA had a significant impact of improving the living conditions in those neighborhoods. The goal of reducing unaccounted-for-water was not achieved in large part, due to the reduction in the loan amount, although, as noted, the goal was overly optimistic to start with. The impact of the sewerage works executed under the project was not very significant when compared to the large investments needed for improving the sewerage service, however, the works were completed as planned.

4.2 Outputs by components:4.2.1 Component A: Institutional StrengtheningInvestment and cost recovery policies. In September 1998, a local consultant prepared the document “Elaboration of Investment and Cost Recovery policies” [3]. This document identified the investments needed in the country’s metropolitan, urban and rural areas, and described options for private sector participation in the management of the water and sanitation services. It did not, however, consider any relationship with ARESEP, the regulatory agency for the sector, with

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which the basis for investment and cost recovery policies ought to be established. This document later served as a basis for preparing, in June 2001, an Inventory of Investments [4] proposed to be executed by the Borrower, which was prepared by another local consultant. The proposed investment and cost recovery policies were not widely adopted by AyA. In 2003, a more detailed investment program was developed by another consultant, and is serving as the basis for defining the official investment program that AyA would undertake in the coming years.

Institutional framework. A Water and Sanitation Sectoral Analysis (ASAPS) [5] was conducted under the project in late 2000 with support from AyA, the Ministry of Health and the MINAE, and published in July 2002. It was prepared by a team of five international and five local consultants. This nationwide study, now widely disseminated, was adopted by the Government of the current administration (2002–2006) and will therefore mark the direction in which the water sector in the country will develop over the following years. The Sectoral Analysis provides an administrative, legal and technical assessment of the sector; an analysis of crucial items; a set of recommended policies, strategies and actions; a proposal for modernizing the sector; an investment plan and an action plan with a breakdown of approximate costs and performance deadlines. The action plan consists of three programs with ten projects, as shown in Table 2.

Table 2: Proposed Action Plan for Modernization of the Water and Sanitation Sector

Program 1: Institutional reform of the sector

• Structuring of the legal and regulatory framework for the Sector.• Evolution of AyA and its role in the Sector.• Establishment of initiatives for hiring other operators for small operating units.• Information campaigns.

Program 2: Sector planning

• National Urban Water and Sanitation Plan.• National Rural Water and Sanitation Plan.

Program 3: Operational management

• Unaccounted-for-Water Reduction.• National Information System for the Sector.• Control and Monitoring of Water Quality.• Strengthening Municipalities ASADAS (and CAARS) and providing them with

Technical Assistance for financial and commercial management.

The relevant institutional reforms made during project execution (during the 1990s), were: (i) transformation of the Rural Water Supply Administrative Committees (Comités Administradores de Acueductos Rurales, CAARS) into Water Supply and Sewer Service Administrative Associations (Asociaciones Administradoras de Acueductos y Alcantarillados Sanitarios, ASADAS) with status of legal entities (2000), although with ample dependence on AyA; (ii) strengthening of the regulation of public services with the transformation of the National Electricity Service (SNE) into the Regulatory Authority of Public Services (ARESEP) (1996), even though the municipalities are not subject to regulation by ARESEP pursuant to a decision of the Constitutional Court (the Comptroller General of the Republic exercises the regulation over the municipalities); (iii) enactment of a new law regulating Government Procurement (1996) and another law regulating the Concession of Public Works and Public Services (1998); (iv) enactment by ARESEP of the Decree of Sectoral Regulations applicable to water supply and Sewerage services (Decree No. 30413-MIP-MINAE-s-MEIC, 2002); and (v) establishment by the

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Government of the National Water Council.

Development and implementation of a programmatic budgetary process. A new corporate planning model and a new corporate budget model, as well as Guidelines for Drafting the Annual Operating Plan and the 1995 AyA Budget [6] were developed under a consulting services study. These models and guidelines have been applied in AyA since 1995.

Development and implementation of a long term corporate plan. A foreign expert prepared a study on the Physical Planning Model proposed for AyA on a preliminary level [7]. The results were not acceptable to AyA, which, in June 2001, updated the inventory of investment needs. For a long period AyA did not have a detailed Investment Plan, in large part due to the uncertainty surrounding the source of funds for financing the investments, the refusal of the previous Government to authorize external lending and the Government-imposed limits on spending, which to a large extent, prevented timely investments. In 2003, a detailed study defined all the potential investment projects in AyA. On the basis of this study, AyA has elaborated the official investment program of the institute.

Advisory services on procurement and internal control. With funding from the loan, a local consultant was hired to provide advisory services on processes of procurement, internal control and coordination with multilateral agencies on aspects of financial management. Procurement procedures were a source of conflicts between the Bank and AyA during the execution of both this project and the preceding project (1935-CR), since some of the Bank’s procurement guidelines are not accepted under the country’s procurement Law. In 1996 a new Procurement Law was enacted; however, the inconsistencies between this Law and the Bank’s procurement guidelines persisted. A recent detailed analysis carried out by a national procurement expert identified the points of friction and concluded that procurement issues may cause problems in the implementation of the entire Bank portfolio.

Development and implementation of an integrated accounting system. The development and implementation of the Integrated Financial and Procurement System (Sistema Integrado Financiero y Suministros, SIFS) and the Integrated Commercial Management System (Sistema Comercial Integrado, SCI) were awarded to joint venture Aguas de Valencia/Unión Fenosa ACEX. In addition, funds from the loan were used to acquire the hardware needed for systems development and production, consisting of two servers for development, two servers for production, 48 computer workstations and 10 printers supporting the systems for the SJMA and other Regions, in addition to the licenses for the application software and the database software. This system was satisfactorily implemented in AyA on a SAP platform. The problems encountered in implementing the systems were resolved by training the AyA officers in all the regions. AyA considers that the systems are currently operating satisfactorily. With the new systems installed and operational, AyA has at its disposal the most modern management instruments which can, if properly handled, boost efficiency and productivity, and significantly contribute to institutional improvements.

Water and sewerage service tariffs. A proposal for a new tariff structure was developed under the project in 1997 [8], based on a formula of a fixed cost term plus a consumption proportional term.

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In addition, a significant progressive increase in sewerage tariffs was proposed. This proposal was not implemented by AyA nor was it discussed with the ARESEP. In November 2002, in response to a request by AyA for a tariff increase, ARESEP [9] introduced a new concept in AyA’s tariff management. It enforces a progressive modification in the tariff levels so as to reach a state under which the water and sewerage tariffs in the metropolitan, urban and rural areas will become identical. The tariffs approved for the Metropolitan Area became applicable in November 2002, the tariffs for the urban area became equal to those of the Metropolitan Area in July 2003 and the tariffs for the rural area reachrd the same level in 2004. The tariff structure was not yet altered and this still needs to be implemented, in order to apply a more adequate tariff structure.

Strengthening decentralization and private sector participation in the water supply and sanitation services provided by AyA. During the project implementation period decentralization of AyA’s operation to the regions was significantly strengthened and today the regions are more autonomous and function with a considerable level of independence. This was made possible to a large extent by the implementation of the Integrated Financial and Procurement System and the Integrated Commercial Management System. Private sector participation in the context of the loan (i.e., as defined in the loan documents) involved the use, by AyA, of service contract such as construction, security, cleaning services, maintenance of some installations, etc. The service contracts approach was complied by AyA. There were attempts to move beyond the service contracts concepts towards deeper private sector involvement. In March 1999, in response to the Government’s request, a World Bank team conducted the study “Strategic Options for the Water and Sanitation Sector in Costa Rica” [10]. It recommended to award to the private sector a full concession of AyA’s operations. The recommendations of this study were rejected by AyA and by the Government. At that time, both AyA and the Government were reluctant to allow private sector participation in the management of the water sector and in the provision of services. The PSP issue was readdressed in the Water and Sanitation Sector Analysis [5], which recommended a different strategy for PSP in the country. Currently, AyA and the Government are more open to private sector participation and have requested Bank support for preparation of a new operation which involves meaningful PSP for: (i) management of the commercial operations of AyA; (ii) reduction of Unaccounted for Water; (iii) management of the water and sanitation services in 5 medium and small municipalities; and (iv) construction and operation of the sewerage system and wastewater treatment installation of SJMA.

The results of the execution of this component are considered satisfactory, taking into account that under the institutional setup of AyA, which has been since its establishment a public institution whose president and senior management are replaced every 2-3 years, it is difficult to expect that meaningful institutional reforms can be achieved during a relatively short time. In addition to the institutional improvements achieved, the project contributed to open the minds and change the attitude of AyA’s senior and middle management to the need for change and reform, as well as to change the attitude of the government toward the water sector and the need for its modernization.

4.2.2 Component B: Unaccounted-for-Water Reduction ProgramInvestments related to water metering. About 110,000 domestic meters and 67,000 protection boxes and their accessories were purchased and installed during project implementation. The total

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coverage of domestic metering reached a value of 93 percent with an effectiveness of 82 percent. In the SJMA, the bulk metering of production and operational control points was completed, with a total of 69 bulk meters installed and connected to the operational control center that was upgraded. Bulk meters in the other AyA regions were purchased with project funding and installed using AyA’s own funds. Although it was expected to reach, with the installation of all the bulk meters, a 100% coverage rate, the current bulk metering coverage is only 90%, because new, yet un-metered, water sources have been incorporated into the supply system since the completion of installation of the bulk metering system.

Development and implementation of an integrated commercial management system that includes a commercial management information system and special procedures for the control of consumers with high level of water consumption and a link to the accounting system. This target was completely met as described above.

Consumer cadastre. In the SJMA, the consumer cadastre component was eliminated from the project as a result of the reduction in the loan amount and it has not been updated by AyA during the project implementation period. The last update occurred in 1990. The consumer cadastre was updated in the other regions outside the SJMA.

Operational control system in the SJMA. The operational control system was installed and is operating satisfactorily in the SJMA. The system consists of 69 bulk meters integrated by a network of radio communications, with an Operational Control Center located in the La Uruca, which was upgraded to work with the new bulk meters and the operational control system.

Replacement of water connections in the SJMA. This component was eliminated from the project as a result of the reduction in the loan amount.

Due to the reduction in the loan amount, the measures finally taken were not sufficient to reduce unaccounted-for-water, which remained unchanged during project execution period, at about 46 percent. The goal for its reduction to 31 percent by the year 2002 has not been met. As noted, the goals set for UFW reduction were overly optimistic to start with and were not consistent with the investments needed to reduce UFW, and even the unrealistic small investment allocated was later reduced.

4.2.3 Component C: SJMA Water Supply and Distribution SystemInstallation of primary distribution and small diameter water pipes in the SJMA. A total of 13,164.4 meters of primary distribution pipes and 15,313.0 meters of small diameter pipes were installed under the proejct.

Construction of storage tanks. Five storage tanks were constructed under the project: Pavas, Belo Horizonte, Santa Ana, San Juan de Dios and Mata de Plátano (El Carmen), with a total volume of 15,000 m3, and two storage tanks were rehabilitated: La Pelota and Tibás, each with a volume of 5000 m3 for a total rehabilitation of 10,000 m3.

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Construction of water production facilities. Three deep wells were perforated: in El Coco Alajuela, in San Pablo de Heredia and in Tanque Tibás, with a total production capacity of some 150 l/s. Only the third well was incorporated at this time to the SJMA water supply system.

Construction of pumping stations. Two pumping stations were constructed in the SJMA water system: Guadalupe with a capacity of 250 l/s and Maiquetía with a capacity of 130 l/s.

The investment in this component was low in respect to the investments required to bring production capacity in the SJMA water supply system in line with demand and provide a satisfactory supply to the population (by reducing unaccounted-for-water and developing new water sources) and was further reduced as a result of the reduction in the loan amount. Currently, the production capacity in the SJMA is nine percent below demand in the summer season, considering that, according to the billing records, summertime demand is approximately seven percent greater than the average yearly demand.

4.2.4 Component D: Rehabilitation of Sewerage Works in SJMARehabilitation of collectors. This component was not carried out.

Installation of secondary networks in Los Guido, La Paz and other neighborhoods in the SJMA. A total of 54,776 meters of sewage collectors were installed in Los Guido, San Miguel (La Paz) and in 15 other neighborhoods in the SJMA, incorporating to the sewerage system 5,833 new connections, benefiting some 24,325 residents, according to the breakdown shown in the Table 3.

Table 3: Details on the Secondary Sewerage Systems Installed Under the Project

Location/Project Length Manholes ConnectionsUjarrás, Zapote 150 4 17Gazel, Cedros de Montes de Oca 803 12 161El Oriente, Montes de Oca 897 13 177San Blas de Moravia 194 3 39San Roque, Calle Fallas 281 5 56Calle Vieja Los Castros, Tibás 496 5 99San Gerónimo, Tibás 1,091 7 218Cementerio, Pavas 130 2 25Villa Franca, Tibás 116 2 23El Jardín, Bajos del Torres 356 8 71Barrio Fátima, San Francisco de Dos Ríos 1,499 23 292Avenida 7, Calles 22/24 San José 135 1 27Ciudadela 27 Julio, Hatillo 531 5 107Hatillo Centro 1,925 13 279Barrio Claret, Barrio México 994 17 199Los Guido 29,212 365 2,611San Miguel 15,966 200 1,432Total 54,776 685 5,833

Rehabilitation of pumping stations. Five small pumping stations were rehabilitated, with flow rates ranging from 5–15 l/s: (i) Cerámica Poás in Calle Fallas de Desamparados; (ii) Florida Norte in

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Barrio Mexico; (iii) La Florita in Calle Fallas de Desamparados; (iv) Lomas del Sol in Curridabat; and (iv) San Esteban Rey in Calle Fallas de Desamparados.

In comparison to the investments needed to rehabilitate the sewerage system in the SJMA as a whole, these works are of little significance. Nonetheless, they did have a large impact on sanitation of the neighborhoods in which they are located, especially in the poor neighborhood of Los Guido, where they benefited some 10,705 residents.

4.2.5 Component E: Operation and MaintenancePurchase of equipment for operation and maintenance of the sewerage systems. This included the purchase of equipment for maintenance of the sewers. The following equipment was acquired: 1 truck with a water jet discharge capacity, 1 truck with sewer cleaning capacity by water, 1 truck with equipment for video inspection of the sewage collectors, 1 back digger and 1 compressor. This equipment is being used by AyA for maintenance of the sewerage system.

Consulting services, equipment and civil works required for the vulnerability study of the maintenance of the Orosi pipeline. Three consulting services were carried out in order to analyze the vulnerability of the Orosi pipeline in the section between El Llano Dam and Tres Ríos water treatment plant, a conveyance line 30 km long, 1100/900 mm in diameter with an inverted siphon at Orosi with a pressure of 560 meters (water column) and a tunnel of one kilometer in Cerro de La Carpintera, which was financed under the Bank’s first loan (1935-CR). The study first identified the areas of greatest risk and the studies needed to define the construction work. Subsequently, geological, hydraulic, hydrological, structural and seismic vulnerability, studies were carried out, supplemented by geophysical and soil studies. Based on the recommendations of these studies, protection work were carried out and some pipes and special couplings were acquired for the installation of inclinometers and piezometers in sectors bordering the Orosi pipeline. In the opinion of the AyA’s operation personnel, no further investments are needed for the moment, as the existing problems have been corrected. AyA needs to continue its monitoring and maintenance activities to adequately preserve these facilities.

4.3 Net Present Value/Economic rate of return:Not applicable.Net Present Value/Economic Rate of Return were not estimated in the SAR.

4.4 Financial rate of return:Not applicable.Financial Rate of Return was not estimated in the SAR.

4.5 Institutional development impact:The project’s greatest impact on AyA has been the improvement of financial and commercial management of the institution, with the development and implementation of the new Integrated Financial and Procurement System (SIFS) and the Integrated Commercial Management System (SCI), which are now operating satisfactorily in the AyA. With the new systems installed and operational, AyA has at its disposal the most modern management instruments which can, if properly handled, boost efficiency and productivity, and significantly contribute to institutional improvements.

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The results of the Sectoral Analysis of Water and Sanitation in Costa Rica (ASAPS), adopted by the Government as a policy for improvement of the sector and reform of AyA, is the project’s most important achievement. The implementation of this policy, supported by the World Bank through a new lending operation should guarantee the adequate development of the sector in a manner that will enable it to address the problems of the water and sanitation services. Attaining adequate levels of efficient services will require undertaking extensive investment.

On various occasions during project execution, the Bank and the consultants hired to assist in project implementation have informed AyA of the needs for adjustment and modernization that would have to be undertaken in order to achieve adequate water and sanitation services in the SJMA and the rest of the country, given the difficulties in obtaining financing for its investments. The financing problems persisted to a large extent due to the previous administration’s refusal to allow AyA to get access to foreign loans so as to control the Government’s foreign debt, and its adoption of macroeconomic measures to offset inflation and reduce devaluation of currency. These measures included imposing caps on spending by Government owned institutions, and therefore, the only remaining option for AyA, not just for accessing financing, but also for improving efficiency, was to incorporate the private sector in the delivery of the services. But this was an approach that AyA was reluctant to undertake at the time, even when it was proposed as a Government strategy under the administration of 1998–2002, when it attempted to rehabilitate and complete the SJMA sewerage system and provide wastewater treatment, at an estimated investment of about US$290 million, through a BOT contract.

However, in spite of the difficulties in implementing the project and AyA’s reluctance to undertake reforms, especially during the early project years, through the project AyA entered the era of technology and modern management instruments. The project opened the mind of AyA’s management and personnel to new horizons and thought it that there is a need to modernize the structure of AyA in order to keep abreast with the modernizing world. As a result of the project AyA is now ready to undertake meaningful modernization steps.

5. Major Factors Affecting Implementation and Outcome

5.1 Factors outside the control of government or implementing agency:During the project execution period, Costa Rica dealt with several shocks and situations beyond the control of the Borrower and the implementing agency: inflation, fiscal deficits, stagnating tax revenues, increases in debt related interest payments, labor unrest leading to higher-than-planned rises in wages, downward tendency in coffee prices, and the impact of Sept 11 on tourism related revenues. This led the government to impose spending caps on public institutions, including AyA and resulted in reducing the availability of counterpart funding for the project and consequently to slower implementation.

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5.2 Factors generally subject to government control:Spending caps. The spending caps strategy imposed by the Government on public institutions, including AyA, had a significant effect on slowing down project execution. Other Government agencies succeeded in getting budget caps lifted and/or revised in order to be able to execute their priority programs, but AyA did not manage to do that and, as a result, implementation suffered delays.

Government procurement. The country’s policy on government procurement does not fully coincide with the Bank’s procurement guidelines and Costa Rica did not, at the time of project execution, accept the supralegality of the Bank procurement guidelines. This led to challenges in execution when conflicts came up. Hiring of consultants was a constant source of conflicts. Another major problem was the intervention of the Comptroller General’s office in complains about award of contracts (works, goods and services). All that delayed the processes of hiring consultants and execution of works and constituted a severe problem in the execution of the project.

5.3 Factors generally subject to implementing agency control:AyA’s Management support to the project. During the first years of project execution, AyA’a management was not decisive in its support to the project. The project was prepared by an administration that left office right after signing the Loan Agreement and the incoming administration was not supportive of the project because of its different priorities. Also, the new Government was faced with a more adverse political climate that prevented institutional development actions. Under these circumstances, counterpart funds were not assigned to the project in a timely fashion and that caused implementation problems. To a large extent, it was difficult to reach agreement over the execution of the institutional development component and AyA’s management was, in spite of the Bank's supervision efforts, reluctant to make any changes or restructuring, particularly when it referred to PSP. During those years, the Government (Ministries of National Planning and Economic Policy, Health and Finance) was confronted with competing priorities and did not focus on the water and sanitation sector or on the project.

Tariffs and counterpart funds. In matters of tariffs and generation of counterpart funds for project implementation, AyA was unable to comply with the investment plans agreed upon with the Bank. The situation became more difficult in 1997, the year that AyA and the Bank agreed to reduce the loan amount by US$10 million (from US$26 million to US$16 million), considering that the AyA was lacking the capacity to execute the rest of the loan.

Delays in the design of works. The designs of the works to be constructed under the project were not prepared in a timely fashion. All the designs were prepared by AyA, except for the protection works of the Orosi pipeline. These delays caused delays in project implementation.

Delays in hiring consulting services. PAHO was hired by AyA to provide technical assistance and to serve as a procurement agency for hiring all the consulting services required for project execution. The performance of PAHO in hiring the required consulting services was not efficient and contributed to delays in project implementation.

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Relations between AyA’s Management and the Bank Task Managers. During most of the project execution period, the relationship between the Bank’s supervision team and the management of AyA was dominated by differences of opinion, a factor which had a negative impact on project execution. Differences were inevitable because the process of reform was left entirely in the hands of the institution needing reform, and there was no, external to AyA, national champion for the reform. The Bank was also slow in understanding that, given Costa Rica's institutional environment, a thorough and inclusive process to build wide social support was needed to get National Assembly approval, and to implement reforms. Finally, during the last years of project implementation--after a lengthy learning process, changes in counterparts and supervision teams--relations improved, and a good dialogue has been maintained since then.

Reduction in loan amount. The reduction of US$ 10 million in the loan amount affected negatively the implementation of the project and its outcome. This reduction was a result of an agreement between AyA’s management and the Bank. The reason for AyA’s management agreement to the reduction is unclear.

5.4 Costs and financing:The cost of the original project was estimated at US$ 40 million to be financed by AyA, US$ 14 million and the World Bank loan, US$26 million. On May 1997, the project cost was reduced to US$ 27.14 million, to be financed by AyA, US$ 11.14 million and the World Bank loan, US$16 million.The project scope was reduced accordingly. Project cost at closing date amounted to US$ 23.82 million, of which AyA financed 8.76 million and the World Bank-loan financed US$ 15.06 million.

6. Sustainability

6.1 Rationale for sustainability rating:Overall, sustainability of project achievements is rated as likely. This rating is justified in light of current transition arrangement for future operation and the programs of the current administration regarding future development of AyA. There are however considerable uncertainties in a public utility which is subject to periodical replacement of its management with the political cycle. The rationale for the sustainability rating is the following:

Implementation of the policy defined by the Government for the Sector and for AyA. The current Government adopted the recommendations of the Sectoral Analysis of water and Sanitation in Costa Rica (ASAPS) and defined a clear policy for the development of the sector and of AyA. It has also allowed AyA to get access to external lending to finance institutional reforms and a series of large sector investments. These actions of the Government provide confidence in the sustainability of the project achievements regarding institutional development.

SIFS Integrated Financial and Procurement System and SCI Integrated Commercial Management System. With these new systems installed and operational, AyA has at its disposal the most modern management instruments which can, if properly handled, boost efficiency and productivity, and

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significantly contribute to institutional improvements. These systems provide confidence in the sustainability of the project results and of AyA in terms of improving institutional performance.

Water supply constructed infrastructure. In general terms, AyA maintains the infrastructure in the SJMA in good condition, which to a large extent, ensures the sustainability of the works over time.

Sewerage infrastructure. Experience has shown that AyA does not maintain well its sewerage infrastructure, so the sustainability of the sewerage infrastructure constructed under the project, mainly the pumping stations, is not guaranteed. The new operation prepared with Bank support includes a large sewerage component which would be implemented and operated by the private sector which will guarantee the sustainability of this component.

6.2 Transition arrangement to regular operations:The water and sewerage works constructed under the project are relatively small in comparison with the SJMA systems; therefore, additional funding to supplement AyA’s existing resources is not needed for their operation and maintenance.

The operation of the SIFS and SCI will require maintenance and upgrading and appropriate allocation of funds is requested for that purpose. These requirements will need to be taken into account in the new operation with the Bank. In addition, AyA needs to implement all the activities which were eliminated from the project when the loan amount was reduced, such as the user cadastre in the SJMA, which is essential for proper operation of the systems.

7. Bank and Borrower Performance

Bank7.1 Lending:In November 1991, the Bank completed a Water Supply and Sanitation Sector Overview (Report No. 10070), which served as the basis for defining the project components. The Bank’s participation in project preparation and the relationship between the Bank and the Executing Agency were highly satisfactory at this stage of the project.

7.2 Supervision:As previously mentioned, during the first years of project execution the relationship between the Bank’s and AyA’s officers was difficult, reflecting changes in counterparts, fiscal constraints and changes in Government priorities. In the following years, around the mid-term review, the relationship was affected by differences of opinion and opposing views regarding institutional improvement and PSP. It is important to mention that all along the Bank maintained close supervision and contact with the Government and counterparts. Over the last few years of execution, the supervision team persistence paid off, relations improved considerably, and a fluid dialogue was established between the Bank, AyA, and the Government. This improved relation plus a shared vision of the sector have allowed initiating preparation activities for a new operation. Taking into account the Bank's persistent effort and the positive evolution, the rating of Bank performance during supervision is satisfactory.

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7.3 Overall Bank performance:The overall Bank performance rating is satisfactory, despite the difficulties at the start of project execution. This rating reflects: (i) the project’s final satisfactory achievements, (2) the initial good project design, (3) the persistent and close supervision, and finally, (4) the Bank's capacity to learn and adapt its approach to policy reform in Costa Rica. In addition, continued Bank support to the sector has been achieved at a time that the country needs the Bank’s technical and financial assistance for implementing the Government’s planned policy.

Borrower7.4 Preparation:AyA’s participation in project preparation was very active; AyA was aware of the need to study the sector in depth and it committed to do so. AyA participated very actively in the preparation of the Water Supply and Sanitation Sector Overview (Bank Report No. 10070) in 1991, which served as the basis for defining the project. The rating is satisfactory.

7.5 Government implementation performance:Approval of the loan in the Legislative Assembly took one year: the loan was signed on July 28, 1993, was approved by the Legislative Assembly on July 22, 1994, and was finally published in La Gaceta, the Official Gazette, on August 22, 1994. The Government failed to decisively support AyA in the execution of the project. AyA failed to obtain the needed tariff increases in a timely manner or to obtain Government’s approval to sufficiently high spending caps which would have ensured timely execution of the project. In spite of the Bank's efforts and sustained dialogue, during a significant part of the project implementation period (about the first seven years), the Government downgraded the sector priority, showing insufficient interest in the improvement of service quality or sector performance. As a result, service quality deteriorated, in general terms, during the decade of the nineties. Only during the final years of project implementation the attitude of the government changed, the water sector received higher priority and strong commitment to reform and improved performance has developed.

7.6 Implementing Agency:Project implementation was very slow; originally, the project was scheduled to close on June 30, 2000. Four extensions were needed to complete execution, the last one through December 31, 2003. The project was declared effective on October 27, 1994. The chart of disbursements in Annex 2(e) shows that in the years 1995 and 1996 there were practically no disbursements, due to delays in the preparation of the designs and bidding documents and to delays in the availability of counterpart funds.

The Executing Agency was unable to execute the full amount of the loan, and in July 1997, it made the decision, along with the Bank, to reduce the loan amount by US$10 million (from US$26 million to US$16 million). The official reason was a lack of AyA’s capacity for executing the loan in the agreed time frame, even though three years remained before the agreed term expired.

During a significant period of project implementation, the Executing Agency was late in submitting the external audit reports of the project and those of AyA. Audit delays were due to slow Government procurement procedures for hiring the external auditors and problems in preparing the financial reports.

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During the last four years of project implementation, the performance of the Executing Agency has improved in all aspects. The Government of Costa Rica and AyA became more supportive of the project and its long-term objectives.

7.7 Overall Borrower performance:Two distinct periods could be identified in terms of the Borrower’s (both government and Executing Agency) performance in project implementation. During the first six years the Borrower’s performance was unsatisfactory, while during the last four years it has improved a lot and could be classified as Satisfactory. Since the overall Borrower performance rating covers the entire project implementation period, and considering the difficulties during the first years of project implementation as described above, the overall Borrower performance (during the combined two periods) is rated as unsatisfactory.

8. Lessons Learned

Approval of the loan agreements. In Costa Rica, approval of loan agreements is handled by the Legislative Assembly. In the best of cases, this approval takes no less than one year. This time period needs to be taken into account in the timeline for project implementation, yet at the same time, it should be used by the Executing Agency to get ready for the project execution by implementing studies, designs, etc.

Government support for the project. The Government’s involvement in project implementation was very limited. In future operations, a mechanism should be established for a continuous dialog with Government authorities, specifically the Ministries of Health and Finance and the National Water Council.

Executing Agency support for the project. The project suffered considerable delays in execution due to lack of support from AyA’s management for its implementation during the initial years. Decline in support generally arise during periodic changes in administrations, which follow the political cycle, every four years and sometimes more frequent. Future operations should establish better mechanisms for evaluating project execution. The mid-term review ought to be supplemented with evaluations at the start of each new administration.

Government procurement. Not all of the Bank’s procurement guideline are compatible with the Costa Rican procurement Law. During project preparation the supralegality of the Bank procurement guidelines was not recognized in Costa Rica. This created implementation problems during the entire period of project execution and led to situations that were impossible to resolve. This lesson has not been capitalized, given that in executing the first Bank operation (Loan 1935-CR), this was one of the biggest challenges. For future operations, this subject needs to be carefully analyzed and a solution to it needs to be identified. The mechanism used in the present loan for overcoming procurement problems, which was the hiring of PAHO as a procurement agency which does not have to act according to the local procurement Law, was declared by the Comptroller General of the Republic as illegal, since it did not follow the procedures set forth in the national legislation on government procurement. The matter of procurement inconsistency is still unresolved.

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Tariffs. The approval of tariff increases was one of the hurdles in the execution of the project. They were not timely, nor do they adhere to clear negotiation principles between the Executing Agency and ARESEP. New operations should make advance plans for clear and transparent principles for tariff increases, agreed upon by the Executing Agency and the ARESEP, particularly while taking into account the regulating entity’s last resolution, which equalized AyA rates throughout the country: metropolitan, urban and rural.

Preparation of projects, designs, bidding documents and contracts. In the two water sector projects partially financed by Bank Loans (the previous Loan 1935-CR and the current Loan 3625-CR), the preparation of designs and bidding and contract documents were causes for considerable delays. The time during which a loan is in the process of approval within the country should be used for implementing these activities. An itemized time line and monitoring by sector authorities should be prepared to reduce these delays. The use of external consulting services is highly recommended for preparation of projects, since it would free the institution from a considerable work load.

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9. Partner Comments

(a) Borrower/implementing agency:

(b) Cofinanciers:Not applicable.

(c) Other partners (NGOs/private sector):Not applicable.

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10. Additional Information

Technical Assistance Agreement with PAHO. To prepare and execute the project, AyA and PAHO signed an agreement (as established in the Loan Agreement), for the purpose of provision of technical assistance to AyA by PAHO, for executing Components A and B of the project. The agreement was also used to procure consulting services and goods according to the Bank guidelines and overcome the problem of incompatibility with the local procurement legislation, with PAHO acting as a procurement agency.

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Annex 1. Key Performance Indicators/Log Frame Matrix

Annex 1a: Output Indicators

Indicator Projected in Loan Agreement for 2001

Actual/Latest Estimate (December

2003)OPERATIONAL TARGETS

1. Domestic metering Level (%) AyA = No. Connections with Operating Meter x 100/No. Water Connections

99 93.3

2. Bulk metering Level SJMA (%) = No. Water Connections x 100/Metered water produced

100 90

3. Unaccounted for Water (%) SJMA = Water Produced - Water billed x 100 / Water Produced

28 48.9

4. Staff Productivity Level AyA = Employees year end / 1000 Water connections year end

6.6 (MTR 4.9) (1) 4.9

FINANCIAL TARGETS5. Personnel Cost/ Operating Cost (%) = Personal Costs x 100 / Operational Costs

0.56 0.49

6. Working Ratio = Operational Costs (Without Depreciation) / Operational Revenues

0.50 0.67

7. Debt Service Coverage Ratio = Internal Cash Generation / Total Debt Service

- (MTR 2.4) 2.2

8. Average Collection Period (Months) = Accounts Receivable year end x12 / (Annual Water + Sewer Revenues)

2.5 2.15

9. Minimum Contribution to Invest. (%) = Minimum Net Internal Cash Generation(4) / Total Investments

30 53.2

(1) Mid Term Review

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Annex 1b: Key performance indicators evolution Operational and Financial Targets

1991(3) 1993 1994 1995 1996 1997 1998 1999(4) 2000(4) 2001(4) 2002

OPERATIONAL TARGETS 1. Micrometering Level (%) AyA = No. Connections with Operating Meter x 100/No. Water Connections Loan Agreement (1) 79 91 96 99 99 99 99 99 99 99 Mid Term Review (2) 71 70 72 77 84 92 99 99 99 99 Real 78.90 - 70.0 73.0 78.0 77.0 85.0 89.0 87.7 81.8 2. Macrometering Level SJMA (%) = No. Water Connections x 100/Metered water produced Loan Agreement 50 60 80 100 100 100 100 100 100 100 Mid Term Review - 70 79 85 90 95 100 100 100 100 Real - 70.0 75.0 80.0 80.0 80.0 80.0 76.6 95.1 3. Unaccounted for Water (%) SJMA = Water Produced - Water billed x 100 / Water Produced Loan Agreement 44 39 34 28 28 28 28 28 28 28 Mid Term Review 50 54 51 50 48 43 36 31 31 31 Real 48.20 54.0 53.0 53.0 51.0 - - 46.6 46.5 4. Staff Productivity Level AyA = Employees year end / 1000 Water connections year end Loan Agreement 8.20 7.80 7.50 7.20 7.00 6.80 6.60 6.60 6.60 6.6 Mid Term Review 7.80 7.40 6.30 6.00 5.70 5.40 5.10 4.90 4.90 4.9 Real 9.50 7.40 6.20 5.80 5.80 5.60 5.04 5.70 4.90 FINANCIAL TARGETS 5. Personnel Cost/ Operating Cost (%) = Personal Costs x 100 / Operational Costs Loan Agreement 0.58 0.58 0.58 0.58 0.57 0.56 0.56 0.56 0.56 0.56 Mid Term Review 0.58 0.58 0.58 0.52 0.52 0.52 0.52 0.51 0.51 0.51 Real 64.30 54.50 53.60 48.70 47.60 48.00 47.00 50.00 45.00 6. Working Ratio = Operational Costs (Without Depreciation) / Operational Revenues Loan Agreement 0.55 0.55 0.50 0.50 0.50 0.50 0.50 0.50 0.50 0.50 Mid Term Review 0.70 0.70 0.66 0.64 0.62 0.60 0.57 0.54 0.54 0.54 Real 0.70 0.71 0.66 0.70 0.72 0.74 0.65 0.67 0.75 7. Debt Service Coverage Ratio = Internal Cash Generation / Total Debt Service Loan Agreement - - - - - - - - - - Mid Term Review (5) 1.7 2.5 2.4 2.4 2.4 2.4 2.4 2.4 2.4 2.4 Real 1.3 2.0 2.3 4.6 2.7 3.0 4.0 1.8 2.0 8. Average Collection Period (Months) = Accounts Receivable year end x12 / (Annual Water + Sewer Revenues) Loan Agreement 2.5 2.5 2.5 2.5 2.5 2.5 2.5 2.5 2.5 2.5 Mid Term Review 2.8 3.3 3.7 3.2 3.0 2.5 2.5 2.5 2.5 2.5 Real 3.9 3.3 3.7 3.5 3.6 3.0 3.2 3.5 2.6 9. Minimum Contribution to Invest. (%) = Minimum Net Internal Cash Generation(4) / Total Investments Loan Agreement 14.0 14.0 14.0 20.0 30.0 30.0 30.0 30.0 30.0 30.0 Mid Term Review Real 22.0 16.4 18.2 36.6 18.9 22.0 24.5 54.4 53.2 (1) Loan Agreement signed July 28, 1993 (2) Mid Term Review June 28, 1996 (3) 2001 Financial Statements not audited (4) The Financial indicator from 1999 to 2000 were estimated based on the assumption that the tariffs would be maintained at the current level. (5) SAR Revised: July 2002, Aid Memoire 29 Jul - 2 Aug 2002

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Annex 2. Project Costs and Financing

Annex 2a: Project Costs by Components (in US$ million equivalent)

Project Component Appraisal Estimate

Amendment Actual/Latest Estimate

(Decembr 31, 2003)

Percentage of Amendment

A. Institutional Strengthening 2.1 2.90 4.02 1.39B. UFW Program 10.8 7.01 7.65 1.09C. SJMA Water Supply 4.7 2.80 2.23 0.80D. SJMA Sewerage Rehabilitation .6 0.94 0.65 0.69E. Operation and Maintenance 1.3 0.57 0.5 0.89Base Cost (December 1992) 19.5 14.22 15.06 1.06Physical Contingencies 2.8 1.78 0.00 0.00Price Contingencies 3.7 0.00 0.00 0.00Total Project Cost 26.0 16.0 15.06 0.94

Annex 2b: Project Costs by Procurement Arrangements (In US$ million equivalent)

Expenditure Procuremet Method Procurement MethodCategories Appraisal Estimate Actual/Latest Estimate ICB LCB Other Total ICB LCB Other Total 1 Works 0.30 2.00 0.00 2.30 1.64 1.20 0.03 2.86 2 Goods 8.90 5.80 2.30 17.00 3.10 0.13 0.58 3.81 3 Services 0.00 1.40 5.30 6.70 0.00 0.00 8.38 8.38 4 Misc. 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 Total 9.20 9.20 7.60 26.00 4.74 1.33 8.99 15.06

Annex 2c: Project Financing by Component (in US$ million equivalent)

Component Appraisal Estimate Amendment Actual/Latest Estimate Bank AyA Total Bank AyA Total Bank AyA Total

A. Institucional Strengtening 2.10 0.70 2.80 2.90 0.25 3.15 4.02 0.20 4.22 B. UFW Program 10.80 1.50 12.30 7.01 2.17 9.18 7.65 1.78 9.43 C. SJMA Water Supply 4.70 5.20 9.90 2.80 6.31 9.11 2.23 5.05 7.28 D. SJMA Sewerage Rehabilitation

0.60 2.40 3.00 0.94 2.18 3.12 0.65 1.51 2.16

E. Operation and Mintenance 1.30 0.40 1.70 0.57 0.23 0.80 0.50 0.22 0.72 Base Cost (December 1992) 19.50 10.20 29.70 14.22 11.14 25.36 15.06 8.76 23.82 Phyical Contingencies 2.80 1.50 4.30 1.78 0.00 1.78 0.00 0.00 0.00 Price Contingencies 3.70 2.30 6.00 0.00 0.00 0.00 0.00 0.00 0.00 Total Project Cost 26.00 14.00 40.00 16.00 11.14 27.14 15.06 8.76 23.82

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Annex 2d: Project costs by loan categories

Not in standard ICR document

SAR-8 Mar 93 Amedment Final Abr 03 Not Disbursed Percentage=CATEGORIES May 2, 1997 Apr-03 Nov 02 x 100/

Amedment 1. Consultancy services and training

6,000,000.00 8,525,000.00 8,378,951.93 146,048.07 98.29

2. Materials and equipment 15,000,000.00 4,100,000.00 3,813,534.41 286,465.59 93.01 3. Civil works 2,000,000.00 2,900,000.00 2,864,936.36 35,063.64 98.79 4. Unallocated 3,000,000.00 475,000.00 0.00 475,000.00 0.00 TOTAL 26,000,000.00 16,000,000.00 15,057,422.70 942,577.30 94.11

Annex 2e: Project disbursements per year

Not in standard ICR document

Reference/FY 1994 1995 1996 1997

1998 1999

2000 2001 2002 2003 Total

SAR: March 8, 1993 1.40 3.50 4.00 5.00 6.70 3.60 1.80 26.00 Amendment May 2, 1997 0.18 0.28 0.88 4.66 7.50 2.50 16.00 Disbursed, April 03 0.18 0.28 0.88 4.73 3.20 3.24 0.67 0.80 1.07 15.06

- 27 -

Disbursements Comparison

0.00

2.00

4.00

6.00

8.00

1 2 3 4 5 6 7 8 9 10

Year

US

$ M

illio

ns

SAR Amedment Actual Disbursed

- 28 -

Annex 3. Economic Costs and Benefits

Not applicable

- 29 -

Annex 4. Bank Inputs

(a) Missions:Stage of Project Cycle Performance Rating No. of Persons and Specialty

(e.g. 2 Economists, 1 FMS, etc.)Month/Year Count Specialty

ImplementationProgress

DevelopmentObjective

Identification/Preparation02/1991 2 TASK MANAGER

(ENGINEER), FINANCIAL AANALYST

06/1991 4 TASK MANAGER (ENGINEER); INSTITUTIONAL SPECIALIST, FINANCIAL ANALYST (2)

10/1991 5 TASK MANAGER (ENGINEER), INSTITUTIONAL SPECIALIST, FINANCIAL ANALYST (2)

03/1992 4 TASK MANAGER (ENGINEER, INSTITUTIONAL SPECIALIST, ENGINEER , FINANCIAL ANALYST

Appraisal/Negotiation08/1992 5 TASK MANAGER

(ENGINEER), INSTITUTIONAL SPECIALIST, FINANCIAL ANALYST, ENGINEER

03/1993 2 TASK MANAGER (ENGINEER), ENGINEER

Supervision

03/18/1994 2 MUNICIPAL ENGINEER (1); SANITARY ENGINEER (1)

2 1

12/09/1994 4 MUNICIPAL ENGINEER (1); DISBURSEMENT OFF. (1); LAWYER (1); TASK MANAGER (1)

S HS

04/21/1995 2 MUNICIPAL ENGINEER (1); TASK MANAGER (1)

S HS

09/11/1995 3 FINANCIAL ANALYST (1); MUNICIPAL ENGINEER (1); TASK MANAGER (1)

S S

05/24/1996 3 FINANCIAL ANALYST (1); MUNICIPAL ENGINEER (1); TASK MANAGER (1)

U S

12/13/1996 3 FINANCIAL ANALYST (1); MUNICIPAL ENGINEEER (1); TASK MANAGER (1)

U S

- 30 -

03/14/1997 3 SECTOR LEADER (1); MUNICIPAL ENGINEER (1); FIELD OFFICER (1)

U S

06/20/1998 3 TASK MANAGER (1); INSTITUTIONAL (1); FINANCIAL ANALIST (1)

S S

01/21/1999 2 TASK MANAGER (1); FINANCIAL SPECIALIST (1)

S S

06/24/1999 1 TASK MANAGER (1) S S10/22/1999 3 TEAM LEADER (1); INST.

DEVELOP. EXPERT (1); FINANCIAL EXPERT (1)

S S

06/2000 2 TASK TEAM LEADER (1); INST. AND ENG. EXPERT (1)

S S

11/02/2001 2 TASK TEAM LEADER (1); ENGINEER (1)

S S

11/02/2001 4 TASK TEAM LEADER (1); FINANCIAL SPECIALIST (1); ECONOMIST (1); ENVIRONMENTAL SPECIALI (1)

S S

03/14/2003 1 TTL (1) S S11/07/2003 1 TTL (1) S S

ICR06/2003 1 FINANCIAL

MANAGEMENT SPECIALIST

S S

11/2003 4 TASK MANAGER (ENGINEER), ENGINEER, FINANCIAL ANALYST, ECONOMIST

S S

03/2004 1 TASK MANAGER (ENGINEER)

S S

TM Task ManagerEN EngineerFA Financial AnalystIS Institutional SpecialistLY LawyerPS Procurement SpecialistDS Disbursement SpecialistEC EconomistENV Environmental SpecialistFMS Financial Management SpecialistTTL Task Team Leader

- 31 -

(b) Staff:

Stage of Project Cycle Actual/Latest EstimateNo. Staff weeks US$ ('000)

Identification/Preparation 70 153,000Appraisal/Negotiation 40 118,700Supervision 322 699,000ICR 10 16,000Total 442 986,000

- 32 -

Annex 5. Ratings for Achievement of Objectives/Outputs of Components(H=High, SU=Substantial, M=Modest, N=Negligible, NA=Not Applicable)

RatingMacro policies H SU M N NASector Policies H SU M N NAPhysical H SU M N NAFinancial H SU M N NAInstitutional Development H SU M N NAEnvironmental H SU M N NA

SocialPoverty Reduction H SU M N NAGender H SU M N NAOther (Please specify) H SU M N NA

Private sector development H SU M N NAPublic sector management H SU M N NAOther (Please specify) H SU M N NA

- 33 -

Annex 6. Ratings of Bank and Borrower Performance

(HS=Highly Satisfactory, S=Satisfactory, U=Unsatisfactory, HU=Highly Unsatisfactory)

6.1 Bank performance Rating

Lending HS S U HUSupervision HS S U HUOverall HS S U HU

6.2 Borrower performance Rating

Preparation HS S U HUGovernment implementation performance HS S U HUImplementation agency performance HS S U HUOverall HS S U HU

- 34 -

Annex 7. List of Supporting Documents

List of supporting documents in ICR file, such as aide-memoire, details of IRR calculations, comments by borrower, co-financiers and other partners, beneficiaries survey and map.

[1] The World Bank, Report No. 11440-CR, March 8, 1993: Staff Appraisal Report, Costa Rica, Second Water Supply and Sewerage Project.

[2] Costa Rica Law 7418, Official Gazette No. 158, August 22, 1994: World Bank 3625-CR Loan Approval.

[3] E. Prado, Septiembre 1998: Elaboración de políticas de inversión y recuperación de costos.

[4] Concesa, Junio 2001: Determinacion de Costos de Inversión, Operación y Mantenimiento para los Sistemas de Acueducto y Alcantarillado Sanitario del AyA.

[5] AyA-OPS/OMS, Julio del 2002: Análisis Sectorial de Agua Potable y Saneamiento en Costa Rica.

[6] Vergara, Carlos, 1994: Modelo del Sistema de Planeamiento Empresarial de AyA, del Modelo de Presupuesto Empresarial de AyA, y de las Directrices para la Formulación del Plan Operativo Anual y del Presupuesto de 1995.

[7] Marmanillo, Iris: 1995: AyA Plan de Inversiones.[8] Niño, Jairo, AyA, Diciembre de 1997: Propuesta de Nueva Estructura Tarifaria para AyA.[9] ARESEP, La Gaceta No 221 del 15 Nov 02: Aprobación de tarifas de agua potable y

alcantarillado sanitario al AyA.[10] Banco Mundial, Saravia, Salinas y Sour, Marzo de 1999: Opciones Estratégicas para el

Sector Agua y Alcantarillado, Empresa AyA, Costa Rica.[11] ARESEP, Mayo 2002, Decreto Ejecutivo 30413: Reglamento Sectorial para la

Regulación de los Servicios de Acueducto y Alcantarillado Sanitario.[12] Contraloría General de la República, 19 Abril 2001: Nulidad Absoluta del numeral 4.3 de

la Cláusula Cuarta del Convenio Específico No. 2 suscrito entre el AyA y la OPS el 28 de abril de 1994.

[13] Consejo Nacional de Rectores (CONARE), Defensoría de los Habitantes, PNUD, 1998, 1999, 2000, 2001: Estado de la Nación en Desarrollo Humano Sostenible.

[14] Ministerio de la Presidencia, 2002: Establecimiento del Consejo Nacional del Agua.[15] ICR Preparation Misions – Aide Memoire, 3-7 November 2003, Aide Memoire 22-26,

March 2004

- 35 -

Additional Annex 8. Borrower's ICR

IMPLEMENTATION COMPLETION REPORT (ICR)Comentarios del Prestatario

Préstamo 3625-CR

8.1 Comentarios en relación con los objetivos del proyecto

El proyecto fue concebido como un aporte a la solución de los problemas que enfrentaba el sector de agua potable y alcantarillado sanitario en general, y el Instituto Costarricense de Acueductos y Alcantarillados (AyA) en particular, al inicio de los años 90, de acuerdo a la visión sobre la prestación de estos servicios que prevalecía en esa época.

A continuación un análisis comparativo de la situación existente en 1990 que propicio la formulación de los objetivos del proyecto y la situación actual respecto a estos mismos criterios, con el fin de evaluar, aunque de forma indirecta, el efecto del proyecto en la situación del sector y del AyA.

Situación previa a la ejecución del proyecto

El “Estudio del Sector de Abastecimiento de Agua y Saneamiento de Costa Rica”, elaborado por el Banco Mundial y concluido al inicio de la década de los años 901, identificó que el sector enfrentaba retos institucionales y financieros que, en caso de no ser resueltos, podían disminuir la capacidad de las instituciones para continuar brindando a la población servicios de calidad y deteriorar las condiciones ambientales en el país.

A continuación un resumen de la situación del país y del AyA en ese momento, según los criterios que se resaltan en el informe correspondiente a este estudio:

A. El país tenía un buen nivel en cuanto a las condiciones generales de salud pública, en gran parte debido al mejoramiento de los servicios de agua y saneamiento en el país y principalmente en la GAM.

B. A pesar del abundante recurso hídrico que tiene el país, la degradación de este recurso iba en aumento con la consecuente preocupación por esta situación.

C. Existían numerosas leyes y reglamentos para la protección del recurso hídrico, sin embargo, estas normas no se cumplían principalmente debido a la compleja estructura institucional, que producía duplicación de responsabilidades entre diversas instituciones públicas y diluía la responsabilidad de estas instituciones en la aplicación de las leyes y reglamentos.

_____________________1“Costa Rica – Estudio del Sector de Abastecimiento de Agua y Saneamiento”. Informe N° 10070-CR. División de

Operaciones de Infraestructura, Departamento II, Región de América Latina y el Caribe, Banco Mundial. Diciembre 30, 1991.

- 36 -

D. Se identificó el sector de agua potable y saneamiento compuesto fundamentalmente por: el Ministerio de Salud, el Instituto Costarricense de Acueductos y Alcantarillados (AyA), el Instituto de Fomento y Asesoría Municipal (IFAM), los Municipios (donde se incluye la Empresa de Servicios Públicos de Heredia) y el Servicio Nacional de Electricidad (SNE). Se indica también la participación de otras instituciones públicas que tienen roles importantes tales como el Ministerio de Recursos Naturales, Energía y Minas (MIRENEN), la Contraloría General de la República y la Procuraduría General de la República.

E. Aunque en 1990, de la población total del país el 92% tenía servicio de agua potable mediante conexión domiciliaria y el 96% tenía acceso a algún sistema de saneamiento2, en muchos acueductos se presentaba un alto nivel de agua no contabilizada que comprometía la continuidad del servicio y provocaba la necesidad de ampliar la capacidad de producción para compensar las pérdidas, y la cobertura real del sistema de saneamiento era menor a la indicada debido a las malas condiciones en que se encontraban algunos tanques sépticos y letrinas.

F. Se estimó que las necesidades de inversión durante la década de los años 90 para lograr en el año 2000 a nivel de país una cobertura de 100% en agua y saneamiento (30% con alcantarillado sanitario y 70% con tanques sépticos y letrinas) y tratar el 50% de las aguas residuales de las población urbana con alcantarillado sanitario, eran de US$386 millones de 1991 o aproximadamente US$40 millones por año (equivalente al 0.7% del PIB). De darse, estas inversiones casi se triplicarían las inversiones históricas, lo cual indicaba la necesidad de establecer una estrategia más agresiva de recuperación de costos y de un uso económico del agua, así como una mejora en la eficiencia de las operaciones de los servicios como una forma de reducir costos.

G. Debido a la existencia de distintos operadores de los servicios de agua potable y saneamiento en la GAM (AyA, ESPH y varios municipios) se identificaron problemas de responsabilidades entre estos entes operadores. Además se resalta el hecho de que las alternativas existentes desde esa época para satisfacer la demanda de agua en las áreas de cobertura de cada uno de estos operadores en forma individual, no eran económicamente viables dadas las grandes economías de escala asociadas con las obras de producción y tratamiento (tanto de agua potable como de aguas residuales).

H. Según los datos del estudio, AyA tenía bajo su responsabilidad los servicios de agua potable de aproximadamente el 45% de la población y la mayoría de los sistemas de alcantarillado sanitario existentes en el país. Además AyA brindaba apoyo técnico y financiero a áreas rurales concentradas (24% de la población) que administraban los servicios mediante juntas administradoras constituidas con ese fin. El 26% de la población se abastecía de sistemas que estaban bajo la responsabilidad de los municipios (o empresas municipales como la ESPH), estando la mayor parte de estos sistemas en situación precaria. El Ministerio de Salud tenía bajo su responsabilidad la atención de los servicios que abastecían al 5% de la población total. En relación con este aspecto se especifica que existen fuertes razones para promover al

____________________2Mediante un sistema de alcantarillado sanitario, tanque séptico o letrina.

- 37 -

AyA como institución administradora de los servicios de agua potable y alcantarillado a nivel nacional, pero que existen fuertes restricciones organizacionales y financieras que limitan la capacidad de AyA para asumir un rol más protagónico.

I. Se identificó como una innecesaria duplicación de responsabilidades la acción de AyA y del IFAM en el suministro de asistencia técnica y financiera a los municipios, asimismo se indicó que el subsidio que representaba el hecho de que los préstamos realizados por AyA y el IFAM a los municipios tuvieran tasas de interés que están por debajo de las tasas comerciales de mercado, no era transparente ni estaba dirigido a las poblaciones económicamente más necesitadas.

J. Se indica que el SNE, que tenía en ese entonces la responsabilidad de la aprobación de las tarifas de servicios públicos y la administración de los recursos hídricos, no tenía políticas tarifarias claras ni tampoco tomaba en cuenta en cuenta en la fijación de las tarifas parámetros de eficiencia operacional.

K. Se anota que el sector privado ha tenido un rol muy marginal en el desarrollo del sector y que ha estado limitado a la construcción de obras principalmente. Adicionalmente se indica que el sector enfrenta dos retos mayores: la necesidad de recursos financieros cuando el Gobierno tiene serias restricciones presupuestarias y la necesidad de incrementar la eficiencia empresarial, destacando que en ambos casos la participación del sector privado puede jugar un rol decisivo.

L. Específicamente sobre el AyA, los principales aspectos anotados en el estudio fueron.

(a) Sobreposición de funciones entre la Presidencia Ejecutiva y la Gerencia General(b) Desbalance organizacional que da prioridad al área de ingeniería en detrimento de otras

áreas tales como la financiera y la comercial(c) Organización muy centralizada y poca delegación de autoridad, que no favorece la

eficiencia y el manejo ágil de los problemas operacionales diarios que se presentan en las ciudades alejadas de San José

(d) Debilidad en el planeamiento empresarial(e) Ausencia de un sistema de información gerencial(f) Ausencia de indicadores de monitoreo para evaluar el desempeño de las diversas unidades

o áreas de la institución(g) Bajo índice de productividad del personal (9.5 empleados por 1000 conexiones)(h) Altos costos de personal (66% del costo total de operación)(i) Ausencia de mantenimiento preventivo(j) Alto nivel de agua no contabilizada (56%)(k) Sistema de facturación comercial con limitaciones(l) Nivel no óptimo de micromedición(m)Alto nivel de cuentas por cobrar(n) Deterioro de la situación financiera originado en incrementos sustanciales de los costos

operativos e incrementos tarifarios inadecuados

- 38 -

(o) Financiamiento de inversiones mediante préstamos externos en municipios no administrados por AyA, asumiendo el servicio de deuda de estos

(p) Ausencia de políticas claras de recuperación de costos en la formulación de las tarifas

A partir del análisis de la situación del sector y del AyA en aquel momento, expuesta de forma resumida en los puntos anteriores, en el informe se proponen las siguientes recomendaciones:

A nivel nacional y municipal:

1. El Gobierno debe definir, dentro del más breve plazo posible, la política de inversión para el sector, contemplando los siguientes factores:

(a) Todas la inversiones deberían corresponder a la solución de mínimo costo y deberían financiarse en parte con la generación interna de caja y con la contribución de los usuarios beneficiados con dichas inversiones.

(b) Las obras de rehabilitación deberían recibir primera prioridad.

(c) Los requerimientos de operación, así como la capacidad operativa del ente responsable del mantenimiento deberían ser considerados.

(d) Las inversiones o deben ser subsidiadas a través de tasas de interés por debajo de las tasas comerciales de mercado. Los subsidios, de ser necesarios, deben ser transparentes y apropiadamente dirigidos a las poblaciones de menores recursos económicos.

2. El IFAM, que tiene una ventaja comparativa en el aprovisionamiento de financiamiento a los municipios para obras de infraestructura, debe continuar con ese rol. La ventaja comparativa de AyA reside en el planeamiento del sector, operaciones y apoyo técnico a los municipios, por lo tanto no debería continuar con el rol de intermediario financiero del sector.

3. Deben definirse dentro del más breve plazo posible, los arreglos operativos y organizacionales a adoptarse para los servicios de agua potable y alcantarillado en la GAM, antes de que se ejecuten obras adicionales de estos servicios, para obviar inversiones costosas que pudieran afectar aún más la crítica posición financiera de AyA.

4. Debe buscarse una participación más amplia y activa del sector privado, como parte de los esfuerzos para incrementar la eficiencia del sector de agua y saneamiento. Para promover esta estrategia, AyA debe trabajar en estrecha coordinación con las autoridades nacionales así como con las autoridades municipales, de forma tal a eliminar las limitaciones legales, institucionales y políticas que pudieran existir para lograr esta participación. Debe iniciarse en el más breve plazo un estudio de alternativas para lograr una mayor participación del sector privado y para atraer fondos privados al sector.

5. Debe incrementarse la protección ambiental de los cursos de agua y desarrollar una estrategia de largo plazo para resolver esta problemática en forma coherente.

- 39 -

A nivel de AyA:

1. Deben definirse de forma clara las responsabilidades y líneas de autoridad del Presidente Ejecutivo y del Gerente General

2. Debe instituirse en AyA un área de planeamiento empresarial

3. Debe prioritariamente diseñarse e implementarse un sistema de información gerencial

4. Debe continuarse la implementación del programa de agua no contabilizada

5. Debe iniciarse el mejoramiento del área comercial, dando prioridad a los sistemas de facturación, a la administración y mantenimiento de la micromedición, y a la eficiencia de cobranza

6. Deben tomarse las acciones necesarias para mejorar los indicadores financieros

7. Debe establecerse que las tarifas de agua y alcantarillado cubran el costo económico de los servicios

8. Debe revisarse y modificarse la estructura tarifaria para que promueva el uso eficiente de estos servicios

Situación posterior a la ejecución del proyecto

A. El país ha mantenido e incluso mejorado el buen nivel en cuanto a las condiciones de salud pública. Las principales acciones relacionadas con el sector que han tenido influencia en esta situación son: a) las inversiones para el mejoramiento y ampliación de la infraestructura de los servicios de agua potable que se continuaron realizando durante la década de los años 90, b) el mejoramiento de la merece resaltarse el esfuerzo que durante los últimos 10 años se ha realizado en el país para: a) calidad del agua suministrada por los diferentes entes operadores, y c) las buenas prácticas de higiene en el hogar que tiene la población costarricense.

En relación con este punto mejorar efectivamente la calidad del agua que se suministra a la población y b) incrementar la cobertura del control de la calidad del agua que permite verificar que esta realmente ha mejorado.

B. En relación con la salud ambiental, el sector privado ha realizado durante los últimos 10 años esfuerzos significativos dirigidos a reducir la contaminación, y consecuente degradación, de las aguas superficiales, originada en su mayor parte por los desechos de las actividades agroindustriales del café y de la caña de azúcar. Por otra parte, la contaminación de las aguas superficiales por la descarga de aguas residuales de origen urbano se ha incrementado, especialmente en el Area Metropolitana de San José (AMSJ) y en el resto de las principales ciudades del país, debido al crecimiento poblacional y al aumento de cobertura de las redes de recolección. Según los resultados de algunas investigaciones recientes, se ha detectado

- 40 -

contaminación de las aguas subterráneas en algunos de los acuíferos y manantiales del país de los cuales se extrae agua para consumo humano, posiblemente originada por los efluentes de los tanques sépticos que se descargan al subsuelo y por los agroquímicos utilizados en la agricultura.

Los esfuerzos del sector público durante los últimos 10 años para reducir la contaminación de las aguas superficiales y subterráneas debido a las aguas residuales urbanas en cuyo ámbito se encuentra la gestión de los sistemas de alcantarillado sanitario, no han logrado resultados concretos, a pesar de que: a) el Gobierno de Costa Rica en 1992

3 indicó al Banco Mundial que

entre sus Políticas Institucionales y de Reforma del Sector Público, en relación con los servicios de agua potable y alcantarillado sanitario, tenía como prioridad la reducción de la contaminación de los cursos de agua, especialmente en GAM y en el Río Grande de Tárcoles, y propiciar las acciones necesarias para el manejo integrado de las cuencas; b) se han emitido o modificado leyes, reglamentos y normas sobre esta temática, y c) se han constituido formalmente organismos para el manejo de las cuencas del Río Grande de Tárcoles y del Río Reventazón.

La percepción de la magnitud del problema y de que no se han logrado resultados concretos se ha generalizado, de tal forma que en el Plan Nacional de Desarrollo - Monseñor Víctor Manuel Sanabria, de la Administración Pacheco de la Espriella, 2002 – 2006, se indica:

“….El Gobierno declaró prioridad el trabajo institucional en materia de recursos hídricos, donde urge un enorme esfuerzo de coordinación y armonía legal que resuelva los problemas originados del traslape de competencias de las instituciones relacionadas con el recurso. Lo anterior es urgente para responder de manera efectiva a las fuertes presiones sobre la disponibilidad del recurso hídrico, principalmente originadas en la concentración demográfica y la expansión urbanística. Asimismo, preocupan las presiones sobre la calidad del recurso, especialmente en lo relativo a la contaminación de aguas superficiales y subterráneas. ….” 4

C. La situación respecto al bajo cumplimiento de las normas incluidas en las numerosas leyes y reglamentos existentes para la protección del recurso hídrico básicamente se mantiene, con algunas excepciones calificadas, y en general por las mismas causas identificadas en el “Estudio del Sector de Abastecimiento de Agua y Saneamiento de Costa Rica” publicado en 1991.

____________________3 Anexo 17 del SAR. Oficio DM-0977-92 enviado al Sr. Lewis Preston, Presidente del Banco Internacional de

Reconstrucción y Fomento, por los señores Rodolfo Méndez y Carlos Vargas, Ministro de Hacienda y Ministro de Planificación Nacional y Política Económica, respectivamente.4Plan Nacional de Desarrollo Monseñor Victor Manuel Sanabria. Diágnostico – Area Temática: En Armonía con

Ambiente.

- 41 -

D. Aún cuando el Gobierno de la República en 19925 indicó al Banco Mundial que entre sus Políticas Institucionales y de Reforma del Sector Público en relación con estos dos servicios tenía como prioridad establecer dentro del Sector Salud el Subsector de Agua Potable y Alcantarillado Sanitario bajo la coordinación del AyA, de forma que este subsector comprendiera los sistemas públicos de agua potable y alcantarillado sanitario, y además indicó

6

:

• que formalizaría en el contexto legal la creación del Subsector de Agua y Alcantarillado en el Sector Salud;

• que determinaría el marco organizacional y los procedimientos que deberían ser utilizados en el subsector de acuerdo a las políticas dadas por el Gobierno;

• que definiría la forma en que estos mecanismos serían aplicados y el tiempo estimado para introducirlos en la GAM;

• que definiría lo mismo para el resto del país; y• que prepararía el Plan de Acción para implantar estas actividades y las acciones a ejecutar

hasta que el proceso fuera completado.

actualmente no está constituido formalmente el Subsector de Agua Potable y Alcantarillado Sanitario dentro del Sector Salud, y de igual manera no fueron definidos el marco organizacional, los procedimientos, los mecanismos ni el Plan de Acción para la implementación de la propuesta planteada en 1992.

Sobre este tema, durante el período de ejecución del proyecto se presentaron varias posiciones e iniciativas, a continuación se indican las más relevantes:

En 1995 en AyA se preparó una propuesta para el ordenamiento del Subsector que fue presentada a conocimiento del Gobierno Central7, específicamente del Ministerio de Reforma del Estado, y posteriormente del Banco Mundial. Básicamente la propuesta consistía en la creación de un Instituto Rector de Agua y Saneamiento (IRAS) y el marco institucional propuesto buscaba diferenciar los roles de los entes operadores, del ente rector y del ente regulador.

____________________5Anexo 17 del SAR. Oficio DM-0977-92 enviado al Sr. Lewis Preston, Presidente del Banco Internacional de

Reconstrucción y Fomento, por los señores Rodolfo Méndez y Carlos Vargas, Ministro de Hacienda y Ministro de Planificación Nacional y Política Económica, respectivamente.6Anexo 20 del SAR. Términos de Referencia – Marco Institucional y Políticas Sectoriales.

7Oficio DPE-2093-96 de fecha 15 de mayo de 1996 enviado por la Dra. Anna Gabriela Ross, Presidente Ejecutivo

de AyA, al Ing. Ventura Bengoechea, Oficial del Proyecto del Banco Mundial.

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En el año 1998, se le presenta al Banco Mundial el criterio del nuevo Gobierno que asumía funciones, respecto a la necesidad de la reforma del marco institucional para la prestación de los servicios de agua potable y alcantarillado sanitario8. En resumen en esta nota el Ministro de Salud indica que el AyA de acuerdo a las leyes vigentes tiene dos misiones claramente definidas: a) la rectoría en el sector de agua potable, alcantarillado sanitario y pluvial, conservación de cuencas hidrográficas y protección ecológica, y b) la administración de los sistemas de agua potable y alcantarillado sanitario en todo el territorio nacional. Asimismo indica que el Gobierno de la República avala y apoya todos los esfuerzos que AyA propone en su Plan Estratégico con el propósito de lograr el establecimiento de una sola y única política reguladora para el funcionamiento de todos los sistemas de agua potable y alcantarillado sanitario del país, propiciando como eje central de esta estrategia la autosuficiencia financiera, para lograr de esta forma la sostenibilidad que requieren todos los sistemas. Aunque no lo expresa explícitamente en la nota, del texto se infiere que el Gobierno no considera necesario implementar ninguna reforma del marco institucional y que más bien lo que se requiere es implementar en todo su alcance la Ley Constitutiva del AyA; criterio manifestado explícitamente por el Presidente Ejecutivo de AyA que había asumido funciones en mayo de 1998.

• Posteriormente, durante el período comprendido entre mayo del 2001 y abril del 2002, se elabora con recursos del préstamo el “Análisis Sectorial de Agua Potable y Saneamiento de Costa Rica”. Como resultado de este proceso se proponen dos escenarios para el desarrollo del Sector de Agua Potable y Saneamiento, a) el primero que implica la implementación de las políticas, estrategias y acciones propuestas en el Análisis Sectorial, y b) el segundo que plantea no realizar ningún cambio, lo que significa mantener las mismas políticas y estrategias que vienen operando en la actualidad.

Como se indica en el Informe Final del estudio, en el primer escenario se parte del hecho de que el sector no será capaz de resolver sus problemas sin cambios importantes en su estructura y concepción actual. Que el AyA debe segregarse en sus dos funciones incompatibles: la rectoría del Estado en agua potable y saneamiento, y la operación de los sistemas. La primera, como función básica del Estado se propone que debe permanecer en un Instituto Rector del Sector de Agua Potable y Saneamiento, organismo planificador, financiador, asesor del Estado y de los operadores, ejecutor de los programas en el área rural y en el cual resida el sistema de información del sector. La segunda sería una sociedad anónima de operación de sistemas, que sea responsable de esta operación en el Area Metropolitana de San José y en las demás ciudades donde lo convenga con los titulares del servicio, en franca competencia con operadores privados que deberán formarse y promocionarse. Este escenario pretende que la transformación del sector sea oportuna y que evolucione de la situación actual a la propuesta mediante un proceso nacional concesuado y de mucho menor impacto que el que se daría en una crisis generalizada.

____________________8Oficio DM-3890-98 de fecha 24 de setiembre de 1998 enviado por el Dr. Rogelio Pardo Evans al Banco Mundial.

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En el segundo escenario, el sector continuará brindando los servicios hasta tanto se lleven a cabo las reformas propuestas. La duración de este escenario será tan larga como tarde el Estado en llevar a cabo las reformas, y se puede decir que esta es la alternativa de no reforma. De suceder esta opción, se continuaría con la situación actual, y el Estado tendría que inyectar dinero al sector para ir resolviendo los problemas más agudos y las crisis que se vayan presentando en los sistemas, hasta que la insostenibilidad tenga más peso que la decisión de no hacer nada, situación en la que las reformas serán más violentas y dolorosas.

Como se indicó al inicio de este punto, sobre este tema, no existen cambios sustantivos respecto a la situación existente en 1992, y tal vez el aspecto fundamental que contribuyó al hecho de que no se haya logrado ni siquiera la implementación parcial de la propuesta planteada por el Ministro de Planificación en 1992 y de ninguna de las posteriores iniciativas presentadas durante el período de ejecución del proyecto, fue que el Gobierno, responsable de ejecutar en conjunto con el AyA el componente A.1 del proyecto9, nunca participó efectivamente en la ejecución y desarrollo de este componente.

La experiencia demuestra que los cambios profundos y estructurales generalmente no germinan dentro de las mismas organizaciones y que la resistencia al cambio es uno de los principales responsables de los fracasos de los procesos de cambio. Es pertinente indicar que hoy, a pesar de la existencia del Análisis Sectorial y de la contundencia de sus conclusiones, la mayor parte de los funcionarios de AyA y de los Directivos de la institución no están de acuerdo en la necesidad de la reforma del sector, que obviamente implica la reforma de AyA. Este aspecto debe constituirse en una lección y dado que el tema se mantiene vigente, de darse una futura operación de crédito donde este tema se incluya, la responsabilidad por su ejecución deberá estar totalmente fuera del AyA y preferiblemente debe estar al más alto nivel en el Gobierno, posiblemente bajo la responsabilidad de los jerarcas de los ministerios de Salud y Planificación Nacional.

E. En relación con el mejoramiento de la gestión y expansión de los servicios, en la nota del Ministro de Planificación de 1992, el Gobierno indicó al Banco Mundial lo siguiente:

• que al año 2000 el AyA tendría bajo su administración todos los sistemas públicos de agua potable y alcantarillado sanitario del país, de acuerdo con lo que se indica en su Ley Constitutiva,

• que se mantendría la cobertura y calidad del servicio de agua potable y se incrementaría la del alcantarillado sanitario, especialmente en la GAM y otras áreas urbanas;

• que los organismos operadores del servicio de agua potable garantizarían la calidad del agua suministrada en todo el país, según lo establecido en la Ley General de Salud y de acuerdo a las directrices emanadas del Ministerio de Salud.

A pesar de las políticas establecidas por el Gobierno en 1992, en la actualidad el AyA tiene bajo su administración directa un conjunto de acueductos que suministran agua al 46% de la

____________________9Según se indica en la Sección 3.01 (a) del Convenio de Préstamo 3625-CR.

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población del país. Por otra parte, mediante acueductos cuya gestión ha sido delegada a juntas comunales, suministra agua a un 22% de esta misma población

10.

En el año 2000, a nivel nacional, la cobertura de suministro de agua mediante sistemas públicos de acueductos fue del 89.4% y la de los sistemas de alcantarillado sanitario del 21.1%. En cuanto al tratamiento de las aguas residuales recolectadas de la población urbana con alcantarillado sanitario, solamente se trata el 4%; y el 98% de la población tenía acceso a algún sistema de saneamiento (alcantarillado sanitario, tanque séptico, letrina o pozo negro). Esta situación es muy similar a la existente en el país al inicio de la década de los años 90, lo que refleja que las inversiones realizadas en los últimos años han permitido mantener la cobertura de agua, pero no incrementar la cobertura de los alcantarillados sanitarios como estaba previsto.

La calidad del agua suministrada a la población ha mejorado considerablemente en los últimos años, de forma paralela al incremento de las acciones de control de la calidad de la misma. Durante el año 2000 fue sometida a vigilancia de su calidad el agua que consumió el 88.2% de la población del país, y según los resultados de los análisis realizados el 70.8% de la población recibió agua de calidad potable11. Ambos valores se han continuado incrementando en los últimos años.

Los altos niveles de agua no contabilizada en los sistemas mantienen a este como uno de los principales problemas que enfrenta el sector, pues aún en la mayoría de los acueductos del país se presentan valores entre el 40 y el 50%.

En el caso específico de los acueductos que gestiona directamente el AyA, los efectos esperados con la ejecución del proyecto no se lograron debido básicamente a la reducción del préstamo en US$10 millones (38.5% del monto original) que en su mayoría afectó el Componente B: Programa de Reducción del Agua No Contabilizada.

F. En lo que respecta a las inversiones, es importante anotar, que la situación expuesta el punto D también obstaculizó la definición de una verdadera política de inversión para el sector. Al estar alejado el Gobierno del proceso de discusión de la necesidad de reformar o modernizar el sector, las propuestas en cuanto a inversión originadas en AyA se han limitado a los sistemas de agua potable y alcantarillado sanitario que están bajo su responsabilidad y a los acueductos cuya administración está delegada a juntas comunales. Aún así, la inversión efectivamente realizada por AyA para la rehabilitación, ampliación y mejoramiento de la gestión en estos sistemas desde 1992, no ha sido la necesaria y ha estado limitada por las políticas fiscales, con el consecuente deterioro paulatino en la prestación del servicio.

____________________10

Análisis Sectorial de Agua Potable y Alcantarillado Sanitario. Página 182.11

Análisis Sectorial de Agua Potable y Alcantarillado Sanitario. Página 183.

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El actual Gobierno y los anteriores, no han definido una política nacional de inversión para el sector de agua potable y alcantarillado sanitario. Basados en el deficiente desempeño de la mayoría de los municipios en su condición de operadores de los servicios, no han brindado su apoyo para el endeudamiento de las municipalidades que buscan este mecanismo para la ampliación y mejoramiento de los sistemas que tienen a cargo, pero tampoco han propuesto otras alternativas para el desarrollo de estos sistemas.

Es indiscutible el hecho de que la política de inversión que el Gobierno debe definir para el sector debe ir en paralelo con la reforma y transformación del mismo y acorde a la situación económica del país, buscando niveles de eficiencia adecuados en los operadores, tarifas que cubran los costos reales y nuevos mecanismos de financiamiento, incluso el financiamiento privado.

La presión que provocará en los próximos años las necesidades de inversión en el sector, que se estimaron en el Análisis Sectorial de Agua Potable y Saneamiento en aproximadamente US$1,600 millones para los primeros 20 años de este siglo (dólares del 2000), en caso de que se decida avanzar en el incremento de la cobertura de los sistemas de alcantarillado sanitario en las áreas urbanas, provocará que no se pueda postergar por mucho tiempo el inicio de las discusiones sobre la reforma y modernización del sector.

G. La problemática relacionada con los conflictos por las responsabilidades entre los diversos entes operadores de los servicios de agua potable y saneamiento que actúan en la GAM se mantiene casi sin ninguna variación. Esta situación está directamente relacionada con la inacción en cuanto a la reforma o modernización del sector referida en el punto D.

H. A pesar del criterio expuesto en el “Estudio del Sector de Abastecimiento de Agua y Saneamiento de Costa Rica” en el sentido de que se consideraba razonable promover al AyA como institución administradora de los servicios de agua potable y alcantarillado a nivel nacional, tal y como está establecido en la Ley Constitutiva de la institución, esto no se ha implementado y el AyA actualmente continúa con la responsabilidad directa por el suministro de agua al 46% de la población del país.

Esto se debe a que existe una fuerte resistencia en la mayoría de las localidades donde las municipalidades aún son responsables por la administración de los servicios de agua y/o alcantarillado sanitario a que AyA asuma la gestión de estos sistemas, básicamente por el incremento de las tarifas que esta decisión implica y por los sentimientos de pertenencia respecto a los sistemas.

En la propuesta de reforma que fue resultado del Análisis Sectorial, se propone un desarrollo diferente en el modelo de gestión de los sistemas, que incluye fundamentalmente la gestión del AyA operador en el AMSJ y en otras área urbanas, la gestión de operadores comunales similares a los que actualmente ya existen, la gestión de directa de municipalidades o empresas municipales, y la gestión de operadores privados o mixtos. La posibilidad de un AyA como único administrador de los servicios de agua potable y alcantarillado sanitario a nivel nacional

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es un escenario que no se considera viable hoy ni en el futuro.

I. En la actualidad, solo el IFAM está facilitando asistencia financiera a los municipios para la ejecución de inversiones relacionadas con los servicios de agua, sin embargo muy limitada.

J. Con la aprobación de la ley de la Autoridad Reguladora de los Servicios Públicos al inicio de la década de los años 90, se inició un nuevo período en cuanto a los procesos de aprobación de las tarifas de los servicios públicos en el país. Paulatinamente, la ARESEP ha ido evolucionando e incorporando en su quehacer políticas tarifarias definidas, así como también está exigiendo a sus regulados el cumplimiento de parámetros de eficiencia operacional.

K. La participación del sector privado en el desarrollo del sector de agua potable y alcantarillado sanitario se mantiene aún limitada al planeamiento, diseño y construcción de obras principalmente.

En el AyA, con el objetivo de lograr incrementar la eficiencia empresarial en unos casos y para cubrir necesidades para las cuales la institución no tiene los recursos disponibles, desde hace varios años se han contratado diversas actividades en varios campos.

Durante el período comprendido entre los años 1998 y 2002 se realizaron acciones con el objetivo de ejecutar el proyecto de rehabilitación y ampliación del alcantarillado sanitario de San José mediante la participación del sector privado en el financiamiento, operación y mantenimiento de las obras mediante la modalidad de BOT, proceso que se decidió suspender por considerarse que no era conveniente para los intereses institucionales. Por su parte, el Banco Mundial brindó en el Anexo 1 de la Ayuda Memoria de la Misión de Octubre de 1999 sus comentarios sobre este proceso.

L. Más del 90% los recursos del préstamo y de la contrapartida asignados al proyecto, fueron dirigidos a apoyar al AyA, y de esta forma lograr implementar soluciones a los principales problemas organizacionales, operativos, comerciales, financieros, tarifarios, etc., que habían sido identificados en el “Estudio del Sector de Abastecimiento de Agua y Saneamiento de Costa Rica” realizado por el Banco Mundial en 1991.

Con este fin se ejecutaron exitosamente los componentes C y D del proyecto, con los cuales se realizaron importantes obras para el mejoramiento y ampliación del acueducto metropolitano de San José y para incrementar la cobertura de recolección del alcantarillado sanitario de San José, respectivamente. También se ejecutó con éxito el componente E, que cubría dos necesidades identificadas como urgentes en 1990: a) la reducción de la vulnerabilidad de la conducción del Proyecto Orosi, obra que había sido construida con financiamiento del Banco Mundial y de la Commonwealth Development Corporation (CDC) del Gobierno del Reino Unido, y b) el fortalecimiento del área de mantenimiento del sistema de alcantarillado sanitario de San José.

El componente B del proyecto, que correspondió al Programa de Agua No Contabilizada, fue el más afectado con la reducción de los US$10 millones en el monto del préstamo, pues este

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componente tenía originalmente asignados US$10.8 millones y después de la cancelación quedo con una asignación de US$7.0 millones. Con los recursos de préstamo y contrapartida se contrató una diversidad de bienes y servicios con el objetivo de reducir, fundamentalmente en el acueducto metropolitano, el porcentaje de agua no contabilizada, que como se indicó anteriormente, en 1990 se estimaba en un 56%.

Mención especial en relación con este componente merecen la adquisición e instalación de 110 mil hidrómetros y 67 mil cajas de protección, de los elementos primarios y secundarios de las instalaciones de macromedición en el acueducto metropolitano, de los medidores Woltman para la macromedición de la producción en los principales acueductos del resto del país, de los equipos de comunicación y transmisión de datos (antenas, torres, radios, PLCs, etc.) y del software para el sistema de control operacional del acueducto metropolitano de San José. A pesar de que originalmente estaba previsto ejecutar con el proyecto acciones relacionadas con el catastro de redes, catastro de usuarios y reemplazo de conexiones en el acueducto metropolitano, estas no se ejecutaron debido a la cancelación parcial de los US$10 millones de los fondos del préstamo.

Durante los dos semestres del año 2003 se estimó que los porcentajes de agua no contabilizada, consolidados para el conjunto de acueductos a cargo de cada una de las seis regiones de AyA eran los siguientes12

:

Región Primer semestre 2003 Segundo semestre 2003Metropolitana 47.2% 48.9%Brunca 46.2% 47.6%Chorotega 31.9% 39.4%Huetar Atlántica 68.4% 68.5%Central 42.6% 51.6%Pacífico Central 41.8% 46.1%

Según lo indicado por la Región Metropolitana, al 31 de diciembre del 2003 el estado de los principales indicadores operativos de gestión en el acueducto metropolitano era el siguiente13:

• Tiempo promedio de instalación de nuevas conexiones: 4 días• Tiempo promedio de atención de fugas en redes de distribución: 3 días• Tiempo promedio de atención de fugas en medidores: 3 días• Micromedición (% de conexiones con medidor): 93.3%• Macromedición (% respecto al volumen producido): 90%

El principal producto de este componente, es sin duda el Sistema Comercial Integrado. Este sistema se ha convertido en una excelente herramienta administrativa e informática para la

____________________12

Estimación del % de ANC. Dirección Operación de Sistemas. Juan Carlos Vindas.13

Indicadores de Gestión Región Metropolitana. Archivo: Indicadores – Avance al 31 de diciembre del 2003.doc. Manuel López.

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gestión comercial, ha permitido la descentralización real de las operaciones comerciales manteniendo el control centralizado, además ha sido el medio para resolver casi en su totalidad los problemas relacionados con la gestión comercial que se identificaban en el año 1990.

Los índices de la gestión comercial, consolidados para todos los sistemas de AyA, correspondientes al mes de diciembre del 2003 eran los siguientes14:

• Razón de facturación (Fact. Neta/ Fact. Bruta): 90.06%• % de anomalías (Servicios con anomalías/Servicios facturados): 3.31%• Eficiencia en la cobranza (Cobranza/Facturación Neta del mes anterior: 101.85%• % de desviación en la facturación (Fact. Neta/Fact. Proyectada): 98.16%• % de desviación en la cobranza (Cobranza real/Cobranza proyectada): 98.77%• % de micromedición (conexiones con medidor/conexiones totales): 94.42%• Periodo medio de cobro: 2.15 meses

Los subcomponentes A.2, A.3 y A.4 del proyecto, también estaban dirigidos únicamente a fortalecer el AyA. En cuanto al subcomponente A.2: Planeamiento Estratégico, con la ejecución del proyecto se ha logrado la generación de mucha información de base, herramientas de análisis y un cambio positivo en cuanto a la función de planificación en la institución, siendo un resultado concreto de este cambio la elaboración del Análisis Sectorial. En cuanto al subcomponente A.4: Desconcentración y Participación del Sector Privado, con el apoyo de los sistemas comercial y financiero/suministros se ha logrado una efectiva desconcentración de las operaciones diarias de rutina a nivel de las oficinas regionales, de forma tal que todos los movimientos comerciales, financieros, de adquisiciones y de bodegas se realizan en cada punto de origen, quedando pendiente en este aspecto lo relacionados con la administración de los recursos humano, ya la institución no cuenta con las herramientas necesarias para una efectiva desconcentración de esta área; en lo que respecta a la participación del sector privado, los resultados básicamente se han limitado a la contratación dispersa de servicios comerciales, asistenciales y logísticos, tales como la vigilancia de edificios, mantenimiento de zonas verdes, instalación de nuevas conexiones, etc. A pesar de que el Banco Mundial propuso en el año 1999 explorar la contratación integral de la gestión de pequeños acueductos alejados de la ciudad de San José, como experiencia para evaluar esta opción como un medio para lograr mayor eficiencia en la gestión de los pequeños acueductos, aún no se ha implementado.

____________________14

Cuadro de Información Comercial e Indicadores Año 2003. Dirección Comercial. Alcides Prado.

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Dentro del componente A el producto principal fue el diseño e implantación del Sistema Integrado Financiero Suministros. Entre los aspectos positivos logrados con el desarrollo de esta herramienta se pueden mencionar los siguientes:

• El sistema permitió la integración de los sistemas financieros y de suministros en una sola plataforma, eliminando todos los diversos sistemas que anteriormente coexistían en el AyA.

• Se establecieron procedimientos consistentes y estandarizados para las áreas involucradas por el sistema.

• Se logró la sustitución de los controles manuales por controles automatizados e integrados de las operaciones.

• Permitió la descentralización de las operaciones bajo una normativa centralizada, permitiendo el registro de la información en línea (a tiempo real).

• Permitió una unificación de Registro en las Operaciones, es decir, información consistente, la información de Presupuesto, Contabilidad y Tesorería es la misma, así como la información de los saldos físicos de inventario con los saldos contables; la información se registra desde su punto de origen, sin necesidad de redigitación a las distintas áreas.

• Permitió la generación de informes directamente del sistema, garantizando una transparencia absoluta en la disposición de la información.

• Facilitó que el personal financiero se posesionara más con un perfil de análisis y no operativo o de registro, al descentralizar el registro de las operaciones.

• Puso a disposición el Correo Electrónico para solicitudes, trámites y comunicaciones en general, eliminando el uso del papel.

• Permitió la implementación de una Contabilidad de Costos que apoya la gestión en la evaluación del desempeño en sus diferentes proyectos y áreas.

Los indicadores financieros del AyA para el año 2003 fueron los siguientes15:

• Razón de trabajo: 0.67• Indice de operación. 0.87• Resultado neto % Ingreso operativo: 2%• Rotación cartera (en días): 82• Cobertura servicio de deuda (veces): 2.20• % de inversión con generación interna: 72%• Indice corriente: 1.2• Deuda a largo plazo/Patrimonio: 0.31• Deuda total/Patrimonio. 0.38• Deuda/Ingresos operativos: 1.27• Costo de personal/Costo operativo: 0.49• Crecimiento de ingresos por servicio: 13%• Crecimiento de costos operativos: 5%

____________________15

Informe Final – Análisis Financiero del Instituto Costarricense de Acueductos y Alcantarillados. Luz María González. Marzo 2004. Tabla 3. Página 6.

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Conclusiones

De acuerdo a lo expuesto anteriormente, la ejecución del proyecto tuvo muchos resultados tangibles y un fuerte impacto positivo en la gestión de AyA, que se refleja en este análisis comparativo de la situación en que se encontraba la institución en 1990 y la situación actual.

Los objetivos del proyecto: “Aumentar la eficiencia operacional y consolidar la viabilidad operacional del AyA” y “Mejorar la operación del sistema de suministro de agua y del servicio de alcantarillado sanitario del Area Metropolitana de San José”, se consideran satisfactoriamente cumplidos.

En lo que respecta al objetivo “Mejorar el marco institucional para el suministro de agua y servicios de alcantarillado sanitario en Costa Rica, incluyendo la promoción de la participación del sector privado y el desarrollo e implementación de políticas sectoriales adecuadas”, los resultados han sido limitados por las razones expuestas anteriormente. No obstante, todas las acciones realizadas durante la ejecución del proyecto en relación con este objetivo, y en especial la elaboración del Análisis Sectorial, han permitido una mayor claridad sobre esta temática y han provocado un mejor nivel de consciencia en algunos sectores de la sociedad sobre la necesidad de discutir sobre el futuro del sector.

8.2 Comentarios en relación con el desempeño de AyA

El desempeño de AyA durante la ejecución del proyecto fue variable y estuvo afectado por situaciones internas y externas que se presentaron durante esos años. A continuación, un resumen de los que podrían considerarse los principales elementos que caracterizaron el desempeño institucional:

• En forma recurrrente, durante todo el período de ejecución del proyecto se presentó inconformidad en algunas de las autoridades de AyA con ciertos componentes del proyecto, especialmente con el Subcomponente A.1. Esta situación provocó que en varias ocasiones no se lograra avanzar realmente en la ejecución de las actividades previstas.

• La situación indicada en el punto anterior, también provocó, durante algunos períodos cortos, ausencia o debilidad en cuanto al apoyo de las autoridades de AyA para la ejecución del proyecto, especialmente en términos presupuestarios. Esta situación fue mucho más evidente al inicio de la ejecución del mismo, ya que el proyecto fue negociado por una administración saliente y el inicio de la ejecución quedó bajo la responsabilidad de la nueva administración entrante, que no compartía en su totalidad los criterios bajo los que fue negociado el proyecto y por ende el empréstito.

• Debilidad institucional para desempeñar una correcta contraparte en los contratos de consultoría. Este aspecto fue especialmente crítico en el desarrollo de los sistemas comercial y financiero-suministros, ya que en ningún momento se pudieron asignar la totalidad de funcionarios de contraparte que los consultores indicaban que se requerían, así como tampoco se lograron oportunamente los incentivos para el personal contraparte que

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debía laborar durante muchas horas más que las de su jornada ordinaria.

• El aspecto positivo más relevante fue que no se presentó ningún cambio en la dirección institucional del proyecto durante todo el período de ejecución, lo cual garantizó el seguimiento de los acuerdos entre el Banco Mundial y el AyA, lo cual fue significativamente importante ante la alta rotación que se presentó con los Oficiales de Proyecto del Banco.

8.3 Comentarios en relación con el desempeño del Banco

Las principales observaciones de AyA en relación con el desempeño del Banco Mundial durante la ejecución del proyecto son los siguientes:

• Se presentó una alta rotación en los Oficiales de Proyecto, lo cual provocó que en varias ocasiones se presentaran cambios de rumbo en la dirección y en los criterios de coordinación entre ambas instituciones para la ejecución del proyecto.

• Consecuencia de la rotación en los Oficiales de Proyecto, también fue la variabilidad de criterio en cuanto a la relación con el AyA y en cuanto a la interpretación de lo acordado en el Convenio de Préstamo

• Durante la mayor parte del período de ejecución del proyecto, los representantes del Banco Mundial responsables del seguimiento del proyecto, no lograron ninguna comunicación con las autoridades del Gobierno, las cuales tenían una responsabilidad directa en la ejecución del Subcomponente A.1. Esta situación también fue causa de que en muchas ocasiones los criterios institucionales prevalecieran sobre los criterios de Gobierno, ya que los representantes del Banco no los conocieron.

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Additional Annex 9. Letter on Government Policy to the Sector

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Additional Annex 10. Maps

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