IFC requires that this document is made available through the World Bank InfoShop and to the locally affected community no less than 30 days prior to project consideration by the IFC Board of Directors. The Summary of Project Information (SPI) also provides details of where the ERS has been made available to the locally affected community. The SPI must be sent to World Bank InfoShop no less than 30 days prior to project consideration by the IFC Board of Directors.

This is a Category B project according to IFC’s Procedure for Environmental and Social Review of Projects because a limited number of specific environmental and social impacts may result which can be avoided or mitigated by adhering to generally recognized performance standards, guidelines or design criteria. The review of this project consisted of appraising technical and environmental/social information submitted by the project sponsor. The following potential environment, health and safety and social impacts of the projects were analyzed: - environmental performance of existing IAMSA operations; - vehicle maintenance programs and wastes management; - driver and employee training and health and safety; - vehicle (new and existing) emissions and energy efficiency; and - environmental benefits from the renewal program.

The sponsor has presented plans to address these impacts to ensure that the proposed project will upon implementation of the specific agreed measures, comply with the environmental and social requirements - the host country laws and regulations and the World Bank/IFC environment and social policies and the environmental, health and safety guidelines. The information about how these potential impacts will be addressed by the sponsor/project is summarized in the paragraphs that follow. - Environmental Performance Typical of the Mexican bus industry, the Group's companies own repair workshops to provide maintenance services. These shops are located both at a central operational base and along their respective routes. Group-wide there are more than 30 major workshops and numerous smaller maintenance facilities. An independent private inspection company, Grupo Promotor Aries, S.A. de C.V, carries out regular inspection of the Group’s operations. As noted above, financing for the purchase of Volvo buses has been established with the participation of the Netherlands Development Finance Company (FMO). In coordination with FMO, the Group's companies evaluated their existing performance and established the -IAMSA Environmental and Social Action Plan-, which includes the following key actions: - implementation of Environmental, Health and Safety Management System ("EHSMS") for all IAMSA Group workshops; - definition of a Code of Conduct; and - implementation of a Social Management System (possibly integrated in the EHSMS). Additionally, the Group committed to prepare and implement a detailed follow-up action plan to remediate all deficiencies as indicated in environmental audits prepared for its workshops, including required soil clean-up and other cleanup from contamination of past activities at affected workshops. The above programs are underway and substantially on schedule. - Maintenance Shops Operation of workshops is controlled by the Secretaria del Medio Ambiente, Recursos Naturales y Pesca ("SEMARNAP"). The Group's companies have implemented the following measures to comply with these requirements: - Inventory and control procedures are in place for hazardous materials. Hazardous wastes are collected and disposed of by companies registered with SEMARNAP; - Control procedures are in place for separation and containment of biodegradable and non-biodegradable wastes; - Fueling stations are equipped with secondary containment and are inspected every three months; - Water used for washing buses is treated and recycled; - Environment-friendly cleaning products are used; - Procedures are in place to ensure that remanufactured engines are used that meet emissions specifications for the vehicle; and - Semiannual engine exhaust emissions testing is performed and engine tune-ups are performed on a scheduled basis. - Human Resources IAMSA Group drivers and maintenance personnel are represented by a trade union. The Group's operating companies follow stringent driver safety procedures mandated by SCT, including regular medical checks and alcohol and drug testing. Drivers are limited to a maximum of 7 hours a day and 5 hours at night. Routes longer than 7 hours have two drivers per bus. Training is provided to drivers on a regular basis. Salaries are performance based in order to secure optimal driving standards and safety for the passengers. Performance is measured on meeting speed limits, adhering to the scheduled number of stops on a given route and proper maintenance of the bus. Each bus carries a data recorder which provides management the ability to check for speed and the number of stops for each trip. - Vehicles New vehicles purchased as part of the renewal program are required to meet Mexican national (GOM) standards for safety, engine exhaust emissions, and fuel economy as established by SCT. These standards are comparable to those used in the EU; for example, emissions must meet the current Euro III standard (Directive 1999/96/EC). The GOM also establishes requirements for replacement engines (NOM-044-ECOL-1993), which establishes the permissible maximum levels of hydrocarbon emission, carbon monoxide, nitrogen oxides, total suspended particulates and exhaust opacity of diesel motors. - Environmental and social benefits Several environmental and social benefits will accrue from the 2002-2005 renewal program: - Fuel Efficiency and Emissions Reduction – Following implementation of the program the Group's fleet-wide fuel efficiency is expected to increase by up to 10%, which is projected to save 4,000 liters of diesel fuel per bus per year. Reduced fuel use, coupled with improved emissions performance of the renewed fleet, will contribute to ambient air quality improvements in Mexico's urban areas; - Maintenance Reduction – Maintenance cost savings are expected to amount to approximately $0.01 per kilometer traveled, a substantial amount for buses that travel approximately 300,000 kilometers per year each. Much of the saving is attributable to reduced use of lubricants and supplies. Additional minor savings are expected in relation to tires as new bus technology is expected to wear out tires at a slower pace than in the past; - Increase in Passenger Utilization – Fleet utilization is expected to increase as new buses attract more customers, thus reducing fuel use and exhaust emissions per passenger kilometer. Greenhouse gas emissions (GHG) from the Group's fleet will not be significantly affected because fleet size and per-vehicle emissions will not substantially change; however, GHG emissions per passenger kilometer will decrease; and - Scrapping Program – The Group internally applies stricter age limits to its fleet than is required by the SCP, and ensures that the majority of buses it retires are scrapped rather than placed in service by other operators. Because the Group's buses constitute nearly one quarter of Mexico's total fleet, its scrapping program encourages the modernization of the overall fleet.

This ERS contains the full environmental and social documentation prepared for the project.

Accordingly, IFC concludes that the proposed project will meet the applicable World Bank/IFC environment and social policies and the environmental, health and safety guidelines upon successful implementation of the agreed mitigation measures.

IFC will evaluate the project's compliance with the applicable environmental and social requirements during the lifetime of the project by reviewing the annual monitoring reports (AMRs) prepared for the project covering the status of implementation of any measures contained in the Environmental Action Plans and ongoing performance of project-specific environmental, health and safety activities. Periodic site supervision visits will also be conducted.