Norvial is owned 34% by G&M, 33% by JJC and 33% by Besco, a fully owned subsidiary of Besalco (Chile). G&M, founded in 1933, is the largest construction and engineering group in Peru and the only construction company listed on Lima’s Stock Exchange. G&M’s activities include construction, real estate, information technology, engineering consulting services, petroleum services and concession operations. The group’s most important source of revenues is provided by commercial and residential building construction as well as civil works. JJC, is a privately held Peruvian engineering and related services company. JJC began its operations in Peru in 1955 and has recognized experience in all aspects of the construction industry, having executed works in the real estate, energy, highway, water and sanitation, maritime, mining and petroleum sectors. Besco, established in Peru in 1998, is a fully owned subsidiary of Besalco. Besalco is one of Chile’s largest construction and concession companies and the only construction company listed on Santiago’s Stock Exchange. Founded in 1944, it specializes in civil works (tunnels, roads, airports, water treatment plants), machinery rental, real estate development, and concessions (car parks and roads).

The total project cost is estimated at $70.7 million. The proposed IFC investment is a $18 million A loan for IFC’s own account.

18.0 million (USD)

Product Line	IFC Investment (million USD)
Risk Management
Guarantee
Loan	18.0
Equity

* These investment figures are indicative

The project is an existing road located north of Lima, between Ancon, Huacho and Pativilca, on a section of the Panamericana highway between km 44 and km 204. Between km 44 and km 75 the road is split in two links: - the Pasamayo Serpentin, a single carriageway road, 22 km long and - the Pasamayo Variante, a dual carriageway, 31 km long. At km 75, the two links merge into a dual carriageway road until km 147 in Huacho, where the road profile changes from dual to single carriageway until Pativilca (km 204). The road crosses rural areas as well as some urban areas between Huacho and Primavera (km 147 to km 161) and between Supe and Pativilca (km 185 to km 204).

This is an environmental and social review category A project. The Environmental Impact Assessment (EIA) for the project identifies several positive impacts and the following key issues:
- resettlement associated to land acquisition;
- management of cultural property affected by the project; and
- management of environmental impacts occurring during the construction and operation of the project.

- Positive Impacts

The EIA predicts that the project will promote the socio-economic growth of the northern zone of the Lima state, especially in the provinces of Huaura and Barranca, by facilitating transportation of agricultural and industrial products to commercial centers in and around Lima and to Peru''s main port (Callao). The EIA also anticipates that the improvements to the Ancon-Huacho-Pativilca toll road will benefit other population centers through increased tourism to the various natural and historical sites in the area (including Lomas de Lachay National Reserve, Medio Mundo Lagoons, Caral Ruins and Castle of Chancay). These tourism resources can be more fully exploited with increased socio-economic integration of the zone. The planned bypasses and interchanges will keep trucks away from the cities of Huacho and Barranca and other populated areas and, therefore, will reduce noise and accident risk.

- Resettlement

The main negative impact of the project will be the physical and economic displacement caused by the acquisition of the right of way. Of the 541 parcels to be affected, 509 will be acquired in whole and 32 in part. Nearly 84% of the affected parcels are in rural areas. Approximately 75 families who live in dwellings that occupy the right of way will have to relocate.

A Compensation and Relocation Action Plan (CAP) has been developed to mitigate the impact of land acquisition. The compensation program will be implemented on the basis of Law No. 27628, enacted in January 2002. This law creates a procedure called trato directo (direct negotiation), which makes it possible to purchase land for public projects without having to resort to expropriation proceedings. The properties that cannot be acquired through trato directo are subject to expropriation under the rules of Law No. 27117 (General Expropriations Law).

The CAP includes a program to regularize land tenure in parcels affected by the right of way, which will permit the compensation of persons who have possession rights, but lack legal title to their land. In addition, the CAP includes various relocation and rehabilitation programs that are consistent with the requirements of the World Bank’s Operational Directive 4.30 on Involuntary Resettlement.

- Impacts on Cultural Property

The project will affect five archeological sites: Cerro Colorado, Vispan, Sendero Vispan y Paicuan and El Molino. Archeological evaluation and rescue projects will be implemented in each of the five sites, following the guidelines of the Technical Commission on Archeology of the National Institute of Culture (NIC). Prior to the beginning of construction the concessionaire must develop an “Archeological Evaluation and Rescue Project” according to the requirements of the Regulations for Archeological Research of the NIC. During construction the concessionaire must implement a monitoring program under the responsibility of a professional archeologist. All materials found must be analyzed and the results of such analysis must be published.

- Environmental Management

An Environmental Management Plan (EMP) was developed as part of the EIA for the construction and operation phases of the project, and provides for monitoring and mitigating environmental and health & safety impacts. The plan includes measures to prevent and/or mitigate environmental impacts during construction, such as measures to manage construction of access roads and provisional facilities, waste dumps, water sources, machinery and equipment, transportation of materials, quarries, asphalt plants, crusher plants and concrete plants. The EMP also contains measures to protect the environment during the operation phase of the project, such as measures to protect air quality, reduce noise and prevent erosion and flooding. The EMP also includes a monitoring program and an emergency response program.

One of the construction companies, G&M, has developed an Environmental Management System (EMS) based on the standard ISO 14001, as well as a Risk Prevention Plan and a Manual to Prevent Accidents in Construction Works. The procedures described in these documents are consistent with EIA requirements.

The contract between Norvial and the toll road operator, Concar S.A., obliges the latter to implement the measures specified in the EMP. The contract between Norvial and the construction consortium will also require the implementation of procedures called for in the EMP.

Location of environmental documents in locally affected community
The EIA has been locally disclosed at Norvial’s administrative offices, located in Paseo de la Republica 4667, Lima 34, Peru.

Project Development Impact Improved maintenance and better traffic flow on the main northern approach to the capital will provide cost savings to cars, buses and trucks using the road. Internal cargo consists mainly of mining and agricultural commodities for export and for consumption in the metropolitan area and industrial and consumer goods moving inland. Cost savings are expected to directly help activities (such as mining, fishing and agribusiness) along the road, and indirectly throughout the country, through improved access to the main domestic market as well as the airport and port facilities in Lima. Agricultural and other producers within the poorer rural hinterlands of the concession roads will also have better access to larger markets in the urban areas. Also, routine road maintenance services require local labor; increased maintenance activities will benefit local communities providing such labor. The planned project investments are expected to reduce vehicle operating costs by avoiding congestions that could otherwise create bottlenecks. Other services that users of the concession benefit from, include roadside mechanic assistance, ambulance services and emergency telephones. An important feature of the concession is the expected improved safety of urban areas that will no longer suffer from long distance (heavy) traffic. Therefore, this investment is expected to reduce the accident and fatality rate. It is also expected to improve quality of life of urban dwellers along the road, as noise and pollutants would diminish. The project would also free up scarce public resources through both the concessionaire assuming the operation and maintenance of the roads as well as payment of income taxes, newly established VAT, and the road fund fee. In addition, Norvial will pay a fee to OSITRAN, thus contributing to the strengthening of regulatory institutions for the benefit of the general public. IFC Role IFC would play a key role by creating an appropriate financial structure and would provide long-term funding which is currently unavailable for this kind of project in Peru. IFC’s presence is essential to provide funding on commercially reasonable terms. This is the first toll road concession to be awarded under the GoP's Highway Development Plan of 1996 (through the concession of 11 networks across the country under a BOT framework) and is expected to be used as a model for future toll road concessions. Given the recent economic slowdown in Latin America that is affecting private sector interest in infrastructure investments in Peru, IFC's participation in the structuring and financing of this concession would provide a strong demonstration effect that could help attract further private sector investments in the upcoming highway concessions planned by the GoP (Highway Network 6, south of Lima, has already prequalified bidders). The Sponsors also asked IFC’s participation to benefit from IFC’s expertise in structuring successful toll projects in the region and worldwide.