- $125,700,000Original Compact Project Amount
- $120,584,457Total Disbursed
Estimated benefits correspond to original $125,700,000 of project funds, where cost-benefit analysis was conducted.[[MCC did not calculate ERRs for transportation at closeout, limiting data to ERRs calculated by MCC at signing.]] Expected benefits were time and vehicle operating cost savings for all vehicles using the improved roads due to the ability to travel faster with less vehicle damage per trip on higher quality roads.[[Vehicle operating cost (VOC) savings are savings in fuel and vehicle maintenance gained through using a higher quality road.]] The Highway Development and Maintenance model 4 (HDM-4) was used to calculate benefits for both projects.[[The Highway Development and Maintenance (HDM-4) is one of MCC’s standard tools to evaluate roads. It takes into account vehicle operating cost savings and time savings as part of decision making for road investments.]] Note that the table below reflects MCC-calculated ERRs only; ERRs calculated by other entities have not been included.
| Estimated Economic Rate of Return over 20 years | Estimated beneficiaries over 20 years | Estimated net benefits over 20 years | ||
|---|---|---|---|---|
| North and South Segments of Highway CA-5 Activity | At the time of signing | 21.07% | 1,350,000[[All activities combined.]] | $39,562,655 |
| At Closeout | Not calculated[[Closeout ERR calculated by independent evaluator, not verified by MCC. See evaluation section for additional information.]] | Not calculated | ||
| Secondary Roads Activity | At the time of signing | 42.07% | $39,706,000 | |
| At Closeout | Not calculated[[Closeout ERR calculated by independent evaluator, not verified by MCC. See evaluation section for additional information.]] | Not calculated | ||
| Vehicle Weight Control Activity | At the time of signing | Included as part of the North and South Segments of Highway CA-5 Activity | Included as part of the North and South Segments of Highway CA-5 Activity | |
| At Closeout | N/A; activity de-scoped | N/A; activity de-scoped | ||
ERRs can be found on the MCC website. All ERRs were calculated at the time of compact signing.
Project Summary
The Transportation Project aimed to reduce high transportation costs through road network infrastructure improvements to enhance market access and foster greater integration between targeted production centers and national, regional, and global markets. The investment also assumed that road upgrades would lead to improved access to wage employment and social services, such as hospitals and schools. The project included three activities:
- The North and South Segments of Highway CA-5 Activity (original budget: $96.41 million; amount disbursed: $90.3 million): The compact initially targeted the expansion and improvement of approximately 109 km of Highway CA-5. The selected portion of the Highway CA-5 was divided as follows:
- South Segment: Included the expansion of the road and replacement of the pavement structure of 59 km between Tegucigalpa and Villa de San Antonio. During implementation the project was further subdivided into two sections: Section 1: Tegucigalpa to Río del Hombre, and Section 2: Río del Hombre to Beginning of the Valle de Comayagu
- North Segment: Included width expansion of the existing road and replacement of pavement structure of 49.5 km between Comayagua and Taulabé. During implementation the project was further subdivided into two sections: Section 3: Final Valle de Comayagua to Siguatepeque, and Section 4: Siguatepeque to Taulabé.
The South Segment originally envisioned the expansion to four lanes in Section 1 (25 km) and building a third lane in the section from Río del Hombre to Detour to Villa de San Antonio (part of Section 2). However, during implementation in 2007, the GoH requested the expansion to four lanes for the complete South Segment, and the option of using concrete as part of the pavement structure. In order to meet cost increases associated with these requests, and to respond to the subsequent costs increases of oil products experienced in 2008, the GoH signed a loan with the CABEI for $130 million to co-finance this Activity. This co-financing covered construction works for Section 1 and a portion of Section 2 (with works completed post-compact), whereas compact funds were used for the implementation of resettlement in all sections, and rehabilitation/construction works for part of Section 2, and the entirety of Sections 3 and 4.
Secondary Roads Activity (original budget: $21.28 million; amount disbursed: $27.7 million): This activity included the paving and upgrading of key secondary routes to improve rural communities’ access to markets. The roads were selected through a process that included: identification of more than 250 potential road sections; calculation of the expected ERRs using the HDM-4 model to identify the 12 sections with the highest ERRs; and screening the 12 potential sections according to the level of complexity of the interventions (availability of feasibility studies, pre-designs, environmental licenses, length, execution time). Projects with the highest rates but with implementation challenges and completion times exceeding the life of the compact were disqualified in the selection process. Finally, five potential sections were submitted to the MCA-H Board for approval, with the understanding that the sections would be implemented according to the availability of compact resources. Three asphalt surface treatment paved road sections were ultimately completed during the compact period, including:
- Comayagua – Ajuterique – La Paz (19.1 km, including 2.4 km between the communities of Ajuterique and Lejamaní);
- Choluteca – Orocuina (19.8 km); and
- Sonaguera –El Coco detour (26.6 km).
As further described in evaluation findings below, these road upgrades contributed to savings in vehicle operating costs and transportation time and promoted income generation through the transportation of agricultural produce in good condition to the market.
- Vehicle Weight Control Activity (original budget: $4.73 million; amount disbursed: $88,479): This activity was designed to sustain the maintenance of improved roads through construction of an effective vehicle weight control system and issuance of contracts to operate it effectively; however, the activity was ultimately de-scoped from the compact as a result of the aforementioned undemocratic transition of power in June 2009.
To support the sustainability of roads and based on discussions with MCC, the GoH agreed to strengthen the budget for the national road maintenance. As a result of the agreement with MCC, the GoH significantly increased its own funding for road maintenance from less than $40 million per year before the compact in 2005 to $64 million in 2010.
Key performance indicators and outputs at compact end date
| Key Performance Indicators | Baseline | End of Compact Target | Closeout Value | Percent Compact Target Satisfied |
| Highway CA-5 and Secondary Roads | ||||
| Highway CA-5 – Kilometers of Highway Upgraded | 0 | 109 | 49.5 | 45% |
| Secondary Roads – Kilometers of Roads Upgraded | 0 | 65.5 | 65.5 | 100% |
| Highway CA-5, T3 – International Roughness Index (IRI)[[International Roughness Index (IRI): Roughness is a measure of the irregularity of the road surface. It affects the operation of a vehicle (safety, comfort and speed of travel) and costs of operation through vehicle wear, fuel consumption and the value of human and asset time spent in transit. This affects the economic evaluation of proposed road maintenance and upgrading expenditures.]] | 4 | 1.9 | 2.2 | 84.2% |
| Highway CA-5, T4 – IRI | 4 | 1.9 | 3.2 | 31.6% |
| Secondary Roads –IRI | 13.6 | 2.5 | 3.2 | 72% |
Explanation of Results
North and South Segments of Highway CA-5 – kilometers of highway upgraded: During implementation, project costs were higher than expected due to an expanded scope of works, increased cost of petroleum derivative products, and higher than anticipated resettlement costs. To ensure that the full scope of work could be completed, the GoH leveraged compact funds to secure a loan from CABEI. However, with the new co-financing arrangement, the time required to complete section 1 (24.3 km, plus approximately 2 km for an additional interchange) was extended, with works completed post-compact. While most of the work for section 2 (33.3 km) was completed using MCC funds prior to the end of the compact, it was not formally handed over until after the compact end date, with final works financed by the GoH with a CABEI loan. Sections 3 and 4 (49.5 km) were completed with MCC funding prior to the end of the compact.
International Roughness Index (IRI): Despite having established the IRI measurement as an indicator, it was not a specified requirement for the construction works contracts for highway CA-5 and secondary roads. While the reported IRI measurements upon completion of the road did not meet the end of compact targets, these results are consistent with acceptable IRI measurements for a road in good condition.
Evaluation Findings
The Transportation Project’s North and South Segments of Highway CA-5 and Secondary Roads Activities, as well as the Farm-to-Market Roads Activity from the Rural Development Project, were independently evaluated in one evaluation using both impact and performance evaluation methodologies. The performance evaluation produced estimated ERR for each road.
As described in the Lessons Learned section, this evaluation contributed to MCC learning in the sector, as detailed in the “Lessons from MCC’s Investments in Roads” (2017) publication in MCC’s Principles into Practice series.
Farm to Market Roads Activity and Transportation Project
| Component | Status |
| Endline Report | 05/01/2014 |
Evaluation Questions: The evaluation of the Transportation Project and Farm to Market Roads Activity aimed to answer whether improved conditions throughout the road network:
- Lowered transport costs and travel time for businesses, including farm households;
- Provided better access to a wider range of job opportunities for individuals (labor market effects);
- Lowered the price of consumables and inputs by increasing competition and reducing barriers to entry posed by poor transport infrastructure;
- Improved access to health establishments and schools; and
- Increased overall incomes and employment at the household level.
Evaluation Findings: The impact evaluation recognized that the Honduran road system functions as a single, integrated road network, thereby allowing for network effects to be taken into account. In other words, the model considers that improvement to a single road section is likely to have impacts that are felt across the entire road network, not just locally, and that these impacts may differ depending on where in the road network the improvement section is located and the degree to which the section serves as a key access point between different sections of the overall network. This new model, which represents the physical road network as an integrated computer/mathematical network (through the GIS), recognizes that in reality, rural households are likely to benefit not only from rural-road improvements, but also from improvements to secondary (or even primary) roads. With this in mind, the analysis produced estimates of the mean impact expected for a randomly selected household in Honduras and found a statistically significant effect on many access times and costs. For example, cost for travel to a hospital decreased 3.53 lempiras ($0.17) per one-way trip and cost for travel to a health center decreased 0.194 lempiras ($0.01 per one-way trip). Additionally, there was a statistically significant effect on increasing monthly agriculture income by 71.9 lempiras ($3.50) per household and statistically significant impact on decreasing monthly non-agriculture income by 109 lempiras ($5).
The evaluator also used the HDM-4 model to estimate ERRs for all roads constructed based on actual construction costs, construction quality and traffic data and updated estimates for future maintenance costs, vehicle operating costs and traffic growth. The evaluator found lower than predicted vehicle traffic counts, higher than expected road maintenance costs, as well as final project improvement costs which were considerably higher than the previous 2008 estimates used. To estimate the rate of road surface degradation, the evaluator also assessed the quality of construction with site visits in October 2011, and found that “the quality of the road improvements based both on direct observation of the improved road surfaces and also on the quality of the asphalt going into the road improvements, was quite high and met the highest international standards.” The evaluator produced ex-post ERRs for the four sections of CA-5 were 18.1 percent, 7.6 percent, 21.1 percent and 14.0 percent, respectively, with a net present value of the investment estimated at $60 million.[[Summarized from Table 12 in evaluator report.]] For secondary road upgrades, the evaluator found a strong increase in traffic volumes, relatively low road project costs compared to primary improvement costs, and high quality road improvement designs and work standards, with low projected future road deterioration rates due to the high standards of the improvements. The estimated ERR values for secondary roads ranged from 29.4 percent to 188.3 percent, with a net present value of the investment estimated at $234.84 million.[[Summarized from Table 14 in evaluator report.]]
For rural roads, the estimated ERRs from the HDM-4 model are sensitive to assumptions on future traffic growth and vehicle speeds post improvements, as well as evaluator assumptions regarding the number of days per year each rural road segment is “passable.” For this reason, the evaluator indicated “the rural road ERR estimates are likely only capturing a small part of the true economic impact of rural road improvements.” For rural roads upgrades, the estimated ERRs were above 10 percent for 30 of 33 sections. The net present value of the investment was estimated at $17.2 million.[[Summarized from Table 18 in evaluator report.]]