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  • Closed Compact Report:  Closed Compact Report: El Salvador Compact
  • April 2018

Connectivity Project

  • $233,560,000Original Compact Project Amount
  • $270,051,380Total Disbursed

Estimated Benefits

Estimated benefits correspond to $270 million of project funds, where cost-benefit analysis was conducted.

Estimated Benefits for the Connectivity Project
Time Estimated Economic Rate of Return (ERR) over 20 years Estimated beneficiaries over 20 years Estimated net benefits over 20 years
At the time of signing 23.9 percent 600,000 N/A
Updated (if relevant) 15.9 percent 533,677 N/A
At compact closure 21.6 percent 533,677 $192,759,102

Economic rates of return (ERRs) dropped during the update as MCC used a new methodology for calculating benefits, switching from the original measurement of land prices to the new measurement of travel time and vehicle savings for road users. The closeout ERR increased due to re-scoping of the funding to the transnational highway and cancellation of the Network of Connecting Roads Activity. A second independent evaluation of the project will determine the post-compact ERR using HDM-4 analysis[[The Highway Development and Maintenance (HDM-4) and Road Economic Decision (RED) models are MCC’s standard tools to evaluate roads. Both models take into account vehicle operating cost savings and time savings as part of a decision making tool for road investments.]] with results expected in 2019.

Project Description

The isolation of El Salvador’s Northern Zone proved to be an impediment to its development, contributing to widespread poverty that affected more than half of the region’s families at the time of compact signing. The Connectivity Project sought to physically link El Salvador’s Northern Zone with the rest of the country, enabling new economic opportunities for rural households, lower transportation costs, and decreased travel times to markets. The project included two activities:

  • The Northern Transnational Highway Activity: This activity aimed to provide contiguous and reliable access to communities in the Northern Zone and main transport corridors to enable the Northern Zone to participate more fully in the national and regional economy. It included designing and constructing approximately 50 km of secondary roads, upgrading approximately 160 km of roads to secondary road standards, and rehabilitating approximately 80 km of roads to secondary road standards.
  • The Network of Connecting Roads Activity: This activity was designed to connect vast rural areas of the Northern Zone with the Northern Transnational Highway and the existing paved road network by upgrading approximately 240 km of connecting roads to modified tertiary road standards.

All roads were subjected to rigorous studies and evaluations for potential environmental impacts. These studies led to specific environmental management plans that included conservation and environmental mitigation. Resettlement activities centered on the acquisition of land and fixed property along the right-of-way, with a successful program involving approximately 2,500 cases of land acquisition conducted to international best practices. FOMILENIO also established a number of best practices of its own as part of this program, including monitoring vulnerable properties adjacent to the right-of-way and creating incentives for rehousing or construction upgrades for families living in unsafe adobe dwellings. MCC and FOMILENIO also provided training on environmental assessment and resettlement for government agencies and contractors.

The Connectivity Project experienced early difficulties due to delays and quality deficiencies on the feasibility study funded by the Government of El Salvador, environmental impact assessment, and initial designs contract. FOMILENIO employed innovative strategies to recover from these delays (e.g., using a design-build contract modality) and reduced costs far below those estimated in the feasibility study. A significant re-scoping nevertheless became necessary. The Network of Connecting Roads Activity was cancelled in March 2009, and its funding was transferred to the Northern Transnational Highway Activity. The Government of El Salvador then agreed to allocate resources from loans with international banks to build some segments of the connecting roads that were considered a priority (more details on the re-scoping of the project are available in the Compact Changes section below).

The Connectivity Project achieved its key targets despite the change in scope. More than 222 km of roads, three large bridges, and 20 smaller bridges were rehabilitated or constructed in northern El Salvador to help improve connectivity with the rest of the country. This east-west road stretches from nearly the Guatemalan border in the west to the Honduran border in the east, and the improvements are anticipated to halve travel time from 12 hours to 6 hours.

Evaluation Findings

Connectivity Project

The impact evaluation of the Connectivity Project was designed to measure changes in transportation costs and households’ ability to extend their labor activities and diversify income sources.

The evaluation found that the Northern Transnational Highway modestly reduced travel time to households’ nearest market as well as the travel time to various services, and lowered the cost of accessing both the market and services. Yet, there were no significant changes detected in agricultural sales, harvests, incomes or expenditures. There were delays in the construction of the Northern Transnational Highway, therefore, the evaluation captures short-run effects (one to two years) and effects on agricultural sales or income may take longer to materialize. MCC plans to conduct a second independent evaluation to analyze aspects of the road not covered in the first evaluation: (i) determine the post-compact ERR using HDM-4 analysis, (ii) assess the road maintenance regime, (iii) analyze the composition of road users, and (iv) assess the transportation market structure. Information from this second evaluation, which is focused on road users, will be used to determine whether MCC should undertake additional household data collection and analysis to evaluate longer-term household outcomes.

Status of the Evaluation
Component Status
Baseline Report Completed in 2010
Final Report Completed in 2017
Second Evaluation Final report expected in 2019

Key performance indicators and outputs at compact end date

Key performance indicators and outputs at compact end date
Activity/Outcome Key Performance Indicator Baseline End of Compact Target Quarter 1 through Quarter 20 Actuals (as of Dec 2012) Percent Compact Target Satisfied (as of Dec 2012)
Northern Transnational Highway Activity Annual average daily traffic on the Northern Transnational Highway
  • This indicator is expected to be measured through data collected for the second evaluation in 2018.
270 962 Pending Pending
Kilometers of roads completed 0 195.6 223.32 114%
Travel time from Guatemala to Honduras through the Northern Zone (hours and minutes)
  • This indicator is expected to be measured through data collected for the second evaluation in 2018.
11.72 5.7 Pending Pending

Data necessary to update indicator performance will be provided through the second Connectivity Project evaluation, expected to be collected in 2018 for a final report in 2019.