Dependent Variable 2: Performance

We will now analyse the data obtained for the dependent variable “degree of performance”. The variable produced a higher amount of results than the previous one, with all three development projects presenting various provisions in their contracts relevant to this dimension of good governance. We will now analyse the results of the two indicators of performance individually.

The first indicator of performance is cost effectiveness. For the purposes of this research, cost effectiveness is understood in terms of the conditions of the loans financing the projects, that is, their interest rates and repayment periods, rather than the cost effectiveness of the projects themselves. In other words, we seek to determine whether Ecuador made a cost-effective decision in seeking financing from China rather than the IFIs. Since this indicator cannot be measured in terms of the presence or absence of relevant quotes in project documents, we will rely on reports from NGOs and other sources. According to Ecuador Finance Minister Patricio Rivera, China’s loan to Ecuador for the Coca Codo Sinclair project has a 6.9% interest rate and a repayment period of 15 years, with a grace period of 5½ years (cited in Hall 2010, pars.4,7). The conditions of China’s loan have been widely criticized by NGOs, journalists and academics, as shown in the following table.

Table 6. Cost Effectiveness

Source Type Quote

International Rivers

NGO

“15-year loan that carries a steep 6.9 percent interest rate” (Finer & Terry n.d., par.23)

Inter-American Dialogue

NGO

“the exceptionally high rate for Ecuador’s Coca-Codo Sinclair Dam” (Gallagher et al. 2012, p.12)

María de la Paz Vela Economist

“multilateral lenders can offer 20-year loans at interest rates of between four and five percent for similar infrastructure projects” (paraphrased in Ortiz 2010, par.24)

Bernardo Acosta Economist

“Es un interés alto. Si el gobierno ecuatoriano acudiera al Banco Mundial o al Banco Interamericano de Desarrollo es

probable que consiga préstamos con plazos más largos y tasas de interés más bajas” (It is a high interest. If the Ecuadorian government went to the World Bank or the IDB it is probable that it would obtain loans with longer

repayment periods and lower interest rates) (cited in Mena Erazo 2010, par.10)

International Business Times Newspaper

“The loans from China were also accompanied by steep interest rates -- around 7 percent on average, which is about twice as high as those from multilateral lenders like

the International Monetary Fund.” (on China’s loans to Ecuador)(Lee 2015, par.11)

The second indicator of performance is performance evaluation, which refers to the presence of procedures for assessing the project’s outputs vis-à-vis pre-established objectives during and/or after its implementation. As previously stated, all three projects contained a variety of relevant quotes in their documents.

The China-financed Coca Codo Sinclair project had various procedures for evaluating the project’s progress, involving the government of Ecuador, Cocasinclair EP and its contractor Sinohydro. First of all, the contracts require the preparation of a quality control manual outlining the construction and engineering methods and standards to be employed by the Sinohydro. Most importantly, the contractor must implement a monitoring system throughout the duration of the project’s to ensure the fulfillment of the manual’s standards. The manual is to be prepared by Sinohydro and reviewed by Cocasinclair EP, who has the right to suggest improvements to it (Table 7, quote n.3). Secondly, the contracts require a quality control program outlining the procedures for ensuring that the project's equipment, materials and construction all meet the quality requirements. This program is to be presented by Sinohydro to Cocasinclair EP (Table 7, quote n.8). Thirdly, the contracts require the project to have a security, health and environment plan, which must have been revised and approved by Cocasinclair EP (Table 7, quote n.4). Fourthly, the contracts require the execution of tests to ensure that each of the individual phases of the project comply with the required levels of efficiency, potency and cavitation, as well as with the Guarantee of Proper Functioning and Absence of Defects (Table 7, quote n.5). The contractor must present a program of these tests to Cocasinclair EP (Table 7, quote n.7). Among these tests, the contract stresses out in particular the need for acceptance tests, which must be applied to ensure that each phase meets efficiency and potency requisites, has no defects and complies with the relevant laws and permits (including environmental laws and the security, health and environment plan) (Table 7, quote n.9). If these requirements are not met, the

acceptance tests must be reapplied after the defect has been corrected (Table 7, quote n.10). Fifthly, the contractor must present to Cocasinclair EP monthly Progress Reports outlining the activities of the previous month (Table 7, quote n.6). Finally, the contracts stipulate the right of both Ecuador’s government and Cocasinclair EP to monitor the project in order to verify that requirements are met and resources are used appropriately (Table 7, quotes n.2 and 7). To this end, Cocasinclair EP is required to provide access to facilities, reports and documents as requested (Table 7, quotes n.1 and 2).

We now turn to the the Agricultural Improvement project’s documents, which also contain an extensive set of quotes (six in total), although still not quite as many as the Coca Codo Sinclair project’s. First of all, the Bank may establish any inspection procedures it deems necessary (Table 8, quote n.5) Secondly, the Bank is to use a Project Execution Plan to supervise the project's progress (Table 8, quote n.4). Thirdly, the Bank may undertake an ex-post evaluation, for which the borrower must provide any necessary documentation (Table 8, quote n.3). These three provisions concern the rights of the lender rather than the duties of the borrower; as such, they are not completely binding, leaving the implementation of the described procedures to the discretion of the IDB. The remaining quotes outline the performance evaluation procedures which must be implemented by the borrower throughout the project. First of all, the borrower must provide reports on the project's implementation at the end of each semester (Table 8, quote n.6). Secondly, midterm, final and impact evaluations are to be undertaken by a consulting service (Table 8, quote n.2). Finally, the borrower must furnish the Bank with regular reports on the project's maintenance for a period of five year after it is completed (Table 8, quote n.1).

Finally, the Decentralized Rural Transport project’s documents produced a considerably smaller number of quotes regarding performance evaluation. Its loan agreement contains only one relevant quote, which is that “the Borrower (...) shall (...) monitor and evaluate the progress of the Project and prepare Project Reports” which “shall cover the period of one calendar semester, and shall be furnished to the Bank” (Table 9, quote n.1). To this we can add two more relevant provisions contained in the IBRD’s General Conditions for Loans. The first one states that the borrower must implement procedures for assessing the project’s progress against pre-established

objectives and indicators (Table 9, quote n.2). The second one states that the borrower must regularly produce reports containing the evaluations’ results as well as suggested measures (Table 9, quote n.3). In other words, the quotes from the IBRD’s General Conditions for Loans repeat in more detail what was already stated in the loan agreement.

Table 7. Coca Codo Sinclair Hydroelectric Project

Dependent Variable Quotes

2) Degree of performance a) Cost effectiveness

b) Performance evaluation Ecuador - Cocasinclair EP (CELEC EP, 2012)

1) “El "ORGANISMO EJECUTOR" se obliga con el "ESTADO" a la presentación de los diferentes informes determinados en el "CONTRATO"” (p.4) 2) El "ESTADO" (...) realizará el seguimiento y control

del uso de los recursos y cumplimiento de las obligaciones que transfiere al "ORGANISMO EJECUTOR", así como de las estipuladas en este convenio, (...) Por su parte, el "ORGANISMO EJECUTOR", para el seguimiento y control referidos, concederá todas las facilidades, colaboración, informes y/o documentos que le fueren requeridos” (p.7)

Cocasinclair EP - Sinohydro Corporation (CELEC EP, 2009) 3) “ El Contratista presentará a COCASINCLAIR (...)

dentro de los noventa (90) Días siguientes a la fecha de suscripción del Acta de Inicio, un Manual de Control de Calidad, basado en el Anexo M, que especifique los métodos de construcción e

ingeniería, prácticas, técnicas y estándares que serán utilizados por el contratista en la ejecución del Proyecto. COCASINCLAIR podrá realizar observaciones y comentarios a dicho manual (...)” (p.20-21). “El Contratista planea montar y aplicar un sistema de monitoreo, mediciones continuo, durante todo el periodo de realización del Proyecto” (Anexo M, p.3)

4) “ El Contratista y sus Subcontratistas cumplirán en todo momento con el Plan de Seguridad , Salud y Ambiente que se incluye en este Contrato como Anexo U. El Contratista presentará a

COCASINCLAIR para su revisión y aprobación (...) el manual (...), ajustado a las necesidades

5) “El Contratista deberá desarrollar los

procedimientos para realizar las pruebas requeridas en este Contrato, incluyendo las Pruebas de Aceptación (...) y ejecutar dichas pruebas con la finalidad de que cada una de las Fases del Proyecto, en particular, y la Central Hidroeléctrica en su totalidad cumpla con la Eficiencia Garantizada, la Potencia Garantizada la Cavitación Garantizada según la Cláusula veinte y la Garantía de Buen Funcionamiento y Ausencia de Defectos de las Fases del Proyecto correspondiente” (p.21-22)

6) “Dentro de los cinco (5) Días siguientes al inicio de cada mes (...) el Contratista deberá elaborar y presentar a COCASINCLAIR un Reporte de Avance de Trabajo detallado de las actividades realizadas en el mes anterior” (p.35)

7) “Es obligación del Contratista entregar una

programación general de las pruebas a realizarse en el Sitio y fuera del Sitio (...). COCASINCLAIR (...) podrán (...) verificar el avance de la fabricación, la calidad y la conformidad con los Requisitos de COCASINCLAIR de todos los Equipos y Materiales que deberán ser proporcionados de acuerdo con este Contrato” (p.64)

8) “El Contratista le presentará a COCASINCLAIR el Programa de Control de Calidad, enfocado en los procedimientos y medidas a seguir para garantizar que los Equipos y Materiales y la construcción sean de la calidad requerida por las especificaciones para el Proyecto” (p.66-7)

9) “Pruebas de Aceptación (...) a fin de demostrar que: (i) la Fase satisface la Eficiencia Garantizada y la Potencia Garantizada; (ii) la Fase del Proyecto correspondiente no tiene Defectos (...); y (iii) el Contratista cumple con los Permisos y Leyes Aplicables, incluso con las leyes ambientales y Plan de Seguridad, Higiene, Salud y Ambiente (SHSA)" (p.69-70).

10) "(Si) la Fase del Proyecto correspondiente o cualquier parte de la Obra o Trabajos (...), no satisfacen la Eficiencia Garantizada o la Potencia Garantizada durante las respectivas pruebas,

COCASINCLAIR ordenará al Contratista corregir el Defecto y repetir las Pruebas de Aceptación" (p.70- 71).

Table 8. Agricultural Improvement Project (IDB, 2014)

Dependent Variable Quotes

2) Degree of performance a) Cost effectiveness

b) Performance evaluation 1) “El Prestatario se compromete a (...) presentar al Banco, durante el plazo de cinco años luego de terminado el período de ejecución del Proyecto y dentro del primer trimestre de cada año calendario, un informe sobre el estado de dichas obras y equipos y el plan anual de mantenimiento para ese año. Si (...) se determina que el mantenimiento se efectúa por debajo de los niveles convenidos, el Prestatario, a través del Organismo Ejecutor, deberá adoptar las medidas necesarias para que se corrijan totalmente las deficiencias” (p.6)

2) “El Prestatario (...) contratará servicios de consultoría (...) a fin de realizar las siguientes evaluaciones del Proyecto: (a) Evaluación de medio término (...) (b) Evaluación final (...) (c) Una evaluación de impacto del Proyecto (...)” (p.7). 3) “El Prestatario (...) se compromete a recopilar,

mantener y poner a disposición del Banco los informes (...) la documentación e información estadística de soporte, para llevar a cabo una evaluación ex-post” (p.8)

4) “El Banco utilizará el PEP (...) como un instrumento para la supervisión de la ejecución del Proyecto” (PEP: “Plan de Ejecución del Proyecto”) (p.8-9). 5) “El Banco podrá establecer los procedimientos de inspección que juzgue necesarios para asegurar el desarrollo satisfactorio del Proyecto” (p.34)

6) “El Prestatario (...) deberá presentar a la satisfacción del Banco, los informes relativos a la ejecución del Proyecto, dentro de los sesenta (60) días siguientes a la finalización de cada Semestre” (p.35)

Table 9. Decentralized Rural Transport Project

Dependent Variable Quotes

2) Degree of performance a) Cost effectiveness

b) Performance evaluation Loan Agreement (Gonzalez Rodriguez, 2007)

1) "The Borrower (...)shall (...) monitor and evaluate the progress of the Project and prepare Project Reports (...) on the basis of the performance indicators set forth below (...). Each Project Report shall cover the period of one calendar semester, and shall be furnished to the Bank (...)" (p.11)

IBRD General Conditions for Loans (IBRD, 2005) 2) “The Borrower shall maintain or cause to be

maintained policies and procedures adequate to enable it to monitor and evaluate on an ongoing basis, in accordance with indicators acceptable to the Bank, the progress of the Project and the

achievement of its objectives” (p.13)

3) “The Borrower shall prepare or cause to be prepared periodic reports (“Project Report”), (...), integrating the results of such monitoring and evaluation activities and setting out measures recommended” (p.13)