Cost Benefit Analysis of Tempisque Bridge

to : Costa Rica 's Minister of Public Works and Transport

from : Staff analyst

subject : recommendation to build bridge over the tempisque river

date : 10 /31 /07

The Minister of Public Works and Transport (MOPT ) Study

The 1992 the Minister of Public Works and Transport (MOPT ) completed a benefit-cost study for the building of a new bridge over the Tempisque River to connect the province of Guanacaste to San , Jose , Costa Rica 's capital . The study economically accounted for the costs of constructing and maintenance of the bridge and the cost of

refurbishing and maintaining the ferry . It also considered savings in vehicle operation costs and travel time reduction . The study predicted a 30 increase in the volume of traffic of passengers and freight travelling between Nicoya Peninsula and San Jose based on an expected 30 decrease in travel time upon completion of the new bridge

Problems of the MOPT Benefit-Cost Analysis

Upon the analysis and review of the 1992 MOPT benefit-cost analysis , it was found not to be convincing . The following problems were identified with the study : First , the analysis failed to consider the economic effect on the tourist industry in the Guanacaste province from the consequences of building the Tempisque Bridge . Secondly , the analysis did not consider the effect on the environment and the preservation of the Tempisque Conservation Area (ACT ) from building the bridge . Third the expected increase in economic activities that would introduce industrial projects in the Guanacaste province were not considered neither were the respective gains and losses accounted for

Fourth , the study did not account for reduced inconvenience and unreliability of the ferry . The ferry did not operate all hours of the day , and sometimes did not operate for days due to mechanical problems The reduced reliability of the ferry would increase the expected gains in travel time . Savings in vehicle operation and travel time costs would also increase since they are calculated based on expected gain in travel time . Similarly the expectations of 30 increase in the volume of traffic between the Guanacaste province and San Jose that was included in the analysis would be altered since the volume of traffic was calculated based on the fact a one percent change in travel time would cause a one percent change in traffic

Finally , the study did not consider the social effect from building the new bridge . It is expected to attract more people to the Guanacaste province and thus increase the population and economic wellbeing of the region . Young people who left the region looking for jobs would return to their family

The Benefits and costs for Building the Bridge

3 .1 Financial Benefit from Building the Bridge

Bridge Net Present Value 424 ,000

Internal Rate of Return 12 .38

Benefit-Cost Ratio 1 .036

Cost of Building the Bridge

Costs of Bridge construction 1 ,918 million

Costs of Bridge Maintenance 1 .29 million /year

Value of Bridge 2013 1 ,151 million

3 .1 .2 Reduction in ferry operation and capital costs

Refurbishing Cost 2000...