Appraisal of Ingavi Rural Development Project - Bolivia - Draft - October 28, 1975

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Folder Title: Appraisal of Ingavi Rural Development Project - Bolivia - Draft - October 28, 1975

Folder ID: 1061191

Project ID: P006122

Dates: 10/28/1975

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@ International Bank for Reconstruction and Development / International Development Association or The World Bank 1818 H Street NW Washington DC 20433 Telephone: 202-473-1000 Internet: www.worldbank.org 1061191 RI 984-085 Other*# C-2 Box # 78302B Appraisal of Ingavi Rural Development Project - Bolivia - Draft - October 28,E1975 DECLASSIFIED WBG Archives Draft - Confidential

October 28, 1975

APPRAISAL OF

INGAVI RURAL DEVELOPMENT PROJECT

BOLIVIA

DECLASSIFIED Date: 10/112610

Projects Department Latin America and Caribbean Regional Office CURRENCY EQUIVALENTS

US$1 = $b 20.00 $b 1.00 = US$0 .05 $b 1 million = US$50,000

WEIGHTS AND MEASURES 2 acres 1 hectare (ha) 10,000 m = 2.47 1 kilometer (km) = 0.62 miles sq. miles = 100 ha 1 square kilometer (km2) 0.39 1 kilogram (kg) 2.20 pounds 1,000 kilograms = 1 metric ton= 0.98 long ton 1 liter (1) = 0.26 gallons (US) = 0.22 gallons (Imperial)

GLOSSARY OF ABBREVIATIONS

BAB - Agricultural Bank of Bolivia BC - Central Bank BPC - Bolivian Power Company CORDEPAZ - Department of La Paz Development Corporation GEOBOL - Geological Survey of Bolivia MACA - Ministry of Peasant Affairs and Agriculture MPSSP - Ministry of Social Security and Public Health PIL - Industrialized Milk Plant SNC - National Roads Service SNDC - National Community Development Service

GOVERNMENT OF BOLIVIA

FISCAL YEAR

January 1 - December 31 BOLIVIA

INGAVI RURAL DEVELOPMENT PROJECT

TABLE OF CONTENTS Page No.

SUMIMARY AND CONCLUSIONS, ...... i-i

I. IN'RODUCTION...... * 1

II. BACKGRojND.t ...... --...... ---... 1

B. Rural Setr...... 2 .THEnea...... * 6

A. Brief Description...... *...... 6 B. Detailed Features...... 7 C. Cost Estimates...... 10

F. Disbursement...... oo. . o~o...... oo * *o o oo o 12 G. Organization andManagemet...... 12 H. Accounts and Auditing...... 15

IV. PRODUCTION, MARKE'ING AND PRICES, AND PRODUCER BENEFITS... 16

V. ECONOMIC BENEFITS AND JUSTIFICATION...... 18

VI. RECOMMENDATIONS ...... -... 21

SCHEDULE A - Project Unit Guidelines

SCHEDULE B - Consultants Terms of Reference

SCHEDULE C - Lending Terms and Conditions

SCHEDULE D - Implementation Schedule

This report is based on the findings of an appraisal team which visited Bolivia in May 1975. Members of the team were Messrs. G. Lubman, and F. Lucca (LCPA1), W. Cuddihy and B. Kanchanalak (AGPOP), and C. Chisholm, W. Farnsworth, and J. Ticas (consultants). TABLE OF CONT'INTS (Cont'd)

ANNEXES

1. Agriculture and Livestock Development

Tibles 1 to B - Model 1: Irrigated Development on Communally-Operated Land Tables 9 to 15 - Model 2: Rainfed Development on Commnally-Operated Land Tables 16 to 18 - Model 3: Rainfed Development on Group of Individual Farms Tables 19 to 21 - Model 4: Marketing Development

2. Irrigation System

Table 1 - Project Water Requirement Assessment Table 2 - Unit Investment and Operating Costs Table 3 - Investment and Operating Costs

3. Credit System

4. Technical Services

Trble 1 - Project Unit Organizatior. Table 2 - Investment Cost

5. Road System

Table 1 - Project Roads Table 2 - Investment and Current Cash Costs

6. Health System

7. Water and Waste System

Table 1 - Well and Pit Privy Unit Investment Cash Costs Table 2 - Investment and Current Cash Costs

8. Investment Cost Phasing

9. Estimated Schedule of Disbursements

10. Economic and Social Analyses

Table 1 - Economic Rate of Return

11. Monitoring

MAP BOLIVIA

INGAVI URAL DEVELOPMENT PROJECT

SUMMARY AND CONCLUSIONS

1. This report appraises a rural development project for which a Bank loan of US$9.0 million equivalent is proposed. The project would cover an area of 800 km2 , approximately 20 km southeast of La Paz. About 4,000 small farm families would benefit from on-farm investment (deepwell irrigation systems, tractors, improved pasture and livestock facilities, and storage facilities), incremental working capital (improved seeds, fertilizer, insecticides, and cultivation), and technical assistance financed under the project; while most of the 10,000 families in the project area would benefit from new and improved roads (85 km), health facilities (including five health posts), and water and waste facilities (4,000 shallow wells and 3,000 pit privies, respectively). A semi-autonomous agency, the Project Unit, would be organized under the aegis of the Ministry of Peasant Affairs and Agriculture (MACA) to implement the project. The Government would be Borrower and would bear the foreign exchange risk.

ii. The Bank Group has granted one loan and 10 credits to Bolivia for US$23.2 million and US$60.3 million equivalent, respectively. The largest portion of the financing, 37%, has been for transportation, with 34% for power, 21% for agriculture, and 8% for industry. Financing for agriculture has consisted of four credits: three for livestock totalling US$10.2 million equivalent and one for agricultural credit of US$7.5 million equivalent. Some difficulty had been experienced in the execution of the Third Livestock Project (261--BO), but the situation has improved and the credit probably will be disbursed on schedule. Execution of the other projects has been reasonably satisfactory.

iii. Bolivia's gross domestic product (GDP) has increased at 6% per year since 1971, but per capita income at US$302 (1974) is still among the lowest in the hemisphere. Moreover, the major stimulus to growth has been in the modern sector: agricultural production for export and hydrocarbon extraction and refining. Distribution of the income is very skewed, with the lowest 40% of the population receiving only 13% of national income. This poorest segment of the population consists largely of small farmers and agricultural laborers engaged in subsistence agriculture in the altiplano. The Government recently has taken measures to improve the economic performance of the country, but substantial external assistance will be required to support its efforts.

iv. The farmers in the project area are largely representative of producers throughout the altiplano. They have an average of 6 ha each on which they plant potatoes for home consumption and sale and forage crops (barley and oats) which are fed to a few cows and some sheep. The land is tilled with steel-pointed wooden plows drawn by oxen and is fertilized with animal manure. Improved seeds,chemical fertilizers, and insecticides are - ii -

little-used. The average family income is about US3$345, of which about US$75 is in cash. Most of the previous efforts to develop the altiplano have been based on a sectoral approach and have been mostly unsuccessful. The proposed project seeks to combine substantial increases in yields and income (which would more than double) with investments in productive infrastructure (roads and storage facilities) and also investments in health, water, and waste facilities which would have a direct impact on the quality of life of the target population. In addition, efforts would be directed toward groups of farmers rather than individuals. This integrated approach, based on group activities, is expected to achieve positive results which eluded previous efforts.

v. Total cost of the project would be about US$12.9 million equivalent, of which the Bank would finance US$9.0 million or 70%, UNDP US$0.8 million or 7% (for consultants), Government US$3.0 million or 22%, and beneficiaries US$0.1 million or 1%. In addition to the financial contribution, beneficiaries would make a substantial labor contribution valued at US$3.4 million. Bank financing would cover the foreign exchange costs (US$5.1 million, or 40% of project cost) and 50% of the local currency costs (US$3.9 million, or 30% of project cost).

vi. The Project Unit would have direct responsibility for the on-farm investment and working capital components of the project. It would provide technical assistance to farmer groups on agriculture and livestock practices, operation and maintenance of facilities, and preparation and implementation of farm development plans. It would also grant subloans to farmer groups in support of the farm development plans, with the Agricultural Bank (BAB) act- ing as financial agent for the handling of funds and the maintenance of accounts. The National Roads Service (SNC) would implement the roads component and the Ministry of Social Security and Public Health (NPSSP) the health, water, and wast components, under agreements with the Project Unit.

vii. Procurement of most farm inputs would be made by farmer groups through normal commercial channels because the size and timing of individual purchases would not be suitable for international competitive bidd;Lng (ICB). However, tractors and irrigation equipment would be purchased through competitive bidding. The irrigation wells would be installed by the Geological Survey of Bolivia (GEOBOL) under the supervision of the Project Unit. Roads would be constructed by SNC, and water supply wells and privies by MPSSP, by force account with the assistance of project beneficiaries. Construction of simple adobe buildings and other facilities would be undertaken by project beneficiaries under the supervision of the National Community Development Service (SNDC).

viii. The financial rate of return for farmers has been estimated to vary from 20 to 200%, while the economic rate of return to the country would be about 15% and the social rate of return about 19%. With appropriate assurances, the project would be suitable for a Bank loan of US$9.0 million equivalent. BOLIVIA

INGAVI RURAL DEVELOPMENT PROJECT

I. INTRODUCTION

1 .01 The Government of Bolivia has requested a Bank loan to help finance a rural development project in the altiplano near La Paz which would have a substantial impact on the income and standard of living of the small farmers in the project area and serve as a model for other rural development efforts in the altiplano. The proposed project was prepared by the Government with the assistance of the FAO/IBRD Cooperative Programme.

1 .02 To date the Bank has made one loan and IDA has granted 1 0 credits to Bolivia for totals of US$23.2 million and US$60.3 million equivalent net of cancellations, respectively. The largest portion of the financing, 37%, has been for transportation, with 34% for power, 21% for agriculture, and 8% for industry. Financing for agriculture has consisted of four credits: three for livestock totalling US$10.2 million equivalent and one for agricultural credit of US$7.5 million equivalent. Some difficulty had been experienced in the execution of the Third Livestock Project (261-BO), but the situation has improved and the credit probably will be disbursed on schedule. Execution of the other projects has been reasonably satisfactory.

II. BACKGROUND

A. General

2.01 Bolivia's economic and financial posture has improved somewhat during the last four years. Real GDP increased by 6% annually during 1971-73, compared with a 3.4% average for the 1968-70 period. Following a similar trend, per capita GNP increased from US$197 in 1973 to US$302 in 1974; however, it remains one of the lowest levels in the hemisphere. Although GDP growth declined to about 59 in 1974, significant gains in the terms of trade resulting from rising petroleum and mineral prices have contributed to the expan- sion of consumption and investment, and to substantial improvement in public finances and balance of payments. This favorable trend in the economy has, however, been accompanied by lagging growth rates in traditional activities such as domestic agriculture, mining, and manufacturing of consumer goods; high unemployment; inadequate infrastructure; and high incidence of poverty in rural areas.

2.02 In 1975, Bolivia's population was estimated to be 5.5 million, 70% of which lives in rural areas. The altiplano and the valleys, which jointly account for about 30% of the national territory, contain about 84% of the rural population. At the current annual rate of population growth (2.7%) it is expected that by 1980 population will rise to 6.5 million, with rural areas accounting for 68% of the total population. The labor force in 1974 was 2.5 million, with the annual rate of increase exceeding employment growth. 2-

Out-migration from rural areas is occurring at an increasing rate, but the limited capacity of the non-rural sector to absorb the rapid increase in labor resources argues for vigorous policies to expand employment opportunities in the rural sector.

2.03 Income distribution remains skewed in Bolivia. Disparity is reflected in the fact that the lower 40% of the population account for only 1 3% of the total income, compared to the 36% of the national income enjoyed by the top 5% of the population. The poorest segment of the population consists largely of small farmers and agricultural laborers engaged in subsistence agriculture in the altiplano.

2.04 The Government is distinctly aware of the major obstacles to development, and consequently it has recently taken measures designed to improve the economic performance of the country. While the Government has directed its efforts towards mobilization of domestic resources and preparation of a development program for Bolivia, the successful implementation of this program is contingent upon the receipt of substantial external assistance.

B. Rural Sector

2.05 Agriculture, which is the principal livelihood of the rural population, accounts for 21% of GDP and 65% of total employment. The decline in agriculture's share of GDP from 30% in 1962 to 21% in 1974 may be attributed in part to the more rapid economic growth of non-agricultural sectors. The rate of growth in agriculture during the 1968-74 period was estimated to be 3.9%, as compared to h.8% for the rest of the economy. Agriculture's exports in 1974, mainly cotton, coffee, sugar and beef, amounted to US$65 million, or about 9% of the total export value. In addition to generating foreign exchange, agriculture provides about 70% of domestic agricultural and food requirements. However, GDP in agriculture has been rising at an average annual rate of only 1 .9%, while domestic demand for agricultural and livestock products has been increasing at an estimated rate of 4% annually. Food imports in 1974, mainly wheat, flower, fats, edible oils and dairy products, accounted for 8C) of total agricultural imports of US$90 million.

2.06 Bolivia's rural sector is comprised mainly of small farmers living under subsistence conditions. The high incidence of poverty can be linked directly to the small-farm sector which is plagued by low productivity, a traditional technological base, underemployed resources, and a disproportion- ately small share of agricultural growth and development. Over 85 of the small-farm population is concentrated in the relatively poor physical environment of the altiplano and the intermediate valleys, areas characterized by a high man/land ratio. The small-farm sector produces about two-thirds of the domestic food supply and provides some form of productive employment for about 65% of the rural inhabitants.

2.07 In contrast, the farmers and ranchers of the modern agricaltural subsector, which is confined to the Santa Cruz and Beni regions, have large farm holdings and enjoy substantial financial support from central and local - 3 - governments as well as from the private sector. Modern techniques are used, especially in the mechanized production of cotton and sugarcane in Santa Cruz. Moreover, marketing arrangements, processing industries and services are better developed.

2.08 Regional imbalances appear to be pronounced in Bolivia's case, largely because of the disparities in growth potentials, level and pattern of agricultural development, and the extent to which each region has attracted resources and governmental support. An inherent problem affecting agricultural growth is the existence of structural imbalance between population and natural resources in Bolivia's three main geographic regions: (i) the cold, dry and largely barren altiplano which comprises 28% of the country's cultivated land and accounts for about 42% of the rural population while contributtng only 18% of the agricultural GDP; (ii) the temperate and humid valleys which include 38% of the cultivated land, 42% of the rural population and 31% of the agricultural GDP; and (iii) the tropical and sub-tropical lowlands which have 35% of the cultivated land, 16% of the population, and 48% of the agricultural GDP. Traditional agriculture is concentrated in the altiplano and the intermediate valleys, while the rapidly developing crops (which include cotton, sugarcane, rice and oilseeds) and beef production have been developed spontaneously by private enterprise in the central and northern lowlands, respectively.

2.09 Agricultural production is further deterred by stagnant technology and low factor productivity, limited skilled manpower, inadequate factor and product markets, and lack of access to agricultural credit, especially long- term credit to finance agricultural infrastructure and agricultural inputs, by a very large segment of producers. The problem is further compounded by the lack of viable farmer organizations, adequate infrastructure and supporting services. In addition, political and economic instability, lack of institutional coordination and the absence of an integrated approach to rural development have made it difficult to successfully assist the Government in its efforts to develop agriculture, particularly in the altiplano.

2.10 Bolivia's efforts to ameliorate rural, social, and economic conditions will be vastly influenced by economic dualism in the rural sector, i.e., large farm operators and a preponderance of small-scale farmers, each with different needs and problems. There is evidence that productivity and the living standards of the rural poor can be improved considerably, provided the Government takes a number of essential measures consisting of (a) preparation and execution of investment programs and establishment of a proper institutional framework to execute such programs in the altiplano and valleys; (b) channeling adequate credit and technical assistance to small farmers in support of such programs; (c) organization of small landholders into cooperatives or other functional groups; and (d) research to develop appropriate crop varieties for the climatic conditions of the altiplano and valleys.

2.11 Although the Government does not have a rural development program nor a clear-cut policy for rural development, the present administration is well aware of the need to adopt such measures and, with external assistance, has recently begun to channel more financial and human resources to small farmers. The Government has also taken steps to reform pertinent institutions and to improve sector management capabilities. In early 1974, the Ministries of Agriculture and Rural Affairs were merged. A special office to coordinate all the development activities on the altiplano has been established with the assistance of the UNDP. Preparation of capital investment projects in the altiplano are now being carried out by IDB and the UNDP. IDB is planning assistance in the field of agricultural research. Likewise, USAID is now considering the possibility of providing technical assistance for the improvement of the Ministry's effectiveness in the formulation of policies, sector planning, and coordination and supervision of investment programs. It is also providing technical and financial assistance to the National Community Development Services (SNDC) to expand its role beyond its present involvement in infrastructure projects only. A reorganization study for the Agricultural Bank of Bolivia (BAB) in order to improve the efficiency of this institution will be financed under Credit 261-BO. Support from external agencies is designed to improve planning, coordination and supervision of development programs to benefit the rural poor in the altiplano and valleys.

2.12 The rural development effort in the project area is intended to bring about needed relief in a region characterized by low productivity and high incidence of poverty. The project proposes a gradual development scheme which would organize farmers into larger production units and introduce simple technical innovations in agricultural practices with the support of technical assistance and credit. From a long-run viewpoint, the project is an initial step toward the organization of human resources, capital formation, and increase of factor productivity in Bolivia's depressed rural areas.

C. Project Area

2.13 The project area is located in the altiplano at about 4,000 m altitude, some 20 km southeast of La Paz (Annex 1, Map IBRD 11737). It covers an area of about 800 km2 , primarily in the eastern part of the Ingavi Province but also partly in the southern part of Los Andes Province. Viacha, the capital of Ingavi Province, is situated approximately in the center of the project area. The plain is mostly uniform land with a gentle slope (about 2%), although some of it is slightly rolling and is broken by a few small hills. Mountain ranges are located to the east and west of the area. Average annual precipitation is about 500 mm, about 60% of which falls from December to February; however, precipitation can vary widely from month to month. Hail storms, which occur from December to February, cause total crop loss about one year in 10. Average temperatures vary from 100 C in the summer (December to February) to 70C in the winter. Frosts occur, primarily in the winter, although light frosts which generally do not kill the crops occur during the summer months as well. About half of the project area is suitable for agriculture and nearly 30% is suitable for irrigation. The utilizable aquifer extends for an area of about 7,000 ha in the central part of the project area. However, because of the limited availability of water (there are no significant surface water resources), only about 1,000 ha (about of the irrigable land) could be supplied with water. 2.14bAs a result of the land reform, nearly all of the farmers in the project area own their land. About 7C% of. them have legal titles, and the National Agrerian Reform Directorate is continuing its program of issuing titles to the remainder. Sqrje land has been maintained for common use in both the traditional communities.'/ and in those areas previously covered by large individual land-holdings. On average, farmers in the project area have about 6 ha of land, about 56% of which is fallow and native pasture, 5% in potatoes, 7% in quinoa (an Andean grain), 30% in barley and oats, and 2% in other crops. Each farmer has, on average, three cows and a bull, two donkeys for hauling, 20 sheep, and a few pigs and chickens. Plowing is accomplished with steel- pointed wooden plows drawn by the bull and a cow. Seed is retained from the previous harvest, and animal manure is used as fertilizer, primarily for potatoes. Yields are low: 4 tons/ha for potatoes; 0.6 tons/ha for quinoa; and 3 tons/ha dry matter for barley and oats. The main cash crop is potatoes, the barley and oats being used as forage for the animals. Total net income per farmer is about $b 6,900/year (US$3h5/year), of which about $b 1,500/year (US$75/year) is cash.

2.15 With the use of improved seed, additional fertilizer, supplementary irrigation, and improved breeding stock, yields can be more than doubled and incomes increased accordingly. These increases can be achieved, however, only through a coordinated package of activities involving credit for investments and working capital, technical assistance, supporting infrastructure, and some improvement of social facilities which would directly affect the quality of life of the farmers.

1/ Based on tracts of land which are the remnants of holdings originally granted by the Spanish Crown to protect the native population of the altiplano against usurpation. - 6-

III. THE PROJECT

A. Brief Description

3.01 The principal objectives of the project are to improve income distribution by increasing the income of small farmers (6 ha average), raise the standard of living of the population of the project area through higher incomes and improved health conditions, foster the cooperative movement as a means of forming more efficient economic units and utilizing more effectively scarce technical assistance and credit resources, increase supplies of basic loods to the La Paz market, and serve as a model for development efforts elsewhere in the altiplano.

3.02 The project would increase agricultural and livestock production through the provision of production inputs, deepwell irrigation systems, tractors, livestock investments, storage facilities, and roads; and would improve living conditions through the installation of health, water and waste faciJli- ties. It would include technical assistance and credit for incremental working capital and fixed investments. The implementation period would be five years.

3.03 A semi-autonomous agency (the Project Unit) would be created under the Ministry of Peasant Affairs and Agriculture (MACA) to implement the project. It would provide credit and technical assistance to farmer groups and would enter into agreements with the National Roads Service (SNc) for the improvement of roads and the Ministry of Social Security and Public Health (MFSSP) for the execution of the health, water, and waste components. The Agricultural Bank (BAB) would be the financial agent for subloans to farmer groups.

3.01 The number of beneficiary families would vary from about 4,000 in the case of agricultural investments to nearly 10,000 in the case of roads. The table below gives the number of beneficiary families for each of the main project components and the cost per family (base cost plus physical contingency). Number of Beneficiary Cost per Component Families Familv

On-farm investments plus power line 4,000 1 ,010 Incremental working capital 4,000 370 Technical services 4,000 590 Roads 10,000 78 Health facilities 8,500 11 Water and waste facilities 8,000 128 -7-

B. Detailed Yenturtin

On-Farm Investments and Incremental Working Capital

3.05 The principal requirements for increased production in the project area are improved production inputs, additional water supplies, mechanization (at least in conjunction with irrigation), improved cultivation and animal husbandry practices, and more efficient marketing of output. The project would meet these requirements (within the constraint of water availability), and would do so in the context of traditional methods of community cooperation. Thus small farmers participating in the project would be members of groups, with the groups differing by function and by degree of internal commitment. All groups would be involved in crop development and would operate common storage facilities (Model 4 represents those groups which 6pt for this mode of development only). Some groups would be involved in both crop and livestock development, and would operate storage and livestock (stud service) facilities in common (Model 3 represents those groups which choose this mode). Some groups would be involved in both crop and livestock development, but on both communal and individual farms. The communal farms would be developed on land that presently is operated in common or on a block formed by contributions of the group members. In some cases, these groups would carry out rainfed development only (Model 2), while in othere they would have access to irrigation water for the communal farm (Model 1). For illustrative purposes, the groups are assumed to have an average of 50 small farmer members each (a representative size for existing groups in the project area), and a total of about 80 groups (4,000 farm families) is expected to participate in the project. In the case of the communal farms, each member of the group is expected to contribute 1 .5 ha to the commonly-operated block, foming a total of 75 ha for each group (this total area would be a requirement for irrigation groups (Model 1) in order to ensure efficient utilization of irrigation facilities). Because of the yield and characteristics of the groundwater aquifer, the number of wells--and consequently irrigation groups--would be limited to 20. Each group would receive long-term credit to finance investments and short- term credit to cover working capital cost (Annexes 1 to 3).

3.06 Production would be based on a mixed farming system. Potatoes, vegetables, and quinoa (an Andean grain) would be grown for home consumption and for market, while alfalfa/fescue and green barley would be cultivated as livestock feed--primarily for dairy cattle and sheep. Investments would include 20 deepwell irrigation systems (each with one well, storage tank, and distribution and drainage system) (Annex 2); 20 tractors; livestock facilities (cultivated pasture, breeding animals, and handling and watering facilities), and storage and administration facilities. Incremental working capital would include improved seed, fertilizer, chemicals for seed treatment, insecticide, fungicide, and cultivation.

3.07 In view of the limited irrigation water available, groups undertaking irrigated development would be required to have at least 30 member families each, in order to spread the benefits. For purposes of construction and procurement efficiency, the wells would be installed in two groups of 10 each, in 1977/78 and 1978/79. The organization of irrigation groups also would proceed according to this schedule, with 10 being formed by July 1 , 1977 and another 10 by July 1, 1978 and each having 75 ha of irrigable land which would be operated as a unit. A detailed study (design, siting, water balance, etc.) for all twenty wells would be reviewed by the Bank prior to the construction of wells or the purchase of equipment. In order to avoid jeopardizing the performance of project wells, the Government would ensure that there would be no additional exploitation of the aquifer outside of the project. The tractors would be used primarily on irrigated land, where production increases are sufficient to warrant their use, and they would be provided only to those irrigation groups which convince the Project Unit that they have the capability to operate and maintain a tractor effectively, and to those contractors or service organizations who have entered into agreements with irrigation groups to work at least 75 ha of land. Assurance on the above matters would be sought at negotiations.

Technical Services

3.08 Credit and technical assistance on agriculture and livestock practices; operation and maintenance of tractors, irrigation systems, and livestock and storage facilities; and preparation and implementation of farm development plans would be provided to farmer groups by the Project Unit (Annex h). An assurance would be obtained that the Government would provide funds to maintain the Project Unit after the project implementation period. Consultant assistance for the Project Unit would be provided by three resident specialists (in project administration, groundwater irrigation, and marketing and credit) for a three-year period and by short-term specialists (including ones in agricultural machinery and adult literacy). In addition, a specialist in sanitary engineering would be provided for a four-year period to assist MPSSP in the implementation of the water and waste component. These specialists would be financed partially by UNDP (with the Banas executing agency), and the Government is preparing the necessary request../

3.09 The Project Unit would establish a system for collection of data to measure the physical, financial, economic, and social impact of the project. The evaluation would focus on the group and project levels as well as the farm level. Among the factors considered would be increased production and income, the progress of group organization and operation, the effectiveness of project lending, and the cost of project services. An assurance would be sought that the Project Unit would establish such a system in consultation with the Bank.

Roads

3.10 Improvement of roads is required to assure the supply of inputs to farmer groups, the transportation of produce to markets, and the access of Project Unit personnel to farmer groups throughout the project area (Annex 5). Of particular importance during the rainy season, however, is the transportation of milk to the dairy plant, timely supply of vegetables to markets and access to the health centers. Since dirt roads are impassable during the

1/ UNDP approval is expected by Board presentation. - 9 -

rainy season, all-weather gravel roads would be necessary. About 85 km of road would be improved or constructed (along dirt tracks). The road work would be undertaken by the National Roads Service (SNC) under agreement with the Project Unit and labor would be provided by beneficiaries. The roads also would be maintained by SNC, again with labor provided by beneficiaries. Funds would be provided under the project for maintenance of project roads during the implementation period, and an assurance would be obtained that the Government would maintain all roads in the project area during and after the project period.

Health Facilities

3.11 In order to provide minimal health services to the population of the project area, the area's present health activities would be expanded to include five satellite health posts surrounding the centrally-located Viacha hospital, which would serve as the referral center (Annex 6). The health posts would be staffed by auxiliary nurses. A mobile unit would be provided to facilitate supervision, administration, and transportation. The health component would be implemented by the Ministry of Social Security and Public Health under an agreement with the Project Unit. An assurance would be sought that the Government would provide the necessary staff and would be responsible' for full operating costs of the health system.

Water and Waste Facilities

3.12 Potable water supply would be provided to about 8,000 families from 4,000 shallow wells equipped with handpumps (Annex 7). A survey is being undertaken at present to determine more precisely the numbers of wells, but about 3,000 wells would be located in areas where the groundwater table is close to the surface and would be excavated manually, while about 1 ,000 wells would be drilled. In the case of drilled wells, a cash contribution of 5 would be required of beneficiaries since little unskilled labor would be employed in construction. A limit of $b 7,200 (US$360) would be placed on the cash cost of wells in order to keep it within reasonable limits. A survey is being undertaken to identify existing facilities and locations for new wells, and it would be sent to the Bank for review prior to the installation of any wells. Pit privies also would be provided for about 3,000 families. Implementation of the water and waste component would be undertaken by NPSSP under an agreement with the Project Unit, with labor for digging wells and constructing pit privies being provided by beneficiaries. NPSSP would supervise the operation of wells and maintain them, with the beneficiaries bear- ing the cost of maintenance, and it would supervise the maintenance of the pitprivies by the beneficiaries. Assurances would be sought on the above.

Vower Line

3.13 Utilization of electricity by the irrigation wells would produce a significant saving in capital cost (pumps and motors), incur about the same operating cost as the diesel alternative, and provide substantial benefits in terms of ease of operation and maintenance (Annex 2). In order to deliver - 10-

a line into power to the wells, the Bolivia rower Co. would have to extend Government would the project area. An assurance would be obtained that the cause the compJ etion of this extension by July 1, 1977.

C. Cost Estimates

3.14 Total project cost is estimated at $b 257 million (US$12.9 million), of which $b 102 million (US$5.1 million), or -presents foreign exchange requirements. Cost estimates and foreign exchange requirements are summarized below: Foreign Base Exchange Cost Requirement Component Local Foreign Total Local Foreign Total ----- $b million ------US. million --- ~T(7 06)

On-farm investments 37.3 33.8 71 .1 1 .86 1 .69 3.55 39 48 Tncremental working 25 capital 22.2 7.h 29.6 1.11 0.37 1.48 16 Technical services 24.h 18.4 42.8 1.22 0.92 2.14 24 43 Roads 7.0 6.5 13.5 0.35 0.33 0.68 7 48 Health facilitien 0.9 0.7 1 .6 0.05 0.03 0.08 1 45 Water and waste 12.0 6.5 18.5 0.60 0.32 0.92 10 35 facil ities Power line 2.1 3.2 5.3 0.11 0.16 0.27 3 60 Subtotal 105.9 76~ 182.h 5.30 3.82 9.12 100 42

Contingencies Physical 6.9 5.7 12.6 0.35 0.28 o.63 h Frice 42.9 19.3 62.2 2.14 0.97 3.11 31

Subtotal 49.8 25.0 74.8 2.49 1.25 3.74 33

Total 155.7 101.5 257.2 7.79 5.07 12.86 ho

5 of base cost on elements The physical contirgency has beer calculated at 1 0-1 other than credit. The price contingency has been calculated on base cost contingency at the following rates: 15%ibr 1976, 12% for 1977-79, plus physical Y% 1976, 81 for and 104 for 1980-81 on the local currency component; and 1 for 1977-79, and 7 for 1980-81 on the foreign exchange requirement. D. Financing

The project cost of $b 257 million (US$12.9 million) would be 3.15 million), financed as follows: Government would contribute $b 59 million (US$3.0 (US$0.8 million), or 22% of project cost; UNDP would finance $b 17 million finance $b 180 million (US$9.0 million), or 70%; and or 7%; the Bank would or 1%. The beneficiaries the balance of $b 1 million (US$0.1 million), the or hO% of Bank loan would cover the foreign exchange costs (US$5.1 million, costs (US$3.9 million, or 30% of project cost) and 50, of the local currency - 11 -

project cost). In addition to the financial contribution indicated above, beneficiaries would make a substantial labor contribution to project works valued at $b 67 million (US$3.4 million) at market prices, which is not included in the table below. The financing for individual components of the project is summarized in the following table (amounts in US$ million).

Component Project Financing Beneficiaries Government UNDP Bank Amt. EAt. $ Amt. 7 T Total

On-farm investments - - 0.99 28 - - 2.56 72 3.55 Incremental working capital - - 0.41 28 - - 1.07 72 1.48 Technical services - - - - 0.60 28 1.54 72 2.14 Roads - - 0.19 28 - - 0.49 72 0.68 Health facilities - - 0.02 28 - - 0.06 72 0.08 Water & waste facilities 0.03 3 0.23 25 - - 0.66 72 0.92 Power line - - 0.27 100 - - - - 0.27 Contingencies 0.01 1 0.86 22 0.25 7 2.62 70 3.714

Total 0.04 1 2.97 22 0.85 7 9.00 70 12.86

3.16 Government would be the borrower and would bear the foreign exchange risk on the Bank loan of 25 years, including five years grace. Proceeds from the loan, as well as the Government contribution, would be channeled through the Central Bank to the Project Unit and the other participating agencies. The Government would make its contribution according to a schedule to be agreed with the Bank. Funds would be disbursed from the Central Bank project upon case accounts only on authorization from the project director, except in the of BAB, where funds would be disbursed against evidence of disbursement by BAB on subloans to project beneficiaries approved by the project director. BAB would mnke payments to the Central Bank project accounts as repayments were received from subborrowers, and funds accruing in the accounts would be available for further lending in the project area for similar purposes. The Central Bank would receive 1/M4 on outstanding subloan amounts as compensation for its services. Assurances on the above would be sought at negotiations.

E. Procurement

3.17 Procurement of most farm inputs would be made by farmer groups through normal commercial channels because the size and timing of individual purchases would not be suitable for international competitive bidding (ICB). Tn the case of tractors, however, the current monopoly position of one manu- facturer for tractors of the size needed for the project distorts the supply situation. Since representatives of at least five foreign manufacturers have facilities adequate to provide necessary service and spare parts, tractors would be purchased in two groups of 10 each, and contracts would be awarded following local competitive bidding in which all suppliers could take part. - 12-

The total amount involved would be US$0.7 million. The pumps, motors, casingg, and screens for the irrigation wells also would be grouped in lots of 10 and purchased through ICB in accordance with Bank guidelines (total 0.3 million). The wells would be installed (US$0.7 million, excluding the US$0.3 million for pumps,etc.)by the Geological Survey of Bolivia (GEOBOL) under agreement with the Project Unit. Road work (US$0.7 million) would be undertaken by SNC on force account, using labor supplied by project beneficiaries. Construc- tion of simple adobe buildings and other facilities would be carried out by project beneficiaries under the supervision of the National Community Development Service (SNDC), which would operate under agreement with the implementing agency having primary responsibility for the particular component involved (Project Unit or MPSSP). MPSSP would install the water supply wells and privies (US$1.0 million) by force account, with the assistance of project beneficiaries.

F. Disbursement

3.18 The Bank would, against appropriate documentation, disburse 72% of expenditures for on-farm investments; incremental working capital, technical services; roads; and health, water and waste facilities. Since the construction period is five years (Annex 8), disbursement is expected to require five and a half years (Annex 9).

G. Organization and Management

Project Unit Organization

3.19 Project implementation would be the responsibility of the Project Unit, which would be formed as a semi-autonomous agency under the Ministry of Peasant Affairs and Agriculture (Annex h). The Government would consult with the Bank on the content of the decree and statutes creating the Project Unit and would not modify them without giving the Brnk an opportunity to comment on the proposed change. These documents would be promulgated prior to negotiations. The Project Unit would have direct responsibility for implementing the on-farm investment and working capital components of the project, while SNC would have responsibility for implementing roads, and 1WSSP health, water and waste facilities, under agreements with the Project Unit. Assur- ances on the above would be sought at negotiations.

3.20 Policy for project implementation would be established by the Project Unitts board of directors, ihich would be composed of a representative and alternate from MACA, the Ministry of Planning and Coordination, the Ministry of Finance, WPSSP, CORDEPAZ, BAB, SXDC, and SNC, with the representative of MACA as chairman. The project director or his representative would also be a member. In addition to establishing project implementation policy, the board would appoint the project director, approve annual budgets and work plans, and ensure effective coordination among participating agencies. The composition and functions of the board of directors are, given in Schedule A, and these matters would be included in the decree and statutes. - 13-

3.21 The project director would be employed in consultation with the Bank, and his terms of reference (including the points indicated in Schedule A) would be agreed upon with the Bank. The deputy director also would be employed in consultation with the Bank. A nucleus of staff for the Project Unit would be seconded from existing agencies, including MACA, BAB, and SNDC; and additional staff would be recruited from outside the Government structure. The salary scale and the staffing schedule would be agreed upon with the Bank (Schedule A). Training would be provided primarily on the job, but technicians would also attend courses in farm plan preparation and financing given by BAB. Assurances would be sought on the above.

Consultants

3.22 In order to assst the Project Unit (in an advisory capacity) in establishing its organization and procedures, to train project staff (Annex 4), and to help provide technical assistance to project beneficiaries, three resident consultants would be retained for a three-year period. They would consist of specialists in project administration, groundwater irrigation, and marketing and credit. Short-term consultants (including agricultural machinery and adult literacy specialists) would also be recruited by the project director with the agreement of the consultant on project administration. Furthermore, a specialist in sanitary engineering would be retained for a four-year period to assist MPSSP in the implementation of the water and waste component. An assurance would be sought that the consultants and their terms of reference (which would include the points given in Schedule B) would be agreed upon by the Brnk.

Project Unit Functions

3.23 The Project Unit would be located in the provincial capital of Viacha, situated within the project area. It would adivse farmer groups on agriculture and livestock practices, assist them in the preparation and implementation of development plans, grant subloans for on-farm investments and working capital, assist farmer groups in purchasing inputs and selling products, implement a program of demonstration farm trials (with the cooperation of the experiment stations), train technicians and farmers (including an adult literacy program), and assist farmers in the organization and administration of groups. It would also design the irrigation systems and supervise their construction, operation and maintenance; purchase the tractors and supervise their operation and maintenance; and supervise the construction, operation, and maintenance of the livestock and storage facilities. Although most of the actual construction on these facilities would be undertaken by other agencies with the participation of the farmer groups, the Project Unit would maintain general supervision of the work of the agencies. It would assume a similar role with respect to the road, health, and water and waste components, and would authorize disbursements from the project account as the work progressed under the agreements with the responsible agencies. - 1lL -

Farmer Groups 3.2h There are perhaps 25 farmer groups presently in existence in the project area, ranging from consumer groups to producer groups. Some have registered with MACA and become recognized as pre-cooperatives, and a few have completed all requirements for registration with the Ministry of Labor and become full cooperatives. The project initially would aim at the existing groups and simultaneously promote the fomation of new ones. It would recog- nize for participation all groups which have been organized to carry out project-relaied activities, whether or not they were registered as pre- cooperatives or cooperatives. About the only requirements would be that they had an established structure, that their members had made a contribution to the group's capital (perhaps $b 50) as a demonstration of support, and that they were willing to undertake commercial obligations (assumption of responsibility to repay subloans, assignment of collateral, delivery of output, etc.).

Lending

3.25 Groups would receive subloans for the purchase of production inputs and tractors, and for the construction of irrigation, livestock and storage facilities. The contribution of groups would be in the form of labor (amount- ing to about 26% of total cost (including non-cash costs) in the case of irrigation systems and about 32% for livestock and storage facilities). Subloan maturities would range from six months in the case of some production inputs to a maximum of 20 years for irrigation systems, with grace periods of up to five years (a list of maturities and grace periods by category is given in Schedule C). The interest rate would be 12%, which is in line with some BAB rates for small farmers. Security would be in the form of a chattel mortgage on the crops, animals, and implements of all beneficiaries of a group. Since land mortgages would not be required, land titling would not be a critical point. Nevertheless, in order to facilitate the establishment of regular commercial relationships, particularly after the project period, the Government would complete the titling process in the project area by December 31, 1976. Assurances would be sought on the above.

3.26 Farm plans and subloan applications would be prepared by the Project Unit and, after approval of the project director, would be forwarded to BAB for disbursement of funds. Supervision of farm plan implementation would be undertaken by the Project Unit and authorization by the Project Unit would be required for each disbursement against a farm plan. BAB would cooperate in the collection of subloans and would handle the funds, but the Project Unit would retain responsibility for collection. BAB would make payments to the Central Bank project account only as amounts were received from subborrowers and therefore would not carry any financial risk. In order to perform its project functions, BAB would upgrade its office in Viacha to branch status. As compensation for its participation, BAB would receive a margin of 2% on outstanding subloan balances. Assurances would be sought on the above. H. Accounts and Auditing

3.27 project accounts would be established by the Central Bank, the Project Unit, BAB, SNC, and MPSSP. They would be audited annually by independ- ent auditors designated in accordance with the laws of the Government and acceptable to the Bank, and certified copies of the auditors' reports would be sent to the Bank within six months of the close of the respective financial years. The accounts of farmer groups would be audited by the Project Unit. - 16 -

IV. PRODUCTION, MARKETING, AND PRODUCR BENEFITS

Production

4.01 Annual incremental production generated by the project would be about 14,400 tons of potatoes, 400 tons of quinoa, 300 tons of vegetables, 3.0 million liters of milk (some of which would be processed into cheese on the farm), 120 tons of beef, and 30 tons of mutton. In addition, some beans, local tubers, poultry, and pigs would be produced. The incremental output of potatoes and quinoa would correspond to about 1% and 3%, and of beef and mutton to less than 1%, of national production in 1974.

Marketing and Prices

4.02 Marketing prospects are satisfactory for project output. Part of the incremental production would be consumed on the farm while the remainder would be sold in local markets or, increasingly, delivered directly to buyers in La Paz. The proximity of the project area to La Paz (about 20 km) places it in a favorable position for supplying this urban center with a growing population now at a level of about 600,000. The marketing function would be undertaken by the farmer groups with the assistance of the Project Unit, which would provide information on prices and would help the groups arrange transportation with the various truckers operating in the area. Milk would be sold to the Government-owned Industrialized Milk Plant (PIL) at La Paz, which operates a collection service in the project area, or would be converted to cheese for sale in the local markets. PIL currently is operating at about 30% of capacity, of which only 10% is fresh and the remainder is reconstituted (project milk output would increase the proportion of fresh milk to about 35%). An assurance would be obtained that the Government would cause PIL to collect milk from project beneficiaries at least once a day and would ensure that PIL had sufficient facilities and personnel to effect the collection. In addition, an assurance would be obtained that the Government would prepare, within one year of the date of effectiveness, a comprehensive plan for the development of milk production in the altiplano. Improvements in the road network would ensure that products could be transported to market in a timely manner and are particularly important for the year-round collection of milk.

4.03 Farmgate prices have been rising steadily since 1970, reflecting both world and domestic market trends. However the Government has no clearly discernible price policy. Ideally, it would like to assure consumers a dependable food supply at reasonable prices while providing producers an adequate return on their investments, but the system of partial controls which exists has developed on an ad hoc basis rather than in accordance with an established policy. These controls, which consist of maximum retail prices for some products and support prices for others (including milk), are largely ineffective, and the market responds primarily to supply and demand forces. Thus producer prices provide sufficient incentives to farmers to make the proposed investments, and the storage facilities contemplated will enable them to take advantage of seasonal price fluctuations. Nevertheless, since the controls might not remain ineffective in the future, an assurance would be obtained that the Government would refrain from imposing any restrictions on the prices of project outputs which would prevent farmers from earning an adequate return on their investments. - 17-

Producer Benefits

4.04 Of the 10,000 families (60,000 people) living in the project area, all would benefit from the road improvements, 80 to 85% from health, water, and waste facilities, and about 40% from on-farm investments and working capital. The table below gives a summary of producer benefits taken from the illustrative farm models (Annex 1).

Irrigated Rainfed Communal Rainfed Communal Individual Marketing Development Development Development Development (Model 17 (Model 2) (Model 3) (Model h) Number of groups 20 20 20 20 Number of families 1,000 1,000 1,000 1,000 Average farm size per family (ha) 6 6 6 6 Investment cost per family (US$) 2,650 885 168 42 Net income per family (US$) At present 345 345 345 345 At full development 1,120 820 680 600 Increment (US$) 775 475 335 255 Financial rate of return (%) 20 32 200 200

These rates of return and the substantial absolute increases in income would provide satisfactory financial incentives for project farmers, and, together with the provision of social facilities which would affect the quality of life of farmers directly, are considered to be adequate incentives for farmers to undertake the types of development foreseen in the project.

Environmental Effects

4.05 The major focus of the project is on productive activities which would result in the improvement of land and water management. The mixed farming system to be utilized would increase the production of forage crops and lead to a better balance between the animal stocking rate and carrying capacity of the land. This factor, together with better cultivation practices, would reduce soil erosion, which is a major problem throughout the altiplano. In addition, the irrigation and drainage works to be constructed would permit control of the water balance and reduce the salinity problem in part of the project area. The prevalence of transmissible disease endemic to this area would not be increased as a result of the irrigation development. (Although malaria is of concern in other parts of Bolivia, it is not present in the altiplano.) The fertilizer and insecticides to be used would have only a small effect on the environment, given normal precaution in their use. The sanitation facilities would reduce contamination of the environment, and the water supply and health facilities would help shield beneficiaries from harm- ful elements in the environment. V. BENEFITS AND JUSTIFICAT ION

.01 This project would be the first comprehensive effort to substantially improve traditional patterns of subsistence crop and livestock production among the small farmers in the altiplano. About 4,000 small farmers (24,000 people) would receive short-term working capital and long-term investment credit, together with technical assistance. Additional external benefits would be received by consumers of the project's products at La Paz, by users of the project infrastructure--e.g., roads and by local suppliers of project inputs. Apart from general consumption effects, the health and welfare of most of the 10,000 families (60,000 people) in the project area would improve as a result of better health services, domestic water supplies, and waste disposal facilities. Income inequities between the rural and urban sectors would be lessened and opportunities to develop farm management skills under improved extension guidance would become available. The irrigation component would lessen seasonal yield fluctuation due to rainfall variability. The proposed pattern of development through group activity is based on traditional practices and is in line with Government's policy of eliminating uneconomic landholdings. This pilot project would also provide sufficient reliable data and project management experience for later phases of Bolivia's altiplano development effort.

5.02 Although few new jobs would be directly created by the project, the increased production opportunity would lessen the considerable disguised rural unemployment in the region as well as increase the skill level of the target population. Furthermore, the secondary effect on non-farm rural employment would be substantial, involving an increased demand for machinery operators, mechanics, traders, etc.

5.03 The best estimate of the project economic rate of return is 15%. In determining this rate, half the costs of the health, water supply, and waste systems were included since part of the benefits of these facilities would be realized through increased labor productivity, and therefore would be represented in agricultural output. (Inclusion of all costs of these facilities would decrease the return to 13%, while excluding all of them would raise it to 17%.)

5.o4 The economic methodology used to transform financial data consisted of breaking the costs or prices of each item into components and repricing them to reflect their economic worth. Each item was separated into local labor, local materials and imported material components. The shadow wage rate was determined by multiplying the financial cost of labor by the ratio of its weighted average marginal opportunity cost during the year to the average market wage rate. Traded goods were revalued at their c.i.f./f.o.b. price adjusted for transport costs. The prices of non-traded goods were multiplied by a conversion factor which is the ratio of the official exchange rate to the shadow exchange rate. - 19 -

Risk and Uncertainty

5.05 The climatic data for the project area are not accompanied by adequate crop production records. Therefore the linkage necessary for a formal risk analysis could not be established, and an uncertainty analysis was undertaken instead. The project economic rate of return was found to be sensitive to changes in 1) projected yield increases, 2) rate of benefit build-up, 3) delays in project implementation, h) project acceptance by farmers both in decree and rate, 5) costs and prices, 6) cropping intensity and 7) timing of costs and returns:

Economic Variable Change Rate of Return

Basic assumptions 0 17 Yield of milk, potatoes + 10 19 Yields - 10 12 Rate of build-up of benefits - 20 11 Delays in implementation + 20 14 Degree of acceptance - 20 14 Degree of acceptance plus sEower rate - 20 12 Costs paid + 10 12 Costs paid - 10 20 Prices received + 10 19 Prices received 10 12 Combination of costs and prices + 10 (both) 17 Cropping intensity + 10 19 Lagging incidence of cost and returns by six months - 14

1/ Including half the cost of the health, water supply, and waste systems.

5.06 In the absence of risk data, the influence of climatic variability was approximated by a slower average rate of benefit build-up. Changes in costs and prices would influence the return according to their relative differences. If prices paid by farmers rose faster than prices paid to farmers by 10% the return would drop to 12%. Because of the difficulties of working with the groupsof small farmers, the rate and degree of acceptance of the development package is uncertain. Farmerst costs and returns would not occur simultaneously during the year. Seeds, fertilizer, etc. would be purchased before planting. Other costs would be incurred at harvest time. Income would not come until after harvest and would be delayed by storage. If the benefit stream were lagged six months behind the cost stream to reflect this situation, the return would drop to 14%. In reality, costs and income would overlap to a certain extent, raising the return to 15%. A "pessimistic" judgment would have more variables taking lower values rather than vice versa, giving a return of 12% or less. An "optimistic" view would require more higher than lower values, giving a return of 17% or above. A "most likely" judgment, where some values are below the basic assumptions, and some above, suggests a return of 15%.

Social Welfare Analysis

5.07 A current per capita income of US$57 places project beneficiaries among the poorest 20% in Bolivia. The proposed project would generate increased income and consumption for the target group. The investment costs come out of savings elsewhere, and this is treated in the economic analysis. The social welfare analysis reprices inputs/outputs taking into account income distribution with and without the project. Project benefits received by a poor man are weighted more heavily than those received by someone above the average level of consumption. The methodology used is that suggested in Bank Staff Working Paper No. 194. The main effect is to derive a new shadow wage rate based on the marginal opportunity cost of labor while considering the social desirability of the extra consumption of the target group. The social rate of return using the parameters derived and the best estimate economic assumptions would be 19%. The effect on income distribution is given in the table below.

Per Capita Income (amounts in US$)

Without Lowest 20% Next 20% With Project of Bolivia of Bolivia Project Change

b del 1 57 59 132 187 228 Model 2 57 59 132 137 140 Model 3 57 59 132 113 98 Model 4 57 59 132 100 75

The net effect of the project should be to raise the target group from among the poorest 20% in Bolivia up to the national average consumption level with some small surplus for domestic savings. - 21 -

VI. RECUMMENDATIONS

6.01 Prior to loan negotiations, the Government would

(a) issue the decree and statutes creating the Project Unit (including the points given in Schedule A), in consultation with the Bank (paras 3.19 and 3.20) and

(b) employ the project director in consultation with the Bank under terms of reference (including the points given in Schedule A) agreed upon with the Bank (para 3.21).

6.02 During loan negotiations, assurances should be obtained that the Government would (a) require groups undertaking irrigated development to have at least 30 member families and 75 ha of irrigable land which would be operated as a unit (para 3.07),

(b) organize 10 irrigation groups by July 1, 1977 and another 10 by July 1, 1978 (para 3.07), (c) carry out a detailed study for all 20 irrigation wells and provide an opportunity for the Bank to review it prior to the purchase of equipment or the construction of wells (para 3.07),

(d) ensure that there was no additional exploitation of the aquifer outside of the project (para 3.07),

(e) provide tractors only to those irrigation groups which convince the Project Unit that they have the capability to operate and maintain a tractor effectively, and to those contractors or service organizations which have entered into agreements with irrigation groups to work at least 75 ha of land (para 3.07),

(f) provide funds to maintain the Project Unit after the project implementation period (para 3.08),

(g) establish, in consultation with the Bank, a monitoring system to measure project impact (para 3.09), (h) provide adequate maintenance for all roads in the project area during and after the project period (para 3.10),

(i) provide the necessary staff and cover the full operating and maintenance costs of the project health system (para 3.11),

(j) obtain a cash contribution of 5% from beneficiaries of drilled water supply wells (para 3.12), -22-

(k) limit water supply well cash cost to $b 7,200 (US$360) per well (para 3.12),

(1) send the survey of existing water supply facilities to the Bank for review prior to installing any project wells (para 3.12),

(m) ensure that the power line extension to the project area were completed by July 1, 1977 (para 3.13),

(n) make contributions to the project according to a schedule agreed upon with the Bank (para 3.16),

(o) refrain from modifying the decree creating the Project Unit without providing the Benk an opportunity to comment on the proposed change (para 3.19),

(p) cause the project deputy director to be employed in consultation with the Bank (para 3.21 ),

(q) adhere to a salary scale and staffing schedule for the Project Unit agreed upon with the Bank (Schedule A) (para 3.21),

(r) provide subloans to project beneficiaries according to the lending terms and conditions contained in Schedule C (para 3.25),

(s) complete the granting of land titles in the project area by December 31, 1976 (para 3.25),

(t) cause BAB to upgrade its office in Viacha to branch status (para 3.26),

(u) cause PIL to collect milk from project beneficiaries at least once a day and ensure that PIL had sufficient facilities and personnel to effect the collection (para 4.02),

(v) prepare, within one year of the date of effectiveness, a comprehensive plan for the development of milk production in the altiplano (para 4.02), and

(w) refrain from imposing any restrictions on the prices of project outputs which would prevent farmers from earning an adequate return on their investments (para 4.03).

6.03 A condition of Board presentation of the loan should be that the Government had recruited the specialists in project administration, groundwater irrigation, marketing and credit, and sanitary engineering under terms of reference (including the points given in Schedule B) agreed upon by the Bank (para 3.22).

6.04 With the indicated assurances the proposed project constitutes a suitable basis for a Bank loan of US$9.0 million equivalent for a term of 25 years, including a five-year grace period.

October 28, 1975 SCHEDULE A Page 1

BOLIVIA

INGAVI RURAL DEVELOPMENT PROJECT

Project Unit Guidelines

General

1. The Project Unit would be formed as a seml-autonomous agency under the aegis of the Ministry of Peasant Affairs and Agriculture (MACA). It would have direct responsibility for the on-farm investment and working capital components of the project, while the roads would be constructed by the National Roads Service (SNC), and the health, water and waste facilities would be installed by the Ministry of Social Security and Public Health (MPSSP), under agreements with the Project Unit. The Project Unit would supervise the work of SNC and MPSSP and would authorize progress payments from the project accounts at the Central Bank as implementation proceeded. The decree and statutes establishing the Project Unit would define the scope of responsibility and authority of the Project Unit, and would specify that the Project Unit would have its own organizational structure, administration,operations, and funds. They would also indicate the composition and functions of the board of directors of the Project Unit.

Board of Directors

2. Each of the entities listed below would name a representative to the board of directors, and also an alternate who would replace the representative whenever the latter was unable to attend a meeting.

Ministry of Peasant Affairs and Agriculture (MACA) Ministry of Planning and Coordination Ministry of Finance Ministry of Transportation Ministry of Public Health Department of La Paz Development Corporation (CORDEPAZ) BAB SNDC Project Director Project Farmers

The representative of MACA would be chairman of the committee and the representative of CORDEPAZ would be the vice chairman. The board would meet at least monthly during the project implementation period. Functions of the board would include the following: ,SCHEDULE A Page 2

1. formulate policy for project execution in accordance with the conditions agreed to between the Government and the Bank;

2. establish general credit policy and lending criteria in accordance with the conditions agreed to between the Govern- ment and the Bank;

3. approve the annual work program and budget submitted by the project director;

h. approve the salary scale and benefits for project staff according to the conditions agreed upon between the Government and the Bank;

5. ensure effective participation by other agencies undertaking project activities, and approve contracts with such agencies;

6. each member would designate an individual at the operational level of the agency which he represents who would serve as the contact for the project director on a daily basis to further coordination between the Project Unit and the other participating agencies; and

7. appoint a private auditing firm to audit the accounts of the Project Unit on an annual basis.

Project Director

3. The project director would be a Bolivian of international experience with an appropriate background in crop and livestock production, administration of rural development or agricultural production projects, and extension and credit for small farmers. He should speak Aymara or learn Aymara as a condition of employment. He would be the chief executive officer of the Project Unit, and his responsibilities would include the following:

1. organize and manage the Project Unit;

2. execute the project under policy established by the board of directors in accordance with the conditions agreed to between the Government and the Bank;

3. participate in board meetings;

4. prepare the annual work program and budget for approval by the board and transmission to the Bank for information; SCHEDULE A Page 3

). authorize the disbursement of funds from the project accounts at the Central Bank;

6. prescribe the functions and responsibilities of project staff;

7. hire, promote, suspend, and dismiss project personnel;

8. recommend to the board the salary scale and benefits for project staff according to the conditions agreed between the Government and the Bank;

9. implement training programs for project staff and supervise the training programs established by other agencies for project staff or beneficiaries;

10. provide to farmer groups the technical assistance and supervision necessary to ensure the successful implementation of project works, including especially the farm development plans and irrigation systems; prepare formats for farm development plans;

11. supervise the project work carried out by other agencies under agreements with the Project Unit;

12. work with the individuals designated by the other agencies participating in the project to ensure coordinated implementation of project components;

13. establish loan regulations and lending procedures in accordance with the credit policy and criteria established by the board;

1 4 . approve farm development plans and subloan applications;

15. act as chairman of the loan committee considering applic ations from project beneficiaries;

16. supervise the collection of interest and principal payments on subloans;

17. recommend to the loan committee the suspension of disbursements in cases of misuse of loan proceeds by project beneficiaries;

18. establish a system for compiling statistics adequate to measure project impact in technical, financial, and economic and social terms, particularly at the farm and group levels and for lending operations; prepare simplified accounts for use by farmer groups to record the physical and financial results of development plans; and

19. report to the board and the Bank on the progress of project implementation, in accordance with guidelines established by each entity. SCHEDULE A Page 4

The nroject director could delegate these functions to other project staff at his discreton but would remain responsible for their successful execution.

Staffing

4. A nucleus of staff for the Project Unit would be seconded from existing agencies: an agriculturalist, a livestock technician, and an irrigation engineer from MACA; an agriculturist and a livestock technician from BAB; and a group organization specialist (promoter) and a group management specialist from SNDC. Additional staff would be recruited from outside the Government. In order to ensure that the Project Unit has adequate staff to perform its functions, it would reach the following personnel levels by the dates indicated:

Type Staff 7/1/76 7/1/77 7/1/78 ------number------

Agriculturalists 3 4 5 Livestock Technicians 3 4 5 Group Officers 2 3 h Irrigation Engineers 2 2 2 Agricultural Machinery Technician 1 1 1

Salaries

5. In order to attract and retain qualified personnel, the Project Unit would pay the following salaries for the staff level indicated:

Staff Level Monthly Salary Annual Salary ------US$ equivalent------

Project Director 1,000 12,000 Deputy Director 800 9,600 Department Chief 700 8,400 Technician 500 6,000

The salaries would be raised periodically to reflect percentage changes in CORDEPAZ salaries.

October 28, 1975 SCHEDULE B Page 1

BOLIVIA

INGAVI RURAL DEVELOPMENT PROJECT

Consultants' Terms of Reference

Project Administration

1. The specialist in project administration should have a background in agricultural science, preferably with an agricultural/forage crop bias. He should have experience in the management of rural development or agricultural production projects and at least five years'practical experience in crop and livestock production. Part of his experience should be in Latin America and part of it with small farmers, particularly indigenous populations. He should be able to read, write, and speak Spanish. The principal duties of the specialist would be to assist the project director in the following:

1. establishment and management of the Project Unit;

2. implementation of all components of the project;

3. preparation of the annual work plan and budget;

h. specification of the terms and conditions of employment, and qualifications of staff and short-term consultants;

5. determination of staff to be seconded from other agencies;

6. establishment of detailed salary scales and other compensation for Project Unit personnel and recruitment of personnel;

7. establishment and implementation of training programs for project staff and project beneficiaries;

8. coordination of the work of other consultants to the Project Unit;

9. supervising technicians providing technical assistance to farmer groups;

10. instructing project beneficiaries in techniques such as forage crop establishment, controlled livestock management systems, livestock and seed selection, improved crop rotation systems, and selection of optimal market opportunities;

11. approving farm development plans and subloans to finance them;

12. supervising the implementation of farm development plans and the collection of subloan payments; SCHEDULE B Page 2

13. establishment and maintenance of simple farm records as required for periodic and regular project evaluation and monitoring; and

14. preparation of the progress reports on project implementation.

Groundwater Irrigation

2. The specialist should have a background in groundwater hydrology and training in irrigation and drainage. He should have at least five years' experience in the design, engineering, and implementation of deep-well irrigation systems involving internal drainage and training of farmers in water management. Part of his experience should be in Latin America and part of it with small farmers, particularly indigenous populations. He should be able to read, write, and speak Spanish. His principal duties would be to assist the chief irrigation engineer of the Project Unit in the following:

1. preparation of a detailed study of the 20 project wells, involving design, siting, and safe yield;

2. establishment of the work program, organization, functions and staffing of the irrigation section within the Project Unit for supervising the canstruction of wells and the operation and maintenance of the irrigation schemes;

3. training of project staff and farmers in all aspects of irrigation development, including water-use management, operation and maintenance;

h . preparation of guidelines for the operation and maintenance of irrigation systems, including water-use management;

5. design and supervision of installation of wells;

6. design and supervision of construction of the distribution systems, and of land levelling;

7. design and supervision of construction of internal drainage systems and improvement of natural drains; and

8. preparation of the detailed construction schedules, specification of materials and equipment, and supervision of the Geological Survey of Bolivia in preparing bid documents, evaluating bids, and awarding contracts for the purchase of materials and equipment. SCHEDULE B Page 3

Marketing and Credit

3. The specialist should have a background in agricultural economics, with a specialization in commodity marketing. He should have at least five years' experience in crop and livestock marketing and credit for small farmers (especially indigenous populations), at least part of which was in Latin America. He should be able to read, write, and speak Spanish. His principal duties would be to assist the Project Unit marketing officer in the following:

1. training and assisting technicians in the promotion, formation and operation of farmer groups and in the performance of their marketing activities;

2. training and assisting technicians to provide guidance to farmer groups on the purchase of inputs and the sale of output;

3. design and implementation of procedures for granting subloans to farmers groups fr investments and working capital, and for collecting subloan payments;

4. establishment of a farm gate price recording system for regular recording of optimum prices available for the crop and livestock products produced by the project;

5. development of a market information system suitable for relaying to farmer groups by circular and/or media propaganda and notices; and

6. undertaking periodic national market surveys for the guidance of Government in its establishment of price policy relating to project products.

Agricultural Machinery h. The specialist should have training in agricultural engineering with a specialization in farm equipment. He should have at least five years' experience in planning and executing farm equipment operations, at least part of which was in developing countries. He should be able to read, write, and speak Spanish. His principal duties would be to assist the Project Unit agricultural machinery officer in the following:

1. preparation of specifications and bid documents, evaluation of bids, and award of contracts for tractor purchases;

2. review of service facilities and spare parts supplies offered by prospective tractor suppliers; SCHEDULE B Page 4

3. training technicians, farmer groups, and contractors in the planning of tractor operations; and

h. training farmer groups and contractors in the operation and maintenance of tractors.

Adult Literacy

5. The specialist should have training in education and experience in designing and implementing adult literacy systems for low-income rural populations. He should be fluent in Spanish. His principal duties would be to assist the Project Unit training officer in the following:

1. design of an adult literacy system appropriate for project beneficiaries;

2. training of volunteers to perform as adult literacy instructors;

3. formulation of an examination system to measure the impact of the program and demonstrate progress to participants.

Sanitary Engineering

6. The specialist in sanitary engineering should have graduate training in sanitary engineering and also training in the development of groundwater supplies and basic sanitation facilities. He should have at least five years' experience with rural water supply projects involving small farmers, particularly indigenous populations. Part of his experience should be in Latin America, and he should read, write, and speak Spanish. He would assist the chief sanitary engineer of the Ministry of Social Security and Public Health (MPSSP) assigned to the project, in the following:

1. establishment of a plan and schedule for the execution of the well and pit privy program and a system of adequate cost controls;

2. fabricating and transporting the materials and supplies;

3. contracting the necessary skilled services;

h. supervising the construction of the water supply and waste disposal facilities;

5. providing orientation and education to the inhabitants in the use of those facilities; SCHEDULE B Page 5

6. controlling the purchase, receipt, and despatch of equipment and supplies;

7. maintaining records of the unit costs involved in the execution of this component of the project;

8. preparing periodic progress and maintenance reports;

9. preparing a training program for administrative, professional and field personnel with a view toward accelerating the execution of the program; and

10. at the end of each year evaluating the progress made and preparing new targets and programs as necessary.

October 28, 1975 SCHEDULE C Page 1

BOL IV IA

INGAVI RURAL DEVELOPMENT PROJECT

Lending Terms and Conditions

Appraisal and Supervision Criteria

1. The Project Unit would prepare for farmer groups development plans detailing the existing situation, the investments to be implemented, and the results of those investments. The analysis would cover all productive activities undertaken on the groups of farms and jointly (although the sub- sidiary activities would be treated in summary fashion). The results of investment would be projected in both physical and financial terms, and would be presented in both total and incremental quantities. A financial rate of return, calculated on a discounted cash flow basis, would be determined for each plan. The amount and terms of subloans, both long-term and short-term, should correspond to the projected cash flows, particularly in incremental terms.

2. All farmer groups undertaking irrigated development would be required to have at least 30 member families and 75 ha of irrigable land which would be operated as a unit.

3. Before the purchase of any irrigation equipment or the construction of any wells, a detailed study (covering design, siting, and safe yield) for all 20 wells would be prepared by the Project Unit and reviewed by the Bank. h. Tractors would be included in the investment package only for those irrigation groups which could demonstrate to the Project Unit that they could operate and maintain a tractor effectively, and they would be financed for those contractors or service organizations which have entered into agreements with irrigation groups to work at least 75 ha of land.

5. The Project Unit would assist farmer groups in the implementation of the development plans and in the operation and maintenance of the facilities installed. It would authorize disbursements from the Agricultural Bank (BAB) as the implementation stages of the plans were completed.

6. The Project Unit would assist farmer groups in maintaining simple records of activities (in physical and financial terms) for the groups' own use and also for use in measuring project impact.

Subloans to Farmer Groups

1. Subloans granted to farmer groups (and, in the case of tractors, to private contractors) would carry an interest rate of 12%. 2. Contributions to investment cost by subborrowers would be in the form of labor. SCHEDULE C Page 2

3. Maturities and grace periods would not exceed the following (in years):

Type Development Maturity Grace Period

Irrigated development on Communally- Operated Land (Model 1) 20 5

Rainfed Development on Communally-Operated Land (Model 2) 20 5

Rainfed Development on Group of Individual Farms (Model 3) 5 2

Marketing Development (Model h) 5 0

Tractor (for contractors) 6 0

h. Security for subloans would be a chattel mortgage on the crops, animals, and implements of all members of a group.

Government (Central Bank) Lending to the Agricultural Bank

1. The interest rate would be 10%.

2. BAB would be reimbursed for 100% of disbursements on subloans.

3. BAB would make payments of both interest and principal to the Central Bank as they were received from subborrowers.

4. The Central Bank would receive a commission of V on outstanding subloan amounts for its services.

5. Repayments of subloans would be made available for further lending in the project area for similar purposes.

October 28, 1975 BOLIVIA

INGAVI RURAL DEVELOPMENT PROJECT

Implementation Schedulel

Responsible ------1976 ------.------.--.-.--.----....-- 1977 ---- Main Activities Agency 1 2 3 4 5 6 7 8 9 10 11 12 1 2 3 4 5 6 7 8 Management and Administration

Recruit Project Unit staff PU-j Recruit consultants PU/Bank Make project implementation agreements with other agencies, BAB, SNC, SNDC, MPSSP, and GEOBOL PU

Agricultural Development

Irrigated Area Organize irrigation groups PU Appoint common irrigators F.rcer Group. Purchase tractors PU Initiate farm plan preparation PU Initiate lending and farm plan implementation PU

Rainfed Area Organize rainfed groups PU Initiate farm plan preparation PU Initiate lending and farm plan implementation PU

Civil Work Construction

Irrigation Make detailed investigations, nrvay, mapping, planning and design and specifications PU/GEOBOL Submit groundwater safe yield studies, civil works drawings to IBRD PU Purchase well equipment GEOBOL/PU Construct main power-line system and connecting lines to pumps BPC Construct wells and water tanks GEOBOL/PU Construct on-farm distribution systems SNDC/PU Level land Forcec Groaps/PU Improve natural draina SNDC/PU

Roads Make detailed investigations, survey, planning and design SNC/PU Construct roads SNC/PU

Water Supply Investigate and survey basic data for preparing work plan MPSSP Sbmit work plan to IBRD MPSSP Recruit skilled labor, engineers, supervisors and sanilary inspectors MPSSP Construct water supply wells and pit privies MPSSP Train sanitary inspectors MPSSP

Health Centers Investigate and survey basic data for planning health system MPSSP Build health centers and rehabilitate hospital SNDC/MPSSP Establish mobile unit MPSSP _ Train staff MPSSP

I/ Assumes loan effectiveness by 6/30/76. 2/ Project Unit

October 22, 1975 ANNEX 1 Page 1 BOLIVIA

INGAVI RURAL DEVELOPMENT PROJECT

Agriculture and Livestock Development

Background

1. Soils. The Ingavi Project area covers about 80,000 ha, and lands were classified in a UNDP survey as follows:

(a) Land without agricultural or irrigation limitations 22,000 ha (b) Land unsuitable for irrigation because of high water table but recommended for selected crops 7,000 ha (c) Land unsuitable for irrigation because of textural and structural conditions and/or shallowness of soil but with fair to good conditions for specific crops 9,000 ha

Subtotal agricultural land 38,000 ha

(d) Saline land 13,000 ha (e) Unsuitable for agricultural use 29,000 ha

Subtotal non-agricultural land 42,000 ha

Total area 80 000 ha

2. Climate. The project area receives about 500 mm of precipitation per year, about 0% of which falls during December, January and February. However, precipitation can vary widely from month to month. Hail storms, which occur during the summer months (December-February), may cause total crop loss one year out of 10, according to inhabitants of the area. Average temperatures vary from 100C in the summer to 70C in the winter. Moderate frosts end in September and recommence in April. In between, light frosts may occur but they generally do not kill the crops.

3. Land Tenure and Income. Nearly all of the rural families in the area own land and 70% have legal titles. Large landholdings (haciendas) were divided up among individual families as a result of the agrarian reform of 1952/53, but some land has been maintained for common use. Individual holdings average about 6 ha. Farmers of the type which would participate in the project have an estimated total income of about $b 6,900 (US$345) per year, of which $b 1,500 (US$75) is cash. ANNEX 1 Page 2

Agriculture

4. Cultivation Practices. Agriculture in the area is characterized by a low level of technology. Most plows are made of wood, have a steel point, and are pulled by a pair of bulls (or a cow and a bull). A few tractors are in use near the project area and are used primarily for plowing. Labor is provided by the farm families and some tasks (such as harvesting) are done collectively. Little irrigation is practiced in the project area as the available surface water does not lend itself to such use. However, irrigation with groundwater is used on vegetable and forage crops at the Patacamaya experiment station with positive results, and irrigation is used with success for the production of forage crops on a few farms near the project area.

5. Inputs. Seed inputs are supported by a national seed program, and a quality control laboratory and a seed processing plant are in operation in Cochabamba. However, because of inadequate local production of alfalfa and fescue seed, the major proportion has to be imported. All chemical fertilizers, insecticides, and fungicides must also be imported, but they are generally not used in the project area. All imported inputs are available through regular commercial outlets. As a rule, organic fertilizer is applied only to land producing potatoes since the supply is generally too limited to permit use on other crops. The traditional practice is to leave part of the land in fallow to permit natural regeneration of soil fertility.

6. Principal Crops. The principal crops grown in the project area are potatoes (13% of cultivated land), barley and oats (69%) and quinoa (17%). There are also few small plots of alfalfa. There is no strict crop rotation, although potatoes are generally grown on land newly activated from the fallow condition which lasts six to eight years. Quinoa and barley generally follow potato production.

7. The present system of potato cultivation is not conducive to good crop yields. Seed, which is small, is generally kept under poor storage conditions from harvest to planting time, and seeding rates are low. By using a better variety such as Sani Imillia, larger seeds (40 to 50 mm in diameter), and higher seeding rate (1,200 kg/ha), yields of 7 tons/ha are being achieved in the project area as compared to an average of 4 tons/ha; with adequate fertilization and supplementary irrigation, yields of 14 tons/ha are being achieved in adjacent areas.

8. Barley and oats are grown extensively for forage in the project area, although barley is more hardy and is the more widely grown of the two. Inadequate seed bed preparation, seeds planted too deeply in the soil, low seeding rates (50 kg/ha) and low levels of soil fertility result in yields of 3 tons/ha dry matter. The better farmers have demonstrated, however, that improved bed preparation and higher seeding rates up to 70 kg/ha increase the yield of barley to h tons/ha dry matter. ANNEX 1 Page 3 9. Quinoa (chenopodium quinoa) is a typical Andean drought-resistant crop, but, commonly grown varieties have a high saponine content and are relatively low yielding (0.6 tons/ha). A higher yielding variety (1.0 tons/ha) h;i; been developed recently at the Patacamaya Research Station and seed is now being produced. Trials have shown that neither supplementary irrigation nor fertilization is economically justified.

10. The amount of water available to alfalfa and the shortness of the rainy season (December through February) limits yields of this crop. However, recent research using supplemental irrigation with 50 introduced varieties has revealed several new high-yielding types, among which are Saranac New York, Ranger, Uinta, Williamsburg Common, Cherokee, Vernal and Moapa. With fertilization and irrigation, farmers in areas adjacent to the project area are obtaining yields of 7 tons/ha dry matter using these varieties.

11. There is no commercial vegetable production in the project area, but it could be introduced readily since the experiment stations at Belen and Patacamaya have identified the more adaptable varieties and recommended planting dates, fertilizer, and irrigation and cultivation practices.

12. Marketing. The project area is especially well situated for marketing of products because of its proximity (about 20 km) to La Paz with its population of 600,000 and growing demand for agricultural products. Most of the output, however, is used on the farm. Transportation of any produce that is to be sold is generally by donkey, except for potatoes which are sold mostly to middlemen (truckers) who transport them to La Paz. The La Paz market has adequate demand for potatoes and for vegetables such as lettuce, radishes, carrots, cabbage, cauliflower and garlic, which can be produced in the project area.

Livestock

13. Major animals in the project area are cattle, used principally for farm traction, with some milk production for family consumption; sheep, which provide cash income and wool for clothing; pigs, usually consumed at farm level; and poultry, maintained for subsistence, with a limited amount of surplus production sold through the local markets.

14. Parasite infestation and brucellosis are the main health hazards in the altiplano for cattle, compounded by the effects of altitude on repro- duction and milk performance. Sheep, on the other hand, are well acclimatized to altiplano conditions, their main health problem being parasite infestation. Animal health problems would be controlled under the project through vaccina- tion and parasite-control programs carried out by the farmer groups under the supervision of the Project Unit.

15. Production Patterns. Productivity is low due to the scarcity and quality of natural grazing resources and subsequent poor nutritional standards. Other contributing factors include the health hazards (para 14). Despite these conditions, however, the farmer is adept at maintaining subsistence levels of production in all but the most severe years. Annual offtake of cattle is ANNEX 1 Page 7 estimated at 10%, with milk yields from native cattle at about 3 liters/day (200-day lactation). Offtake of sheep is estimated at about 35%. 16. Although commercial dairy production has never developed signifi- cantly in the altiplano, some pioneer operations have established themselves economically and provide the base for an expanded industry. Improvements generally have included the introduction of cultivated pasture--mainly alfalfa and fescue--and the use of improved breeds. Acclimatized Friesian and Brown Swiss dairy animals are becoming increasingly available to smallholders, mainly through surpluses from commercial farms, the experiment station at Belen, and from Peru.

17. Sheep generally do not compete with cattle as cattle are maintained on hay and crop residues, while sheep tend to be grazed on the fallow land and communal areas. Overstocking of all areas is rife. Increases in sheep production have been based on the introduction of cultivated pasture and the use of improved breeds such as Corriedale, Rambouillet, Targhee, and Junin.

18. Livestock Marketing. Animals are generally sold in small local markets by the head. Cattle sell for about $b 20/kg (US$1.00/kg) carcass weight and sheep for about $b 25/kg (US$1.25/kg). Carcass weights range from about 180 to 250 kg for cattle and 16 to 25 kg for sheep. Prices, however, fluctuate with seasonal supply.

19. Milk Marketing. The small amount of milk marketed by farmers in the project area is sold to the Industrialized Milk Plant (PIL) in La Paz. The plant capacity is 30,000 liters of milk/day, of which only about 18,000 liters/day are used. Of this output, about 16,000 liters comes from reconstituted milk processed from dried milk powder and butter oil, and the balance is fresh milk. PIL is attempting to replace the reconstituted milk with fresh milk and will increase its collection services as production in the traditional areas increases. PIL pays about $b 3.60 (US$0.18) per liter for milk at farmgate. Farmers can also convert milk to cheese and sell it in the local market.

Development Models

20. The proposed development is based on the activities of groupsof farmers in order to take advantage of increases in scale and to make more efficient use of technical assistance personnel and credit. The models represent the principal modes of development anticipated, which envisage improvements in the key problem areas of input organization and purchasing, production systems and management, and output marketing. They are based on traditional methods of farm organization and cooperation currently practiced in the project area. In each case, farmers would be members of groups averaging about 50 members each. They would develop their own individual farms and would also participate in joint activities to varying degrees. Model 1 and Model 2 represent the highest level of joint activity, in which blocks of land averaging l/ The term "group" is used rather than "cooperative" since the latter has a specific legal connotation in Bolivia. All groups would be eligible to participate in the project, whether or not they were registered as cooperatives. ANNEX 1 Page 5

75 ha each would be operated on a communal basis. These blocks would be formed from land that currently is operated communally or from contributions of the group members. Both types of communal action already exist in the project area. Model 3 represents a lower level of joint activity in which development would encompass both crop and livestock operations but would occur only on individual farms, with some facilities owned and operated in common. Model 4 represents the farmers at the lowest level of joint activity who would be involved in crop development only and whose only common facility would be storage.

21. At present, each farmer has about 6 ha, of which 0.3 ha is in potatoes, 0.4 ha in quinoa, 1.8 ha in barley or oats, 0.1 ha in other crops, and 3.4 ha in fallow and native pasture. The rotation is one year of potatoes, one of barley, and one of quinoa. The barley is grazed and also cut for hay. Livestock include about 3 cows and a bull, 2 donkeys for hauling, 20 sheep, and a few pigs and chickens. Yields of 4 tons/ha for potatoes, 0.6 tons/ha for quinoa, and 3 tons/ha dry matter for barley give the farmer a current annual production of 1.5 tons of potatoes, 0.2 tons of quinoa, and 5.4 tons dry matter of barley. Annual total net income is about $b 6,900 (US$345).

22. Through the use of improved seed, additional fertilizer, stud services from improved bulls, and better cultivation and animal husbandry practices, yields on individual farms can be raised to 7 tons/ha for potatoes and 4 tons/ha dry matter for barley which, together with an increase in the cropping intensity, would increase production to 3.5 tons of potatoes, 0.4 tons of quinoa, and 8.0 tons dry matter of barley. Annual total net income would rise to about $b 12,000 (US$600). This development reflects that of Model 4 (Marketing Development), and the farmer would receive additional benefits from participation in the other types of groups.

23. Irrigated Development on Communally-Operated Land (Model 1 - Tables 1-8). In this model, 50 farmers would develop their individual farms and, in addition, would each contribute 1.5 ha of currently fallow land to form a block of 75 ha to be operated on a communal basis. Development on the 75-ha block would be based on potatoes, dairy cattle, some vegetables, and some sheep fattening. Stud service would be provided to group members for individual herds of both cattle and sheep. Investments would extend over a three-year perioa and would include an irrigation system (well, storage tank and distribution and drainage systems); a tractor; pasture establishment (alfalfa and fescue); livestock purchases (bulls, native cows, improved cows, and rams); handling (stable and corral), watering, and storage facilities and administration buildings.

24. Within the 75-ha block of land, 50.5 ha would be irrigated on a rotating basis. Crops grown on the irrigated land would be potatoes (15 ha), alfalfa/fescue (35 ha), and vegetables (0.5 ha). Barley (24.5 ha) would be grown on the non-irrigated portion. The alfalfa/fescue and barley would be grazed and also mown for hay. The rotation would involve one year of potatoes, two of barley, one of potatoes, one of barley, and six of alfalfa/fescue. ANNEX 1 Page 6

25. Two Friesian or Brown Swiss bulls would be purchased to service the group herd and also to provide breeding service for the cows maintained by members on their individual farms. Sixty-two native cows and six improved cows (Friesian or Brown Swiss) would be purchased during the investment period to form the basis of the group herd, which would grow to a maximum of 128 head by the eighth year. Two Corriedale rams would be purchased to provide stud service to sheep in individual farm herds of members. In addition a maximum of 78 sheep would be puirchased for fattening on a seasonal basis.

26. Improved potato seed (available through commercial outlets) would be used. It would be treated before planting and the seeding rate would be increased. Insecticide would be applied to land planted to potatoes and vegetables. Fertilizer requirements would be met primarily by using manure from the dairy herd, supplemented by chemical fertilizer for potatoes, vegetables, and alfalfa/fescue.

27. Tractor power would be used for some land preparation, planting, cultivating, harvesting, and transportation. Either a tractor would be purchased by the group, or tractor services would be hired from contractors. Donkeys would be used for at least some of the on-farm hauling and transportation of cash crops (including milk) to local markets or to the nearest road for truck pickup.

28. Potato yields are expected to increase from 4 tons/ha at present to 12 tons/ha over a 3-year period. Barley yields would increase from 3 tons/ ha dry matter to 4 tons over two years. The yield of alfalfa/fescue would reach 7 tons/ha dry matter by the fourth year. Milk output per cow would rise from the present 3 liters/day for 200 days to 8 liters/day for 240 days over 8 years as a result of genetic upgrading, betler nutrition, improved management practices, and release from drafting chores.

29. At full development, total annual production of potatoes would reach 355 tons, vegetables 15 tons, alfalfa/fescue 280 tons dry matter (approximately half of production would be grazed), barley 498 tons dry matter (with half grazed), milk 102,000 liters, beef 6 tons, and mutton 3 tons. Potatoes would be stored on-farm to take advantage of late season price increases. Storage would also be provided for the first alfalfa/fescue cutting to protect the hay during the remainder of the rainy season.

30. Since potatoes for home consumption would continue to be grown on the individual farms of group members, all of the output of the group operation would be marketed, with the exception of the forage crops fed to livestock. A portion would still be sold in local markets, but, increasingly, sales in larger quantities would be made direct to La Paz. Milk would be sold to the PIL dairy plant in La Paz, although some might be converted to cheese, depending on relative prices. Annual total net income received by participating farmers would reach $b 22,400 (US$1,120) by year 11. ANNEX 1 Page 7

31. Rainfed Development on Communally-Operated Land (Model 2 - Tables 9-15). This model is similar to Model 1 except that the land would not be irrigated and no vegetables would be grown. The 75-ha block of land would be planted to potatoes (15 ha), alfalfa/fescue (30 ha), and barley (30 ha). The rotation would involve one year of potatoes, two of barley, one of potatoes, one of barley, and six of alfalfa/fescue. Since production would be lower than that in Model 1, the size of the livestock herd also would be smaller. Livestock investment would include two bulls (Friesian or Brown Swiss),six improved cows (Friesian or Brown Swiss), 27 native cows, and two Corriedale rams. The cattle herd would reach a maximum of 60 head by the eighth year, and a maximum of 18 sheep would be purchased for fattening on a seasonal basis.

32. Oxen would be used to provide the main source of power for this operation, although tractor services would be used for planting alfalfa/ fescue. Yields would increase from 4 to 7 tons/ha for potatoes, 3 to 4 tons/ha dry matter for barley, and 3 to 8 liters/day for milk. Alfalfa/ fescue would produce 2 tons/ha dry matter. Total annual production at full development would be 280 tons of potatoes, 60 tons dry matter of alfalfa/ fescue (about half of the forage crop production would be grazed), 520 tons dry matter of barley, 58,000 liters of milk, 5.6 tons of beef, and 2 tons of mutton. Annual total net income received by participating farmers would reach $b 16,400 (US$820) by year 10.

33. Rainfed Development on Group of Individual Farms (Model 3 - Tables 16-1. This model reflects the operation of a group of farmers who did not i; =sto work a portion of their land in common, preferring to maintain their individual farming operations, but who were willing to group themselves for the purpose of utilizing technical assistance and assuming joint obligation for credit. The types of investments would be the same as for Model 2, except that no improved cows would be purchased and the only facilities operated in common would be the bull and ram breeding services, and storage.

34. On each individual farm of 6 ha, the cropping pattern would change from a typical 0.3 ha of potatoes, 0.4 ha of quinoa, 1.8 ha of barley, 0.1 ha of other crops, and 3.4 ha of native pasture/fallow to 0.5 ha of potatoes, 0.6 ha of quinoa, 1.0 ha of alfalfa/fescue, 2.0 ha of barley, 0.1 ha of other crops, and 1.P ha of native pasture/fallow. The rotation would be one year of potatoes, one of barley, and one of quinoa. Each farmer's cattle herd would change from three cows and a bull before development to three cows at full development. The number of sheep would remain the same (20), but eight per year would be fattened.

35. Yields would increase from 4 to 7 tons/ha for potatoes, 3 to 4 tons/ ha dry matter for barley and 3 to 4 liters/day for milk. Total annual production at full development would be 175 tons of potatoes, 18 tons of quinoa, 400 tons dry matter of barley (about half of forage crop production would be grazed), 36,000 liters of milk, 5 tons of beef, and 2 tons of mutton. Annual total net income per farmer would reach $b 13,600 (US$680) by year eight. ANNEX 1 Page F

36. Marketing Development (Model 4 - Tables 19-21). This operation is the same as Model 3, except that no bulls or rams would be purchased and the only joint facility would be storage. Nevertheless, livestock development would be feasible on the basis of forage crop development and bull and ram stud services purchased from other groups in the area. Thus the cropping pattern, yields, and annual production would be the same as for Model 3, with the exception of milk production which would rise to only 1P,000 liters/year because of less control over livestock development than in Model 3. Annual total net income per farmer would reach $b 12,000 (US$600) by year seven.

October 2F, 1975 ANNEX 1 Table I BOLIVIA

INGAVI RURAL DEVELOPMNT PROJECT

Agriculture and Livestock Developetont

Model I - Irrigated Developmentt on Comeunally-Operated Land

On-yaem Investment Costs

Local Cost or Invaeteant Period ToLal U.S. Cooperatiue Investment Ite. Unit Unit Cost Year 1 Year 2 Year 3 UnLt1 Total Cost Equivalent P.E. Comoenl I ntribution ($b) (No,) (Amount) (No.) (Amount) (No.) (Aanout) (No.) ($b '000) (0s$ '000) (M) (Aoout) () (Amont). ($b'000) ($b'000) ($b'000) (US$'000) (US$1000) A. POYSUCAL INPUTS Buildings Office and store- Units 24,000 1 12.0 - - - - 1 12.0 0.6 20 0.12 80 0.48 Produce storage 50,000 1 25.1 - - - - I 25.0 1.25 20 0.25 80 1.0 Hoses" 25,000 1 12.5 - - - - 1 12.5 0.625 20 0.125 80 0.5 10.0 0.5 20 0.1 80 U.4 Garage onrkthop " 20.000 1 10.0 - - - I Assembly ro-e " 16,000 1 8.0 - - - - 0.08 0.4 20 0.08 60 0.32 Subtotal 67.5 L2.5 3.375 1.6_75 2.7

Stock Handling Facilities airy and sheep shed nits 105,000 - 52.5 - - - - 1 52.5 2.625 20 0.525 80 2.1

Watering Facilities ;eadquartrs Office and central buildings meters 10,000 1 5.0 - - - - 1 5.0 0.25 20 0.05 80 0.2 20 s0 0.5 Taks and trough. 00i. 25,000 1 12.5 - - - 1 12.5 0.625 0.125 well 6,800 1 4.7 - - - - 1 4.7 0.235 10 0.011 9 0.101

Subtotal 22.2 22.2 1.110 0.186 0.80 achineery Motorcycles unIt 9,000 1 9.0 - - . - 1 9.0 0.45 100 0.45 - Bicycles 3,600 3 3.6 - - - - 1 3.6 0.18 100 0.18 - -

Subtotal 12.6 12.6 ,063 0.63 -

Pasture Establish.e.t Ploning ad harrowing ha 91 40 3.6 - - - - 40 3.6 0.18 20 0.036 90 0.144 Seed kg/hO 860 40 34.4 - - - - 40 34.4 1.72 100 1.72 - - Ferilieer 500 40 20.0 . - - - 40 20.0 1.00 100 1,00 - Planig he 100 40 4.0 . - - - 40 . 4.0 0.2 20 0.04 80 0.1b Cutting and storage h 900 ------100 St,ege shed unit 18,000 1 9.0 - - - - 1 9.0 0.45 20 0,09 0 0.36 Reseeding pesoo/ha 800 - - 10 _ 10 0 20 16.0 0.8 200 - Subtotal 71.0 08 87.0 4.35 3.49 - 7.66

Tools end Equipment unit 10,000 1 10.0 - - - I 10.0 0.5 100 0.5 - -

Total 234.0 8 0 234.0 11 261.22 5.49

B. LIVESTOCi PURCHASES

Bus hood 12,000 1 12.0 1 12 - - 2 24.0 1,2 50 0.6 50 20 Blproved dairy Cohs " 8,000 5 40.U 1 -8' - 48.0 2.4 50 1.2 50 2.. Local cowo 4,000 9 36.0 3 8120 2104 .2 248.012.4 - 15022.4 Ones 000 - - - - 2 1.6 2 1.6 .08 t0 _.08

Total 00.0 149 !5.6 321.6 16.08 (.0 24.27

Total Physical and Liveso. k 294.0 156 93.1 543-6 27. 18 7.3 19.4

C. TRACOR AND IMPLEMENTS2/

Tractor, 72 0P 'nit 330 1 330.0 - - - - 1 330.0 16.5 - - Plough 60 1 60.0 - - - - 1 60.0 3.0 - ---260.0 3.0- Doc herrows 60 1 60.0 1 --234.0 1.7- Mer 34 1 34.0 1 Carts, 2 6R 1 60.0 - - - - 1 68.0 3.4 - Spore parts, 20% Se 110.4 1 110.4 - - - - 1 110.4 5.52 -

Subtotal 662.4 662.4 33.12 90 29.8 3.31

D. IRRIGATION FACILITIES

well nit 502070 1 507.0 - - - 1 507.0 25.35 85 20.28 15 5.07 Pump and engine 116,000 1 116.0 - - - 1 116.0 5.8 91 5.23 9 0.57 48 3.12 Water tank 130,000 1 130.0 - - - - 1 130.0 6.5 52 3.38 6.25 Irrigation system 410,000 1 123.0 - - - - 1 123.0 6.15 - - 100 Drainage ilproent" 330,000 1 264.0 - - - 1 264.0 13.2 60 7.92 40 5.28 Land levelling 75,700 -- - - Engineering costs 92,000 1 92.0 - - 92.0 4.6 27 1.242 73 3.358

Subtotal 1,232.0 1,292.0 61.57 38.05 23.55

5.78 3.53 Irrigation physical contingencies (152) 185.0 - 185.0 9.2

E, TOTAL INVESTMENTS 2,400.0 156 93.6 2,650.0 1.32 62 02.30 39 24.65

/ Former contrlbution t ' labor estimated at 37M of ne building value. Actual cash paid out is entered. 2/ See Annex 1, Table 2 tsr details.

October 7, 1975 ANNEX I Table 2 BOLIVIA

INGAVI RURAL DEVELOPMENT PROJECT

Model 1 - Irrigated Development on Communally-Operated Land

Details of Tractor Investment and Operating Costs

Cost Cost Foreign Exchknge Local Currency $b '000) ('000 US$) _% Amount _% Amount

MACHINERY UNIT Tractor, 72 HP - 9,000 hrs. over 6 yrs. 330 Implements, 5,000 hrs. over 6 yrs. I x Plow x 4 discs x 20" 60 1 x Disc harrows x 20 discs 60 1 x Mower 34 2 x Carts x 2.5 tons 68

Sub-total machinery 552 Spare parts, 20% 110.4

Total 662.4 32.21 90% 22.99 10% 3.22

OPERATING COSTS Diesel fuel, 7 1/hr @ 0.95 pesos/i x 1,500 hrs/yr x 6 yrs. 59.8 Lubricating oil, 17 1/150 hrs K 13.4 pesos/i 13.6 Engine oil, 0.03 1/hr @ 13.4 pesos/i 3.6 Oil for injection pump & govenor, 0.25 1/150 hrs. @ 13.4 pesos/i 0.3 Transmission oil, 26.5 1/150 hrs @ 16.6 pesos/1 26.4 Air filter oil, 2.5 1/150 hrs @ 13.4 pesos/i 2 Hydraulic oil, 3.3 1/200 hrs @ 20 pesos/i 2.9 Fuel & oil filters, 0.04 pesos/hr 0.5 Grease, 0.5 kg/10 hrs @ 12 pesos/kg 5.4 Service charges, mechanics @ 5,000 pesos/yr/tractor 30.0

Total 144.5 Total/year 24

INCOME 9,000 hrs. @ 125 pesos/hr, over 6 yrs. 1,125 Per year @ 1,500 hrs/yr. 187.5

ASSUMPTIONS Tractor Use 1,500 hrs/yr./tractor, used as follows for modelling purposes;

Model 1 Model 2 All Family Farms Including Models 3 + 4 Potatoes 15 ha x 10 hrs = 150 15ha x 10 = 150 200 farms x 2 hrs = 500 hrs/tractor Vegetables 0.5 x 10 = 5 -- sufficient for potate ploughing Barley 20 x 4 = 80 30ha x 4 = 120 Pasture establ. 40 x 6 = 240 -- Pasture maint. 40 x 2 = 80 -- Irrigation distribution system 40 x 1 = 40 -- Mowing and cartage 100 hrs 100 -- General use 145 hrs 145 130 Approximate total use = 600 hrs/tractor + 400 hrs/tractor + 500 hrs/tractor 1,500 hrs/tractor set Tractor Income $i Model I (owners), 600 hrs -- Model 2, contract, 400 hrs @ $ b 125 50,000 Family farms, contract 500 hrs @ $ b 125 62,500 1,500 hrs 112,500

October 21, 1975 ANNEX 1 Table 3 BOLIVIA

INGAVI RURAL DEVELOPMENT PROJECT

Agriculture and Livestock Development

Model 1 - Irrigated Development on Comemnally-Operated Land

Herd Projection

Herd Values Opening ------End of Year (July - June) ------CategOry Unil Years 0-4 Years 5-20 Number 1 2 3 4 5 6 7 8-20 HERD COMPOSITION Reed

Bulls 12,000 12,000 1 1 2 2 2 2 2 2 Goes (Breedi) 4,000 8,000 14 14 42 61 54 55 60 60 60 Calves (born during year) 600 650 12 10 30 43 38 40 44 44 Heifers 9-24 months " 5,000 5,000 -- 5 5 14 20 Cull 12 12 12 Coes " 4,000 4,000 2 2 6 9 0 9 9 TOTAL HEAD 15 23 62 104 122 123 124 120 128

Asilal Uoir. A.U-i -- -- 15 16 49 70 75 80 Purchase sheep for fattening Hend 180 200 80 80 80 -- -- 0 78 78 78 70 70 70 Breding rams foe Bernice " 650 800 -- -- 0 2 2 2 2 2 2 Sheep asinal units A.U., -- -- 4 4 4 TOTAL ANIMAL UNITS 1 1 50 7 0044

MORTALITIES

Bulls 0ead - Cos ------1 1 Gaines 3 2 2 2 2 1 3 2 2 2 Heifers (9-24 ean.hs) -- 2 TOTAL CATTLE DEATHS - 3 2 Sheep ------1 2 2 2 2 2 2 PURCHASES

Boils Hea, 12,000 16,000 1 -- 0U 1 Improved coos " 8,000 -- 5 1 0 S - - - Criollo cows 4,000 -- 9 1 31 21 TOTAL CATTLE PURCHASES 15 2 32 21 1 Sheep fee lareenieg 180 200 -- -- 78 78 78 78 70 78 Breeding cams 650 800 -- -- 2 -- -- 1 ------I--- TOTAL SHEEP PURCHASES -- -- 79 78 78 79 79 78 SALES

Bull calne" Head 200 250 5 5 14 10 17 10 20 Surplus heifero (1 year) " 3,000 4,000 ------1 3 0 9 Cli coes " 4,000 4,500 2 2 6 9 8 9 9 Cull heifers (2-3 years) " 2,500 3,000 ------Cll bulls " 5,000 6,000 -- -- - 1 1 1

SUB-TOTAL 7 7 20 29 27 31 30 39 Fa, shrep 230 270 0 0 70 76 70 737 7 Call erns "230 270 0 0 0 -

TECHNICAL COEFFICIENTS

a i es oes % 90 75 75 75 75 75 75 75

(a) als 7 -- -- 15 15 10 10 (4) Adult 10 10 10 10 -- -- 5 4 4 4 4 4 4 4 (a) Sheep % 3 3 3 3 3 3 3 3 Culls

(a) Bulls -15 15 15 1 5 15 15 15 (b) Coes . -- -- 15 15 15 15 15 15 15 15 (c) Heifes (2-3 yrs.) 75-- - / /5 1535 Cows serviced/bll Cows/bull -- -- 3 3 1 3 30/ 3/1 Ewes sorolced/ram Ees/cano -- -- 50/1 50/1 30/1 50/1 50/1 50/1 50/1 50/1 30/1 Percent rows 4 total herd % . - .. 93 72 57 43 40 4 4 45 No. cows in l1k Head -- - -- 12 12 30 43 38 40 44 44 Milk yield/aow/annum litres 3 litres/day 1/ 3,4,6,8 1./day 2/ 720 720 720 720 720 960 1440 aking rac y 1970 ASU. -- 16 50 74 79 84 84 84 04 Offtake at-- 16 50 84 84 84 84 84 84 Extraction rate - -- 20 26 26 26 26 29 32 Sheep gais/day Kgma. 2 kg/mth 3kg/eth 0.085 0.085 0.085 0.085 8.1 0.1 0.1 0.1 PRODUCTION DATA Beef Production (Cold dressed wei g ht)

Cull tcos h. 165 330 330 990 1485 1320 1485 1485 1485 C ll h e s 40-30 -- -- - 400 -- - Gall htlrs -y.670- -- -- 400 ------Suh-tat. d M/tons k .33 .33 .99 1.845 1.56 1.725 1.725 1.725 Milk production '000/ton - -- .912 .912 1.064 .04 1.064 1.04 8.64 8.64 21.6 30.96 27.36 38.4 63.36 84.48

1/ Present yields are based on a urvey 'y CORDEPAZ. 2/ Mission estimates - as percentage F cos in 1 the herd increases and responds to alfalfa/fescue feed and impact project activities as-fern management. of unit extension

October 21, 1975 AMNEX I Table 4 BOLIVIA

INGAVI RURAL DEVELOPMENT PROJECT

Agriculture and Livestock Development

Model 1 - Irrigated Development on Communally-Operated Land

Crop Projection - Sales

Before ------Yea...... Category Unit Years 0-4 Years 5-20 Development 1 2 3 4 5 6 7 8-20 /ha /bs CROP PROJECTIONS

Cash Crops Potatoesi tons 7,10,12,12 12 20 105 150 180 180 180 180 180 180 Quinoa /0.6 ------Vegetable- units 20,000 20,000 - - 10,000 10,000 10,000 10,000 10,000 10,000 10,000 Papalizas and ocas tons 0.6 - 0.6 ------Wheat " 0.7 - 0.4 ------

Forage Crops Oats )3/ " 3,4,4,4 4 77 73 98 98 98 98 98 Barley) 98 98 Alfalfa/fescue " 0,3,6,7 7 - - 120 240 280 280 280 280 280 Selling Prices ------b '00 -- ($b) SALES

Cash Crops Potatoes " 3,000 3,000 60 315 450 540 540 540 540 540 540 Vegetables units 1.5 1.5 - - 15 15 15 15 15 15 15 Papalizas, ocas tons - - 2.4 ------Quinoa " - - 11.1 - Wheat " - - 1.6 ------Subtotal 75 315 465 555 555 555 555 555 555 Surplus orage Crops Alfalfa hay ton 1,200 1,200 ------Cereal hay " 900 900 - - - - - Subtotal

Livestock Products Bull calves head 200 250 - 1.0 1.0 2.8 3.8 4.25 4.5 5.0 5.0 Surplus heifers " 1,000 1,100 - - - - - 1.1 3.3 8.8 9.9 Cull cows 4,000 4,500 - 8.0 8.0 24.0 36.0 36.0 40.5 40.5 40.5 Cull heifers " 600 650 - - - - - 0.65 0.65 0.65 0.65 Cull bulls " 5,000 6,000 - - - - 6.0 - - Sheep " 230 270 - - - 16.6 18.72 18.72 18.72 18.72 18.72 Fresh milk liters 3,56 3.56 - 30 30 76.9 110.2 94.72 136 225.56 300.0 Bull services service/cow 50.0 50.0 - - 0.5 1.0 1.5 1.5 1.5 1.5 1.5 Ram services service/ewe 10.0 10.0 - - 0.2 0.2 0.6 0.6 0.6 0.6 0.6 Subtotal - 40 40 121 174 160 209 300 377

Tractor IncomeS/ Hire 900 bra/year hours 125 125 - 112.5 112.5 112.5 112.5 112.5 112.5 112.5 112.5

Total 75 467 617 788 841 827 876 967 1,044

1/ CORDEPAZ, "Proyecto de Desarrollo Rural", La Paz, 1974. Mission estimates based on field data collected by government agencies. 2/ Idem, Annex 3, page 16. 3/ Idem, Annex 3, page 8. 4/ Wood, J.H. "The Performance of Some Introduced Species of Forage on the Altiplano of Bolivia", La Paz, 1975. Zuazo, M.D., "Cultivation of Forages in the Altiplano", Banco Agricola de Bolivia, 1974. CORDEPAZ, "Proyecto de Desarrollo Rural". 1974. 5/ See Annex 1, table 2, for details. October 17, 1975 ANNEX 1 Table 5 BOLIVIA

INGAVI RURAL DEVEIDPMENT PROJECT

Agriculture and Livestock Development

Model I - Irrigated Development on Comaunally-Operated Land

Crop Projection - Operating Expenses ($b '000)

Before ------Year ------Category Unit No./Year Unit Value Development 1 2 3 4 5 6 7 8-20 OPERATING EXPENSES

Administration Farm manager man/years 1 10,000 - 10 10 10 10 10 10 10 10 Clerk storekeeper ' 1 9,000 - 9 9 9 9 9 9 9 9 Dairy and livestock foreman " 1 7,000 - 7 7 7 7 7 7 7 7 Subtotal - 26 26 26 26 26 26 26 26 Hired Labor Milkers 2 6,000 - 12 12 12 12 12 12 12 12 Subtotal - 12 12 12 12 12 12 12 12 Animal Health Dipping head - 1.20 Drenching - 2.40 Minerals 8.20) - 3 3 4 5 5 5 5 5 Vaccine - 4.00 Veterinary services visits 6 400/visit Subtotal 3 3 4 5 5 5 5 5 Maintenance and Replacements Pastures man/days 10/ha 25 ------Buildings - 27 of new value - - 1 1 1 1 1 1 Internal roads tractor hours ------Stock handling facilities - 2% of new value - 1 1 1 1 1 1 Watering facilities (H.Q.) - 21 of new value - - 0.1 0.1 0.1 0.1 0.1 0.1 0.1 Irrigation facilities -- - - - Motorcycles replace in yr.5 - 9,000 - - . - - - - General per annum - - - 10 10 10 10 10 10 10 10 Subtotal - 10 12.1 12.1 12.1 12.1 12.1 12.1 12.1 Replacements Livestock Bulls head I in 2 12-16,500 - - - - 12 - - - Rams 800 ------0.8 0.8 Subtotal - - - - 12 - - 0.8 0.8 Packing Materials Potato and grain sacks 100 kg 180 sacks 20 - 3.6 3.6 3.6 3.6 3.6 3.6 3.6 3.6 Subtotal 3.6 3.6 3.6 3.6 3.6 3.6 3.6 3.6 Planting Materials Potato seed kg/ha 1,200 4 - 72 72 72 72 72 72 72 72 Cereal seed 2,024 3.91 - 9 9 9 9 9 9 9 9 Vegetable seed 1.1 1.1 1.1 1.1 1.1 1.1 1.1 1.1 Fertilizer Insecticides - 45 45 45 45 45 45 45 45 - 4.5 4.5 4.5 4.5 4.5 4.5 4.5 4.5 Subtotal - 131.6 131.6 131.6 131.6 131.6 131.6 131.6 131.6 Fuels and Lubricants Motorcycles liter/year - Subtotal

Irrigation 0 & Mi Electricity KWh 66,000 1.06 - - 69.96 69.96 69.96 69.96 69.96 Inspections, etc. 69.96 69.96 man/year 10,000 - - 10 10 10 10 10 Replacement of pump and 10 10 driven motor 1 116,000 - - Subtotal - - 82 82 82 82 82 82 82 Tractor!/ Operating expenoes hout 1,500 - - 24 24 24 24 24 24 24 24 Subtotal - 24 24 24 24 24 24 24 24 Miscellaneous Annual accounting per annum - 2 2 2 2 2 2 2 2 Tools "- 1 1 1 1 1 Subtotal - 2 3 3 3 3 3 3 3

Total - 246 296 297 313 301 301 302 302

Purchased sheep for fattening - - - 14 14 15 15 15 15 Total operating expenses 33 246 296 311 Total Sales 327 316 316 317 317 75 467 617 788 841 827 876 Net operating income 967 1,044 42 222 321 477 514 511 560 Incremental operating income 650 727 - 180 279 435 472 469 518 608 685

1/ Replace pump in year 11 for $b 116,000. Tariff includes full capital recovery on US$460,000 at 8% for 20 wells. 2/ Replace tractor and implements in years 7, 13, for $b 662,400. 3/ See Annex 1, Table 2 for details.

October 17, 1975 BOLIVIA

INGAVI RURAL DEVELOPMENT PROJECT

Model 1 - Irrigated Development on a Coo.unally-Operated Land

Financial Projection After Debt Service Before ------Category Development 2 3 4 5 6 7 8 9 10 11 12 13 1 15 16 17 18 19 20 21 A. Cash Inflow ($ b '000)

S opment /5 467 417 708 841 841 876 967 1,044 1,044 1,044 1,044 2. Dveo oetEan 1/ 2-2,400 156 94 -- -- 1,044 1,044 1,044 1,044 1,044 1,044 1,044 1.044 ------1,4 104 1,044104 1,41,044 3. Cash balance previous year -- 141 114 235 351 478 620 15 170 296 393 195 335 34 116 19 43 28 24 41 50 4. Seasonal loan for oper. exp. 2/ -- 246 ------94 43 28 4 50

Total Inflow 75 3,113 914 996 1,076 1,192 1,354 1,587 1,059 1,214 1,340 1,437 1,239 1,379 1,070 1,160 1,063 1,087 1,082 1,090 1,003 1,094

B. Cash Outflow ($ b '000)

1. Development investment -- 2,400 156 94 -- -- 662 ------116 -- 2 -- Operating -- 2. empenses 33 246 296 311 327 316 316 316 316 4 3 3 36 3 -- -- 3. Loan repayments 316 3 316 316 316 316 a) Dev. loan principal -- -- b)) 0evev. looitresloan in .. t 280306 310 310 --318 310 297 276 -- 255 234 2i7967 19-- 1R-- 14 66 --32 -- -- 176 176 176 176 176 176 176 176 176 176 176 176 176 176 176 c) Seasonal loan principal 246 ------212 191 170 149 128 104 96 65 43 23 d) Seasnnal loan interest - 30 ------e) Diatribution to members 42 50 60 50 80 80 100 100 100 150 200 400 200 34 300 400 500 430 450 500 500 579 Total Outflow 75 2,972 800 761 725 714 734 1,572 889 918 947 i,242 904 1,420 962 1,041 1,120 1,049 T,028 1,037 1,033 1,094 C. Cash Balance 141 114 235 351 478 620 15 170 296 393 195 335 -- 116 19 43 38 54 41 50 --

1/ 20 year loan at 127 with 5 years grace. 2/ 12 months loan at 127.

October 22, 1975 ANNEX I Table 7

BOLIVIA

INGAVI RURAL DEVELOPMENT PROJECT

Agriculture and Livestock Development

Model I - Irrigated Development on Comunally-Operated Land

Family Farm - Crop Projections, Sales and Operating Expenses

Yields/ha. has. Without ------Year ------Category Unit years 0-4 yrs. 0. 1 Project 1 2 3 4 5-20

tons ------.------Crop Projectin ------

Barley tons 3, 3, 3, 4 1.8 2 5.4 6.0 6.0 8.0 8.0 8.0 Potatoes!/ 4, 5, 6, 7 0.33 0.5 1.32 2.5 3.0 3.5 3.5 3.5 Quinoa 0.6 0.44 0.6 0.264 0.36 0.36 0.36 0.36 0.36 Wheat 0.7 0.04 0.04 0.028 0.028 0.028 0.028 0.028 0.028 Papalizas, Oca 3.0 0.02 0.02 0.06 0.06 0.06 0.06 0.06 0.06 2.63 3.16 Livestock Products

Meat /3/ kg/DWT 85 285 85 90 95 100 Milk litres 312 312 320 340 350 360 Sheep units 8 8 8 9 10 10 Pigs kg/DWT 60 60 60 62 62 65 Value of Production Cash Crops Farm Gate Prices ------$b ------..-

Barley 4/ Potatoes kg 3 3,960 7,500 9,000 10,500 10,500 10,500 Quinoa kg 3 792 1,000 1,000 1,000 1,000 1,000 Wheat kg 4 112 112 112 112 112 112 Papalizas, oca. kg 4 240 240 240 240 240 240 Sub Total 5,104 8,852 10,352 11,852 11,852 11,852 Animal Products Meat kS 20 1,700 5,700 1,700 1,800 1,900 2,000 Milk 1 3.56 1,110 1,100 1,140 1,210 1,246 1,282 Sheep kg 20 800 800 800 900 1,000 1,000 Pigs kg 15 900 900 900 930 930 975 Sub Total 4,510 8,510 4,540 4,840 5,076 5,257 Total Value 9,614 17,362 14,892 15,692 16,928 17,109 Less On Farm Consumption 4,900 5,000 5,200 5,400 5,600 5,900 Total Cash Sales 4,714 12,362 9,692 11,292 11,328 11,209 Costs of Production (pesos) Planting Material Price $b No./yr.

Potato seed kg 4 396, 600 1,584 2,400 2,400 2,400 2,400 2,400 Barley seed kg 3.91 165.6, 184 647 719 719 719 719 719 Quinoa seed kg 3 22, 30 66 90 90 90 90 90 Wheat kg 4 2, 2 8 8 8 8 8 8 Papaliza and oca kg 5 2, 2 10 10 10 10 10 10 Manure tons 100 2.5, 3.6 250 360 360 360 360 360 Fertilizer kg 500 - - - - - Insecticide kg 100 0, 3.8 - 380 380 380 380 380 Labor Human man/days 25 240 270 6,000 6,750 6,750 6,750 6,750 6,750 Animal an./days 30 34, 34 1,020 1,020 1,020 1,020 1,020 1,020 Tractor Hire hrs 125 0, 2.5 - 312 312 312 312 312 Sacks units 20 20, 40 400 800 800 800 800 800

Total Value 9,985 12,849 12,849 12,849 12,849 12,849 Less non Cash Costs 7,270 8.130 8,130 8,130 8.130 8,130 Total Cash Costs 2,715 4,719 4,719 4,719 4,719 4,719

Incremental Operating Expenses - 2,000 2,000 2,000 2,000 2,000

l/ CORDEPAZ, "Proyecto de Desarrollo Rural", La Paz 1974. Also mission estimates from field data. 2/ Farm bull sold in year 1, replaced by service availability of improved size. 3/ Add 5% per year to carcass weights in years 3 to 5 to reflect improved feeding, breeding and management. 4/ Consumed on farm by animals.

October 15, 1975 BOLIVIA

INGAVI RURAL DEVELOPMENT PROJECT

Agriculture and Livestock Development

Model 1 - Irrigated Development on Communally-Operated Land Farm Family - Financial Projections After Debt Service ' ------Year------. - -

------Year ------2 3 4 5 6 7 8 9 Category 10 11-21

A. CASH INFLOW:

1. Cash Sales 4,714 12,362 9,692 11,292 11,328 11,209 11,209 11,209 11,209 11,209 11,209 11,209 2. Cash Carried Forward from Previous Year - - 4,719 4,719 4,719 4,719 4,719 4,719 4,719 3. Seasonal Loan for Operating Expenses 4,719 4,719 4,719 - 79 4,719 4,79 - - - TOTAL INFLOW 4,714 17,081 14,411 16,011 16,047 15,928 15,928 15,928 15,928 B. CASH OUTFLO 15,928 15,928 15,928

1. Cash Operating Expenses 2,714 4,719 4,719 4,719 4,719 4,719 4,719 4,719 4,719 4,719 4,719 4,719 - 7- 7 2. Loan Repayments -75,285 - 4 4 4 TOTAL OUTFLOW 2,714 10,004 4,719 4,719 CASH BALANCE 4,719 4,719 4,719 4,719 4,719 4,719 2,000 7,077 9,692 11,292 11,328 11,209 4,719 4,719 WITHDRAWALS 1! 11,209 11,209 11,209 11,209 11,209 11,209 2,000 2,358 4,973 6,573 6,609 6,490 6,490 6,490 6,490 6,490 6,490 6,490 C. FARM FAMILY NET BENEFIT

1. Value of Domestic Consumption 4,900 5,000 5,200 5,400 5,600 5,900 5,900 5,900 5,900 5,900 2. Withdrawals 5,900 5,900 2,000 2,358 4,973 6,573 6,609 6,490 6,490 6,490 6,490 6,490 3. Share Income from Group 6,490 6,490 Farm 2 ,00012 1,000 1,600 1 2,000 2,000 2000 3,000 40001 TOTAL NET BENEFIT 6,900 8,358 11,373 12,973 13,809 13,990 14,390 14,390 14,390 15,390 16,390 22,390 D. WITHOUT PROJECT FARM FAMILY NET BENEFIT 6,900 6,900 6,900 6,900 6,900 6,900 6,900 6,900 6,900 6,900 6,900 6,900 E. INCREMENTAL FARM FAMILY NET BENEFIT - 1,458 4,473 6,073 6,909 7,090 7,490 7,490 7,490 8,490 9,490 15,490 F. FAMILY INCOME AT FULL DEVELOPMENT Sb 22,390 = US$1,120 or US$187 per capita. FAMILY INCOME WITHOUT PROJECT $b 6,900 = US$345 or US$57 per capita. INCREMENTAL INCOME $b 15,490 = US$ 775.

1/ Cash Balance - Operating expenses for following year = withdrawals.

cb -

October 15, 1975 ANNEX 1 Table 9

BOLIVIA

INGAVI RURAL DEVELOPMENT PROJECT

Agriculture and Livestock Development

Model 2 - Rainfed Development on Coumunally-Operated Land

On-Fatm Investment Costs - Financial Flows

Local Cost or ------Investment Period ------Total Total US Cooperative Investment Item Unit Unit Cost Year 1 Year 2 Year 3 Units Cost Equivalent F.E. Component Contribution ($b) (No.) (Amount) (No.) (Amount) (No.) (Amount) (No.) ($b'O0O) (US$'000) (%) (Amount) (%) (Amount) ($b'000) ($b'000) ($b'OOO) A. PHISICAL INPUTS

Buildings Office and store Units 24,000 1 12 - - - 1 12 0.6 20 0.12 20 0.48 Produce storage 50,000 1 25 Houses - - - - 1 25 1.25 20 0.25 80 1.0 25,000 1 12.5 - - - 1 12.5 0.625 20 0.125 80 0.5 Garage workshop 20,000 1 10.0 - - - - 1 10 0.5 20 0.1 80 0.4 Assembly room " 16,000 1 .0 - - - 1 8 0.4 20 0.08 80 0.32 67.5 - - 67.5 3.375 0.675 2.7 Stock Handling Facilities Dairy and sheep shed 105,000 1 52.5 - - - - 1 52.5 2.625 20 0.525 80 2.1 Watering Facilities Headquarters Office and central building Peters 10,000 1 5 - - - - 1 5 0.25 20 0.05 80 0.2 Tanks aod troughs 25,000 1 12.5 - - - - - 12.5 0.625 20 0.124 80 0.5 Shallow wells and pump 6,800 - 4.7 - - - - - 4.7 0.275 10 0.023 90 0.212 22.2 22.2 1.11 0.198 0.912 Machinery Motorcycles Unit 9,000 1 9 - - - - 1 9 0.45 100 0.45 - Bicycles " 3,600 3 3.6 - - - - 1 3.6 0.18 100 0.18 - Electric ,snerator " 8,000 1 18 - - - - 1 18 0.9 100 0.9 - 30.6 - - 30.6 1.53 1.53 Pasture Establishment Plowing ha 560 30 16.8 - - - - 30 16.8 0.84 20 0.47 0.67 Sanding 80 kg/ha 860 30 25.8 - - - - 30 25.8 1.29 100 1.29 - Fetil ize kg 10 30 15.0 - - - - 30 15 0.75 toU 0.75 - - Planting ha 100 30 3 - - - - 30 3 0.15 . - 100 0.15 Weeding ha 500 -- - - Storage ha 900 - - Reuceding kg/ha 880 - - 7 5.6 7 5.6 14 11.2 0.56 100 0.56 - - Storage shed nit 18,000 - 9 - - - - 1 9 0.45 20 0.09 80 0.36 69.7 5.6 5.6 80.8 4.04 2.87 1.18 Tools and Equipment " 10,000 1 10 -10 0.5 100 0.5 - - Seeds, FertiliIsr, insectirides, Sacks Crone)N ha 45 - 110 - 89.99 - 89.99 135 290 14.5 10 1.45 90 13.05 Tractor Hire (Annual Crops) hrs 125 400 50 50 50 - 150 7.5 20 1.5 80 6.0 Total 412.5 145.6 145.6 703 35.2 9.25 26.0 B. LIVESTOCK PURCIASES

Bulls had 12,000 1 12 1 12 - - 2 24 1.2 50 0.6 - 48 2.4 50 0.6 501.2 50 1.2 Improved do:ry cans 0,000 3 24 3 24 6 Local cows contriotod " 4.000 18 72 5 20 4 16 27 108 5.4 - - 100 5.4 Rams " 800 2 1.6 - - - - 2 1.6 0.08 - - 100 0.20 Total 109.6 S6 16 181.6 9.08 1.8 7.28 Total investments 522.1 201.6 161.6 885.0 44.25 25 11.05 75 33.23

1/ For Cash Flow - only financial transactions are shown. With labor contribution by members of group at 50. of the cost of buildings the item is entered at its actual cash 2/ Capitalize during investment period. cost.

October 16, 1975 ANNEX 1 Table 10

BOLIVIA

INGAVI RURAL DEVELOPMENT PROJETI

nAriculture and Livestock Development

Model 2 - Rainfed Deveppmewt o- Ccsanelly-Operated Land

Herd Projection HERD VALUES Opening ------End of Year ------Cateor Unit Years 0-4 Years 5-20 .Number 1 2 3 4 5 6 7 8-20

HERD COMPOS1TION Bull 2/ heat 12,000 12,000 1 1 2 2 2 2 2 2 2 Cows (Breeding) 4,000 8,000 18 18 23 29 30 30 30 30 30 Calves (born during year) " 600 650 - 16 12 16 20 20 20 20 20 HOifers9-242 months " 5,000 5,000 - - 7 6 4 4 4 4 4 Cull Cos / 4,000 4,000 - 3 3 4 4 4 4 4 _4 TOTAL HERD - 19 38 47 57 60 60 60 60 60 Animal Unit 12 A.U.a - 19 20 33 39 39 39 39 39 39 Purchased Sheep for fattening 5/ head 18 18 18 18 18 18 18 18 Breeding Rns for Service1 2 2 2 2 2 2 2 2 Sheep Animal Units 2/ A.U.. - 1 1 1 1 1 1 0 1 TOTAL AN1MAL UNITS A.U.s - 19 20 34 40 40 40 40 40 40 MORTALITIES BlIls head ------Coo . - - - 1 1 1 1 1 1 1 Calv. - 2 1 2 2 2 2 2 Heifers 9-24 .onths - - --

Total Cattle Deah - - - 3 2 3 3 3 3 3 Sheap head - -1 1 1 1 1 0 1

PURCHASES

Bull. 0 head 12,000 12,000 1 - 1 - - - 1 mprovedCooa 7 8,000 8,000 2 3 0 - CrloI Corwi9 4000 - 16 2 5 4 - - - - Sab-Total - - 19 3 9 4 1 - - 1 Sheep for fattening head 10 200 18 18 18 18 18 18 18 18 10 ireed I ng Rame 650 800 2 2 - - 1 - 1 - -

SALES hullCalvesbead 200 250 - 7 5 7 9 9 9 9 9 Orplo ioer (I year) 3,000 4,000 - - - - 2 5 5 5 5 Culls Cows 4,000 4.500 - 3 3 4 4 4 4 4 4 C.ll ORifers (2-3 years) 2,500 3,000 - - - - - CUl olls 5,000 6,000 _ - _- _ - - 1 - Sub-Total - - 10 8 11 l6 18 18 19 18 Fat Sheep & Call Rams head 230 270 17 17 17 18 17 17 17 17

TECaNICAL COEFFICIENTS Cale Brt % - - 90 70 70 70 70 70 70 70 mortalities (a) Calvet 4 - 15 15 10 1I 0 10 10 10 (b) Adulo - - 5 4 4 4 4 4 4 4 (c)sheep a - - 3 3 3 3 3 3 3 3

(a) S.lt 7s - - 15 15 15 15 15 15 15 15 (h) Coos - 15 15 15 15 15 15 15 15 (c) Heiler. (1-3 yrs) - 5 5 5 5 5 5 5 5 Conw Otrviced/B.11 Cows/Blll - 30/1 30/1 30/1 30/1 30/1 30/1 30/1 30/1 Prcent Cows of otal Herd % - - 94 65 48 48 48 48 48 48 NSmber Cows lv Milk head 15 15 20 21 21 21 21 21 ilk Yield/Cow/annum litre, 3 litre/day 3,4,6,8 1/day 720 720 720 720 720 960 1440 1920 Stocking Rte - 20 34 40 40 40 40 40 40 Carryong Capotty - -20 34 40 40 40 40 40 40 Offtohe 11/ % - 2ate20 25 30 29 29 29 29 Extraction Rate 12/ % - 80 19 20 20 20 20 20 Sheep CCai/day kg 2k kg/mth 3 kg/th .085 .085 .085 .085 .1 .1 .1 .1 tart Servicev/ m 0:150:150:1 50:1 50:1 50:1 50:1 50:1 50/r:

PRODUCTION DATA Beef Production (Cold Dressed Weight) Toll Coot KO. 165 - 495 660 660 640 660 660 660 C.11lulla 12/ 400 400 - - -- C ll 1e:lcra (2-3 y16) "0 240 ------

Sub-Total 0. tao - .495 .660 1.060 .660 .660 .660 .660 Muttoo Productio M. tons 12 14 .204 .284 .204 .204 .204 .238 .238 .238 Milk Prodotion -4 ('000 litera) 10.8 10.1 14.4 15.12 15.12 20.16 30.24 40.32

1 Assoed Increases in value. of 10%-20% in different age & sex group doe to progressively improved nutrition & upgrading genetically. 2/ Bulls will be maintained for service ,o coperativ owned herds and to members @ peOs 50/too which includes a maximuo of 3 matings to conception. About 150 olstsir bull adapted to the altiplano and soese Brown Swiss are estimated to be available annually. 1 3/ Covs culled for ages at about 9 years average and retained for average period of 6 soaths to dry up. Low fertilitycows culled at 3-4 years. 4/ Cattle animal units - total herd less lOOT of calves and 50% of tall cows. 5/ About 80 young sheep will be purchased yearly i.e. 20/3 month feeding cycle for fattening & resale. Alternatively members could pay for a fattening servite. 6/ Two Corriedale rams purchased for member breeding service @ Pesos 10/owe served a saximm of 3times. This provision should lead to destocking of aembers flocks, improved carcass eights and wool yields and better control of diseases and parasites, 7/ Sheep animal units: 5 aduit sheep -1 Animal unit. 0/ Very few altitude adapted Ho teins are available for purchase. Brown Swiss are expected to be available hat with inferior milk yields, 9/ Ceiollo cow will be contributed by or purchased fram members on the basis for a upgrading programme with Holstein bulls in the majority and some Brown Swiss. Breediag will be strictly coatrolled by bread type. 10/ Male calves will be sold between 1 week-a month fran birth to coop members for growing out to work oxen. 11/ Offtake rate - total farm bred sales to livestock expressed as a percentage of total farm bred herd. 12/ Extraction rate - total farm bred sales of livestock less surplus heifers sold for breeding expressed as a percentage of total farm bred herd, i.e. total slaughter attle a. a percentage of farm bred herd. 13/ One bull is replaced each five years on aetage. After the Initial period one bull per five cooperatives would be expected to be replaced each year. 14/ Assumes that POLS will collect milk once taily early morning at fare gate price of Pesos 3.56 ave/litre.

Octobor 16, 1975 ANNEX I Table 11

BOLIVIA

INGAVI RURAL DEVELOPMENT PROJECT

zriculture and Liv-stock Development

Model 2 - Rainfed DesvlosPRt pn Ca..nally-Operated Lard

Cr2e Projection - Sales ($b '000)

Catagory UnIt Years 0-4 Years 5-20 e-o- ---1 2 -t 3-7------Year ------CROP PROJECTIONS he h- Cash Crops Potatoesi/ ton 5,6,6,7 tOnS 7 20 75 90 Papaliras, Ora 90 103 105 105 105 105 3. 7 9 9 Quinoa & Wheat 3.7 .6 .4 Forage Crops oat, )2/ Barley ) .0,0/ha. 3,4,4,4 tos 4 77 90 120 120 120 120 120 120 120 Alfalfa/Festuca Past.2! too/ha. 0-2 2 - - 30 60 60 60 60 60 60 SALES SELLING PRICES Cash Crops b Potatoes 3,000/ton 3,000/ton Papalias, Ocas24 60 225 270 315 315 315 315 315 315 Quiro a . 6 - - - Whear 1-6-1. Sob-Total 75.0 225 - Surplus Forage Crops 270 270 315 315 315 315 Alfalfa Hay Cereal Hay 900/ton 900 Sub-Total Livestock Products Bull Calves hed 200 Surplus Heifer, 250 1.4 1.4 1.0 2.25 2.25 2.25 2.5 1,000 1,10 . . 22 .2 Cul Cwrs" s4,000 4,500 4 5 5.55.5 5.5 5.5 18 .5 2? 2.25 Co1l CHeil re 4,501 Cull Beilers " 12RO 1 600 650 - 12 14 16 10 11 Cull " 5ulls5,000 6,000 She'p -5.0 230 270 3.9 3.9 3..0 Fresh Milk litr.. 3.56 3.56 3 . 5.. . 4.59 4.59 4.59 4.59 R Se rv ces I c t o a 5 6 5 6 - 38.45 3 0.45 51.26 53.82 53.82 71.77 107.65 143.54 Ral IprVIteo 1ervicpo/tws0 10 - .5 11 1 1 1 1 Sub-Total - .2 .2 .6 .6 .6 .6 .6 TOTLtalE a .43.75 56.4574.96 87.12 85.76103.7114459 175.4 0 TOTAhL SALES14,9 758 75.0 268.75 326.45 344.96 402.12 400.76 418.71 459,59 490,48

1/ See An,,x 1, Table 4. 2/ See Annex 1, Table 4. 3/ See Anoex 1, Table 4.

October 16, 1975 ANNEX 1 Table 12 BOLIVIA

INGAVI RURAL DEVELOPMENT PROJECT

Agriculture and Livestock Development

Model 2 - Rainfed Development on Cousnunally-Operated Land

Crop Projection - Operating Expenses ($b '000)

Category Before ------Year ------Unit No Year Unit/Value Development 1 2 3 4 5 6 7 8-20 OPERATING EXPENSES

Administration Farm manager mn-year 1 10,000 - 10 10 10 10 Clerk 10 10 Ii 10 storekeeper " 1 9,000 - 9 9 9 9 9 9 9 9 Dairy and livestock foreman " 1 7,000 - 7 7 7 7 7 7 7 7 Subtotal - 26 26 26 26 26 26 26 26 Labor Milkers " 3 6,000 18 18 18 18 18 18 18 18 Animal Health Dipping head - 1.20 ) Drenching 2.40 ) Minerals 8.00 - 3 Vaccines 3 3.5 4 5 5 5 " 4.00 ) - Veterinary services visit 6 400/visit

Maintenance and Running Costs Pastures man-day 10/ha 25 - - Buildings 2% of new value - - 1 Internal roads tractor hours - Stock handling facilities 27 of new value - Watering facilities 2% of new value - - 0.1 0.1 0.1 0.1 0.1 5.1 Motorcycles 20% 0.1 of new value . 9 - . Electric generator 10% of new value 18 - General per annum - 10 10 10 10 10 10 10 10 Subtotal 10 12.1 12.1 12.1 39.1 12.1 12.1 12.1 Replacements Bulls head 12,000 Ram. 12 - 800 - - 0.8 - - 0.8 - Subtotal - - 12.8 - - 0.8 - Packing Materials Potato and grain sacks unit 105 20 - - 2.1 2.1 2.1 2.1 2.1 Planting Materiall/ Potato seed kg/ha 1,200 4 72 72 72 72 72 Cereal seed " 92 3.9 10.79 10.79 10,79 10.79 10.79 --- Fertilizer tons/ha 7.2 100 - - Insecticides 7.2 7.2 7.2 7.2 7.2 Subtotal - 89.99 89.99 89.99 89.99 89.99 Fuels and Lubricants Motorcycles km .90/liter Electric generator hours 2 2 2 2 2 2 2 2 Subtotal 3 3 3 3 3 3 Miscellaneous 3 3 Annual accounting per annum 2 2 2 2 2 2 2 2 2 2I2 2 Tools " 10% - I I

Subtotal 2 2 2 3 3 3 3 3 Tractor Hirni' hours 400 125 - - - 50 50 50 50 50 Total direct operating expenses 62 64.1 64.6 203 236 209 210 209 Purchased sheep for fattening - 3 3 4 4 4 4 4 4 Total opersting expenses 33 65 67 Total sales 69 207 240 213 214 213 75 269 327 Net operating income 345 402 401 419 460 490 42 204 260 276 Incremental operating income 195 161 206 246 277 - 162 218 234 237 119 164 204 235

1/ Capitalize during investment period. 2/ As for 1/.

October 20, 1975 BOLIVIA

INGAVI RURAL DEVELOPMENT PROJECT

Model 2 - Rainfed Development on Con-aun all-Operated Land

Financial Projection After Debt Service ($b, 000)

Without ----.----.--- Penject ------1 2 3 4 5 ------Year ------6 7 BL 9- 1D 11 12 13 14 _15 _16 _17 IS J 1 1 Category

A. CASH INFLOW

1. Dales _75 2. Development Lnan I/ 269 326 345 402 400 - 522 202 162 419 460 490 490 490 490 490 - - - 490 490 490 490 490 490 490 3. Cash Balance Previous Year 490 490 - 4 196 26 270 129 29 10 29 5 B 1 29 54 4. Seasonal Loan for Operating 3 27 24 9 Expenses 2/ - 6 - - 92 2

TOTAL INFLOW 75 856 612 703 688 675 548 489 500 519 495 498 490 0 490 501 519 544 527 517 514 518 B. CASH OUTFYL 9 90 51 59 54 52 1 1 1

1. Invetmaent - 522 202 162 - - 2. Operating Expenses 33 65 07 69 207 24i 213 214 213 213 213 213 213 213 2 2 2 2 3. Loan Repayment 365 7 69 27 4 23 24 23 23 23 23 23 23 213 213 213 213 1 1 1 --59595959 59 59 59 59 a) Development Loan Principal - - b) Developmant Loan Interest 2 r) S)easnale vo n LoanLoan In epao 62 106 106 106 5 59 59 59 59 59 59 59 Prinipal -65-- 87 106 106 99 92 85 78 71 64 57 50 43 35 2 9 21 14 7 -- d) Seasonal Loan Interest - - 8 a) Di stribution to Members 42 0 1 0 1 O 00 100 100 150 130 150 150 -Z 150 150 150 152 200 2 3 TOTAL. OUTFLOW TOTL - 0Z9290- 200 LO0 39 75OTFOW 772 416 417 413 546 519 479 471 514 487 500 493 46 79 472 465 307 500 93 486 518 C. CASH ALANCE - 84 196 286 275 129 29 10 29 5 8 - - - 11 29 54 37 27 24 28 -

j/ 20 year loan at 12% with 5 years grace. 2/ 12 months loan at 12%.

October 15, 1975 ANNEX I Table 14

BOLIVIA

INGAVI RURAL DEVELOPMENT PROJECT

Agriculture and Livestock Development

Model 2 - Rainfed Development on Communally-Operated Land

Farm Family - Crop Projections, Sales and Operating Expenses

Yields/ha ha Without ------Year ------Category Unit years 0-4 years 0.1 Protect 1 2 3 4 5-20 ~ ~ ~ ~ ~ Crop Projections Cro Prjecion ------~ ~~ ~ ~ ~ tons------0~

Barley tons 3,3,3,4 1.8 2 5.4 5.4 6.0 8.0 8.0 8.0 Potatoesi! ' 4,5,6,7 0.33 0.5 1.32 '2.5 3.0 3.5 3.5 3.5 Quina 0.6 0.44 0.6 0.264 0.36 0.36 0.36 0.36 0.36 Wheat ' 0.7 0.04 0.04 0.028 0,028 0.028 0.028 0.028 0.028 Papalisas, oca 3.0 0.02 0.02 0.06 0.06 0.06. 0.06 0.06 0.06 2.63 3.16 Livestock Products 3 MeatZ' / kg/DWT 85 285 85 90 Milk liters 95 100 312 312 320 340 350 360 Sheep units $ 8 8 9 10 Pigs kg/DWT 10 60 60 60 62 62 65 Value of Production

Cash Cm ps Farm Gate Prices ------$b6b ------BarleyA Potatoes kg 3 3,960 7,500 9,000 10,500 10,500 Quinoa kg 3 10,500 792 1,000 1,000 1,000 1,000 1,000 Wheat kg 4 112 112 112 112 112 Fapalicas, oca kg 4 112 240 240 240 240 240 240 Subtotal 5,104 8,852 10,352 11,852 11,852 11,852 Animal Products

Meat kg 20 1,700 5,700 1,700 1,800 1,900 2,000 Milk 1 3.56 1,110 1,110 1,140 1,210 1,246 1,282 Sheep kg 20 800 800 900 1,000 1,000 Pigs kg 15 1,000 900 900 930 930 930 975 Subtotal 4,510 8,510 4,540 4,840 5,076 5,257 Total value 9,614 17,362 Less on farm consumption 14,892 16,692 16,928 17,109 4,900 5.000 5,200 5,400 5,600 5,900 Total cash sales 4,714 12,362 9,692 11,292 11,328 11,209 Costs of Production (pesos)

Planting Material Price $b No./yr

Potato seed kg 6 396 600 Barley seed 1,584 2,400 2,400 2,400 2,400 2,400 kg 3.91 165.6 184 647 Quinoa seed 719 719 719 719 719 kg 3 22 30 Wheat 66 90 90 90 90 90 kg 4 2 2 Papali 8 8 8 8 8 8 andoca kg 5 2 2 10 10 10 10 10 10 Manure tons 100 2.5 Pertilicer 3.6 250 360 360 360 360 360 kg 500 ------Insecticide kg 100 0 5 - 380 380 380 380 380 Labor

Human man/day 25 240 270 6,000 6,750 6,750 6,750 6,750 6,750 Animal an./day 30 34 34 1,020 1,020 1,020 1,020 1,020 1,020 Tractor Hire hours 125 - 2.5 - 312 312 312 312 312 Sacks units 20 20 40 400 800 800 800 800 800 Total value 9,985 12,849 Less non cash costs 12,849 12,849 12,849 12,849 7,270 8,130 8,130 8,130 8,130 8,130 Total cash costs 2,715 4,719 4,719 4,719 4,719 4,719

ncremental Oerating Epenses - 2,000 2,000 2,000 2,000 2,000

1/ CORDEPAZ, "Proyecto de Desarrollo Rural", La Paz, 1974. 2/ Farm bull sold in year 1, replaced by service availability of improved size. 3/ Add 5% per year carcass weights in years 3 to 5 to reflect improved feeding, breeding and management. 4/ Consumed on farm by animals.

October 20, 1975 BOLIVIA

INGAVI RURAL DEVELOPMENT PROJECT

Agriculture and Livestock Development Model 2 - Rainfed Development on Communally-Operated Land

Farm Family - Financial Projections After Debt Service ($b ) Without ------Years- Categor Project 1 2 3 4 5 6 7 8 9 10 11-21 A. Cash Inflow

1. Cash sales 4,714 Cash 12,362 9,692 11,292 11,328 11,209 11,209 11,209 11,209 2. carried forward from previous year -- -- 4,719 4,719 11,209 11,209 11,209 4,719 4,719 4,719 4,719 4,719 4,719 4,719 4,719 3. Seasonal loan for operating expenses -- 4,719 ------9 Total Inflow 4,714 17,081 14,411 16,011 16,047 15,928 15,928 15 928 15 928 15 928 15,928 15,928 B. Cash Outflow

1. Cash operating expenses 2,714 4,719 4,719 4,719 4,719 4,719 4,719 4,719 4,719 4,719 4,719 4,719 2. Loan repayments -- 5,285 ------

Total Outflow 2,714 10,004 4,719 4,719 4,719 4,719 4,719 4,719 4,719 4,719 4,719 4,719 Cash Balance 2,000 7,077 9,692 11,292 11,328 11,209 11,209 11,209 11,209 11,209 11,209 11,209 Withdrawals-l 2,000 2,350 4,973 6,513 6,609 6,490 6,490 6,490 6,490 6,490 6,490 6,490 C. Farm Family Net Benefit

1. Value of domestic consumption 4,900 2. 5,000 5,200 5,400 5,600 5,900 5,900 5,900 5,900 Withdrawls 2,000 2,358 4,973 6,573 5,900 5,900 5,900 6,609 6,490 6,490 6,490 6,490 6,490 6,490 6,490 3. Share income from group farm -- 1,200 1,000 1,600 2,000 4,000 4,000 20 2,00 3 4 4,000 Total Net Benefit 6,900 8,358 11,373 13,573 14,209 16,390 16,390 14,390 14,390 15,390 16,390 16,390 D. Without Project Family Net Benefit 6,900 6,900 6,900 6,900 6,900 6,900 6,900 6,900 6,900 6,900 6,900 6,900 E. Incremental Farm Family Net Benefit -- 1,458 4,473 6,673 7,309 9,490 9,490 7,490 7,490 8,490 9,490 9,490 F. Family Income at Full Development $b 16,390 = US$820 or US$137 per capita. Family Income Without Project $b 6,900 = US$345 or US$57 per capita. Incremental Income $b 9,490 = US$475.

1/ Cash Balance - operating expenses for following year = withdrawals.

October 22, 1975 BOLIVIA Anne I Table 16 INGAVI RURAL DEVELOPMENT PROJECT

Agriculture and LivestockDeveLpYent

Model 3 - Painted Developent on Group of Individual Far=n

lnve.tment and Production Data

Year 1 Year 2 Yer 3 Cteoiory Unit Cash Cost N Nat. i. mt. No. AB. Total Units Total Coott US$ Equiv. E.- Cum-tt nt Locol VoMpoEtt (Sb) ($1'000) ($b'000) ($b'000) ($b'000) (1sJ$'000) % Ant. 7 At.

A. ON FARM INVESTMENT/Group of 50 farms

1. Livestock Bult 12,000 2 24 3 36 - - 5 60 3 50 1.5 50 1.5 RBms 800 5 4 5 4 - - 10 8 0.4 0 0 100 0.4 2. Pasture Seed 860 20 17.2 15 12.9 15 12.9 50 Flrtilizer 43 2.15 100 2.15 0 0 300 20 6 15 4.5 15 4.5 50 15 0.75 loo 0.75 0 0 3. MarketIng VuclItlot Office & store (inputs) 12,000 1 12 - - - - 1 12 0.6 20 0.12 80 0.48 Produce Storage 2i,000 1 25 - - - - 25 1.25 20 0.25 80 1. 0 --- 4.70.24 100.02 9 0.22 Well -1d Pump .,700 1 4.7 1 T30TAL INVESTMENTS 92.9 57.4 17.4 168 8.4 57 4.79 43 3.6 B. PRODUCTION/Gouop of 50 farnu Othout Year Project 1 2 3 4 5 6 7 8-20 1. Crupo/f-rno Yield, tonq/ha, Barley 3 3 3 3 4 4 4 4 4 Potatoes 4 5 6 7 7 7 7 7 Iluino 0.6 onchooged Wheat 0.7 unchanged Oc, stc. 3 uhanged Are, h. Burley 1.8 2 un.hanged Pdtaioes 0.33 0.5 .nchongad Qui..a 0.44 0.6 unecatgod Wheat 0.04 0.04 unchnged 0c, etc. 0.02 0.02 unchaaged Productio t-osBarley 5.4 6 6 8 a 8 8 8 8 Potatoes 1.32 2.5 3 3.5 3.5 3.5 3.5 3.5 3.5 Quino 0.264 0.36 0.36 0.36 0.36 0.36 0.36 0.36 0.36 wheat 0.028 0.028 0.028 0.028 0.028 0.028 0.028 0.028 0.028 Ot., tc. 0.06 0.06 0.06 0.06 0.06 0.06 0.06 0.06 0.06 2. An- l Productu/farm Productiun, Beef, kg. Dwt. 1/ 15 285 85 90 95 100 100 100 113 Milk, litre, 3 2 350 400 450 500 550 600 680 720 Mutton, kg. Dat. 4S 40 4o 45 45 50 50 50 50 Pork, kg. Dtt. 3 60 60 62 65 65 65 70 70 3. Total Group Production Barley, tons 270 300 300 400 40 400 400 400 401) Pototoeo ",1f 125 150 175 175 175 175 175 175 Quo a "13.2 18 18 18 18 18 18 10 18 Whoot 1,4 1.4 1.4 1.4 1.4 1.4 1.4 1.4 1.4 Oc, tct. " 3 3 3 3 3 3 3 3 3 Bref, han. 4,23- 14,250 4,250 4,500 4,750 5,000 5,000 5,000 5,000 Milk, litrts 15,010 17,500 20,000 22,500 25,000 27,000 30,000 34,000 36,000 Mttco, kg. 2,100 2,000 2,000 2,250 2,250 2,500 2,500 2,500 2,500 Pork, kg. 3,400 3,000 3,000 3,100 3,250 3,250 3,250 3,500 3,500

1/ POduction in year is unuually high d e to one tim sl of farn bull rendered ,urplhs by purchas of five bu ls for group.

0ctb-c 15, 1975 BOLIVIA

INGAVI RURAL DEVELOPMENT PROJECT

Agriculture and Livestock Development

Model 3 - Rainfed Development on Group of Individual Farms

Group Sales and Operating Expenses

Without Project Year Category Project 1 2 3 4 5 6 7 8 9 10-20 ------$b 000------

A. Cash Inflow Total Value of Production

Price/unit ($b) Potatoes 3000/ton 198 375 450 525 525 525 525 525 525 525 525 Quinoa 3000/ton 40 54 54 54 54 54 54 54 54 54 54 Wheat 4000/ton 5 5 5 5 5 5 5 5 5 5 5 Oca 4000/ton 12 12 12 12 12 12 12 12 12 12 12 Beef 20/kg DWT 85 285 85 90 95 100 100 100 100 100 100 Milk 3.56/liter 55 62 71 80 89 98 107 121 128 128 128 Mutton 20/kg DWT 40 40 40 45 45 50 50 50 50 50 50 Pork 15/kg NWT 45 45 45 46 49 49 49 52 52 52 52 Total 480 888 762 857 871 893 902 919 926 926 926

Less On-Farm Consumption 245 250 260 270 280 295 295 295 295 295 295

Total Cash Sales 235 638 502 587 591 598 607 624 631 631 631

B. Cash Outflow Total Value of Production Costs

Potato seed 79 120 120 120 120 120 120 120 120 120 120 Barley seed 32 36 36 36 36 36 36 36 36 36 36 Quinoa seed 3 5 5 5 5 5 5 5 5 5 5 Wheat seed 0.4 0.4 0.4 0.4 0.4 0.4 0.4 0.4 0.4 0.4 0.4 Oca seed 0.5 0.5 0.5 0.5 0.5 0.5 0.5 0.5 0.5 0.5 0.5 Manure 12.5 18 18 18 18 18 18 18 18 18 18 Insecticide - 19 19 19 19 19 19 19 19 19 19 Labor, human 300 337 337 337 337 337 337 337 337 337 337 Labor, animal 51 51 51 51 51 51 51 51 51 51 51 Tractor Hire - 15.6 15.6 15.6 15.6 15.6 15.6 15.6 15.6 15.6 15.6 Sacks 20 40 40 40 40 40 40 40 40 40 40 Subtotal 1198 642 642 642 642 642 642 642 642 642 642

Clerk/Storekeeper - 9 9 9 9 9 9 9 9 9 9 Maintenance on buildings - 1 1 1 1 1 1 1 1 1 1 Total 498 652 652 652 652 652 652 652 652 652 652

Less Non-Cash Costs (Labor and Manure) 363 406 406 406 406 406 406 406 406 406 406

Total Cash Costs 135 246 246 246 246 246 246 246 246 246 246

October 15, 1975 ANNEX I Table 18 BOLIVIA

INGAVI RURAL DEVELOPMENT PROJECT

Agriculture and Livestock Development

Model 3 - Rainfed Development on Group of Individual Farms

Group and Farm Family - Financial Projections after Debt Service

Project Year Without 8-20 Category Project 1 2 3 4 5 6 7 C------y------($b '000)------

1, GrA$

A. Cash Inflow 624 631 235 638 502 587 591 598 607 1. Sales, Cash -9 71 2. Development Loan - 93 57 18 - - 2 246 246 246 3. Cash Carried Over from Previous Year - 246 246 236 236 246 4. Seasonal Loan for Operating Expenses 3246 - 2 4 Total Inflow 235 977 805 851 827 834 853 870

B. Cash Outflow - 1. Investments - 93 57 18 - - - - 246 236 236 246 246 246 2. Cash Operating Expenses 135 246 246 3. Loan Repayments 56 56 56 - a) Development Loan Principal l/ - - - 2056 1356 57 b) Development Loan Interest 11 18 20 c) Seasonal Loan Principal 2/ 246 - - - 4 2 d) Seasonal Loan Interest 3 28 ~ 4 2 - 9 Outflow 15624 321 283130392426 Total 515 529 544 624 631 Cash Balance 100 353 484 567 279 283 298 378 385 Withdrawals 3/ 100 107 238 331

1I. Farm Family

A. Cash Inflow ($b) 10000 11700 11800 11960 12100 12300 12620 1. Cash Sales .4714 12760 4920 4920 4920 4920 4920 4920 2. Cash Carried Forward from Previous Year - - 4920 3. Seasonal Loan for Operating Expenses -4920 - - 6 6 7 7 14 Total Inflow 4714 17680 14910 16620 16720 16880 17020 17320 17540

B. Cash Outflow 4920 , 4920 4920 4920 4920 4920 1. Cash Operating Expenses 2714 4920 4920 2. Loan Repaymeut - a) Investment Share - 220 360 400 1520 1380 1260 - - - Loan -5480 - - - b) Seasonal 6440 6300 6180 4920 4920 Total Outflow 2714 10620 5280 5320 11300 10280 10580 10840 12400 12620 Cash Balance 2000 7060 9640 5360 5660 5920 7460 7700 Withdrawals 2000 2140 4720 6380

C. Farm Family Net Benefit 5400 5600 5900 5900 5900 5900 1. Value of Domestic Consumption 4900 5000 5200 6380 5360 5660 5920 7460 7700 2. Withdrawals 2000 2140 4720 10960 11560 11820 13360 13600 Total Net Benefit 6900 7140 9920 11780 6900 6900 6900 6900 6900 6900 6900 6900 D. Without Project Net Benefit 6900 6700 3020 4880 4060 4660 4920 6460 E. Incremental Farm Family Net Benefit - 240

F. Family Income at Full Developmen : $b 13,600 = US$680 or US$113 per capita.

Family Income Without Project: $b 6,900 = US$345 or US$57 per capita. Incremental Income $b 6,700 = US$335.

1/ Development Loan over 5 years with 2 years grace at 12%. 2/ Seasonal Loan for 12 months at 12%. / Withdrawals = Cash Balance - Operating Expenses for following year.

October 15, 1975 BOLIVIA

INGAVI RURAL DEVELOPMENT PROJECT

Agriculture and Livestock Development

Model 4 - Marketing Developmentj/

Investment and Production Data

Category CategoryYear Unit Cost Unit Cash Cost No. I Amount otal Cot US Euiv. F.E. Component Local CMonent b$b) ($b'000) ($b'000) (US$'00) 7 Amount % Amount A. Investment Items for 50 Farms Aunt % Amo 0 (US$ '000) 1. Office and Store (US$ '000) (Inputs) 24,000 12,000 1 2. Produce Storage (Outputs) 12 12 0.6 20 50,000 25,000 1 25 25 3. Shallow Well 1.25 20 0.12 80 .0 and Pump 6,800 4,700 4.7 0.2 80 0.22 TOTAL 80,800 41,700 41.7 41.7 2.09 19 0.39 81 1.70

B. Production for 50 Farms

Without Project 1 2 Y 4------Barley, tons 270 300 300 400 Potatoes "66 400 400 400 125 150 Quinoa 175 175 175417 13.2 18 18 Wheat 18 1lB 18 4l5 "1. 18 18 18 181517185 47 Oca t1.4 1.4 1.4 1.4 1.4 1.4 1.4 1.4 71.4 3 3 3 3 3 3 3 3 3 Animal Products Beef kg 4,250 4,250 4,250 4,500 4,750 Milk liter 15,600 15,600 5,000 5,000 16,000 17,000 17,500 18,000 18,000 Mutton kg 2,000 2,000 5,000 5,000 Pok"3,000 2,000 2,000 2,0,000 3,0003,000 3,100 3,100 3,250 3,250 3,250 3,250 ,000 18,000 18000 3,ork 3,.1,0 3103 0 2,000 2,000 2,000 2,000 C. Production Per Farm

Production, Yields, etc. See Table 7, Annex 1.

1/ Groups of 50 farms, each of 6 ha.

October 15, 1975 BOLIVIA

INGAVI RURAL DEVELOPMENT PROJECT

Agriculture and Livestock Development

Model 4 - Marketing Development

Sales and Operating Expenses

Without Project Year Category Project 1 2 3 4 5 6 7 8 9 10-20 ------$b '000------

A, Cash Inflow Total Value of Production

Price/unit ($b) Potatoes 3000/ton 198 375 450 525 525 525 525 525 525 525 525 Quinoa 3000/ton 40 54 54 54 54 54 54 54 54 54 54 Wheat 4000/ton 5 5 5 5 5 5 5 5 5 5 5 Oca 4000/ton 12 12 12 12 12 12 12 12 12 12 12 Beef 20/kg DWT 85 85 85 90 95 100 100 100 100 100 100 Milk 3.56/litre 55 55 57 61 62 64 64 64 64 64 64 Mutton 20/kg DWT 40 40 40 40 40 40 40 40 40 40 40 Pork 15/kg DWT 45 45 45 46 46 49 49 49 49 49 49 Total 480 671 758 833 842 849 849- 849 849 849 849

Less On-Farm Consumption 245 250 260 270 280 295 295 295 295 295 295

Total Cash Sales 235 421 498 563 562 554 554 554 554 554 554

B. Cash Outflow Total Value of Production Costs

Potato seed 79 120 120 120 120 120 120 120 120 120 120 Barley seed 32 36 36 36 36 36 36 36 36 36 36 Quinoa seed 3 5 5 5 5 5 5 5 5 5 5 Wheat seed 0.4 0.4 0.4 0.4 0.4 0.4 0.4 0.4 0.4 0.4 0.4 Oca seed 0.5 0.5 0.5 0.5 0.5 0.5 0.5 0.5 0.5 0.5 0.5 Manure 12.5 18 18 18 18 18 18 18 18 18 18 Insecticide - 19 19 19 19 19 19 19 19 19 19 Labor, human 300 357 337 337 337 337 337 337 337 337 337 Labor, animal 51 51 51 51 51 51 51 51 51 51 51 Tractor hire - 15.6 15.6 15.6 15.6 15.6 15.6 15.6 15.6 15.6 15.6 Sacks 20 20 20 20 20 20 20 20 20 20 20 Subtotal 498 642 642 642 642 42 642 642 642 642 642

Clerk/Storekeeper - 9 9 9 9 9 9 9 9 9 9 Maintenance on buildings - 1 1 1 1 1 1 1 1 1 1 Total 498 652 652 652 652 652 652 652 652 652 652

Less Non-Cash Costs (Labor and Manure) 363 406 406 406 406 406 406 406 406 406 406

Total Cash Costs 135 246 246 246 246 246 246 246 246 246 246

October 15, 1975

Co Z

0 ANNEX 1 Table 21

BOLIVIA

INGAVI RURAL DEVELOPMENT PROJECT

Agriculture and Livestock Development

Model 4 - Marketing Development

Financial Projections After Debt Service

------Year ------Item Without Project 1 2 3 4 5 6 7-20 1. GROUP OF 50 FAMILIES

Cash Inflow ($b'000) Cash Sales 235 421 498 554 554 554 554 554 Development Loan - 42 - - - - - Cash Carried Forward from Previous Year - - 45 138 246 246 246 246 Seasonal Loan for Operating Expenses - 246 201 108 - -

TOTAL 235 709 744 800 800 800 800 800 Cash Outflow Investments - 42 - - - - - Cash Operating Expenses 135 246 246 246 246 246 246 246 Loan Repayments: - 1) Development Loan From Principal!/ - - 9 9 9 9 9 2) Development Loan Interest - - 5 4 3 2 1 3) Seasonal Loan Principal 2/ - 246 201 108 4) Seasonal Loan Interest - 30 25 13 -

TOTAL 135 564 486 380 257 256 256 246 CASH BALANCE 100 145 258 420 543 544 544 554 WITHDRAWALS 3/ 100 100 120 174 297 298 298 308 2. FARM FAMILY

Cash Inflow ($b) Cash Sales 4,714 8,420 9,960 11,080 11,080 11,080 11,080 11,080 Cash Carried Forward from Previous Year - - 910 2,688 3,400 4,920 4,920 4,920 Seasonal Loan for Operating Expenses - 4,92 4,010 2,232 1,520 - - .

TOTAL 4,714 13,340 14,880 16,000 16,000 16,000 16,000 16,000 Cash Outflow Cash Operating Expenses 2,714 4,920 4,920 4,920 4,920 4,920 4,920 4,920 Loan Repayments 1) Investment Share - - 280 260 240 220 200 - 2) Seasonal Loan - 5,510 4,491 2,500 1,702 - - -

TOTAL 2,714 10,430 9,691 7,679 6,862 5,140 5,140 4,920 CASH BALANCE 2,000 2,910 5,188 8,320 9,137 10,800 10,860 11,080 WITHDRAWALS 2,000 2,000 2,500 3,400 4,217 5,940 5,940 6,160 Farm Family Net Benefit Value of Domestic Consumption 4,900 5,000 5,200 5,400 5,600 5,900 5,900 5,900 Withdrawals 2,000 2,000 2,500 3,400 4,217 5,940 5,940 6,10 TOTAL 6,900 7,000 7,700 8,800 9,817 11,840 11,840 12,000 "Without Project" Net Benefit 6,900 6,900 6,900 6,900 6,900 6,900 6,900 6,900 Incremental Farm Family Net Benefit - 100 800 1,900 2,917 4,940 4,940 5,100

Family Income at Full Development, $b 12,000 = US$600 or US$100 per capita. Family Income Without Project, $b 6,900 = US$345 or US$57 per capita. Incremental Income, $b 5,100 = US$225.

1/ Development Loan over 5 years with 0 years grace at 12%. 2/ Seasonal Loan over 12 months at 12%. 3/ Withdrawals = Cash Balance - Operating expenses for following year.

October 15, 1975 ANNEX 2 Page 1

BOLIVIA

INGAVI RURAL DEVELOPMENT PROJECT

Irrigation System

Introduction

1. UNDP investigated groundwater resources in the northern and central altiplano between 1969 and 1974 (BOL-68-514). Within the total area og 50,000 km , two priority regions were selected for detailed studyt 69,000 km between La Paz and Lake Titicaca and 33,000 km2 around Oruro. These regions have dense population, the infrastructure is relatively developed, and they are located near major markets. The La Paz region also benefits from a climate moderated by Lake Titicaca. Of the six major aquifers identified only one, located about 20 km southwest of La Paz, is overlain with soils suitable for irrigated agriculture. The project area encompasses this aquifer.

Irrigation Area

2.. Soils. Lands on the greater portion of the altiplano are-gravelly, generally with shallow soil, and there are extensive strips havirg a high groundwater level with dispersed saline lands, usually in low lying spots, and near the streams. The area proposed for irrigation is located approximately in the center of the project area, to the southeast of the provincial capital of Viacha. Most of the lands are uniform, with a very gentle slope (2%). Some, however, is slightly rolling and would require land leveling. The top soils are medium to deep, reasonably permeable, moisture retentive, and appear well suited for irrigation, while heavy clay with less permeability can be found near the streams. A zone of high watertable is located on the western side of the area. IT prevent seepage through the light soils and cracks which could develop in the clay-soil area, it would be necessary to line canals. Drains for internal drainage purposes would be needed in the clay zone and in the high water level zone particularly.

3. Rainfall. Annual rainfall is about 500 mm, with approximately 60% fall- ing in the peak period of December to February. However, since less than 200 mm is reliable, the crops proposed to be grown, such as alfalfa and potatoes, which require up to 460 mm and 407 mm of water throughout their growing periods, respectively, would have to be supplemented by irrigation to achieve their full yields.

4. Water Supply. The potential for surface water development is extremely limited because of the high rate of percolation of the streams and the lack of storage areas. Many of these streams actually disappepr before they reach Lake Titicaca but the water they lose is the major replenishment for the aquifers underneath. Water would, therefore, be drawn from the aquifer that has good soils associated with it, since it is the only one which can be exploited economic ally. ANNEX 2 Page 2

5. The UNDP study identified the project aquifer on the basis of hydro- geological data which were obtained from about 20 test holes in the vicinity. The selected aquifer was located at a depth of from about 10 m to 150 m below the project area, and it covers about 70 km2 . It is composed of gravel, sand and clay in different proportions at different depths, but gravel and .sand are the main components, which means that a large amount of water could be stored in it. The findings reveal also that artesian water lies below impermeable clay beds (Lacustrine sediments), whereas static groundwater is located above the beds. Based on a conservatively expected specific yield of 10%, 5 Mm3 could be pumped from the 500 Mm3 of groundwater contained in this aquifer. The project irrigation requirement is 4.4 Mm-/year (Tble 1), so supply would be adequate. Water quality ranges between C1S 1 and C2 S1 -/> which is acceptable for the crops to be grown.

Scope and Main Features

6. About 1,000 ha of the 7,000 ha identified as suitable soil over the selected aquifer would be irrigated by pumping groundwater from 20 deep wells spaced at 2-km intervals. Each well would command an area of 75 ha, of which about 50 ha would be irrigated in any given year. Each well system would have the following main features:

(a) A well sunk to a depth up to 140 m in the aquifer;

(b) A submersible pump (with 55 hp electric motor);

(d) A 1,000 m3-capacity water tank to regulate water from the well;

(e) Farm drains at intervals of about 200 m for both surface and internal drainage. (The exact spacing in each zone would be determined during the detailed design stage.);

(f) A path (1.5 m wide) along the drains to provide access for maintenance of the system;

(g) Improved natural drains to carry drainage water to the main streams; and

(h) Land leveling on 75 ha.

1/ These classifications refer to U.S. Salinity Laboratory Standards. 0 1S 1 indicates low salinity (65-100 ppm) and low sodium hazard. C231 indicates medium salinity (160-500 ppm) and low sodium hazard. ANEX 2 PNge 3

7. The Bolivia Power Company (BPC) would extend a line south from Viacha and provide connections to the individual wells. The cost of this installation would be about $b 5.8 million, but it would result in a capital cash cost saving for the 20 wells of about $b 6.2 million over a diesel alternative. If amortization of the power line investment were included in the rate to be charged to the wells, it would result in a tariff of about $b 1.06/kwh. The resulting annual operating cash cost would be about the same as that for the diesel alternative ($b 82,000 (US$4.,100) per well ). Since an electric motor is easier to operate and maintain than a diesel, the electrical alternative is superior--both economically and technically--to the diesel.

Cropping Pattern and Water Requirements

8. The main irrigated crops would be alfalfa (70%) and potatoes (30%). Using the Modified Blaney-Criddle method, which takes into account the crop growth stage coefficients adjusted to the conditions prevailing in the project area, the annual irrigation water requirement would be 470 mm for alfalfa and 375 mm for potatoes. The total annual irrigation water requirement expressed in volume would be 4,500 3 /ha/year (225,000 i 3 /wei/year or U. bMi3/year.

9. Peak demands would occur in October/November and would be at the rate of about 36,000 m3 per month. The proposed pump and motor (para 6) would have a capacity of 144 m /hour, so it could adequately meet peak requirements. Cost

10. The unit investment and operating costs per well are given in Table 2. Investment cost would amount to $b 1.91 million (US$96,000), of which $b 1.42 million (US$71,000)would be cash cost. Operating cost would be $b 202,000 per year, of which $b 82,000 (US$,100) would be cash cost.

11. Aggregate investment and operating costs are given in Table 3. Invest- ment cost would amount to $b 38.2 million (US$1.9 million) of which $b 28.3 million (US$1. million) would be cash cost. Operating cost would rise from $b 810 000 (US$41,000) or $b 330,000 (US$17,000) cash cost, in project year two to $b .04 million (US$200,000), or cash cost $b 1.64 million (US$82,000) in project year four and subsequent years.

Cost Sharing and Recovery

12. Beneficiaries would contribute 26% to investment cost in the form of labor and would receive from the Agricultural Bank (BAB) a loan for the remainder. They would also contribute to operating cost -- 56%-- and would receive working capital financing from BAB for the remainder. ANNEX 2 Page &

Implementation

13. Design work and training of common irrigators would be carried out by the Project Unit itself, but the remaining tasks would be undertaken by other agencies, under the Project Unit's supervision, as follows:

(a) Mapping -- the Military Geographical Institute;

(b) Well construction and development, including installing pumps and motors, building water tanks and connection outfits -- Geological Survey of Bolivia (GEOBOL);

(c) Construction of distribution and drainage systems -- National Community Development Service (SNDC) or private contractors, with beneficiary participation;

(d) Natural drainage improvement -- SNDC or private contractors, with beneficiary participation; and

(e) Land leveling -- beneficiaries.

A groundwater irrigation specialist would be retained for a three-year period by the Project Unit to provide technical assistance.

14. Implementation would occur over a three-year period, with engineering and surveying being carried out in year one and construction in years two and three. Ten wells would be sunk in year two and the rest in year three. The distribution system, drains and on-farm work would be started simultaneously with each well construction. Well construction alone should be completed in two months' time; however, the distribution system and on-farm work may take up to six months.

15. Prior to the construction of the wells, the area would be surveyed in detail, the wells designed, the site selection finalized, and the safe yield of the aquifer checked by the Project Unit. The resulting analysis would be reviewed by the Bank before construction was initiated. Organisation of the farmer groups wishing to install a well and formation of their 75-ha irrigation areas also would occur prior to well construction. Since 10 wells would be installed in year two and 10 in year three, 10 groups would have to be organized by the beginning of each year.

16. Each irrigation system, consisting of well and equipment, storage tank, and distribution and drainage system, would be owned and operated by a farmer group which would allocate water to the irrigated area as required by the cropping pattern. A common irrigator would be hired by the group, probably from among its ANNEX 2 Page 5 own members, and made responsible for distributing the water according to the plan prepared by the group. He would also direct the efforts of members contributing labor for maintenance work. The Project Unit would assist the group in performing trials to determine the optimum slope of the land., layout of the water courses, plan for water alloc ation, and operation and maintenance of the system.

October 17, 1975 B 0 L I V I A

INGAVI RURAL DEVELOPMENT PROJECT

Irrigation System

Project Water Requirement Assessment JAN FEB MAR APR MAY JUN JUL AUG SEP OCT NOV DEC ANNUAL

Rainfall-75% probability-mm 68 74 35 22 ------3 9 29 77 317 Temperature 0 C 8.8 8.5 8.8 8.7 8.0 6.9 6.9 7.8 8.3 9.5 9.8 9.4 Alfalfa

Consumptive use mm 62.5 83.8 53.3 38.9 22.4 32.5 44.7 Effective rainfall 58.2 63.8 460.1 mm 40.0 50.0 25.0 10.0 ------16.0 47.0 188.0 Irrigation requirement Mm 22.5 33.8 28.3 28.9 22.4 32.5 44.7 42.2 16.8 272.1 Potatoes

Consumptive use mm 76.5 69.1 68.3 11.7 19.1 34.8 56.6 71.1 407.2 Effective rainfall mm 40.0 50.0 25.0 ------15.0 50.0 180.0 Irrigation requirement mm 36.5 19.1 43.3 11.7 19.1 34.8 41.6 21.1 227.2 Irrigation water requirements for project cropping pattern at 607 efficiency 3 707 Alfalfa m /ha 280 420 350 350 280 385 525 490 210 3 290 30% Potatoes m /ha 180 90 210 -- 3 60 90 180 210 105 1,125 Project Total m /ha 460 510 560 350 340 475 705 700 315 4,415 for 1,000 ha Mm3 6.460 0.510 0.560 0.350 0.340 0.475 0.705 (20 wells serving 50 ha each) 0.700 0.315 4.415

October 15, 1975 ANNEX 2 Table 2 3)LIVIA

INGAVI RURAL DEVELOPMENT PROJECT

Irrigation System

Unit Investment and Oerating Costs (f$b '000

Total Cost i/

Investment Cost

Component Amount Drilling 507 Pump and motor 2 116 Storage tank 130 Distribution and drainage system 410 Natural drain improvement 330 Land leveling 75 Engineering and supervision 92 Subtotal 1,660 Physical contingency (15%) 250 Total 1,910

Operating Cost

Component Amount

Energy 64 Maintenance 111 Common irrigator 9 Subtotal 18h Physical contingency (10%) l8

Total 202

Cash Cost Investment Cost

Component Amount

Drilling 507 Pump and motor 116 Storage tank 130 Distribution and drainage system 123 Natural drain improvement 264 Land leveling Engineering and supervision 92 Subtotal 1,232

Physical contingency (15%) 185 Total 1,417 Operating Cost

Component Amount Energy 64 Maintenance 2 Common irrigator 9

Subtotal 75

Physical contingency (10%) 7

Total 82 l/ Includes non-cash costs. 2/ Includes 10% allowance for spare parts.

October 16, 1975 ANNEX 2 Table 3

BOLIVIA

INGAVI RURAL DEVELOPMENT PROJECT

Irrigation System

Investment and Operating Costs ($b-~00)

Total Cost

Investment Cost Year Component 1 2 3 Total Wells (20) 6,500 16,050 15,650 38,200

Operating Cost Year Component 2 3 -

Operation and maintenance - 810 2,020 4,040

Cash Cost

Investment Cost Year Component 1 2 3 Total

Wells (20) 4,820 11,900 11,620 28,340

Operating Cost Year Component 1 2 3 4 9 Operation and maintenance - 330 820 1,640

L/ Includes non-cash costs.

October 16, 1975 ANNEX 3 Page 1

BOLIVIA INGAVI RURAL DEVELOPMENT PROJECT

Credit System

Project Unit

1. The Project Unit would have full responsibility for credit operations under the project. It would prepare development plans for farmer groups and draw up subloan applications, based on those plans, which would be approved by the project director. The subloan applications then would be forwarded to the Agricultural Bank of Bolivia (BAB), for disbursement, and the Project Unit would supervise implementation of the plans, authorizing disbursements by BAB as work progressed. The Project Unit would also undertake the collection of subloan payments by subborrowers, with the cooperation of BAB personnel.

Agricultural Bank of Bolivia 2. BAB would act as the financial agent for the credit operations, disbursing funds and maintaining accounts. It would not have authority to reject subloan applications. BAB also would participate in the collection of payments by sending personnel into the field to handle the funds, but it would not have responsibility for the collection effort. Since payments would be made to the Central Bank only as amounts were received from subborrowers, BAB would not carry any financial risk. As compensation for its participation in the project, BAB would receive a commission of 2% on outstanding subloan amounts. In order to comply with its obligation, BAB would upgrade its office in Viacha to branch status.

3. BAB currently is the executing agency for the Third Livestock Project (261-BO) and the Agricultural Credit Project (561-BO). Although it has incurred substantial losses in recent years as a result of the devaluation of 1972 and the lack of appropriate administrative policies and procedures, a new general manager has been appointed and a management consulting firm has been retained to assist in a reorganization. Some difficulty had been experienced in the execution of the livestock project, but the situation has improved and progress is now satisfactory. The credit project has just started. Items Financed by Subloans

4. Long- and medium-term subloans would be provided for irrigation systems, livestock facilities (including pasture establishment, breeding animals, and handling and watering facilities), tractors, and storage facilities. Short-term subloans would be made available for working capital. Subloans would be made avail- ANNEX 3 Page 2 able to farmer groups which had been formed to implement joint development plans and to contractors ( for tractors). Tractors would be financed only for those irrigation groups and contractors who convince the Project Unit that they have the capability to operate and maintain a tractor effectively.

Channeling of Funds

5. Proceeds of the Bank loan and the Government contribution would be disbursed to the Central Bank, which would set up accounts for each of the project components: on-farm investments, incremental working capital, technical services, roads, health facilities, and water and waste facilities. In the case of the first (except when irrigation or tractors are involved), the Central Bank would disburse funds to BAB on the basis of evidence of disbursement by BAB on subloans to project beneficiaries approved by the project director. Funds would be repaid by BAB to the Central Bank as payments were received from project beneficiaries and would be available for further lending in the project area.

6. For irrigation systems, disbursements would be made by the Central Bank, with the authorization of the project director, to agencies such as the Geological Survey of Bolivia (GEOBOL), which would undertake preparatory survey and design work. At the time that construction of a specific well started, the portion of preparation cost allocated to that well would be transferred to the farm group's subloan account with BAB. A similar procedure would be followed with tractors if payments were required before delivery could be made to individual farmer groups and contractors.

7. Disbursements for technical services would be made by the Central Bank directly to the Project Unit. Disbursements for roads would be made to the National Roads Service (SNC), and, for health, water and waste facilities, to the Ministry of Social Security and Public Health (MPSSP) on authorization of the project director. The Project Unit would monitor the work of these agencies and authorize progress payments.

8. As compensation for its services, the Central Bank would receive a commission of 1/4% on outstanding subloan amounts.

October 20, 1975 ANNEX h Page 1

BOLIVIA

INGAVI RURAL DEVELOPMENT PROJECT

Technical Services

General

1. Technical services would cover a range of organizations and functions, from the organization of the Project Unit by the Government with the assistance of a specialist in project administration, to the operation of irrigation systems by farmer groups with the assistance of the Project Unit, to the improvement and maintenance of roads by the National Roads Service (SNC) with farmer groups' participation. The common denominator in almost all cases would be the involvement of farmer groups. They would participate, in varying degrees, in the construction of facilities and would have responsibility, to the maximum extent feasible, for the operation and maintenance of the facilities. Thus, the focus of the project would be on farmer group actions with the assistance of an outside agency, at times involving the guidance of consultants.

2. Economic and social infrastructure works besides roads would include health centers, a hospital, water supply wells, and privies. The Ministry of Social Security and Public Health (MPSSP) would supervise the construction of these facilities (under the general supervision of the Project Unit) with the participation of farmer groups in construction varying from a 7% contribution to the hospital rehabilitation to 70% in the case of privies. The degree of farmer group responsibility for operation and maintenance of these facilities would correspond roughly to the magnitude of their contribution to construction. Assistance to MPSSP in planning and implementing the well and privy programs would be provided by a specialist in sanitary engineering, who would be recruited for a period of four years.

3. Directly-productive components would be carried out with the assistance of the Project Unit. In this case, farmer groups would have almost complete responsibility for the decision relating to the installation, operation, and maintenance of the facilities (irrigation systems, livestock and storage facilities, and tractors). They would also bear the full cost of the facilities through initial contributions and repayment of debt financing (the stipulation on the use of debt repayments is contained in para 3.16 of the main text). Rather intensive guidance would be provided by the Project Unit, but responsibility would rest with the farmer groups. ANNEX 4 Page 2

Project Unit

It. Organization. The Project Unit would be formed as a semi-autonomous agency under the aegis of the Ministry of Peasant Affairs and Agriculture (MACA). Its scope of responsibility and authority would be set forth in a decree and statutes, and it would have its own organizational structure, administration, operations and funds. Policy for the Project Unit would be established by a board of directors which would be composed of a representative and an alternate from MACA, the Ministry of Planning and Coordination, the inistry of Finance, the Ministry of Social Security and Public Health (MPSSP), the semi-autonomous agencies the Department of La Paz Development Corporation (CORDEPAZ), the Agricultural Bank (BAB), the National Community Development Service (SNDC), and the National Roads Service (SNC), the project director, and project farmers, (Table 1). The representative of MACA would be the chairman of the board and the representative of CORDEPAZ, vice-chairman. In addition to establishing project policy, the board would appoint the project director, approve annual budgets and work plans, and ensure effective coordination among participating agencies (Schedule A). Meetings of the board would be held monthly during the project implementation period. Each participating agency would designate someone from within its own organization to function as the working-level contact for the project director. Thus, most coordination should be effected at this level without involving the board of directors.

5. The chief executive officer of the Project Unit would be the project director, who would be recruited from among Bolivians with international experience. He would be responsible only to the board of directors and would have the functions and duties specified in Schedule A. He would be supported by a project deputy director and by a nucleus of staff which would be drawn from some of the participating agencies: an agriculturalist, a livestock technician, and an irrigation engineer from MACA; an agriculturalist and a livestock technician from BAB; and a group organization specialist (promoter) and a group management specialist from SNDC. Additional staff would be recruited from outside the Government. Salaries would be maintained at levels comparable to those of other semi-autonomous agencies such as CORDEPAZ, in order to attract and hold qualified personnel.

6. The Project Unit would be located in Viacha, which is situated within the project area and is the capital of the Ingavi Province. It would have a liaison office in La Paz. Project staff, including the consultants, would live in Viacha.

7. Functions. The Project Unit would have two main departments.- the Ser- vices Department and the Engineering Department. The former would provide technical assistance to farmer groups on agricultural and livestock development and on organization and management of groups. Agriculture and livestock activities would include advising farmer groups on cultivating and animal husbandry techniques (including control of health problems); preparing farm development plans for groups and assisting them in the implementation of the plans; granting subloans (for tractors, irrigation systems, livestock investments, storage facilities, and working ANEX 4 Page 3 capital); collecting and disseminating information on input prices and supplies, and product prices and markets; assisting groups in the purchase of inputs and the sale of products; implementing a program of demonstration farm trials (with the cooperation of the Belen and Patacamaya experiment stations); and training technicians and farmers. Training for both technicians and farmers would involve courses at the experiment stations of Belen and Patacamaya and field training. In addition, technicians would participate in BAB courses in farm plan preparation and financing. An adult literacy program for farmers would be introduced to enable them to better assimilate the technical assistance provided and begin to utilize information available from commercial sources.

8. With respect to the organization and management of groups, the department would assist farmers in the creation of groups and in the planning and organ- izing of their operations. As part of the guidance on administrative matters, this department would help groups establish and operate a simple accounting system and would assist them in registering with the appropriate Government agencies. Training would be provided to group members in management and accounting at the nearby training center operated by SNDC, as well as in the field.

9. One responsibility of the Engineering Department would be the purchase of tractors through international competitive bidding (ICB), after sufficient tractor applications had been received from groups and contractors to form a contract attractive to international bidders (about 10 tractors). Particular enpha- sis would be placed on the adequacy of service to be provided by the supplier, especially with regard to the maintenance of spare parts stocks. Initial training for tractor operators would be provided by the supplier, while follow-up training and assistance in planning and executing tractor operations would be provided by the Project Unit.

10. Another responsibility of this department would be the supervision of construction and operation of the irrigation systems. The design work and well siting would be done by this department. However, the mapping, the purchasing of pumps, etc., the drilling of wells, and the construction of the distribution and drainage systems would be undertaken by other agencies (or farmer groups) under the supervision of this department. It would train the common irrigators in the operation and maintenance of the irrigation systems, primarily in the field. This department would also supervise the construction of storage and livestock facilities (by SNDC with farmer group participation or, in some cases, by private contractors) and the roads, health, water, and waste facilities by SNC and MPSSP under agreements with the Project Unit. To make this supervision of other agencies' work effective, the Project Unit (specifically the project director) would authorize disbursements from the project account as the work progressed.

11. Consultants. Three specialists would be recruited to assist the Project Unit for a period of three years: one each in the fields of project administration, ANNEX h Page 4 groundwater irrigation, and marketing and credit. In addition, provision would be made for the retention of consultants on short-term assignments, including agricultural machinery, adult literacy, dairy livestock, crop/pasture, and sociology specialists. Terms of reference for the main consultants are given in Schedule B.

Cost and Cost Sharing

12. The cost of technical services (all of which would be cash cost), including salaries, vehicles, office equipment, training, demonstrations, and consultants for the Project Unit, plus the consultant sanitary engineer for MPSSP, would be $b 47.0 million (US$2.h million) over the five-year project period (Table 2). Recurrent costs (all cash costs) starting at $b 5.9 million (US$0.3 million) in the sixth year and decreasing gradually thereafter, would be borne fully by the Government. No recovery of technical services costs would be sought from project beneficiaries.

October 20, 1975 BOLIVIA

INGAVI RURAL DEVELOPMENT PROJECT

Technical Service

Project Unit Organization

Board of Directors Ministry of Peasant Affairs and Agriculture Ministry of Planning and Coordination Ministry of Finance Ministry of Transportation CORDEPAZ BAB SNDC Project Director Project Farmers

Project Director

Administration

Services Department] Engineering Department

Production Group Services Development Irrigation Machinery

World Bank - 15269 ANNEX 4 Table 2

BOLIVIA

INGAVI RURAL DEVELOPMENT PROJECT

Technical Services

Investment Cost (amounts in $b '000)

------Year ------Unit 1 2 3 4 5 Total Total Item Unit Cost No. Amount No. Amount No. Amount No. Amount No. Amount Units Cost Staff

Project director man-year 240 1 240 1 240 1 240 1 240 1 240 5 1,200 Deputy project director 192 1 192 1 192 1 192 1 192 1 192 5 960 Department chiefs 168 2 336 2 336 2 336 2 336 2 336 10 1,680 Veterinarian " 144 1 144 1 144 1 144 1 144 1 144 5 720 Extensionists " 120 6 720 8 960 10 1,200 10 1,200 10 1,200 44 5,280 Group officers " 96 2 192 3 288 4 384 4 384 4 384 17 1,632 Irrigation engineers 144 2 288 2 288 2 288 2 288 2 288 10 1,440 Irrigation technicians " 96 3 288 3 288 3 288 3 288 3 288 15 1,440 Machinery technicians 72 2 144 2 144 2 144 2 144 2 144 10 720 Training officer 120 1 120 1 120 1 120 1 120 1 120 5 600 Clerical staff " 43 5 215 5 215 5 215 5 215 5 215 25 1,075 Miscellaneous " 29 5 145 5 145 5 145 5 145 5 145 25 725 Subtotal 31 3,024 34 3,360 37 3,696 37 3,696 37 3,696 176 17,472 Administration Costs.

Personnel travel " 25 8 200 11 275 14 350 14 350 14 350 61 1,525 Vehicle operating costs vehicle-year 25 14 350 16 400 18 450 18 450 18 450 84 2,100 Office costs year 120 - 120 - 120 - 120 - 120 - 120 - 600 Demonstration program " 80 - 80 - 80 - 80 - 80 - 80 - 400

Subtotal 750 875 1,000 1,000 1,000 4,625

Training Program 240 - 240 - 240 - 240 - - - - - 720 Facilities

Office rental 40 1 40 1 40 1 40 1 40 1 40 5 200 Garage and storage 30 1 30 1 30 Housing 1 30 1 30 1 30 5 150 " 100 6 600 6 600 6 600 6 600 6 600 30 3,000 Subtotal 670 670 670 670 670 3,350 Equipment

Four wheel drive vehicles unit 200 10 2,000 ------10 2,000 Trucks " 300 1 300 - - 1 300 - - - - 2 600 Motorcycles 10 10 100 10 100 5 50 - - - - 25 250 Tractor and implements 662 1 662 ------1 662 Irrigation spare parts L/S 200 - 200 ------200 Communication equipment " 200 - 150 - 50 ------200 Office equipment 140 - 140 ------140 Subtotal 3,552 150 350 - - 4,052 Subtotal 8,236 5,295 5,956 5,366 5,366 30,219 Consultant Services Resident Project administrator man-year 900 1 900 1 900 1 900 - - - - 3 2,700 Irrigation engineer " 840 1 840 1 840 1 840 - - - - 3 2,520 Marketing and credit specialist 840 1 840 1 840 1 840 - - - - 3 2,520 Sanitary engineer " 840 1 840 1 840 1 840 1 840 - - 4 3360 Subtotal 4 3,420 4 3,420 4 3,420 1 840 - - 13 11,100 Short-Term

Agricultural machinery specialist man-month 120 2 240 1 120 ------3 360 Adult literacy specialist 120 2 240 1 120 ------3 360 Dairy livestock specialist " 120 1 120 1 120 ------2 240 Crop/pasture specialist 120 1 120 1 120 ------2 240 Sociologist 120 1 120 1 120 ------2 240 Subtotal 7 840 5 600 ------12 1,440

Subtotal 4,260 4,020 3,420 840 - 12,540 Subtotal 12,496 9,315 9,376 6,206 5,366 42,759

Physical Contingency (10%) 1,204 985 924 594 534 4,241 Total 13,700 10,300 10,300 6,800 5,900 47,000

October 14, 1975 ANNEX 5 Page 1

BOLIVIA

INGAVI RURAL DEVELOPMENT PROJECT

Road System

Background

1. The project area is linked to La Paz by the asphalt road between Viacha and La Paz, the asphalt road along the northern boundary between Laja and La Paz, and the asphalt road along the eastern boundary which runs south from La Paz toward Oruro (Map IBRD 11737). The remaining network within the project area is composed of gravel roads, dirt roads and dirt tracks in varying condition. Since the dirt roads and tracks are impassable during the rainy season and some of the roads need repair to permit passage in any season, a road program would be implemented under the project. 2. Adequate transportation in the project area on a year-round basis would be essential for the development of the region. In general, a suitable road network would be needed for the movement of inputs to fams, produce to markets, and Project Unit personnel throughout the area. Of particular importance during the rainy season, however, is the transportation of fresh milk to the dairy plant, timely supply of vegetables to markets, and access to the health centers (for visits of the mobile health unit and referral of patients to the hospital). Therefore, all-weather roads would be required.

Scope and Main Features

3. The proposed road program would bring all major concentrations of population within about 3 km of a road, or about the distance that a loaded donkey could walk in an hour.

4. All roads would be all-weather roads with a 15-cm gravel surface. The major differences among the roads would be the width, height above ground level, and drainage works. The three classifications of road to be included in the project area given below according to width:

(a) 6-m road would have a height of 0.65 m above ground level and have three culverts per km.

(b) 5-m road would have a height of 0.30 m above ground level and have one culvert per km.

5. Existing dirt tracks would be upgraded to roads, existing roads would be improved, and all would be maintained during the project implementation period (five years). Drainage structures would be installed as required. The main features would be: ANNEX 5 Page 2

(a) Improvement of about 10 km of 6-m road. The degree of improvement necessary is about 20%, equivalent to 2 km of road to be constructed.

(b) Improvement of about 20 km of 5-m road. The degree of improvement necessary is about 85%, equivalent to 52 km of road to be constructed.

(c) Improvement of about 55 km of 4-m road or track. The degree of improvement necessary is about 95%, equivalent to 52 km of road to be constructed.

Cost

6. The investment cost per km of 5-a road would be about $b 224,000 (US$11,200), of which $b 170,000 (Us$8,500) would be cash cost, and the current (maintenance) cost per km per year would be $b 12,000 (US$660), of which $b 8,400 (US$420) would be cash cost. Total investment cost for the component would be $b 19.5 million (US$975,000): $b 18.9 million (US$9145,000) for road improvement and $b 580,000 (US$29,000) for maintenance during the project period. The corresponding cash costs would be a total of $b 15.5 million (US$777,000), with $b 15.1 million (Us$755,000) for improvement and $b 410,000 (US$20,500) for maintenance during construction. Total current (maintenance) cost would rise from $b 600,000 (US$30,000) in year 6 to $b 900,000 (US$45,000) average for years 7 to 15. The corresponding cash costs would be $b 420,000 (US$21,000) and $b 630,000 (US$31,500). Cost estimates are based on unit quantities and costs calculated by the National Roads Service (SNC). Table 1 shows the individual roads to be improved, the degree of improvement required, and the cash cost per road, while Table 2 gives the investment and current cash cost for the component. Cost Sharing and Recovery

7. Project beneficiaries would contribute about 20% to the cost of read improvement and about 30% to the cost of read maintenance in the form of unskilled labor. The remaining costs would be borne by the Government and would not be recovered. Current (maintenance) cost for the sixth and subsequent years would be borne by the Government except for the road werk tax of three days of work per year per family.

Implementation 8. SNC would implement the road component under the supervision of the Project Unit. The Project Unit would advise SIC on the priorities for road improvement and would review the detailed work program prepared by SUC.

9. SNC would also conduct necessary field investigations, prepare engineering plans and designs, and provide the necessary equipment, supplies and skilled labor to carry out the work program. Unskilled labor would be provided by project beneficiaries. The road construction work would be done by force account of SNC, since contracted work is costly for secondary and feeder roads. ANNEX 5 Page 3

10. Implementation would be carried out over three years, with engineering design and some construction work (primarily on 4-m roads) in year one and the major construction effort in years two and three (Table 2).

11. Annual maintenance of the prject roads would include regrading by motor graders after the wet season, some spot gravelling, and drainage clearing. SNC would carry out this work by force account, with the participation of project beneficiaries.

October 28, 1975 ANNEX 5 Table 1

BOLIVIA

INGAVI RIURAL DEVELOPMENT PROJECT

Road System

Project Roads

Degree Improvement Equivalent Unit Total Length Required Distance Cash Cost Cash Cost (km) . (( (T'000/) (~$bT00

6 -m Roads

Viacha-Capiri 10 20 2 330 660

5-m Roads

Vischa-Remedios 20 85 17 179 3,046 Additional drainage morks 1,184 Subtotal 20 85 17 4,230 k-m Roads

Pan de Azucar Access 2 100 2 146 291 Irpa Chico Access k 100 4 146 582 Additional drainage works 77 Achica Abajo Access 8 100 8 146 1,165 Additional drainage works 384 Collahua-Coniri 1 0 1 00 1 0 146 1,456 Collahua Fam Access 5 100 5 146 728 ChuJnupa-Road 1350 3 100 3 146 437 Chacoma Grande-Road 1350 3 100 3 146 437 Additional drainage works 230 Tacagua-Road 107 3 100 3 146 437 Achioa-Road 1 2 100 2 146 291 Hasu Cruz-Road 1 2 100 2 146 291 Capiri-Trinidad 5 100 5 146 728 Trinidad-Viacha 8 70 5 146 728

Subtotal 55 95 52 8,262

Total 85 84 71 13,152

October 21 , 1975 ANNEX 5 Table T

BOLIVIA

INGAVI RURAL DEVELOPMENT PROJECT

Road System Investment and Current Cash Costs ($ o0p)

Investment Cost

Component ------Year ------1 2 3 4 5 Total

6-m Road (2 )t/ 64 595 - - - 659 5-m Road (17 ) 632 1,9Oj 1,69 - - 4,230 4-m Road (52 io/) 1,240 3,720 3,303 - - 8,263 Maintenance - 64 102 190 369

Subtotal 1,936 6,232 5,061 102 190 13,521

Physical Contingency (15% on construction and 1C% on maintenance) 294 938 759 8 20 2,019

Total 2,230 7,170 5,820 110 210 15,540

Current Cost Component ------Year ------1 2 3 4 5 6 7-15

Maintenance - - - - - 382 573 Physical Contingency (10%) - - - - - 38. 57

Total - - - - - 420 630

1/ Equivalent km. A greater length of road would actually be improved.

October 21, 1975 ANNEX 7 Page 1

BOLIVIA

INGAVI RURAL DEVELOPMENT PROJECT

Water and Waste System

Background

1. Considering the high rate of enteric diseases in the project area, the provision of sanitary water facilities would make a substantial contribution to the improvement of health conditions among the target population. While not as important in this regard as the water facilities, because of the scattered population and the cold (about 9 OC average temperature) and relatively dry (about 500 mm annual rainfall) climate of the altiplano, the waste disposal facilities (pit privies) would also provide educational benefits in terms of hygienic and sanitation training beyond the immediate scope of the program. The project area is only about 20 km away from the La Paz metropolitan area so that the health situation there is critical to a much larger population than that directly affected by the project.

2. About 10,000 families are scattered throughout the project area, which extends over about 800 km2 . A survey is currently being carried out to determine the water supply situation in the area, and preliminary data indicate that the majority of the families are served by shallow unprotected wells, which generally are unsanitary. In a few cases, people obtain water from a common well, generally located at the nearest school. These wells tend to be better than the others but they would also need improvement.

3. The potable water supply would be obtained from the groundwater table which is generally high in the area. The deep aquifer from which the irrigation water would be pumped is separated by an impermeable soil formation from the aquifer from which the potable water is taken so that the potable supply would not be affected by irrigation withdrawals.

Scope h. Since the fall benefits of the total health package of the project would be realized only if most of the families in the are a were served by sanitary water supplies, efforts would be made to involve as many of the people as possible in this component. Nevertheless, participation of the population would be limited by varying interest, willingness to make the required contribution (para 9), and the maximum unit cost (para 7), and it is expected that about 8,000 families (4,000 wells) would be involved. Participation in the pit privy element would be more restricted, partly because the demand for such facilities is smaller (the ANNEX 7 Page 2

advantages of sanitary water supplies are readily understood by farmers, but acceptance of pit privies requires a more intensive educational process) and partly because the benefits of these facilities would be less than those for water. Therefore, the pit privy program would be aimed at about 3,000 families (3,000 pit privies). These figures compare with about 4,000 families to be reached through the agricultural component of the project.

5. The dispersed nature of the population (the houses are from 200 to 500 m apart) makes the construction and operation of a central water supply system prohibitively expensive. Therefore, the only solution is the improvement of existing wells and construction of additional wells where none exists, to provide each residence, or wherever possible, cluster of houses, with its own well.

Facilities

6. In the part of the project area where the goundwater table is close to the surface, wells would be dug manually (by beneficiaries) and would be cased with a PVC pipe or concrete rings (depending on the final cost analysis) and provided with a concrete slab and cover, and a hand pump. Where the groundwater table is lower (below about 5 m), manual excavation would not be feasible and wells would be drilled. The drilled wells would be equipped with standard casing, screen, handpump, and concrete slab for drainage. Although the total cost of a dug well would be more than that of a drilled well (para 7), the dug well represents a preferable approach in those areas where it is feasible because its financial cost is less as a result of the substantial beneficiary contribution. Hand pumps would be used instead of the less expensive buckets (about $b 1,000, or US$50) because the latter are more subject to contamination and they are less satisfactory mechanically. The pit privies would consist of a hole excavated manually, a concrete slab, and a small adobe building. Cost

7. The total cost of a hand dug well would be $b 7,500 (US$375), of which $b 4,730 (US$237) would be cash cost, and that for a drilled well would be $b 5,500 (US$275), all of which would be cash cost. Unit investment cost for a pit privy would be $b 550 (US$28), of which only $b 165 (US$8.25) would be cash cost. The per capita cash costs would be about $b 395 (US$20) for a dug well, $b 460 (US$23) for a drilled well, and $b 14 (US$0.70) for a pit privy, all acceptable levels. In order to ensure that wells would not be constructed in areas with conditions leading to exorbitant costs, a limit of $b 600 (US$30) would be placed on per capita cash cost (corresponding to a limit of $b 7,200 or US$360 per well). Unit investment cash costs for wells and pit privies are given in Table 1.

8. The total investment cost for the water and waste component would amount to $b 29.8 million (US$1.5 million), of which $b 20.4 million (US$1.0 million) would be cash cost. The total would be composed of $b 20.4 million (US$1.0 million) for dug wells, $b 5.0 million (US$250,000) for drilled wells, $b 1.5 million ANNEX 7 Page 3

(US$75,000) for pit privies, and $b 0.2 million (US$10,000) for training (para 12). The corresponding cash costs would be $b 12.9 million (US$645,000) for dug wells, $b 5.0 million (US$250,000) for drilled wells, $b 450,000 (US$22,500) for pit privies, and $b 200,OOO (US$10 000) for training. Current (maintenance and inspection) costs (total and cash) would rise from about $b 5,000 (US$250) in the first year to $b 300,OOO (US$15,000) in the sixth and subsequent years. The investment and current cash costs for the component are given in Table 2.

Cost Sharing and Recovery

9. In the case of dug wells, beneficiaries would contribute 37% to total cost in the form of labor for excavation. For drilled wells, beneficiaries would be required to provide a cash contribution of 5%, since there would be little opportunity for unskilled labor to be employed in construction. Bene- ficiaries would contribute 70% to the cost of pit privies in labor for excavation and labor and material (adobe) for construction. The remaining costs would be borne by Government and would not be recovered. Current cost would be borne partly by beneficiaries, who would pay for maintenance of the wells and maintain the pit privies themselves, and p artly by the Government, which would carry out the maintenance of the wells, undertake an inspection program to ensure their proper usage, and supervise the maintenance of the pit privies.

Implementation

10. The water and waste component would be implemented by the Ministry of Social Security and Public Health (MPSSP). A survey is being conducted at present to determine:

(a) the location of each house, (b) the size of each family, (c) the present source and adequacy of water supply for each family, and (d) the existence of pit privies.

The survey will provide the basis for specifying more precisely the requirements of the population and identifying possible locations for facilities. It will also give an indication of interest among potential beneficiaries. A work plan then will be prepared which will focus initially on those areas in which population density is relatively high (for efficiency of work crews), construction costs are relatively low (where the groundwater table is near the surface), and interest of the community and families is high.

11. Dug wells and pit privies would be installed by MPSSP with the assistance of the beneficiaries. The other wells would be drilled, cased, and have the pumps installed through contracts awarded by public bidding or through force ANNEX 7 Page 4 account by MPSSP. Sanitary inspectors would inspect the wells and privies on a routine basis to ensure appropriate operation and maintenance of the facilities. MPSSP would maintain the wells and supervise the maintenance of the privies.

Institutional Arrangements

12. MPSSP currently has a limited well and pit privy program for the altiplano, but it would have to expand its capacity to meet the requirements of the project. Additional skilled laborers, engineers, supervisors, and sanitary inspectors would have to be recruited, and the training course for sanitary inspectors would have to be expanded. In order to carry out a program of this magnitude, MPSSP would need the assistance of a sanitary engineer for a four- year period, particularly for planning and execution of the training and construction programs. Te cost of this specialist ($b 840,000 or US$2,000/year) is included in total project cost under technical services.

October 21, 1975 ANNEX 7 Table 1

BOLIVIA

INGAVI RURAL DEVEIOPMENT PROJECT

Water and Waste System

Well and Pit Privy Unit Investment Cash Costs ($b)

Well

Component Cost by Type Well Hand Dug Drilled

Excavation/drilling - 800 Casing and concrete 1,100 1,000 Hand pump 2,200 2,200 Engineering and supervision] 1000 1,000 Sub-Total 4,300 5,000

Physical Contingency (10%) 430 00

Thtal LM 1-

Pit Privy

Compnent Cost

Excavation Base 55 Slab 45 Mound House Engineering and supervision-

Sub-Total 150

Physical Contingency (10%)

Ttal16

1/ Includes instruction, supervision, and disinfection by MPSSP.

October 21, 1975 ANNEX 7 Table 2

BOLIVIA

INGAVI RURAL DEVELOPMENT PROJECT

Water and Waste System

Investment and Current Cash Costs ($b '000)

Investment Cost Year Total Component 1 2 3 __i

Wells Hand dug (3,000) 857 1,714 3,427 3,427 3,427 12,852 Drilled (1,000) 370 880 1, 250 1,250 1,250 5,000

Pit privies (3,000) 30 60 120 120 120 450

Training 200 -- 200 Sub-total 1,457 2,654 4,797 4,797 4,797 18,502

Physical Contingency (10%) 143 266 483 483 483 1.858

Total 1_600 2,g20 5.280 5,80 5,280 2,J60

Current Cost Tear Component Z ..: 6-20

Maintenance and inspection 5 27 55 109 191 273

Physical Contingency (10%) 3 5 Total 30 60 120 210 300 ANNEX 8

BOLIVIA

INGAVI RURAL DEVELOPMENT PROJECT 1./ Investment Cost Phasing ($b'000)

Component 1 2 3 _ Total ------Project Year------

On-Farm Investments 4,820 28,100 31,960 7,085 2,935 74,900

Incremental Working Capital - 11,520 12,530 2,775 2,775 29,600

Technical Services 13,700 10,300 10,300 6,800 5,900 47,000

Roads 2,220 7,150 5,810 110 210 15,500

Health Facilities 530 750 520 - - 1,800

Water and Waste Facilities 1,600 2,930 5,290 5,290 5,290 20,00

Power Line 5 800 - - - -M, Total , 50 66,410 22,060 17,110 195~000

1/ Base cost plus physical contingency.

October 28, 1975 ANNEX 9

BOLIVIA

INGAVI RURAL DEVELOPMENT PROJECT

Estimated Schedule of Disbursements (US$'OOO)

IBRD Fiscal Year Cumulative Disbursement Balance and Quarter at End of Quarter of Loan 1976/77 September 30, 1976 100 8,900 December 31, 1976 200 8,800 March 31, 1977 300 8,700 June 30, 1977 400 8,600 1977/78 September 30, 1977 600 8,400 December 31, 1977 900 8,100 March 31, 1978 1,400 7,600 June 30, 1978 2,000 7,000

1978/79 September 30, 1978 2,700 6,300 December 31, 1978 3,400 5,600 March 31, 1979 4.,200 4,800 June 30, 1979 4,900 4,100

1979/80 September 30, 1979 5,600 3,M0 December 31, 1979 6,200 2,800 March 31, .1980 6,700 2,300 June 30, 1980 7,100 1,900

1980/81 September 30, 1980 7,.5oo 1,500 December 31, 1980 7,900 1,100 March 31, 1981 8,200 800 June 30, 1981 8,500 500

1981/82 September 30, 1981 8,800 200 December 31, 1981 9,000 0

1/ Assumes loan effective by June 30, 1976.

October 28, 1975 ANNEX 1 0 Page 1

BOLIVIA

INGAVI RURAL DEVELDPMENT PROJECT

Economic and Social Analyses

1 . The economic rate of return was calculated on the basis of data shown in Table 1. Financial costs/prices of inputs/outputs were transformed accord- conversion factors ing to the methods shown below. Key assumptions and derived were:

(a) Economic price of labor. Monthly incremental labor requirements for all activities were calculated and compared with supply available and the market wage rate. A weighted average of the marginal opportunity cost gave an economic wage rate of $b 23/ day compared with a market wage rate of $b 30/day.

(b) Incremental labor supply and demand. The k,000 farm families were assumed To supply three full-time labor units giving 3.6 million man-days/year. Total demand would peak at 1 .5 million man-days/year. The availability assumption would not be critical.

(c) Economic pricing of goods. Importable or exportable goods were valued at their c.i.f./f.o.b. prices and adjusted for transport costs to or from Viacha to the border. Non-traded goods were multiplied by a standard conversion factor of 0.94.

(d) Standard conversion factor (SCF). This is the nine-year average o? the ratio of-the shadow exchange rate to the official exchange rate and was derived from the formula: SCF - M + X M + tM + AX - t-

were M = 9-year average of imports X 9-year average of exports tm = 9-year average of taxes on imports t= 9-year average of taxes on exports

Because of data availability problems, conversion factors for construction and transport were not derived.

(e) Cost recovery. Cost recovery was 100% with all off-farm items such as technical services; roads; and health, water and waste facilities being charged against the project. The electricity charge of $b 1 .06/KWH represents the base rate plus recovery of the incremental capital cost over 30 years at 8%. ANNEX 10 Page 2

2. Social Rate of Return. Pricing for all items except labor is the same as for the economic analysis. Labor was repriced according to the formula

CF, = m/3+/c/6- Ac6 d which simply says that the social cost of the incremental labor is equal to the value of production foregone elsewhere plus the value of the increased consumption of the workers, adjusted to border prices, minus a factor represent- ing the value to society of an increase in consumption by the target group. If they are very poor, this last factor will reduce the cost to society more than if they are less poor relative to the rest of the community.

m = marginal opportunity cost of labor = $b 6,600/year /9 = SCF = .94 A c = change in consumption (increment) per capita = $b 1,532 d = weighted average of income distribution parameter = 2.5 v = social value of public income = 2.3 CF = conversion factor for labor = 0.6 the social Using these assumptions the social rate of return was 19% reflecting desirability of the project when compared with a 15% return on the grounds of efficient resource allocation alone, neglecting income distribution.

October 28, 1975 BOLIVIA

INGAVI RURAL DEVELOPNENT PROJECT

Economic and Social Analyses

Economic Rate of Return (Amounts in $b '000)

------Project Years ------

CATEGORY 1 2 3 _4 5 6 7 8 9 10 11-20

INVESTMENTS

ON FAH4 MODEL 1, Irrigation Systems 4,920 14,471 10,761 5,574 - - 10 Group Farms - 10,640 1,630 840 - - 10 GrOup Farms - 10,640 1,630 840 - MODEL 2, 10 Group Farms - 5,380 1,840 1,460 - - 10 Group Farms - - 5,380 1,840 1,460 - MODEL 3, 10 Groups of 50 Family Farms - 1,140 570 170 - - 10 Groups of 50 Family Farms - - 1,140 570 170 - MODEL 4, 5 Groups of 50 Family Farms - 370 - - - - 5 Groups of 50 Family Farms - - 370 - - - 5 Groups of 50 Family Farms - - - 370 - - 5 Groups of 50 Family Farms - - - -370 - TOTAL AGRICULTURE 4,920 32,001 32,781 12,454 2,840 - Technical Services 12,878 9,682 9,682 6,392 5,546 - Roads 2,694 10,552 3,164 78 150 - Health 592 1,212 1,316 1,034 1,034 - Water & Waste 1,605 2,950 5,440 5,400 5,490 - TOTAL INVES2MENT: 22,689 56,577 52,383 25,358 15,060 -

INCREMENTAL OPERATING COSTS

Agriculture - 9,639 19,658 20,171 23,054 24,904 24,604 31,224 31,224 22,524 22,524 Technical Services - - - - - 5,900 4,200 4,200 2,500 1,000 - Roads - - - - - 550 800 800 800 800 800 Health - - - - - 1,034 1,034 1,0314 1,034 1,034 1,034 Water & Waste - - - - - 300 300 300 300 300 300 TOTAL OPERATING COSTS - 9,639 19,658 20,171 23,054 32687 30,938 37,558 25,658 24,5

TOTAL INCREMENTAL OUTFLOW 22,869 66,216 72,041 45,529 38,114 32,688 30,938 37,558 35,858 25,658 24,658

INCREKENTAL ECONCMIC INFLOW SALES MODEL 1, 10 Group Farms - 4,380 5,800 7,400 7,910 7,770 8,230 9,090 9,810 9,810 9,810 10 Group Farms - - 4,380 5,800 7,400 7,910 7,770 8,230 9,090 9,810 9,810 500 Family Farms - 3,642 2,480 3,327 3,438 3,523 3,523 3,523 3,523 3,523 3,523 500 Family Farms - - 3,642 2,480 3,327 3,438 3,523 3,523 3,523 3,523 3,523 MODEL 2, 10 Group Farms - 2,520 3,060 3,700 3,780 3,770 3,930 4,720 4,610 4,610 4,610 10 Group Farms - - 2,520 3,060 3,700 3,780 3,770 3,930 4,720 4,610 4,610 500 Family Farms - 3,642 2,480 3,327 3,438 3,523 3,523 3,523 3,523 3,523 3,523 500 Family Farms - - 3,642 2,480 3,327 3,438 3,523 3,523 3,523 3,523 3,523 MODEL 3,500 Family Farms - 3,642 2,380 3,327 3,438 3,523 3,523 3,523 3,523 3,523 3,523 500 Family Farms - - 3,642 2,480 3,327 3,438 3,523 3,523 3,523 3,523 3,523 MODEL 4,250 Family Farms - 1,240 1,240 1,663 1,719 1,761 1,761 1,761 1,761 1,761 1,761 250 Family Farms - - 1,240 1,240 1,663 1,719 1,761 1,761 1,761 1,761 1,761 250 Family Farms - - - 1,240 1,240 1,663 1,719 1,761 1,761 1,761 1,761 250 Family Farms - - - - 1,240 1,240 , 1,719 1,761 1,761 1,761 TOTAL INCREMENTAL INFLOW: - 19,066 36,344 43,168 50,022 51,085 52,536 55,144 57,556 58,356 58,356

NET INCRENENTAL BENEFIT: (22,869) (47,150) (35,697) (2,361) 11,908 18,397 21,598 17,586 21,698 32,698 33,698

RATE OF RETURN: 15%

October 20, 1975 ANNEX 11

BOLIVIA

INGAVI IJRAL DEVELOPMENT PROJECT

Monito ring

1. The project target group of 60,000 people out of a population of some two million rural poor in similar conditions in the altiplano makes the here scope for replicating the development procedures and techniques applied the very great. This is the first integrated rural development effort in region and much basic information required for accurate planning is either lacking or of limited reliability. The resulting uncertainty requires assup- tions about key variables to be made by informed judgment often based on sketchy data. Collection of information to fill data gaps would be a valuable but unmeasured output of the project and would influence design and implementation of further projects in the altiplano.

2. Data collection would be directed towards enabling an evaluation of how well the chosen strategy was achieving basic project objectives: (1) to improve the welfare of the rural poor and (2) to provide a model for further development efforts. Cross-section and time-series data would measure welfare changes by looking at higher per capita incomes, improved health, more egal- itarian income distribution, etc. Information would be collated according to the means used to effect these changes: (1) improvement of crop cultivation and livestock husbandry, (2) formulation of buying/selling tactics for inputs/ outputs and (3) provision of social infrastructure.

3. Specific details would focus on farmer acceptance and the technical performance of the development instruments of (1 ) provision of long-term credit for on-farm investments in well irrigation, limited mechanization, dairy livestock facilities, improved cattle, forage crops, storage facilities, etc., (2) provision of short-term credit for improved potato seed, insecticide, fertilizer, etc., (3) technical advice and assistance to participants and (h) provision of roads and health, water, and waste facilities.

Examples of information collected would be:

1. Sociological: number of users of health services, changes in nutrition, family incomes, participants' comments, problems and suggestions about the project.

2. Financial: prices paid and received at the farm and group level, costs and returns, on-farm consumption, credit data.

3. Technical: base yields, yield response to improved techniques, yield and output variance and causes (rainfall, frost incidence, etc.)

Much data is already available--e.g. rainfall is measured at Viacha--and much is available from data collected for other Purposes. This would reduce the burden on the Project Unit while providing a central source of reliable and relevant data.

October 28, 1975. IBRD 11737 68 25' To Huarino 68"20' 68.115' 68. 10' 68 05' OCTOBER 1975

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