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Return ) Reports De Sk RETURN ) REPORTS DE SK - RESTRICTED WITHIN Rport N- PA-l1Ob ONE WEEK Public Disclosure Authorized TM$report is for officialuse only by theBank Group au specl)Iy authoried atnIzatons Of penoC. It maynot be published,quoted or dted without DankGroup athoration. Th BankGroup does not accopt responibilty for theaccrcy orcodmpletau of the report. INTERNATIONALBANK FOR RECONSTRUCTIONAND DILOPMENT INTERNATIONAL DEVELOPMENT ASSOCIATION Public Disclosure Authorized APPRAISAL OF FOURTH LIVESTOCK DEVELOPMENT PROJECT URUGUAY Public Disclosure Authorized February 17, 1972 Public Disclosure Authorized Agriculture Projects Department CURENY EQUIVALENTS UB)$ - Uruguay Paso 250 'Urugua Peso 1 a US$0.004 Uruguay Peso 1,000,000, US$4,000 WVQGTS AD MEASURES (Metric system) 1 kilogram (kg) - 2.20 pounds 1,000 kg - 1 metric ton - 0.98 long ton 1 meter (a) - 1.09 yards 1 kilometer (ka) - 0.62 uiles I hoctare (ha) - 10,000 m2 - 2.47 acres 1 square kilometer (km2) - 100 ha - 0.39 square mile I liter (1) - 0.26 gallon ABBREMVMOS BOSt - Bank of the Republic CD - Central Bank FUND - Livestock Fund in Central Bank FRIGONAL - Government-owned Meat Packing Plant FMD - Foot and Mouth Disease IDB - Iuter-American Developuent Bank INC - Institute of National Colonization PLAN - Comision Honoraria del Plan Agropecuario, an agency of the Ministry of Agriculture and Livestock (Comision) Fiscal Year January 1 - Decenber 31 URUGUAY APPRAISAL OF FOURTh LIVESTOCK DEVELOPMENTPROJECT TABLE OF CONTENTS Page No. SUMMARY AND CONCLUSIONS . ................................ i-ii I. INTRODUCTION ... 1 II. BACKGROUND . ............... 2 A. Agriculture and Livestock in the Economy . , 2 Livestock ProductionPatterns ................ 2 B. Agricultural Services . 3 Research. 3 Agricultural Credit. ...................., 4 C. Livestock Development Policies and Programs. 4 III. IMPACT OF BANK LENDING.............................. 6 A. New Technology.................... ,.,h6 B. Experimentation .. 6 C. On-Ranch Production Impact......... , 7 D. Loan Repayments .. 7 E. Other Benefits .. 7 IV. THE FOURTHLIVESTOCK DEVELOPMENT PROJECT. 9 A. Definition ............. ., 9 B. Detailed Features . 9 C. Cost Estimates............... 11 D. Financing.............. .. 113 E. Procurement .. 15 F. Disbursement .. 1 G. Auditing .............. 16 H. Organization and Management . .16 I. Lending Operations . .17 V. PRICES, PRODUCTION, MARKETS, FARMERBENEFITS AND REVENUE GENERATION. 18 A. Prices.1 6 B. Production and Markets.18 C. Processing .................. 19 D. Farmer Benefits and Revenue Generation.19 VI. ECONOMIC BENEFITS AND JUSTIFICATION.19 VII. AGREEMENTS REACHED AND RECOMMENDATION.20 This report is based on the findings of a Bank appraisal mission to Uruguay in May-June 1971, composed of Messrs. A. Schumacher and E. P. Schertz (3ank), and E. A. Clarke and J. Romero (Consultants). ANNEXES 1. Development of the Livestock industry - Policies and Programs. I. Introduction II. Background and Current Situation Production Patteras, Land Use and Farm Size Production, Consumption and Exports III. Policies and Programs IV. Processing and Marketing of Livestock Products Structure and Status of the Processing Industry Modernizing and Processing Industry Meat Inspection and Hygiene Control Marketing Table I - Size of Ranches Table 2 Slaughtering, Consumption and Exports of Beef Table 3 - Export of Sheep and Sub-Products Table 4 - Breakdown of Beef Export Prices Table 5 - Breakdown of Export Price of Greasy Wool (1968- 1969) Tab'le 6 - Foreign Aid for Agriculture 2. Technical Services A. Consultantand Technical Services B. Plan Agropecuario C. Duties Responisibilities and Authorities of the Technical Director and the Senior Agricultural Economist. D. Research Projects and aeed Certification Tabie 1 - Technical Services and Training (Foreign Exchange). Figure - Plan AgropecuarioOrganization Chart 3. Agricultural Credit, Services and Facilities A. Background B. Central Bank and Mornetary Policy C. Official Banks D. Comme.cial Banks E. Indexing Appendix 1: Declaration Form and Contractual Clauses Appendix 2: Lending Policies and Procedures A. ParticipatingBanks B. Central Bank Table 1 - The Bank of the Republic (BOR). Assets, Loan Portfolio, Profits and Salaries (1966-1970) Table 2 - Financial Position of Bank of Republic as of December 31, 1969 and 1970 Table 3 - Bank of Republic - Financial Position and Operating Results Table 4 - Volume of Credit Granted and Operated by Private Banks Table 5 - Discount Lines Opened by the Central Bank to the Banking System Table 6 - Outstanding Discounts with the Central Bank (Official Banks) Table 7 - Banco Hipotecario (MortgageBank) Outstanding Loans at End of Year Table 8 - Condensed Balance Sheets of 12 Selected Commercial Banks Figure 1 - Partial Organization of the Central Bank of Uruguay Figure 2 - Bank of the Republic-Organization 4. Impact of Bank Lending Program (1959-1971) A. Pasture Improvementsand Ranch ManagementPractices B. Beef Production and Processing for Export C. Income Distribution and Social Effects Table 1 - Project Ranch Size Distribution 5. Beef Cattle and Sheep Production Table 1-8 - 500 ha Beef Cattle and Sheep Ranch Table 1 - On-Ranch Investment Cost Projections Table 2 - Cattle Herd Projections Table 3 - Sheep Flock Development Projections Table 4 - Wool Sales Projections Table 5 - Sales Projections Table 6 - Operating Cost Projections Table 7 - Cash Flow Projectiors Table 8 - Financial Rate of Rcturn Table 9 - 16 1,000 ha Beef Cattle and Sheep Ranch Table 17 - 24 4,000 ha Beef Cattle and Sheep Ranch 6. Beef Production on Dairy Farms Table 1 - Development of a 100 ha LaiEy Beef Farm On-Farm Investment - Cost Projections Table 2 - Herd Projection - Dairy Farm Table 3 - Projection of Sales and Operating Expenses Table 4 - Cash Flow Projections Table 5 - Financial Rate of Return Calculations - 4 - 7. The Pig-Sub-Sector and the Hog Project Sub-Component Table 1 - Development of a 25 Sow Uinit On-Ranch Investment Cost Projections Table 2 - Herd Projection Table 3 - Projectior. of Sales and Operating Expenses Table 4 - Cash Flow ProJections Table 5 - Financial Rate of Return Calculations 8. Consolidated Project Investments 9. Projected Sources aad Applications of Funds - Participating Banks, Central Bank and Government 10. Disbursement Estimates 11. Economic Rate of Return Calculations Table 1 - Economic Rate of Return 12. Beef Commuodity Review Table I - Trends in beef and veal production, net trade, and per capita consumption, selected regions and countries average 1961-65 anc annual, 1963-1970 Table 2 - Exports and imports of beef and veal, selected continents and regions. Table 3 - Argentine and Uruguay - Cattle numbers; beef and veal producton, per capita consumption, and exporrs, with comparisoas, annual, 1963 to 1969. Table 4 - Argentina, Uruguay and Brazil: Exports of chilled Liidfrozen beef and veal, by principal destinations and total, annual, 1963-70. Table 5 - European Community, Italy, Germany (F.R.), and Franea; Imports of beef and veal, total and by principal origins, annua', 1963-1970. Table 6 - Zuropean Free Trade Association, United Kingdom, 'Opain and Greece: Imports of beef and veal, total and by principal sources, annual, 1963-70. Table 7 - 1i'xportsand :^mports of bDeef and veal meat, .. acluding live cattle and calves, 1961-63 and 1968-69, and net trade in beaf and veal, 1964-66 wvera;ie, selecteu european countries. Table d - irgentina and Uruguay - average unit export values, beef, total and by method of preservation and cut, annual, 1967-1970. Table 9 - Net imports of beef and veal, including live cattle and calves, Eurepean Community and 11 othe. European countries; actual, 1961-63 and 1968/69, and projected, 1970, 1975, 1980. Maps 1 - General Location of Main Farm Types 2 - i'rigorifico Location 3 - Dairy Plant Location URUGUAY APPRAISAL OF FOURTH LIVESTOCK DEVELOPMENTPROJECT SUMMARYAND CONCLUSIONS I. The proposed loan (two stages) of US$25.6 million would support a Fourth Livestock Development Project financed by the Bank and would continue technical and financial assistance for Uruguay's national program of live- stock development for a two-year period. The first :.oan of US$7.0 million was made in 1959 (245-UR). Subsequent loans were made of US$12.7 million (1965 -- 407-UR), and US$6.3 million (1970 -- 698-UR), the latter being supplemented by US$4.0 million in June 1971 (773-UR). ii. A new technology of pasture improvement was introduced through the first two loans. Despite good technical progresE, 'however, a broad sector impact was not realized because of adverse government policies affecting pricing, credit, processing, and marketing. iii. Since June 1969, the Bank and the Governmert of Uruguay have pursued a dialogue on livestock sector policy improvements and reorganiza- tion of Project on-lending arrangements. During this period, the Govern- ment took a series of difficult policy decisions which, supported by a rise in export prices, brought a record demand for credit in 1971. These decisions led to more efficient operation of packing plants, improved meat inspection and hygiene control, tax and pricing measures to encourage exports and restrain domestic consumption, and a broadening of the banking base for channelling development credit to the livestock sector. {v. The results have been impressive. Meat exports in 1970 reached 145,000 m tons worth a record US$88 million, compared to exports of 69,000 m tons valued at US$27 million in 1961. Meat processors invested some US$8 million in modernizing 15 plants
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