World Bank Document

lBETURuM RETICE CIRCULATING COPY ;-. ESKDRERPOIS BE~ RETURNED REPORTS-0 gX aT 0m Report No. TO-466a Public Disclosure Authorized This report was prepared for use within the Bank and its affiliated organizations. They do not accept responsibility for its accuracy or completeness. The report may not be published nor may it be quoted as representing their views. INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT INTERNATIONAL DEVELOPMENT ASSOCIATION Public Disclosure Authorized SAN LORENZO IRRIGATION AND LAND SETTLEMENT PROJECT (STAGE III) PERU Public Disclosure Authorized March 26, 1965 Public Disclosure Authorized Projects Department C JR SX\YC 7 L g .z, -_.-Z ?,-7,? -O -73 xSol IIJI27,t . ISS .s 3 .- _- P E R U SAN LORENZO IRRIGATION AID LAND SETTLEMENT PROJECT (STAGE III) TABLE OF CONTENTS Page No* SIkMARY .... o ooo i - ii I, INTRODUCTION . ... o . 1 II. BACKGROUND . 1 III. THE SAN LORENZO PROJECT AREA . *.. o. 3 Location and Irrigable aArea b. .. 3 Physical Characteristics.....o 0 . 3 Climate . a o . .9 o. 4 Population. * * O * * a* * * * * * , e* * * * V Land Settlement and Development . a 4h Land Tenure and Use .d. .e ... 5 Irrigation Water Supply .. ........ 6 Drainage. a. a 0 . 6 Services. 0 . 7 Marketing ... .. .. ..... .. 7 IV. THE PROJECT -STAGE III.e o o o o a o a 7 Heavy Equipment clTorksand . e .Q O . 8 Technical Services, Facilities and Equilpment. 0 9 Agricultural Credit . .d .t.. .. .. .. 10 Electric Power. * . a . 11 Basin Program . * . 12 V. COST ESTIMATES AND FINANCING . ....... .e 12 VI. ORGANIZATION AND IMiANAGEMENT . .*. .* . 15 Government Level. .* . 15 Project Level . 15 Lending Operations.i gao . .. .... .... a. 16 Basin Program ... .... .... a ..... 16 VII. OPERATING RESULTS. 17 -2- Page No. VIII. BEITEFITS AMD JUSTIFICATION . .@. * . 00. 17 IX. CONCLUSIONS AND RECOMMENDATIONS . o . 18 ANNEXES Annex 1 - Map Annex 2 - Land Sales and Projected Sales by Economic Group of Irrigable Land Annex 3 - San Lorenzo Agency - Banco de Fomento Agropecuario Table 1 - Terms and Conditions of Loans to Settlers Table 2 - San Lorenzo Agency of the Banco Agropecuario del Peru - Summary Balance Sheet (Provisional) as at August 31, 1964 Annex 4 - Projected Schedules Table 1 - On-Farm Investments Table 2 - Loan Disbursements Annex 5 - San Lorenzo Project Investments - Projected Cashflow 1965 - 1985 Annex 6 - Organization Chart - San Lorenzo Irrigation and Land Settlement Project - Organization and Functions Annex 7 - Agricultural Production and Cropping Pattern Annex 8 - List of Goods and Services to be Financed PER U SAN LORENZO IRRIGATION AND IAND SETTLEMENT PROJECT (STAGE III) S UMMNi A R Y i. The Government of Peru has requested additional financing for the San Lorenzo Irrigation and Land Settlement Project to accelerate land settlement and development. ii. Stage I consisting of the diversion works, canals and tunnels to supplement irrigation water only for the Piura Valley, was completed in 1953 . The cost was met by the Government. A Bank loan of US$18 mil- lionl! was made in 1955 to finance the foreign exchange costs of engineer- ing and construction of additional irrigation works (Stage II). These were completed in 1959 at a total cost equivalent to US$26.6 milliono,/ The local currency costs of appraximately US$8.6 million2/ equivalent were financed by P.L. 480 funds from the United States. From 1959 through August 31, 1964, the equivalent of US$12.9 milliong/ was spent for additional facilities, technical services, investigations, equipment, administration, and on-farm investnents. In this period 14.,270 ha were sold and partially developed. iii. During the period September 1, 1964, through December 1967, now under consideration, the equivalent of US$29.8 million would be required to meet additional costs necessary to further develop the 14,270 ha and to settle and bring into production approximately 17,700 additional ha (Stage III). This would raise the total irrigable hectares settled and developed in the San Lorenzo area to approximately 32,000 by the end of 1967. Approximately US$6.7 million of the US$29.8 million would be met by the settlers on the Project through water payments, their initial share of on-farm development costs, and sub-loan repayments of earlier settlers, and by the farmers of the Piura and Chipillico Valleys through water payments. The undisbursed portion of the current A.I.D. loan would cover an additional US$3.3 million. However, the Government lacks the resources to provide the balance of approximately US$19.8 million in addi- tion to meeting the debt service charges on the existing Bank and A.ID. 1/ About 68 percent of total Stage II costs of approximately US$26.6 million. 2/ Dollar equivalent adjusted to present exchange rate. - ii - loans and providing short-term agricultural credit for the settlers. Hence the need for additional Bank financing (Stage III) for equipment, technical services, drainage works and medium- and long-term agricultural credit. Financing is also provided in the loan for a Basin Pro- gram for Northwestern Peru for costs of engaging a firm of consultants to survey the water and related resources of the Region, to develop plans for the financing and implementation of projects to utilize these resources according to a system of priorities, and to develop recommendations for instituting the most effective regional organization for local administration of the Program. iv. Despite delays and problems, the Project is emerging as a suc- cessful one financially, economically and socially. It is estimated that the total Project will yield an internal rate of return to the economy of 14 percent and the incremental benefits of Stage III would result in an internal rate of return on Stage III investments of 16 percent. The Pro- ject has achieved a balance of services to physical development which is resulting in financiallv secure well-adiusted settlers. v. The proposed loan would be to the Republic of Peru. The loan funds for Stage III would be exclusively for the Project and would be administered by the Project Management under authority delegated to the Director General by the President of Peru and the Minister of Agriculture. The San Lorenzo Agency of the Banco de Fomento Agropecuario de Peru would administer the agricultural credit portion of the loan on behalf of the Management, but with the latter participating in the sub-loan determina- tions. The loan funds for the Basin Program would be administered through the Office of the President of the Republic by a local Northwestern Peru Regional Development Service. vi. The Bank appraisal confirmed the need and justification for Bank financing of US$104. million or approximately 35 percent of total Stage III costs of US$29.8 million, and for US$0.6 million to cover the costs of the consulting services for the Basin Progriam, or a total loan of US$11.0 million. The loan for Stage III would cover foreign exchange costs estimated at US$5,5 million (approximately 53 percent) and local currency costs estimated at US$4.9 million (approximately 47 percent). The loan for the Basin Program would be for consulting services. An appropriate term would be 20 years, including a four year grace period. p E t u SAN LOPRENZO IRRIGATION AND LAND SETTLEMENT PROJECT (STAGE III) I. INTRODUCTION 1. The Government of Peru (the Government) has submitted a request for a Bank loan for financing a further stage (Stage III) of the San Lorenzo Irrigation and Land Settlement Project (the Project). Financing totaling US$20.75 million was specifically requested for a program of agricultural credit, for graveling of the canal roads, for construction and asphalt surfacing of two main artery roads, for a small hydroelectric power installation and related transmission facilities, and for equipment 0 A Bank appraisal mission visited Peru in September 1964 and eliminated the road construction and hydroelectric components as not being presently jus- tified, and reduced the overall equipment component as excessive. After consultation with the Project Management (Management), however, components were added for technical services, for the construction of drainage works, and for types of equipment to enable Managementfs program of farm-to-market road construction and graveling to continue. These actions result in proposed Bank financing totaling US$10.4 million, or approximately 35 percent of total Stage III costs estimated at the equivalent of US$2908 million. US$0.6 million was also added for financing a Northwestern Peru Regional Basin Program (Para. 60). II. BACKGROUIND 2. The Project is located betwieen the Quiroz and Chira Rivers on the north and the Piura River on the south, about 1,000 kilometers north of Lima near the Ecuador border (See Annex 1 Map). Works affecting it have been constructed in two stages. Stage I ccnsisted of the diversion works, canals and tunnels to supplement water from the Piura River for irrigating about 31,0001/ ha only in the Piura Valley. These facilities were financed by the Government from its own resources, and construction was completed in 1953. 3. Stage II had the objective of supplying water for irrigating about 50,000 ha of new land in the project area and for providing supple- mental water for the Piura Valley. It consisted of enlarging the Stage I 1/ All hectares referred to in this report are considered to be irrigable. - 2 - facilities and construction of the San Lorenzo Dam and Reservoir and the canal and lateral system on the Project. It was completed in 1959 at a total cost of S/ 718.5 million (US$26.6 million equivalent, of which the Bank financed the US$18 million foreign exchange costs 2/ From 1959 through August 31, 1964, the equivalent of US$120,91/ was spent for additional facilities, technical services, investigations, equipment, administration and on-farm investments.

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