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Document of The World Bank FOR OFFICIAL USE ONLY Public Disclosure Authorized FILE CO?" Report No. 2454-ME M'EXICO Public Disclosure Authorized STAFF APPRAISAL REPORT OF THE RIO FUERTE/RIO SINáLOA IRRIGATION PROJECT Public Disclosure Authorized May 7, 1979 Public Disclosure Authorized Regional Projects Department Latin America and the Caribbean Regional Office This document has a restrieted distribution and may be used by recipients only in the performance of their official duties. Its contents may not otherwise be diselosed without W'orid Bank authorization. CURRENCY EQUIVALENTS US$1 = Mex $22.5 Mex$1 = US$0.04 Mex$1 million = US$44,444 WEIGHT AND MEASURES 2 1 hectare (ha) = 10,000 m = 2.47 acres 1 kilometer (km) 2 = 0.62 miles 1 square kilometer (km ) = 0.39 sq. miles = 100 ha 1 kilogram (kg) = 2.2 pounds 1 liter (1) = 0.26 gallons 1 metric ton (mt) = 1,000 kg = 0.98 long ton ABBREVIATIONS ANAGSA National Agriculture and Livestock Insurance Company BNCR National Bank for Rural Credit CIAPAN Agricultural Research Center for the North-West CIMMYT International Center for Improvement of Maize and Wheat CONASUPO : National Marketing Cooperation DITA : District Integrated Technical Assistance Program FERTIMEX : National Fertilizer Company FIRA : Agriculture Trust Funds of the Bank of Mexico INIA : National Institute for Crop Research MHIP : Major Hydraulic Infrastructure Program PLAMEPA : On farm Improvement Plan in Irrigation Districts PLINO : Plan for Irrigation Investments in the North West PRONASE National Seed Production Company SARH Ministry of Agriculture and Hydraulic Resources MEXICO FOROFFICIAL USE ONLY APPRAISAL OF THE RIO FUERTE/RIO SINALOA IRRIGATION PROJECT Table of Contents Page No. I. THE AGRICULTURAL SECTOR ................................ 1 The Resource Base ...................................... 1 Agricultural Production ................................ 1 Rural Population, Employment and Income .... ............ 2 Government Policies .................................... 3 Bank Participation ..................................... 4 II. THE PROJECT AREA ........................................ 5 Location ................................................ 5 Soils, Topography and Drainage ......................... 5 Climate .6................................................ Irrigation Systems ..................................... 6 Present Use of Project Lands ........................... 7 Population .............................................. 7 Land Tenure .......................... ..... 7.......7 Credit and Crop Insurance ....................... ....... 8 Agricultural Inputs.. 8 Research and Extension .10 III. THE ONGOING SINALOA PROJECT .11 Original Project Description .11 Project Execution, 1974-1977 .11 The Revised Sinaloa Project .12 Revised Project Benefits and Economic Justification .... 13 IV. THE PROJECT ............................................ 14 Project Concept ......................................... 14 Project Description ..................................... 14 Water Supply and Demand .16 Water Quality .17 Construction Schedule and Status of Engineering 18 Cost Estimates .18 Financing Plan .18 Procurement ..................... ...... 20 Disbursements ...................... ...... 20 Accounts and Audit .21 Environmental Impact .21 This report is based on the findings of an appraisal mission consisting of Messrs. E. Gazit, T. Kimura, D. Myren and Messrs. A. Feinstein, M. Fireman and M. Zohar (consultants) in September 1978 and a follow up mission comprising Messrs. M. Raczynski, R. Milford, L. Moscoso and Mr. C. Houston (consultant) in February 1979. This document has a restricteddistribution and may be used by recipients only in the performance of their official duties. Its contents may not otherwise be disciosed without WoirldBank authorization. TABLE OF CONTENTS (Continued) Page No. V. ORGANIZATION AND MANAGEMENT ............................ 22 General ................................................ 22 Major Hydraulic Infrastructure Programs .... ............ 22 Irrigation Districts ................................... 22 Monitoring and Evaluation .............................. 24 VI. AGRICULTURAL PRODUCTION, MARKETS, MARKETING AND PRICES . 25 Ir Area, Cropping Patterns, Yields ........................ 25 Production ............................................. 28 Markets and Prices ..................................... 28 VII. PROJECT BENEFICIARIES, FARM INCOMES AND COST RECOVERY .. 29 VIII. BENEFITS AND JUSTIFICATION ............................. 31 Benefits ............................................... 31 Risk and Sensitivity ................................... 31 IX. RECOMMENDATIONS ........................................ 33 Tables Annex 1. Selected Documents and Data Available in the Project File. Charts No. 20103 Map No. IBRD 13953R I. THE AGRICIJLTURAL SECTOR The Resource Base 1.01 Mexico has a land area of some 2 million km and a population of 62 million (in 1976), growing at an annual rate of over 3%. Some 40% of the total population, or about 24 million people, gain their livelihood from agriculture. Agriculture is also an important foreign exchange earner: it had a share of 23% of the total value of exports in 1976. The wide range of latitudes and altitudes results in a great diversity of crop and livestock output; but the extent of arid and mountainous lands is such, however, that only about 18% of the total land area, some 35 million ha, is considered cultivable. Of this, an estimated 15 million ha are harvested of which an estimated 5 million ha under irrigation; Mexico is presently the sixth largest country in the world in expanse of irrigated lands. Agricultural Production 1.02 Crop Production. Until the early 1940s, total cultivated area in Mexico was about 7.5 million ha, located mainly in the central highlands where maize, beans and other food crops were grown under rainfed conditions together with small irrigated areas under fruits and vegetables. Since, the development of irrigation in the arid regions along the Pacific coast, and in the Northern States (combined with successful research efforts to develop irrigated crop technologies) both cropped areas and yields increased substantially and output of wheat, sorghum, oilseeds, cotton, fruits and vegetables and alfalfa grew rapidly. 1.03 Notwithstanding the growth and diversification of crop output over the years, maize is still the most widely grown crop in the country, accounting for about 8 million ha, or over half the country's cultivated area. Most of it is cultivated together with smal]er areas of beans, under rainfed conditions by small farmers and concentrated in the central and southern highlands, along the Gulf coast and in the Chiapas region. In the humid tropical regions along the southern Gulf coast and Chiapas, sugarcane, bananas, cocoa and coffee are also grown. Table 1.01, presents the production of main crops grown in Mexico over the 1960-1976 period. 1.04 Livestock Production. In the past, most of the commercial livestock output used to come from extensive cattle breeding on the arid and semi-arid rangelands of the North with income derived from the sale of feeder cattle, mainly to the U.S. market. Milk, hogs and poultry were produced in small quantities, mostly in the central highlands and for subsistence. The increase in domestic demand has, however, caused a rapid expansion of output country wide. It has enabled the opening up of new cattle producing areas along the Gulf coast where better rainfall and good pasture quality has enabled much higher stocking rate. The growth of Mexico City has also accounted for a rapid increase in milk, pork and polultry meat production iinthe central plateau region. Table 1.02, presents the production of main livestock products in Mexico over the 1960-1976 period. - 2 - 1.05 Production Trends. The table below compares the growth of GDP with the growth in the crop and livestock sector, on an average 10-year basis, in the 1945-1975 period: Average Rate of Growth per Annum Period GDP Crops Livestock C + L 1945-55 5.8 7.3 3.7 6.0 1955-65 6.7 4.4 3.7 4.2 1965-75 6.2 0.9 4.2 2.1 1.06 As can be seen above, growth of crop production was most impressive in the first decade, good in the second, but less satisfactory in the third. The early increases were due mainly to large scale irrigation development which commenced about 1945. However since the middle sixties crop production growth almost stagnated in spite of continued high investments in irrigation. This decline and finally the stagnation in production growth came about because: (a) Irrigation projects became increasingly complex and more costly to prepare and carry out and as a result the area under irrigation grew less rapidly; (b) excessive water use and inadequate drainage and maintenance on irrigated lands caused extensive salinization which reduced cropped areas and yields; (c) crop specific problems such as cotton (disease), fruits and vegetables (export limitations) or sugar (production organization) had a dampening effect on output; and (d) in later years, more land in newly irrigated areas were allocated to small farmers and "ejidatarios" rather than to private medium and large scale farmers; the small farmers and ejidatarios needed more and better extension services to insure production increases in line with those being obtained by medium to large size farmers but until recently extension services made available have not been of the extent and quality required to achieve this. 1.07 It also became evident