Appraisal for Ingavi Rural Development Project - Bolivia - Report Number 936-BO - February 5, 1976

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Folder Title: Appraisal for Ingavi Rural Development Project - Bolivia - Report Number 936-BO - February 5, 1976

Folder ID: 1061181

Project ID: P006122

Dates: 2/5/1976

Fonds: Records of the Latin America and Caribbean Regional Vice Presidency

ISAD Reference Code: WB IBRD/IDA LAC

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196R984-085 Other #:C-2 Box # 78302B - Number SSIFIED Appraisl~forIngavi Rura Development Project - Bolivia Report DECLASSIFIEDeDECLA WBG Archives HLE COPY Report No. 936-B0 Appraisal of Ingavi Rural Development Project Bolivia

February 5, 1976 Projects Department Latin America and Caribbean Regional Office FOR OFFICIAL USE ONLY

ECLASSilk

intrnaona~evfopment AssociatIon

T1*, doMUMvnt has a, restete vanuiond m 4y We iise by recipienJ75 -nyhePerkomac of t16i ute t OntniMay'Pca not otheltwise be diclosed wvtthout Wor*Wan atiatk m CURRENCY EQUIVALETS

US$1 = $b 20.00 $b 1.00 = US$0.05 $b 1 million = US$50,000

WEIGHTS AND MEASURES

2 1 hectare (ha) - 10,000 m = 2.47 acres 1 kilometer (km) = 0.62 miles 1 square kilometer (km2) = 0.39 sq. miles = 100 ha 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 DESEC - Center for Social and Economic Development 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 FOR OFFICIAL USE ONLY

BOLIVIA

INGAVI RURAL DEVELOPMENT PROJECT

TABLE OF CONTENTS

Page No.

SUMMARY AND CONCLUSIONS ...... 1-i

I. INTRODUCTION ...... 1

II. BACKGROUND ...... 1

A. General ...... 1 B. Rural Sector ...... 2 C. Project Area ...... 4

III. THE PROJECT ...... 5

A. Brief Description ...... 5 B. Detailed Features ...... 6 C. Cost Estimates ...... 10 D. Financing ...... 11 E. Procurement ...... 12 F. Disbursement ...... 13 G. Organization and Management ...... 13 H. Accounts and Auditing ...... 17

IV. PRODUCTION, MARKETING AND PRICES, AND PRODUCER BENEFITS 17

V. BENEFITS AND JUSTIFICATION ...... 20

VI. AGREEMENTS REACHED AND RECOMMENDATION ...... 23

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. Luhman, and F. Lucca (LCPA1), W. Cuddihy and B. Kanchanalak (AGPOP), and C. Chisholm, W. Farnsworth, and J. Ticas (consultants).

This document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contents may not otherwise be disclosed without World Bank authorization. TABLE OF CONTENTS (Cont'd)

ANNEXES

1. Agriculture and Livestock Development

Tables 1 to 8 - Model 1: Irrigated Development on Communally- Operated Land Tables 9 to 15 - Model 2: Rainfed Development on Communally-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 Current Cash Table 3 - Investment and Current Cash

3. Credit System

4. Technical Services

Table 1 - Project Unit Organization Table 2 - Investment Cash Cost

5. Road System

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

6. Health System

Table 1 - Investment Cash Cost

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 Analyses

Table 1 - Economic Rate of Return

MAP BOLIVIA

INGAVI RURAL DEVELOPMENT PROJECT

SUMMARY AND CONCLUSIONS i. This report appraises a rural development project for which a Bank loan of US$9.5 million equivalent is proposed. The project would cover an area of about 800 km2 , approximately 20 km southeast of La Paz. About 4,000 small farm families would benefit from on-farm investment (deep well irrigation systems, tractors, improved pasture and livestock facilities, and storage facilities), incremental production credit (for improved seeds, fertilizer, insecticides, and services), and technical assistance financed under the project, while most of the 10,000 families in the project area would benefit from improved roads (85 km), health facilities (including six health posts), and drinking water and waste facilities (4,000 shallow wells and 3,000 pit privies, respectively). The Project Unit, a semi-autonomous agency under the aegis of the Ministry of Peasant Affairs and Agriculture would implement the project. The Government would be the Borrower and would bear the foreign exchange risk. ii. The Bank Group has granted two loans and 10 credits to Bolivia for US$55.5 million and US$60.3 million equivalent, respectively. The largest portion of the financing, 55%, has been for transportation, with 25% for power, 15% for agriculture, and 5% 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 project 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 consists largely of small farmers and agricultural laborers engaged in subsistence agriculture in the altiplano. The Govern- ment 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. The use of improved seeds, chemical fertilizers, and insecticides is limited. The average family income is about US$345, of which about - ii -

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, drinking water, and waste facilities that 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$9.5 million, or 74%; Government, US$3.3 million or 25%; 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 56% of the local currency costs (US$4.4 million, or 34% of project cost). The consultant services of the technical services component of the project (US$0.9 million) were originally to be financed by UNDP and the Government; however, due to UNDP's recent financial difficulties, the consultant services would now be financed jointly by the Bank (US$0.5 million) and the Government (US$0.4 million). Should UNDP funds for financing consultant services become available during the 1977-80 period, then the corresponding amounts in the Bank loan would be cancelled. 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 in cooperation with the Agricultural Bank (BAB) acting as financial agent, responsible for processing loan applications and disbursing funds on the recommendation of the Project Unit. The National Roads Service (SNC) would implement the roads component and the Ministry of Social Security and Public Health (MPSSP), the health, drinking water, and waste 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 bidding (ICB). However, the tractors would be purchased through local competitive bidding, and the irrigation equipment and materials would be purchased through international competitive bidding (ICB), in accordance with Bank guidelines. 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). - iii - 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%. ix. During negotiations appropriate assurances were obtained that provide a suitable basis for a Bank loan of US$9.5 million for 25 years, including a seven-year grace period. 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 two loans and IDA has granted 10 credits to Bolivia for totals of US$55.5 million and US$60.3 million equivalent, net of cancellations, respectively. The largest portion of the financing, 55%, has been for transportation, with 25% for power, 15% for agriculture, and 5% 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 in the hemisphere. Although GDP growth declined to about 5% in 1974, significant gains in terms of trade resulting from rising petroleum and mineral prices have contributed to the expansion 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; low employment growth; 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%. The labor force in 1974 was 2.5 million, with the - 2 - annual rate of increase exceeding employment growth. 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 13% of the total income, compared to the 36% of the national income enjoyed by the top 5% of the population. The poorest segment 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 has consequently 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 availability 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 4.8% for the rest of the economy. Agriculture's exports in 1974, mainly cotton, coffee, sugar and beef, amounted to US$56 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. Food imports in 1973, mainly wheat, flour, fats, edible oils and dairy products, accounted for about 80% of total agricultural imports of US$42 million.

2.06 Bolivia's rural sector consists 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 the 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 agricultural subsector, which is confined to the Santa Cruz and Beni regions, have large farm holdings and enjoy substantial financial support from central and local governments as well as from the private sector. Modern techniques are used, especially in the mechanized production of cotton and sugarcane in Santa Cruz. - 3 -

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 a structural imbalance between population and natural resources in Bolivia's three main geographic regions: (a) 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 contributing only 18% of the agricultural GDP; (b) the temperate and humid valleys, which include 38% of the cultivated land, 42% of the rural population, and 34% of the agricultural GDP; and (c) 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 - 4 - and to improve sector management capabilities. In early 1974, the Ministries of Agriculture and Peasant 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. 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) aimed at improving 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 southerst of La Paz (Annex 1, Map IBRD 11737). It covers an area of about 800 km , 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 10*C in the summer (December to February) to 7*C 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 crops 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 5% of the irrigable land) could be supplied with water. - 5 -

2.14 The project area population of about 60,000 consists almost exclusively of indigenous farmers, almost all of whom live in adobe dwellings on their own land. About 70% of them have legal titles, and the National Agrarian Reform Directorate is continuing its program of issuing titles to the remainder. Some land has been maintained for common use in both the traditional communities 1/ and in those areas previously covered by large individual land holdings. The families average about four children and thus have a total of about three adult labor units each for work on the farm. About 90% of the productive population has had same formal education. Medical attention is provided mostly by local healers.

2.15 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$345/year), of which about $b 1,500/year (US$75/year) is cash.

2.16 Experience has indicated that, 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.

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 foods to the La Paz market, and serve as a model for development efforts elsewhere in the altiplano.

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 -

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, drinking water and waste facilities. 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) has been 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, the Ministry of Social Security and Public Health (MPSSP) for the execution of the health, drinking water, and waste components, the Servicio Geologico de Bolivia (GEOBOL) for the installation of deep well irrigation systems, the Servicio Nacional de Desarrollo de Comunidades (SNDC) for the construction of distribution and drainage system and improvement of existing drainage, and the Instituto Geografico Militar (IGM) for mapping of the parts of the project area to be irrigated. The Banco Agricola de Bolivia (BAB), under a subsidiary agreement with Banco Central, would act as the financial agent, responsible for processing loan applications and disbursing credit funds to farmers on recommendation of the Project Unit. Assurances were obtained during negotiations that signing of each agreement would be a condition of disbursement for the respective component.

3.04 The number of beneficiary families would vary from about 4,000 in the case of agricultural investments to about 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 Family (US$)

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 8,000 11 Water and waste facilities 8,000 128

B. Detailed Features

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 for irrigation ppurposes, - 7 -

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 operate, common storage facilities (Model 4 represents those groups which opt for this level of cooperation only). Some groups would operate both storage and livestock (stud service) facilities in common (Model 3 represents those groups which choose this level). Some groups would undertake to develop crops and livestock on (land which they maintain collectively as well as on their independently owned plots. 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 others they would have access to irrigation water for the communal farm (Model 1) (Annexes 1 to 3).

3.06 For illustrative purposes, the groups are assumed to have an average membership of 50 small farm families 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, forming 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. They would irrigate about 50 ha of the total on a rotating basis. Because of the yield and characteristics of the groundwater aquifer, the number of wells, and consequently irrigation groups, would be limited to 20.

3.07 Production would be based on a mixed farming system. Potatoes, vegetables, and quinoa 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, submersible pump, shed, 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. Each group would receive long- and medium-term credit to finance irrigation systems, livestock facilities (including pasture, breeding animals, and handling and watering facilities), tractors, and storage facilities, and short-term credit to cover working capital cost.

3.08 In view of the limited irrigation water available, groups undertaking irrigated development would be required to have, in addition to 75 ha of irrigable land (para. 3.06), at least 30 member families 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 1976/77 - 8 -

and 1977/78. 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 and such) for all 20 wells would be undertaken by the Project Unit's groundwater specialist and the results provided to the Bank for its review 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 the project area aquifers would not be exploited to the extent that the water supplied by such aquifers becomes insufficient for the irrigation requirements of the Project. The tractors would be used primarily on irrigated land, where production increases are sufficient to warrant their use. They would be provided to groups which exhibit capability to operate and maintain a tractor effectively and to those contractors or service organizations that have entered into agreements with irrigation groups to work at least 75 ha of land for about five years. However, preferences for the purchase of tractors would be given to farmer groups over contractors. Assurance on the above matters were obtained during negotiations.

Technical Services

3.09 Technical assistance on the formation and administration of groups; agriculture and livestock practices; operation and maintenance of tractors, irrigation systems, and livestock and storage facilities; training for farmers; and preparation and implementation of farm development plans would be provided to farmer groups by the Project Unit (Annex 4). The Project Unit also would grant long-term and short-term subloans to farmer groups in support of the development plans. An assurance was obtained during negotiations that the Government would provide funds to maintain the Project Unit over the development period of about 10 years. 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 consultants (including specialists in agricultural machinery and adult literacy crops and pasture, dairy livestock, and sociologist). In addition, a specialist in sanitary engineering would be provided for a four- year period to assist MPSSP in the implementation of the drinking water and waste component. The consultant services of the technical services component of the project (US$0.9 million) were originally to be financed by UNDP and the Government; however, due to UNDP's recent financial difficulties, the consultant services would now be financed jointly by the Bank (US$0.5 million) and the Government (US$0.4 million). Should UNDP funds for financing consultant services become available during the 1977-80 period, then the corresponding amounts in the Bank loan would be cancelled.

3.10 The Project Unit would establish by February, 1977 a system for monitoring and evaluating project impact in order to provide guidance to project management in implementing the project and to improve the design of further projects over the development period of about 10 years. Data would be collected - 9 -

on the physical financial, economic, and social aspects of the project. Acti- vities on the group and project levels, as well as the farm level, would be analyzed. 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 (Annex 4). An assurance was obtained during negotiations that the Project Unit would establish such a system for the development period of about 10 years.

Roads

3.11 Improvement of roads would be 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, would be 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 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 SNC under agreement with the Project Unit and unskilled labor would be provided by beneficiaries. The roads also would be maintained by SNC, again with unskilled labor provided by beneficiaries. Funds would be provided under the project for maintenance of project roads during the implementation period, and an assurance was obtained during negotiations that the Government would maintain all roads in the project area during and after the project period.

Health Facilities

3.12 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 six satellite health posts surrounding the centrally-located Viacha hospital, which would serve as the referral center and would be improved (Annex 6). The health posts would be staffed by auxiliary nurses. Auxillary nurses' training would be provided under the project. Candidates for training would be selected by local health post committees. Mobile units 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. Assurances were obtained during negotiations that the Government would provide the necessary staff with adequate incentives and would be responsible for full operating costs of the health system.

Water and Waste Facilities

3.13 Potable water supply would be provided to about 8,000 families from 4,000 shallow wells equipped with handpumps (Annex 7). A survey is now being completed to determine more precisely the number of wells needed, but about 3,000 wells would be located in areas where the groundwater table was close to - 10 -

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 a well to keep it within reasonable limits. The survey, which would be identifying existing facilities and locations for new wells, would be sent to the Bank for review prior to the installation of any wells. Pit privies would also be provided for about 3,000 families. Implementation of the drinking water and waste component would be undertaken by MPSSP under an agreement with the Project Unit, with beneficiaries providing the labor for digging wells and constructing pit privies. MPSSP would supervise the operation of wells and maintain them, with the beneficiaries bearing the cost of maintenance and it would supervise the maintenance of the pit privies by the beneficiaries. Assurances were obtained during negotiations on the above.

Power Line

3.14 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 power to the wells, the Bolivia Power Co. would have to extend a line into the project area. An assurance was obtained during negotiations that the Government would cause the completion of this extension by July 1, 1977, and the tariff rate to be charged to the users would be satisfactory to the Bank.

C. Cost Estimates

3.15 Total project cost is estimated at $b 257 million (US$12.9 million), of which $b 102 million (US$5.1 million), or 40%, represents foreign exchange requirements. Cost estimates and foreign exchange requirements are summarized below: - 11 -

Foreign Project Cost Base Exchange Component Local Foreign Total Local Foreign Total Cost Requirement ------$b million ------US$ million ---- -%------%------

On-farm investments 37.3 33.8 71.1 1.86 1.69 3.55 39 48 Incremental production credit 22.2 7.4 29.6 1.11 0.37 1.48 16 25 Technical services 24.4 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 facilities 0.9 0.7 1.6 0.05 0.03 0.08 1 45 Water and waste facilities 12.0 6.5 18.5 0.60 0.32 0.92 10 35 Power line 2.1 3.2 5.3 0.11 0.16 0.27 3 60

Sub-total 105.9 76.5 182.4 5.30 3.82 9.12 100 42

Contingencies Physical 6.9 5.7 12.6 0.35 0.28 0.63 44 Price 42.9 19.3 62.2 2.14 0.97 3.11 31

Sub-total 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 40

The physical contingency has been calculated at 10 to 15% of base cost on elements other than credit. The price contingency has been calculated on base cost plus physical contingency as of the end of 1975 at the following rates: 15% for 1976, 12% for 1977/79, and 10% for 1980/81 on the local currency component; and 10% for 1976, 8% for 1977/79, and 7% for 1980/81 on the foreign exchange requirement.

D. Financing

3.16 The project cost of $b 257 million (US$12.9 million) would be financed as follows: Government would contribute $b 66 million (US$3.3 million), or 25% of project cost; the Bank would finance $b 190 million (US$9.5 million) or 74%; and the beneficiaries the balance of $b 1 million (US$0.1 million) or. 1%. The Bank loan would cover the foreign exchange costs (US$5.1 million, or 40% of project cost), and 56% of the local currency costs (US$4.4 million, or 34% of 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$3.4 million) at market prices, which is not included in the cost or financing tables. The financing for individual components of the project is summarized in the following table (amounts in US$ million). - 12 -

Project Financing Beneficiaries Government Bank Component Amt. % Amt. % Amt. % Total

On-farm investments - - 0.99 28 2.56 72 3.55 Incremental production credit - - 0.41 28 1.07 72 1.48 Technical services - - 0.25 12 1.89 88 2.14 Roads - - 0.19 28 0.49 72 0.68 Health facilities - - 0.02 28 0.06 72 0.08 Water and waste facilities 0.03 3 0.23 25 0.66 72 0.92 Power line - - 0.27 100 - - 0.27 Contingencies 0.01 1 0.96 25 2.77 7 L 3.74

Total 0.04 1 3.32 25 9.50 74 12.86

3.17 Government would be the borrower and would bear the foreign exchange risk on the Bank loan of 25 years, including seven years of grace. Loan proceeds, 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 agreed upon with the Bank. Funds would be disbursed from the Central Bank project accounts only on authorization from the Project Unit, except in the case of BAB, where funds would be disbursed against evidence of disbursement by BAB on subloans to project beneficiaries approved by the Project Unit. BAB would make payments to the Central Bank project accounts as repayments were received from subborrowers, and funds acccruing in the accounts would be available for further lending in the project area for similar purposes. The Central Bank would receive 1/4% on outstanding subloan amounts as compensation for its services. Assurances on the above were obtained during negotiations.

E. Procurement

3.18 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). In the case of tractors, however, the current monopoly position of one manu- facturer for tractors in the 40 to 110 horse power range 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. Assurance was obtained during negotiations that the Government would permit the importation of tractors in the 40 to 110 horse power range on equal terms for all bidding firms. The total amount involved (covering the cost of tractors, implements, spares) would be US$0.7 million. The pumps, motors, casings, and screens for the irrigation wells also would - 13 -

be grouped in lots of 10 and purchased through ICB in accordance with Bank guidelines (total US$0.3 million). The wells would be installed (US$0.7 million which excludes the US$0.3 million for pumps and such) by the Geolog- ical Survey of Bolivia (GEOBOL) under agreements with the Project Unit. Road work (US$0.7 million) would be undertaken by SNC on force account, using unskilled labor supplied by project beneficiaries. Construction 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 drinking water supply wells and privies (US$1.0 million) by force account, with the assistance of project beneficiaries (para 3.13). Assurances on the above were obtained during negotiations.

F. Disbursement

3.19 The Bank would disburse 72% of expenditures for on-farm investments, incremental production credit, and road construction by force account, against certificates of expenditure, the documentation for which would not be sub- mitted for review but would be retained by the Government and held available for inspection by the Bank during the course of supervision missions. Expen- ditures for health, drinking water, and waste facilities also would be reimbursed at the rate of 72%, against appropriate documentation. For technical services, the Bank would disburse 88% of expenditures against appropriate documents. Any undisbursed loan funds remaining after project completion would be cancelled. Since the construction period would be five years (Annex 8), disbursement is expected to require five and one half years (Annex 9).

G. Organization and Management

3.20 The Project Unit, established as a semi-autonomous agency under MACA (Annex 4), would be responsible for project implementation. The content of the decree and statutes creating the Project Unit would not be modified without giving the Bank an opportunity to comment on the proposed change. The Project Unit would have two main departments: the Services Department and the Engineering Department. It 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; MPSSP, the health, drinking water and waste facilities; GEOBOL, the installation of deep well irrigation systems; SNDC, the construction of distribution and drainage system and improvement of existing drainage; IGM, the mapping of the parts of the project area to be irrigated; and BPC, the extension of power lines into the project area for the irrigation systems under agreements with the Project Unit. Assurances on the above were obtained during negotiations. - 14 -

3.21 Policy for project implementation would be established by the Project Unit's board of directors, which would be composed of a representative and alternate from MACA, the Ministry of Planning and Coordination, the Ministry of Finance, MPSSP, the Department of La Paz Development Corporation (CORDEPAZ), BAB, agricultural technician from MACA, and a representative of the farmers participating in the project with the representative of MACA as chairman. The project manager would also be a member. In addition to establishing project implementation policy, the board would appoint the project manager, 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 are outlined in the decree and statutes.

3.22 The project manager has been appointed and his deputy would also 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 staffing schedule would be agreed upon with the Bank (Schedule A). Train- ing would be pro vided primarily on the job, but technicians would also attend courses at the Belen and Patacamaya experiment stations and courses in farm plan preparation and financing given by BAB. Assurances to this effect were obtained during negotiations.

Consultants

3.23 In order to assist 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 be, respectively, specialists in project administration, groundwater irrigation, and marketing and credit. Short-term consultants (including agricultural machinery, crops and pasture, dairy livestock, sociologist, and adult literacy specialists) would be recruited by the project manager 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 drinking water and waste component. An assurance was obtained during negotiations that the consultants and their terms of reference (which would include the points given in Schedule B) would be agreed upon by the Bank.

Project Unit Functions

3.24 The Project Unit would be located in the provincial capital of Viacha, situated within the project area. It would advise 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 - 15 -

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 of 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 drinking water and waste components, and would authorize disbursements from the project account as the work progressed under the agreements with the responsible agencies.

Farmer Groups

3.25 The inhabitants of the altiplano have long utilized cooperative forms of organization to undertake various activities. In addition to purely political organizations, there are perhaps 40 groups currently in existence in the project area, with membership varying from 30 to 75 families and activities ranging from production to consumption. The legal status of the groups also varies widely, with some being merely informal organizations while others are registered with the Ministry of Agriculture as pre-cooperatives and still others are registered with the Ministry of Labor as full cooperatives. Some of the groups engaged in productive activities have blocks of land, formed by contributions of the members, which are operated in common. Others cooperate on a service basis only. In almost all cases, however, there are some facilities (office, store, warehouse, stable, or land, etc.) which are held and operated in common.

3.26 Although there are numerous groups and a variety of functions being performed by the groups, most of them have not been in existence continuously for extended periods of time. Often they have been formed to serve a specific purpose, then have slumped into inactivity when the need has been met, only to be reactivated when another perceived need has arisen. These periods of activity frequently have occurred in response to external stimuli. Thus many of the groups have been unable to generate sufficient internal benefits to justify their continuous existence. Various factors have contributed to this pattern of sporadic operation, but perhaps the two principal external factors are the inadequacy of technical assistance and the lack of credit. Technical assistance needs are for organization and management of groups, including training of group leaders and assistance in administration and record-keeping, and, to the extent that groups are involved in productive activities, for training and guidance in agriculture and livestock practices. Credit requirements include short-term and long-term financing for working capital and investments.

3.27 Previous attempts to meet these requirements of the groups have been partial, limited, and thus largely unsuccessful. Continued technical assistance on a broad basis and adequate credit have not been provided. The extension - 16 -

service of MACA includes dedicated technicians, but there are too few of them to be effective. The Northern Altiplano Project, supported by MACA and CORDEPAZ, is demonstrating initial promise, but it is devoted almost exclusively to the supply of production inputs and covers too large an area to be effective. The UNDP-supported projects which preceeded the Northern Altiplano Project provided groups with some investment inputs, as well as production inputs, but it lacked continuous technical assistance to ensure that the investment was put to productive use. Furthermore, the credit obligations were not well defined. BAB never has established satisfactory credit relationships in the project area. SNDC is working well with groups to construct social infrastructure works, but involvement with the groups tends to diminish once the works are completed. The organization which seems to be having the most success working with groups, the Center Social and Economic Development (DESEC), a non-profit organization, focusses on the institutional aspect of group formation and development, and assists groups in undertaking well defined agricultural programs.

3.28 The activities of groups participating in the project would vary considerably. At one end of the scale, they would only operate storage facilities, while at the other, they would operate irrigation systems, storage and livestock facilities. Thus the project would have the flexibility to encompass a wide range of agricultural development programs and agricultural activities. The Project Unit would assist farmers wishing to form a group, provide guidance to groups on administrative matters, and help groups establish simple records of physical and financial data. Group leaders would attend courses in organization and management at one of the SNDC training centers. In the area of production activities, the Project Unit would assist groups in the purchase of inputs, the installation and operation of facilities and equipment, the implementation of improved agriculture and livestock practices, and the marketing of output. Credit would be provided for both seasonal production requirements and long-term investment requirements according to farm plans prepared by the Project Unit in cooperation with the groups. It is expected that these inputs, together with the increases in income to be achieved under the project and the benefits to be received from the investments in social infrastructure, would provide an adequate basis for the formation and continuous functioning of effective farmer groups.

3.29 The project initially would aim at the existing groups and simultaneously promote the formation of new ones. It would recognize for participation all groups which have been organized to carry out project-related 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 credit obligations. Currently, BAB is providing credit to such groups in the altiplano with much success.

Lending

3.30 Groups would receive subloans for the purchase of production inputs and tractors and for the construction of irrigation, livestock, and storage - 17 -

facilities. The contribution of groups would be in the form of labor (amount- ing to about 26% of the total of cash and 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 rates BAB is charging small farmers under IDA's credits 261-BO and 561-BO. 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, 1977. Assurances on the above were obtained during negotiations.

3.31 Farm plans and subloan applications would be prepared by the Project Unit and, after approval of the project manager, 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. The Project Unit would supervise the collection of subloans, with BAB handling the funds. BAB would make payments to the Central Bank project account only as amounts were received from sub-borrowers and therefore would not carry any financial risk. In order to perform its project functions, BAB would establish an office in the city of Viacha. As compensation for its participation, BAB would receive a margin of 2% on outstanding subloan balances. Assurances to this effect were obtained during negotiations.

H. Accounts and Auditing

3.32 Project accounts would be established by the Central Bank, the Project Unit, BAB, SNC, and MPSSP. Those of the Project Unit and BAB would be audited annually by auditors 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.

IV. PRODUCTION, MARKETING AND PRICES, AND PRODUCER 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 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, - 18 -

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 the level of about 600,000. The marketing function would be undertaken by the farmers 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, 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. The latter is based on powdered milk received from the World Health Program (WHP) which is tentatively scheduled to terminate within the next three years. The annual incremental milk production under the project woulo be 3 million liters, increasing the proportion of fresh milk to about 35% of PIL's present input. Improving PIL's milk collection service would be required to ensure increase in milk supplies. An assurance was obtained during negotiations 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 order to evaluate the extent to which milk supply from the altiplano norte could be increased sufficiently to meet PIL's full operation capacity and since family milk production is an important part of subsistence farming and could provide a major source of cash income in the altiplano, an assurance was obtained during negotiations that the Government would prepare, within one year of the date of effectiveness, a comprehensive plan for the development of milk production in the region. 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. At present, producer prices provide sufficient incentives to farmers to make the proposed investments, and the storage facilities contemplated would enable them to take advantage of seasonal price fluctuations.

Producer Benefits

4.04 Of the 10,000 families (60,000 people) living in the project area, all would benefit from the road improvements, about 80% from health, drinking water, and waste facilities; and about 40% from on-farm investments and working - 19 -

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 Group (Model 1) (Model 2) (Model 3) (Model 4)

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

Since the proposed development is based on technology already utilized in or near the project area and on traditional forms of cooperation among the target farmers, these rates of return are considerd feasible. Compared to the rest of the population, project farmers would rise from among the poorest 20% in Bolivia to about the national average income level. Thus the rates of return and substantial absolute increases in income are expected to provide satisfactory financial incentives for project farmers. Together with the provision of social facilities which would affect the quality of life of farmers directly, they are considered to be adequate incentives for farmers to undertake the types of development foreseen in the project.

Cost Recovery

4.05 The beneficiaries would pay 100% of the investment and operating costs of production facilities. Investment costs would be recovered through the credit mechanism, and operating costs would be partially financed through credit and partially paid directly by the beneficiaries. Technical assistance would be provided to beneficiaries as a normal extension service, and the costs would not be recovered. The power line investment and operating costs would be recovered 100% through the tariff charged to beneficiaries. For roads and health facilities, beneficiaries would make a labor contribution to both investment and operating (maintenance) costs, but cash costs would not be recovered. In the case of drinking water and waste facilities, beneficiaries would make a contribution in kind (mostly labor) to investment costs and would make a small (5%) cash contribution for drilled wells. The remaining cash investment costs would not be recovered, but operating costs would be defrayed by the beneficiaries. - 20 -

Environmental Effects

4.06 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 harmful elements in the environment.

V. BENEFITS AND JUSTIFICATION

5.01 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 farmer families (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, and 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 fluctuations due to rainfall variability. The proposed pattern of development through group activity is based on traditional practices and is in line with the Government's policy of eliminating uneconomic landholdings. This pilot project would also provide 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 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, and the like. - 21 -

5.03 The best estimate of the project economic rate of return is 15% (Annex 10). 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%.)

5.04 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.

5.05 The average annual Government contribution during the implementation perod would be about US$0.7 million (less than 1% of the annual public capital expenditures), and substantially less after project completion. Provided that the project is relatively successful and initial external assistance is forthcoming, similar projects could be carried out in other areas within the altiplano without placing too much of a burden on Government finances.

Risk and Uncertainty

5.06 Launching the project in the altiplano implies taking more than the usual risk in Bank-financed projects in South America, particularly since the results obtained in this region by other institutions have been mixed and in- conclusive. Therefore, during preparation a special effort was made to analyze past experience with other projects. As a conclusion it was found that the main identifiable risk elements are (i) insufficient interest on the part of farmers to participate effectively in the project; (ii) deficiencies in the institutions involved in project implementation; and (iii) shortfalls in reaching projected production targets because of technical factors.

5.07 In view of this, the project deliberately relies on traditional methods of farm organization and farmers cooperation currently practiced in varying degrees in the project area. The project is designed to insure maximum participation by farmer groups in decisions affecting not only their investments and operation of facilities but also their life style. Field demonstrations and technical and organizational assistance by Bolivian staff would be provided in a manner to motivate farmers to accept the proposed production methods and to utilize effectively the various services offered under the project. - 22 -

5.08 The Project Unit was established since no existing agency was found entirely suitable to execute this complicated project. Particular attention will be paid to staffing the Unit with a group of well qualified and dedicated professionals supported by consultant assistance. They would be expected to work closely with farmer groups to help them make reasonably good investment decisions which would be based on thorough evaluation of soil and climatic conditions in the project area. These conditions are comparatively better in the project area than elsewhere in the altiplano and, therefore, fairly good results might be expected. However, because of the inadequate crop production records in the provinces in question, the variations in projected production increases are based on rough estimates only and there remains an unavoidable and far from negligible degree of uncertainty with respect to variation in yields that farmers may encounter. In view of the uncertainties involved the project would have to be monitored very closely and modifications may have to be introduced quickly during the implementation of the project. Nevertheless, the risk of failure will remain but the Bolivian Government is willing to assume this risk in order to improve production and living standards of poor farmers in the Altiplano and considers the Bank's support for this experiment of crucial importance.

5.09 The main risks confronting the project were subjected to quantita- tive analysis. 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 (a) projected yield increases; (b) rate of benefit build-up; (c) delays in project implementation; (d) project acceptance by farmers both in degree and rate; (e) costs and prices; (f) cropping intensity; and (g) timing of costs and returns:

Economic Variable Change Rate of Return (%) (%)

Initial assumptions /1 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 slower 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. - 23 -

5.10 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 possible delays in farmer group organization and the difficulties of working with groups, the rate and degree of acceptance of the development package is uncertain. Far- mers' costs and returns would not occur simultaneously during the year. Seeds, fertilizer, and such 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%.

VI. AGREEMENTS REACHED AND RECOMMENDATION

6.01 During negotiations, assurances were obtained on the following main points that the Government would:

(i) require groups undertaking irrigated development to have at least 30 member families and 75 ha of irrigable land to be operated as a unit (para 3.08);

(ii) organize 10 irrigation groups by July 1, 1977, and another 10 by July 1, 1978 (para 3.08);

(iii) carry out a detailed study for all 20 irrigation wells with the assistance of the groundwater irrigation specialist of the Project Unit, and provide an opportunity for the Bank to review this study prior to the purchase of equipment or the construction of wells (para 3.08);

(iv) ensure that the project area aquifers are not exploited to the extent that the water supplied by such aquifers becomes insufficient for the irrigation requirements of the Project (para 3.08);

(v) provide tractors only to those irrigation groups which exhibit capability to operate and maintain a tractor effectively under the supervision of the Project Unit, and to those contractors or service organizations which have entered into agreements - 24 -

with irrigation groups to work at least 75 ha of land for five years; with preference for the purchase of tractors given to farmer groups over contractors (para 3.08);

(vi) provide funds to maintain the Project Unit over the development period of about 10 years (para 3.09);

(vii) establish by February, 1977, in consultation with the Bank, a monitoring system to measure project impact over the development period of about 10 years (para 3.10);

(viii) provide adequate maintenance for all roads in the project area during and after the project period (para 3.11);

(ix) provide the necessary staff, adequate incentives, and cover the full operating and maintenance costs of the project health system (para 3.12);

(x) obtain a cash contribution of 5% from beneficiaries of drilled water supply wells (para 3.13);

(xi) limit drinking water well cash cost to $b 7,200 (US$360) per well (para 3.13);

(xii) send the survey of existing water supply facilities presently being completed to the Bank for review prior to installing any project wells (para 3.13);

(xiii) ensure that the power line extension to the project area is completed by July 1, 1977 and the tariff rate to be charged to the users would be satisfactory to the Bank (para 3.14);

(xiv) make contributions to the project according to the schedule agreed upon with the Bank (para 3.17);

(xv) procure items in accordance with the provisions of para- graph 3.18;

(xvi) refrain from modifying the decree or statutes creating the Project Unit without providing the Bank an opportunity to comment on the proposed change (para 3.20);

(xvii) cause the project deputy manager to be employed in consultation with the Bank (para 3.22);

(xviii) adhere to staffing schedule for the Project Unit agreed upon with the Bank and provide appropriate training (Schedule A) (para 3.22);

(xix) provide sub-loans to project beneficiaries according to the lending items and conditions contained in Schedule C (para 3.30); - 25 -

(xx) complete the granting of land titles in the project area by December 31, 1977 (para 3.30);

(xxi) cause BAB to establish an office in the city of Viacha with adequate staff and facilities in order to perform its project functions (para 3.31);

(xxii) 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); and

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

6.02 Condition of effectiveness of the loan would be that the experts in project administration, groundwater irrigation, marketing and credit, and sanitary engineering would be employed under terms of reference agreed upon by the Bank (para 3.23).

6.03 A condition of disbursement for each respective component of the project would be that the Project Unit and the participating agencies in the project have entered into contractual arrangements satisfactory to the Bank and that Banco Central and BAB have signed a subsidiary agreement (para 3.03).

6.04 With the indicated assurances, the proposed project constitutes a suitable basis for a Bank loan of US$9.5 million equivalent for a term of 25 years, including a seven-year grace period.

January 21, 1976 SCHEDULE A Page 1

BOLIVIA

INGAVI RURAL DEVELOPMENT PROJECT

Project Unit Guidelines

General

1. The Project Unit was formed as a semi-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, drinking 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 define the scope of responsibility and authority of the Project Unit, and specify that the Project Unit has its own organizational structure, administration, operations, and funds. It also indicates 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:

MACA Ministry of Planning and Coordination Ministry of Finance Agricultural Technician, MACA Ministry of Public Health Department of La Paz Develonment Corporation (CORDEPAZ) BAB Project Manager 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:

(a) formulate policy for project execution in accordance with the conditions agreed to between the Government and the Bank: SCHEDULE A Page 2

(b) establish general credit policy and lending criteria in accordance with the conditions agreed to between the Government and the Bank;

(d) approve the salary scale and benefits for project staff according to the conditions agreed upon between the Govern- ment and the Bank;

(e) ensure effective participation by other agencies undertaking project activities, and approve contracts with such agencies;

(f) 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 manager on a daily basis to further coordination between the Project Unit and the other participating agencies; and

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

Project Mlanager

3. The project manager 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 in 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:

(a) organize and manage the Project Unit;

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

(d) prepare the annual work program and budget for approval by the board and transmission to the Bank for information;

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

(f) prescribe the functions and responsibilities of project staff;

(g) hire, promote, suspend, and dismiss project personnel; SCHEDULE A Page 3

(h) recommend to the board the salary scale and benefits for project staff according to the conditions agreed between the Government and the Bank;

(i) implement training programs for project staff and supervise the training programs established by other agencies for project staff or beneficiaries;

(j) 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 development plans;

(k) supervise the project work carried out by other agencies under agreements with the Project Unit;

(1) work with the individuals designated by the other agencies participating in the project to ensure coordinated implementation of project components;

(m) establish loan regulations and lending procedures in accordance with the credit policy and criteria established by the board;

(n) approve farm development plans and subloan applications;

(o) supervise the collection of interest and principal payments on subloans;

(p) recommend to the loan committee the suspension of disbursements in cases of misuse of loan proceeds by project beneficiaries;

(q) 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

(r) report to the board and the Bank on the progress of project implementation, in accordance with guidelines established by each entity.

The project manager could delegate these functions to other project staff at his discretion but would remain responsible for their successful execution. SCHEDULE A Page 4

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 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. 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 4 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 Manager 1,000 12,000 Deputy Manager 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.

November 24, 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 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 manager in the following:

(a) establishment and management of the Project Unit;

(b) implementation of all components of the project;

(d) specification of the terms and conditions of employment, and qualifications of staff and short-term consultants;

(e) determination of staff to be seconded from other agencies;

(f) establishment of detailed salary scales and other compensation for Project Unit personnel and recruitment of personnel;

(g) establishment and implementation of training programs for project staff and project beneficiaries;

(h) coordination of the work of other consultants to the Project Unit;

(i) supervising technicians providing technical assistance to farmer groups;

(j) 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;

(k) approving farm development plans and subloans to finance them; SCHEDULE B Page 2

(1) supervising the implementation of farm development plans and the collection of subloan payments;

(m) establishment and maintenance of simple farm records as required for periodic and regular project evaluation and monitoring; and

(n) 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:

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

(b) establishment of the work program, organization, functions and staffing of the irrigation section within the Project Unit for supervising the construction of wells and the operation and maintenance of the irrigation schemes;

(c) training of project staff and farmers in all aspects of irrigation development, including water use management, operation and maintenance;

(d) preparation of guidelines for the operation and maintenance of irrigation systems, including water-use management;

(e) design and supervision of installation of wells;

(f) design and supervision of construction of the distribution systems, and of land levelling;

(g) design and supervision of construction of internal drainage systems and improvement of natural drains; and

(h) 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. SCHEDUE 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:

(a) training and assisting technicians in the promotion, formation and operation of farmer groups and the performance of their marketing activities;

(b) training and assisting technicians to provide guidance to farmer groups on the purchase of inputs and the sale of output;

(c) design and implementation of procedures for granting subloans to farmer groups for investments and working capital, and for collecting subloan payments;

(d) design and implementation of procedures for collecting debt service on subloans, including direct collection through marketing intermediaries such as PIL;

(e) establishment of a farmgate price recording system for regular recording of optimum prices available for the crop and livestock products produced by the project;

(f) development of a market information system suitable for relaying to farmer groups by circular and/or media pro- paganda and notices; and

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

Agricultural Machinery

4. 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:

(a) preparation of specifications and bid documents, evaluation of bids, and award of contracts for tractor purchases; SCHEDULE B Page 4

(b) review of service facilities and spare parts supplies offered by prospective tractor suppliers;

(d) 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 education 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:

(a) design of an adult literacy system appropriate for project beneficiaries;

(b) training of volunteers to perform as adult literacy instructors;

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:

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

(b) fabricating and transporting the materials and supplies;

(d) supervising the construction of the water supply and waste disposal facilities;

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

(f) controlling the purchase, receipt, and dispatch of equipment and supplies;

(g) maintaining records of the unit costs involved in the execution of this component of the project;

(h) preparing periodic progress and maintenance reports;

(i) preparing a training program for administrative, pro- fessional and field personnel with a view toward accelerating the execution of the program; and

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

November 24, 1975 SCHEDULE C Page 1

BOLIVIA

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 subsidiary 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. Production inputs would be financed by long-term and/or short-term subloans depending on the cash flow, which investments would be financed by long-term loans.

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 groundwater irrigation engineer of the Project Unit and reviewed by the Bank.

4. 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 which have entered into agreements with irrigation groups to work at least 75 ha of land for at least five years. However, preferences for the purchase of tractors for project work would be given to farmer groups over contractors.

5. The Project Unit would assist farmer groups in the implementation of the development plans and in the operation and maintenance of tractors and of the facilities installed. It would authorize disbursements for the Agricul- tural 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. SCHEDULE C Page 2

Subloans to Farmer Groups

1. Both long-term and short-term 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.

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 4) 5 0

Tractor (for contractors) 6 0

Working Capital 1 0

4. Security for subloans would be a chattle 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 1/4% 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.

November 24, 1975 BOLIVIA

INGAVI RURAL DEVELOPMENT PROJECT

Implementation Schedulef'

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

Management and Administration

Recruit Project Unit staff p___-_-_-_____'_____'_* Recruit consultants PU/Bank - Make project implementation agreements with other agencies, BAB, SNC, SMUC, MPSSP, and GEOBOL PU ____-_-______-

Agricultural Development

i jioA d Ac,- Organize irrigation groups PU Appoint common irrigators Farmer Groups . .___-_-_-_-_-_-_+__ Purchase tractors PU Initiate farm plan preparation PU Initiate lending and farm plan implementation PU .

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

Civil Work Construction

Irrigation Make detailed investigations, survey, mapping, planning and design and specifications PU/GEOBOL Submit groundwater safe yield studies, civil works drawings to IBRD PU Purchase well equipment GtBOOL/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 Parmer Groups/PU Improve natural drains SRDC/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 -_-_-_-_-_____-_-_* ubmit work plan to IBRD MPNIP Recruit skilled labor, engineers, supervisors and sanicsry inspentors MPSSP ._._.___._._-_-_-_-_-____Construct water supply wells and pit privies MPSSP . Train sanitary inspectorn MPSSP

Realth Centers Investigate and survey basic data for planning health system MPSSP I Build health centers and rehabilitate hospital SRNDC/MPSSP Establish mobile unit MPSSP -_-_-_-_-_-_ _ Train staff MPSSP -

1/ Assumes loan effectiveness by 6/30/76 and thmt various otiiitie L11 continue throughout the project implementation period of 5 yern as inloated by open-ended limua. 3' Project Vait

January 22, 1976 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 crop 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 crop land 38,000 ha

(d) Saline land 13,000 ha

(e) Unsuitable for crop use 29,000 ha

Subtotal non-crop land 42,000 ha

Total area 80,000 ha

2. Climate. The project area receives about 500 mm of precipitation per year, about 60% 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 10C in the summer to 7*C in the winter. Moderate frosts occur between April and September, from October to March light frosts may occur but crop damage is minimal.

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 supply the major proportion of alfalfa and fescue seed 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 for about six to eight years 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. Quinoa and barley are interplanted generally with potato.

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 4 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) has 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, Unita, 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 reproduction 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 vaccination 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). ANNEX 1 Page 4

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 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 significantly 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 Marketin&. 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 power and butter oil, and the balance is fresh milk. PIL is attempting to replace the reconstituted milk with fresh milk. 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 groups 1/ of 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

1/ The term "group" is used rathern 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 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 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.

23. Irrigated Development on Communally-OperatedLand_(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 period 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. ANNEX 1 Page 6

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 (40 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.

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 purchased 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 2 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, better nutrition, improved management practices, and release from drafting chores.

29. At full development, 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 ANNEX 1 Page 7 livestock. A portion of potatoes 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.

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, and 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 - Table 16-18). This model reflects the operation of a group of farmers who did not wish to 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 1.8 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. ANNEX 1 Page 8

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.

36. Marketing Development (Model 4 - Table 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 18,000 liters/year because of less intensive livestock development than in Model 3. Annual total net income per farmer would reach $b 12,000 (US$600) by year seven.

November 24, 1975 ANNEX 1 Tabls 1 BOLIVIA

INGAVI RURAL DEVELOPMENT PROJECT

Agriculture and Livestock Deveopment

Model 1 - Irrigated Development on Communally-Operated Land

On-Fam Investamet Costs

Local Coot .,c Investment Period Total U.S, Ccoptrative Investment Item Unt Unit Cost Year 1 Year 2 Year 3 Units Total Cast EIvalvelnt P.E. Copon.et Cent r ibuio. ($b) (No.) (Amount) (No.) (Amount) (No.) (Amount) (N..) ($b '000) (US$ '000) ) (Amount) (%) (Anonoc) (US$'000) (US$'000) A. PHYSICAL INPUTS ($b'000) ($b'000) ($b'000)

Buildings 1 Office and tt. Units 24,000 1 12.0 - - - - 1 12.0 0.6 20 0.12 80 0.48 Produce storage 50,000 1 25.0 - - - - 1 25.0 1.25 20 0.25 80 1.0 Houses " 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 0.5 20 0.1 80 0.4 Assembly coca 16,000 1 0 1 8.0 0.4 20 .0 80 0.32

Subtotal 67.5 67.5 3.375 .675 2.7

Stock Handling Facilities Dairy and oheep ahed units 105,000 - 52.5 - - - 1 52.5 2l625 20 0.525 80 2.1

Watoring Facilities edquarrst Office and central buildings meters 10,000 1 5.0 . - - 1 5.0 0.25 20 0.05 80 0.2 Tanks and troughs unit, 25,000 1 12.5 - - - - 1 12.5 0.625 20 0.125 80 0.5 Woll " 6,800 1 4.7 - - - - 1 4.7 0.235 10 U.Qi1 90 0.101

Subtotal 22.2 22.2 1.110 0-186 0.801 Machiner, Motorcycles unit 9,000 1 9.0 - - - - 1 9.0 0.45 100 0.45 - Bicyles" 3,600 3 3.6 - - I1 3.6 0.18 100 0.18 -

Subtotal 12.6 12.6 0.63 0.63 -

Pasture Establishment Plwing and harrowing ha 91 40 3.6 - - - - 40 3.6 0.18 20 0.036 80 0.144 Seed kg/ha 860 40 34.4 - - . - 40 34.4 1.72 100 1.72 - FPrtilizer 500 40 20.0 - - - - 40 20.0 1.00 100 1.00 - Planting hs 100 40 4.0 - - - - 40 4.0 0.2 20 .04 80 0.16 Cutting and storage ho 900 ------100 . Storage shed evit 18,000 1 9.0 - - - - 1 9.0 0.45 20 0.09 80 0.36 Reseeding peaes/h. 800 . - 10 8 10 8 20 16.0 0.8 100 - - -

Subtotal 71.0 8 8 07.0 4.35 3.69 - 0.66

Tools and Eqipmnt -nit 10.000 1 iO.i - _ - - 1 10.0 .S 100 0.5

Total 234.0 8 8 234.0 11.7 6.21 .49

B. LIVESTOCK PURCHASES

Bulls head 12,000 1 12.0 1 12 - - 2 24.0 1,2 50 0.6 50 0.6 Improved dairy co.s 8,000 5 40.0 1 8 - - 6 48.0 2.4 50 1.2 50 1.2 Local vns" 4,000 9 36.0 32 128 21 84 c2 248.0 12.4 - - 100 12.4 Ram. 800 - - - 2 1.6 2 1.6 0.08 - 100 0.08

Total 88.0 148 05.6 321.6 16.00 1.1 14.28

Total Physical and Livestock 294.0 156 93.6 ii3.6 27.18 7.3 19.44

C. TRACTOR AND IMPLEMENTS!/

Tractor, 72 HP unt 330 1 330.0 - - - 1 330.0 16.5 - Ploug- 60 1 60.0 - - - - 1 60.0 3.0 - DIsc hrot" 60 1 60.0 - - - 1 60.0 3.0 - PMnner 34 1 34.0 - - - - 1 34.0 1.7 Carts, 2 68 1 68.0 - - - - 1 68.0 3.4 - - Spara parts, 20% itt 110.4 1 110.4 - - - - 1 100.4 0.52 - -

Sebtoal 612.4 662.4 39.2 90 29.6 10 3.31

D. IRRIGATION FACILITIES

Wall unit 507,000 1 507.0 - - - - 1 507.0 25.35 85 20.28 15 5407 Iuop and angIna " 116,000 1 116.0 - - - - 1 116.0 5.8 91 5.23 9 0.57 Water tank 130,000 1 130.0 . . - - 1 130.0 6.5 52 3.38 48 3.12 Irrigation syste 410,000 1 123.0 - - - - 1 123.0 .15 - - 100 6.15 Drainage imp ovement 330,000 1 264.0 - - - - 1 264.1 13.2 60 7.92 40 5.28 - . - Land Ieelileg 75,000 - - - - - Engineering costs " 92,000 1 92.0 - - - 1 92.0 4.6 27 1.242 73 3.358

Subtotal 1,232.0 1,292.0 61.57 3.05 23.50

Irrigation physicol .ontiencles (15%) 185.0 185.0 9.2 5.78 3.53 E. TOTAL INVESTMENTS 2,400.0 156 93.6 2,650,. 1.32 62 81.36 38 50.65

_/ Parmer contribution as labor estimated at 507. of ne building value. Actual .ash paid oet Is entered. 2/ See Annex 1, Table 2 for details.

October 7, 1975 ANNEX 1 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 Exchange Local Currency $b '000) ('000 US$) 7 Amount _% Amount

MACHINERY UNIT Tractor, 72 HP - 9,000 hrs, over 6 yrs. 330 Implements, 5,000 hrs. over 6 yrs. 1 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/l x 1,500 hrs/yr x 6 yrs. 59.8 Lubricating oil, 17 1/150 hrs @ 13.4 pesos/l 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/l 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 pusos/1 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 I Model 2 All Family Farms Including Models 3 + 4 Potatoes 15 ha x 10 hrs = 150 15ha x 10 = 150 200 farms x 2k hrs = 500 hrs/tractor Vegetables 0.5 x 10 = 5 -- sufficient for potatc 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 hrs/tractor + 500 hrs/tractor Approximate total use =600 hrs/tractor + 400 = 1,500 hrs/tractor set Tractor Income $ b 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 Comnunally-Operated Land

Herd Projection

,Herd Values Opening ------End oR Year (July - June) ------Category Unit Yaars 0-4 Years 5-20 Number 1 2 3 4 5 6 7 8-20 HERD COMPOSITION Head

Bulls 12,000 12,000 1 1 2 2 2 2 2 2 2 Cows (Breeding) " 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 12 12 12 Cull Cows " OUDO 4,000 2 2 6 9 H 9 9 9 TOTAL EAD 23 62 04 122 123 124 128 128 Animnl Units A.U.s -- -- 15 16 49 70 75 so 80 80 80 Purchase sheep for fattening Head 200 180 -- -- 0 78 78 78 78 78 78 Breeding rams for service " 650 800 -- -- 0 2 2 2 2 2 2 Sheep animal units A.U. -- -- -0 4 4 4 4 4 4 5- TOTAL ANIMAL UNITS TOA NMlUIS15 16- 50 74 79 H4 84 84 84 MORTALITIES

Bulls Head ------Cus ------1 1 3 2 Calv 2 2 2 - -- -- 2 1 3 2 2 2 Heifers (9-24 months) 2 TOTAL CATTLE DEATHS ------3 2 Sheep ------1 2 2 2 2 2 2 PURCHASES

Bulls Head 12,000 16,000 1 -- 1 0 0 -- - -- Improved cows 8,000 -- 5 1 0 0 -- Crioll coos " 4,000 -- 9 1 31 21 -- TOTAL CATTLE PURCHASES 15 2 32 21 1 - -- Sheep for fattening " 180 200 -- -- 78 78 78 78 78 78 Breeding rams 650 800 -- -- 2 -- -- 1 TOTAL SHEEP PURCHASES -- -- SALES

Bull calves Head 200 250 5 5 14 19 17 18 20 20 Sorplus heifers (1 year) 3,000 4,000 ------1 3 8 9 Cull coos 4,000 4,500 2 2 6 9 8 9 9 9 Cull heifers (2-3 years) " 2,500 3,000 ------1 1 1 1 Cull bulls " 5,000 6,000 -- -- - I -- --

SUB-TOTAL 7 7 20 29 27 31 38 39 but sheep 230 270 0 0 76 76 76 76 76 76 Cull ramnu 230 270 0 0 0 - -- 1 1 --

TECHNICAL COEFFICIENTS

Calves orn 7 -- -- 90 Mortalities 75 75 75 75 75 75 75

(a) Calve 7 -- -- 15 15 10 10 10 10 10 10 (b) Adultu . -- -- 5 4 4 4 4 4 4 4 (c) Sheep % -- -- 3 3 3 3 3 3 3 3 Culls

(a) Bulls -- -- 15 15 15 15 15 15 15 15 (4) Cows -- -- 15 15 15 15 15 15 15 15 (t) Heifers (2-3 yrs.) % -- -- 5 5 5 5 5 5 5 5 Cows servlced/bll Cows/bull -- -- 30/1 30/1 30/1 30/1 30/1 30/1 30/1 30/1 Res aerciced/ram toes/rums -- -- 50/1 50/1 50/1 50/1 50/1 50/1 50/1 50/1 50/1 percent cows & total herd % -- -- 93 72 57 43 48 48 46 46 No. coos in milk Head -- -- 12 12 30 43 38 40 44 44 Milk yleld/cow/annun litres 3 litres/day 1/ 3,4,6,8 1./day 2/ 720 720 720 720 720 860 1440 1920 Btching rate A.U. -- -- 16 50 74 79 84 84 84 84 Carrying capacity A.U. -- -- 16 50 84 84 84 84 84 84 Offtake rte 7 ------20 26 26 26 26 29 32 Eutraction rate , ------20 20 20 25 25 26 28 Sheep gain/day Kgrs. 2 k,/mth 3kg/mth 0.085 0.085 0.085 0.085 0.1 0.1 0.1 0.1

PRODUCTION DATA Beef Production (Cold dressed weight)

Cull coso kg itS 330 330 990 1485 Cull hulls' 4(10 1320 1485 1485 1485 ------400 *------Cull heifers 2-3 yrs. " lO0 240 400 ------" I N/toss .33 .33 .99 1.845 1.56 1.725 1.725 1.725 Mi Nb pce produtiooduction /ton -- .912.912 1.064 1.064'SOD/iont 1.064 1.064 8.64 8.64 21.6 30.96 27.36 38.4 63.36 84.48

1/ Present yields are based on a survey by CORDEPAZ. 2/ Mission estimates - as percentage F1 cows in ti, herd increases and responds to alfalfa/fescue feed and impact of project unit extension activities on-farm management.

October 21, 1975 ANNEX 1 Table 4 BOLIVIA

INGAVI RURAL DEVELOPMENT PROJECT

Agriculture and Livestock Development

Model I - Irrigated Development on Communally-Operated Land

Crop Projection - Sales

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

Cash Crops Potatoneni tarn 7,10,12,12 12 15 20 105 150 IS 180 180 180 180 180 Quinoa 2/ 0.6 - - 3.7 ------Vegetablen- snits 20,000 20,000 0.5 - - 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 trops Os )3/ 3,4,4,4 4 24.5 77 73 98 98 98 98 98 Barley)-' 98 98 4 Alfalfa/fescue / 0,3,6,7 7 35 - - 105 210 245 245 245 245 245

Selling Prices ------$6000...... ($b) SALES

Cash Crops Potatoes " 3,000 3,000 60 315 450 54G 540 540 540 540 540 Vegetables units 1.5 1.5 - - 15 15 15 15 15 15 15 Papalizas, ocas tOs - - 2.4 - - - Quinoa - - 11.1 Wheat " - - 1.6 ------Subtotal 75 315 465 555 555 555 555 555 555

Surplus lrorage 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 servicen 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 Income5/ Hire 900 hrs/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 nn the Altiplano of Bolivia", La Paz, 1975. Zuazo, M.D., "Cultivation of Forages Ln the Altiplano", Banco Agricola de Bolivia, 1974. CORDEPAZ, "Proyecto de Desarrollo Rural", 1974. 5/ See Annex 1, table 2, for details. ANNEX 1 Table 5 BOLIVIA

INGAVI RURAL DEVELOPMENT PROJECT

Agriculture and Livestock Development

Model 1 - Irrigated Development on Communally-Operated Land

Crop Projection - Operating Expenses ($b '000)

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

Administration Farm manager manlyears 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 8.2Q) 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 7% of new value - - 1 1 1 1 1 1 1 -- - - - Internal roads tractor hours -- - Stock handling facilities - 2% of new value - - 1 1 1 1 1 1 I Watering facilities (H.Q.) - 2% of new value - - 0.1 0.1 0.1 0.1 0.1 0.1 0.1 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 1 in 2 12-16,500 - - - - 12 - - - Ram " BOO ------0.8 0.8 Subtotal - - - - 12 - - 0.8 0.8

Packing Materials Potato and grain sacks 100 kg sacks 180 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

Plating 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 - 45 45 45 45 45 45 45 45 Insecticides - 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 ubricants Motorcycles liter/year 1 1 1 1 1 1 1 1 Subtotal - 1 1 1 1 1 1 1 1

Irrigation 0 & MU/ Electricity KWH 66,000 1.06 - - 70 70 70 70 70 70 70 Inspections, etc. man/year 10,000 - - 12 12 12 12 12 12 12 Replacement of pump and driven motor 1 116,000 - - - - Subtotal - - 82 82 82 82 82 82 82

TractorZ' Operating expenses- hour 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 i 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 33 246 296 311 327 316 316 317 317 Total Sales 75 467 617 788 841 827 876 967 1,044 Net operating incone 42 222 321 477 514 511 560 650 727 Incremental operating income - 180 279 435 472 469 518 608 685

1/ Replace pump in year 11 for $b 116,000. Tariff includes full capital recovery of power line cost. 2/ Replace tractor and implements in years 7, 13, for $b 662,400. 3/ See Annex 1, Table 2 for details.

November 24, 1975 BOLIVIA

INGAV1 RURAL DEVELOPMENT PROJECT

Model I - Irrigated Development on a C-oonally-Operated Land

Financial Projection After Debt Service

Before ------Year ------Category Developent 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21

A. Cah Inflw ($ b '000)

1. SaLes 75 467 617 788 841 841 876 967 1,044 1,044 1,044 1,044 1,044 1,044 1,044 1,044 1,044 1,044 1,044 2,044 1,044 1,044 2. Denelopmant loan 1/ -- 2,400 156 94 ------3. Cash balance prenloos year -- -- 141 114 235 311 478 620 15 170 296 393 195 335 34 116 19 43 28 24 41 50 ------4. -- easonol------loanlroper enp.2/ -- 2446 ------

Total Inflow 75 3,113 914 996 1,076 1,192 1,354 1,87 1,059 1,214 1,340 1,437 1.239 1,379 1,078 1,160 1,063 1,097 1,082 1,098 1,093 1,094

B. Cash Outflow ($ b '000)

1. Developmnt investent -- 2,400 156 94 ------662 ------116 -- 662 ------2. Operating nxpensan 33 246 296 311 327 316 316 316 316 316 316 316 316 316 316 316 316 316 316 316 316 316 3. Loan repayments a) De. loan principal ------176 176 176 176 176 176 176 176 176 176 176 176 176 176 176 b) Dev. loan interest -- -- 288 306 318 318 318 318 297 276 255 234 212 191 170 149 128 104 96 65 43 23 c) Seneonol loan principal -- 246 ------d) Seasnnal loan inrest -- 30 ------e) Dstribotion to members 42 50 60 50 80 80 100 100 100 150 200 400 200 34 300 400 500 450 450 500 500 579

Total Outflaw 75 2,972 800 761 725 714 734 1,572 889 918 947 1,242 904 1,420 962 1,841 1,128 1,049 1,028 1,857 1,035 ,94

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 12% with 5 years grace. 2/ 12 ontba loan at 12%.

October 22, 1975 ANNEX 1 Table 7

BOLIVIA

INGAVI RURAL DEVELOPMENT PROJECT

Agriculture and Livestock Development

Model 1 - Irrigated Development on Communally-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

Crop------tons ------Crop Frojectlons Barley tons 3, 3, 3, 4 1.8 2 5.4 6.0 6.0 8.0 8.0 8.0 Potatoel/ " 4, 5, 6, 7 0.33 0.5 1.32 2.5 3.0 3.5 3.', 3.5 Quinna " 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 C.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 1 kg/DWI 85 285 85 90 95 100 Milk litrec 312 312 320 340 350 360 Sheep units 8 8 8 9 10 10 Pigs kg/DWl 60 60 60 62 62 65

Value of Production Cash Crops Farm Gate Prices b ------$b ------

Barley !/ - - Potatoes kg 3 3,960 7,500 9,000 10,500 10,500 10,500 Quince 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 kg 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 Quince 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 - 380 380 380 386 380 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

1/ CORDEPAZ, "Proyecto !e 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 ------Without Project 1 2 3 4 5 6 7 8 9 10 11-21

Category

A. CASH INFLOW

1. Sales 75 269 326 345 402 400 419 460 490 490 490 490 490 490 490 490 490 490 490 490 490 490 2. Development Loan 1/ - 522 202 162 ------3. Cash Balance Previous Year - - 196 84 286 275 129 29 10 29 5 9 - - - 11 29 54 37 27 24 28 4. Seasonal Loan for Operating Expenses 2/ - 65 ------

TOTAL INFLOW 75 856 612 703 688 675 548 489 500 519 495 498 490 490 490 501 519 544 527 517 514 518 B, CASH OUTFLOW

1. Inveastment - 522 202 162 ------2. Operating Expenses 33 65 67 69 207 240 213 214 213 213 213 213 213 213 213 213 213 213 3. Loan Repayment 213 213 213 213 a) Development Loan Principal ------59 59 59 59 59 59 59 59 59 59 59 59 59 59 59 b) Development Loan Interest - 62 87 106 106 106 106 106 99 92 85 78 71 64 57 50 43 35 28 21 14 7 c) Seasonal Loan Principal - 65 ------d) Slasonal Loan Interest -- - -- o) Dintribution to Members 42 50 60 _0 100 200 200 100 100 150 130 150 150 000 150 150 150 200 200 200 200 239

TOTAL OUTFLOW 75 772 416 417 413 546 519 479 471 514 487 500 493 486 479 472 465 507 500 493 486 518 C. CASH BALANCE - 196 286 84 275 129 29 10 29 5 8 - - - 11 29 54 37 27 24 28 -

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

October 15, 1975 ANNEX 1 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 ------ton------Crop Projections

Barley tons 3,3,3,4 1.8 2 5.4 5.4 6.0 8.0 8.0 8.0 Potatoesl" 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

3 Meat2/ / kg/DWT 85 285 85 90 95 100 Milk liters 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 Cmops Farm Gate Prices ------bbb ------

Barley - - - - - 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

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 1,000 Pigs kg 15 900 900 930 930 930 975

Subtotal 4,510 8,510 4,540 4,840 5,076 5,257

Total value 9,614 17,362 14,892 16,692 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 6 396 600 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 5 - 380 380 380 380 380

Labor

1uman 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 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

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 (Sb ) Without ------Years ------Category Project 1 2 3 4 5 6 7 8 9 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 4,719 4,719 4,719 3. Seasonal loan for operating expenses -- 4,719 ------

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 Withdrawalsl 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 5,000 5,200 5,400 5,600 5,900 5,900 5,900 5,900 5,900 5,900 5,900 2. Withdrawls 2,000 2,358 4,973 6,573 6,609 6,490 6,490 6,490 6,490 6,490 6,490 6,490 3. Share income from group farm -- 1,000 1,200 1,600 2,00 4,000 4000 2,00 2,00 3,00 4,00 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

1>~ BOLIVIA Annex I Table 16 INGAVI RURAL DEVELOPMENT PROJECT

Agriculture and Livestock Development

Model 3 - Rainfed Development on Group of Individual Farms

Investment and Production Data

Year 1 Year 2 Year 3 Category Unit Cash Cost No. Amt. No. Amt. No. Amt. Total Units Total Costs US$ Equiv. F.E. Component Local Component ($b) ($b'000) ($b'000) ($b'000) ($b'000) (US$'000) % Amt. % Amt.

A. ON FARM INVESTMENT/Group of 50 farms

1. Livestock Bulls 12,000 2 24 3 36 - - 5 60 3 50 1.5 50 1.5 Rams 800 5 4 3 4 - - 10 8 0.4 0 0 100 0.4 2. Pasture Seed 860 20 17.2 15 12.9 15 12.9 50 43 2.15 100 2.15 U 0 Fertilizer 300 20 6 15 4.5 15 4.5 50 15 0.75 100 0.75 0 0 3. Marketing Facilities Office & store (inputs) 12,000 1 12 - - - - 1 12 0.6 20 0.12 80 0.48 Produce Storage 25,000 1 25 - - - - 1 25 1.25 20 0.25 80 1.0 Well and Pump 4,700 1 4.7 - - - - 1 4.7 0.24 10 0.02 90 0.22

TOTAL INVESTMENTS 92.9 57.4 17.4 168 8.4 57 4.79 43 3.6

B. PRODUCTION/Group of 50 farms Without Year Project 1 2 3 4 5 6 7 8-20 1. Crops/farms Yield, tons/ha, Barley 3 3 3 3 4 4 4 4 4 Potatoes 4 5 6 7 7 7 7 7 7 Quinoa 0.6 unchanged Wheat 0.7 unchanged Oca, etc. 3 unchanged Area, has. Barley 1.8 2 unchanged Potatoes 0.33 0.5 unchanged Quinoa 0.44 0.6 unchanged Wheat 0.04 0.04 unchanged Oca, etc. 0.02 0.02 unchanged Production tons,Earley 5.4 6 6 8 8 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 Oca, etc. 0.06 0.06 0.06 0.06 0.06 0.06 0.06 0.06 0.06

2. Animal Products/farm Production, Beef, kg. Dwt. 1/ 85 285 85 90 95 100 100 100 100 Milk, litres 312 350 400 450 500 550 600 680 720 Motton, kg. Dwt. 40 40 40 45 45 50 50 50 50 Pork, kg. Dwt. 60 60 60 62 65 65 65 70 70

3. Total Group Production Barley, tons 270 300 300 400 400 400 400 400 400 Potatoes 66 125 150 175 175 175 175 175 175 Quinoa 13.2 18 18 18 18 18 18 18 18 Wheat " 1.4 1.4 1.4 1.4 1.4 1.4 1.4 1.4 1.4 Oca, etc." 3 3 3' 3 3 3 3 3 3 Beef, has. 4,250 14,250 4,250 4,500 4,750 5,000 5,000 5,000 5,000 Milk, litres 15,600 17,500 20,000 22,500 25,000 27,000 30,000 34,000 36,000 Mutton, kg. 2,000 2,000 2,000 2,250 2,250 2,500 2,500 2,500 2,500 Pork, kg. 3,000 3,000 3,000 3,100 3,250 3,250 3,250 3,500 3,500

1/ Production in year 1 is unusually high due to one time sale of farm bull rendered surplus by purchase of five bulls for group.

October 15, 1975 BOLIVIA

INGAVI RURAL DEVELOPMET 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 IWT 40 40 40 45 45 50 50 50 50 50 50 Pork 15/kg DTh 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 1 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

Without Project Year Category Project 1 2 3 4 5 6 7 8-20 ------(Sb '000)------

I. Group

A. Cash Inflow

1. Sales, Cash 235 638 502 587 591 598 607 624 631 2. Development Loan - 93 57 18 - - - - 3. Cash Carried Over from Previous Year - - 246 246 236 236 246 246 246 4. Seasonal Loan for Operating Erpenses - 246 - - - - - Total Inflow 235 977 805 851 827 834 853 870 877

B. Cash Outflow

1. Investments - 93 57 18 - - - - - 2. Cash Operating Expenses 135 246 246 246 236 236 246 246 246 3. Loan Repayments a) Development Loan Principal 1/ - - - - 56 56 56 - - b) Development Loan Interest - 11 18 20 20 13 7 - c) Seasonal Loan Principal 2/ - 246 ------d) Seasonal Loan Interest - 28 - - - Total Outflow 135 624 321 284 312 305 309 246 246 Cash Balance 100 353 484 567 515 529 544 624 631 Withdrawals 3/ 100 107 238 331 279 283 298 378 385

II. Farm Family

A. Cash Inflow ($b)

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

B. Cash Outflow

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

C. Farm Family Net Benefit

1. Value of Domestic Consumption 4900 5000 5200 5400 5600 5900 5900 5900 5900 2. Withdrawals 2000 2140 4720 6380 5360 5660 5920 7460 7700 Total Net Benefit 6900 7140 9920 11780 10960 11560 11820 13360 13600

D. Without Project Net Benefit 6900 6900 6900 6900 6900 6900 6900 6900 6900

E. Incremental Farm Family Net Benefit - 240 3020 4880 4060 4660 4920 6460 6700

F. Family Income at Full Development: $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%. j/ Withdrawals = Cash Balance - Operating Expenses for following year.

October 15, 1975 BOLIVIA

INGAVI RURAL DEVELOPMENT PROJECT

Agriculture and Livestock Development

Model 4 - Marketing Developmenti

Investment and Production Data

Year 1 Category Unit Cost Unit Cash Cost No. Amount Total Cost US$ Equiv. F.E. Component Local Component ($b) ($b) ($b'000) ($b'000) (US$'000) % Amount % Amount (05$ '000) (05$ '000) A. Investment Items for 50 Farms

1. Office and Store (Inputs) 24,000 12,000 1 12 12 0.6 20 0.12 80 0.48 2. Produce Storage (Outputs) 50,000 25,000 1 25 25 1.25 20 0.25 80 1.0 3. Shallow Well and Pump 6,800 4,700 1 4.7 4.7 0.24 10 0.02 90 0.22 TOTAL 80,800 41,700 41.7 41.7 2.09 19 0.39 81 1.70

B. Production for 50 Farms ------Year------Without Project 1 2 3 4 5 6 7 8 Crops Barley, tons 270 300 300 400 400 400 400 400 400 Potatoes " 66 125 150 175 175 175 175 175 175 Quinoa " 13.2 18 18 18 18 18 18 18 18 Wheat " 1.4 1.4 1.4 1.4 1.4 1.4 1.4 1.4 1.4 Oca " 3 3 3 3 3 3 3 3 3 Animal Products Beef kg 4,250 4,250 4,250 4,500 4,750 5,000 5,000 5,000 5,000 Milk liter 15,600 15,600 16,000 17,000 17,500 18,000 18,000 18,000 18,000 Mutton kg 2,000 2,000 2,000 2,000 2,000 2,000 2,000 2,000 2,000 Pork " 3,000 3,000 3,000 3,100 3,100 3,250 3,250 3,250 3,250 C. Production Per Farm

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

l/ 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 498 642 642 642 642 642 642 642 642 642 642

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

w z 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!l - - 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 5,94 5,940 6,100

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 of 50,000 2 km2 , two priority regions were selected for detailed study: 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 having 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. To 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% falling 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 disappear 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 economically. 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 specified 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 m 3 / year (Table 1), so supply would be adequate. Water quality ranges between C 1S 1 and C2S1, 1/ 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 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. C S, indicates low 1 salinity (65-100 ppm) and low sodium hazard. C S indicates medium salinity (160-500 ppm) and low sodium hazard. 2 1 ANNEX 2 Page 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 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 m3 /ha/year 225,000 m3/well/year or 4.4 mm3/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 3 /hour, so it can 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$4,100) would be cash cost.

11. Aggregate investment and operating costs are given in Table 3. Investment cost would amount to $b 38.2 million (US$1.9 million) of which $b 28.3 million (US$1.4 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 4.04 million (US$220,000, 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 4

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'; 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 sites 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. Organization 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 to 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 own members, and made responsible for distributing ANNEX 2 Page 5 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 allocation, and operation and maintenance of the system.

November 24, 1975 B 0 L I V I A

INGAVI RURAL DEVELOPMENT PROJECT

Irrigation System

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

Rainfall-75% probability-mm 68 74 35 22 ------3 9 29 Temperature C 77 317 0 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 58.2 63.8 460.1 Effective rainfall 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 60% efficiency 3 70% Alfalfa In /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 3 for 1,000 ha Mm 6.460 0.510 0.560 0.350 0.340 0.475 0.705 0.700 0.315 (20 wells serving 50 ha each) 4.415

October 15, 1975 ANNEX 2 Table 2 BOLIVIA

INGAVI RURAL DEVELOPMENT PROJECT

Irrigation System

Unit Investment and Current Cash Costs ($b '000)

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

Current Cost

Component Amount

Energy 64 Maintenance 2 Common irrigator 9

Subtotal 75

Physical contingency (10%) 7

Total 82

1/ Includes 1 % allowance for spare parts.

November 24, 1975 ANNEX 2 Table 3

BOLIVIA

INGAVI RURAL DEVELOPMENT PROJECT

Irrigation System

Investment and Current Cash Costs ($b '000)

Investment Cost Year Component 1 2 3 Total

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

Current Cost Year Component 1 23 4-20

Operation and maintenance - 330 820 1,640

November 24, 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 manager. 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, responsible for processing loan applications and disbursing funds. It would not have authority to reject subloan applications. 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 obligations, BAB would establish an office in Viacha.

3. BAB currently is the executing agency for the Third Livestock Pro- ject (261-BO) and the Agricultural Credit Project (561-BO). Some difficulty had been experienced in the execution of the livestock project 261-BO, but the situation has improved and progress is now satisfactory. The credit project 561-BO has just started. Although BAB has incurred some 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.

Items Financed by Subloans

4. Long- and medium-term subloans would be provided for irrigation systems, livestock facilities (including pasture, 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 available 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 ANNEX 3 Page 2 that they have the capability to operate and maintain a tractor effectively. However, preferences for the purchase of tractors would be given to farmer groups over contractors.

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 production credit, technical services, roads, health facilities, and drinking water and waste facilities. In the case of on-farm investments (except when irrigation or tractors are involved) and incremental production credit, 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 manager. 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 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, drinking water, and waste facilities, to the Ministry of Social Security and Public Health (MPSSP) on authorization of the project manager. 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.

January 26, 1976 ANNEX 4 Page 1

BOLIVIA

INGAVI RURAL DEVELOPMENT PROJECT

Technical Services

General

1. Technical services would cover a range of activities 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 posts, a hospital, drinking 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).

Project Unit

4. Organization. The Project Unit has been formed as a semi-autonomous agency under the aegis of the Ministry of Peasant Affairs and Agricul- ture (MACA). Its scope of responsibility and authority is set forth ANNEX 4 Page 2 in a decree and statutes, and the Unit has 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 Ministry of Finance, the Ministry of Social Security and Public Health (MPSSP), and the semi-autonomous agencies, the Department of La Paz Development Corpora- tion (CORDEPAZ), the Agricultural Bank (BAB), Agricultural technicians from MACA, the project manager, 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 policy, the board would appoint the project manager, 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 manager. Thus, most coordination should be effected as this level without involving the board of directors.

5. The chief executive officer of the Project Unit is the project manager, who has been recruited from among Bolivians with international experience. He would be responsible only to the board of directors and have the functions and duties specified in Schedule A. He would be supported by a project deputy manager 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 Services 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 (includiag 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 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 ANNEX 4 Page 3

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 assimilate better 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 organizing 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 local competitive bidding, after sufficient tractor applications had been received from groups and contractors to form a contract attractive to international bidders (about 10 tractors). Particular emphasis 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, drinking 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, groundwater irrigation, and marketing and credit. Also, a specialist in sanitary engineering would be provided for a four-year period to assist MPSSP in the implementation of the drinking water and waste component. 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 consultants are given in Schedule B. ANNEX 4 Page 4

Monitoring

12. 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 scope for replicating the development procedures and techniques applied here very great. This is the first integrated rural development effort in the region and much basic information required for implementation and planning is either lacking or of limited reliability. The resulting uncertainty requires assumptions 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 provide a basis for management decisions during implementation as well as influence design and implementation of further projects in the altiplano.

13. Data collection would be directed towards providing project management with rapid feedback to permit appropriate modifications to be made, and towards enabling an evaluation of how well the chosen strategy was achieving basic project objectives: (a) to improve the welfare of the rural poor and (b) 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 egalitarian income distribution, etc. Information would be collated according to the means used to effect these changes: (a) improvement of crop cultivation and livestock husbandry, (b) formulation of buying/selling tactics for inputs/outputs and (c) provision of social infrastructure.

14. Specific details would focus on farmer acceptance and the technical performance of the development instruments of (a) provision of long-term credit for on-farm investme:ts in well irrigation, limited mechanization, dairy livestock facilities ky-fed cattle, forage crops, storage facilities, etc., (b) provision of short-term credit for improved potato seed, insecticide, fertilizer, etc., (c) technical advice and assistance to participants and (d) provision of roads and health, water, and waste facilities.

Examples of information collected would be:

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

(b) Financial: prices paid and received at the farm and group level, costs and returns for productive investments, on-farm consumption, costs of services provided and recovery of costs, credit data.

(c) Technical: base yields, yield response to improved techniques, yield and output variance and causes (rainfall, frost incidence, etc.). ANNEX 4 Page 5

(d) Organizational: formation and participation of groups (number of groups, number of members, administrative performance, operating results, adequacy of records), effectiveness of technical assistance structure (procedures, technician/group ratio, etc.).

Much data are 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.

Cost and Cost Sharing

15. 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$2.4 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.

February 2, 1976 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 Agricultural Technician, MACA CORDEPAZ BAB Project Manager Project Farmers

PROJECT MANAGER Deputy Project Manager

immmmmmmmmme Ad ministration

Services Department Engineering Department

Production Group Services Development Irrigation Machinery

World Bank - 15269(R) ANNEX 4 Table 2

BOLIVIA

INGAVI RURAL DEVELOPMENT PROJECT

Technical Services

Investment Cash Cost (amounts in $b 'U)

------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 1 30 1 30 1 30 5 150 Housing " 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 3,360

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 conditions. 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 area. In general, a suitable road network would be needed for the movement of inputs to farms, 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 are 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. ANNEX 5 Page 2

5. Existing dirt tracks would be upgraded to roads, existing roads would be improved, and all would be maintained during the project implementation period of five years by SNC (Government would be solely responsible for maintenance after the implementation period). Drainage structures would be installed as required. The main features would be:

(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-m 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$945,000) 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 roads improvement and about 30% to the cost of road maintenance in the form of unskilled labor. The remaining costs would be financed by the Bank and the Government and would not be recovered from the beneficiaries. Current (maintenance) cost for the sixth and subsequent years would be borne by the Government except for the road work tax of three days of work per year per family. ANNEX 5 Page 3

Implementation

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

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.

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 project roads would include regrading by motor graders after the wet season, some spot gravelling, and drainage clear- ing. SNC would carry out this work by force account with the participation of project beneficiaries.

November 24, 1975 ANNEX 5 Table 1

BOLIVIA

INGAVI RURAL DEVELOPMENT PROJECT

Road System

Froject Roads

Degree Improvement Equivalent Unit Total Length Required Distance Cash Cost Cash Cost (km) (km) ($b'000/km) ($b'000)

6-m Roads

Viacha-Capiri 10 20 2 330 660

5-m Roads

Viacha-Remedios 20 85 17 179 3,046 Additional drainage works 1 ,184

Subtotal 20 85 17 h,230 h-m Roads

Pan de Azucar Access 2 100 2 146 291 Irpa Chico Access 4 100 4 146 582 Additional drainage works 77 Achica Abajo Access 8 100 8 146 1,165 Additional drainage works 384 Collahua-Coniri 10 100 10 146 1,456 Collahua Farm 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 Achica-Road 1 2 100 2 146 291 Masu Cruz-Road 1 2 100 2 1h6 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 2 BOLIVIA

INGAVI RURAL DEVELOPMENT PROJECT

Road System

Investment and Current Cash Costs ($b '000)

Investment Cost

Component ------Year ------1 2 3 4 5 Total 6-m Road (2 k1/ 64 595 - - 659 5-m Road (17 km!) 632 1,904 1,694 - 4.,230 h-m Road (52 knL) 1,240 3,720 3,303 - - 8,263 Maintenance - 13 64 102 190 369

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

Physical Contingency (15% on construction and 10% 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 h 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 6 Page 1

BOLIVIA

INGAVI RURAL DEVELOPMENT PROJECT

Health Component

A. Background

1. The health status of the population of the project area is similar to that of other poor rural areas, in Bolivia. Communicable diseases, primarily respiratory and gastrointestinal, along with trauma, malnutrition and pregnancy complications, are the major causes of morbidity and mortality. Reliable statistics do not exist for the project area but the crude death rate for Bolivia is estimated at 10 per 1,000, one of the highest in Latin America, and infant mortality in the rural areas, while estimated at 154 per 1,000 live births, is probably closer to 250 per 1,000 due to severe under- reporting.

2. Much of the observed mortality and morbidity of the project area is preventable. The gastrointerestinal diseases would be greatly reduced with the existence of adequate drinking water and sanitation (see Annex 7, Water and Waste System). Improved nutrition would decrease both maternal and infant mortality and morbidity in addition to increasing the resistance of all persons to disease (the increased production and consumption by the project area population as part of the overall project would contribute to improved nutrition). Basic medical care (e.g. vaccinations, primary medical care, etc.) would also reduce the incidence and virulence of the most important diseases affecting the project area.

Facilities

3. In addition to the traditional healers and midwives, where most people receive care, there is one hospital at Viacha and one operating health post at Laja in the project area. The Viacha hospital is classified as a "Health Center Hospital". As of late 1974, it had one full-time and one part-time physician assigned by the Ministry of Social Welfare and the Public Health (MPSSP). A railroad physician is there half-time. The 34-bed hospital was constructed a few years ago with the cooperation of the Health Ministry and the Railroad Union. In addition, a 12-bed annex was completed in 1973 through US donations. The hospital is relatively well-equipped with most equipment coming from US donations. The x-ray unit is old but functioning. The hospital is considered one of the best rural facilities in Bolivia in that it has: (i) a laboratory equipped to do biochemistry and bacteriology; (ii) a good administration run by experienced nuns with financial support from religious sources in the US; and (iii) a health education program involving many village leaders in surrounding communities. ANNEX 6 Page 2

Utilization

4. Utilization of the Viacha hospital for in-patient services is high for rural Bolivia, but actually quite low (40-50% bed occupancy). Out-patient utilization has been about 300 visits per month, in addition to the Railroad Union patients who share the facility. This gives a utilization rate of 0.07 visits per person per year for the project area population, indicating that the local population barely utilizes the Viacha facility. For many people it has been easier to reach La Paz because of the transportation and the security that medical attention will be available. There is one health post in operation, at Laja. Recently, health posts were installed in Coniri and Irpachico. However, these posts were discontinued because of low utilization.

5. One seemingly successful program operating in the project area is the Mothers' Clubs. Twelve of these clubs are supervised by the Nutrition Division of the Ministry of Health, with some 1,500 participating mothers. The clubs are organized to: (i) distribute donated foods (US P.L.480); (ii) provide nutrition education; and (iii) develop (eventually) consumer coops.

Obstacles

6. The major obstacles for developing health programs in the project area, as in other areas, are: (i) lack of community interest (probably due to previous irrelevance of various programs); (ii) inadequate staffing and training; (iii) inadequate supervision, maintenance of supplies and administration; and (iv) poor financial support.

B. The Project

Scope

7. In order to provide minimal health services to the population of the projent area, the area's present health activities will be expanded to include six satellite health posts surrounding the centrally located Viacha hospital, which would serve as the referral center. Each health post would be staffed by two auxiliary nurses and mobile units would be provided to facilitate supervision, administration and transportation. The health component would be implemented by the MPSSP under an agreement with the Project Unit. Assurances were obtained that the Government would be responsible for full operating costs of the health system. The health component is closely related to the project as a whole and with drinking water and privy program in particular. Both will make important contributions to improvements in the health status of the project area population. ANNEX 6 Page 3

8. Utilization of formal health services has been extremely low both at Viacha and at the health post(s) in operation. This low utilization is due to: (i) no assurances of staff presence; (ii) a lack of drugs, medications and equipment; and (iii) various socio-cultural barriers. The project would attempt to confront these obstacles in the following ways: (i) by training staff to work at the health posts; (ii) by having the community select for training for these positions persons from the communities to be served; (iii) by financing basic necessary equipment for the health posts; (iv) by financing basic transportation to facilitate outreach activities of health post staff; and (v) by obtaining assurances that all necessary operating costs would be provided by Government.

Satellite Health Posts

9. The satellite health posts will be located within one hour's walk of the 3,000 to 5,000 persons to be served by each post. The distance from each health post to the Viacha hospital would be between 10 and 20 kilometers. The new posts would be 600 sq. ft. three room structures similar to the four already existing. The existing posts require minor improvements. The new posts would be constructed by the National Community Development Service (SNDC) with labor participation by the beneficiary communities. The participation is estimated at 30% of the post costs and will be supervised by the MPSSP. Basic equipment and an initial stock of medications would be provided through the project.

10. Each health post would be staffed by two auxiliary nurses assigned by the MPSSP. Assurances were obtained that the Government would provide the necessary staffing. Auxiliary nurses currently receive six months' training at the School of Public Health in La Paz. As part of the project, classroom instruction would be given in La Paz, while the practical instruction would be organized in the project area. An additional three months' in-service training would be provided at the various health posts. Scholarship funds for both the six-month and three-month periods would be provided through the project. Short additional courses are being given to provide added training for the MCH and nutrition aspects. Fifteen additional auxiliary nurses would be trained through the project. Special emphasis would be given to preventive services in the training. Candidates for training would be selected by the communities where they would work.

11. The responsibilities of the axuiliary nurses would include: (i) nutrition and other health education outreach activities; (ii) training and supervision of village leaders and midwives in preventive programs; (iii) detection of communicable diseases (e.g. TB, measles, gastrointestinal diseases, etc.); (iv) immunization campaigns; and (v) assistance to the well and privy programs. To be successful, however, the nurse auxiliaries would require considerable supervision and administrative support. ANNEX 6 Page 4

12. Local health committees of the populations to be served by the health posts would be formed under the project. These local health committees would choose the two persons to be trained as nurse auxiliaries of sanitarios (the male equivalent). A major function of the committees would be to identify the local healers and midwives. Special short courses would be provided under the project for these traditional healers. Recently there have been successful short courses for local midwives in other parts of the altiplano. To help in the creation of health committees, an active promotion effort would be undertaken by the Unidad Santiaria de La Paz in each of the areas where health posts would be located.

Supervision

13. Supervision of the health posts would be through the administrative unit based at the Viacha hospital responsible to the Unidad Sanitaria de La Paz. The unit will include: (i) a graduate nurse to supervise the auxiliary nurses in their various functions; (ii) an administrator to coordinate the maintenance and supply of materials and drugs at the health posts, to manage the financial aspects of the program, and to oversee the data collection and evaluation; and (iii) two sanitary engineers to work with the well and privy program, a very important part of improving health in the project area.

14. To facilitate supervision, provide physician care, and provide transportation of referred cases to the Viacha hospital, mobile units are included: one jeep and one "stretch" jeep which would double as an ambulance. Two motorcycles, for the sanitary engineers, and bicylces, for the nurse auxiliaries, are also included as would be radios for communication between the hospital and the health posts. Operation and maintenance would be handled by the administrator.

Viacha Hospital

15. In 1974, Viacha hospital was assigned 1.5 physicians by the MPSSP. Under the project the MPSSP would increase the staffing to three physicians. Other hospital staffing would remain as at the present time. The nuns currently involved in the administration, nursing and health education programs would continue. Initial screening would be done by the hospital nurses. This will allow for a more efficient use of physician time where they would only see those patients which require their more specialized skills. Non-physicians would handle the large number of outpatient visits which do not require physician skills.

16. The project includes the addition of 100 m2 for the project administrative unit and for storage space. Space would also be provided for a classroom for health education programs. Funds are provided for basic hospital out-patient equipment as well as replacement parts for the x-ray machine. Radios are also included for communication between the hospital and each of the health posts. ANNEX 6 Page 5

Other Agencies

17. Agencies involved in the health component would include the MPSSP and the Unidad Sanitaria de La Paz Department. The Maternal and Child Health, Nutrition, and Transmissible Disease Units in La Paz would be called upon to help supervise the preventive programs in the project area. The Community Development office would be called upon to assist in the construction and upgrading of the health posts.

18. The construction and upgrading of the six health posts would cost $b 426,000 (US$21,300), of which $b 284,000 (US$14,200) would be the cash cost. The remainder would be provided through community contribution of labor and materials from the area. Medical equipment for five of the six health posts would cost $b 80,000 (US$4,000) - one health post is already equipped. An initial stock of medicines (a revolving fund supported by patient contributions) for the six health posts would cost $b 96,000 (US$4,200). The mobile units, including the jeeps, motorcycles, and bicycles would cost $b 394,000 (US$19,700). Basic medical equipment for one jeep plus vehicle maintenance would cost $b 27,000 (US$1,350). Hospital improvements including construction, equipment, and radios for the hospital and health posts would cost $b 360,000 (US$18,000). Training of the nurse auxiliaries (and sanitarios), traditional healers and general health promotion activities would cost $b 309,000 (US$15,450). This includes the cost of six months' training and six months' additional in-service training for the auxiliaries, plus the requisite supervision. This gives a cash cost of $b 1,550,000 (US$77,500). Contingencies estimated at 15% of cash cost would amount to $b 230,000 (US$11,500). The total cash cost would be $b 1,780,000 (US$89,000).

Evaluation

19. An evaluation of the impact of the health interventions on the target population would be made during project implementation. Baseline information would be gathered in small sample areas during the first year of the project and again at periodic intervals. Basic mortality, morbidity, and utilization data would be routinely collected. The administrator would be responsible for overseeing the data collection. Responsibility for this element would be with the Unidad Sanitaria de La Paz. Table 1 BOLIVIA

INGAVI RURAL DEVELOFMEIT PROJECT

fealth Component (cash costs)

Item Units Unit Josts ($b) Total Costs (;b)

Health Posts

- upgrading h 21,000 84,000 - construction 2 100,000 200,000 - equipment 5 16,000 80,000 - medicines 6 16,000 96,000

Mobile Units

- jeep 160,000 320,000 - motorcycle 2 16,000 32,000 - bicycle 14 3,000 )12,000 - equipment 1 3,000 3,000 - maintenance 3 8,000 24,000

Hospital

- upgrading 280,000 260,000 - equipment 40,000 80,000

Training

- scholarships 17 12,000 180,000 - supervision 1 69,000 69,000 - materials 20,000 60,00C

Sub-total 1,550,000 Contingency (15,) 230,000

Total 1,780,000 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 9C 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 2are scattered throughout the project area, which extends over about 800 km . 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

4. Since the full benefits of the total health package of the project would be realized only if most of the families in the area 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 advantages of sanitary ANNEX 7 Page 2 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 groundwater 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 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 woud be used instead of the less expensive buckets (about $bl,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 drill 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 well 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. ANNEX 7 Page 3

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 18.6 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 (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 200,000 (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 300,000 (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. Beneficiaries 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 supplies needed to maintain the wells and would maintain the pit privies themselves, and partly 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,

(d) the existence of pit privies.

The survey would 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. ANNEX 7 Page 4

A work plan then would be prepared which would 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 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. The cost of this specialists ($b 840,000 or US$42,000/year) is included in total project cost under technical services.

November 24, 1975 ANNEX 7 Table 1

BOLIVIA

INGAVI RURAL DEVELOPMENT 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 supervisioni 1,000 1,000

Sub-Total 4,300 5,000

Physical Contingency (10%) 430 500

Total h,730 5,500

Pit Privy

Component Cost

Excavation - Base 55 Slab 45 Mound - House - Engineering and supervision- 50

Sub-Total 150

Physical Contingency (10%) _5

Total 165

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 4 5

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 -1600 2,920 5,280 5,280 5,280 20,360

Current Cost Year Component 1 2 3 4 5 6-20 Maintenance and inspection 5 27 55 109 191 273 Physical Contingency (10%) - 3 5 11 19 27

Total 5 30 60 120 20 _00

November 24, 1975 ANNEX 8

BOLIVIA

INGAVI RURAL DEVELOPMENT PROJECT

1/ Investment Cost Phasing ($b'000)

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

On-Farm Investments h,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 20,400

Power Line 5,800 - - - - 5,800 Total 21,670 60,750 66,410 22,060 17,110 195,000

1/ Base cost plus physical contingency.

October 28, 1975 ANNEX 9

BOLIVIA

INGAVI RURAL DEVELOPMENT PROJECT

1/ Estimated Schedule of Disbursements (US$'000)

IBRD Fiscal Year Cumulative Disbursement Balance and Quarter at End of Quarter of Loan

1976/77 September 30, 1976 100 9,400 December 31, 1976 200 9,300 March 31, 1977 300 9,200 June 30, 1977 500 9,000

1977/78 September 30, 1977 600 8,900 December 31, 1977 900 8,600 March 31, 1978 1,400 8,100 June 30, 1978 2,100 7,400 1978/79 September 30, 1978 2,700 6,800 December 1, 1978 3,400 6,100 March 31, 1979 4,200 1,300 June 30, 1979 5,000 6,

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

1980/81 September 30, 1980 7,500 2,000 December 31, 1980 7,900 1,600 March 31, 1981 8,200 1,300 June 30, 1981 8,600 900

1981/82 September 30, 1981 8,800 700 December 31, 1981 9,500 0

1/ Assumes loan effective by June 30, 1976. ANNEX 10

BOLIVIA

INGAVI RURAL DEVELOPMENT PROJECT

Economic 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 according to the methods shown below. Key assumptions and derived conversion factors 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 4,000 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 of the ratio of the shadow exchange rate to the official exchange rate and was derived from the formula: SCF= M + X M + t + X - t m x

where M = 9-year average of imports X = 9-year average of exports t = 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% for all on-farm items including electrical supply. The electricity charge of $b 1.06/KWH represents the base rate plus recovery of the incremental capital cost over 30 years at 8%. For off-farm items such as roads; and health, water and waste facilities, costs were not recovered except for 5% charge for drilled wells for drinking water. November 24, 1975 BOLIVIA

INGAVI RURAL DEVELOPMENT 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

INVESTIMENTS

ON FAIM MODEL 1, Irrigation Systems 4,920 14,1471 10,761 ,74 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 5,4oo 5,490 - TOTAL INVESTMENT: 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 1,034 1,034 1,034 1,034 Water & Waste - - - - - 300 300 300 300 300 TOTAL OPERATING COSTS - 9,639 19,658 20,171 23,054 32688 30,938 37,558 35,858 ,

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

INCREMENTAL ECONOMIC 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 - - - - 1,24o 1,240 1,663 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 INCREMENTAL BENEFIT: (22,869) (47,150) (35,697) (2,361) 11,908 18,397 21,59d 17,586 21,698 32,698 33,698

RATE OF RETURN: 15%

October 20, 1975 IBRD 11737 68 25' To Huarina 68*20' 68i15' 68 10' 68.05 OCTOBER 1975

16*30 BOLIVIA THE INGAVI RURAL DEVELOPMENT PROJECT

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