Document of The World Bank LE COPY

FOR OFFICIAL USE ONLY Public Disclosure Authorized

Report No. 2539-PE

PERU Public Disclosure Authorized STAFF APPRAISAL REPORT

OF THE

LOWER PIURA IRRIGATION REHABILITATION PROJECT Public Disclosure Authorized

October 15, 1979 Public Disclosure Authorized

Regional Projects Department Latin America and the Caribbean Regional Office

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. Currency Equivalents (At February 1979 Exchange Rate)

US$1 = Peruvian S/.$205.0 S/.$100 = US$ 0.49 S/.$1 million = US$4,900.0

Weights and Measures

2 1 hectare (ha) = 10,000 m = 2.47 acres 1 kilometer (km) = 0.62 miles 1 square kilometer (km ) = 0.39 sq. miles = 100 ha 1 kilogram (kg) = 2.2 pounds 1 liter (1) = 0.26 gallons 1 metric ton (mt) 3 = 1,000 kg = 0.98 long ton 1 million cubic meter (Mm ) = 264.18 million gallons

Abbreviations

ACCHP: Asociacion de Consultores Proyecto Chira-Piura The Chira-Piura Consultants Association BAP: Banco Agrario del Peru Peruvian Agricultural Bank CAP: Cooperativa Agraria de Produccion Agrarian Production Cooperative CENCIRA: Centro Nacional de Capacitacion para la Reforma Agraria National Training Center for Agrarian Reform CNP: Consejo Nacional de Produccion National Production Council CRIA: Centro Regional de Investigacion Agropecuaria Regional Center of Agricultural Research DDA: Direccion de Desarrollo Agropecuario de DEPECHP Agriculture and Livestock Directorate of DEPECHP DEO: Direccion de Estudios y Obras de DEPECHP Studies and Works Directorate of DEPECHP DEPECHP: Direccion Proyecto Especial Chira-Piura Chira-Piura Special Project DEPERTC: Direccion Proyecto Especial de Rehabilitacion de Tierras Costeras Special Project for Rehabilitation of Coastal Lands DGAC: Direccion General de Agricultura y Crianzas General Directorate of Agriculture and Livestock DGAS: Direccion General de Aguas y Suelos General Directorate of Water and Soil DGC: Direccion General de Comercializacion General Directorate of Marketing DGFF: Direccion General de Silvicultura y Fauna General Directorate of Forestry and Wildlife DGRA: Direccion General de Reforma Agraria General Directorate of Agrarian Reform FOROFFICIAL USE ONLY

DOM: Direccion de Operacion y Mantenimiento de DEPECHP Operation and Maintenance Directorate of DEPECHP DRT: Direccion de Rehabilitacion de Tierras de DEPECHP Land Reclamation Directorate of DEPECHP ENCI: Empresa Nacional de Comercializacion de Insumos National Marketing Company EPSA: Empresa Publica de Servicios Agropecuarios Public Company of Agricultural Services FAO: Food and Agricultural Organization FUNDEAL: Fundacion para el Desarrollo del Algodon Cotton Development Foundation ICB: International Competitive Bidding IDB: Banco Interamericano de Desarrollo Interamerican Development Bank IECO: International Engineering Company INIA: Instituto Nacional de Investigacion Agricola National Agricultural Research Institute LCB: Local Competitive Bidding MAA: Ministerio de Agricultura y Alimentacion Ministry of Agriculture and Food UNP: Universidad Nacional de Piura National University of Piura

This document has a restricteddistribution and may be used by recipients only in the performance of their officialduties. Its contents may not otherwisebe disclosed without World Bank authorization.

PERU

LOWER PIURA IRRIGATION REHABILITATION PROJECT

Table of Contents

Page No.

I. THE AGRICULTURAL SECTOR ...... 1

A. General ...... 1

The Resource Base ...... 1 The Coastal Zone ...... 1 The Sierra ...... 2 The Selva ...... 2 Agrarian Reform ...... 2 Other Policy Measures and Current Trends ...... 3

B. Irrigation and Drainage Subsector ...... 4

C. Previous Bank Involvement and Proposed Strategy for the Sector ...... 5

D. Institutional Framework ...... 6

II. THE PROJECT AREA ...... 7

Location ...... 7 Climate ... 8 Soils, Topography and Drainage ...... 8 Existing Infrastructure ...... 9 Land Use ...... 9 Population and Employment ...... 10 Land Tenure and Farmer Organizations ...... 10 Agricultural Services ...... 11 Extension ...... 11 Research ...... 11 Agricultural Credit ...... 11 Marketing ...... 12

This report is based on the findings of an appraisal mission consisting of Messrs. J. Roman, E. Brook, M. Raczynski, and D. van der Sluijs (Bank), and Messrs. A. Kogan and C. Bower (consultants) that visited Peru in November 1978 and a follow-up mission consisting of Messrs. J. Roman, E. Brook, and D. van der Sluijs (Bank) and W. Johnston (consultant) in February 1979. Table of Contents (Continued)

Page No.

III. THE PROJECT ...... 12

Project Origin ...... 12 Project Description ...... 12 Detailed Features ...... 13 Irrigation Works ...... 13 Flood Protection Works ...... 14 Drainage Works ...... 14 On-farm Investments - Development Credit ..... 14 Equipment ...... 14 Technical Services ...... 14 Consultants' Services ...... 14 Status of Project Preparation ...... 15 Water Supply and Demand ...... 15 Water Quality ...... 16 International Waters ...... 16 Implementation Schedule ...... 16 Cost Estimates ...... 16 Financing ...... 17 Procurement ...... 18 Disbursement ...... 19

IV. PROJECT ORGANIZATION AND MANAGEMENT ...... 20

Executing Agency ...... 20 Engineering and Construction of Civil Works .... 20 Land Reclamation, Drainage and On-farm Works ... 20 Operation and Maintenance ...... 21 Agricultural Extension and Research ...... 21 Development Credit ...... 22 Consultants' Services ...... 23 Monitoring and Evaluation ...... 23 Accounts and Audits ...... 23

V. PRODUCTION, MARKETS, PRICES, BENEFICIARIES AND COST RECOVERY ...... 24

Future Land Use and Cropping Pattern-- Yield, Production ...... 24 Market Prospects and Prices ...... 25 Beneficiaries ...... 25 Water Charges ...... 26

VI. BENEFITS AND JUSTIFICATION ...... 27

Benefits ...... 27 Risk and Sensitivity ...... 27 Environmental Impact ...... 28

VII. SUMMARY OF AGREEMENTS REACHED AND RECOMMENDATION ...... 29 Table of Contents (Continued)

ANNEXES

1. Supporting Tables and Charts

1 Volume of Agricultural Production 2 Climatic Data 3 Land Reclamation Service - Cost Estimates 4 Agricultural Extension Service - Cost Estimates 5 Maintenance Equipment - CIF Peruvian Port 6 Irrigation Water Requirements 7 Water Balance - Medium and Lower Piura Valley 8 Project Cost 9 Schedule of Expenditures 10 Financing Plan 11 Estimated Schedule of Disbursement 12 With and Without Project, Area Development and Cropping Pattern 13 Yields Per Hectare and Volume of Production With and Without Project 14 Producer Prices at Farmgate Level 15 Agricultural Labor Requirement 16 Crops Production Cost per Ha - 1.8-ha Farm Model 17 Crops Production Cost per Ha - 15-ha and 1,000-ha Farm Model 18 1.8-ha Farm Model 19 15-ha Farm Model 20 1,000-ha Farm Model 21 Annual Operation and Maintenance Cost (Civil Works) - O&M 22 Rent and Cost Recovery 23 Project Production Benefits 24 Rate of Return Streams 25 Rate of Return and Sensitivity Analysis

Chart No. 20376 Implementation Schedule Chart No. 20375 Organization Chart

2. List of Selected Documents and Data Available in the Project File

MAPS

IBRD 14158 - Chira-Piura-San Lorenzo System IBRD 14159 - Lower Piura Irrigation Rehabilitation II Project

PERU

LOWER PIURA IRRIGATION REHABILITATION II PROJECT

I. THE AGRICULTURAL SECTOR

A. General 1/

1.01 Agriculture contributes about 13% to Peru's GDP, but it occupies more than 42% of the labor force and accounts for about 22% of total merchan- dise exports. Food processing employs an additional 4% of the labor force and contributes about 9% of the GDP. The value of food production at constant prices increased only at an average of 1% per annum from the mid-1960s to the mid-1970s, while, during the same period, population increased by an average of 2.9% per annum. Consequently, the country's dependence on imported food- stuffs has grown substantially, mainly in dairy products, pulses, vegetable oils and grains such as wheat and maize. At the same time, the volume of agricultural exports declined and by 1975/76 was only about 60% of its 1962/63 level. As a result, the value of agricultural imports as a percentage of agri- cultural exports has increased significantly during the last decade. Improvement of the performance of the agricultural sector has now become critical to the country's economic progress and to the well-being of the rural population. Annex 1, Table 1 shows agricultural production during the period 1961/78.

The Resource Base

1.02 In comparison to other Latin American countries, Peru has a rela- tively limited natural resource base. While the total area of the country is 128.5 million ha, only about 3.7 million ha, or 2.9%, are cultivable and another 22 million ha (17%) are natural pastureland. Most of the soils suit- able for intensive agriculture are already cultivated, but additional land could be developed either in the Ceja de Selva (lower slopes of the Andes), which would be expensive because of the lack of access and basic infrastruc- ture and services, or in the coastal zone, also requiring substantial invest- ments to improve presently unproductive land. The ratio of cropland actually harvested to rural population is 0.34, but figures vary according to the three main ecological regions into which Peru can be divided--the Coastal Zone, the Sierra and the Selva.

1.03 The Coastal Zone. The Coastal Zone in the west of the country, consists mainly of flat desert plains, sand dunes and the dry, heavily eroded Andean foothills. It is a narrow 3,000-km-long belt, covering about 13 million ha (10.2% of the total land area), where about 46% of the country's

1/ An Agricultural Sector Survey Updating Report was issued in September 1977. The findings of that report are incorporated in Peru: Long-Term Develop- ment Issues (2204-PE) of April 16, 1979. -2- population lives. Coastal agriculture is limited to the river valleys where irrigation is possible; these valleys produce over 40% of the country's gross value of crop production, including sugar, rice, cotton, maize, potatoes, citrus, olives and grapes. The region enjoys relatively close proximity to the urban markets and a good transportation network and other infrastructure and is relatively prosperous.

1.04 The Sierra. The Sierra, or Andean highland region, covers over 33.2 million ha (26% of the total land area) and accounts for about 44% of the population. It consists of steep mountains reaching over 5,000 m and high valleys located between the mountain ranges. Some 2.3 million ha in the Sierra are cropped and about 17.3 million ha are used for grazing, mostly under marginal conditions because of steep slopes and high altitudes. Severe topography, erratic rainfall and extreme changes in temperature make farming difficult and limited to a short season, leading to low agricultural produc- tivity. While there is little scope for putting new land into production, there is potential for improving livestock productivity.

1.05 The Selva. The Selva, or jungle region, east of the Andes mountains, covers about 81.6 million ha (63.8% of the total land area) and accounts for 10% of total population. ONERN, the Government's Natural Resource Evaluation Agency, has classified most soils in the lower Selva as marginal and suitable for grazing and forestry. Soils in the foothills between the Andes and the lower Selva, called Ceja de Selva, are generally of better quality, and agriculture there is concentrated primarily in four river valleys. Fruits, coffee and tea are the main crops in the Ceja de Selva, and livestock produc- tion is being developed in some areas. Despite the relatively low soil quality, the Selva region has been gaining importance economically because of oil exploitation and construction of two Trans-Andean Highway projects, one financed by the Bank and the other by the Inter-American Development Bank. It is likely that these projects will give impetus to further agricultural development in the region.

Agrarian Reform

1.06 In June 1969, the Government approved a new land reform law that was aimed at (a) expropriation of 14,500 estates covering 43% of the country's gross farm area (10.3 million ha) by the end of 1977; and (b) adjudication of 10.6 million ha, including 430,000 ha of state land to agricultural workers, small farmers and Indian communities. These targets were by and large reached by the end of 1978. Altogether, 434,000 rural families, out of a total of 1.8 million families, gained access to land through this law.

1.07 A typical feature of the agrarian reform in the initial stage, which has been achieved, is that it did not result in the parceling up of large landholdings among individual farmers, but, rather, left intact large estates (cotton and sugar estates in the Costa, cattle and sheep holdings in the Sierra), which are now run on a commercial basis under various forms of cooperative associations (without individual holdings). By and large, these associations are working fairly well in situations where a large-scale -3- organizationfor production already existed and the workers, now members of the cooperative,were acquaintedwith the technologiesused. The main problems still encounteredare (a) that a large number of techniciansand administrators previouslyworking on private estates left and had to be replaced by less qualified staff; and (b) cooperativemembers push for increasedwages and fringe benefits and purchase of labor-savingmachinery, which has resulted in a difficult financial situation. On the other hand, Government'sefforts to get small farmers, landless workers and Indian communitiesto work together in production and service cooperativeshas had little success in spite of generous financialbacking; and most farmers continue to farm their plots individually.

1.08 Another importantfeature is that some 78% of the rural population, 65% of them landless workers or farmers with less than 2 ha, were left untouched by the agrarian reform. In a sense, these groups are now worse off than before; for the landless workers, employment opportunitieson the large cooperativefarms have now become more scarce, and Government has channelled its agriculturalsupport services almost exclusivelyto the cooperatives.

Other Policy Measures and Current Trends

1.09 Concurrentwith implementationof the agrarian reform, Government adopted other policies which have tended to greatly increase its influence in the productionand marketing of agriculturalcommodities. In 1975, it created a National Production System (SPA) under which production targets for all priority commoditiesare proposed by a National Production Council (CNP). They are then relayed to regional and local authoritiesand finally to produc- tion nuclei, which are groupings of farmers with at least 3 ha of land, for comments. Final production targets are then set by CNP after considerationof the comments. Individualproducers must comply with the productionplan of their nuclei; otherwise,no credit, fertilizeror irrigationwater will be provided. The Government has also (a) enforced price control by setting prices at the producer and wholesale and consumer levels and by fixing marketing margins; (b) set up a series of Government organizationsto enforce price controls and control marketingmechanisms and to carry out all marketing of agriculturalexports and all imports of basic foodstuffs;and (c) set up a complex system of transportlicenses and controls to regulate the movement of produce between farms and consumers.

1.10 To an important,although not wholly quantifiable,extent, the Government policies regardingproduction and prices have braked the expansion of output. From 1968 to 1977 agriculturaloutput increasedby only 8%, while per capita food production fell by 10%. Output performanceappears to have been especiallypoor since 1972. Between the various products, the trends have been disparate, e.g., rice and livestockoutput has increased,potato productionhas stagnated;and sugar declined. - 4 -

1.11 In order to increase production, reduce agricultural imports and improve producers' returns, the Government has been revising its price control and marketing policies. In 1978, producer prices were substantially increased; cotton prices are now based on world market levels and restric- tions on production were relaxed; and consumer subsidies on some food products were discontinued.

B. Irrigation and Drainage Subsector

1.12 Of the total 3.7 million ha of cropland in Peru, about one-third, or 1 million ha, are irrigated. Peru has abundant water resources, which, however, are poorly distributed geographically: most of the more important river systems flow from the Andes mountains to the east, into the Amazonian basin, while Peru's better agricultural lands are located west of the Andes. Some 50 rivers, flowing to the west through the coastal region into the Pacific, provide the bulk of irrigation water for about 770,000 ha in the Costa and for six of the 10 largest cities.

1.13 The coastal valleys where water is available have conditions that are generally favorable for high crop production due to potentially good soils and near optimal solar radiation and temperatures. Maximum river flows occur between December and March (summer), when average daily temperatures along the coast are above 200 C. This is the cropping season for the main annual crops such as cotton, maize, sorghum, rice and vegetables. Sugarcane is grown in the northern coastal areas.

1.14 Prior to the land reform in the late 1960s, most of the construction and maintenance of the irrigation and drainage infrastructure was taken care of by the private sector, with hardly any Government support. However, the systems were developed on a piecemeal basis because large-scale irrigation investments and management on a regional basis were beyond the capacity of the private sector to handle. As a result, irrigation systems are too old and inadequate to achieve efficient water management and optimum use of land and water resources. Moreover, as drainage facilities are largely lacking, water- logging and salinization has increasingly become a problem: it is estimated that a total of 250,000 ha of irrigated lands are now affected to varying degrees, and the affected areas are increasing. Since the salts are generally non-alkali and soils are generally light to medium textured, the land can be reclaimed by leaching and construction of proper drainage. In facing the problem of scarce land resources, a rapidly growing population and growing dependency on imported foods, the Government, in 1977, decided to initiate a program for the rehabilitation of coastal lands as a more quickly maturing and less costly alternative to large new irrigation schemes. The first stage of this plan is Irrigation Rehabilitation Project I, which, with Bank finance (Loan 1403-PE), aims at the rehabilitation of six coastal valleys, thereby reclaiming and putting into agricultural production some 19,000 ha. The project is in the early stage of implementation, with the first year devoted mainly to establishing the executing agency and preparing final engineering designs; construction is slightly behind schedule. 1.15 Water rights and managementare governed by the GeneralWater Law of July 24, 1969. All waters from whatever source are the property of the state, and previous private water rights have been cancelled. Responsibility for control and use of the water rests with the Ministry of Agricultureand Food (MAA), which allocates it in consultationwith the farmers'water users' associations.

1.16 Under the law, farmers should, in accordancewith their capacity, pay water charges, tarifas, to cover full operationand maintenance,plus a reasonableamount of the investmentcosts of the works. The General Direc- torate of Water and Soil of MAA is responsiblefor establishingwater rates and reviewing them annually. However, water charges are nominal, collection rates are only about 40%, and receipts do not cover O&M costs. Moreover, the monies that are collectedgo to the national treasurerand not to the irrigationdistricts where farmers could see a return for the fees they paid. In practice,maintenance is carried out by the water users' associations,which are authorizedto impose charges, and quotas, to pay for the work.

C. Previous Bank Involvementand Proposed Strategy for the Sector

1.17 The Bank has made some 10 agriculturalloans to Peru. Five of them, in the period 1954-73, totallingUS$55.0 million, were for agriculturalcredit and were channelledthrough the Peruvian AgriculturalBank (BAP) (105-PE, 162-PE,257-PE, 415-PE and 933-PE). In general, BAP performancehas been good; disbursementsof the last loan (933-PE)have been completedand pre- paration of a sixth loan is underway. Two other loans (67-PE of 1952 and 98-PE of 1954), totallingUS$3 million, were for farm machinery imports and the other three for irrigation. Loans 114-PE of 1955 and 418-PE of 1965, total- ling US$24.5million, financed irrigationworks and land settlementin the San Lorenzo area within the Chira-Piurabasins. Owing to managerialproblems, inadequatecounterpart funding and shortage of water, the second of these loans encounteredconsiderable difficulties and took 11 years to disburse but neverthelessachieved its basic goals and produced importantbenefits (Project PerformanceAudit Report, SECM-48 of January, 1978). The third irrigation project, Loan 1403-PE signed in 1977, was referred to in paragraph 1.14.

1.18 It is anticipatedthat the Bank will intensifyits lending operations in the agriculturalsector in the coming years in supportof the Government's policy initiativesand investmentprograms. Further large-scaleirrigation rehabilitationand drainage projects on the Coast are a distinct possibility as the Government further strengthensits implementationcapabilities in this area. Financingof small-scaleirrigation construction and improvement subprojectscarried out under the aegis of a national program in both the Coast and the Sierra is to be further examinedwith the authorities. The Bank has appraiseda small integratedrural developmentproject in the Southern Altiplano (Puno) and the experienceto be gained in its executionshould pro- vide the basis for future projects of that type in the Sierra. There are considerablepossibilities for promotingtropical tree crop and livestock developmentand rural infrastructurein the Ceja de la Selva, while efforts should be made to identify developmentpossibilities for the lower Selva. 6-

Finally, among the projects with national scope would be those that included term lending for crop, livestock and agro-industrial development through BAP (building on the experience of five previous loans); provision of marketing and storage infrastructure; and strengthening of the agricultural research and extension services. Such an approach would make a direct impact on the productive capacities and quality of life of the low-income rural population.

D. Institutional Framework

1.19 Since 1978, MAA has been responsible for all policies and opera- tions in the agricultural sector. At the central level, under the Minister, MAA operates through two Director Superiors and five General Directorates: Agrarian Reform (DGRA); Water and Soil (DGAS); Forestry and Wildlife (DGFF); Agriculture and Livestock (DGAC); and Marketing (DGC). The Director Superiors and general directorates are responsible for formulating policy and monitoring operations, assisted by 10 general offices (Oficinas Generales) that provide technical, legal and administrative support. Operations at field level are carried out by 13 regional offices (Agrarian Regions), subdivided, in turn, into 24 zonal offices (Agrarian Zones). The Chira-Piura area is under the jurisdiction of Agrarian Region 1, Piura zone.

1.20 Generally, MAA, at both the central and local levels, has suffered from budgetary limitations and administrative red tape and, because of low salaries, has difficulties in retaining qualified personnel, thus limiting its coverage and effectiveness. Compounding the situation, a considerable number of qualified technicians have left because of the economic difficulties the country has faced. To strengthen the operational capacity of the sector, the Government should make efforts to attract qualified and experienced technicians to key managerial positions.

1.21 To overcome the problems facing regional offices, the Ministry has set up a number of so-called Special Projects, which are semi-autonomous offices, reporting directly to one of the Director Superiors. The special projects are responsible for implementing large projects or programs. Among them are the Chira-Piura Special Project (DEPECHP) and the Special Project for the Rehabilitation of Coastal Lands (DEPERTC).

1.22 DEPECHP, since its creation in 1969, has been responsible mainly for construction of the Poechos dam, the Chira-Piura diversion canal and the Lower Piura main drainage network (para 3.01) and for carrying out feasibility studies for agricultural development of the Chira-Piura region. It has also carried out some small resettlement projects for people displaced by the Poechos reservoir. DEPECHP's main strength therefore is in construction, but it has also developed good project managerial capabilities and is gradually becoming involved in agricultural development. DEPERTC was created in 1977 and its main responsibility has been the implementation of the Bank-financed Irrigation Rehabilitation I Project (Loan 1403-PE). -7-

1.23 Other departments and government agencies under MAA are: the National Training Center for Agrarian Reform (CENCIRA); the Public Company of Agricultural Services (EPSA) in charge of marketing basic agricultural products; the National Marketing Company (ENCI) in charge of supply of agri- cultural inputs and marketing of cotton; and the National Agricultural Research Institute (INIA). 1/

1.24 BAP is a government-owned institution with 18 branch offices, 54 agencies and 34 field offices. It has executed five agricultural credit loans (para 1.17), acts as banking agent for the on-farm development credit component of the ongoing Irrigation Rehabilitation I Project (para 1.14) and would provide short- and long-term credit under the project. BAP provides about 85% of institutional credit, 10% is provided by commercial banks and the rest by other development banks and direct Government allocations. About 90% of BAP's annual lending is short-term production credit, mainly to associative enter- prises. Its larger source of short-term resources is the Central Bank through its discount facilities and preferential interest rates. Long-term loans have generally been made using external sources such as Bank or IDB loans. BAP's lending operations have grown in recent years owing to its lending to associa- tive enterprises and decreasing participation of private banks. In the period 1970 to 1975 lending operations increased by about one-third in real terms. However, the volume of long-term development credit has increased to a lesser degree because of lack of resources and reduced willingness to invest by farmers. Although a high level of overdues has been a problem in recent years, an examination of the cash receipts and payments shows a steady continuing improvement in the collection of short-term loans, which account for the greatest part of BAP's lending.

II. THE PROJECT AREA

Location

2.01 The lower Piura Valley project area is part of the contiguous Chira-Piura plains covering, altogether, some 167,000 ha of potential arable land, of which some 137,000 are presently under irrigation with surface and groundwater. The plains are located about 1,000 km north of Lima near the border with Ecuador. The Chira River, with its tributaries, the Quiroz and Chipillico, and the Piura River are the main surface water sources (IBRD Map No. 14158). However, water resources are unevenly distributed with regard to land availability, and the Chira River flow is more abundant and regular than that of the Piura River. Past Government efforts have therefore concentrated on storing and diverting water from the Chira to San Lorenzo plains and to the Piura Valley.

1/ INIA was created in February 1979 but had not yet become operational. It will be responsible for all basic and applied research in the sector and will take over the functions of the four existing regional centers of agricultural research (CRIAs). - 8 -

2.02 In the 1950s and 1960s, partially with Bank finance (Loans 114-PE and 118-PE), the Government developed the San Lorenzo project consisting of diversion works to transfer water from the Quiroz to the Piura and Chipillico Rivers, the San Lorenzo dam on the latter river (260 Mm3) and the Sa. 1C;-nzo irrigation system. Construction of these works brought additional areas under irrigation and alleviated water shortages in the middle and lower Piura Valleys, but did not solve the problem entirely. Therefore, the next stage was construction of the Poechos reservoir (930 Mm3 ) and of the Chira-Piura diversion canal, both of which were completed in 1976 with financing from the Yugoslavian firm, ENERGOPROJEKT, ensuring permanent water supply from the regulated Chira River to the middle and lower Piura Valley.

2.03 The lower Piura Valley, with 34,700 net irrigable ha, extends southward from the city of Piura to the Laguna Ramon. The area is served by good communication facilities. The Pan-American highway connects it with Lima, the rest of the country and Ecuador, and commercial airlines have daily flights from Lima to Piura. Cotton production from the area is exported through the port of Paita.

Climate

2.04 The climate is desertic, with an average annual rainfall of only 62 mm, most of it from January through March. Rainfall patterns are erratic, and, while there are years with virtually no rainfall, daily precipitation as high as 53 mm has also been recorded. Average annual evaporation is 1,840 mm. Monthly average temperature ranges from 21.3 in August to 26.50 in January. Average relative humidity varies from 55% in February to 71% in July (for details, see Annex 1, Table 2).

Soils, Topography and Drainage

2.05 The lower Piura area consists of a layer of predominantly coarse textured alluvium 5 to 40 m thick, underlain by fine, impermeable, semi- consolidated marine sediments. Based upon the USBR classification, about 70% of the land is classified as Classes I and II; about 25%, Class III; and the remainder 5%, Classes IV and V. Soils are sands and loamy sands (24%), sandy loams and loams (40%), silt loams (28%), and clay loams and clays (8%). Topography is quite flat, except for some scattered dunes, with slopes from 0.3 to 0.5 m/km in the north-south direction and 0.3 m/km across the valley and away from the Piura River. Elevation above sea level ranges from 24 m at the city of Piura to 3 m at Sechura. The Piura riverbed is slightly higher than the valley and does not have an open outlet to the sea (it ends in the Laguna Ramon). As a result, drainage is deficient and percolation of irrigation water has led to high groundwater levels: less than 1 meter below surface over about 25% of the project area and less than 2 meters below surface over about 60% during the main irrigation months. -9 -

2.06 The combination of deficient drainage, low rainfall, high evaporation and shortage of irrigation water in the past has resulted in salt accumulation over the entire project area. About 27,400 ha (78% of the project area) are affected by salinity and the remaining 7,300 ha (22% of the project area) are highly salinized and out of production. However, with water now available from the Poechos reservoir, the non-clay saline soils can be reclaimed by leaching if better drainage is provided.

2.07 Peak erratic high discharges of the Piura River spill over the perched riverbed, flooding the flat project area at intervals of between six and 10 years. To prevent the floods, 12.3 km of protection dikes have been built, but additional ones would be required to protect the works and produc- tion to be developed under the proposed project.

Existing Infrastructure

2.08 About 31,900 ha in the lower Piura Valley are at present dominated by a series of irrigation subsystems, each with its own intake in the Piura River, constructed early in this century by former landowners of the then- existing large farms. The overall system comprises 276 km of canals and is in poor operating condition. At the intakes, river water is raised by temporary weirs, which are washed out once or twice a year by high flows. Canal gradients are low and their conveyance capacity is reduced as a result of inadequate maintenance. Because of this, water flow is slow, making timely irrigation impossible: it is estimated that, in about 70% of the area, inter- vals between irrigations are 25% longer than necessary, which adversely affects crop development and production. Another effect of low gradients is that the water head is often insufficient to irrigate by gravity, making pumping from the canals necessary; about 9,400 ha are at present served by a combination of gravity and pumping. Low conveyance efficiencies cause water losses of an estimated 300 Mm3 per year, further raising already high groundwater levels. In addition to surface irrigation, there are in the valley 87 deep wells, which, with a 3.2 m3 /sec-installed capacity, provide supplementary water to some farms in dry years.

2.09 The Government completed construction of two main collector drains, Sechura (67 km), discharging directly into the sea, and DS 13.04 (49 km), and a network of 338 km of secondary open drains in 1978. The drains are capable of evacuating all percolated water from irrigation but require a network of collector and field drains to feed them. Maintenance of the drains has so far been inadequate and their water carrying capacity is being reduced by aquatic vegetation and sand from moving dunes.

Land Use

2.10 Of the 34,700 ha of net cultivable land in the project area, only some 27,400 ha are now under cultivation with a cropping intensity of 106%. Long staple, high quality Pima cotton is the major crop, covering 21,000 ha; grains (corn, sorghum and some rice) occupy about 3,300 ha, and pasture and subsistence crops cover 4,700 ha. Due to the poor condition of irrigation - 10 - infrastructure, inadequate technical assistance and reduced production credit, average yields per hectare are low: 1.5 tons for cotton, 2.0 for corn, and 2.8 for sorghum. Livestock consists of some 3,600 dairy cows, about 50% of which belong to small farmers, and a large goat population belonging to small farmers and landless peasants.

Population and Employment

2.11 Population in the department of Piura is about 1 million, of which some 360,000 live in the city of Piura and about 120,000 in the project area. Of the latter, about 70,000 live in the towns of Catacaos (30,000), La Union (25,000) and Sechura (15,000), while the remaining 50,000 are on farms or in small villages. Population growth is estimated at 2.5%. About 12,700 families, with an estimated active population of 2.5 persons per family, derive their income from agriculture; of these, 11,800 own land and the other 900 are laborers.

2.12 Employment varies according to land tenure. Members of the agrarian production cooperatives are permanently employed and are paid minimum wages. Minifundistas, 1/ however, with farms averaging 1.8 ha, need to use only about 20% of their potential 6.7 million man-days in labor on their own farms and, therefore, have to seek employment for the remaining 5.4 million man-days off the farm. As only some 10% can be absorbed in agriculture by the cooperatives and larger farmers and an estimated 40% in other sectors in the area, seasonal unemployment is a problem.

2.13 Annual income per family is estimated to be Si. 367,700 (US$1,784) for cooperative members, almost all of it from on-farm work, and S/. 260,800 (US$1,272) for minifundistas; of the latter's income, about S/. 150,000 (US$732) is provided by off-farm employment.

Land Tenure and Farmer Organizations

2.14 Land reform was carried out in the project area in the early 1970s. Farms over 50 ha, covering about 57.9% of the project area were expropriated and converted into agrarian reform enterprises, mainly Agrarian Production Cooperatives (CAPs). The present land tenure situation is as follows:

Average Area Category Farm Size Area Families per Family (ha) (ha) (%) (No.) (%)

Agrarian production cooperatives 880-1,820 17,450 50.3 2,790 23.7 6.25 Communal cooperatives n.a. 2,200 6.3 1,230 10.4 1.80 Peasant groups n.a. 450 1.3 170 1.4 2.66 Minifundistas 0-5 13,000 37.5 7,500 63.6 1.73 Small farmers 5-15 680 1.9 80 0.7 8.50 Medium-size farmers 15-50 920 2.7 30 0.2 30.70

34,700 100.0 11,800 100.0 2.94

1/ Minifundista: Farmers who have such small areas for cropping that income derived from farming is equal to or less than minimum consumption levels. - 11 -

2.15 The 12 CAPs in the project area have overcome the critical period of establishmentand reached a reasonable level of organization. They all farm the land collectively,and, as required by law, have their own technical managers who are helping them to improve farm management,agricultural prac- tices, and overall performance. As a result, their financial situation is sound and none of them had in arrears debts with BAP at the end of 1978. Members of communal cooperativesand peasant groups, on the other hand, farm the land individually. These farmers as well as the minifundistas,altogether occupying 45% of the area, have little access to agriculturalservices and are not organizedfor production,constituting, therefore, the proposed project's main target population.1/

AgriculturalServices

2.16 Extension. The "Agrarian Zone" in Piura, the regional office of the MAA, has four agriculturalistsand three medium-leveltechnicians who advise farmers on production techniquesfor cotton and grains in the project area. The Zona Agraria techniciansdeal almost exclusivelywith cooperatives,while small private farmers have practicallyno access to them. Also, the Cotton DevelopmentFoundation (FUNDEAL)gives limited assistance,mainly in phytosanitarycontrol, providing three agronomistsfor the entire Chira-Piura region. In addition, CENCIRA has a regional office in Piura which provides audio visual extensionprograms in agriculture. In general, existing exten- sion services are not well coordinated,reach only a small percentage of farmers, and are inadequatelystaffed.

2.17 Research. Isolated research efforts are undertaken by a number of entities. CRIA-II (para 1.23), with its headquartersin Chiclayo,conducts 'work on adaptation of varieties and developmentof technologicalpackages for cotton and rice at its Chira station. DEPECHP, partly through agreements with the National University of Piura (UNP), has been carrying out field experi- ments and research on drainage and salinity in the Montegrande and Pedregal pilot areas. FUNDEAL, which receives its budgetary funds from a special tax paid by the producers, 2/ provides financial assistance to CRIA in its cotton- related work. In general, production-orientedresearch is weak as is the link between research and extension.

2.18 AgriculturalCredit. BAP (para 1.24) provides 95% of the institu- tional credit for agriculturein the project area. About 96% of the resources are devoted to short-termproduction credit, mainly for cotton. Of the total about 80% goes to the cooperatives,15% to medium-size farmers and only 5% to small farmers and minifundistas. Recently, long-term funds for farm investment and machinery have been made available to cooperativesfrom an IDB loan, which has nationwide coverage. Development of the project area would require addi- tional financial resources for short-termproduction credit and long-term on-farm investment credit, mainly for small farmers.

1/ The term "minifundistas"will henceforth be meant to include members of communal cooperativesand of peasant groups. 2/ The equivalentof US$1 per bale of cotton weighing 217 kg. - 12 -

2.19 BAP operates in the area through its Piura branch office, which has a staff of 15 professionals and 45 auxiliaries and an agency in La UIion T-7th four professionals and seven auxiliaries. These offices, with a moderate increase in staff and technical support from DEPECHP (para 4.05), would be able to handle the proposed project's incremental credit requirements.

Marketing

2.20 ENCI has the monopoly for distributing inputs and marketing of major commodities, including cotton. It operates in the project area through an agency in Piura and licensed agents in Catacaos, Castilla and La Union. Cotton ginning is carried out by five privately owned gins that have a combined ginning capacity of 6 m tons/hour and 7,000 m tons of storage. EPSA, with storage capacity of 5,000 m tons, markets rice and regulates grain prices. Since rice production in the lower Piura is marginal, the milling facilities, which are private, are located in the Chira Valley, mainly at Sullana, some 70 km north of Piura. With moderate expansion of their working shifts, the existing marketing facilities would be capable of handling expected incremental production generated by the project.

III. THE PROJECT

Project Origin

3.01 The International Engineering Co. (IECO), USA, with Bank finance (Loan 418-PE), carried out a feasibility study of the Chira-Piura Valleys in 1968, the outcome of which was a plan to improve water availability to the lower Piura Valley and to rehabilitate the Chira and lower Piura irrigation schemes. The first stage of the plan was construction of the Poechos dam, the Chira-Piura diversion canal and the main and secondary drainage networks of the lower Piura Valley (paras 2.02 and 2.09). The proposed project would be the second stage of the plan and would consist of the rehabilitation of irrigation works and reclamation of salinized lands in the lower Piura Valley. Feasibility studies of the project were prepared by the consortium, Chira-Piura Consultants' Association (ACCHP), assisted by the FAO-IBRD Cooperative Program. Bank missions visited Peru to appraise the project in November 1978 and February 1979.

Project Description

3.02 The objective of the proposed project would be to increase agricul- tural production and productivity on 34,700 ha and raise the incomes of about 11,800 cooperative members and smallholder families. This would be accomp- lished through rehabilitation of irrigation facilities, completion of drainage networks, reclamation of saline soils, protection against floods and provision of technical assistance and equipment (see IBRD Map No. 14159). - 13 -

3.03 The project would consist of:

(a) irrigation works, including (i) construction of a diversion dam on the Piura River; (ii) construction and lining of a main irrigation canal 40 km long; (iii) rehabilitation and lining of 112.1 km of secondary and 77.9 km of tertiary canals and rehabilitation of 1,170 km of lateral and sublateral canals; (iv) construction of administrative buildings for the irrigation district; and (v) consulting services for engineering and supervision of these works;

(b) drainage works, including construction of 15 km of main drains, 415 km of collector drains and 1,070 km of field drains;

(c) flood protection works, including improvement of 12.3 km of flood protection dikes, construction of 54.1 km of new dikes along both banks of the Piura River, and realignment of some stretches of the river;

(d) development credit for land levelling, irrigation ditches, soil leaching and improvements and other on-farm investments;

(e) equipment;

(f) technical services, including (i) strengthening of the agricultural extension service, with special emphasis on assistance to small- holders; (ii) establishment of a land reclamation service; and (iii) training of Peruvian technicians abroad; and

(g) consultant services to (i) assist the project executing authority in project implementation; and (ii) carry out feasibility studies for subsequent rehabilitation projects.

Detailed Features

3.04 Irrigation Works. A diversion dam and main irrigation canal would be constructed to replace the Piura River as a water carrier and, therefore, make construction of provisional weirs and pumping unnecessary for most of the project area. Sand traps would be built at the offtake of the main canals to remove silt during high river flows. Ninety percent of secondary and tertiary canals would be totally reconstructed and, in general, would follow existing alignments but would be elevated to provide sufficient water-head. Unlined lateral and sublateral canals would be rehabilitated or constructed on about 50% of the cooperatives' land (8,730 ha) and on practically the entire small farmer area (17,200 ha). The embankments of the main and secondary canals would double for service roads.

3.05 The project would also finance construction of 2,900 m2 of buildings to serve as headquarters for the irrigation district and for the agricultural extension and land reclamation services. - 14 -

3.06 Flood Protection Works. Existing dikes would be improved and new ones would be constructed to confine the Piura River between two embankments, 500 to 600 m apart, running from Puente Piura to Laguna Ramon (24.4 km) along the right bank and from Puente Piura to Ventura (26.5 km) along the left bank. Dikes would be designed to protect against maximum peak discharges occurring once every 25 years.

3.07 Drainage Works. Fifteen km of main drains and a network of collec- tor drains would be built to complete the basic drainage network for the 34,700-ha project area. Main drains would be 3 m deep and would be built in a small part of the area not currently served by existing drains. Collector drains would be open, 2 to 2.2 m deep and spaced between 400 to 600 m over all the project area. Field drains would be mostly tile pipes of 6-inch diameter buried about 1.5 m deep. If economically and technically feasible, plastic pipes may be used instead of tile.

3.08 On-farm Investments - Development Credit. Land levelling and con- struction of irrigation ditches would be carried out on most small farmers' and minifundio land (15,600 ha) and on about 5,270 ha of land held by medium- size farmers and cooperatives; soils would be leached in the entire project area and gypsum would be applied on some 1,000 ha of alkali soils. 1/ Other investments would include farm constructions and dairy livestock for selected small farmers on a trial basis. Up to 90% of on-farm investments would be financed under the project through long-term development credit channelled through BAP (para 4.11).

3.09 Equipment. The project would make funds available for purchase of tilelayer machines, maintenance equipment, vehicles for the use of the land reclamation and extension services, a laboratory for soil and water analysis, and topographical and office equipment (Annex 1, Tables 3, 4 and 5).

3.10 Technical Services. The project would provide for:

(a) salaries of incremental agricultural extension service staff and their operating expenses (10 professionals, 34 medium-level technicians and 10 clerical staff) (para 4.08);

(b) salaries for staff of the land reclamation service and their operating expenses (12 professionals, 35 medium-level technicians, clerical staff and laborers) (para 4.03); and

(c) short courses and field training assignments of up to six months abroad in irrigation, drainage, land reclamation, operation and maintenance, farm management and other project-related matters for MAA technicians. The project would provide funds for travel expenses, tuition and living allowances.

3.11 Consultants' Services. The project would include:

(a) seventy-five man-months of individual consultants to assist the executing agency in the implementation of the various project components; and

1/ Gypsum requirements would be estimated based on laboratory procedures agreed upon at appraisal. - 15 -

(b) consultingservices for basic and feasibilitystudies for a third irrigationrehabilitation project.

Status of Project Preparation

3.12 ENERGOPROJEKTprepared preliminarydesigns and will complete by the end of March 1980 final designs for the diversion dam, main irrigation canal and flood protectionworks. ACCHP prepared preliminarydesigns for the remaining irrigationand drainage works, which are sound. Final designs would be completedby the end of 1980. Designs for field drains and farm works would be done during the project implementationperiod as land is being incorporated. The Bank would review and comment on final designs of all project works.

Water Supply and Demand

3.13 The project would derive its water from the Poechos reservoir,the Piura River and the undergroundaquifer. Annual flows range from 1,200 to 8,000 Mm3 in the Chira River and from 50 to 3,200 Mm3 in the Piura River. Existing wells yield a maximum of only 40 Mm3/year. Irrigationwater require- ments, calculatedwith the Blaney-Criddleformula, disregardingrainfall and assuming conveyance,field and overall efficienciesof 80%, 60% and 50%, respectively,are estimated at 662 Mm3 (Annex 1, Table 6). Other demands from Poechos consideredin the water balance are: Ecuadorianwater rights upstream of the dam (181 Mm3) irrigationof the Chira Valley (1,109.3Mm 3) and the middle Piura Valley (723.9 Mm3), municipal supply (71.6 Mm3) and a future industrialcomplex at Bayovar (73.8 Mm3). Future rehabilitationof the Chira Valley irrigationsystem would bring about savings of about 300 Mm3/year.

3.14 Consultantsanalyzed the water balance using a model, which, based upon 39 years of hydrologicalrecords, simulatedoperation of the Poechos reservoirand of the overall Chira-Piura system for a 25-year period, disre- garding future savings in the Chira Valley. The model and the input data used adequatelycovers the cyclical drought periods and provides reasonableinfor- mation to judge the project's water balance. The results of the analysis, presented in Annex 1, Table 7, show that, for the main season, over 25 years, demand would be fully satisfiedin 18 years (72%); moderate shortages(between 13 and 37%) would occur in six years (24%) and a serious shortage in one year (4%). For the second season, out of 25 years, demand would be fully satisfied in 13 years (52%); there would be shortagesof between 20% and 50% in four years and no water would be available in eight years (32%). Accordingto these results in the dry years, the area could be fully cultivatedonly during the main season with yield reductions,and the area croppedwould have to be reduced in the second season in proportionto water availability. These constraintshave been taken into account in estimatingaverage yields and cropping intensityprojections in the economic analysis (para 6.02). - 16 -

Water Quality

3.15 The quality of water to be used in the project is excellent for irrigation. Weighted salinity of the Poechos and Piura River water will not exceed 325 ppm. The water contains no toxic or harmful elements, and there is no evidence of water-borne diseases.

International Waters

3.16 The Chira-Piura River has its head waters in Ecuadorian territory (Catamayo River). In 1971, Peru and Ecuador signed an international agreement for joint development of the Puyango-Tumbes and Catamayo-Chira River basins. The Poechos dam, the main water source for the project, was constructed and operates under the framework of this agreement. Water in the reservoir is now maintained at a level that does not cause flooding in Ecuadorian territory and the reservoir will be capable of continuing to supply existing water require- ments in the valley without raising the water level. Thus the issues involved will continue to be covered by appropriate arrangements between the two coun- tries.

Implementation Schedule

3.17 The project would be implemented over a period of five years. Construction of the diversion dam, main irrigation canal and flood protection works would begin in early 1980 and would take about three years. Construc- tion of the remaining civil and on-farm works would begin in mid-1980 and would take until the end of 1984. Supporting services would be provided during the whole five-year implementation period beginning in early 1980. For details, see Chart 20376.

Cost Estimates

3.18 Total project costs amount to US$178.8 million, including a foreign exchange component of US$102.5 million, or 58%. Base costs, totalling US$124.7 million, are expressed in February 1979 prices. For the main irrigation and flood control works, they are based upon updated unit costs incurred by ENERGOPROJEKT in a previous contract in the area; for other works, they are based upon a cost analysis carried out by ACCHP and updated by DEPECHP. Cost of civil works to be carried out by contractors includes 3% tax amounting to US$1.4 million. Costs of imported equipment are CIF Paita, excluding import taxes which Government agencies do not pay. Average consulting fees were estimated at US$8,000 per man-month including: salaries, travel and living expenses, and overhead. Physical contingencies, estimated at 15% for all civil engineering works and 10% for equipment, salaries and other operational expenses, total US$18.5 million. Price contingencies, amounting to US$35.6 million, were calculated at 6% per year for equipment and 7% per year for civil works. It has been assumed that deviations between international and internal inflation would be compensated for by changes in the exchange rate as has been the Government's policy in the past few years. Project costs are detailed in Annex 1, Table 8 and summarized below. Annex 1, Table 9 shows the expected schedule of expenditures. - 17 -

Foreign Local Foreign Total Local Foreign Total Exchange S/. Million ------US$ Million----- %

Main Irrigation and Flood Control Works 5,057 8,382 13,439 24.7 40.9 65.6 62

Irrigation and Drainage Networks 4,656 4,336 8,992 22.7 21.2 43.9 49

On-farm Investments 632 976 1,608 3.1 4.7 7.8 61

Equipment - 781 781 - 3.8 3.8 100

Technical Services and Consultants 554 176 730 2.7 0.9 3.6 20

Total Base Cost 10,900 14,651 25,551 53.2 71.5 124.7 58

Physical Contingencies 1,578 2,179 3,757 7.9 10.6 18.5 58

Price Contingencies - - - 15.1 20.5 35.6 58

Total Project Cost 76.2 102.6 178.8

Financing

3.19 Project investments would be financed by ENERGOPROJEKT, the Govern- ment, the beneficiaries and the Bank. ENERGOPROJEKT would finance 50% of the construction and design costs of main irrigation and flood control works, esti- mated at US$46.4 million equivalent, including contingencies. The Bank loan of US$56.0 million equivalent, or 31.3% of the total project cost, would cover the full foreign exchange cost (US$46.0 million) and US$10.0 million of the local currency cost of the remaining investments. The Government, through annual budgetary allocations, would provide counterpart funds equivalent to US$74.5 million, or 41.6%, and the beneficiaries would contribute US$1.9 million, or 1.1%, of the total project cost. The proposed financing plan is shown in Annex 1, Table 10 and summarized below:

ENERGOPROJEKT Government 1/ Bank Total Item US$M % US$M % US$M % US$M _%

Main Irrigation and Flood Control Works 32.8 50.0 32.8 50.0 65.6 37.0 Irrigation and Drainage Networks 16.9 38.5 27.0 61.5 43.9 24.2 On-farm Investments 2.8 35.4 5.1 64.6 7.8 4.4 Equipment 3.8 100.0 3.8 2.1 Technical Services and Consultants 0.7 27.8 2.8 72.2 3.6 2.0 Contingencies 13.6 25.1 23.2 42.9 17.3 32.0 54.1 30.3

TOTAL 46.4 26.0 76.4 42.7 56.0 31.3 178.8 100.0

1/ Includes about a US$1.9 million contribution of the beneficiaries for con- struction of field drains and on-farm investments. - 18 -

3.20 The Bank loan would be made to the Government of Peru for 17 years, including four years' grace. Government would transfer to BAP US$5.9 million of the proceeds of the Bank loan and US$2.5 million of its own allocation to the project to enable BAP to finance the medium- and long-term credit require- ments for on-farm investments. The transfer would be made to BAP in the form of an increase of its capital. The Government and ENERGOPROJEKT have signed the financing agreement and completed negotiation of the construction contract. Execution of the construction contract will be a condition of loan effectiveness.

Procurement

3.21 ENERGOPROJEKT, under special arrangements with the Government, would carry out construction of the works it finances (diversion dam, main irrigation canal and flood protection works) estimated at US$92.8 million, inclusive of physical and price contingencies. Contracts for construction of secondary and tertiary lined canals and main and complementary drains, totalling US$40.4 million, would be let through International Competitive Bidding (ICB) in accordance with Bank guidelines. Owing to the scope of the works involved, prequalification of contractors is recommended for ICB. Maintenance equipment totalling US$4.7 million, would also be procured under ICB; for bid evaluation, a 15% margin of preference or the prevailing custom duties, if lower, would be allowed for equipment produced in Peru. Contracts for construction of unlined lateral and sublateral canals and buildings, totalling US$6.7 million, would be let following Local Competitive Bidding (LCB) procedures in accordance with Bank guidelines. LCB is recommended in this case because lateral and sublateral canals would be constructed under labor-intensive methods. Pipes for field drains, totalling US$3.3 million, would be locally produced and therefore procured through LCB. Foreign contractors and suppliers would not be precluded from participating in LCB. Construction of field drains (supply of pipes excluded), totalling US$3.4 million, would need to be carried out at irregular intervals as the project advances and therefore would be undertaken by force account or negotiated contracts. On-farm works financed through development credit and totalling US$11.4 million would be done under negotiated contracts between farmers and local contractors. Vehicles and other equipment, totalling US$0.60 million, would be purchased in small amounts and, therefore, procured under LCB.

3.22 Peruvian law requires that foreign contractors enter into joint ventures with local contractors, which is inconsistent with the Bank procure- ment guidelines, but this requirement has been waived for construction contracts to be financed by the Bank under the project. - 19 -

Disbursement

3.23 The proposed Bank loan would be disbursedas follows:

Amount of Category Item Disbursements (US$ Million)

I Civil works, engineering and supervision: 65% of total cost 29.6

II Subloansmade by BAP to finance on-farm investments: 70% of total amount of subloans 5.9

III Equipment and pipes: 100% of foreign expenditures of internationallyprocured items or 80% of locally procured items 5.6

IV Salaries of incrementalstaff and operatingexpenses of the land reclamationand agriculturalextension services: 65% of total cost 2.1

V Consultant services,other than engineeringand super- vision, and training program: 100% of total cost 0.9

VI Unallocated 11.9

TOTAL LOAN 56.0

Disbursementswould be made against normal documentationexcept for works carried out by force account, subloans made by BAP, and salaries and operating expenses of the extension and land reclamationservices, which would be dis- bursed against statementsof expendituresduly certifiedby the implementing agency. Statements of expenditures would be audited as indicated in paragraph 4.14. Supportingdocumentation for statements of expenditurewould not be submitted to the Bank but would be retained by the executing agencies for inspectionby Bank missions. Disbursementapplications based on statementsof expenditureswould be accompaniedby an annex showing a breakdown of (a) sala- ries and wages of incrementalstaff based on positions incrementalto the staff list on June 30, 1979; (b) materials (construction materials, agricul- tural inputs, office supplies,gasoline, oil and such); (c) general services (third-partypayments covering short-term contractsand such; and (d) various operating expenses. The Bank loan is expected to be disbursed over a period of five years accordingto the schedule of disbursementshown in Annex 1, Table 11. - 20-

IV. PROJECT ORGANIZATION AND MANAGEMENT

Executing Agency

4.01 MAA would have overall responsibility for the project, while DEPECHP, a special project of MAA (para 1.21) with headquarters in Piura, would be directly responsible for project implementation. The latter would supervise, with the help of consultants, design and construction of the irrigation and drainage works and carry out all force account works. It would also assume responsibility for agricultural extension, land reclamation and maintenance of the irrigation and drainage systems in the project area. Operation of these systems would continue to be the responsibility of the Agrarian Zone through the Irrigation District, which the Government would strengthen and provide with all necessary funds and facilities as required. Assurances to this effect were obtained at negotiations. Other agencies participating in the project would be DEPERTC, BAP, the Agrarian Zone of Piura, CENCIRA and INIA (paras 1.19 to 1.23 and Chart 20375).

Engineering and Construction of Civil Works

4.02 The Studies and Works Directorate (DEO) of DEPECHP would have overall responsibility for design and construction of civil works. ENERGOPROJEKT, under the supervision of DEO, would make final designs and construct the diver- sion dam, main irrigation canal and flood protection works. Consultants under DEO would prepare final designs for the remaining civil works and would super- vise construction contracts of all project works. At negotiations, assurances were obtained that DEPECHP would employ consultants, acceptable to the Bank, to make final designs of Bank-financed works and to supervise construction of all project works. Government policy calls for increasing use of manual labor in construction to ease unemployment in rural areas. Therefore, the project would encourage construction contractors to use labor-intensive methods for excavating drains and lateral and sublateral canals, provided that such methods were economically competitive and the implementation schedule would not be adversely affected.

Land Reclamation, Drainage and On-farm Works

4.03 The Land Reclamation Directorate (DRT) of DEPECHP would, assisted by DEPERTC, operate the land reclamation service to be established under the project. The service would: (a) monitor the effect of drainage on the water table; (b) design and construct field drains; and (c) design and supervise construction of on-farm development works. The service would be staffed by Peruvian technicians assisted by individual consultants in irrigation, drainage and land reclamation (para 4.12) and would work in close collaboration with DEPERTC. This collaboration would include exchange of technical staff, consultation on drainage and land reclamation problems, selection of consul- tants and training of technical staff.

4.04 Monitoring of the watertable and of the effectiveness of the drainage network would be done by: (a) reconditioning and completing the existing network of observation wells and making monthly observations of the ground- water depth; and (b) measuring drainage water flow and quality at selected points of the drainage system. Based upon the results of these observations - 21 - and permeability tests, DRT would decide on the spacing and design and would construct field drains by force account; where tile drainage is necessary, DRT would install pipes with a tilelayer machine which would be purchased under the project. The farmers under the supervision of DRT would fill in the trenches at their own expense. The pipes would very likely be clay and locally produced. However, technical and economical feasibility of importing plastic pipes would be explored. DRT would also prepare farm works designs and land reclamation plans which the farmers would present to BAP for financing (para 4.11). Upon procurement of finance, DRT would assist the farmers in contracting and supervising construction of the works.

Operation and Maintenance

4.05 The Operation and Maintenance Directorate (DOM) of DEPECHP operates the Poechos reservoir, the Chira-Piura canal and the existing drainage network of the project. Under the project, DEPECHP would also assume responsibility for maintenance of the project irrigation and drainage systems. The Agrarian Zone would continue to operate the irrigation works through the irrigation district authority, prepare cropping plans with the active participation of the users' associations and of the irrigators' commissions and decide on water allocations accordingly.

4.06 Assurances were obtained that: (i) not later than June 30, 1980, DEPECHP, assisted by consultants, would prepare and put into implementation a maintenance plan for the irrigation and drainage network acceptable to the Bank. The plan would give special attention to removing weeds from the drains and to solving the sand dunes problem; and (ii) the diversion dam and dikes included in the project as well as the existing Poechos dam would be periodically inspected and maintained in accordance with sound engineering practices.

Agricultural Extension and Research

4.07 The Agriculture and Livestock Directorate (DDA) of DEPECHP would be responsible for extension services under the general guidance of the Agrarian Zone. DDA would primarily assist small farmers but would also provide guidance to the managerial and technical staff of the cooperatives. Jointly with DRT, it would also assist the farmers in preparing farm development plans and in presenting corresponding credit applications to BAP, and monitor and evaluate the impact of the project on agricultural production (para 4.13).

4.08 The extension service would have its headquarters in the town of La Union and its procedures would be similar to the training and visit system 1/ which has been supported in a number of Bank-financed projects. It would be headed by a senior agriculturalist, assisted by four technicians, who would provide guidance to the field offices and serve as a link with INIA, CENCIRA and FUNDEAL. DDA would reach small farmers by establishing five agencies,

1/ Agricultural Extension: The training and visit system, by D. Benor and J.Q. Harrison, May 1977. - 22 - each covering about 2,000 farmers, or 3,400 ha. Each agency would be staffed with an agronomist and six medium-level technicians, five agriculturalists and one livestock specialist. The service to the 12 associative enterprises which have professional-level managers would be provided by four experienced agriculturalists.

4.09 CENCIRA, under an operational agreement with DEPECHP, would establish a program to train project extension agents. CENCIRA, which has long expe- rience in this field, would develop and implement the training program in collaboration with the General Directorate of Agriculture and Livestock of MAA, and INIA, FUNDEAL, UNP and DEPECHP. At negotiations, assurances were obtained that the above-mentioned agreement would be signed and that the Government would adequately fund CENCIRA to implement it.

4.10 INIA, under operational agreement with DEPECHP, would intensify its applied research in the Chira research station to develop and improve production technical packages for the several project crops and to assist the project in irrigation and drainage research. The extension service would test on a commercial scale the technological packages developed by INIA and disseminate them to the farmers when adopted. DEPECHP would retain visiting scientists to help INIA to design and conduct its work at the Chira station, and the project would provide the funds to finance them (para 4.12). At negotiations, assur- ances were obtained that the above-mentioned agreement would be signed and that the Government would adequately fund INIA to implement it.

Development Credit

4.11 On-farm investments to be carried out under the project (para 3.08) would be financed by medium- and long-term subloans to individual farmers, groups of farmers or associative enterprises. BAP would grant subloans on the basis of development plans prepared by DEPECHP (para 4.04) for up to 90% of the value of the investment plan with the remainder to be contributed by the beneficiaries. The repayment terms of the subloans would be in accordance with the financial situation of the farmers/enterprises receiving credit; subloans would be for periods of up to 15 years, consistent with the antici- pated calendar for attaining full productivity increases from the investments and would include grace periods of up to five years for the repayment of principal. The annual interest rate for these loans would be equal to the one BAP charges for loans for capital investments (Prestamos de Capitalizacion), currently 31% plus 2% commission charge: assurances were obtained during negotiations that the Government would periodically revise the lending rates in consultation with the Bank to take account of relevant changes in the rate of inflation and in the capital market conditions; and that, except as the Bank and the Government otherwise agree, the lending rate would not be lower than 33% per year, commissions included. While this lending rate is at present negative in real terms, it is expected that, during the application of the current Government economic recovery program, it would be raised to positive levels or close to them during the period of project implementation. Inflation has been 75% in 1978, and it is projected to be about 60% and 40% in 1979, and 1980, respectively. BAP with its own resources, would also provide incremental short-term production credit to all project beneficiaries. MAA would enter into a legally binding agreement with BAP, acceptable to the Bank, - 23 - for provision of short-term production credit and for channelling the project funds for on-farm investments to make subloans to farmers/enterprises on terms and conditions as set out in this paragraph. The signing of the agreement would he a condition of loan effectiveness.

Consultants' Services

4.12 In addition to the consultants mentioned in paragraph 4.02, DEPECHP would retain individual consultants, with qualifications and under terms and conditions acceptable to the Bank, to: (a) assist DRT in planning, designing, and constructing field drains and on-farm development works and monitoring the effects of the drainage system (36 man-months) (para 4.03); (b) assist DOM in developing a plan for optimal utilization of the Chira-Piura water resources and defining operating rules for the Poechos reservoir (six man- months); (c) assist DOM in developing and putting into operation a maintenance plan for the irrigation and drainage network (six man-months) (para 4.06); and (d) assist DDA in establishing the extension service and developing crop production packages (27 man-months). DEPECHP, in collaboration with DEPERTC, would also retain a consulting firm to carry out feasibility studies for the rehabilitation of the Chira Valley irrigation system. Terms of reference for these studies, satisfactory to the Bank, would be prepared not later than December 31, 1980. Assurances to this effect were obtained during negotiations.

Monitoring and Evaluation

4.13 DEPECHP would consistently monitor and evaluate the impact of the project on groundwater levels, soil salinity, land reclamation, cropped areas, irrigation and drainage practices, use of agricultural inputs, yields, produc- tion, prices, marketing and income. Data collected by DRT and DDA would be integrated and analyzed by the Programming Office of DEPECHP, which would also evaluate the overall impact of the project. This office would submit periodical progress reports of the project and project completion report according to Bank guidelines. To undertake this task, the Programming Office would be staffed with at least three additional professionals with relevant experience in the field. Assurances were obtained that DEPECHP would: (a) monitor and evaluate the impact of the project; (b) submit to the Bank progress reports; and (c) prepare a project completion report for submission to the Bank no later than six months after the closing date.

Accounts and Audits

4,14 DEPECHP would maintain separate accounts which would record expendi- tures made under the different project categories. BAP would also maintain separate accounts of subloans for investments in on-farm works. Assurances were obtained that (a) project expenditures made by DEPECHP would be verified and controlled in accordance with sound auditing principles consistently applied; (b) such audit reports would include a separate opinion as to whether the procedures and controls relating to statements of expenditures were properly prepared and in accordance with the legal project requirements; (c) BAP's accounts of subloans to participating farm enterprises would be audited annually by independent auditors acceptable to the Bank; and (d) MAA would send to the Bank certified copies of each year's project accounts within four months after the close of each financial year. - 24 -

V. PRODUCTION,MARKETS, PRICES, BENEFICIARIES AND COST RECOVERY

Future Land Use and Cropping Pattern - Yield, Production

5.01 With the project, the physical area under cultivation would increase from 27,470 ha to 34,720 ha and cropping intensities from 106% to 135%. Thus, the cropped area would increase from 29,100 ha to 47,000 ha at full development. No basic changes are foreseen in the crops grown. Cotton is expected to continue as the major crop, occupying 22,000 ha, while the area under grains (corn, sorghum and rice) would go up from 3,285 ha to 18,400 ha and the area under pulses, from 550 ha to 2,000 ha, mainly as a result of double cropping. With better drainage, salinity control, timely and improved irrigation practices, and agricultural services, projected yields are expected to rise from 50% to 120% above without project levels. In light of current farmer experience and given that, under the project, farmers for the first time would have ready access to essential inputs, full development credit and adequate technical assistance, the above increases in productivity are considered reasonable within a specified time frame of seven years. Furthermore, once the problem of salinity has been resolved, growing conditions in the area for irrigated crops are almost ideal, particularly with respect to light/temperature relations and the absence of serious pests and diseases. Cropping patterns, yields and production are summarized below and shown in more detail in Annex 1, Tables 12 and 13.

-----Without Project------With Project at Full Development--- Cropped Cropped Incremental Area Yield Production Area Yield Production Production Crop ha mt/ha '000 tons ha mt/ha '000 tons '000 tons

Cotton 21,140 1.5 31.7 22,000 2.4 52.8 21.1 Corn 1,215 2.0 2.4 8,200 4.5 36.9 34.5 Sorghum 1,210 2.8 3.4 8,200 5.1 41.8 38.4 Rice 860 4.0 3.4 2,000 6.0 12.0 8.6 Pulses 550 0.95 0.5 2,000 1.8 3.6 3.1 Garden Crops 680 6.0 4.1 1,500 12.0 18.0 13.9 Other Annuals 2,949 6.2 18.3 1,000 12.0 12.0 (6.3) Green Fodder 485 65.0 31.5 2,100 80.0 168.0 136.5

Total Cropped Area 29,089 47,000

Physical Area Cultivated 27,469 34,720

Cropping Intensity 106% 135% - 25 -

Market Prospects and Prices

5.02 No marketing problems are foreseen for the crops produced under the project. Cotton has the advantage of being of the long staple Pima variety. The only other countries that produce it are Egypt and Sudan, and the USA, and it receives premium prices in the world market. Since annual incremental production of cotton fiber resulting from the project (about 6,300 tons) would be quite insignificant in terms of worldwide availabilities, it is not likely to have an adverse impact on the world price; but it would make a significant contribution to the Peruvian exports of cotton, which have been substantially reduced from about 70,000 tons in 1966 to about 20,000 in 1978. Additional corn, sorghum and rice production would permit a reduction of grain imports, while increased production of vegetables would help satisfy the increasing demand for such products in the cities near the project area. The additional supply of alfalfa hay would be used by farmers raising feeder cattle, an activity that is increasing in the Piura area and neighboring departments.

5.03 In accordance with Government policy, ENCI would be solely respon- sible for marketing and exporting cotton, which would account for about 75% of the total net value of production of the project at full development. Existing private gins would be able to carry out ginning without having to increase capacity (para 2.20) by merely extending the ginning season. ENCI has gained expertise in dealing with cotton exports and has done good work in collecting and grading samples of cotton as a basis for establishing the price to be paid to growers. However, cotton growers complain of delays in receiving their money, usually waiting about five months. As a result, some small growers are forced to deal with intermediaries who pay cash but at much lower rates. The Government is aware of the problem and has promised to try to shorten the period of reimbursement by, among other things, providing inputs in lieu of cash. However, further dialogue between the Bank and the Government would be required to work out a workable solution to the problem. EPSA would market all rice production, which would be milled privately.

5.04 Current prevailing farmgate prices were used in the analysis of farm models while international prices converted to farmgate level were used in the economic analysis. World market prices were projected to increase in the period 1979-90 at real annual rates of 2% for cotton, 1.3% for rice, 3.2% for maize and 2.7% for sorghum. These price increases are based on the Bank's Commodities Division projections. Farmgate and economic prices are shown in Annex 1, Table 14.

Beneficiaries

5.05 The proposed project would, through increased production, benefit directly 11,800 families, mostly minifundistas and members of cooperatives (para 2.14). It would also reduce farm underemployment by the creation of about 1.4 million man-days of labor per year at full development (Annex 1, Table 15). Family incomes have been analyzed with three farm models of 1.8 ha (minifundistas), 1,000 ha (cooperatives) and 15 ha (small- to medium- size farmers). Physical and financial development of the models are presented in Annex 1, Tables 16, 17, 18, 19 and 20. According to the models, the bene- ficiaries' farm income would develop as follows: - 26 -

Small- and Cooperative Medium-size Minifundistas Members Farmers 1/

Average Land per Family (ha) 1.80 6.25 15.00 Area Covered (ha) 15,650 17,450 1,600 Number of Families 8,900 2,790 110 Farm Income per Family Before Project Charges (US$): Without Project 1,272 1,780 2,780 With Project at Full Development 2,229 4,207 9,430

Water Charges

5.06 Although the water law states that beneficiaries should pay fully for operation and maintenance of the irrigation works and a reasonable propor- tion of the investments, only nominal O&M charges are actually imposed and there are no cost recovery charges. However, it is currently MAA's policy to enforce the law and to return the proceeds of O&M charges to the irrigation districts. Therefore, assurances were obtained that the Government would: (a) increase O&M water charges to a level of actual O&M costs; (b) no later than December 31, 1983, return to the irrigation district the total amount of O&M fees collected; (c) recover as much as possible of the investment costs, in accordance with the farmers' payment capacity and in a period of not more than 50 years; and (d) not later than December 31, 1982 and at least once every two years thereafter: (i) review the level and structure of water charges taking into account the effect of inflation and the ability of the farmers to pay; and (ii) adjust the water charges accordingly.

5.07 In order to estimate future project charges and arrive at the rent and cost recovery index, it has been assumed that (a) minifundistas would not repay any capital costs because, even with the project, their incomes at full development would be below the estimated US$2,792 relative poverty level per family in Peru at that time; (b) cooperatives and medium-size farmers would repay investment costs over a 50-year period without interest, which would bring the total level of charges for these farm categories to about 10% of their net value of production; and (c) the level of project charges would be adjusted annually for all farmers to account for inflation. Expected operation and maintenance costs are calculated in Annex 1, Table 21. The rent and cost recovery indexes are summarized below and calculations presented in Table 22:

Small- and Medium-size Cooperatives Farmers Minifundistas (1,000 ha) (15 ha) 1/ Incremental annual project charges at full development in 1979 prices: O&M - US$/ha/year 62.3 62.3 62.3 Capital Recovery - US$/ha/year - 70.4 70.4 Rent Recovery Index 26.6 50.3 55.6 Cost Recovery Index 40.3 53.7 51.5

1/ About 80 families with holdings between 5 ha and 15 ha and 30 families with holdings between 15 ha and 50 ha are expected to participate. - 27 -

VI. BENEFITS AND JUSTIFICATION

Besef its

6.01 Execution of the project would bring about a significant increase in agricultural production and improve living conditions for the beneficiaries. Rehabilitation of the irrigation works and completion of the drainage network would improve the production potential of 27,400 ha now suffering from salinity and high watertables and would reclaim some additional 7,300 ha now out of production altogether. Improved irrigation water distribution and management and provision of agricultural extension and marketing services would further lead to more intensive cultivation and production, particularly by the poorest farmners in the project area (Annex 1, Table 23). Incremental production of cotton would, at full development, increase agricultural exports by about US$16.7 million, and export taxes would rise by about US$3.7 million per year. In addition, increased production of grains would decrease imports by abotutUS$7.0 million per year. The project would also contribute significantly to the consolidation of the agrarian reform process by: (a) improving organi- zation of the existinig production cooperatives involving some 2,800 farmers and 17,400 ha, and (b) providing access to the agricultural services and incorporating in the economy some 8,900 minifundistas and members of Grupos Campesinos holding 15,718 ha.

6.02 The economic rate of return of the project has been estimated at 15% (Annex 1, Table 24) and was derived under the following assumptions: (a) agri- cultural production was estimated based upon the incorporation of land and yields projected in Tables 12 and 13 of Annex 1, with reductions in cropped area and yields to account for dry years as projected in the water balance (para 3.14); (b) economic prices for cotton, maize, sorghum and rice as projected by the Bank were converted to farmgate level as specified in para- graph 5.04; for other products, prevailing farmgate prices were used (Annex 1, Table 14); (c) production costs were priced at local market prices (Annex 1, Tables 16 and 17); (d) investment costs include all project works, equipment, support and consulting services; (e) to reflect, underemployment in the area, hired and family-supplied labor were shadow-priced at 70% of the financial cost; and (f) a standard conversion factor of 0.87 was used to impute the foreign exchange component of the project costs and the benefits from exported (cotton) and imported substituting commodities (corn, sorghum and rice).

Risk and Sensitivity

6.03 Execution of the project does not present major risks. DEPECHP has good experience in constructing works of the type included in the project. Additional irrigation water already available from Poechos insures sufficient water for leaching saline lands and increasing cropping intensity. Farmers have substantial experience in growing the project crops and are open to advice from extension workers. The agrarian production cooperatives have passed the critical stage of establishment and organization, and recent performance is sound, making it likely that they would be responsive to project objectives. Establishment of the land reclamation and extension - 28 - services and provisionof short- and long-termcredit should effectivelyhelp to bring about agriculturalproduction in minifundio areas. Possible risks involved would be: (a) constructiondelays owing to difficultiesin negotia- ting rights-of-waywith minifundistas,maintaining irrigationservice during construction,and concentrationof activities in the area; and (b) failure . the executing agency to offer adequate salaries to retain qualified staff for the agriculturalextension and land reclamationoffices, which would seriously impair delivery of services to farmers and thereforeadversely affect expected increases in productivity. During supervision,the Government and the Bank should ensure that the project is adequatelymanaged and funds are allocated in a timely manner.

6.04 A sensitivityanalysis was performed using the following situations to determinewhich variables would be most crucial to the success of the project:

(a) Changes in Benefits and Cost Streams. The expected economic rate of return (ERR) would range between 10% and 15% under various assumptionsin which benefits and investmentcost streams would increase,be delayed, or go in opposite directions (benefits decreasedand investmentcosts increased). Also, a sensitivitytest was carried out to determine the impact of cotton prices on the ERR. For details, see Annex 1, Table 25.

(b) SwitchingValues. The switching value test indicateshow much the particularvalue tested must be changed to cause the ERR to drop below the estimated opportunitycost of capital in the country. The results of this test show that project benefits can decrease by 17%, or the capital cost increase by 23% or the operating costs by 156% to yield an ERR of 12%, which is the estimated opportunitycost of money in Peru (Annex 1, Table 25).

EnvironmentalImpact

6.05 The project would not adversely affect the environment. Reduction of salinity and improved operationmaintenance and irrigationpractices would in fact upgrade environmentalconditions in the lower Piura Valley. There is no evidence that drainage discharge into the ocean is in any way affecting plant or animal life. Also, monitoring of the watertable would permit timely action to prevent possible waterloggingin the future. There are no water-borne diseases in the project area and none are expected to develop as a result of project implementation. - 29 -

VII. SUMMARYOF AGREEMENTSREACHED AND RECOMMENDATIONS

7.01 During negotiations, assurances were obtained that Government would:

(a) cause MAA to: (i) make DEPECHP responsible for agricultural extension, land reclamation and maintenance of the irrigation and drainage systems in the project area; and (ii) strengthen the Irrigation District of the Agrarian Zone and provide il with the necessary funds and facilities to operate the irrigation and drainage systems (para 4.01);

(b) cause DEPECHP to employ consultants, acceptable to the Bank, to make final designs of Bank-financed works and to supervise construction of all project works (para 4.02);

(c) insure that DEPECHP, would: (i) not later than June 30, 1980, prepare and put into implementation a maintenance plan for the irrigation and drainage works acceptable to the Bank; the plan would give special attention to removing weeds from the drains and to solving the sand dunes problem; and (ii) the diversion dam and dikes included in the project as well as the existing Poechos dam would be periodically inspected and maintained in accordance with sound engineering practices (para 4.06);

(d) cause DEPECHP to enter into operational agreements with and adequately fund: (i) CENCIRA to establish a program for training of the extension service staff (para 4.09); and (ii) INIA to develop production technological packages for the several project crops and assist the project in irrigation and drainage research (para 4.10);

(e) periodically revise the lending rate for subloans in consulta- tion with the Bank to take account of relevant changes in the rate of inflation, and that except as the Bank and the Government otherwise agree, the lending rate would not be lower than 33%, commission included (para 4.11);

(f) cause DEPECHP to retain consultants, under terms and conditions and with qualifications acceptable to the Bank, to assist it in: (i) planning, designing, and constructing field drains and on-farm development works, and monitoring the effects of the drainage system; (ii) developing a plan for optimal utilization of the Chira-Piura water resources and defining operating rules for the Poechos reservoir; (iii) developing and putting into operation a maintenance plan for the project area irrigation and drainage network; (iv) establishing the extension service and developing technical packages for crop production; and (v) carrying out feasi- bility studies for the rehabilitation of the Chira Valley irrigation system; teIis of reference satisfactory to the Bank would be prepared for these studies before December 31, 1980 (para 4.12); - 30 -

(g) cause DEPECHP to: (i) monitor and evaluate the impact of the project; (ii) submit to the Bank progress reports; and (iii) prepare a project completionreport to be submitted to the Bank within six months after the closing date (para 4.13); and

(h) ensure that: (i) project expendituresmade by DEPECHP would be verified and controlledin accordancewith sound auditing principles consistentlyapplied; (ii) such audit reports would include a separate opinion as to whether the procedures and controls relating to statementof expenditureswere properly prepared and in accordancewith the legal project requirements;(iii) BAP's accounts of subloans to participatingfarm enterpriseswould be audited annually by independentauditors acceptable to the Bank; and (iv) MAA would send to the Bank certified copies of each year's project accounts within four months after the close of each financial year (para 4.14).

(i) ensure that: O&M water charges be increased to a level of actual O&M costs; (b) no later than December 31, 1983, the total amount of O&M fees collected be returned to the irrigationdistrict; (c) as much as possible of the investmentcosts be recovered, in accordance with the farmers' payment capacity and in a period of not more than 50 years; and (d) not later than December 31, 1982, and at least once every two years thereafter: (i) the level and structureof water charges be reviewed taking into account the effect of inflation and the ability of the farmers to pay; and (ii) the water charges be adjusted accordingly (para 5.06).

7.02 A condition of loan effectivenesswould be that (a) MAA and BAP had signed an agreement for channellingproject funds for on-farm investments and for making subloans to farmers/enterpriseson terms and conditionsas set out in paragraph 4.11; and (b) the Government and ENERGOPROJEKThad executed the constructioncontract for the constructionof the main irrigationand flood control works.

7.03 With the above assurancesand condition, the proposed project is suitable for a Bank loan of US$56 million equivalent on standard terms and conditions.

October 15, 1979 PERU

LOWER PIURA IRRIGATION REHABILITATION II PROJECT

Volume of Agricultural Production in Peru"/

1961 - 1978

Commodity Average Average 1961-65 1968-72 1973 1974 1975 1976 1977 1978

------…ooo Metric Tons------

Wheat 150 129 149 150 143 148 130 90 Rice, Paddy 324 492 451 426 473 579 547 400 Corn 490 588 616 600 625 700 720 550 Barley 185 160 165 168 168 165 170 175 Millet 25 8 8 8 8 10 8 8 Sorghum 2 14 22 18 30 40 50 80 Beans, Dry 39 48 37 35 36 36 38 40 Potatoes 1,487 1,819 1,713 1,722 1,640 1,670 1,600 1,650 Cassava 436 464 460 469 470 402 410 410 Sweet Potatoes 148 163 155 146 150 155 165 165 Sugarcane 7,373 7,569 8,746 9,179 8,928 8,761 8,825 8,400 Tobacco 3 3 4 5 5 5 3 3 Cotton 140 86 84 88 73 57 58 74 Cotton Seed 233 145 149 160 132 102 102 130 Coffee 2 48 58 60 54 54 60 62 66 Cattle ImportS-/ 76 89 30 10 10 10 5 0 Beef and Veal 91 94 85 95 91 84 85 83 Mutton and Lamb 38 33 34 36 33 35 33 34 Pork 43 46 45 55 55 53 52 52 Wool, Greasy Basis 11 10 9 9 9 9 9 9

1/ Figures for 1976-78 are preliminary. P}.2 2/ In 1,000 Head j

Source USDA PERU

LOWER PIURA IRRIGATION REiABILITATION PROJECr

Climatic Data -/

Annual Temiperature (Co) 1 Feb Mar sQL hy _1= Jutl Au :U Oct Nov Oec /verage

Average 27.0 27.8 27.8 26.6 24.6 23.0 21.9 22_1 22.6 23.2 23.7 25.3 24.6 Maximum 33.1 33.9 34.0 32.8 30.5 28.6 27.6 28.0 28.8 29.3 30.1 31.8 - Minimum 20.8 21.6 21.6 20.3 18.7 17.3 16.2 16.2 16.3 17.0 17.3 18.8

Itecijiitdtlon (m/Ill) 10.0 12.5 30.3 3.2 1.1 1.0 0.0 0.1 0.5 1.3 1.8 0.5 62.3

Relative lIumidity (I) 61.4 55.2 63.8 63.4 67.4 70.5 71.4 70.6 69.2 68.4 66.9 64.3 66.0

Evaporation (m/n) 193.5 181.3 175.5 169.1 146.9 123.4 123.5 127.4 129.9 150.4 146.5 175.8 1,843.2

Wind Velocity (m/s) 4.9 4.4 4.3 4.6 4.9 5.0 5.3 5.6 5.7 5.7 4.2 5.5 5.0

Days Light ilours (M/) 52.7 51.7 53.5 61.7 60.2 54.7 53.8 59.8 59.2 61.2 59.4 59.6 57.3- flours of Stn Per Day 6.4 6.4 6.7 7.4 7.2 6.4 6.4 7.1 7.2 7.5 7.3 7.3 6.9

I/ Average data for 1968 to 1978; CORPAC and Mirafloree stationa-

May 8, 1979 ANNEX 1 Table3 LOWER PIURA IRRIGATION REHABILITATION II PROJECT

Land Reclamation Service

Cost Estimates (S/. '000)

Item Annual Total (5years) 1. OPERATINGCOSTS

a. Personnel Salaries

Chief Engineer 1,200 6,000 Assistant Engineer 840 4,200 Chief Design Engineer 960 4,800 Chief Construction Engineer 960 4,800 Chief Water & Soil Engineer 960 4,800 Irrigation & Drainage Engineer (3) 2,160 10,800 Construction Engineers (2) 1,440 7,200 Soils Scientist 720 3,600 Agroeconomist 720 3,600 Designs Assistant (6) 2,880 14,400 Construction Inspectors (6) 2,880 14,400 Surveyors (8) 5,040 25,200 Draftsmen (4) 1,680 8,400 Irrigation & Drainage Technicians (8) 2,880 14,400 Laboratory Assistant (3) 900 4,500 Secretaries (4) 768 3,840 Laborers (20) 2,400 12,000 Social Benefits (30%) 8,816 44,082

38,204 191,022

b. Vehicles O&M 2,091 10,455

c. Materials 7,716.2 38,581

Base Operating Costs 48,011.2 240,058 Physical Contingencies (10%) 4,801.1 24,006

Total Operating Costs 52,812.3 264,064

2. INVESTMENT COSTS

a. Vehicles, pick-up (4) 6,970

b. Office Furniture 1,305

c. Equipmentl/ 55,370

Base Investment Costs 63,645 Physical Contingencies (10%) 6,364

Total Investment Costs 70,009

1/ Includes topograhical,meteorological, hydrometric, soils laboratory and office equipment.

Ma- -1, 1979 - 34 - ANNEX 1 PERU Table 4

LOWER PIURA IRRIGATIONREHABILITATION II PROJECT

AgriculturalExtension Service

Cost Estimates (S/. '000)

Item Annual Total (5 years) 1. OPERATING COSTS

a. Salaries

Chief of Unit (GeneralAgronomist) 1,200 6,000 Agronomist (IrrigatedCrops) 720 3,600 Livestock Specialist (DairyCattle) 720 3,600 Livestock Specialist (Goats & Sheep) 720 3,600 AgriculturalEconomist 720 3,600 Heads of "Agencias" (5 Ings. Agrons.) 3,600 18,000 Livestock Technicians (5) 2,400 12,000 ExtensionOfficers (25 Tecnicos Agropecuarios) 9,o000 45,000 Extension Agents for Cooperatives (4) 1,440 7,200 Secretaries (10) 1,920 9,600 Social Benefits (30% of base salaries) 6,732 33,660

Subtotal Salaries 29,172 145,860

b. Vehicles O&M4J 5,289 26,445

c. Materials 2,050 10,250

Base Operating Costs 36,511 182,555 Physical Contingencies (10%) 3,651 18,256

Total Operating Costs 40,162 200,811

2. INVESTMENTCOSTS

a. Vehicles

4-wheel Drive Vehicles (6) (US$8,500 each) 10,455.0 Motorcycles (35) (US$1,000each) 7,175.0

Subtotal 17,630.0

b. Office Furniture 2,683.2

c. Office Equipment 8,708.0

Base Investment Costs 29,021.2 Physical Contingencies(10%) 2,902.1

Total Investment Cost 31,923.3

1/ 30% of base cost. May 21, 1979 PERU

LOWER PIURA IRRIGATION REHABILITATION II PROJECT

Maintenance Equipment - CIF Peruvian Port (US$'000o Unit Item No. Price Total

3 Backhoe 200 hp - 13 m 6 197.1 1,182.6 Backhoe 125 hp - 0.7 m 5 123.7 618.5 Bulldozer 140 hp 2 93.3 186.6 Bulldozer 75 hp 2 45.6 91.2 Motorgrader 135 hp3 2 70.1 140.2 Wheel loader 2.3 m 1 80.0 80.0 Truck, tank with sprinkler system, 2,000 gal. 2 30.0 60.0 Truck, dump 5 m 2 26.0 52.0 Truck, oil tank 500 gal, 1 40.0 40.0 Truck, maintenance unit 2 60.0 120.0 Truck, 5 ton 2 22.0 44.0 Trailer 1 65.0 65.0 Vehicles, four-wheel drive 5 8.5 42.5 Motorcycles 125 cc 10 1.0 10.0 Concrete mixer 6 cubic feet 1 2.0 2.0 Vibrator 2 2.0 4.0 Pneumatic compactor 2 2.0 4.0 Service equipment Global 50.0 50.0 Radio equipment Global 20.0 20.0 Tilelayer machine 1 257.1 257.1 Tile drain cleaner 1 4.0 4.0 Spare parts (10%) 307.4

Baseline Cost 3,381.1 Physical Contingencies (10%) 338.1

TOTAL COST 3,719.2

May 21, 1979 (D t-n PERU

LOWER PIURA IRRIGATION REHABILITATION PROJECT

Irrigation Water Requirements

annual Irrigated Consumptive Area Use Jan Feb Mar Apr May June Ju Aug Sept Oct Nov Dec ToLal haa/year ------Millions of n 2/------

1st Season + Perm.

Cotton 22,000 7,250 11.0 31.0 56.0 81.0 74.0 47.0 18.0 - - - - - 318.0 Rice 2,000 13,880 1/ 7.0 8.0 9.0 6.0 1.0 ------3.0 34.0 Maize 3,200 5,980 - - 3.0 8.0 10.0 9.0 6.0 2.0 - - - - 38.0 Sorghtum 4,200 5,110 - - 4.0 12.0 14.0 9.0 3.0 - - - - - 42.() Alfalfa 2,100 17,220 10.0 10.0 8.0 8.0 5.0 3.0 3.0 3.0 4.0 5.0 6.0 7.0 72.0 Vegetable 700 5,170 - 0.7 1.7 2.5 2.0 0.5 ------7.4 Others (sweet potato) 500 7,240 - 0.4 1.3 2.2 2.3 1.6 0.6 - - - _ _ 8.4

34,700 519.8

2nd Season

Maize 5,000 4,430 ------3.0 7.0 10.0 12.0 9.0 3.0 44.0 Sorghum 4,000 4,620 11.0 6.0 ------2.0 7.0 10.0 36.0 Vegetable 800 2,960 0.4 ------0.4 1.1 1.6 1.3 4.8 Pulses 2,000 3,230 ------1.5 4.2 5.0 2.3 13.0 Others (sweet potato) 500 4,850 ------0.2 0.7 1.3 1.7 0.9 4.8

12,300 102.6

47o000 3/ 39.4 56.1 83.0 119.7 108.3 70.1 33.6 12.2 16.6 25.6 30.3 27.5 622.4 I>>, S V m

1/ Farm gate demand including field leak and percolation losses. 2/ Monthly water requirements at the head of the network (Catacaos), considering 0.5 overall irrigation efficiency (0.8 conveyance; 0.6 field). 3/ Cropping intensit, 47.000 1 34,700 = 1.35

May 21, 1979 ANNEX 1 PERU Table 7

LOWER PIURA IRRIGATION REHABILITATION II PROJECT

Water Balance - Medium and Lower Piura Valleyl/

Municipal Supply Main Season Second Season Bayovar TUTAL Year Mm; X mm X Mrn X Mm Z Mm- X

1 42.3 100 700.5 100 0.0 0 67.5 91 810.3 86 2 42.3 100 700.5 100 126.4 100 73.8 100 943.0 100 3 42.3 100 700.5 100 126.4 100 73.8 100 943.0 100 4 42.3 100 700.5 100 126.4 100 66.2 90 935.4 99 5 42.3 100 700.5 100 76.0 60 73.6 100 892.6 95 6 42.3 100 438.7 63 0.0 0 6.3 9 487.3 52 7 42.3 100 700.5 100 126.4 100 73.6 100 943.0 100 8 42.3 100 700.5 100 0.0 0 62.1 84 804.9 85 9 42.3 100 700.5 100 126.4 100 73.8 100 943.0 100 10 42.3 100 452.9 65 0.0 0 49.2 67 544.4 58 11 42.3 100 608.3 87 126.4 100 61.8 84 838.8 89 12 42.3 100 700.5 100 58.0 46 73.8 100 874.6 94 13 42.3 100 700.5 100 126.4 100 61.8 84 931.0 99 14 42.3 100 700.5 100 126.4 100 73.8 100 943.0 100 15 42.3 100 700.5 100 126.4 100 73.8 100 943.0 100 16 42.3 100 700.5 100 71.0 56 73.8 100 887.6 94 17 42.3 100 700.5 100 0.0 0 49.2 67 792.0 84 18 34.7 82 494.8 71 0.0 0 6.3 9 535.8 57 19 33.7 80 223.9 32 0.0 0 0.0 0 257.6 27 20 30.0 71 492.6 70 0.0 0 17.0 23 538.6 57 21 40.7 96 576.2 82 126.4 100 61.8 84 805.1 85 22 42.3 100 700.5 100 120.8 96 73.8 100 937.4 99 23 42.3 100 700.5 100 126.4 100 73.8 100 943.0 100 24 42.3 100 700.5 100 126.4 100 73.8 100 943.0 100 25 42.3 100 700.5 100 102.2 81 73.8 100 918.8 97

Ave. 41.1 97 635.8 91 77.3 61 58.7 80 812.9 86

Demands: Municipal Supply 2/ 42.3 First Cropping Seasonr- 700.5 Second Cropping Season-- 126.4 Bayovar 73.8

Total 943.0

1/ Water balance does not consider future savings from rehabilitation of Chira Valley.

2/ Includes water losses in the Chira-Piura canal and in the Piura River upstream of Catacaos.

May 17, 1979 - 38 - AN\'EX 1 :able 6

PERE

LOVER PIURA IRRIGATION REHABILITAIIONII PROJEC7'

Project Cost

Foreign Base Item Local Foreign Total Local Foreign Total Exchange Cost - S/.Million------USSMillion---

Main Irrigation and Flood Control Works Diversion Dam 1,391.38 1,093.22 2,484.6 6.79 5.33 12.12 44 9.8 Main Irrigation Canal 2,217.28 3,325.92 5,543.2 10.82 16.22 27.04 60 21.9 Flood Control Dikes 838.04 3,352.16 4,190.2 4.09 16.35 20.44 80 16.5 Engineering and Supervision 610.90 610.90 1,221.8 2.98 2.9e 5.96 50 4.8

Subtotal 5,057.60 8,382.20 13,439.8 24.68 40.8E 65.56 62 53.0

Irrigation and Drainage Networks Secondary and Tertiary Canals (lined) 1,435.00 2,152.44 3,587.44 7.00 10.50 17.50 60 14.2 Lateral and Sublateral Canals 421.58 515.27 936.85 2.06 2.51 4.57 55 3.7 Main Drains 43.23 80.28 123.51 0.21 0.39 0.60 65 0.5 Collector Drains 1,372.29 5S8.12 1,960.41 6.69 2.82 9.56 30 7.7 Field Drains 282.06 846.18 1,128.24 1.37 4.13 5.50 75 4.5 Buildings and Furnishngs / 78.72 19.68 98.40 0.3e 0.10 0.48 21 0C4 Engineering and SupFrnision . 536.53 134.13 670.66 2.62 0.65 3.27 20 2.6 Right-of-Way and Taxes 486.60 - 486.60 2.37 - 2.37 - 1.2

Subtotal 4,656.01 4,336.10 8,992.11 22.70 21.15 43.85 49 34.7

On-Farm Investments IrrigationDitches 217.34 144.89 362.23 1.06 0.71 1.77 40 1.4 Land Levelling 240.52 721.55 962.07 1.17 3.52 4.69 75 3.3 Leaching and Soil Improvements 87.38 87.39 174.77 0.42 0.43 0.85 51 0.7 Other Investments 86.92 21.73 108.65 0.42 0.11 0.53 21 0.4

Subtotal 632.16 975.56 1,607.72 3.07 4.77 7.84 61 6.3 Equipment Maintenance Equilment - 692.90 692.90 - 3.38 3.38 100 2.7 Vehicles2/ - 24.60 24.60 - 0.12 0.12 100 0.1 Technica' quipment - 63.55 63.55 - 0.31 0.31 lUO u.

Subtotal - 781.05 781.05 - 3.81 3.81 100 3.1

Technical'Servicesand Consultants Agricultural Extension lR2.5h - 182.56 0.89 - 0.89 - 0.7 Land Reclamation 240.06 - 240.06 1.17 - 1.17 - 1.0 Training - 20.50 20.50 - 0.10 0.10 100 0.1 Consulting Services - 123.00 123.00 - 0.60 0.60 100 0.5 Feasibility Studies 131.20 32.80 164.00 0.64 0.16 0.80 20 0.6

Subtotal 553.82 176.30 730.12 2.70 0.6 3.56 24 2.9

Total Base Cost 10,899.59 14,651.21 25,550.80 53.15 71.47 124.62 58 100.0

Physical ConLingencies 1,608.38 2,179.41 3,787.79 7.85 10.63 18.48 58 14.9

Price Contingencies 15.23 20.48 35.71 58 28.5

TOTAL PROJECT COST 76.23 102.58 178.81 58 142.3

Exchange Rate: US$l - 205 soles !/ Determined as 10% of all the irrigation and drainage categories except field drains and right-of-way.

2/ Includes vehicles for agricultural research and extension service and land reclamation unit,

April 2, 1979 - 39 - ANNEX 1 Table 9

PERL

LOWER PIURA IRRIGATION REHABILITATION II PROJECT

Schedule of Expenditures (US$ Million)

------Project Years- - Item 1980 1981 1982 1983 1984 Total

Main Irrigation & Flood Control Works Diversion Dam 7.27 4.85 - - - 12.12 Main Irrigation Canal 5.40 10.82 10.82 - - 27.04 Flood Control Dikes - 4.09 8.17 8.18 - 20.44 Engineering & Supervision 1.27 1.98 1.90 0.81 - 5.96

Subtotal 13.94 21.74 20.89 8.99 - 65.56 Irrigation & Drainage Networks Secondary & Tertiary Canals (lined) 1.75 4.38 5.25 3.50 2.62 17.50 Lateral & Sublateral Canals 0.46 1.14 1.14 1.14 0.69 4.57 Main Drains - - - 0.60 - 0.60 Collector Drains 1.91 2.87 2.87 1.91 - 9.56 Field Drains 0.27 1.10 1.38 1.38 1.37 5.50 Buildings and Furnishings 0.18 0.30 - - - 0.48 Engineering and Supervision 0.43 0.87 0.93 0.71 0.33 3.27 Right-of-Way & Taxes 0.49 0.42 0.28 0.20 - 1.39

Subtotal 5.49 11.08 11.85 9.44 5.99 43.85

On-Farm Development Irrigation Ditches 0.18 0.44 0.44 0.44 0.27 1.77 Land Levelling 0.46 1.18 1.18 1.18 0.69 4.69 Leaching and Soil Improvements 0.16 0.17 0.17 0.17 0.18 0.85 Others 0.10 0.10 0.11 0.11 0.11 0.53

Subtotal 0.90 1.89 1.90 1.90 1.25 7.84

Eauipment Maintenance Equipment 2.06 0.84 0.48 3.38 Vehicles 0.12 - - 0.12 Technical Equipment O.ll 0010 0.10 0.31

Subtotal 2.29 0.94 0.58 3.81

Technical Services and Consultants Agricultural Extension 0.17 0.18 0.18 0.18 0.18 0.89 Land Reclamation 0.23 0.23 0.23 0.24 0.24 1.17 Training 0.03 0.04 0.03 - - 0.10 Consulting Services 0.10 0.15 0.15 0.10 0.10 0.60 Feasibility Studies - 0.40 0.40 - - 0.80

Subtotal 0.53 1.00 0.99 0.52 0.52 3.56 Total Base Cost 23.15 36.65 36.21 20.85 7.76 124.62

Physical Contingencies 3.44 5.44 5.38 3.08 1.14 18.48

Price Contingencies 3.40 8.43 11.46 8.53 3.89 35.71

TOTAL PROJECT COST 29.99 50.52 53.05 32.46 13.19 178.81

May 8, 1979 - 40 - ANNEX 1 Table 10

PERU

LOWERPIURA IRRIGATION REHABILITATION II PROJECT

Financing Plan (US$Million)

Energoprojekt Gcvernmentl/ World Bank Item US$Million % US$Million % US$Million % Total

Main Irrigation and Flood Control Works Diversion Dam 6.06 50 6.06 50 - - 12.12 Main Irrigation Canal & Structures 13.52 50 13.52 50 - - 27.04 Flood Control Dikes 10.22 50 10.22 50 - - 20.44 Admin. Eng. & Supervision 2.98 50 2.98 50 - - 5.96

Subtotal 32.78 50 32.78 50 - - 65.56 Irrigation & Drainage Networks 7.72 35 14.35 65 22.07 Irrigation Canals - - 7.72 35 14.35 65 22.07 Main & Collector Drains - - 3.56 35 6.60 65 10.16 Field Drains - - 1.92 35 3.58 65 5.50 Building Construction &-Furnishings - - 0.17 35 0.31 65 0.48 Admin. Eng. & Supervision - - 1.14 35 2.13 65 3.27 Right-of-Way & Taxes - - 2.37 100 - - 2,37

Subtotal - - 16.88 38 26.97 62 43.85

On-Farm Investments - - 2.74 35 5.10 65 7.84

Equipment MaintenanceEquipment - - - - 3.38 100 3.38 Vehiclesl/ - - - - 0.12 100 0.12 Technical Equipment2/ - - - - 0.31 100 0.31

Subtotal - - - - 3.81 100 3.81

Technical Services and Consultants Agricultural Extension - - 0.31 35 0.58 65 0.89 Land Reclamation Unit - - 0.41 35 0.76 65 1.17 Training - - - - 0.10 100 0.10 Consulting Services - - - - - 0.60 100 0.60 Feasibility Studies - - - 35 0.80 100 0.80

Subtotal - - 0.72 28 2.84 72 3.56

Total Base Cost 32.78 26 53.12 43 38.72 31 124.62

Physical Contingencies 4.92 27 7.95 43 5.61 30 18.48

Price Contingencies 8.70 24 15.34 43 11.67 33 35.71

TOTAL PROJECT COST 46.40 26 76.41 43 56.00 31 178.81

1/ Includes vehicles for agricultural research and extension service and land reclamation unit.

2/ Includes topographical, meteorological, hydrometric, soils laboratory and office equipment.

3/ Includes US$1.1 million contribution of the beneficiaries.

May 8, 1979 - 41 - ANNEX 1 Table 11

PERU

LOWER PIURA IRRIGATIONREHABILITATION II PROJECT

Estimated Schedule of Disbursement (US$ Million)

Cummulative Disbursement Disbursement World Bank Date at the at the end of Fiscal Year of Disbursement end of period the period

1981 December 31, 1980 1.0 1.0 June 30, 1981 6.9 7.9

1982 December 31, 1981 6.5 14.4 June 30, 1982 7.2 21.6

1983 December 31, 1982 7.3 28.9 June 30, 1983 7.6 36.5

1984 December 31, 1983 6.0 42.5 June 30, 1984 5,9 48.4

1985 December 31, 1984 3.9 52.3 June 30, 1985 3.7 56.0

April 30, 1979 PERU

LOWER PIURA IRFICATION REHABILITATION II PROJECT

W1ith and Without Project, Area Development and Cropping Pattern (ha)

Without ------With Project------Project 1980(1) 1981(2) 19P2(3) 1993(4) 1)4(9) 98l(6) t$86

Cultivated Area 27,469 27,469 27,969 28,969 30,569 32,569 34,720 34,720 Cropped Area 29,089 29,450 32,250 35,300 38,170 41,730 45,300 47,000

Cropping Intensity (Z) 84 85 93 102 110 120 130 135

Main Season and Permanent Crops

Cotton 21,140 21,150 21,400 21,650 21,850 22,000 22,000 22,000 Corn 990 900 1,100 1,400 2,000 2,500 3,000 3,200 Sorghum 985 1,100 1,500 2,000 2,500 3,500 4,100 4,200 1 Rice 860 900 1,250 1,500 1,750 2,000 2,000 2,000 4 Garden Crops/ 340 350 400 500 530 600 750 700 Other Annual Crops-2/ 2,669 2,400 1,980 1,660 1,230 900 560 520 Pasture and Fodder Crops/ 485 500 700 1,000 1,400 1,800 2,100 2,100

Subtotal 27,469 27,300 28,330 29,710 31,260 33,300 34,510 34.720

Second Season Crops

Corn 225 500 1,300 2,000 2,,30G 3,000 3,800 5,000 Sorghum 225 400 1,100 1,800 2,500 3,000 4,100 4,000 Pulses 550 600 800 1,000 1,210 1,430 1,700 2,000 Garden Crops-/ 2/ 340 350 400 450 120 13600 750 800 Other Annual Crops- 280 300 320 340 370 400 440 480

Subtotal 1,620 2,150 3,920 5,590 6,910 8,430 10,790 12,280

TOTAL CROPPED AREA 29,089 29,450 32,250 35,300 38,170 41,730 45,300 47,000

1/ Onions, preen corn, relon, etc. 9/Sweet votato. 3/Alfalfa.'

M;1y 8, 1979 PERU

LOWEP.PIUKA IRRICATION REHABILITATION I1 PROJECT

Yields Per Hectare and Volume of Production With and Without Project

CroP9

Yields (Ions/Ila) Without Project ______-_ -- _----_------…With Project------1 2 3 14 5 6 7-50 -rement.al 2.40 .90 Cotton 1.50 1.60 1.75 1.90 2.10 2.30 2.40 4.50 2.50 Ccrn 2.00 2.30 2.60 3.00 3.50 4.00 4.50 5.10 2.30 Sorghum 2.80 3.00 3.35 4.00 4.60 5.10 5.10 6.00 2.00 Rice 4.00 4.20 4.50 5.00 5.50 6.00 6.00 P'ulses (dry).95 1.00 1.15 1.32 1.50 1.65 1.80 1.80 .85 7.40 8.35 9.20 10.60 12.00 12.00 6.00 Gerden C(dry)o1 6.00 6.50 Other Annual Crop2/ 6.20 6.50 7.40 8.35 9.20 10.60 12.00 12.00 5.80

24.00 5.00 Pasture .ad Fodder-/ 19.00 19.00 20.00 21.00 21.00 22.00 24.00

Volume of Production (000 of metric tons)

21.09 Cotton 31.71 33.84 37.45 41.14 45.89 50.60 52.80 52.80 34.47 Corn 2.43 3.22 6.24 10.20 15.05 22.00 30.60 36.90 38.43 Sorghum 3.39 4.50 8.71 15.20 23.00 33.12 41.82 41.82 8.56 Rice 3.44 3.78 5.63 7.50 9.63 12.00 12.00 12.00 3.08 Pulase3 .52 .60 .92 1.32 1.82 2.36 3.06 3.60 18.00 13.92 Ga.denCrop s-1 4.08 4.55 5.92 7.93 9.75 12.72 18.00 Others--l 18.28 17.55 17.02 16.70 14.72 13.78 12.00 12.00 (f.28)

48.72 39.58 Pasture and Fodder3/ 9.14 9.72 14.11 20.88 30.51 40.19 48.72

1/ Onions usel as prototyp-. 2/ Sweet potatoes used as prototype. 3/ AlfaJfa hay, equivalent to 29-. of gross weight.

May 29, 1979 - 44 - ANNEX 1 Table 14

PERU

LOWERPIURA IRRIGATIONREHABILITATION II PROJECT

Producer Prices at Farm Gate LevelY/ TS-.per Metric Ton)

Financial ------Economic Prices------Prices 1980 1981 1982 1985 1990

Cotton2/ 77,083 122,670 126,014 129,714 131,920 131,920

Rice-.I 29,830 53,200 54,670 56,640 60,430 62,380

Maize 22,420 27,550 28,030 28,520 29,430 30,090

Sorghum 22,800 25,000 25,900 26,390 27,330 27,800

Pulses 36,670 36,670 36,670 36,670 36,670 36,670

Vegetables 21,394 21,394 21,394 21,394 21,394 21,394

Sweet Potatoes 10,260 10,260 10,260 10,260 10,260 10,260

Alfalfa 10,070 10,070 10,070 10,070 10,070 10,070

1/ All prices in constant 1979 values. 2/ It is assumed that the Piura cotton will receive about 15% premium in the world market compared to Mexican SM 1-1/16" CIF N. Europe. About 15% of the CIF price is the cost cf commercialization;about $10 per ton is the price of cotton seed; and about 30% is the extraction rate of lint from raw cotton. 3/ A ratio of about 1.5 is assumed between vaddy and milled rice.

May 3, 1979 PERU

LOrWER PIURA IRRIGATION REHABILITATION II PROJECT

Agricultural Labor Requirements (in mandays)

----.------Without Project------

Crop Jan Feb Mar Apr May Jun Jul Sep Oct Nov Dec Total totton 253,680 380,520 232,540 84,560 105,700 317,100 317,100 169,120 84,560 1,944,880

Ccrn - 1st Seas,,n 9,900 5,940 4,950 4,950 14,850 40,590 Corn - 2nd Season 2,250 1,350 1,125 1,125 3,375 9,229

Sorghum - 1st Season 4,925 9,850 5,910 6,895 6,895 34,475 2 Sorghuim - nd Season 1,125 2,250 1,350 1,575 1,575 7,875

Rice 13,760 13,760 13,760 14,620 15,480 1,720 17,200 90,300

Pullsss 4,400 4,400 2,200 5,500 2,200 18,700

Gdar'eJi Crops - i.st Season 3,740 7,820 7,820 7,820 4,080 31,280 Garden Crops 2nd Season 7,820 7,820 7,820 7,820 31,2fl)

Otiher Annuals - 1st Season 21,352 42,704 16,014 40,035 120,132

Other Anniuals - 2nd Season 2,240 4,480 1,680 4,200 12,600

Alfalfa 1 1,940 1,940 1,940 1,940 1.940 1 1,940 1,940 1,940 1,940 1,940 22, 795

rf(rAL MANDAYS 268,895 414,785 293,202 162,504 158,799 384,900 325,680 191,135 101,800 21,935 16,380 24,090 2,364,105

------Full Development------

Cop _Jn Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Total

Cotton 330,000 440,000 308,000 110,000 132,000 396,000 396,000 198,000 110,000 2,420,000

Corn - lst Season 35,200 19,200 19,200 16,000 54,400 144,00n

Corn - 2nd Season 55,000 30,000 30,000 25,000 85,000 225,000 Sorghum - 1st Season 25,200 42,000 25,200 29,400 33,600 155,40(0

Sorghum - 2nd Season 24,000 40,000 24,000 28,000 32,000 148,000

Rice 36,000 36,000 36,000 38,000 42,000 8,000 42,000 238,000 rulses 20,000 22,000 12,000 24,000 12,000 90,000

Garden Crops - 1st Season 11,900 24,500 24,500 24,500 12,600 98,000

Garden Crops - 2nd Season 28,000 28,000 28,000 28,00(0 112,000 Other Annuals - lst Season 5,200 10,400 4,680 9,360 29,640

Other Annuals - 2nd Season 4,800 9,600 4,320 8,640 27,360 Alfalfa 10,500 10,500 10,500 10,500 10,500 10,500 10,500 10,500 10,500 10,500 _0,0 v 115,500 Sr 2

TM AL MANDAYS 340,500 558,800 445,400 235,800 255,080 558,460 431,300 347,100 234,820 125,140 111,500 159,00(0 3,802,90(0

May 23, 1979 PERU

LOWERPIURA IRRIGATION REHABIL-TATION II PROJECT

Crops Production Cost Per Ha

1.8 Ha Farm Model Without Project (Soles) Garden Other Alfalfa Alfalf Inputs Other Than Labor Cotton Corn Sorghum Pulses C Annuals2/ 1st Year Yrs.l-6

(1) Land Preparation Ploughing 1604.3 1604.3 1604.3 1604.3' 1604.3 1604.3 2673.9 - Harrowing - 534.8 - - 1069.6 - - - Bordering 534.8 - - 534.8, - 534.8 - - Leveling 534%8 534.8 534.8 534.8 1069.6 534.8 - -

(2) Planting Sowing 534.8 - 1069.6 - - - 534.8 - Seed 1711.3 2852.2 2673.9 2406.5 8913.0 2673.0 12478.3 -

(3) Crop Husbandry Cultivation 1604.3 1069.6 1069.6 534.8 - - -

(4) Fertilization Machine or Arimal Works 534.8 534.8 - 534.8 - - - _ Fertilizers 7066.3 7066.3 5650.9 1 96.5 6207.0 4602.7 3083.9 1800.4

(5) Pest & Disease Control Inputs 3297.8 784.3 757.6 1069.6 713.0 713.0 1301.3 2602.6 Areal Spraying

(6) Irrigation (5 applics) 1782.6 1782.6 1782.6 1782.6 1782.6 1782.6 1782.6 1782.6

(7) Harvest Sacks, bags, etc. 392.2 534.8 713.0 534.8 891.3 1069.6 - - Cleaning of fields 891.3 -

(8) On-farm transportation 534.8 534.8 534.8 534.8 1604.3 1604.3 534.8 2139.1

Subtotal 20132.8 17833.3 16391.1 12068.3 23854.7 16011.3 22389.6 8324.7

Labor 46000.0 22500.0 21500.0 21500.0 53000.0 23500.0 16000 0 31000.0 Total Cost 66132.8 40333.3 37891.1 33568.3 76854.7 39511.3 38389.6 39324-7

1/ E.g. red onion 2/ E.g. sweet potatoes.

olo "av 3, 197n ci' PERU

LOWERPIU1A IRRIGATION REHABILITATION II PROJECT

Crops Production Cost$ Per Ha

1.8 Ha Farm Model

With Project (Soles) Garden Other Alfalfa Alfalfa !pu_ts Other Than Labor Cotton Corn Sorghum Pulses Cropsl/ Annuals2/ 1st Year Yrs. 1-6

(1) Land Preparation Ploughing 1604.3 1604.3 1604.3 1604.3 1604.3 1604.3 3743.5 - Harrowing - - - - 1069.6 - - Bordering 534.8 - - 534.8 - 534.8 - - Leveling 1069.6 1604.3 1604.3 1604.3 1069.6 1604.3 -

(2) Planting Sowing 534.8 534.8 1069.6 534.8 - - - Seed 1426.1 2852.2 2673.9 2406.5 8913.0 2673.9 12478.3 -

(3) Crop Husbandry Cultivation 2139.1 1069.6 1069.6 534.8 - - - -

(4) Fertilization Machine/Animal Work 1069.6 1069.6 - 2533.1 - - 1069.6 1069.6 Fertilizers 14198.5 11531.7 10064.6 2479.6 15615.7 7601.0 6032.3 4278.3

(5) Pest Disease Control Inputs 5971.7 1782.6 802.2 2673.9 2228.3 1069.6 2602.6 3903.9 Areal Spraying

(6) Irrigation (6 applic) 2673.9 2673.9 2673.9 2673.9 2673.9 2673.9 2673.9 2673.9

(7) Harvest (Mechanic.) 3297.8 1069.6 Sacks, Bags, etc. 802.2 1069.6 1069.6 891.3 1337.0 1782.6 - - Clean. hp of fields

(8) On-farm transp. 1069.6 1069.6 1069.6 1069.6 2139.1 2139.1 534.8 3208.7

Subtotal 33094.2 30694.8 23701.6 19540.9 36650.5 22753.1 29135.0 15134.4 Labor 57000.0 23500.0 22500.0 23500.0 71500.0 31000.0 20000.0 44000.0 Total Cost 90094.2 54194.8 46201.6 43040.9 108150.5 53753.1 49135.0 59134.4

I/ E.g. Red onions. -- 2/ E.g. Sweet Potatoes.

May 8, 1979 '| PERU

LOWER PIURA IRRIGATION REHABILITATION II PROJECT

Crops Production Cost Per Ha

15 Ha and 1,000 Ha Farm.Model

Without Project (Soles) Garde, Other Alfalfa Alfalfa Ioputs Other Than Labor Cotton Corn Sorghum Rice Pulses Crops- Annuals-/ st Year Years 2-6

(1) Land Preparation Ploughing 3,565.2 3,565.2 3,565.2 3,565.2 31565.2 3,565.2 3,565.2 3,565.2 - Horrowing 1,426.1 1,426.1 1,426.1 1,426.1 1',426.1 1,426.1 1,426.1 713.0 - Bordering 713.0 - 713.0 1,426.1 713.0 - 1,426.1 ------2,139.1 1,426.1 2,852.2 - (2) Planting Sowing 1,782.6 1,782.6 1,782.6 - 891.3 - - - - Seed 1,996.5 3,422.6 3,565.2 3,609.8 2,673.9 8,913.0 2,673.9 12,478.3 -

(3) Crop Husbandry Cultivation 2,852.2 2,139.1 1,426.1 - 1,426.1 - - -

(4) Fertilization Machine/Arimal Work 1,426.1 1,426.1 1,426.1 1,426.1 - - - - _ Fertilizers 7,066.3 7,066.3 5,650.9 10,599.4 1,996.5 6,207.0 4,602.7 3,083.9 1,799.5

(5) Pest Disease Control Inputs 4,456.5 784.3 757.6 1,069.6 1,069.6 713.0 713.0 1,301.3 2,602.5 Aerial Spraying 1,515.2 - - 820.0 - - - - -

(6) Irrigation (5 applic) 1,782.6 1,782.6 1,782.6 1,782.6 1,782.6 1,782.6 1,782.6 1,782.6 1,782.6

(7) Harvest 2,673.9 10,392.6 Sacks, Bags, etc. 392.2 534.8 713.0 534.8 534.R 891.3 891.3 - - Cleaning Up of Fields and Thrashing - - - 8,913.0 - - - -

(8) On-farm Transportation 713.0 713.0 855.7 39 713.0 713.0713.0 713.0 4.Z78.3 Subtotal 28,974.5 28,029.6 34,056.7 39,165.7 16,792.1 26,350.3 19,220.0 26,489.5 10,462.9 Labor 46,500.0 18,000.0 13,250.0 52,500.0 16,000.0 48,000.0 21,500.0 14,500.0 28,500.0 TOTAL COST 75,474.5 46,O2Q.6 47,306.7 91,665.7 32,792.1 74,350.3 40.720.0 40,989.5 38,962.9

1/ E.P. red onion. 2/ E.g. sweet potatoes.

May 3, 1979 PERU

LOWER PIURA IRRIGATION REHABILITATION II PROJECT

Crops Production Costs Per Ha

15 and 1,000 Ha Farm Model

With Project (Soles) Gardey, Other 2/ Alfalfa Alfalfa Inputs Other Than Labor Cotton C Sorghum Rice Pulses Crops- Annuals- 1st Year Years 2-6

(1) Land Preparation Ploughing 3,565.2 3,565.2 3,565.2 4,456.4 3,565.2 3,565.2 3,565.2 3,565.2 - Harrowing 1,426.1 1,426.1 1,426.1 1,426.1 1,4264 1,426.1 1,426.1 - - Bordering - 713.0 713.0 1,426.1 713.0 - 1,426.1 713.0 - Land Smoothing 1,426.1 1,426.1 1,426.1 1,426.1 713.0 2,139.1 1,426.1 2,852.2 -

(2) Planting Sowing 1,782.6 1,782.6 1,782.6 - 1,462.1 - - - Seed 1,711.3 2,852.2 3,565.2 3,609.8 2,406.5 8,913.0 2,673.9 12,478.3 -

(3) Crop Husbandry Cultivation 4,278.3 2,852.2 1,426.1 - 2,139.1 - - - -

(4) Fertilization Machine/Aniral Work 1,426.1 1,426.1 1,426.1 1,426.1 - - - 1,426.1 1,426.1 Fertilizers 14,198.5 11,531.7 10,064.6 16,918.7 3,943.1 9,358.7 7,601.0 6,034.1 4,278.3

(5) Pest Disease Control Inputs 5,971.7 1,782.6 757.6 1,426.1 2,673.9 2,228.3 1,069.6 2,602.6 3,903.9 Aerial Sprayiny 1,515.2 - - 820.0 - - - - -

(6) Irrigation (6 applic.) 2,673.9 2,673.9 2,673.9 2,673.9 2,673.9 2,673.9 2,673.9 2,673.9 2,673.9

(7) Harvest (mechanically) 3,297.8 12,478.3 Sacks, Bags, etc. 802.2 1,069.6 802.2 802.2 891.3 1,337.0 1,782.6 - - Cleaning Up of Fields and Thrashing - - - 13,191.3 - - - -

(8) On-farm Transportation 1,069.6 1,069.6 1,140.9 7,130.0 713.0 1,426.1 855.7 713.0 7L130.4 Subtotal 41,846.8 37,468.7 43,247.9 56,969.7 23,284.2 33,064.4 24,500.2 33,058.4 19,412.6 Labor 53,500.0 22,000.0 15,000.0 59,500.0 21X000,0 68,500.0 27,500.0 21,500.0 43,000.0

TOTAL COST 95,346.8 59,468.7 58,247.9 116,469.7 44,284.2 101,564.4 52,000.2 54,558.4 62,412.6

1/ E.g. red onion. 2/ E.g. sweet potatoes.

May 3, 1979 - 50 - ANNEX 1 Table loa PERU

LOWER PIURA IRRIGATION REhABILITATION II PROJECT

1.8 Ha Farm Model

Expected Farm Development and Cropping Pattern

With Project Without ------Project 1 2 3 4 5 6 7

Farm Works

Land leveling (ha) - 1.8 ------Irrigation ditches (ha) - 1.8 ______Soil leaching (ha) - 1.8 ------

Land Use

Cultivated area (ha) 1.44 1.44 1.72 1.80 1.80 1.80 1.80 1.80

Crops

Cotton 1.03 1.04 1.05 1.06 1.10 1.10 1.10 1.10 Corn 0.24 0.30 0.35 0.40 0.44 0.44 0.44 0.44 Sorghum 0.04 0.10 0.20 0.30 0.41 0.41 0.41 0.41 Pulses 0.11 0.11 0.11 0.12 0.12 0.12 0.12 0.12 Garden Crops!/ - - - 0.05 0.12 0.12 0.12 0.12 Other Annual,2/ 0.10 0.08 0.06 0.05 0.03 0.03 0.03 0.03 Alfalfa3/ -- - 0.10 0.22 0.22 0.22 0.22 Total cropped area (ha) 1.52 1.63 1.77 2.08 2.44 2.44 2.44 2.44 Cropping intensity Z 106 113 103 115 136 136 136 136

Production (tons)

Cotton 1.50 1.66 1.84 2.01 2.31 2.53 2.64 2.64 Corn 0.48 0.69 0.91 1.20 1.54 1.76 1.98 1.98 Sorghtu 0.11 0.30 0.67 1.20 1.89 2.09 2.09 2.09 Pulses 0.10 0.11 0.13 0.16 0.18 0.20 0.22 0.22 Garden Cropasl - - - 0.42 1.10 1.27 1.44 1.44 1 Other Annual=2 0.62 0.52 0.44 0.42 0.28 0.32 0.36 0.36 Alfalfa/ - - - 2.09 4.79 ..Q1 S in S.)o

Gross Value of Production (S/.'-O°)

Cotton 115.62 127.96 141.93 154.94 178.06 195.02 203.50 203.50 Corn 10.76 15.47 20.40 26.90 34.53 39.46 44.39 44.39 Sorghum 2.51 6.84 15.28 27.36 43.09 47.65 47.65 47.65 Pulses 3.67 4.03 4.77 5.87 6.60 7.33 8.07 8.07 Garden Crops!! - - - 8.99 23.53 27.17 30.81 30.81 Other Arnual'2/ 6.36 5.34 4.51 4.31 2.87 3.28 3.69 3.69 Alfalfa3u - - - - 21.05 48.24 49.44 51.36 51.36 Total 138.92 159.64 186.79 249.42 336.92 369.35 389.47 389.47

Cost of Production (S/.'000) Crops Cotton 20.73 22.48 24.38 26.44 29.47 31.65 36.40 36.40 Corn 4.28 5.78 7.29 9.01 10.71 11.58 13.50 13.50 Sorghum 0.66 1.73 3.64 5.76 8.29 8.74 9.72 9.72 Rice ------Pulses 1.33 1.42 1.52 1.7.8 1.91 2.04 2.34 2.34 Garden Crops - - - 1.43 3.65 3.88 4.40 4.40 Other Annuals 1.60 1.35 1.06 0.93 0.59 0.62 0.68 0.68 Alfalfa - - - 2.50 2.58 2.81 3.33 3.33

Subtotal 28.60 32.76 37.89 47.85 57.20 61.32 70.37 70.37

Labor (family only) 72.38 75.73 79.24 82.91 86.75 90.77 94.97 94.97

Total Cost 100:98 108.49 117.13 130.79 143.95 152.09 165.34 165.34

1/ Red onions. 2! Sweet potatoes. 3/ Alfalfa hay, 292 of green weight.

May 3, 1979 PERU

LOWER PIURA IRRIGATION REHIABILITATION II PROJECT

1.8 Ha Farm Model

Cash Flow (S/. '000)

With Project Without ------_Years______--______Project 1 2 3 4 5 6-16 17

CASH INFLOW

Sales 1/ 138.92 159.64 186.79 249.42 336.92 369.35 389.47 3s-.47 Long-term Loans- 2/ 110.60 Short-term Loans- 28.60 32.76 37.89 47.85 57.20 61.32 70.37 _,.37

Total Cash Inflow 167.52 303.00 224.68 297.27 394.12 430.67 459.84 459.84

CASH OUTFLOW

Costs 3/ Cash Farm Investments- 110.60 Cash Production Costs-/ 28.60 32.76 37.89 47.85 57.20 61.32 70.37 70.37

Subtotal 28.60 143.36 37.89 47.85 57.20 61.32 70.37 70.37

Debt Service Short-term Loans 29.46 33.74 39.03 49.29 58.92 63.16 72.48 72.48 Long-term Loans 1.66 3.32 3.32 3.32 3.32 12.97 -

Subtotal 29.46 35.40 42.35 52.61 62.24 66.48 85.45 72.48

Project Charges 5/ Operation and Mai tenance- 20.05 22.39 25.00 27.92 31.17 34.81 38.87 38.87 Capital Recovery.6 ------

Subtotal 20.05 22.39 25.00 27.92 31.17 34.81 38.87 38.87

Total Cash Outflow 78.11 201.15 105.22 128.38 150.61 162.61 194.69 181.72

5 et Farm Income 7/ 89.41 101.85 119.46 168.69 243.51 268.06 265.15 278.12 Estimated of Farm Income - 151.31 149.64 147.88 146.05 144.13 142.12 140.02 140.02

Total Family Income 240.72 251.49 267.34 314.94 387.64 410.18 405.17 418.14

1/ For cash farm investments at 3% real interest, 15 years repayment and 5 years grace. 2/ For cash production costs at 3% real interest. 3/ 90Z of farm investments. Remaining 10% is farmers' contribution in labor. 4/ Production costs exclusive of family labor. 5/ S/.21,592.4 per ha including O&M of existing infrastructure. 6/ No capital recovery is recommended for a 1.8 ha farm. T/ Correspond to wages for 507 of the residtual family labor supply. -

Mav 3, 1979 PERU

LOWERPIURA IRRIGATION REHABILITATION II PROJECT

1.8 Ha Farm Model

Monthly Agricultural Labor Requirement (man-days)

Jan Feb Mar Apr May Jun Jul AuR Sept Oct Nov Dec Total Without Project Cotton 16.56 24.84 15.18 5.52 6.90 20.70 20.7 11.04 5.52 126.96 Corn 2.10 1.26 1.05 1.05 3.15 0.03 0.18 0.15 0.15 0.45 9.66 Sorghum 0.20 0.40 0.24 0.28 0.28 1.40 Pulses 0.56 0.56 0.28 0.70 0.28 2.38 Garden Crops ------Other Annuals 0.80 1.60 0.60 1.5 4.50 Alfalfa - - - . - 0.45 144.76 Total 16.56 27.70 18.20 8.69 9.53 25.91 20.7 11.07 5.70 0.15 0.15

Full Development Cotton 16.5 22.0 15.40 5.5 6.60 19.80 19.8 9.90 5.50 121.00 Corn 2.2 1.20 1.2 1.00 3.40 2.64 1.44 1.44 1.20 4.08 19.80 Sorghum 1.2 2.00 1.2 1.40 1.60 1.26 2.10 1.26 1.47 1.68 15.17 Pulses 0.5 0.55 0.3 0.60 0.30 2.25 Garden Crops 4.20 4.20 4.20 4.20 16-80 Other Annuals 0.30 0.6 0.27 0.54 1.71 Alfalfa 1.1 1.1 1.10 1.1 1.10 1.10 1.1 1.10 1.10 1.10 1.10 1.10 13.20 1.97 6.86 Total 17.6 27.0 20.55 9.9 10.97 26.74 20.9 19.10 14.34 8.00 IRP'J1

Available laborl' 2.5 x 25 62.5 62.5 62.5 62.5 62.5 62.5 62.5 62.5 62.5 62.5 62.5 62.5 750.00

1/ Assume: 2.5 full laborers per family at 25 days per month.

January 17, 1979 ANNEX 1 Table 19a PERU

LOWERPIURA IRRIGATION REHABILITATION II PROJECI

15 Ha Farm Model

Expected Farm OeveloPent and Cropping Pattern

With Proiect Without ------… Years------Project 1 2 3 4 5 6 7 Farm Works

Land leveling (ha) - 2.0 2.5 - - - - - Irrigation ditches (ha) - 2.0 2.5 - - - _ _ Soil leaching (ha) - 2.0 8.0 - - - - - Land Use

Cultivated area (ha) 12.00 12.00 13.90 15.00 15.00 15.00 15.00 15.00 Crops

Cotton 8.57 8.60 8.70 8.80 8.90 9.00 9.00 9.00 Corn 0.63 0.70 1.00 1.80 2.20 2.43 3.00 3.46 Sorghum 0.73 0.84 1.25 1.95 2.48 3.50 4.50 5.90 Rice 0.46 0.50 0.65 0.80 1.00 1.20 1.38 1.62 Pulses - - 0.30 0.25 0.22 0.20 0.18 0.16 0.15 0.14 Other An ualsI/ 1.60 1.50 1.40 1.20 1.00 0.80 0.50 0.30 Alfalfal/ 0.25 0.30 0.41 0.47 0.70 0.90 1.00 1.20 Total cropped area (ha) 12.54 12.69 13.90 15.22 16.46 17.99 19.53 21.62 Cropping intensity Y 105 106 100 101 110 120 130 144 Production (tons)

Cotton 12.86 13.76 15.23 16.72 18.69 20.70 21.60 21.60 Corn 1.26 1.61 2.60 5.40 7.70 9.72 13.50 15.57 Sorghum. 2.04 2.52 4.19 7.80 11.41 17.85 22.95 30.09 Pulses 0.29 0.25 0.25 0.26 0.27 0.26 0.27 0.25 Rice 1.84 2.10 2.93 4.00 5.50 7.20 8.28 9.72 Other A upais!' 9.92 9.75 10.36 10.02 9.20 8.48 6.00 3.60 Alfalfa-- 4.71 5.83 8.27 9.81 15.23 20.10 23.20 27.84 Gross Value of Production (S/.'000)

Cotton 991.29 1,060.66 1,173.97 1,288.83 1,440.68 1,595.62 1,664.99 1,664.99 Corn 28.25 36.10 58.29 121.07 172.63 217.92 302.67 349.08 Sorghum 46.51 57.46 95.53 177.84 260.15 406.98 523.26 686.05 Rice 54.89 62.64 87.40 119.32 164.07 214.78 246.99 289.95 Pulses 10.63 9.17 9.17 9.53 9.90 9.53 9.90 9.17 Other An7ualsi2 101.78 100.04 106.29 102.81 94.39 87.00 61.56 36.94 Alfalfa_i 47.43 58.71 83.28 98.79 103.02 202.41 233.62 280.35 Total 1,280.52 1,384.78 1,614.54 1,918.19 2,544.84 2,734.24 3,051.99 3,316.53

Production (S/.'000) Crops

Cotton 248.27 262.56 279.97 298.50 318.18 339.12 376.65 376.65 Corn 17.66 20.45 30.44 57.10 72.71 83.69 112.41 129.65 SoXghum 24.86 29.61 45.6t 73.63 96.92 141.58 195.63 255.18 Rice 18.02 20.66 28.33 36.79 48.52 61.43 78.62 92.29 Pulses 5.04 4.40 4.06 3.87 3.65 3.40 3.49 3.26 Garden Crops - - - Other Annuals 30.75 29.84 28.80 25.55 22.04 18.25 12.25 7.35 Alfalfa 2.62 3.43 5.11 6.40 10.41 24.98 11.42 14.96

Subtotal 347.22 370.95 422.31 501.84 572.43 672.45 790.47 879.34

Family Labor 286.93 296.74 306.88 317.37 328.21 339.43 351.03 363.03 Hired labor 343.49 358.46 374.09 390.40 407.42 425.18 443.72 463.06

Total Cost 977.64 1,026.15 1,103.28 1,209.61 1,308.06 1,137.06 1,585.22 1,705.43

1/ Sweet potatoes. 2/ Alfalfa hay, 29% of green weight.

May 4, 1979 PERU

LOWER PIURA IRRIGATION REHABILITATION II PROJECT

1S ha Farm Model

Cash Flow (S/. 'OUO)

Without With Proiect Proiect ------Years------1 2 3 4 5 6 7-13 8 15 Cash Inflow Sales 1/ 1280.52 1384.78 1614.54 1918.19 2544.84 2734.24 3051.99 3316.53 3316.53 3316-53 Long-term Loans 2/ 145.40 178.40 Short-term Loans- 690.91 729.41 796.40 892.24 979.85 1097.63 1224.19 1342.40 1342.40 1342.40 Total Cash Inflow 1971.43 2259.59 2589.34 2810.43 3524.69 3831.87 4276.18 4658.93 4658.93 4658.93 Cash Outflow Costs 3/ Cash Farm Investments- 145.40 178.40 Cash Production Costs4/ 690.71 729.41 796.40 892.24 979.85 1097.63 1224.19 1342.40 1342.40 1342.40 Subtotal 690.71 874.81 974.80 892.24 979.85 1097.63 1224.19 1342.40 1342.40 1342.40 1 Debt Service Short-term Loans 711.43 751.29 820.29 919.01 1009.25 1130.56 1260.93 1382.67 1382.67 1382-67 f Long-term Loans 2.18 7.04 9.71 9.71 9.71 24.33 42.26 23.28 - Subtotal 711.43 753.47 827.33 928.72 1018.96 1140.27 1285.26 1424.93 1405.95 1382.67 Project Charges Operation and Matitenance.5/ 167.10 107.10 191.08 231.96 274.52 307.17 323.89 323.89 323.89 323.89 Capital Recovery- - - 30.68 83.62 141.47 189.09 218.04 218.04 218.04 218.04 Subtotal 167.10 167.10 221.76 315.58 415.99 496.26 541.93 541.93 541.93 541.93 Total Cash Outflow 1569.24 1795.38 2023.89 2136.54 2414.80 2734.16 3051.38 3309.26 3290.28 326757o Net Family Income 402.19 464.21 565.45 673.89 1i09.89 1097.71 1224.80 1349.67 1368.65 139.93

1/ For cash farm investments at 3'!.real interest, 12 years repayment jnd 5 years grace. 2/ For cash production costs at 3% real interest. 3/ 90% of farm investments. Remaining 10% is farmers' contribution in labor. 4/ Production costs exclusive of family labor. 5/ S/. 21, 592.4 per ha of full development. 6/ SI. 726,812 per ha in 50 years. Does not include the on-farm investment.

May 4, 1979 PERU

LOWER PIURA IRRIGATION REHABILITATION II PROJECT

15 Ha Farm Model

Monthly Agricultural Labor Requirements (man-days)

Jan Feb Mar Apr May Jun Jul AUg Sept Oct Nov Dec Total Without Project Cotton 139.20 208.80 127.60 46.40 58.00 174.0 174.0 92.80 46.40 1,067.20 Corn 5.00 3.00 2.50 2.50 7.5 1.30 0.78 0.65 0.65 1.95 25.83 Sorghum 3.00 6.00 3.60 4.20 4.2 0.65 1.30 0.78 0.91 0.91 25.55 Other Annuals 12.80 25.60 9.60 24.0 72.00 Pulses 2.4 2.40 1.20 3.00 1.20 40.20 Rice 7.36 7.36 7.36 7.82 8.28 0.92 9.20 48.30 Alfalfa 0.75 1.00 1.00 1.00 1.00 1.0 1.0 1.00 1.00 1.00 1.00 1.00 11.75 Total 147.31 225.16 157.76 86.92 83.58 210.7 177.4 98.15 50.68 5.43 4.68 13.06 1

Full Development Cotton 135.0 180.00 126.00 45.00 54.00 162.0 162.0 81.00 45.00 990.00 Corn 16.50 9.00 9.00 7.50 25.5 . 21.56 11.76 11.76 9.80 33.32 155.70 Sorghum 8.40 14.00 8.40 9.80 11.2 27.00 45.00 27.00 31.50 36.00 218.30 Rice 29.16 29.16 29.16 30.78 34.02 6.48 34.02 192.78 Pulses 1.4 1.54 0.84 1.68 0.84 6.30 Other Annuals 3.00 6.00 2.70 5.4 17.10 Alfalfa 6.00 6.00 6.00 6.00 6.00 6.0 6.0 6.00 6.00 6.00 6.00 6.00 72.00 Total 170.16 240.06 187.16 105.18 114.02 210.1 169.4 137.1 108.6 46.44 54.62 109.34 1 652.18

Available labor l 2.5 x 25 62.5 62.5 62.5 62.5 62.5 62.5 62.5 62.5 62.5 62.5 62.5 62.5 750.00

Deficit (in % of requirement) Without Project 58 72 60 28 25 70 65 36 * * 414.00 Full Development 63 74 67 40 45 70 63 54 42 . . 43 561.00

Er 1/ Assume: 2.5 full laborers per family, at 25 days per month.

January 17, 1979 LOWER J')0 10510001(1 71131ltalIu H1 PtIOJIC

1,D00Uk Pa, Ihdel

txpe.t-d F.r- D.Vt4I-nt _d Cropp-eg Pa-tern

Sittmt ______- ______--- er------~--~------?1gj01 ' I2 3 4 5 6 7 Par. IlopOG

Lnd 1eil lb.) - 100.00 100.00 I10 Ir-iga,.o ld,r- h.) 1o00.00 100.00 110 - SoIIl I inen (1-) _ - 30000 0.00 w0. -00 - - bnd Use

OnIleXatad see. (ha)

C-opn 8D3.00 000.00 870.00 9.0 1,000.00 (.000.00 11000.00 I.0_60 Cr0-,, f07.00 615.00 622.00 6219.00 637.00 664.00 652.00 Curn 640 40.00 51.0 72.00 170.00 140.0D 1o.00 spru7s6 210.00 230-D3 40.00 51 00 72.00 110.00 140.00 160.00 ho e 37.00 210.00 283.00 40.0O 48.00 53.0 6'.0D 74.00 100.C0 1i0OO8 FrI.. / 20. 00 20.00 23.00 25.00 31.0D 40 00 5.00 54.0 G.,d.n Cops- / 21 54 00 24.00 24.00 2S.O0 25.00 25.00 Ollar A.f,1-y 25.00 7500G 20.00 46.00 44.00c 45.00 44. 00 43.00 AlfalfaI- 42.00) 61.00 1 .0 15.00 13.00 10.00 8.00 4.00 2.00 Total CrrpPtt6 Aa.a (h.) 029.00 864.00 920.00 1,00N.0D (.08000 1,190.00 1,292.) Cropping Int-nalr 1 104 2 VA-OD 10J 106 106 109 119 129 Pendu ttin (ten,)

Cotn 910 0o 94 .00 1,018.50 1,195.10 1,337 10 1,481 oo 1564.00 one 60.00 3 00D 1017.30 167.2D 38D.00 490.00 770.0 94.0 1..035-0 Sersohu4n 112.00 153.00 241.20 0. 644.OD 918.00 1 071.0 1., 7 6k.e 120.00 168.00 216.0D 265.00 352.00 644.0 Pin*sa 600.00 68A.00 ~ 19.00 20.00 26.50 33.00 45.00 66.00 91.80 CGd.n Ceo- 97.20 2 1 144.00 156.00 177.60 200.40 23D.00 265.W other A>aa1- 310.C0 3DO.00 7310.00 312.00 360.40 375.r0 404.80 *55.60 10.10f. 504.00 49Z_00 3339.3D 291.50 262.10 206.60 174.00 89.30 46.40 Cross V0.15 o Pro cti (S/. '000)

Cotton7 181.4.07 75,849.67 83,904.85 92,121.89 1(3.061.68 004,175.36 Cop,, 120,619.40 122,05 .41 1.793.60 2 629.87 4 197.02 7,38.0 10,985.80 16,142.60 SeP60., 21,186.9D 21,3204.11 2,553.60 3,488.40 S499.36 10.032.03 14,13.Z0 20, 930.40 11k. 24,416.s0 26,47. 3,579.6D 5,011.44 6,443.28 7 904,95 10,500.16 13,244.52 17,896.00 p1.l. 10 19.23"9.4 467.13 733.40 971.16 0,201.11 1 680,15 2,420.Z2 31,36.31 C rd,, C.p.- 3,040.74 3,54.32 2 1 3,337.4 17".571. 4,287.316 4920.62 5,669.41 6.418,20 6,41.80 Other fna1- 3,18D60. 3,201.12 3,1192.0 3,60 .712 4 157.257.676 53 U,1710625,067.20 Alf.10. 3,416.75 2,935.41 2,639.35 2.807.112 1,752.18s 99.215 467.25- 550.1 88,485.69 97.186.77 110,947.69 128,613.27 151.713.04 178,108.05 199,545.96 zj0141L6 S

Ceat o1f tn,5ip (SI. '000)

17 584.7 t,77S.92 20,011.91 31,37.4 226772.75n4,5.2 27,286.20 27,Q6I._ cattsC tt I1,2.0 tit2t132 32*z 2 (7459.73147 ,9.83497 4.671.110 2411.74 4,4W 9 I. 210I",9920 9.02.57,64.70 997S6,08.06 brOs 1,1U5.61 1,452.66U 2092.M 2*,437.47 p.1.96 371.89l .52,06 7,6105.76 3,7n0.86 5,697.09 11,52.11 424.02 42.1.25 617.6 669.20 1,167.20 (.757.02 had"sCrp 1 632 .40 OtharA" 413.29 74.66 692.20 77.577.006.S0 U621.s 96.60 854. 72 946 22 o.0 9e9 750 -2 760.3 .tjro.i 18.28217t30 1.029.09 1,156 112.11 13.26 115.96 Ill.W 22 89

Snbtnotl 23,360.97 25,647,21 26.173.16 33,411.5 36,423.00 14,220.21 51,0. 02 ss.421.46 pil Lb.or 3,51.00 37.54553 3a,567.13 39.611.52 60,194.47 41,801.74 42,939.15 44,107.70 fr-d t1. 0r 1,470.05 1,179.22 6.,51." 7.410.92 7,706.60 6,296.59 6,933.51 9.,17.66 Tyt,l Cast 6S.,52.02 69,272.26 24.3522.96 0.46,6 69,826.27 94,350.54 104,6727.8 109.151.66

5/AlIsila ha. 72 5080 040 066 3. 1979 PERU

I1R PTIIR1 IRRIGATTON REHABILITATION II PROJECT

1,000 ha Farm Model

Cash Flow (SI. 'OOOs)

With Project Without ------B------rYeare ------Project 1 2 3 4 5 6 7 8-12 13 14 15

Cash Inflow Sales I/ 88485.69 97186.77 110947.69 128913i27 151713.04 178158.05 199545.98 206408.85 206408.85 206408.85 206408.85 206408.85 Long-term Loans- 7830.00 7830.00 8963.00 Short-term Loans- 29101.02 32026.73 35785.83 40851.57 46131.80 52548.80 61933.53 65044.48 65044.48 65044.48 65044.48 65044.48 Total Cash Inflow 117586.71 137043.50 154563.52 178727.84 197844.84 203706.85 261479.51 271453.33 271453.33 271453.33 271453.33 271453.33

Cash Outflow Costs 3 Cash Farm Investments&/ 7830.00 7830.00 8963.00 Cash Production Costs- 29101.02 32026.73 35785.83 40851.57 46131.80 52548.80 61933.53 65044.48 65044.48 65044.48 65044.48 65044.48 Subtotal 29101.02 39856.73 43615.83 49814.57 46131.80 52548.80 61933.53 65044.48 65044.48 65044.48 65044.48 650b4448

Debt Service Short-term Loans 29974.05 32987.53 36859.40 42077.12 47515.75 54125.26 63791.54 66995.81 66995.81 66995.81 66995.81 66995.8t Long-term Loans 117.45 352.35 604.25 738.69 738.69 1760.55 2782.42 1952.15 2695.35 1438.62 1438.6' Subtotal 29974.05 33104.97 37211.75 42681.37 48254.44 54863,95 65552,09 69718.23 68947,96 69691.19 68434,43 68A434.43

Prolect Charges Ppera-ion and Mauntenauce- 31139.83 11139.83 12738.8S 15463.92 18301.43 20477.73 21592.40 21592t4,4 21592,4ci 21592.40) 21592.40 21592'; Capital Recovery-' - - 2045.37 5574.84 9431.43 12606.22 14536.24 14536.24 14536.24 1453e,24 14536.24 14536.24 Subtotal 11l39.83 11139.83 14784.25 21038.76 27732.86 330R3.95 36128,.4 361:8 64 36128.54 36128.64 3lu1"'8.64 31262R6'

hotal Cash Outflow 70214.90 4101_.53 95611.83 11353u,70 122119.10 14r496.70 163614,2t, 170951.35 li§)17L8 1'0864.3 16f9607.15 9,69>0i7'

Ner Farm Income 47371.81 52941,91 58951.69 65193.14 75725.74 63210,15 97865.25 :00501.98 101332-`.5 J0P859,0 101E'4Ž 8 101844,-

Net Family Income 296.0? 330.89 3t8.4$ 40t.40 473.29 595.06 611.5e. f23.14, F. 5lY6' P34t

1h Forcash farminvesuTments at 3°. reel interest, 12 yea repayrent 6 5 years grace. 2/ For cash production costs at 37, real interest. 3/ 907. of farm tnvestmeents. Remaining 107. is farmers' contribution in labtor. 4/ Production costs exclusive of family labor. 5/ Sj, 21, 592.4 per ha at full development. ry< 6/ S/. 726,812 per ha in 50 yeAts. Does not Include *he cn fsar investmrent. 7/ 160 families in a cooperative farr..

May 4, 1379 PERU

LOWER PIURA IRRIGATION REHABILITATION II PROJECT

1,000 Ha Farm Model

Agricultural Labor Requirements (man-days)

Jan Feb Mar Apr May Jun Jul AUR Sep Oct Nov Dec Total

Without Project Cotton 9,240 13,860 8,470 3,080 3,850 11,550 11,550 6,160 3,080 71,110 Corn 360 216 180 180 540 90 54 45 45 135 1,845 Sorghum 180 360 216 252 252 45 90 54 63 63 1,133 Rice 496 496 496 527 558 62 620 3,255 Garden Crops 132 276 276 276 144 276 276 276 276 2,208 Other Annuals 776 1,552 582 1,455 80 160 60 150 4,815 Alfalfa 54 72 72 72 72 72 72 72 72 72 72 72 846 Total 9,790 15,100 10,666 5,903 5,770 14,013 11,702 6,803 3,632 597 518 890 85,384

Full Development Cotton 9,900 13,200 9,240 3,300 3,960 11,880 11,880 5,940 3,300 72,600 Corn (Ist and 2nd) 990 540 540 450 1,530 1,540 840 840 700 2,380 10,350 Sorghum (1st and 2nd) 600 1,000 600 700 800 780 1,300 780 910 1,040 8,510 O Rice 1,944 1,944 1,944 2,052 2,268 10,152 Garden Crops (1st and 2nd) 221 455 455 455 234 420 420 420 420 3,500 Other Annuals (Ist and 2nd) 290 580 261 522 120 240 108 216 2,337 Alfalfa ------Total 11,844 16,955 13,469 7,527 8,094 14,966 12,000 8,920 5,968 2,256 2,030 3,420 107,449

Available labor-/ 160 x 2.5 x 25 10,000 10,000 10,000 10,000 10,000 10,000 10,000 10,000 10,000 10,000 10,000 10,000 120,000

Deficit (in Z of requirement) Without Project . 34 6 . . 29 C1 . . . . 70 Full Development 16 41 26 . . 33 17 . . * * 133

1/ Assume: 2.5 full laborers per family, at 25 days per month.

January 17, 1979. r

;0 _ 59 - E 1 PER,

LOWER PIURA IRRIGATION REHABILITATION II PROJECT

Annual Operation and Maintenance Cr.- (Civil Works) - O&M (Mlillionsof Soles)

z of Foreign Construction Construction Unskilled Exchange Cost Cost Total Labor Component

Existing Infrastructure 11,250.91/ - 306.0 22.0 177.3

per hectare cost (soles) 324,000.0 _ 8,80C.0 - -

Project Infrastructure

Main Irrigation and Flood Control 13,439.8 1.4 183.8 37.7 112.8

1. Diversion Dam 2,484.6 1.0 24.8 3.0 10.9 2. Main Irrigation Canal 5,543.2 2.0 110.9 13.3 66.6 3. Dikes . 4,190.2 0.75 31.4 21.4 25.1 4. Administrative Engineering 1,221.8 - 16.7 - 10.3

Irrigation and Drainage Networks 8,503.6 2.4 199.9 59.1 107.7

a. Irrigation Works 4,524.4 - 118.6 14.2 68.9

i. Secondary & Tertiary Canals 3,587.5 2.0 71.8 8.6 43.1 ii. Lateral & Sublateral Canals 936.9 5.0 46.8 5.6 25.8

b. Drainage Works 3,210.1 64.2 44.9 30.3

i. Main Drains 121.5 2.0 2.4 0.2 1.6 ii. Complementary Drains 1,960.4 2.0 39.2 26.6 11.8 iii. Field Drains 1,128.2 2.0 22.6 18.1 16.9

c. Administrative Buildings 98.4 1.0 1.0 - 0.2

d. Engineering & Supervision 670.7 2.4 16.1 - 8.3

Total 21,943.4 1,7 387.7 96.8 220.5

Physical Contingencies 3,291.5 1.7 56.0 14.5 33.1

Total Cost 25,234.9 1.7 443.7 111.3 253.6

Per Hectare Cost (soles) 726,812.0 12.0lO.O - -

Per Hectare Cost US$ 3,545.4 62.3

% as of Construction Cost 1.7

Total Per HlectareCost (Existing & Project)(soles) 21,800.4

1/ Share of Bajo Piura in the investment costs of the Poechos Dam and the diversion canal.

April 30, 1979 PERU

LOWERPIURA IRRIGATION REHABILITATION II PROJECT

Rent and Cost Recovery!!

Farm Size 1.8 ha 15 ha 1,000 ha Total Percentage Distribution 45.5 4.6 49.9 Projeet ------S/.OOO------S/. Millions

1. Gross value of production-V 3,664.6 30,394.8 1,926,461.5 69,530.5 2. Less production cost 677.4 12,646.3 623,264.1 18,277.8 3. Equals net income (1-2) 2,987.2 17,748.5 1,303,197.4 51,252.7 4. Less - debt service on development credit]l_ 69.7 81.4 14,393.8 880.1 5. - imputed value of management servicer4/ - 1,519.7 96,323.1 1,847.8 6. - imputed return on own capitaLP/ 0.6 5.2 343.8 12.1 7. - allowance for risk and uncertaiuty_/ 366.5 3,039.5 192,646.2 6,682.3 8. Equal rent/surlplus 2,550.4 13,102.7 999,491.5 41,830.4 9. Rent as a percentage of net cash income (8*3) 85.4 73.8 76.7 81.6 10. Government revenues: 679.0 7,279.7 503,035.9 11:736-2 (i) Operation and Maintenance7! 377.2 3,130.4 208,692.7 193.0 (ii) Cost recovery89/ - 1,801.3 120,065.7 2,293.7 I (iii) Production taxes on cotton 301.8 2,348.0 174,257.5 690g,0 - 11. Rent recovery index (10+8) 26.6 55.6 50.3 38.0 . 12. Public sector outlays: 1,685.1 14,146.0 937,272.6 32,890.4 (i) Main irrigation works 1,307.9 11,015.6 728,579.9 25,551.4 (ii) Operation and Maintenance 377.2 3,130.4 208,692.7 7,339.0 13. Cost recovery index (10+12) 40.3 51.5 53.7 48.0 14. Farmers family income at full development - (soles) 418.1 1,391.9 636.5 15. Estimated critical consumption level (1986' - (soles)S 4 1 398.9 16. Estimated GDP per family in 1986 - (solesMo 1,209.7

1/ Items 1 through 13 are in 1979 constant prices and represent incrementaldiscounted values at 10% rate over 50-year period. 2/ Derived from the farm models. 3/ On farm investment, In the 1.8 ha farm, the credit is for 15 years, including a five year grace period and 10 years for repayment at 3% interest. In the 15 ha and 1,000 ha farms, the credit is for 12 years including a five year grace period and seven years for repayment at 3Z interest. 4/ Calculated as 5% of gross value of production in cooperatives and 15 ha farms. 3/ Representsthe imputed return (10%) on the farmers share in the on-farm investment component (which is also 10%). 6/ 10% of the gross value of farm production. 7/ Detived from Table 21. ' Assuming project cost is amortizedIn 50 years. 9/ Correspondsto estimatedrelative poverty level of a $278 at full development for the country. to! Corresponds to GDP per capita of US$843 at full development.

September 18, 1929: PERU

LOWERPIURA IRRIGATION REHABILITATION II PROJECT

Project Production Benefits- (S./ Millions)

1 2 3 4 5 6 7 8 9 10 11-50

Without Pro ject Gross Value of Production 4,442.76 4,565.76 4,565.76 4,565.44 4,645.59 4,645.59 4,645.59 4,645.59 4,645.59 4,653.71 4,653.71

Inputs, Labor & Initerest 2,171.83 2,171.83 2,171.83 2,171.83 2,171.83 2,171.83 2,171.83 2,171.83 2,171.83 2,171.83 2,171.83

Net Value of Production 2,270.93 2,393.93 2,393.93 2,393.93 2,473.76 2,473.76 2,473.76 2,473.76 2,473.76 2,481.8R 2,481.88

With Project

Gross Value of Production 5,078.62 6,001.45 7,421.23 9,118.38 10,309.53 11,517.10 11,732.84 11,739.34 11,739.34 11,739.34 11,830.48

Inputs 783.11 891.70 1,068.47 1,241.92 1,391.20 1,637.35 1,689.32 1,689.32 1,689.32 1,689.32 1,68t1.32 a

Labor 1,507.65 1,568.35 1,631.11 1,696.66 1,765.03 1,836.47 1,872.50 1,872.50 1,872.50 1,872.50 1,877.50

Interest 23.49 26.75 32.05 37.26 41.74 49.12 50.68 50.60 50.68 50.68 50.68

Total Production Costs 2,314.21 2,486.80 2,731.63 2,975.84 3,197.97 3,522.94 3,612.50 3,612.50 3,612.50 3,612.50 3,617.50

Net Value of Production 2,764.41 3,514.65 4,689.60 6,142.54 7,111.56 7,994.16 8,120.34 8,126.84 8,126.84 8,126.84 8,217.98

Increment

Incremental Net Value of Production 493.48 1,171.83 2,295.67 3,748.61 4,637.80 5,520.40 5,646.58 5,653.08 5,653.08 5,644.96 5, 736.. 1(

Incremental Benefits 443,90 1,293.40 2,540.40 3,993,20 3,992,70 1,407,00 5,646,60 .4,234,10 5,653.00 2,198.60 2/

_/ Economic prices. 21 Stream for years 11 to 50 are in working papers,

May 10, 1979

t,1

5k LSll F71004 181tiG41T3I tli6091L1T4TION 11 PROJECT

Rat.. of tatorn Stra 70. mIlton

1I 2 4 5 6 7 8 9 20 3; 1 t 14 15 16 17 18 19 20 1L?f

IHCMdtEHTAL b8N31ITS 443.9 1,293.4 2,540.4 3,993.2 3,992.7 1,607,0 5, 64.6 4,236.1 5,953.0 C,190.6 .392,5 0,296.3 5,736.1 5,736.1 5,736.1 4,685.1 4,296. 3 20.35.6 n 2706. 7 3/

Main Irrigatin anod Flood Control Work 2,7857.7 4,456.7 4,282.5 1,843.0 - - - . ' Irrigatilon and Drainage Networ k. 1,125.5 2, 271.4 2,429.3 1,935.3 1,027.1 ______- - _ On fore Dn-nloFp-tt 184.5 387.5 389.5 389.5 256.3 - - - - . _ _ _ _

orblrp_t rio18. 7 95.70 203.0 106.6 106.6 80.0 90.0 80.0 80.0 80.0 55.0 55.0 55.0 55.0 55.0 55.0 55.0 SS.o 55.0 55.0 55.' Pheatc l Cr.tlgonl. 705.2 1,115.2 1,102.9 631.4 2D3.0

Subtotal 5,451.1 8,628.5 8,526.1 4,905.7 1,593.0 80.0 830.0 8t.0 .0 80.0 55.0 55.0 55.0 55.0 55.0 55.0 55.0 55.0 55.0 55.0 55.7' xIUftAHll7 OPOOA.7180CBT

Rk SarnirAin OE 1 5.0 15.4 26.0 36.5 43.4 3.4 42.8 41.1 38.2 34.0 28.9 23.7 18.3 13.1 8.8 5.2 L27 1.3 044 - _

Op_rottIr and Halnte-nne 03.1 214.6 34.6 419.4 443.7 443.7 443.7 443.7 443.7 643.7 443.7 443.3 443.7 443.7 443.7 43.7 443.7 44.7 643.7 443.7 441.7

Subtotal 88.1 230.0 370.6 455.9 487.1 487.1 *86.5 884.8 481.9 477.7 472.6 467.4 462.0 456.8 452.5 448.9 46.4 445.0 444.1 443.7 443 7

Ner l-nrronotI 0natlt. (5.045.7) (7,656.7) (6.601.0) (2.213.0) 2,557.7 *,953.3 5,080.1 5,088.3 5,091.2 5.087.3 5,208.5 5,213.7 5,219.1 5,224.3 5,228.6 5,232.2 5,234.7 5,236.1 5,237.0 5,717.4. 5,217.4 t-noi Iara of Ret-rn 13.50

i "rranial"o-nfite 749.9 1,216.3 2,469.6 4,013.6 4,068.5 2,078.1 6,020.7 4,854.3 6 037.4 2,530.6 5,673.6 4,918.4 6.164.0 6,164.0 6,104.0 5,231.6 6,918.4 3,296.9 0 3,099.1 3/ Toa1. re.na nat 5,38.9 08,859.0 8,898.5 5,369. 2,086.3 572.7 372.1 570.3 567.5 563.3 932.2 S28.0 522.6 317.4 313.2 509.5 507.0' 505.4 504.71 504.3l 504.3 Not Io-ntai Sftit, (4,905.65 77,347.12 (6.161.89 5 3940.) 3,506.0 5,9 9 6,137.4S. 6,146.7 6,149.3 6,253.7 6,280.2 6,284.4 6,289.8 6,295.0 6, 99. 3 6,302.9 6,3 05. 64,336.8 6,304. t,3 h,3 0 6.)D.

Xt-ntnrc lain of Ort.rn 15.07.

11 R.iat, to rho orddlt to t (nn farm danoini ad fIid drama). . ,-doulind oaeg.rptnn 1i that the roat intert 1i n f.o th adia-ord nwt -t-nd for 15 yean to 1.8 ha fOrs vth 5 yer rr orlod,- and for 12 Onra 8 2/ wso. hed Prr;-d t 70: ppliod tandard to0onvde3 fantora of 0.2 fan longateai, 0.93 for 08 ooao, .4dd 0.87 for awtbi rodife'aed i_ont eutwtoinoa. 3/ Sra tor fevr 21 to 50 re in the wooIkief pn8.

Jong 18, 1979 -63 - ANNEX1 Table 25

PERU

Lower Piura IrrigationRehabilitation II Project

Rate of Return and SensitivityAnalysis

Rate of Return

(a) Base 15.0

(b) As (a) and delay of one year in benefits and operating costs 13.0

(c) As (a) and capital costs increasedby 10% 13.5

(d) As (a) and operating costs increasedby 10% 14.7

(e) As (a) and benefits

up 10% 16.5 down 10% 13.0

(f) As (a) and cotton price

down 10% 14.0 down 20% 13.0 down 50% 10.0

(g) Switchingvalues

Percent changes that would make the ERR equal to 12% (opportunitycosts of capital)

In benefits -16.9% In capital costs 23.3% In operatingcosts 155.8%

June 27, 1979

ANNEX 2

PERU

LOWER PIURA IRRIGATION REHABILITATION II PROJECT

Related Documents and Data Available in Proiect Files

Chira Piura Irrigation Water Supply Study - Summary Report, IECO, December 1967.

Integrated Development of Resources in the Tumbes Chira-Piura River Basins of Peru, 3 volumes, IECO, May 1968.

Rehabilitation of the Lower Piura Valley - Feasibility Study, 4 volumes, IECO, February 1969.

Proyecto de Rehabilitacion del Bajo Piura, 3 volumes, Associacion de Consultores Proyecto Chira-Piura, October 1978.

Balance Hidrologico del sistema Chira-Piura, DEPECHP, 1978.

Reglas de Operacion del Reservorio de Poechos, DEPECHP, 1978.

Proyecto de Rehabilitacion del Bajo Piura, Analisis de.Precios Unitarios, Costos Horarios y Rendimientos, MAA - Direccion Ejecutiva del Proyecto Especial Chira-Piura, December 5, 1978.

Proyecto de Rehabilitacion del Bajo Piura - Metrados de Todos los Sistemas de Riego del Bajo Piura, DEPECHP, December 5, 1978.

Bases Para Licitacion y Especificaciones Tecnicas, Asociacion de Consultores Chira-Piura, July, 1978.

Costos Actualizados de Canales Laterales y Sublaterales de Riego y Obras a Nivel Predial, DEPECHP, March 1979.

Sistemas Secundarios y Terciarios de Riego, Costos Analisis de Precios Unitarios a Diciembre de 1978, March 1978.

Rehabilitacion Bajo Piura - Canal Principal de Riego Estudio Previo - Informe Final, ENERGOPROJEKT, 1978.

Proyecto de Estudios de Diques de Proteccion a lo Largo del Rio Piura y Regulacion del Rio Piura, Corbin, May 1979. Pima S4, Variedad Algodon, Ministerio de Alimentacion N°2 4, Peru, May 1976.

Nuevo Linaje de Algodonero Pima S4, Ministerio de Alimentacion N° 8, Peru, May 1977. ANNEX 2

0 Variedades de Arroz, Ministerio de Alimentacion N- 1, Peru, April 1976.

- Recomendacion para el Cultivo del Arroz Campana 78-79, MAA, May 1978.

- Sorgo Grano, Ministerio de Alimentacion N- 1, Peru, May 1976.

Desarrollo Ganadero del Bajo Piura, Samanez-Piqueraz, Lima, February 1979.

Republica Peruana - Ley General de Aguas y Sus Reglamentos, 1976.

Memorandum Report - Soil and Salinity - Lower Piura Irrigation Rehabilitat Project, Charles Bower, December 15, 1979.

Lower Piura Rehabilitation Project, Water Resources and Irrigation Systems, A. Kogan, January 1979.

Memorandum Report - Follow-up Appraisal of Lower Piura Irrigation Rehabili- tation II Project, William R. Johnston, March 19, 1979. PERU LOWER FIURA IRRIGATION REHABILITATION 11PROJECT Implementation Schedule

Investment Period Item Unit Quantity . . 1979 1980 1981 1982 1983 1984 1985 1986

Main Irrigation and Flood Control Works Final Design Construction Diversion Dam No. 1.0 (40%) (60%) Main Irrigation Canal Km 40.0 l5.01 (15.0) Flood Protection Dikes Km 66.4 (25.0) | l25.0) (164)

Irrigation and Drainage Network 1 Final Designi _ Construction (20) (45) (55) (40) I 30) Secondary and Tertiary Canals Km 190.0 l)5) Lateral and Sublateral Canals Km 1,170.0 (100) (290) (290, (2901 (200) Main Drains Km 15.0 (15) Complementary Drains Km 415.0 (80) (100) | (125) 11101 Field Drains2l Km 1,070.0 (2701 1270) (265)

Bulildings M. 2,900.0 530207 2003 2 Oni-Farm Works 12.00 Irrigation Ditches Ha 20,930 0) Land Levelline I-I l~ ~~ ~ ~I ~~~~~~~~~2,1(5,200) F5,-200l 1 l3,230) Leaching Ha 3720,3 4 701 700 t Equipment Ginhalob 2 ; - N I

Suppoit Servir es & CoTsIltants Aqrcuit(ura Extension Lanri Rirciamaetiori _ Consulting Services | - Feuisibility Studjies I Tra)rrnr i 27 -ij Agricuitural Developrent (290901) __294570 132 503002 ultivated Area I H-a 4 27 2 4 1 9 i j 2 ) I ? . Cropped AreA Ha i2 170 43 I 401I

Cropping interisity i006i (107) | I "I (122i | !25; 1128) I130) i 135

1I Secorndaty anid tertiary canals, main and complementary drains. 21 Design arid censtrucnon concur!ent.

ADii1 17, 1979 W I Rnir 20.M;

PERU LOWERPIURA IRRIGATION REHABILITATION 11PROJECT OrganizationChart

MAIN OFFICE DIRECTOR PERUVIAN AGRICULTURAL ANKICULTURE AND FOOD

_ ~Z

DIRECTOR DIRECTOR OTIIFR MAA Ar;FNC;I', PIURA BrANCH INDEPENDENT AGENCIES AGRARIAN ZONE - PIURA DEPERTC Cooperation tn CENCIRA Shorsterm Credit ~~~~DIRECTOR Fornmers'Organ,zaton ENCI Mvrkqt Long-term Credit DEPECHP * FUNDEAL: Cotton DeveloPment Regional Production Programming Draiage and Lantd Reclainat,on EPSA Marketing nitr cn (on-term nvestments) UNP Training Research Water Allocation Feesibility Studies Regional Extension Plans Training INIA Reili

PROGRAMMING OFF ICE ADMINISTRATIVE Programming and Budgeting SERVICES Monitoring Reporting

INTERNAL AUDIT

LAND RECLAMATION AGRICULTURAL DEVELOPMENT STUDIES AND WORKS OPERA1'ION AND MAINTENACE DIRECTORATE DIRECTORATF DIRECTORATE DIRECTORATE Reservoir Drainage and On-laim Works Drigns Protect Prornotion Desgn of Irriqation Works Ponchos Construc,ton ot Firdk Diaiis. Aqiruilniretl Extension D'esi 01n Iati Wpvsoal Co stSucot-n Coistruct~~~ AI,istaoetAssitanc~ ~toCvlta ionxFrsearchis. Prooion Agvicultial Research of Construcoi"n Lower Piura Drainage and Watin aid So9 Lalo.ato,v Pnrcesslo, Farmersiq of Credit Applications Irtaio1ok Monintor,nn Agyiculttural Production | W,I l,l 11,,...:.i*

IBRD14158 * ToToorhev 81~~~~~~~~~~~~~~~~~~~00' ( 0030' ~~~~~~~~~~~~~~~~ -~~~~ MM 171979~~~~MA

(ra /ora PO CHOS = \? HECND¢M~~~~~~~~~~~PE

CH/ RA/V Z E y / F .ic

PA C/fIC

PIU~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~I

> ~~~~~~~~~DIVV~~~~CATACAOS P I UgR A

ICL-JA' \'RA ju

\>>t NaP44X6t§@6on ~~~~LowerPiuraIrrigation Rehabil'tation |..CHIRAPIURASAN LORENZO SYSTEMII Project

PROJECT \ ] 1 ~~~~~~~~~~~~~~~~~~L..., P,ur. (proIe,t area) 7I rr,g.t,on cora.- \ ~~~~~~~~~~~~~~~~~~~~IBRDF-oced - 'acshi,.aVolley \ * ~~~~~~~~~~~~~~~~~~No-IBRDFiacdoc5 :._ San Lo,en"o ,0 5 10 1,5 20 25 3 35 4 N.,IBRD Fi... ced Di,-ri-n doms1 Upper Piura Kl iI//Xt RSPERUEXISTING: Mddle P 10 5 2F0 Canols nce ,- Chir Vlley

Dresmh2-rr>7bxYordr/tdrrrArrtNlrrarcrPon ed roods

O 5 10 15 20 - % Xvon-IBRD P,nnn,ed DiveKbion dorns UppernPDums

ucwrprpooare cobrweir sf,00' eo,0 0-,00,

PERU LowerPiura Irrigation Rehabilitation IT Project -

FAJET rlrow/CEO .0S cvlsrPIURA,t=

- Mocn,cqoIE on con-

- ToIe rehob,l,rotedF 2 . .... R _ N-e Teroarycaols;

Secondarydra-ns zvPior R-oec _- FolEcer;,EE

=mi TEnerseordor /l_ ;\ NG t e- , sW'>.o Flood pc-teot.o- dokes 0.n _ 11 /

0 4 7 -;iSenddores llorrorof alley] 3g $ / Anno = -/ I/

rIO~~_, , PoOE' ,f /, o. 0oA

D ! 2 3 4 c r. -- tA- T t X J / |( ' -- IT* T Oth-.n.d,~#o - e0~ N~ °,!2 MiLES -i?4i-d. S ';;/K

a, .t- t' 0, f cA ovc

000st rSpc4 / =& /4KN t LI$II=VI\/ ARENA_ . V4 nf- -=8 t'LA

C-

;f I ///t ~fb =_ /=I T, _ _\ 1

/, bX i f ;04 ft:ECe F!voOdvr 9 j 4> /

C-.'~~~~~~~~~~~~' Lk...~~ ./

0/1 / ~~~~ Nt 11 OvedoopWPr P~~~~~~A cc ~~~~~~~~~~~~~~~~~~/7 4 c/o ' *.\i¶cjnfrL. 0>~~~A 7150 KE

~~~~~~~~0t K.e..r<.be .... AA)~~~~~~~"

lioCt>c0occ -' _ 2

t 1 0

1 -r~~~~~~~~~~~~~~~~

T,~~~~~~~~~~~~~~~~~~~~~~~000.0110oo1 0k 00000o4o0 0000