World Bank Document

Report No. 1708a-BO t cC 04 Appraisalof Ulla Ulla DevelopmentProject Public Disclosure Authorized Bolivia

December27, 1977 ProjectsDepartment Latin America and CaribbeanRegional Office FOR OFFICIALUSE ONLY Public Disclosure Authorized Public Disclosure Authorized Public Disclosure Authorized

Documentof the World Bank

This document hasa restricteddistribution and may be used by recipients only in the performanceof their officialduties. Its contents may not otherwise be disclosedwithout World Bankauthorization. CURRENT EQUIVALENTS

US$1.00 = $b 20.00 $b 1.00 = US$0.05

WEIGHT AND MEASURES

Metric System

GLOSSARY OF ABBREVIATIONS

ACE - Agricultural Credit and Extension Division of INFOL ASI - Agricultural and Social Infrastructure Division of INFOL BAB - Agricultural Bank of Bolivia BE - State Bank COMBOFLA - Bolivian Committee for Promotion of Wool COMPRO - Marketing and Processing Division CORDEPAZ - Regional Cooperative for Division of La Paz DESEC - Center for Social and Economic Development DPH - Department of Public Health of University of San Andres FOMEX - Export Promotion Division FOMO - National Manpower Development Services FORNO - Private Company for Processing Wool FOTRAMA - Alpaca Wool Processing and Marketing Company IBTA - Bolivian Institute for Agricultural Technology IDB - Inter-American Development Bank IDIF - Physic Research Institute of the University of San Andres INBOPIA - National Institute for Handicrafts and Small Industry INFOL - National Institution for the Development of Wool MPAA - Ministry of Peasant Affairs and Agriculture MPSSP - Ministry of Social Security and Public Health NCSA - National Council for Social Action OAS - Organizationof America States PM - Planning and Monitoring Division SNC - National Roads Services SNDC - National CommunityDevelopment Service

FISCAL YEAR

January 1 - December 31 FOR OFFICIAL USE ONLY

BOLIVIA

ULLA ULLA DEVELOPMENT PROJECT

TABLE OF CONTENTS

Page No.

SUMMARY AND CONCLUSIONS ...... i - iv

I. INTRODUCTION ......

II. BACKGROUND ...... 1......

A. General ...... 1 B. Agriculture and the Rural Sector ...... 2 C. Wool Textile Industry ...... 7 D. Handicraft Industry ...... 10 E. Project Area ...... 12

III. THE PROJECT ...... 14

A. Brief Description ...... 14 B. Detailed Features ...... 15 C. Cost Estimates ...... 19 D. Financing ...... 21 E. Procurement ...... 22 F. Disbursement ...... *...... 23

IV. ORGANIZATION AND MANAGEMENT ...... 24

V. PRODUCTION, MARKETING AND PRICES, AND PRODUCER BENEFITS ...... 30

VI. BENEFITS AND JUSTIFICATION ...... 33

VII. AGREEMENTS REACHED AND RECOMMENDATION ...... 36

Schedule A - Lending Terms and Conditions ...... 40

This report is based on the findings of an appraisal mission which visited Bolivia in March, 1977. Members of the mission were Messrs. N.P. Sharma (LCPA2), E. Ruderfer (LC2DE), Ms. D. Babelon and Messrs. C. Plaza (LCPA2), B. Kanchanalak (AGPOP), and S. Miquel (LCPHW), and R. Levy, J. Villarroel, E. Franco, 0. Echeverri, and W. Minto (Consultants).

This documenthas a restricteddistribution and maybe usedby recipientsonly in the performance of their officialduties. Its contentsmay not otherwisebe disclosedwithout World Bank authorization. TABLE OF CONTENTS (Continued)

ANNEXES

Page No.

1. Research and Extension Component ...... 43

Table 1 - List of Measuring Devices and Equipment - Irrigation System - Investment Costs .. 49 Table 2 - Project Facilities - Investment Costs .. 50 Table 3 - Project Facilities *...... 51 Table 4 - Irrigation System ...... 52 Table 5 - Commercial Farm ...... 53 Table 6 - Commercial Farm - Alpaca Herd - Herd Projection ...... 54 Table 7 - Commercial Farm - Llama Herd - Herd Projection ...... 55 Table 8 - Commercial Farm - Alpaca/Llama - Production Projection ...... 56 Table 9 - Commercial Farm - Alpaca/Llama (2,500 ha) - Sales and Operating Costs ...... 57 Table 10 - Commercial Farm - Alpaca/Llama (2,500 ha) - Cash Flow Projections ...... 58 Appendix 1 - Consultants' Terms of Reference ...... 59

2. Livestock Development (Alpaca/Llama) ...... 61

A. Project Area ...... 61 B. Livestock in the Project Area ...... 64 C. Livestock Development under the Project ...... 66

Table 1 - Farm Model No. 1 - 100-Alpaca Herd (1 or 2 families) - Investment Costs 70 Table 2 - Farm Model No. I - 100-Alpaca Herd (1 or 2 families) - Herd Projection ... 71 Table 3 - Farm Model No. 1 - 100-Alpaca Herd (1 or 2 families) - Production Projection ...... 72 Table 4 - Farm Model No. 1 - 100-Alpaca Herd (1 or 2 families) - Production Value and Operating Costs ...... 73 Table 5 - Farm Model No. 1 - 100-Alpaca Herd (1 or 2 families) - Cash Flow Projection ...... 74 Table 6 - Farm Model No. 2 - 400-Alpaca Herd (5 families) - Investment Costs ...... 75 Table 7 - Farm Model No. 2 - 400-Alpaca Herd (5 families) - Herd Projection ...... 76 Table 8 - Farm Model No. 2 - 400-Alpaca Herd (5 families) - Production Projection 77 Table 9 - Farm Model No. 2 - 400-Alpaca Herd (5 families) - Production Value and Operating Costs ...... 78 TABLE OF CONTENTS (Continued)

ANNEXES Page No.

Table 10 - Farm Model No. 2 - 400-Alpaca Herd (5 families) - Cash Flow Projection 79 Table 11 - Farm Model No. 3 - 1,000-Alpaca Herd (12 families) - Investment Costs 80 Table 12 - Farm Model No. 3 - 1,000-Alpaca Herd (12 families) - Herd Projection ...... 81 Table 13 - Farm Model No. 3 - 1,000-Alpaca Herd (12 families) - Production Projection 82 Table 14 - Farm Model No. 3 - 1,000-Alpaca Herd (12 families) - Production Value and Operating Costs ...... 83 Table 15 - Farm Model No. 3 - 1,000-Alpaca Herd (12 families) - Cash Flow Projection 84 Table 16 - Farm Model No. 4 - 5,000-Alpaca Herd (55 families) - Investment Costs ...... 85 Table 17 - Farm Model No. 4 - 5,000-Alpaca Herd (55 families) - Herd Projection ...... 86 Table 18 - Farm Model No. 4 - 5,000-Alpaca Herd (55 families) - Production Projection 87 Table 19 - Farm Model No. 4 - 5,000-Alpaca Herd (55 families) - Production Value and Operating Costs ...... 88 Table 20 - Farm Model No. 4 - 5,000-Alpaca Herd (55 families) - Cash Flow Projection 89 Table 21 - Financial Analysis - Rates of Return and Sensitivity Testing .... *...... 90 Table 22 - Alpaca, Llama, Vicuna - Estimated Production Projection ...... 91 Table 23 - Total Lending Program .. * ...... 92 Table 24 - Phasing of the Lending Program ...... 93 Chart 1 - No. 17641 - Farm Management Schedule

3. Vicuna Conservation and Development Component ...... 95

Table 1 - Investment and Recurrent Cash Costs ..... 99

4. Wool Collection, Storage and Processing Component ..... 100

I. Background ...... 100 II. Wool Collection, Storage and Processing under the Project ...... 105

Table 1 - Bolivia - Prices paid by COMBOFLA for Alpaca Fiber ...... 113 Table 2 - Peru - FOB Prices, First Quality Raw Fiber (Greasy) ...... 113 Table 3 - Processing Plant - Volume of Raw Material Processed ...... 114 TABLE OF CONTENTS (Continued)

ANNEXES Page No.

Table 4 - Processing Plant - Alpaca Raw Material Available ...... 115 Table 5 - Incremental Costs ...... 116 Table 6 - Project Costs ...... 117 Table 7 - Equipment ...... 118 Table 8 - Direct and Indirect Labor and Annual Cost ...... 119 Table 9 - Technical and Administrative Personnel and Cost ...... 120 Table 10 - Processing Plant - Investment Costs ..... 121 Table 11 - Income Statement ...... 122 Table 12 - Financial Rate of Return ...... 124 Table 13 - Cash Flow Projection ...... 125 Chart I - No. 17639 - Proposed Production Flow for the Plant ...... Chart 2 - No. 17640 - Implementation Schedule.

5. Handicraft Component ...... 128

A. Background ...... 128 B. Handicraft Component ...... 130

Table 1 - Investment Costs ...... 135 Table 2 - Credit to Artisans - Total Lending Program ...... 136 Table 3 - Handicraft Model No. 1 - One Family of 2 to 3 Artisans - Cash Flow Projection 137 Table 4 - Handicraft Model No. 2 - Group of 30 Artisans - Cash Flow Projection ...... 138 Table 5 - Handicraft Model No. 1 - One Family of 2 to 3 Artisans - Sales and Operating Costs ...... 139 Table 6 - Handicraft Model No. 2 - Group of 30 Artisans - Sales and Operating Costs 140 Table 7 - FOMO - Total Costs ...... 141 Table 8 - INBOPIA - Total Costs ...... 142 Table 9 - Phasing of the Lending Program ...... 143

6. Road Component ...... 144

Table 1 - Suggested Design Standards ...... 146 Table 2 - Equipment Investment Cost ...... 147 Table 3 - Total Costs ...... 148 Chart 1 - No. 17846 - Implementation Schedule

7. Health Component ...... 150

I. Background ...... 150 II. Project Health Facilities ...... 152

Table 1 - Investment and Operating Cost Phasing .... 157 TABLE OF CONTENTS (Continued)

ANNEXES

Page No.

8. Water Supply and Human Waste Disposal Systems ...... 158

Table 1 - Details of Cost Estimates for Hand-pump Well ...... 162 Table 2 - Pit Privy System - Investment Costs ..... 163 Table 3 - Water Supply - Total Costs ...... 164 Table 4 - Waste Disposal (Pit Privies) - Total Costs ...... 165

9. Education Component ...... 166

Table 1 - Estimated Enrollment 1976-81 ...... 170 Table 2 - Basic Education Schools - Costs of Construction and Furnishing ...... 171 Table 3 - Intermediate School (Ulla Ulla) - Costs of Construction, Furniture and Equipment . 172 Table 4 - Total Costs ...... 173 Chart I - No. 17845 - Implementation Schedule

10. Women's Participation Component ...... 175

I. Introduction ...... 175 II. Participation of Women under the Project ...... 177

Table I - Total Costs ...... 179

11. Technical Assistance ...... 180

A. Llama Fiber Dehairing Research ...... 180 B. Solar Energy ...... 183

Table I - Llama Fiber Dehairing Research - Suggested Specification for Pilot Processing Plant ...... 186 Table 2 - Llama Fiber Dehairing Research - Costs of Machinery, Equipment and Laboratory Facilities ...... 187 Table 3 - Llama Fiber Dehairing Research - Total Costs ...... 189 Table 4 - Solar Energy - Investment Costs ...... 190

12. Project Administration ...... 191

Table 1 - National Institution for the Development of Wool (INFOL) - Total Cost ...... 198 Table 2 - Project Staff ...... 199 Chart 1 - No. 17638 - The National Institution for the Development of Wool (INFOL) ...... Appendix 1 - Terms of Reference for the Administration and Management Expert ...... 201 TABLE OF CONTENTS (Continued)

ANNEXES

Page No.

13. Investment Cost Phasing ...... 202

14. Table I - Total Project Costs ...... 203 Table 2 - Detailed Project Costs ...... 204

15. Estimated Schedule of Disbursement ...... 205

16. Project Cash Flow ...... 206

17. Chart No. 17847 - Implementation Schedule

18. Economic Analysis ...... 208

A. Economic Values of Labor and Goods ...... 208 B. Economic Rates of Return ...... 209

Table 1 - Summary of Calculations ...... 214 Appendix 1 - Llama Dehairing Research - Economic Rate of Return ...... 215 Table 1 - Llama Dehairing Technology - Production Mix of the Processing Plant ...... 216 Table 2 - Llama Dehairing Technology - Economic Rate of Return - Summary ...... 217

Map No. 12907 BOLIVIA

ULLA ULLA DEVELOPMENT PROJECT

SUMMARY AND CONCLUSIONS i. This report appraises an integrated rural development project for which an IDA credit of US$9 million and a Bank loan of US$9 million equivalent are proposed to finance continued development of Bolivia's Altiplano begun under the Ingavi Rural Development Project (Loan 1211-BO). The proposed project would provide critical assistance to families living in the Ulla Ulla region of the Altiplano where Bolivia's poverty is most severe and widespread. About 70% of Bolivia's estimated population of about 5.6 million lives in rural areas with a per capita income of US$60 to US$100. The Altiplano and the valleys, which account for about 30% of the national territory, contain about 85% of the rural population. Deep-rooted cultural ties have inhibited Altiplano inhabitants from migrating in large numbers to the more prosperous regions of the east. While commercial agriculture in the tropical eastern lowlands has been growing rapidly, the small farm subsistence sector concentrated in the Altiplano (3,000-4,500 meter) has stagnated. Agriculture in the Altiplano is based on the cultivation of a few crops, such as quinoa, oats, barley, beans and potatoes, and on raising livestock, mostly llamas, alpacas, sheep and cattle. ii. There is little scope for expanding land under cultivation and the extremely small-scale farm operations (less than 6 ha) and low soil fertility in the Altiplano have kept production at low levels. However, the potential for livestock has not been fully exploited yet. Bolivia's efforts to develop alpaca and llama for wool production, as a source of foreign exchange and as an additional income and employment source for the rural poor, are deficient and lag far behind the intensive programs undertaken in Peru. Alpaca and llama fiber production has been low, and programs to improve alpaca and llama breeds for their high value wool have been confined to only small-scale research programs. iii. The Government has outlined its strategy for agricultural and rural development in the recent National Development Plan, which emphasizes the reduction of the country's dependence on imported foodstuffs and the alleviation of acute poverty and underemployment in the Altiplano. For the latter, agricultural investment would be directed toward integrated rural development projects to provide basic social services, infrastructure, marketing, credit, and extension services to increase productivity. iv. The Government has modest expectations concerning development efforts in the Altiplano. It recognizes the difficulties in bringing about an orderly development of the region, which is endowed with limited resources and harsh conditions and where the population has in the past been less receptive to change and is to some extent suspicious and unapproachable. Implementation of rural development projects in the Altiplano would imply taking more than the usual risks, particularly since the results obtained - ii - by other institutions in this region have been mediocre and to some extent inconclusive. Despite these constraints, there have been some positive changes recently in the attitude and ideals of the Altiplano rural poor toward social and economic changes. Communities have become more sensitive to progress and indicate strong desires to participate in the development process. This, in addition to the Government's new determination and declared commitment to engendering development in the Altiplano, could be the overriding factors insofar as the success of rural development projects in the Altiplano is concerned. v. To date, IDA/Bank financing for agriculture has amounted to US$27.2 million which has been used to assist the Government to initiate a long-term program for the development of a viable livestock industry in the lowlands, to increase agricultural production and to improve living conditions on the Altiplano, as well as to strengthen the Banco Agricola as a development institution. vi. The proposed project would emphasize the alpaca/llama agri-business complex, integrating diverse components into a single development scheme beginning with production of the raw material and including processing to semi- finished products and conversion to handicrafts and their marketing. The project would also improve the environmental and social conditions in the Ulla Ulla region. In addition, the project would have substantial impact on institution building. The National Institution for the Development of Wool (INFOL), the newly created institution for regulating the growth of the wool textile industry, and the National Institute for Small Industries and Handi- crafts (IMBOPIA), for the development of the handicraft industry, would be strengthened under the project. vii. Specifically, the proposed project would finance an Experiment Station for the execution of a research program for the development of alpaca and llama herds and a commercial farm to serve as a demonstration unit and to establish farmer confidence and trust in the development program. The project would provide farmers with technical and veterinary services and credit to about 2,500 farm families for on-farm investments and herd development, and would make provision for the establishment of a pricing mechanism to provide incentive to farm_rs and artisans to increase production and reduce the illegal flow of alpaca fiber into Peru. The project would also expand and strengthen the conservation program for vicunas and would finance the expansion and improvement of the wool collection system, a new centrally located warehouse and a new processing plant. In addition, the project would include credit for the wool handicraft industry for about 3,400 families, mostly in rural areas, and would improve the living conditions of about 3,000 families in the project area through provision of health and education centers, drinking water and waste disposal facilities, and improved roads. viii. The proposed project would also include several innovative features. Through a technical assistance component, the project would finance development of a llama fiber dehairing technique to increase production of llama fiber and to utilize more fully the 2.2 million llamas now available in Bolivia. It would also finance the preparation of solar energy devices, for use in the rural areas of the Altiplano where this energy is an important natural resource. In addition, concerted efforts would be directed - iii - toward women in the project area through provision of technical assistance to improve and develop basic skills and to increase productivity. ix. The Government places high priority on the project, which is in line with the Government'sstrategy to improve the economic and social conditions of the rural poor of the Altiplano. The proposed project, with the Ingavi Rural Development Project (Loan 1211-BO),would provide the basis for a long- range program to develop the Altiplano. x. The total cost of the project is estimated at about US$24 million, of which US$9 million, or 38%, represents the foreign exchange component. The proposed IDA credit (US$9 million) and Bank loan (US$9 million) for the project would finance US$18 million, equivalent to 75% of the total project costs. The IDA/Bank funds would cover 100%, or US$9 million, of the foreign exchange costs and 60%, or US$9 million, of local costs. The Commission of the European Community has agreed to participate in the project and will provide a grant equivalent to about US$2 million to finance local expenditures. The Government would provide the remainder of the funds (US$4 million, or 17% of total project costs) and would be committed to continuing contributionof funds after project completion. The beneficiarieswould not make any financial contribution;however, they would make a labor contributionin kind to project works valued at US$160,000. Also, the beneficiarieswould contribute about 4,000 ha for the establishmentof project facilities in the project area. xi. Local cost financing is justified in Bolivia in view of the country's poverty and its intensive efforts to mobilize domestic savings and also because of the importance of the project to the Government'soverall strategy in engendering developmentin the Altiplano. xii. The project would be administeredby INFOL, the newly created institutionunder the auspices of the Ministry of Agriculture and the Ministry of Commerce and Industry for the developmentof the wool industry. The Agriculturaland Social InfrastructureDivision (ASI) of INFOL would be directly responsiblefor project execution. For the handicraft, solar energy, physical infrastructurecomponents (roads, health, education, and water and waste disposal facilities),INFOL would enter into operationalagreements with each respective participatingagency. xiii. Sub-loan terms would range up to 10 years, including grace periods of up to four years, at an interest rate of 12% on outstanding subloan balances. New equipment for the processing plant, road constructionand maintenance equipment, and vehicles would be awarded through international competitivebidding according to Bank procedures. Also, tender packages for laboratory equipment, commercial farm equipment, and equipment for schools, health and project administration,water and waste disposal facilities,solar energy and handicrafts in excess of US$100,000 equivalent would be procured through internationalcompetitive bidding according to Bank procedures. Since some of the equipment for llama dehairing research facilities would be second-hand,procurement would be through negotiationsacceptable to IDA/Bank. Procurement of most farm inputs would be made by farmers through normal - iv - commercial channels because of the size and timing of individual purchases. Road work would be undertaken by the National Roads Service (SNC) on force account. Civil works for health centers, schools, trading posts and storage facilities, processing plant, dehairing research facilities, and project unit facilities would be carried out through local competitive bidding, acceptable to IDA/Bank. xiv. Financial rates of return for alpaca livestock development have been estimated to range from 30% to 100%, and for the handicraft development the financial rates of return have been estimated at over 100%. The overall economic rate of return of the project is 25%, excluding the social infrastructure and technical assistance components. The economic rate of return for the livestock development component is 18%, the cost of which is US$5.1 million; 30% for wool collection, storage and processing, the cost of which is US$4.9 million; and 70% for handicraft component, the cost of which is US$3.0 million. xv. The wool textile industry as a whole would benefit from the project through improvement of research, extension and farming systems at the production level; improvement and expansion of marketing infrastructure; modernization of the processing facilities; and development of llama dehairing technology. The handicraft industry would also benefit through provision of credit and technical assistance. Annual incremental production of alpaca fiber at full development would be about 330 m tons and yarn production would amount to 250 m tons, including 190 m tons of alpaca yarn. Also, at full development, the annual incremental value of handicraft items is estimated at US$6.4 million. The project would be directly responsible for the employment of 290 persons and would substantially reduce underemployment in the project area and of artisans in the rural area. Beneficiaries in the project area are in the poverty group, and, under project conditions, it is expected that the average farm family income based on livestock activity would increase from less than US$100 to US$896 at full development (12 years). Likewise, a typical artisan family with three of its members actively engaged in making alpaca/llama/sheep wool-based handicraft items could earn a cash family income of about US$1,800. Other benefits would include improved environmental and social conditions in the project area. xvi. During negotiations appropriate assurances were obtained that provide a suitable basis for an IDA credit of US$9 million and a Bank loan of US$9 million at standard terms for Bolivia. The Government would be the borrower and would bear the foreign exchange risk involved.

December 8, 1977 BOLIVIA

ULLA ULLA DEVELOPMENT PROJECT

I. INTRODUCTION

1.01 The Government of Bolivia has requested an IDA credit of US$9 million and a Bank loan of US$9 million to help finance a second integrated development project in the Altiplano. The proposed project would provide critical assistance to families living in the Ulla Ulla region of the Altiplano, where Bolivia's poverty is most severe and widespread. It would emphasize the alpaca/llama agri-business complex, integrating diverse components into a single development scheme, beginning with production of raw material, its processing to semi-finished products, conversion to handicrafts, and marketing. In addition, the project would include development of solar energy in the Altiplano and a conservation program for vicunas. The Government places high priority on the proposed project, which is in line with the Government's strategy to improve the economic and social condition of the rural poor of the Altiplano. The pertinent feasibility studies were prepared by the Organization of American States (OAS) with Bank assistance.

1.02 To date, the Bank has made 11 loans and IDA has granted 10 credits to Bolivia for total amounts of US$212.0 million and US$60.3 million, net of cancellations, respectively. The largest portion of the financing, 36%, has been for transportation, with 20% going for power, 10% for mining and industry, 9% for a gas pipeline, 6% for urban development, 5% for education, and 4% for water supply. The remaining 10%, US$27.2 million, has been directed to agriculture to assist the Government in initiating long-term development of a viable livestock industry, increasing agricultural production, and improving living conditions on the Altiplano, as well as strengthening the Agricultural Bank of Bolivia as a development institution.

II. BACKGROUND

A. General

2.01 Bolivia has maintained a favorable economic and financial position during the 1971-76 period, with real GDP increasing steadily at an average annual rate of 6%. Following a similar trend, per capita GNP increased from US$197 in 1973 to US$320 in 1975, but it continues to be one of the lowest in the hemisphere. The sustained economic growth can be attributed to the continued political stability, better management of public institutions and the economy, an increase in hydrocarbon prices, and the growing domestic savings and greatly increased capital flows. However, a high incidence of poverty in rural areas and the lagging growth rate in domestic agriculture remain serious problems. - 2 -

2.02 Bolivia's population is estimated at about 5.6 million, 70% of whom live in rural areas where per capita income ranges between US$60 and US$100. The Altiplano and the valleys, which jointly account for abo-- 30% of the national territory, contain about 85% of the rural population. Income distribution remains skewed. This disparity is reflected in the fact that the lower 40% of the population accounts for only 13% of the total income, compared to the 36% of the national income enjoyed by the top 5% of the population. The poorest segment consists largely of small farmers and agricultural laborers engaged in subsistence agriculture.

2.03 The Government is well aware of the major impediments to develop- r-ent and has consequently directed its efforts towards mobilization of domestic resources and preparation of a national development program. However, successful implementation of this program is contingent upon the availability of substantial external assistance.

B. Agriculture and the Rural Sector

2.04 Agriculture accounts for 21% of GDP and provides employment for over 50% of the country's labor force. Agricultural exports in 1976, mainly sugar, cotton, coffee, timber and beef, amounted to US$73.5 million, or about 12% of the total export value, while food imports amounted to US$56.2 million, accounting for 10% of total merchandise imports. Although commercial agriculture in the tropical eastern lowlands has been growing rapidly, the small farm subsistence sector concentrated in the Altiplano region has stagnated. Regional imbalances appear to be pronounced largely because of the disparities in growth potentials, the level and pattern of agricultural development, and the extent to which each region has attracted resources and governmental support.

2.05 Agriculture in the Altiplano (3,000-4,500 meter) is based on the cultivation of a few crops, such as quinoa, oats, barley, beans and potatoes, and on raising livestock, mostly llamas, alpacas, sheep and cattle, but the extremely small scale of farm operations, low soil fertility, and harsh environmental conditions have kept production at low levels. There is admittedly little scope for expanding land under cultivation but the potential of livestock has not yet been fully exploited (para 2.19). Agricultural production is further deterred by outdated technology and low factor productivity, limited skilled manpower, inadequate factor and product markets, and lack of access to agricultural credit, especially long-term credit to finance agricultural infrastructure and inputs, for a very large segment of producers. The problem is further compounded by the lack of viable farmer organizations, adequate infrastructure, and supporting services.

2.06 In contrast, the farmers and ranchers of the modern export-oriented agriculture, which is confined to the Santa Cruz and Beni regions, have large farm holdings and enjoy substantial financial support from the Government as well as from the private sector. Modern techniques are used, especially in the mechanized production of cotton and sugarcane in Santa Cruz, and marketing arrangements and support services are better developed and established. Rural Poor and Government's Development Efforts

2.07 Bolivia's rural poor are mainly small farmers living under subsistence conditions, mostly in the Altiplano. The high incidence of poverty can be linked directly to the sizeable small-farm sector which is plagued by low productivity, a traditional technological base, underemployed resources, and a disproportionately small share of agriculture growth and development. Other rural poverty problems are (a) a high infant mortality rate (250 per 1,000 live births); (b) high adult illiteracy (85% - only 4% complete primary school); (c) malnutrition and a life expectancy of about 45 years; (d) a language problem since a high proportion of the rural population speak only Aymara or Quechua; and (e) inadequate infrastructure and services. However, with all these handicaps, deep-rooted cultural ties have inhibited Altiplano inhabitants from migrating in large number to the more prosperous eastern regions, which argues for a rigorous policy to expand employment opportunities to occupy the growing labor force.

2.08 Bolivia's efforts to ameliorate rural, social, and economic conditions will be vastly influenced by economic dualism in the rural sector, i.e., large farm operators and a preponderance of small-scale farmers, each with different needs and problems. There is evidence that productivity and the living standards of the rural poor would be improved considerably, provided the Government takes a number of essential measures, including (a) preparing and executing investment programs and establishing a proper institutional framework to execute such programs in the Altiplano and -valleys; (b) channeling adequate credit and technical assistance to small farmers in support of such programs; (c) organizing small landholders into cooperatives or other functional groups; and (d) conducting research to develop appropriate crop varieties for the climatic conditions of the Altiplano and valleys.

2.09 Recently, the Government has begun to channel more financial and human resources to small farmers, and it has also taken steps to reform pertinent institutions and improve sector management capabilities. To this end, the Ministries of Agriculture and Peasant Affairs were merged in 1974, and a special office to coordinate all the development activities on the Altiplano was established with the assistance of the UNDP. Assistance has also come in the form of external financing for agricultural and rural development, which has been increasing steadily, with IDB, USAID and the World Bank being principal donors. USAID is considering the possibility of providing technical assistance for the improvement of the Ministry's effectiveness in the formulation of policies, sector planning, and coordination and supervision of investment programs. It is also providing technical and financial assistance to the National Community Development Services (SNDC) to expand its role beyond its present involvement in infrastructure projects only. A reorganization study for the Agricultural Bank of Bolivia (BAB), aimed at improving the efficiency of this institution, is being financed under Credit 261-BO. The Center for Social and Economic Develop- ment (DESEC), a non-profit private organization, is also active in the rural areas. DESEC's primary functions are to promote and organize cooperatives in - 4 - rural areas, provide technical assistance to farmers and prepare feasibility studies. It assisted FAO/CP in the preparation of the Ingavi Rural Develop- ment Project (Loan 1211-BO) and is now assisting UNDP in preparing the feasibility study for a third integrated development project. Also, more recently (May 1977), Bolivia organized a meeting in which UN agencies participated to discuss Government's strategy and development plan for the rural sector and a framework for coordinated assistance from the UN system. Bolivia is the first nation among the less developed countries to undertake such a measure directed toward rural development. The Government now plans to establish a multi-disciplinary unit that would coordinate development efforts.

2.10 Government Strategy. According to the recent National Development Plan, the Government's efforts would be directed at reducing the country's dependence on imported foodstuffs and to alleviate acute poverty and underemployment in the traditional agricultural sector. For the latter, agricultural investment will be directed toward integrated rural development projects to provide basic social services, infrastructure, marketing and credit, and extension services. The Government plans to use the Ingavi Rural Development Project (Loan 1211-BO) and the Ulla Ulla Development Project as prototypes for development of the Altiplano and the intermediate valleys and to seek support from external agencies to improve planning, coordination, and supervision of development programs to benefit the rural poor. For the period 1977-79, the Bolivian Government is seeking external financing in the amount of US$331 million, about 15% of total external financing for all sectors, for agricultural and rural development.

2.11 The Government recognizes the difficulties in bringing about an orderly development of the Altiplano, which is endowed with limited resources and harsh conditions and where the population has in the past been less receptive to changes and, to some extent, suspicious and unapproachable. Thus, implementation of rural development projects in the Altiplano would imply taking more than the usual risks, particularly since the results obtained in this region by other institutions have been mediocre and somewhat inconclusive.

2.12 However, there have been positive changes recently in the attitudes and ideals of the rural poor in the Altiplano towards social and economic changes. Communities have become more sensitive to progress and indicate strong desires to participate in the development process. This, then, in addition to the Government's declared commitment to engendering development in the project area, could be the overriding factor insofar as the success of rural development projects in the Altiplano is concerned.

2.13 Government Agencies. The Ministry of Peasant Affairs and Agricul- ture (MPAA), BAB, SNDC, the Regional Development Corporations, and the National Institution for Colonization are the principal institutions involved in rural areas. - 5 -

2.14 MPAA, through the newly created semi-autonomous Institution for Agriculture and Teclnology (IBTA), is responsible for extension services and research as well as for establishment of overall sectoral policies and formulation of specific priorities. These are then submitted for review and approval by the Ministry of National Planning and Coordination.

2.15 BAB is the major institutional source of agricultural credit, but most of its lending is confined to large farmers. However, after its forthcoming reorganization and with competent staff, it could emerge as an important and viable agricultural development institution.

2.16 SNDC, which was created with the assistance of USAID, has focused on construction of schools and roads in rural areas, but it has recently placed emphasis on credit and small irrigation schemes.

2.17 The Colonization Institution is responsible for directed colonization schemes. IDB and USAID have assisted in the preparation and financing of these schemes, but, by and large, the few that have been attempted have failed.

2.18 To date, the three most active regional development agencies in the agricultural sector are in Santa Cruz, La Paz and Chuquisaca. The Santa Cruz Works Committee, with its own financial resources obtained from royal- ties on petroleum sales, is actively engaged in financing small-scale agricultural projects and supporting infrastructure, while CORDEPAZ, the regional development agency in La Paz, has participated in the preparation of the Ingavi Project, financed pre-feasibility studies for rural integrated projects in the Northern Altiplano, and now plans to finance a sugar development program in Apolo. It also finances infrastructure in the rural areas in the Department of La Paz. The Chuquisaca Development Committee has obtained financing from IDB (US$2.2 million) for development of the swine industry and it now plans to expand its activities in the Department of Chuquisaca for agricultural and rural development.

Alpaca, Llama and Vicuna Livestock

2.19 Alpaca/llama/vicuna livestock is an important resource in the Altiplano. Most recent estimates indicate that there are about 2.2 million llamas, 300,000 alpacas, and 1,000 vicunas. While llamas are predominant in the dry and arid southern and central Altiplano, about 50% of the alpaca population is concentrated in the more humid, higher reaches of the northern highlands. The remaining animals are dispersed throughout the central Altiplano where natural conditions in some areas are favorable. To date, the Government's efforts to develop agriculture in the Altiplano have been centered exclusively on raising yields of the traditional crops (potatoes, quinoa, barley, alfalfa, and some vegetables) and introducing improved breeds of sheep and cows at the farm level. However, Bolivia's efforts to develop alpaca and llama and wool production as a source of foreign exchange and as an additional income and employment source for the rural poor are deficient and lag far behind the intensive programs undertaken in Peru. Alpaca and llama fiber production has been low and programs to improve alpaca and llama breeds for their high value wool have been limited to a small-scale research - 6 - program at the Patacamaya Experiment Station. Emphasis on improving alpaca and llama fiber production would generate forward linkages, i.e., expansion of wool processing and the handicrafts industry.

2.20 Alpaca. In recent years, alpaca fiber averaged 132 m tons annually. The average yield of fiber is 0.8 kg per animal, compared to about 1.3 kg in Peru under improved breeding and herd management practices. The average size herd in Bolivia is estimated at 100 alpacas, generally characterized by low fertility (35%) and a high mortality rate (20%). Pasture rotation is not practiced, and unrestricted grazing has led to the depletion of good range land. Animals are kept until they die from natural causes, and no effort is made to cull the male animals. As a result, there is a high share of non- reproductive animals. Animal health problems are acute and no measures are taken to control animal diseases. Alpacas are sheared every two years instead of annually and the method is haphazard. Usually animals are sheared with a knife, tin can lids, or even broken glass, and no effort is made to separate the fiber according to fineness, which varies from one part of the body to another.

2.21 Peruvian experience indicates that alpaca fiber production in Bolivia could be increased almost fourfold but only through a coordinated package of activities in adaptive research, technical assistance, credit for on-farm investment and herd development, and supporting infrastructure.

2.22 Llama. There is potential for large-scale production of llama fiber; however, the real problem has been lack of a dehairing technology (para 2.35). Llama fiber production varies considerably from year to year, but has been estimated at about 55 m tons per annum in recent years. Most of the fiber is exported to the USA and Europe, where it is processed into fabrics.

'2.23 The average annual yield of llama fiber is about 1.0 kg per animal, but with improved breeding and herd management this could go up to 1.3 kg. With dehairing technology, total animal llama fiber production would be in excess of 800 m tons a year.

2.24 Vicuna. The vicuna, unlike the llama and alpaca, is undomesticated, and lives primarily at high altitudes on the Altiplano of Peru and Bolivia, although small numbers have been sighted in Chile and Argentina. Currently, there are only about 1,000 in Bolivia of which about 60% are in the Ulla Ulla reserve area. It is estimated that the total vicuna population in South America dropped from 400,000 in the early 1950s to only about 5,000 at the end of the 1960s, owing to the high prices and strong demand for its fleece. Top quality vicuna wool can be bought for about US$25 per pound compared to only 40 cents per pound for high-grade sheep wool. The majority of these survivors have been saved and numbers have since increased due to the conservation measures taken by Peru and Bolivia, but vicunas are still being killed for their high-valued fleece in the two countries.

2.25 The Government is now placing priority on the vicuna conservation and development program and it plans to establish firm control over poachers. It also intends to seek assistance in conducting detailed research on vicunas and in evaluating ways of breeding them for commercial purposes. -7-

Solar Ener~Iy

2.26 The rural poor of the Altiplano depend on non-commercial energy sources for fuel for household needs. Currently, dried animal dung is the single most important source of energy, but resources are inadequate to meet household requirements, providing for only limited cooking and no heating during the Iarsh winter months. Also, the use of dried animal dung to generate energy eliminates its use as fertilizer. Therefore, alternative sources of energy in rural areas are of critical importance.

2.27 Solar energy is a potentially usable resource in the Altiplano, and the Go .nment places high priority on its exploitation and development. At an average altitude of more than 13,000 feet above sea level and with an average of 2,500 sun hours per annum, the region receives high levels of solar energy, ranging from about 400 cal/cm /day in winter months, to more than 600 cal/cm /day in summer, well above the minimum limits for the economic operation of solar energy devices.

2.28 Bolivia has already initiated a solar energy program at the Physics Research Institute (IDIF) of the University of San Andres in La Paz, which is well known for its research in cosmic ray physics. To date, water heaters, food driers and metalurgical and mineral devices using solar energy have been developed and tested to some extent. There is, however, a shortage of funds for equipment and tools for the workshop and for carrying out further research and experimentation.

.C. Wool Textile Industry

2.29 The Bolivian textile industry, accounting for almost 20% of the labor force in the industrial sector, has been growing in recent years at a rate of about 3.5% to 4% per annum. Installed capacity is estimated at 54,000 spinning spindles and some 1,650 looms, with the wool industry alone accounting for about 28% and 20% of spindles and looms, respectively. Of the estimated 125 mills registered, only seven belong to the wool sector, two of which account for 75% of the installed capacity. In terms of labor force, the wool industry employs about 28% of the total force in the textile industry, being second to the cotton sector.

2.30 In spite of the upward trend in the textile industry, a recent study by Werner Management consultants on behalf of the Bolivian Government in 1974/ 75 found that mills were generally obsolete and in a poor state of maintenance, with inadequate processing technology, working methods, and management.

Processing

2.31 The principal raw materials for the wool industry are sheep wool, alpaca/llama fiber, and acrylics, all of which are processed into fabric, yarn, blankets and traveling rugs and hats. Only two enterprises -- the state enterprise, COMBOFLA, and a cooperative, FOTRAMA -- are involved in spinning alpaca fiber (para 2.33). A third enterprise, FORNO, also buys small quantities of fiber, usually from COMBOFLA, to incorporate into woolen blankets and -8-

traveling rugs. Most of the fiber collected, however, is processed into knitting yarns for sale to artisans. Total yarn production has been increasing by about 12% a year since 1974 and in 1976 reached 45 m tons.

2.32 The amount of llama fiber presently produced is small relative to the potential for large-scale production. Except for some sales to FORNO, fiber has been mostly exported to the USA and Europe, although the demand for coarse fiber is limited.

2.33 The Alpaca Wool Processing and Marketing Company (FOTRAMA) complex is an integrated cooperative established to provide education, health care and employment to communities in the Cochabamba area. This cooperative has a small mill which produces coarse semi-worsted alpaca yarn for distributing to its members to use in making handicraft items. The Bolivian Committee for Production of Wool (COMBOFLA) processing plant in Pulacayo is not suitable for processing. Raw material must be transported by train, a 15-hour run from La Paz. The plant layout is deficient and most of the equipment is obsolete. Work methods and plant conditions are poor; quality control is non-existent; and technical and supervisory staff lacks the know-how and experience required to run a modern mill. The plant is not expected to continue operations for more than three to five years.

2.34 Increasing sales of artisanal end products have generated a large demand for yarn by low income groups in rural and urban areas where unemployment and underemployment are high. This demand, however, cannot be met because Bolivia's processing capacity of alpaca wool is limited to an estimated 50% of total production. Therefore, a new processing plant with improved technology and processing facilities and improved management and organization is urgently needed.

Llama Fiber Dehairing Technology

2.35 Traditionally, llama fiber is considered inferior to that of the alpaca or vicuna due to heterogeneity, which results from the presence of varying amounts of coarse hair mixed with fine, soft fibers. The presence of these coarse fibers creates processing problems in conventional spinning, weaving and dying, and gives a rough and unpleasant texture to fabric. Very little research has been done in Bolivia to develop a dehairing processing technique. However, dehairing processing technology has been developed by several countries although the details remain a "trade secret't of specialized firms in both the USA and Europe.

2.36 With about 2.2 million llamas in Bolivia (para 2.19), the Govern- ment places high priority on acquiring a suitable dehairing technology, since it would have substantial impact on livestock production, the wool industry and the handicraft sector. A conservative estimate places potential llama fiber production after dehairing in excess of 800 m tons annually (para 2.23). -9-

Institutional Arrangement

2.37 Development of the alpaca and llama resource has lagged, mainly because of the lack of strong institutional support. In 1962, the Government established COMBOFLA as an independent state enterprise under the auspices of the Ministry of Peasant Affairs and Agriculture, but it has not fulfilled its responsibilities for the integrated development of the entire wool industry. Instead, it has concentrated exclusively on collecting and processing alpaca/ llama fleece for export, marketing yarn to its affiliated artisans, and selling artisanal products. It has also mishandled the purchasing of wool from alpaca/llama owners, which has resulted in about 20% of Bolivia's total fleece production being smuggled into Peru, where prices are higher and there are other incentives as well to Bolivian producers (para 2.41). Because of the comparative lower price it offers, its involvement with the artisan industry, and its failure to promote integrated development of alpaca/llama and sheep, COMBOFLA has been steadily losing the confidence of both the public and private sectors.

2.38 An independent national institution under the Ministry of Peasant Affairs and Agriculture and the Ministry of Industry and Commerce has now been established to revitalize the alpaca/llama textile industry and to help improve incomes of the rural poor on the Altiplano (para 4.01).

Marketing and Prices

2.39 Marketing. COMBOFLA accounts for most of the collection of alpaca and llama raw material although FOTRAMA gathers some from the central Altiplano and a substantial amount is bought by itinerant tradesmen directly from producers at local fairs. However, due to the poor marketing infrastructure at the production level and because of higher prices in Peru, about 40% of total production in the project area is sold across the border.

2.40 COMBOFLA's gathering system covers only selected producing areas, leaving out some remote regions that account for a substantial part of total annual production. Currently, it has four main gathering posts and 13 secondary posts, operated by a staff of 21 persons. In general, facilities, such as offices, warehouses and equipment, are small, inadequate, and in poor condition, but transportation constitutes the major bottleneck.

2.41 Marketing and price information is scarce, with COMBOFLA providing what it can at the main gathering centers only. The fiber brought by the farmers to the collecting points is paid for by the kg, which is equivalent to 2 lb instead of 2.2 lb, but this confuses the farmers, who are used to the Peruvian system of selling by the pound. In addition, the farmer often does not receive immediate cash payment but instead is issued a credit voucher which he will exchange against cash when it becomes available (often a month or two later).

2.42 Bolivia has developed a tourist and export market of artisanal end products, the added value of which as against raw material is of the order of 150%. Bolivian export legislation discourages the export of raw materials, - 10 -

imposing a tax of 25% on unprocessed textile raw materials. The domestic tourist market for these artisanal products is good and is expected to remain attractive if appropriate product adaptation and market development efforts are undertaken. Additionally, the export potential for alpaca/llama products is high, since they are available in Bolivia and Peru only, and world demand exceeds present supplies (mainly from Peru).

2.43 Alpaca/llama meat, hides, and pelts are also marketed on a small scale. At present an excessive number of pelts is being processed for the handicraft industry, mainly for bedspreads, hats, and rugs, but the supply comes from dead animals and the slaughtering of young animals. Currently, there is no legislation to regulate the production and marketing of pelts, but to avert a decline in the alpaca and llama population in the long run, control over the slaughter of young animals may be needed.

2.44 Prices. The current farmgate prices of alpaca fiber are $b 90, or US$4.5, per kg for white and an average of $b 56 (US$2.8) per kg for colored. COMBOFLA is the main buyer and it fixes prices every six months. In Peru prices are usually 15% to 25% higher for white wool and 20% to 30% higher for colored wool. The selling price of alpaca yarn, set by COMBOFLA is currently US$12.5 per kg. This subsidized price does not, however, allow the Pulacayo processing plant to cover its costs. In Peru, the ex-factory price of alpaca yarn is about US$19 per kg for yarns of about the same quality. The lower COMBOFLA price is actually equivalent to a subsidy to foreign tourists in Bolivia, although the booming Peruvian handicraft industry shows that its higher prices have not kept the market from growing. To correct the imbalance in the Bolivian system, prices of yarn should be adjusted to reflect production cost, and farmgate prices should be adjusted to follow the Peruvian prices so that the substantial outflow of raw materials to Peru can be stopped. The possibility of increased income would also give sufficient incentive to increase production.

D. Handicraft Industry

2.45 The Bolivian handicraft industry generates about US$4 million in foreign exchange annually and is a vital source of supplementary income and employment for about 200,000 poor rural and urban families. While Bolivia has developed a profitable tourist and export market for its handicraft products, i.e., sweaters, ponchos, blankets and other garments, it has realized only a fraction of the possible benefits associated with handicraft trade because of (a) shortages of alpaca/llama/sheep wool and yarn; (b) lack of credit for the purchase of wool, yarn, tools, machinery and for establishment of workshops; (c) lack of essential training and technical assistance programs; (d) deficient promotional and marketing programs; and (e) weak organizational arrangements.

2.46 The bulk of Bolivia's small artisans depend mainly on subsistence farming for their livelihood and supplement their basic income from sales of handicrafts. Families have sufficient time to engage in making articles - 11 - for sale as the agricultural season is concentrated in a period of about five months of the year, which leaves them about seven months for other activities. Potentially, a typical artisan family with three of its members engaged in making alpaca/llama/sheep wool-based handicraft items could earn about US$1,800 equivalent a year.

2.47 Customarily, women prepare the wool for further processing and do spinning and knitting, while men do mostly weaving. They knit and weave sweaters, ruanas, decorative bags, colorful hats, ponchos and the like, all made from alpaca/llama wool. Some of these items are used by the family and the rest is either bartered for essential commodities needed to sustain the family throughout the year or sold to intermediaries. The production process under present conditions is tedious and requires long working hours. Spinning and knitting is often done by hand or with wooden looms. Dyeing techniques are primitive, with the coloring chemicals extracted from vegetable substances that tend to fade after exposure to the sun. Finished products are stored in the artisans' adobe huts until the intermediaries or representatives of the commercial firms arrive in the village to make purchases. The prices offered by the purchasing agents for the items, however, are very low compared to what could be obtained by selling directly in urban centers.

2.48 The role of the private sector in the handicrafts trade has been positive but limited in scope. A few individuals with some capital and much imagination and drive have taken the initiative and organized a relatively small number of artisans into production cooperatives to whom they sell wool and yarn at subsidized rates in exchange for the right to purchase their end products.

2.49 Prospects for the growth of the handicrafts industry improved with the establishment in August 1974 of the National Institute for Small Industries and Handicrafts (INBOPIA) as a decentralized institute under the auspices of the Ministry of Industry, Commerce and Tourism. Its main purpose is to plan and promote the development of small industrial enterprises and the handicrafts industry in Bolivia and while it has made some progress, its efforts have been hampered by lack of funds and support staff.

2.50 INBOPIA's budget for 1977 amounts to US$150,000 and it has a total staff of 25, 17 of whom are professionals. Since it began operation, INBOPIA has carried out socioeconomic studies on artisan activities; it has launched a nationwide registration campaign for all artisans in the country; it has participated in international fairs to promote export of Bolivian handicrafts; and it has helped to organize nine artisan cooperatives with the assistance of IDB. INBOPIA's programs for the next five years will concentrate on strengthening its operation in the small industrial sector and particularly on increasing its involvement with the handicraft trade. - 12 -

E. Project Area

2.51 The project area (Map IBRD 12907) is in the department of La Paz, northeast of Lake Titicaca, in the upper part of the Suches river drainage basin. The Suches river forms the boundary between Bolivia and Peru and marks the western boundary of the project area. The eastern boundary, for the most part, coincides with the Andes range. The project area contains portions of the Franz Tamayo and Saavedra Provinces and covers about 300,000 ha of extensive plains with an average elevation of about 14,000 feet. The southern part of the project area varies from high altitude rolling grassy hillocks and stringer meadows to steep mountain slopes that go down into narrow river valleys. The bottom lands of these rivers, and occasionally the adjacent steep slopes, are cultivated. Overall, soils are best suited to grazing lands.

2.52 The climate is generally cool, with marked differences between day and night temperatures. The average annual temperature is approximately 8 0 C, varying from an average winter night temperature of 6 below the freezing point to 280 above zero centigrade during daytime in the summer. Night frosts can be expected throughout the year. The combina- tion of high altitude, clear unpolluted skies and relative proximity to the equator results in a high incidence of solar radiation (para 2.27). Average annual rainfall is reported between 400 and 800 mm, with the larger part falling from November through March.

2.53 Livestock is the principal agricultural activity in the project area, which supports about 150,000 alpacas, approximately 25,000 llamas and 600 vicunas. Cultivated areas are extremely sparse and restricted to the southern fringes of the project area where cultivated forage and some food crops (barley, onions, potatoes, and flat beans) are grown. Other than range-livestock activities, there is virtually no alternative economic activity. Handicraft items are produced but generally do not play a significant role in the money economy. Employment opportunities are limited to the COMBOFLA buying stations and some retail establishments.

2.54 About 3,000 families live in the project area, 2,000 of whom would benefit directly from the livestock development program. Communities are based on the ancient Aymara social organization characterized by extended families. There is a long history of community programs among these people as well as traditions of common land ownership and joint efforts for civil and religious activities. Communal living and land ownership patterns especially favor livestock development based on farmer groups.

2.55 Women play a predominant role in economic activities, but the living conditions of typical housewives in the project area are extremely harsh and the rewards very limited. They work hard and die at the relatively young average age of 45. Young girls are assigned to herding alpacas, spinning, hauling water over long distances, collecting dung for cooking fuel, washing dishes, and sweeping the house yards. Most marry at the age of 15. The women's work schedule is governed by the requirements of the - 13 - various agricultural seasons -- shearing alpaca/llama; collecting the fleece; washing, spinning and selling it; herding animals; and visiting fairs. During slacks in the agricultural cycle, women do spinning and knitting and make handicraft items to supplement the income derived from sales of alpacas and their fleece.

2.56 To date, the project area has received very little development assistance and the target population would be the poorest of the rural poor in the Altiplano. Social and physical infrastructure are almost non-existent. The road network in the project area consists of dirt roads and tracks, which are usually in poor condition. The roads receive occasional maintenance from the National Roads Service (SNC) but are almost impassable during the rainy season (January-March) and during the winter months (July and August).

2.57 The health status of the population in the project area is poor. In 1976, there were two outbreaks of exanthematic typhus, and, in the same year, an epidemic of measles or whooping cough (data are not sufficient to determine which of the two diseases was involved) killed 33 children and two adults. The only accessible health facility for people living in the northern part of the project area is a post located in the Peruvian village of Cojata, a three-hour walk, and there is a medical post in Charazani, about 30 km from Ulla Ulla, located along the eastern boundary of the project area. The building was upgraded to a health center hospital last year but it still has not been equipped. There is one medical doctor but no auxiliary personnel. Personal hygiene practices are almost non-existent. Most communities get their water supplies from open ditches, which are polluted since they are unprotected, and there are no waste disposal facilities.

2.58 Education facilities in the project area are poor and inadequate. Classrooms are damp and cold, roofs usually leak, rooms are improperly ventilated and poorly illuminated, and there is a lack of adequate drinking water facilities and pit privies. In addition most schools are inadequately furnished, lack basic teaching aid materials and equipment, and teachers use Peruvian textbooks in many courses because of unavailability of locally produced teaching materials. The courses taught in the project area also have little relevance to the student's environmental and eventual work needs, being biased toward urban and academic courses. Attendance rates are low, dropout rates are very high, and the ratio of over-aged students with respect to average-aged students is relatively high by comparison with other regions. Due to the poor education system, the majority of graduates from local schools are as ill-prepared to contribute to the welfare of their communities as their counterparts who never attended schools.

2.59 There are no agricultural services in the project area. The last time an extension agent visited the area was two years ago. - 14 -

III. THE PROJECT

A. Brief Description

3.01 The proposed project would provide financing for a comprehensive integrated development over a five-year investment period. The overall objective of the project would be to promote an orderly development of the alpaca/llama agro-industry; to conserve and develop vicuna resources; and to improve the economic and social conditions of about 3,000 families in the project area. An additional 3,400 rural families would benefit from the development of the wool handicraft activity under the project. The project, with the Ingavi Rural Development Project (Loan 1211-BO), would also provide the basis for a long-range program to develop other regions of the Altiplano.

3.02 Under the project, alpaca and llama production (crude and processed hair) would be increased by improving feed base, quality of animal breed, and range and herd management practices; providing trading posts and storage facilities; and improving marketing and processing systems for alpaca and llama fiber. A research program would improve development of alpaca and llama breeds and expand and strengthen the conservation program for vicunas. The project would provide technical and veterinary services and credit for on-farm investments and herd development. It would also make provision for a pricing mechanism to give farmers and artisans incentives for increasing fiber production and handicraft items, and for reducing the illegal flow of alpaca fiber into Peru. In addition, the wool handicraft industry would receive credit and technical assistance, and living conditions would be improved in the project area through provision of health and education centers, drinking water and waste disposal facilities, and improved roads.

3.03 The proposed project would also include several innovative features. Through a technical assistance component, the project would finance development of a llama dehairing technololgy to increase llama fiber production and to utilize more fully the 2.2 million llamas now available in Bolivia. It would also finance the exploitation of solar energy, an important natural resource in the Altiplano, for use in the rural areas of the region. In addition, concerted efforts would be directed toward improving the lot of women in the project area through technical assistance to develop basic skills and to increase productivity. Finally, the project would have substantial impact on institution building.

3.04 The proposed IDA credit and Bank loan would be made to the Government, and the National Institution for the Development of Wool (INFOL), the newly created institution under the auspices of the Ministry of Peasant Affairs and Agriculture and the Ministry of Commerce and Industry, would be responsible for project execution. The Agricultural and Social Infrastructure Division (ASI) of INFOL would be directly responsible for project administration and management in Ulla Ulla. For the handicraft, solar energy, and physical infrastructure components (roads, health, education, and water and waste disposal facilities), INFOL would enter into operational agreements with each respective participating agency. - 15 -

B. Detailed Features

Livestock Development (Alpaca/Llama/Vicuna)

3.05 Experiment Station. Experiment Station facilities, including a commercial farm, would encompass an area of about 4,000 ha. The Experiment Station would be provided with laboratory equipment and facilities for research on low-cost production systems and on parasitology, bacteriology, biology, pasture, and animal nutrition as they relate to alpacas and llamas. The Experiment Station would include a 20-ha irrigation scheme to produce forage for the Experiment Station's use and a supply of grass seeds for farmers to utilize in the project area. Also, the irrigation scheme would be used to determine the technical and economic feasibility of using irrigation to increase the carrying capacity of range land since about 8,000 ha of land can be irrigated in the project area (Annex 1). In the initial period, the Experiment Station, would utilize the results already obtained from basic and applied research on alpaca, particularly at the La Raya Experiment Station in P eru.

3.06 The communities in the project area have contributed 4,000 ha of land for the necessary facilities. Of this, about 1,500 ha would be utilized for the Experiment Station and the remaining 2,500 ha for the commercial farm.

3.07 Commercial Farm. A commercial farm would be established for the implementation of improved techniques currently available as well as those developed at the Experiment Station to gain farmers' confidence in the development program (Annex 1). The commercial farm would employ a farming system compatible with that existing in the project area and would include about 2,500 ha of range land, operating with about 1,500 alpacas and about 370 lfamas (para 4.21). The farm would operate as a commercial enterprise and would serve as a demonstration unit, adopting improved range and animal husbandry practices. It would maintain separate accounts and adopt sound management practices. Profits of the commercial farm would be shared by the communities which contributed land to the Government for establishment of the facilities. At full development, i.e., after 10 years, INFOL would transfer the commercial farm to the donor communities for operation as a cooperative enterprise. Assurances on the above were obtained during negotiations. Assur- ances were also obtained that INFOL would submit to IDA/Bank by January 1, 1982, a proposal outlining the terms and conditions under which the commercial farm would be transferred to the communities who contributed land.

3.08 On-farm Investments and Herd Development. Herd development and increased fiber production would be achieved within the context of traditional patterns of farm activities and forms of cooperation in the project area. Sub-loans would be made to individual farmers or groups of farmers to improve traditional shearing techniques and fiber handling and classifying practices, and also for construction of facilities for implementing a sound - 16 - animal program including improved animal husbandry and range management practices. Major investment items would include spray-bath facilities, holding corrals, shearing sheds, fiber classification and storage sheds, mechanical shearing equipment, drugs, animals and fences. Minor investment items would include medical kits, hand shears, scales, fiber classifying tables, and identification tags (Annex 2).

3.09 Farmers would participate either individually or as members of a farmer group. The smallest farm development model would include 100 alpacas, which is few enough to be herded easily by one person, and no fences would be required. Pasture rotation would be accomplished by marking the pasturing areas with movable landmarks. The only investment item would be hand shears, and medicines for the animals would be the only cash operating cost. Farmer groups would vary in size, with membership ranging from five to 55 families. Such communal farms would be developed on land presently operated in common. Herd size of each farmer group would depend on farmer participation and vary accordingly. Investment items would include a holding corral, shearing platform, hand shears, tools, shearing table, identifying tags, fences, drugs, and male replacements for the first year. In all cases (Models 2, 3 and 4, Annex 2), shearing would be done annually, and animal husbandry practices such as breeding and calving in addition to parasite control would be carried out according to a prescribed scheduled (Annex 2).

3.10 Extension Services. Technical services would be provided to farmers in improved technology for animal husbandry, in improved herd and range management practices, improved shearing techniques, and in preparation and implementation of farm development plans. In order to improve the overall effectiveness of the extension system and communications between extension personnel and the target group, local cadres would be selected and trained in animal husbandry and range management practices (Annex 1).

3.11 Veterinary services would also be provided to project beneficiaries. Part of the assistance would be in the form of training in simple procedures for control and prevention of internal and external parasites and first aid and other practices as part of the overall herd management program. The veterinary services would be provided free of charge; however, any medicines required would be paid by the project beneficiaries.

3.12 Vicuna Conservation and Development. The project would provide funds to strengthen the present protection scheme for vicunas, train guards and introduce research and experimentation activities designed to establish a systematic vicuna management program in the Ulla Ulla Reserve and throughout Bolivia. Six additional guards would be recruited and trained, and the project would also provide accommodation facilities for guards, new observation posts, additional vehicles, and other necessary equipment (Annex 3).

Wool Collection, Storage and Processing

3.13 Gathering System. The collection network would be enlarged and improved to cover all the producing areas. Facilities would be expanded by renting larger storage rooms, and five new posts would be built (one main - 17 - and four secondary) and adequately staffed. All gathering posts would be provided with adequate furniture and office equipment, and vehicles would be supplied to facilitate the flow of alpaca/llama/sheep--rawmaterial to La Paz (Annex 4).

3.14 Storage Facilities. A warehouse would be built in El Alto near La Paz, close to the processing plant, to facilitate the seasonal collection of sheep wool and alpaca and llama fiber. It would be equipped with two passenger vehicles, three hydraulic wool pressers, two forklift trucks and furniture and office equipment. It would have a total staff of 16 persons.

3.15 Processing Plant. The project would finance a new spinning plant in La Paz with a total annual capacity of 595 m tons of yarn on a three-shift basis or 300 m tons on a two-shift basis. The plant would be supplied with all necessary machinery and equipment, which would include a scouring unit for the processing of 1,800 m tons of sheep wool for the Bolivian wool mills. The project would make provision for consultant services to provide technical know-how and to implement all the mill control programs as well as to set up a training program for plant personnel.

Handicraft

3.16 The project would provide credit and technical assistance to help about 3,400 small rural and urban artisan families in the Departments of La Paz and Cochabamba to increase production and exports of typical handicraft items. The handicrafts component would consist of: (a) a US$2.0 million lending program to finance the capital requirements of small artisans working with alpaca/llama/sheep wool; (b) a US$1.0 million technical assistance program to help INBOPIA organize artisan production and marketing groups, finance the cost of quality control and standards, promote exports of Bolivian handicrafts by preparing a national catalogue of handicraft and participating in international fairs, monitor radio broadcasting programs, supervise the training program of the National Manpower Development Service (FOMO) for the participating artisans, and coordinate with the State Bank (BE) the implementation of the credit component; and (c) a US$100,000 purchasing fund to enable INBOPIA to buy and sell, on a modest scale, some of the handicraft articles produced by artisan organizations in order to ensure competitive market prices (Annex 5).

Roads

3.17 Construction and improvements of roads would be required to ensure flow of goods and services to and from the project area and the access of ASI personnel to farmer groups throughout the project area, particularly during the rainy season (January-March) and during winter months (July and August). Works under the project would thus include construction and improvement of about 54 km of all-weather roads in the project area (Annex 6). The National Roads Service (SNC) would implement the program, which would be completed in 18 months. The project would also finance purchase and operation of equipment for project roads and for their maintenance during and after the implementation period. - 18 -

Health Facilities

3.18 A health facilities network would be established to provide minimal health services in the project area (Annex 7). Existing communities would be organized into "group units" for delivery of health care services, and a micro-health post would be installed in each village (totalling 30) as part of the health system. Each post would be equipped with a first aid kit containing basic drugs for treatment of the most common ailments in the community. In addition, a medical post with six beds, attached to the project facilities in Ulla Ulla, would be constructed. Also, the health facility at Charazani would be equipped as a medical post. With six beds for delivering ambulatory and hospital care, this facility would serve a population of over 16,000 in the surrounding areas. The newly created health facility in Achachi, about 150 km from Ulla Ulla, would be the main referral hospital for the project area. Total manpower requirement for the health system would be two physicians, two auxiliary nurses and 30 community health workers. The community health workers would be trained by the Department of Public Health (DPH) of the University of San Andres.

Water Supply and Waste Disposal Facilities

3.19 Potable water supply and waste disposal facilities would be provided to about 2,000 families in the project area. About 1,200 pumps and 1,000 pit privies would be installed over the project period (Annex 8).

Education Facilities

3.20 The project would construct 25 new classrooms and renovate two existing ones. It would also replace the intermediate school of Ulla Ulla with a new school to accommodate 50 students. Houses would be built for teachers, and textbooks and learning materials would be provided. Provision would also be made for a teachers' training program (Annex 9).

Women's Participation

3.21 The proposed component would assist about 2,000 women living in the project area to improve their health and nutrition, home care practices, and education. Funds would be provided for the construction of five Mothers' Club Centers in strategic locations and for the recruitment and training of talented local women to become promotion agents. The five centers would be provided with adequate furniture and equipment. Women would also receive training in handicraft skills and marketing (Annex 10).

Technical Assistance

3.22 Llama Fiber Dehairing Research. Inasmuch as purchased dehairing processing technology could be applied almost immediately, the project would initially make provision for the Government and INFOL to initiate negotiations for the purchase of dehairing technology and submit a proposal for IDA/Bank consideration not later than June 30, 1978. Should the Government - 19 -

su,ccessfullynegotiate purchase of appropriate technology, acceptable to IDA/Bank, any costs in excess of allocations for the development of llama deihairing technology under the project would be assumed by the Government. Assurances to this effect were obtained during negotiations.

3.23 In the event that the dehairing technology cannot be purchased by the Bolivian Government, a research program would be established within the country for the development of a Bolivian technology and the services of a well established and specialized research organization would be contracted. The project would provide for a pilot processing plant equipped with mostly (about 76%) used textile machinery and equipment, a complete fiber testing laboratory equipped with up-to-date instruments, and a qualified and expe- riLenced research staff (Annex 11). Used textile machinery and equipment would minimize investment costs while satisfactorily meeting the relatively short- term needs of the research program. The research facilities would be located next to the proposed alpaca/llama spinning plant and the research program would be carried out over three and a half years. After the completion of the research program, the textile machinery and equipment would be used by INFOL for research purposes. Assurances were obtained during negotiations that the Government would support the research program with adequate funds in the event that research is carried beyond the three and one-half year period.

3.24 Solar Energy. Since solar energy is a potentially usable resource in the Altiplano, the project would strengthen local facilities and expertise by providing financing for purchase of equipment and tools for the workshop presently used by the Physic Research Institute (IDIF) of the University of San Andres and funds for the development of simple, low-cost energy collection and utilization devices for use in the Altiplano. It would also provide scholarships for training abroad and for the services of a solar energy expert to assist IDIF in developing and testing solar devices that would be economically competitive with conventional technologies and readily acceptable in the rural areas (Annex 11).

Project Administration

3.25 The project would provide financial support to INFOL, which would be responsible for project execution (Annex 12). Administration costs would include salaries of INFOL staff, overhead costs of INFOL and incremental administration costs of other agencies.

C. Cost Estimates

3.26 The total cost of the project is estimated at about US$24 million, of which US$9.0 million, or 38%, represents the foreign exchange component. Investment cost phasing of the project is detailed in Annex 13. The project costs include provision for 254 man-months of consultant services at an estimated cost of US$1.2 million. The physical contingency has been calculated at 10% of base cost on investment items. The price contingency has been calculated on base cost plus physical contingency as of the end - 20 -

of 1977 at the following rates: 12% for 1978-80 and 10% for 1981/82 of the local currency; and 7.5% for 1978/79 and 7% for 1980/81/82 of the foreign exchange component, which.is line with the Bank guidelines. Project costs estimates are in Annex 14 and are summarized as follows:

Foreign % of ------$b '000------US$'000------Exchange Baseline Local Foreign Total Local Foreign Total % Cost

Productive Investment Commercial farm 1,186 1,294 2,480 59 65 124 52 1 Collection, storage and processing 41,978 55,220 97,198 2,099 2,761 4,860 57 28 Credit to farmers and communities 12,600 17,400 30,000 630 870 1,500 58 9 Handicraft credit 34,000 6,000 40,000 1,700 300 27000 15 11 Sub-total 89,764 79,914 169,678 4,488 3,996 8,484 47 49

Productive Support Project facilities 1/ 51,547 17,142 68,689 2,577 857 3,434 25 20 Vicuna conservation program 1,109 235 1,344 55 12 67 18 _ FOMO (training) 2,894 496 3,390 145 25 170 15 1 Roads 10,464 6,242 16,706 523 312 835 37 5 Llama dehairing 2,901 15,313 18,214 145 766 911 84 5 Solar energy 420 2,580 3,000 21 129 150 86 1 Sub-total 69,335 42,008 111,343 3,466 2,101 5,567 38 32

Social Infrastructure Health 6,373 1,753 8,126 319 87 406 22 2 Water supply and waste disposal 6,489 1,921 8,410 324 96 420 23 3 Education 7,500 3,640 11,140 375 182 557 33 3 Women's participation 1,050 150 1,200 52 8 60 13 - Sub-total 21,412 7,464 28,876 1,070 373 1,443 26 8

Administration INBOPIA 8,453 8,501 16,954 423 425 848 50 5 INFOL 15,842 3,719 19,561 792 186 978 19 6 Sub-total 24,295 12,220 36,515 1,215 611 1,826 33 11

Total baseline cost 204,806 141,606 346,412 10,239 7,081 17,320 41 100

Contingencies: Physical 7,106 9,321 16,427 355 466 821 57 - Price 87,570 30,565 118,135 4,379 1,528 5,907 26 _

Total project cost 299,482 181,492 480,974 14,973 9,075 24,048 38 139

1/ Including experiment station and technical services.

September 6, 1977 - 21 -

D. Financing

3.27 The IDA credit (US$9 million) and the Bank loan (US$9 million) for the project would finance US$18 million, equivalent to 75% of the total project costs, with the remainder of funds (US$6 million) to be provided by the Government and the European Community. The proposed financing plan is as follows: Project Financing US$'000

IDA/Bank Government- Total Amount % Amount % Amount %

Productive Investment Commercial farm 83 67 41 33 124 100 Collection, storage and processing 4,053 83 807 17 4,860 100 Credit to farmers and communities 1,005 67 495 33 1,500 100 Handicraft credit 1,340 67 660 33 2,000 100 Sub-total 6,481 76 2,003 24 8,484 100

Productive Support Project facilities 2/ 2,391 70 1,043 30 3,434 100 Vicuna conservation program 47 70 20 30 67 100 FOMO (training) 117 69 53 31 170 100 Roads 659 79 176 21 835 100 Llama dehairing 830 91 81 9 911 100 Solar energy 120 80 30 20 150 100 Sub-total 4,164 75 1,403 25 5,567 100

Social Infrastructure Health 277 68 129 32 406 100 Water supply and waste disposal 282 67 138 33 420 100 Education 375 67 182 33 557 100 Women's participation 40 67 20 33 60 100 Sub-total 974 68 469 32 1,443 100

Administration INBOPIA 665 78 183 22 848 100 INFOL 699 71 279 29 978 100 Sub-total 1,364 75 462 25 1,826 100

Total baseline cost 12,983 75 4,337 25 17,320 100

Contingencies 5,017 75 1,711 25 6,728 100

Total project cost 18,000 75 6,048 25 24,048 100

VL Including a grant equivalent to US$2 million from the European Community to finance local expenditures. 2/ Including experiment station and technical services. - 22 -

3.28 The IDA/Bank funds would cover 100% of the foreign exchange costs (US$9 million) and 60%, or US$9.0 million, of local costs. Local cost financing is justified in Bolivia in view of the country's poverty and its intensive efforts to mobilize domestic savings and also because of the importance of the project to the Government's overall strategy in engendering development in the Altiplano. The Commission of the European Community has agreed to participate in the project and will provide a grant equivalent to about US$2 million to finance local expenditures. The Government would contribute about 17% (US$4.0 million) of the total project costs. The beneficiaries would not make any financial contribution; however, they would supply labor in kind to project works (on-farm development and water supply and waste disposal facilities) valued at US$160,000 at market prices, which is not included in the cost or financing tables. Also, the beneficiaries would contribute about 4,000 ha for the establishment of project facilities.

3.29 The Government would be the borrower and would bear the foreign exchange risk. The IDA credit and Bank loan would be at standard terms for Bolivia. Similar to the on-lending procedures under the Ingavi Rural Develop- ment Project (Loan 1211-BO), proceeds of the credit and loan, as well as the Government counterpart funds, would be channeled through the Central Bank to INFOL and other participating agencies. Project funds would be made available by the Government as a grant except for the credit program (US$3.5 million) for livestock and handicraft activities; funds (US$4.9 million) for the investment costs of processing plant and collection and storage facilities, including incremental working capital; and funds (US$124,000) for the investment costs and first year operating costs of the commercial farm. For the processing plant, including collection and storage facilities, about US$4.9 million would be lent to INFOL for 15 years with five years of grace at 12% interest by the Government, and, likewise, US$124,000 would be lent to INFOL by the Government for 14 years with four years of grace at no interest charge. It would be a condition of effectiveness that the Financing Agree- ment between the Government and INFOL had been executed. Funds would be disbursed from the Central Bank project accounts only on authorization from INFOL, except in the case of BAB and the State Bank (BE), where funds would be disbursed against evidence of disbursement by BAB and BE on sub-loans to project beneficiaries (para 4.17). The Central Bank would receive 1/4% on outstanding sub-loan amounts as compensation for its services. Funds accruing in the project account from the credit program would be available for further lending and for similar purposes. Assurances on the above were obtained during negotiations.

E. Procurement

3.30 New equipment for the processing plant (US$2.5 million, excluding contingency), road construction and maintenance equipment (US$300,000, excluding contingencies) and vehicles (US$261,000, excluding contingencies) would be - 23 - awarded through international competitive bidding according to Bank procedures. Since some equipment for llama dehairing research facilities would be purchased second-hand (US$153,000), procurement would be through negotiations acceptable to the Bank. For international competitive bidding, INFOL would consolidate t'he requirements of the participating agencies and issue the calls for tenders. All tender packages for laboratory equipment, commercial farm equipment, and equipment for schools, health and project administration, water and waste disposal facilities, solar energy and handicrafts (US$1.0 million, excluding contingency) in excess of US$100,000 equivalent would be procured through international competitive bidding according to Bank procedures. Furniture and office equipment (US$190,000, excluding contingency) would be procured through local competitive bidding according to local procedures satisfactory to the Bank. Procurement of most handicraft and farm inputs would be carried out by farmers through normal commercial channels because of the size and timing of individual purchases. Road work (US$0.8 million, excluding contingencies) would be undertaken by SNC on force account. Civil works (US$2.3 million, excluding contingency) for health centers, schools, trading posts and storage facilities, processing plant, dehairing research facilities, and project facilities in Ulla Ulla would be carried out through local competitive bidding, acceptable to IDA/Bank.

F. Disbursement

3.31 The IDA/Bank would disburse over a period of five years:

(a) 100% of foreign expenditures for the purchase of vehicles (US$261,000) and equipment (US$2,900,000);

(b) 100% of foreign expenditures for consultants' services and overseas training;

(d) 68% of local expenditures for civil works facilities; and

(e) 68% of local expenditures for solar energy, handicrafts, dehairing research, education, health and project administration.

The figures in (a) above do not include the Bank's share of the price contingencies which amount to US$5.0 million.

3.32 Disbursement of funds for vehicles, all equipment, civil works and consultants, and overseas training would be made against normal documentation. Disbursement of remaining expenditures, including civil works for roads by force account, would be made against certificates of expenditures, the docu- mLentation for which would not be submitted for review, but would be retained by the borrower and made available for inspection by IDA/Bank during the course of project supervision. A schedule of estimated disbursements is given in Annex 15 and the expected project cash flows are given in Annex 16. - 24 -

IV. ORGANIZATION AND MANAGEMENT

4.01 The newly created INFOL would be responsible for project implementation (Annex 17). INFOL would have its own organization, administration, and funds. The Board of Directors would be composed of one representative from the Ministry of Peasant Affairs and Agriculture (rotating chairman), Ministry of Commerce and Industry (rotating chairman), the Ministry of Planning and Coordination, the Ministry of Finance, the Bolivian Institute for Agricultural Technology (IBTA), FOTRAMA and INBOPIA; two delegates from private marketing firms dealing with handicrafts; a representative from small artisan associations; and the general manager of INFOL. In addition to reviewing policy matters, the Board would appoint key staff of INFOL; approve annual development programs, budgets, and work plans; and ensure effective coordination and implementation of development programs in the sub-sector (Annex 12).

4.02 INFOL's general manager has been appointed. He would be responsible to the Board of Directors for day-to-day execution of the proposed project. He would be supported by a deputy manager and a small core of highly qualified professionals: five division chiefs, two economists, one financial analyst, one statistician, one veterinarian, credit and pasture experts, and administrative and support staff. Assurances on the above were obtained during negotiations. An internationally recruited expert in administration and management would be hired for 24 months to assist the general manager in coordinating the institute's activities and in project management. An assurance was obtained that the administrative and management expert would be employed by July 1, 1978 on terms and conditions satisfactory to IDA/Bank. Assurances were also obtained that the Government would provide INFOL with necessary staff and adequate incentives. In addition, an assurance was obtained that any replacement of INFOL's general manager and ASI's chief would be subject to IDA/Bank approval.

4.03 INFOL would have five divisions: Planning and Monitoring (PM), Marketing and Processing (COMPRO), Agricultural Credit and Extension (ACE), Administration in La Paz, and Agricultural and Social Infrastructure (ASI) in Ulla Ulla. ACE would prepare and monitor investment programs and promote credit among farmers in Oruro and Potosi that would complement ASI's development activities in Ulla Ulla under the project. ACE would also be responsible for coordinating courses with the local universities relating to alpaca/ llama and sheep development and for promoting training programs at the La Raya Experiment Station in Peru.

4.04 INFOL's PM would collect data and prepare annual wool production forecasts and estimates of demand for fleece and yarn, and, on the basis of such information, would establish quotas for textile and handicraft users and formulate minimum selling and purchasing prices for fleece and yarn. It would also prepare marketing information and trade bulletins. INFOL would also be required to establish a pricing mechanism that would serve as an incentive to producers and artisans to increase production and ensure a - 25 - steady and timely supply of raw materials to the processing plant and yarn to artisans. Guaranteed minimum prices would, inter alia, reflect farm production costs, collection and storage costs, and processing plant operation costs including a reasonable profit margin. Actual farmgate prices would be set in line with prices paid in Peru. In order to support this price guarantee scheme, a stabilization fund would be set up and supported initially by Government's contribution, and subsequently, by profits of the new processing plant (Annex 4). Assurances were obtained during negotiations that the Government would submit a proposal to the Bank for comments by October 31, 1978 on the pricing mechanism and the stabilization fund and outlining how the program would be carried out. PM would also monitor the overall progress of the project and other development programs as well as preparation of new projects being implemented by INFOL. An assurance was obtained during negotiations that all requests for construction of new wool processing plants or expansion of existing capacity would be approved by the Government only after consultations with INFOL.

4.05 INFOL's COMPRO would take over existing COMBOFLA facilities and assume full responsibility for the collection, sorting, storage, processing and selling of fleece and yarn to artisans and industrial users. Assurances were obtained during negotiations that INFOL would contract the services of a well established and specialized research organization on terms and conditions acceptable to the Bank by July 1, 1978 to carry out the research program of llama dehairing. It would, however, not engage in handicraft activities, and would submit a proposal to IDA/Bank by September 1, 1978, outlining how workers at the Pulacayo processing plant would be adequately compensated when the plant's operation is terminated on completion of the new processing plant., Assurances to this effect were obtained during negotiations. Assurances were also obtained during negotiations that INFOL would supply FOTRAMA with the necessary alpaca fiber to meet its annual requirement subject to a ceiling of 50 m tons equivalent. COMPRO would also be responsible for the development of llama dehairing technology, export promotion and for establishing and maintaining an efficient grading and quality control system. Assurances were obtained that INFOL would contract the services of a specialized consulting firm for 43 man-weeks and a textile expert for 12 man-weeks on terms and conditions acceptable to IDA/Bank by January 1, 1979 to provide technical know-how for operating the plant, to establish grading norms and fiber pricing mechanism as well as to set up a training program for plant personnel (para 3.15). COMBOFLA's outstanding debt to USAID which now stands at US$1 million would be paid by the Government in order that INFOL would be clear of obligation0

4.06 ASI, with headquarters in Ulla Ulla, would have five units: the Commercial Farm; the Experiment Station and Vicuna Reserve; Credit and Extension; Monitoring; Administration, and an ad hoc committee (para 4.08) which would advise ASI's chief and be actively involved in the implementation of the Ulla Ulla Development Project (Annex 12). Given the remoteness of the project area from the main centers of population and the harshness of living conditions in the area, the compensation program for the staff in Ulla Ulla would be made considerably attractive. An assurance was obtained that the Government would provide the staff with adequate incentives and that it would provide adequate funds and staff to maintain the Experiment Station after project completion. - 26 -

4.07 ASI's chief would have overall authority and responsibility for execution of the livestock component of the project, reporting directly to INFOL's general manager. ASI would also be responsible for implementation and coordination of the women's participation program (para 3.21). For the research program, ASI would be assisted by specialists in pasture and forage (18 months) and experts in animal breeding and production (12 months). Assurances were obtained during negotiations that the former would be employed for six months per year and the latter for three months per annum, all over a three-year period.

Ad Hoc Technical Committee

4.08 An ad hoc committee would be established in the project area to function at an advisory level on matters relating to programs undertaken by the project, annual investment plans, and any outstanding issues which might arise between the participating farmers and project management. The chief of ASI would be chairman of the committee, which would have as members the unit chiefs of ASI, plus two representatives of project beneficiaries and two women from the project area who would be elected delegates serving one-year terms. An assurance to this effect was obtained at negotiations.

Project Evaluation and Monitoring

4.09 A Monitoring Unit would be set up within ASI to conduct a continuous study of project activities and to evaluate project performance. This unit would have a staff of two professionals: one agricultural economist and an anthropologist sociologist. For the social infrastructure components, the Monitoring Unit would coordinate data collection with each of the participating agencies responsible for each of the respective components. Informa- tion collected to fill data gaps would provide a basis for management decisions during implementation of the proposed project as well as in future projects in the Altiplano. Data collection (technical, economic, financial and sociological) would also be directed towards providing project management with information on how successful the chosen strategy was in achieving basic project objectives. In addition, it would monitor sub-loans made to farmers and artisans and would evaluate periodically the impact of the credit program and training. For the handicraft component, BE, in cooperation with INBOPIA, would prepare progress reports indicating the number of sub-loans approved, commitments, disbursements, and cancellation, both by amounts and by geographic regions. INFOL would send quarterly reports to IDA/Bank highlighting the progress and operating results of the project. Assurances were obtained during negotiations that the Monitoring Unit would be established by April 1, 1978 and that quarterly reports would be sent to IDA/Bank within two months of the end of each quarter.

Participating Institutions

4.10 INFOL would enter into operational agreements with INBOPIA for the handicrafts component; SNC for the road program; MPSSP for the health component and for the water supply and waste disposal system; Ministry of Education - 27 - for the education component; IDIF for the solar energy program; and the Wild- life and National Parks Division for the vicuna conservation and development program. BAB and BE, under subsidiary agreements with Banco Central, would act as financial agents for the credit components. The signing of an agreement with each entity, satisfactory to IDA/Bank, would be a condition of disbursement for each respective component.

4.11 Handicraft. INBOPIA would be primarily responsible for the handicraft component and would enter into a contractual arrangement with BE and the National Manpower Development Service (FOMO) for implementation of the lending program, training and radio broadcasting in Spanish, Aymara and Quechua. An assurance to this effect was obtained during negotiations. INBOPIA would contract an expert on organization and management (24 months), an expert in marketing and fair organization (24 months), and short-term consultants in textile engineering and design (six months) to provide support to INBOPIA on all aspects relating to the handicraft component. An assurance was obtained during negotiations that the experts would be employed by July 1, 1978 and the short-term consultants by January 1, 1979 on terms and conditions satisfactory to IDA/Bank.

4.12 Roads. SNC would implement the road program under the direction of the ASI, which would advise SNC on the priorities for construction and review the detailed work program prepared by SNC. SNC would conduct field investigations, prepare engineering plans and design and cost estimates, operate equipment financed under the project and supply skilled labor to carry out the work program. Annual maintenance of project roads would be carried out by SNC by force account. Assurances were obtained during negotiations that the Government would maintain all roads in the project area during and after the project period and that equipment purchased under the project would be utilized by SNC for maintenance of project area roads only.

4.13 Health and Water Supply. MPSSP would be responsible for the construction of health facilities, procurement of equipment, and administration cf health facilities, and the Department of Public Health of the University cifSan Andres (DPH), under an operational agreement with MPSSP, would be responsible for implementing the training, monitoring, supervision and evaluation aspects of the health system. Assurances were obtained on the above cluringnegotiations. Also, an assurance was obtained that the Government would provide the necessary staff with adequate incentives and would maintain health facilities after the project period. Also, IPSSP would be responsible f:or installing the hand-pump wells and pit privies, with beneficiaries pro- vriding the labor for excavation works. MPSSP would supervise the operation of wells and maintain them, and the beneficiaries would bear the costs of maintenance. It would also supervise the maintenance of the pit privies by beneficiaries. Assurances were obtained that MPSSP would carry out detailed investigations to determine priority areas to be served and availability of aquifers and prepare a plan of operation before purchasing pumps.

4.14 Education. The main responsibility for the implementation of t:he education component would be delegated to a specialist who would be contracted locally by the Project Unit managing the Education and Voca- tional Training Project (Loan 1404-BO) and seconded to INFOL. The Project - 28 -

Unit would prepare the work program and monitor the progress of the project with the assistance of the specialist. Assurances were obtained during negotiations that the specialist would be recruited by the Project Unit within three months of loan signing on terms and conditions acceptable to IDA/Bank. Assurances were also obtained that the Government would provide adequate budgetary allocations for the maintenance and repair of all buildings, furniture and equipment provided under the project.

4.15 Solar Energy. IDIF would implement the solar energy program. Demonstration of the practical uses of solar energy devices would be carried out jointly in selected areas in the Altiplano by ASI and IDIF. INFOL would contract a solar energy expert to assist with the research program, particularly in developing and testing simple and low-cost solar energy devices for heating, cooking, pumping, drying and greenhouse agriculture. An assurance was obtained that the solar energy expert would be hired by January 1, 1979 on terms and conditions satisfactory to IDA/Bank.

4.16 Vicuna Conservation. The chief of the unit responsible for the Experiment Station in Ulla Ulla would be in charge of the daily operations of the vicuna conservation and development program, coordinating work with the Wildlife and National Parks Division. INFOL would also take the necessary measures to exchange information and experts in this field with Peru, Chile and Argentina. It is highly unlikely, however, that the protection program can be implemented successfully in Bolivia unless the 10-year moratorium which expires in 1979 on all killing, marketing and exporting of vicunas' skin or fleece is extended beyond 1979. Assurances were obtained during negotiations that the Government would discuss this matter with Peru, Chile and Argentina and would support the extension of the moratorium beyond 1979.

Lending Policies and Procedures

4.17 On-farm investment and herd development credit would be channeled through BAB according to on-going procedures, which have proven satisfactory. The lending program for the handicraft component would be managed by the Artisan Section (Schedule A) within BE.

4.18 Sub-loan maturities for alpaca herd development would not exceed 10 years, with grace periods up to four years. Likewise, sub-loan maturities for handicraft production would not exceed six years, with grace periods up to 12 months. For sub-loans for alpaca herd development, security would be in the form of chattel mortgages on animals. For handicraft, security would be in the form of machinery and equipment for capital investments and raw materials and finished products for working capital. The interest rate on sub-loans would be 12%, which is in keeping with the Government's interest rate policy for agricultural development projects and in line with the rates BAB is charging small farmers under IDA Credits 261-BO and 561-BO and Bank Loan 1211-BO (Schedule A). - 29 -

4.19 ASI would prepare farm investment plans and loan applications for alpaca herd development and would carry out technical and financial analyses of sub-loan applications. Sub-loan applications would be forwarded to BAB for disbursement of funds after approval by ASI's chief. ASI would supervise the collection of sub-loans, with BAB handling the funds. Further, ASI would assist individual farmers and farmer groups in the implementation of the farm development plans. The Government would assume the financial risk and BAB would receive a margin of 2% on outstanding sub-loan balances for its participation. In order to carry out its responsibility, BAB would establish an office at ASI facilities in the project area. Assurances to this effect were obtained during negotiations.

4.20 INBOPIA would provide technical assistance to artisans in preparing investment plans and loan requests for handicrafts activity. BE would be responsible for the technical analysis of each sub-loan and it has agreed to process and approve applications from individual artisans within seven days of the date of receipt and within 15 days for group applications. Following approval, BE would supervise the implementation of each investment plan. For the lending program, BE would assume the financial risk and would receive a margin of 3-3/4% on outstanding sub-loan balances (Schedule A). Funds accruing in the project account (Central Bank) from repayment of all sub-loans would be established as a revolving fund that would be made available for further lending for similar purposes. Assurances were obtained on the lending'terms and conditions listed in Schedule A during negotiations.

Alpacas for Experiment Station and Commercial Farm

4.21 The Experiment Station and commercial farm require about 2,500 alpacas for the research, extension and production program envisaged. There are two sources of supply -- one within the project area and the Central Altiplano and the other in Peru, which has about 3 million animals. Obtaining the animals from Peru would ensure better quality, including more females. Also, the La Raya Research Station in Peru has indicated its willingness to provide about 1,500 alpacas to Bolivia in exchange for llamas, provided the Peruvian law prohibiting export of the animal can be waived. Assurances were cbtained during negotiations that INFOL, not later than April 1, 1978, would furnish to IDA/Bank a satisfactory proposal for the purchase of alpacas for the Experiment Station and the Commercial Farm.

Accounts and Auditing

4.22 INFOL would maintain a separate project account, with sub-accounts for each project component. Detailed accounting procedures would be established for recording all transactions relating to the project. Similarly, participating institutions responsible for implementing a project component would also maintain separate project accounts. Assurances were obtained curing negotiations that INFOL would have its accounts and financial statements, including the project accounts, audited by independent auditors, satisfactory to IDA/Bank, according to procedures acceptable to IDA/Bank, and that the audited financial statements and the auditor's report would be f'orwarded to IDA/Bank within six months of the close of INFOL's fiscal year. - 30 -

V. PRODUCTION, MARKETING AND PRICES, AND PRODUCER BENEFITS

Production

5.01 The project would account for substantial production. Average annual value of incremental production of fiber collected would amount to $b 31.9 million (US$1.6 million), including US$1.4 million of alpaca fiber. These fibers would be processed into yarns amounting to about $b 88.6 million, or US$4.4 million, including US$3.8 million of alpaca yarn, which, in turn, would generate incremental sales of $b 129.3 million (US$6.4 million) of handicraft products. Incremental value of adequately scoured wool would amount to about $b 7.2 million (US$360,000). Although total collection of sheep wool is not expected to increase substantially, better scouring would allow the Bolivian mills to use local wool in the production of finer yarns, and thereby reduce the industry's dependency on imported quality yarns and tops. Alpaca meat consumption, which is confined primarily to the Altiplano, would increase from the present level of 75 m tons to 543 m tons at full development. Also, about 38,000 breeding alpacas would be sold locally during the development period.

5.02 The project's incremental production is summarized below:

Incremental Production Production Full /1 1976 Year 5 Year 10 Development Alpaca Herd

Total number of head 300,000 13,763 61,586 82,810

Alpaca fiber (m tons) 132 26 133 330

Llama Fiber Collected (m tons) Without dehairing technology 55 85 95 112 With dehairing technology 55 175 1,100 1,100

Yarns (m tons) Alpaca 45 21 86 190 Llama Without dehairing - 50 54 60 With dehairing - 92 460 355 Acrylic - 122 80 -

Handicraft Products Value (US$'000) 4,000* 6,400 6,400 6,400

* Estimates.

/1 Full development under the livestock credit component would be reached by year 15, handicraft credit component by year 5, and the collection and processing component by year 17. - 31 -

Marketing and Prices

5.03 Marketing. Under the improved gathering system (para 3.13), INFOL would be responsible for almost all the fiber collection, as well as the sale of yarn to artisans and industrial users. The Planning and Monitoring Divi- sion (PM) of INFOL would collect data and prepare annual wool production forecasts and estimates of demand for fiber and yarn, and, on the basis of such information, would establish quotas for textile and handicraft users.

5.04 Bolivia has developed a tourist and export market of artisanal products; however, the bulk of the handicraft items would be marketed locally. Bolivian export legislation discourages the export of raw materials, imposing a tax of 25% on unprocessed textile raw materials. The domestic tourist market for these artisanal products is good and is expected to remain attractive if appropriate product adaptation and market development efforts are undertaken. Additionally, the export potential for alpaca/ llama products is high, since they are available in Bolivia and Peru only, and world demand is such that present supplies (mainly from Peru) are not sufficient.

5.05 Prices. The current farmgate prices of alpaca fiber are $b 90 per kg (US$4.5) for white and an average of $b 56 per kg (US$2.8) for colored. In Peru prices are usually 15% to 25% higher for white wool and 20% to 30% higher for colored wool. The selling price of alpaca yarn is currently US$12.5 per kg, while in Peru the ex-factory price of alpaca yarn is about US$19 per kg for yarns of about the same quality. INFOL would establish a pricing mechanism, allowing prices of yarns to be adjusted to reflect production cost, and, likewise, farmgate prices to be adjusted to follow the Peruvian prices.

Pioducer Benefits

5.06 Income of beneficiaries from the enterprises to be financed under the project would increase significantly, as shown below, providing sufficient incentive to project beneficiaries to participate in the investment program. - 32 -

Farmers' Cash Income With Project Investment Without at Full /1 Cost Project Development Per Family __US__------US$ per family ------

Livestock Production

Model 1 (100-alpaca herd, 2 families) 73 825 10 Model 2 (400-alpaca herd, 5 families) 93 997 669 Model 3 (1,000-alpaca herd, 12 families) 98 1,038 625 Model 4 (5,000-alpaca herd, 55 families) 106 1,114 655

Handicraft Production Model 1, one family 974 1,833 275 Model 2, group of 30 artisans 314 512 200

/1 Full development under livestock production would be reached by year 12 and handicraft production by year 7.

5.07 Farmers' cash income includes remuneration of family labor; however, it does not include extra benefits of home consumption of fiber for family clothes, but its value, about US$10 per family, is negligible. In addition, the collection, storage and processing units would generate average annual net profits after tax, debt service and depreciation of US$233,000 during debt repayment and US$1.9 million afterwards. The commercial farm in Ulla Ulla would yield a profit of about US$27,500 at full development (year 12).

5.08 The financial rates of return on investments are summarized below:

Financial Rate of Return No. of Sub-loans (%)

Livestock Production Model 1 (100-alpaca herd) above 100 440 Model 2 (400-alpaca herd) 40 260 Model 3 (1,000-alpaca herd) 35 32 Model 4 (5,000-alpaca herd) 34 4

Collection, Storage and Processing 29 1

Handicraft Production Model 1 (1 family) above 100 680 Model 2 (30 artisans) above 100 90 - 33 -

The financial rates of return on the livestock models are high because the value of fiber production more than doubles the first year that shearing is practiced every year instead of every second year, as well as because of immediate revenues from animal sales. The high rates may also be attributed to improvements in marketing and extension services and to adoption of improved farming rather than to the amount of the initial investment. The rates of return on the handicraft models are also high, which may be attributed to the small investments required since handicraft actually is labor intensive and to the immediate return on the incremental working capital.

VI. BENEFITS AND JUSTIFICATION

6.01 The project is designed to reach the Altiplano rural poor, who until now have received only sporadic and limited assistance for economic and social advancement. Together with the Ingavi Project (Loan 1211-BO), the proposed project would provide the basis for long-range development of the Altiplano. Initially, the project would provide assistance to families living in the Ulla Ulla region of the Altiplano where Bolivia's poverty is most severe and widespread and it would promote the development of the wool industry, which, with agriculture, forms the backbone of the rural sector of the Altiplano. The relatively high investment costs, particularly of social infrastructure components under the project, are necessary conditions for economic development in the project area as well as for the development of the wool industry, which has implications beyond the project area.

6.02 The wool textile industry as a whole would benefit from the project through improvement of research, extension and farming systems at the production level; improvement and expansion of marketing infrastructure; modernization of the processing facilities; and development of llama dehairing technology. Establishment of an effective research/extension infrastructure in the project area would have substantial impact on alpaca/llama fiber production and utilization of resources. Annual incremental production of alpaca at full development would be about 330 m tons, and yarn production would amount to 250 m tons, including 190 m tons of alpaca yarn. Development of the llama fiber dehairing technology would increase llama fiber production significantly. A conservative estimate places potential llama fiber production after dehairing at about 800 m tons annually. Improvement in the marketing facilities and the establishment of an effective pricing mechanism would drastically reduce the flow of alpaca raw material into Peru, which is currently estimated at 40% of total production in the project area.

6.03 The handicraft industry, which is a vital source of supplementary income and employment for about 200,000 poor rural and urban families, as well as of supplemental foreign exchange, would also benefit from the project through provision of credit and technical assistance to about 3,400 small rural and artisan families. At full development, the annual incremental value of handicraft items is estimated at US$6.4 million. Under project conditions, a typical artisan family with three of its members actively engaged in making alpaca/llama/sheep wool-based handicraft items could earn a cash family income of about US$1,800. - 34 -

6.04 Under the project about 2,500 farm families would participate directly in the livestock developmentprogram. Beneficiariesin the project area (about 2,000) are in the poverty group, and, under improved conditions, it is expected that the average farm family income at full development (year 12) would increase from less than US$100 to US$896. The establishmentof centers and provision of training programs for women in the project area would improve basic skills and productivity,thereby increasing the participationof women in the developmentprocess. The health and welfare of the 3,000 families living in the project area would also improve as a result of better roads, health services, education,and domestic water supplies and waste disposal facilitiesat an investmentcost of US$759 per family. Additional external benefits would also be received by persons living outside the project area through use of roads and health facilities.

6.05 The vicuna conservationand developmentprogram would increase the herd size of vicuna, which is presently an endangered species, to a level sufficientto permit commercialexploitation of its high-value product. Likewise, exploitationof solar energy, which is an importantresource in the Altiplano, and the developmentof simple, low-cost solar energy-using devices would complement the non-commercialenergy sources and would meet the critically needed energy requirementsof the rural poor in the Altiplano.

6.06 Also, the project would be directly responsiblefor the employment of 290 persons and would substantiallyreduce underemploymentof beneficiaries in the project area and of artisans in the rural areas. In addition, the project would have substantial impact on institutionbuilding. INFOL, the newly created institutionfor regulating the growth of the wool textile industry, and INBOPIA, for the development of the handicraft industry,would be strengthenedunder the project.

6.07 The overall economic rate of return of the project is 25%, calculated on the basis of costs relating to livestock production;project unit facilities;collection, storage and processing of raw materials; roads; administrationcosts of INFOL; handicraftproduction; incrementaladminis- trative costs of INBOPIA; and artisans' training program (FOMO). Benefits taken into account include those from livestock development,commercial farm, collection system, processing plant, and developmentof the handicraft industry. The economic rate of return is 18% for the livestock development component, the cost of which is US$5.1 million; 30% for wool collection; storage and processing, the cost of which is US$4.9 million; and 70% for the handicraft component, the cost of which is US$3.0 million. If the benefits of the llama dehairing technologyare included, then the overall economic rate of return of the project increases from 25 to 32% (Annex 18).

6.08 Finally, the proposed project, with the Ingavi Rural Development Project (Loan 1211-BO),would provide the basis for a long-range program to develop other areas of the Altiplano. Similar projects could be carried out in other areas within the Altiplano without placing too much of a burden on Government finances. The average annual Government contributionduring the implementationperiod and after project completionwould be less than 1% of the annual public capital expenditures. - 35 -

Project Risk

6.09 Unlike the Ingavi Rural Development Project (Loan 1211-BO), climatic variation would not be a critical factor inasmuch as the proposed project focuses on livestock rather than agricultural crops. In view of COMBOFLA's weaknesses and since the proposed project would initiate, for the first time in Bolivia, a comprehensive development program, there is need for the establishment of a multi-disciplinary organizational structure cutting across existing institutional lines.. The creation of INFOL would ensure an orderly development of the wool-textile industry.

6.10 Various components under the project exhibit strong complementarity and the benefits generated by the unified infusion of these inter-related components in a single package far exceeds those of piecemeal implementation of the components. Recognizing that the implementation of some components may pose some unwarranted risks, the project has included technical assistance and attractive remuneration in order to attract highly qualified staff and thus, hopefully, reduce the apparent risk of increasing delays from occurring.

6.11 It is only realistic to expect that, during implementation, delays and problems are likely to occur which are completely different than those foreseen during project preparation and appraisal. The likelihood of such occurrences is particularly enhanced by the fact that the project contains a Large number of unique components, many of which have never been tested before by the Bank under field conditions in Bolivia or elsewhere. In view of these uncertainties, the project would have to be monitored exceedingly closely and modifications may have to be introduced quickly during the implementationi of the project, as is the case with the Ingavi Rural Development project. The Bolivian Government is fully aware of these uncertainties but is giving the highest priority to the implementation of the project and considers the Bank's support of crucial importance.

Ecological Impact

6.12 The proposed project is expected to have a positive environmental impact. Improvement of herd and range management practices would lead to a better balance between animal resources and the carrying capacity of the land, and thereby reduce soil erosion. Provision of sanitation facilities would reduce environmental contamination. Improved health care services, housing conditions, water supply and personal hygiene practices would improve ecological conditions and protect beneficiaries from harmful elements in the environment. The vicuna conservation and development program is designed to protect this endangered species by improving the balance between vicuna population and its natural habitat.

Fiscal Impact

6.13 For the productive investment component of the project, investment costs would be recovered through the credit mechanism, and operating costs would be partially financed through credit and partially paid directly by the beneficiaries and INFOL. Other cash costs relating to productive support - 36 - and social infrastructure components and administration would not be recovered. The primary fiscal impact would arise from taxation of profits of the processing plant, with average annual revenue amounting to US$163,000. INFOL's processing plant would yield average annual net earnings of US$233,000 during the plant's 15-year debt repayment period and US$1.9 million thereafter to the Government. A secondary area of fiscal impact would be revenues from net earnings of artisans but the magnitude would be insignificant (US$10,000 per annum). The Government's annual contribution after project completion would amount to US$0.8 million. Considering the above earnings generated by the project to the Government, the net annual contribution would not place any strain on Government's annual public capital expenditure budget.

VII. AGREEMENTSREACHED AND RECOMMENDATIONS

7.01 During negotiations, assurances were obtained from the Government that:

(a) profits of the commercial farm would be shared by the communities which contributed land to the Government for establishment of the project facilities, and, at full development, i.e., after 10 years, INFOL would transfer the commercial farm to the donor communities for operation as a cooperative enterprise; to this end INFOL would submit to IDA/Bank by January 1, 1982, a proposal outlining the terms and conditions under which the commercial farm would be transferred to the communities who contributed land (para 3.07);

(b) the Government and INFOL would initiate negotiations for the purchase of dehairing technology and submit a proposal for Bank consideration not later than June 30, 1978, and, should the Government negotiate purchase of appropriate technology, acceptable to IDA/Bank, any costs in excess of allocations for the development of llama dehairing technology under the project would be assumed by the Government (para 3.22);

(c) the Government and INFOL would support the research program for llama dehairing with adequate funds in the event that research is carried beyond the three and one-half year period (para 3.23);

(d) funds -accruing in the project account from the credit program would be available for further lending and for similar purposes (para 3.29); - 37 -

(e) any replacement of INFOL's general manager and ASI's chief would be subject to IDA/Bank approval (para 4.02);

(f) the Government and INFOL would submit a proposal to IDA/Bank by October 31, 1978 for comments on the pricing mechanism and the stabilization fund and outlining how the program would be carried out (para 4.04);

(g) all requests for construction of new wool processing plants or expansion of existing capacity would be approved by the Government only after consultations with INFOL (para 4.04);

(h) INFOL would not engage in handicraft activities and would submit a proposal to IDA/Bank by September 1, 1978, outlining how workers at the Pulacayo processing plant would be adequately compensated when this plant's operation is terminated on completion of the new processing plant (para 4.05);

(i) INFOL would supply FOTRAMA with the necessary alpaca fiber to meet its annual requirement subject to a ceiling of 50 m tons equivalent (para 4.05);

(j) INFOL would establish an ad hoc committee in the project area, composed of the Chief of ASI, unit chiefs of ASI, plus two representatives of project beneficiaries and two women from the project area who would be elected delegates serving one-year terms to function at an advisory level on matters relating to programs undertaken by the project, annual investment plans, and any outstanding issues which might arise between the participating farmers and project management (para 4.08);

(k) INFOL would establish the project Monitoring Unit by April 1, 1978 and quarterly progress reports would be sent to IDA/Bank within two months of the end of each quarter (para 4.09);

(1) INBOPIA would enter into a contractual arrangement with the State Bank (BE) and FOMO for implementation of the lending program, training and radio broadcasting relating to the handicraft component (para 4.11);

(m) the Government would maintain all roads in the project area during and after the project period and that equipment purchased under the project would be utilized by SNC for maintenance of project area roads only (para 4.12);

(n) DPH, under an operational agreement with MPSSP, would be responsible for implementing the training, monitoring, supervision and evaluation aspects of the health system (para 4.13); - 38 -

(o) the Government would provide the necessary staff with adequate incentives and would maintain health facilities after the project completion period (para 4.13);

(p) for the water supply and waste disposal facilities, MPSSP would carry out detailed investigations to determine priority areas to be served and availability of aquifers and prepare a plan of operation before purchasing pumps (para 4.13);

(q) a specialist would be recruited for the education program within three months of loan signing on terms and conditions acceptable to IDA/Bank, and the Government would provide adequate budgetary allocations for the maintenance and repair of all buildings, furniture and equipment provided under the project (para 4.14);

(r) the consultants to be contracted by INFOL would be employed under terms and conditions satisfactory to IDA/Bank in the time frame specified in paras 4.02, 4.05, 4.07, 4.11 and 4.15;

(s) the Government would support the extension of the moratorium on all killing, marketing and exporting of vicunas' skin or fleece beyond 1979 (para 4.16);

(t) the Government would cause BAB to establish an office at the project facilities in Ulla Ulla (para 4.19);

(u) INFOL would provide sub-loans to project beneficiaries according to the lending terms and conditions listed in Schedule A and funds accruing in the project account from repayments of all sub-loans would be made available for further lending for similar purposes (para 4.20);

(v) INFOL, not later than April 1, 1978, would furnish to IDA/Bank a satisfactory proposal for the purchase of alpacas for the Experiment Station and Commercial Farm (para 4.21); and

(w) INFOL would have its accounts and financial statements, including the project accounts, audited by independent auditors, satisfactory to IDA/Bank, according to procedures acceptable to IDA/Bank, and the audited financial statements and the auditors' report would be forwarded to IDA/Bank within six months of the close of INFOL's fiscal year (para 4.22).

7.02 It would be a condition of effectiveness that the Financing Agree- ment had been executed on behalf of the Government and INFOL. - 39 -

7.03 A condition of disbursement for each respective component of the project would be that INFOL would enter into agreements with participating agencies, satisfactory to IDA/Bank, and that Banco Central and BAB and BE had signed subsidiary agreements (para 4.10).

7.04 With the assurances obtained, the project is suitable for an IDA credit of US$9 million and a Bank loan of US$9 million at standard terms for Bolivia.

December 27, 1977

- 40 - Schedule A

BOLIVIA

ULLA nLLA DEVELOPMENTPROJECT

Lending Terms and Conditions

Lending Policies and Procedures

1. On-farm investments and herd development credit would be channeled through the Agricultural Bank of Bolivia (BAB) and the lending program for the handicraft component would be managed by the Artisan Section within the State Bank (BE).

2. On-Farm Investments and Herd Development. About 70% of the total credit for alpaca herd development would be earmarked for lending in the project area and the remaining 30% in the Central Altiplano. In selecting sub- borrowers priority would be given to farmers who live on a farm and engage in raising alpacas and have agreed to accept ASI's supervision of farm develop- pment.

3. Sub-loans would be made to improve the traditional shearing techniques and the fiber handling and classifying practices, and also for construction of facilities for implementing a sound animal health program including improved animal husbandry and range management practices. Major'investment items would include spray-bath facilities, holding corrals, shearing sheds, fiber classification and storage sheds, mechanical shearing equipment, fences, drugs and live animals. Minor investment items would include medical kits, hand shears, scales, fiber classifying tables and identification tags.

4. ASI would carry out technical and financial analyses of sub-loan applications. The extension staff would prepare farm investment plans and loan requests. When considering applications for sub-loans, special attention would be given to forage availability, the need to introduce new animal husbandry and range management methods to substitute or improve the traditional practices, the availability of technical assistance and assurance of marketing channels for the proposed fiber and pelt production.

5. Sub-loan applications would be forwarded to BAB for disbursement of funds after approval of ASI's chief. ASI would assist individual farmers and farmer groups in the implementation of the farm development plans and would authorize disbursements for the Agricultural Bank (BAB) as the implementation stages of the plans were completed. Also, ASI in collaboration with the farmers would maintain financial and technical records of activities for selected farm operations for use in measuring project impact.

6. Handicraft. BE with its 35 district offices in rural areas and eight regional offices would facilitate the credit program. The program would give priority to making sub-loans to individuals or groups of rural artisans although urban artisans and shops involved in the production of alpaca/llama/sheep wool would be considered. Priority for lending would be given to the Departments of La Paz and Cochabamba.which account for the bulk of artisan activity. I - 41 -

Schedule A

7. Sub-loans would be for the purchase of raw materials and for the purchase oL knitting and weaving machinery and for the establishment of small shops for production of handicraft items. The maximum amount any individual artisan would be eligible to borrow under this program would be US$3,000 equivalent. Groups of artisans would be entitled to an amount not in excess of US$100,000 equivalent per group, association or cooperative. Authority to approve sub-loan applications up to US$5,000 equivalent would rest with each district office, while applications for between US$5,000 and US$20,000 equivalent would require approval by the regional offices. Approval for sub-loans about US$20,000 equivalent would be granted by the headquarters office in La Paz. Collaterals for capital investment would consist of the machinery and equipment of the sub-borrower, and for the working capital it would consist of the raw materials and finished goods.

8. Procedures for sub-loan application and approval would be simplified without lowering the evaluation quality of each application. Each applicant would complete a simple application form which would be obtained either from INBOPIA or BE. Applications from groups of artisans would be required to present standard evidence of their legal status. INBOPIA would provide technical assistance to artisans in preparing investment plans and loan requests. BE has agreed that it would approve applications received from individual artisans not later than seven days from the date of receipt and not later than 15 days for group applications. Following approval, BE would supervise the implementation of each investment plan.

Sub-loans to Farmers and Artisans

9. (a) Sub-loans to farmers, farmer groups and artisans would carry an interest rate of 12% on the outstanding sub-loan balances;

(b) Contributions to investment cost by sub-borrowers would be in the form of labor in kind, and cash contributions on voluntary basis;

Type of Development Maturity Grace Period …----- Years------

On-farm investments and herd development 10 4

Handicraft development 6 1

(d) Security would be in the form of chattel mortgage on animals in the case of sub-loans for alpaca herd development; and machinery and equipment for capital investments and raw materials and finished products for working capital in the case of sub-loans for handicraft activity. - 42 -

Schedule A

Government Lending (Central Bank)

A. BAB

1. Interest rate to BAB would be 10%.

2. BAB would be reimbursed for 100% of disbursements on sub-loans.

3. BAB would make payments of both interest and principal to the Central Bank as they were received from sub-borrowers.

4. Government would take financial risk on loan portfolio.

5. Central Bank would receive a commission of 1/4% on outstanding sub-loan balances.

6. For its services, BAB would receive a margin of 2% on outstanding sub-loan balances.

7. Funds accruing in the project account (Central Bank) from repayment of sub-loans would be made available for further lending for similar purposes.

B. BSB

1. The interest rate to BE would be 8%.

2. BE would be reimbursed for 100% of disbursement on sub-loans.

3. BE would assume financial risk and would receive a margin of 3-3/4% on outstanding sub-loan balances.

4. Central Bank would receive a commission of 1/4% on outstanding sub-loan balances.

5. Repayments of sub-loans would be made available for further lending for handicraft production.

6. Funds accruing in the project account (Central Bank) from repayment of sub-loans would be made available for further lending for similar purposes.

December 8, 1977 - 43 - ANNEX 1

BOLIVIA

ULLA ULLA DEVELOPMENT PROJECT

Research and Extension Component

Background

1. Agricultural research and extension in Bolivia are inadequate and fail to meet the needs of the agricultural sector. Until recently, research and extension applications have been subject to poor planning, insufficient funds, lack of adequate staff, and an absence of a sound organizational structure and a well defined nationwide program.

2. There are only two agricultural experiment stations in the Altiplano (Patacamaya and Belen), and the principal focus of research is on potatoes, wheat, forages, and sheep. Bolivia has about 2.2 million llamas and 0.3 million alpacas, which constitute an important resource in the Altiplano and are the principal source of livelihood for a large portion of the region's rural population, but research and studies related to alpacas and llamas are almost negligible. The Patacamaya station is now carrying out some selected research on llama; however, the program is small and does not have high priority. Compared to Peru, which accounts for over 50% of the world's alpaca and llama resources, Bolivia is about 10 to 15 years behind in research relating to alpaca development. Development of the alpaca and llama resources would depend, to a large extent, on a sound and viable research and extension system in the Altiplano.

3. The Government has recognized the need to improve and strengthen the research and extension programs, and in 1975 it created the National Institute for Agricultural Technology (IBTA) as an executing agency for research and extension throughout the country. IBTA's primary functions are to formulate and implement policies pertaining to research, technical assistance and rural extension, and to promote and coordinate research and extension activities. It is also expected that IBTA would be instrumental in improving and strengthening the agricultural research capability.

Research and Extension Programs under the Project

4. The proposed project would finance a research program to improve development of alpaca and llama breeds and would make provision for technical veterinary services to farmers participating in the project. An Experiment Station would be set up in the project area for the execution of a research program for the development of alpaca and llama herds, with emphasis on improving farming systems, feed base, quality of animal breed, and range and herd management practices. Also, a commercial farm (alpacas and llamas) would be established for the implementation of improved techniques currently available as well as those that would be developed at the Experiment Station and for demonstration. - 44 - ANNEX 1

5. Experiment Station. The Experiment Station facilities, including the commercial farm, would encompass an area of about 4,000 ha. The Experi- ment Station would be provided with laboratory equipment and facilities for research on low-cost production systems and on parasitology,bacteriology, biology, pastures, and animal nutrition as they relate to alpacas and llamas. In addition, there would be office space for administrativeand research staff, living quarters for single and married staff, cafeteria facilities, and housing for guests and persons attending training courses and seminars. In view of the low temperaturesthat are predominant throughout the year, buildings would also be provided with heating facilities. Electricitywould be generated from two 60-kw generators,and drinking water would be obtained from a deep well system.

6. Applied research on alpacas and llamas would cover five fields of investigation:

(a) internal and external parasites, with emphasis on intestinal and skin parasites;

(b) reproduction,focusing on factors which affect fertility and color transmission. Proper breeding cycles and lactation periods would be studied as a function of seasonal variations in the weather;

(d) nutrition, closely related to the research on forage conducted in the area; and

(e) herd and range'management practices.

In the initial period, the Experiment Station, would utilize the results already obtained from basic and applied research on alpaca, particularlyat the La Raya Experiment Station in Peru. In the short run, the aim would be to generate farm improvementsand eliminate some production constraintsby adaptation of existing technology.

7. Research on range management and developmentwould be carried out by an agronomist and an assistant on a full-time basis, and work would emphasize range management practices that could be introduced in the communal lands of the peasant groups. The adaptabilityof different types of forage to the conditions prevailing in the Ulla Ulla area and their behavior under irrigation would also be investigated.

8. The rangelandswould be inventoriedand mapped according to sites and classified in types of ranges from the management standpoint,i.e., in view of soils, plant cover, and ecological conditions. Range management plans and prescribed treatments would be based on this and subsequent survey information and on the year-long needs of the grazing animals. The conditionsof the range, soil and plant cover would be monitored continuouslythrough the use of visual inspection,transversal cuts at regular intervalsand fenced-off study plots. - 45 - ANNEX 1

9. Since there are no data available on experiments with seeded pastures on cultivated land in the project area, small-scale trials would be conducted at the lower elevations on more mature soils, both with and without supplemental irrigation. The emphasis in these trials would be to extend the green- grass grazing season into the dry winter period, at which time the native rangelands are producing much less high quality forage. These experimental plots would be fenced to control grazing animals.

10. Similar experiments would be conducted with new and improved range forage plant species, but because of the uncertainty of the economics and biological aspects, range plant species adaptation trials would be carried out on an experimental basis, guided by trained research personnel. It is likely that a large number of untried plant species (yellow blossom sweet clover, white sweet clover, alsike clover, ladino clover, and possibly, the grasses alta fescue and Russian wildrye), are adaptable to the area and would merit the risk of modest investments in field-scale trials. Such trials would be initiated at the lower altitude areas, with some small-scale tests in the higher regions under varied conditions. Plots in the latter areas would be chosen only where adequate moisture can be assured, either from natural groundwater, from overflow, or from supplemental irrigation.

11. The Experiment Station would include a 20-ha irrigation scheme to produce forage for the experimental station's use and a supply of grass seeds for farmers to utilize in the project area. Also, the irrigation scheme would determine the technical and economic feasibility of using irrigation to increase the carrying capacity of rangeland since about 8,000 ha of land can be irrigated in the project area. The research data in both rainfed and irrigated systems would be compiled and analyzed for the benefit of immediate and future improvement of the forage productivity in the project area.

12. The irrigation system would be a simple on-farm gravity type, tap- ping about 100 liters/second of water from a nearby perennial stream. The flow would be conveyed by a feeder to the main ditch and distributed to each of the 2-ha plots through secondary and tertiary ditches. The system would be lined with soil cement to prevent seepage. Land grading, drains and farm roads would be provided as necessary. The main distribution features would involve feeder and main ditches totaling about 500 m, secondary ditches totaling 1,220 m, and tertiary ditches totaling 2,000 m. The system would include control structures and measuring devices as listed in Table 1.

13. Demonstration and adaptive work on plants would be coordinated with the work at Belen and Patacamaya Experiment Stations of IBTA in order to demonstrate the range potential of the project area. Range management plans and prescribed treatments would be based on survey information and the year- long needs of the grazing animals.

14. Commercial Farm. The commercial farm would be compatible to the existing farming system in the project area and would include about 2,500 ha of range land and operate with about 1,500 alpacas and about 370 llamas bought locally and from Peru. The farm would operate as a commercial enterprise and - 46 - ANNEX 1 would serve as a demonstrationunit, adopting improved range management and animal husbandry practices developed at the Experiment Station. The chief of the commercial farm, reporting directly to the Director of the Agricultural and Social InfrastructureDivision, would be responsiblefor the management and day-to-dayactivities of the commercial farm, and he would be supported by a staff of 10, mainly herders and farm hands. Profits of the commercial farm would be shared by the communitieswhich contributed land to the Govern- ment for the establishmentof. the Project Unit facilities,including the Experiment Station and the commercial farm. At full development,i.e., after 10 years, the Government would transfer the commercial farm to the donor communitiesto be operated as a cooperativeenterprise.

Technical Services

15. The project would provide technical assistance to farmers on improved technology for animal husbandry, in improved herd and range management practices, and in preparation and implementationof farm development plans. The primary technical assistance system would require extension agents, a sociologistand techniciansin the fields of livestock development and range management.

16. The extension agents would initially focus their work on establishing a line of communicationand trust between themselves and farmers in the project area and on delivering improved technology for alpaca development. They would be assisted by researchersand would provide the essential practical feedback from the field to the Experiment Station. They would use the commercial farm for demonstrationpurposes and for introductionof improved technology to farmers. The extension staff would provide technical assistance to the campesino groups in regard to management decisions on development technology in various fields and supply price and marketing information to farmers. They would also assist in making investments in range and pasture improvementand in livestock; in the purchase of inputs and sale of products; in implementatinga system of production management; in training sub-techniciansand campesino groups; and in preparing investmentplans for sub-loan applications.

17. The extension staff would also be responsiblefor providing veterinary assistance to the project beneficiaries. Part of the assistance would be in the form of training in the use (field-daysand on-the-farmdemonstra- tions) of simple procedures for control and prevention of internal and external parasites, and first aid and other practices as part of the overall herd management program. The verterinaryservice would be supported by the laboratory techniciansand facilities of the Project Unit. Tests of blood, feces, tissues, etc., necessary for diagnosiswould be conducted by the pertinent laboratory. The veterinary service would be provided free of charge, however, any medicines required would be paid for by the project beneficiaries.

18. In order to improve the overall effectivenessof the extension system and to improve communicationsbetween extension personnel and the target group, local cadres would be selected and trained in animal husbandry and - 47 -

ANNEX 1 range management practices. Each cadre would specialize in shearing, range development and herd management. The impact of extension forces, thereby would be expanded. Over the years these para-extension personnel would acquire permanent skills in a limited range of basic tasks and, in their villages, would gain prestige as experts. The more adept personnel could become trainers for other villages in the project area, thereby extending substantially the coverage of the extension force. Also, the para-extension workers would assist extension staff in preparing farm plans to serve as bases for sub-loan applications.

19. Provision would be made in the project unit facilities for a classroom and dormitory for persons attending training courses conducted by project staff or by outside consultants. This would be an important aspect of long- term planning to improve the extension delivery system. The leaders of farmer group units and the para-extension workers would be the priority candidates for these training courses.

20. The research and extension system would have a total of 41 staff members, including four research staff, four laboratory technicians, six enten- sion agents, one farm manager and 25 laborers and herders. In order to ensure that the Experiment Station has adequate professional staff to perform its functions, it would reach the following personnel levels by the dates indicated.

Type of Staff June 1, 1978 June 1, 1979 Jan. 1, 1980 ------number…------

Chief of research 1 Parasitologist 1 Bacteriologist 1 Animal nutritionist 1 Laboratory technicians 2 4 Head of extension 1 Extension agents 6 Farm manager 1

21. In order to attract and retain qualified personnel, the National Institution for the Development of Wool (INFOL) would pay the following salaries to the staff level indicated:

Staff Level Monthly Salary Annual Salary ($b) ($b)

Chief of research 21,300 297,800 Parasitologist 17,900 250,200 Bacteriologist 17,900 250,200 Animal nutritionist 17,900 250,200 Laboratory technician 15,300 214,400 Head of extension 21,300 297,800 Agronomist (extensionist) 17,900 250,200 Veterinarian (extensionist) 17,900 250,200 Chief of commercial farm 15,300 214,400 - 48 -

ANNEX 1

Cost Estimates and OperatinS Results

22. The total investment cost of the project facilities excluding the commercial farm, would amount to $b 29.4 million (US$1.5 million) Table 2. Civil works would account for 32% of total investment costs and would amoun to $b 16.1 million, or US$803,000 (Table 3). Total investment costs of t - nical assistance, which would include specialists in pastures and forages. animal breeding and production, and fellowships and training for local stpr- would amount to be $b 3.5 million (US$175,000). The total investment cost of the irrigation system would be $b 646,000, or US$32,000 (Table 4). Total operating costs of project facilities would be $b 38.6 million (US$2.0 million). Details of investment and operating costs are shown in Table 3.

23. The total investment cost of the commercial farm would amount to $b 2.1 million (US$105,000). A cost breakdown is shown in Table 5, and herd and production projections in Tables 6, 7, and 8. Earnings and cost estimates appear in Table 9 and cash flow projections are shown in Table 10.

Implementation

24. The Agricultural and Social Infrastructure Division (ASI) of the National Institution for the Development of Wool (INFOL) would be directly responsible for the management and administration of the Experiment Station and the commercial farm. Specialists in animal production and experts on pastures and forages would be contracted by INFOL to assist with the research program (Appendix 1). The chief of the commercial farm would be an individual with practical experience in livestock operation and management. He would be responsible for providing the necessary assistance to the chief of ASI; preparing annual investment and work plans for the commercial farm; hiring and supervising the work of the labor on the farm; purchasing and selling livestock and fiber; budgeting and record keeping; would collaborate with the Credit and Ex- tension Division of ASI, a farm development program to demonstrate to local farmers the benefits of applying pasture rotation, utilizing veterinarian services and introducing improved range and alpaca breed management. Also, he would coordinate the commercial farm's program with the work of the Experiment Station.

25. The chief of the Experiment Station would be a professional with research and livestock development experience and practical experience in experiment station administration and management. His principal responsibi'- ities would be to prepare annual investment and research work programs, estt-i. lish research priorities, coordinate and supervise the work of the technicaL staff of the Experiment Station. For the research program, he would maintain a close liaison with the Belen and Patacamaya Experiment Stations in Bolivia and with the La Raya Experiment Station in Peru.

December 8, 1977 49- ANNEX 1 Table 1

BOLIVIA

ULLA ULLA DEVELOPMENTPROJECT

List of Measuring Devices and Equipment

Irrigation System

Investment Costs Total Cost Scientific Instruments Units ($b)

Parshall flume 2 500 Rain gage 1 1,000 Thermometer 1 1,000 Evaporation pan 1 1,000 Anemometer 1 1,000 Current meter (set) 1 6,000 Lysimeter 1 5,000 Radiation gage 1 1,000 16,500

Equipment and Vehicles Jeep 1 110,000 Truck 1 180,000 Tools L/S 50,000 340,000

June 17, 1977 - 50 - ANNEX 1 Table 2

BOLIVIA

ULLA ULLA DEVELOPMENT PROJECT

Project Facilities

Investment Costs Unit Total No. of Cost Cost Units $b $b'000

Civil Works

Construction - square meters Guest house 700.6 4,025 2,820 Administration building 373.4 4,025 1,503 Laboratory building 569.5 4,025 2,292 Houses (3) 378.0 4,025 1,521 Generator shed 31.0 3,450 107 Workers' living quarters 573.0 2,300 1,318 Mechanic's repair shop 500.0 2,162 1,081 Warehouse 108.0 2,990 323 Warehouse office 12.0 4,025 48 Shearing facilities: fiber storage 162.0 4,025 652 Shearing facilities: holding corral 300.0 759 228 Shearing facilities: shearing area 450.0 2,990 1,345 Site works 1,500

Sub-total 14,738

Professional Fees on Civil Works 1,327

Total civil works 16,065

Agricultural Machinery

Wheel tractor - 80 hp 1 360,000 360 Tractor implements 421

Total agricultural machinery 781

Livestock 597

Equipment and Furniture

Laboratory equipment 1,600 Guest house equipment 400 Office equipment 125 Audio visual equipment 62 Communications equipment 140 Electric power system 906 Fuel storage tanks and pumps 220 Heating equipment 224 Domestic water supply 1,000 Waste disposal system 418 Farm development equipment 309 Livestock equipment 323 Furniture 705 Miscellaneous 25

Total equipment and furniture 6,457

Vehicles

4-wheel drive, 7 passenger 6 160,000 960 4-wheel drive pick-up 2 170,000 340 Carry-all, 4-wheel drive 2 200,000 400 Truck, 5 ton 1 300,000 300

Total vehicles 2,000

Sub-total & 25,900

Technical Assistance

Research and production 2,160 Fellowship 1,370

Total technical assistance 3,530

Total investment cost 29,430

Physical contingencies 2,943 (10% of irvestment cost) 32,373

June 15, 1977 BOLIVIA

JLLA ULLA DEVELOPMENTPROJECT

1/ Project Facilities

------Years------Total Total Foreign Foreign 1 2 3 4 5 Cost Cost Exchange Exchange -S------$b'000--_-_-_-_-_-_-_ - us$ e0ooo $ us$ Investment Costs

Civil works 2/ 8,253 7,812 - 16,065 803 28 221 Equipment: Laboratory equipment 1,600 - - - 1,600 80 90 72 Agricultural machinery 781 - - - - 781 39 90 35 Livestock equipment - 323 - - - 323 16 90 14 Vehicles 1,160 840 - - - 2,000 100 95 95 Furniture - 670 35 - - 705 35 40 14 Electric power system 906 - - - - 906 45 90 40 Water supply 1,000 - - - - 1,000 50 60 30 Waste disposal 418 - - - - 418 21 60 13 Guest house equipment 400 - - - - 400 20 60 12 Livestock (1,000) _ - 597 - - 597 30 65 20 Farm development 309 _ _ 309 15 45 7 Audio visual equipment - 62 - - - 62 3 90 3 Communication equipment 140 - - - - 140 7 90 6 Office equipment - 125 - - - 125 6 60 4 Fuel storage - 220 - - - 220 11 40 4 Heating system - 224 - - - 224 11 90 10 Miscellaneous - - 25 - - 25 2 - - 6,714 2,464 657 - - 9,835 492 77 379 Technical assistance Research and production specialists - 720 1,440 - - 2,160 108 200 108 Fellowships _ 685 685 - - 1,370 68 100 68

Sub-total - 1,405 2,125 - - 3,530 176 100 176

Irrigation system 646 - - - - 646 32 50 16

Total investment costs 15,613 11,681 2,782 - - 30,076 1,503 53 792

Operating Costs

Salaries 1,248 5,754 5,754 5,754 5,754 24,264 1,213 - - Research supplies - - 194 194 194 582 29 80 23 Fertilizer (pasture maintenance) - - 1,919 1,919 1,919 5,757 288 - 7 Vehicles - 152 264 264 264 944 47 15 6 Generator - 192 192 192 192 768 38 15 - Singles living quarters - '1,022 1,022 1,022 1,022 4,088 204 - 21 office supplies - 150 300 300 300 1,050 53 40 4 Library subscriptions - - 30 30 30 90 5 80 - Building and ground maintenance - - 20 50 50 120 6 - Irrigation maintenance 190 190 190 190 190 950 48 8 4

Total operating costs 1.438 7.460 9.885 9,915 9 . 915 38.613 1.931 3 65

Total baseline cost 17,051 19,141 12,667 9,915 9,915 68,689 3,434 25 857 Physical contingencies (10% of investment costs) 1.561 1,168 278 - - 3,007 150 53 79

Total 7 18.612 20,309 12.945 9.915 9.915 71.696 3.584 26 936

1/ Excluding commercial farm. 2/ Includes professional fees on civil work ($b 1,326,000).

June 14, 1977 - BOLIVIA

ULLA ULLA DEVELOPMENTPROJECT

Irrigation System

Unit ------Years------Total Total Foreign Foreign No. of Cost 1 2 3 4 5 Cost Cost Exchange Exchange Units -… ------b------'. us$° I. Investment Costs Canals and drains (earth work) - - 182,000 - - - - 182,000 9,100 - - Land grading - - 60,000 - - - - 60,000 3,000 50 1,500 Control structures and measuring devices - - 26,800 - _ _ _ 26,800 1,340 41 549 Vehicles and tools - - 340,000 - - - - 340,000 17,000 85 14,450 Engineering and overhead - - 37,300 _ 31 300 1,865 - Total investment costs 646,10 - - - 646,000 32,305 51 16,499 II. Operating Costs Maintenance - _ 190,000 190,000 190,000 190,000 190,000 950,000 47,500 8 3,800 Total operating costs 190,000 190,000 190,000 190,000 190,000 950,000 47,500 3,800 Total baseline cost 836,100 190,000 190,000 190Q00 190,000 1,596.100 79,805 25 20,299 Physical contingencies (107,on investment costs) 64,610 - - - 64,610 3,230 51 1,648 Total costs 710,710 1 190,000 03.,0 190.000 1,660,710 59-0

June 9, 1977

4-el ANNEX / - 53 - Table 5

BOLIVIA

ULLA ULLA DEVELOPMENT PROJECT

Commercial Farm - Investment Costs Project Unit ------Years------Total No. of Cost 1 2 3 Cost Units ------$b------

Livestock Purchase Alpaca Breeding males 100 900 - - 90,000 90,000 Breeding famales 1,000 750 - _ 750,000 750,000 Females 1-2 years 300 700 - - 210,000 210,000 Males 1-2 years 100 772 - - 77,200 77,200 Llama Breeding males 20 700 - - 14,000 14,000 Breeding females 250 800 - - 200,000 200,000 Females 1-2 years 75 784 - - 58,800 58,800 Males 1-2 years 25 800 - - 20,000 20,000 Sub-total - - 1,420,000 1,420,000

Fencing 1/ New - km 64 10,000 640,000 - - 640,000

Construction Corrals 4 7,500 30,000 - - 30,000

Livestock Equipment Hand shears 24 50 - - 1,200 1,200 Mechanical shear i 2,000 - - 14,000 14,000 Ear tags 10,000 2 - - 20,000 20,000 Scales for fiber 4 2,000 - - 8,000 8,000 Classifying tables 2 2,000 - - 4,000 4,000 Livestock scale 1 10,000 - - 10,000 10,000 Sub-total - - 57,200 57,200

Total 670,000 - 1,477,200 2,147,200

1/ Fencing: wire and posts ($b 8,915/km) labor ($b 1,085/km).

October 12, 1977 BOLIVIA

ULLA ULLA DEVELOPMENT PROJECT

Commercial Farm - Alpaca Herd

Herd Projections

------Year ------…------1 2 3 4 5 6 7 8 9 10

Herd Composition (end of year) Breeding males 140 100 100 100 100 110 110 110 110 110 Breeding females 1,170 1,076 1,172 1,200 1,250 1,300 1,300 1,300 1,300 1,300 Females 1-2 yrs. - 184 218 241 290 328 341 372 376 376 Males 1-2 yrs. - 184 217 240 290 327 340 371 375 375 Female calves 200 234 259 305 345 359 387 392 392 396 Male calves 200 234 258 305 345 358 387 391 391 396

Total animals 1,710 2,012 2,224 2,391 2,619 2,782 2,865 2,936 2,944 2,953

Total adult animals 1,310 1,544 1,707 1,781 1,930 2,065 2,091 2,153 2,161 2,161 Carrying capacity 1/ .80 .90 .90 1.0 1.0 1.1 1.1 1.1 1.1 1.1

Mortality Adults 120 137 141 155 119 131 140 115 118 118 Calves 100 117 129 152 151 158 136 127 127 118 U, Total 220 244 270 307 270 289 276 242 245 236

Sales Cull adult males 10 29 - - 10 10 10 10 10 10 Cull adult females - - - - 57 60 60 60 60 60 Breeding females 1-2 yrs. 26 - - 93 62 104 187 215 245 249 Breeding males 1-2 yrs. 34 - 164 195 213 250 294 312 342 346

Total 70 29 164 288 342 424 551 597 657 665

Purchases (beginning of the year) Breeding males 100 ------Breeding females 1,000 ------Females 1-2 yrs. 300 ------Males 1-2 yrs. 100 ------Female calves ------Male calves - - - -

Total 1,500 ------

Coefficients Fertility rate % 50 50 60 65 70 70 70 70 70 70 Mortality adults % 8 8 7 7 5 5 5 4 4 4 Mortality calves % 20 20 20 20 18 18 15 14 14 13

1/ Adult animals

October 11, 1977 o BOLIVIA

ULLA ULLA DEVELOPMENTPROJECT

Commercial Farm - Llama Herd

Herd Projections

------…Year…------1 2 3 4 5 6 7 8 9 10

Herd Composition (end of year) Breeding males 33 25 25 25 25 30 30 30 30 30 Breeding females 292 269 270 302 315 340 340 340 340 340 Females 1-2 yrs. - 46 55 60 67 83 85 97 99 99 Males 1-2 yrs. - 46 54 60 66 82 86 97 98 98 Female calves 50 59 65 70 87 90 101 103 103 104 Male calves 50 58 64 70 86 90 101 102 102 103

Total animals 425 503 533 587 646 715 743 769 772 774

Total adult animals 325 386 404 447 473 535 541 564 567 567 Carrying capacity 1/ 0.80 0.90 0.90 1.0 1.0 1.1 1.1 1.1 1.1 1.1

Mortality Adults 29 34 35 38 29 31 35 29 31 31 Calves 25 29 32 35 38 40 36 33 33 31

Total 54 63 67 73 67 71 71 62 64 62

Sales Cull adult males 3 5 - - - 3 3 3 3 3 Cull adult females - - - - - 15 15 16 16 16 Breeding females 1-2 yrs. - - 23 - 29 8 47 52 63 65 Breeding males 1-2 yrs. 6 - 41 48 56 54 74 79 89 90

Total 9 5 64 48 85 80 139 150 171 174

Purchases (beginning of year) Breeding males 20 ------Breeding females 250 ------Females 1-2 yrs. 75 ------Males 1-2 yrs. 25 ------Female calves ------Male calves ------

Total 370 ------

Coefficients Fertility rate % 50 50 60 65 70 70 70 70 70 70 Mortality adults % 8 8 7 7 5 5 5 4 4 4 Mortality calves % 20 20 20 20 18 18 15 14 14 13

1/ Adult animals

October 11, 1977

hctW BOLIVIA

U.LA ULLA DEVELOPMF.NTPROJECT

Commercial Farm - Alpaca/Llama

Production Projections

------Year ------1 2 3 4 5 6 7 8 9 10 Alpaca Fiber No. of animals sheared 1,490 1,768 1,954 2,054 2,349 2,493 2,589 2,694 2,699 2,717 Yield per animal (kg) 1.20 1.24 1.27 1.31 1.36 1.40 1.45 1.51 1.57 1.63 Total production (kg) 1,778 2,192 2,482 2,691 3,195 3,490 3,754 4,068 4,237 4,429 White 1,341 1,644 1,861 2,018 2,396 2,617 2,815 3,051 3,178 3,322 Color 447 548 621 673 799 873 939 1,017 1,059 1,107 Alpaca pelts Adult 120 137 141 155 119 131 140 115 118 118 Calves 100 117 129 152 151 158 136 127 127 118 Llama fiber No. of animals sheared 371 440 466 514 579 644 672 707 708 712 Yield per animal (kg) 1/ 1.00 1.03 1.06 1.09 1.12 1.17 1.20 1.26 1.31 1.36 Total production (kg) 371 453 494 560 648 753 806 891 927 968 Llama pelts Adult 29 34 35 38 29 31 35 29 31 31 Calves 25 29 32 35 38 40 36 33 33 31 Alpaca livestock Cull adult males 10 29 - - 10 10 10 10 10 10 Cull adult females - - - - 57 60 60 60 60 60 Breeding females, 1-2 yrs. 26 - - 93 62 104 187 215 245 249 Breeding males, 1-2 yrs. 34 - 164 195 213 250 294 312 342 346 Llama livestock Cull adult males 3 5 - - - 3 3 3 3 3 Cull adult females - - - - - 15 15 16 16 16 Breeding females, 1-2 yrs. - - 23 _ 29 8 47 52 63 65 Breeding males, 1-2 yrs. 6 _ 41 41 56 54 74 79 89 90

1/ Based on preliminary data obtained from unimproved llamas.

October 11, 1977

H 1

tD0M X BOLIVIA

ULLA ULLA DEVELOPMENT PROJECT

Commercial Farm - Alpaca/Llama (2,500 ha)

Sales and Operating Costs ($b)

------Years------_ 1 2 3 4 5 6 7 8 9 10 11 12

Sales

I. Livestock Alpaca: Cull adult males 3,600 10,440 - - 3,600 3,600 3,600 3,600 3,600 3,600 3,600 3,600 Cull adult females - - - - 17,100 18,000 18,000 18,000 18,000 18,000 18,000 18,000 Breeding females, 1-2 yrs. 13,000 - - 46,500 31,000 52,000 93,500 107,500 122,500 124,500 124,500 124,500 Breeding males, 1-2 yrs. 25,000 - 123,000 146,250 159,750 187,500 220,500 234,000 256,500 259,500 259,500 159,500

Llamas: Cull adult males 1,470 2,450 - - - 1,470 1,470 1,470 1,470 1,470 1,470 1,470 Cull adult females - - - - - 6,750 6,750 7,200 7,200 7,200 7,200 7,200 Breeding females, 1-2 yrs. - - 18,400 - 23,200 6,400 37,600 41,600 50,400 52,000 52,000 52,000 Breeding males, 1-2 yrs. 4,704 - 32,144 32.144 43,904 42,336 42,336 58.016 61,936 69,776 70,560 70,560

Sub-Total 48,274 12,890 173,544 224,894 278,554 318,056 439,436 475,306 529,446 536,830 536,830 536,830

2. Fiber Alpaca 146,616 179,744 203,508 220,654 261,982 286,164 307,812 333,576 347,442 363,186 363,186 363,186 Llama 8,533 10,419 11,362 12,880 .14,904 17,319 18,583 20,493 21,321 22,264 22,264 22,264

Sub-Total 155,149 190,163 214,870 233,534 276,886 303,483 326,350 354,069 368,763 385,450 385,450 385,450

3. Pelts Alpaca 7,700 8,975 9,795 11,430 11,005 11,580 10,240 9,405 9,435 8,850 8,850 8,850 Llama 1,290 1,500 1,630 1,780 1,810 1,910 1,790 1,610 1,351 1,271 1,271 1,271

Sub-Total 8,990 10,475 11,425 13,210 12,815 13,490 12,030 11,015 10,786 10,121 10,121 10,121

Total Sales 212,413 213,528 399,839 471,638 568,255 635,029 777,816 840,480 908,995 932,401 932,401 932,401

Operating Costs

Hired labor 252,000 252,000 252,000 252,000 252,000 252,000 252,000 252,000 252,000 252,000 252,000 252,000 Animal health 74,400 87,730 96,068 102,620 111,636 120,146 122,848 126,464 126,904 126,940 126,940 126,940 Land tam 3,115 3,115 3,115 3,115 3,115 3,115 3,115 3,115 3,155 3,155 3,155 3,115

Total Operating Costs 343,315 342,845 351,183 357,735 366,751 375,261 377,963 381,579 382.055 382,055 382,055 382,055

Investme-t Costs 2,147,200 ------Investment plus operating crsts 2,490,515 342,845 351,183 357,735 366,751 375,261 377,963 381,579 382,019 382,055 388,055 382,055 Total benefits 212,413 213,528 399,839 471,638 568,255 635,029 777,816 840,480 908,995 932,401 932,401 2,699,299 1/ Net benefits -2,278,102 -129,317 48,656 113,903 201,504 259,768 399,853 458,901 526,976 550,346 544,346 2,317,214

Financial Rate of Return: 10%

1/ Including herd value of Sb 1,766,868

Note: Unit prices: alpaca white fiber: Sb 90 per kg; alpaca colored fiber: Sb 58 per kg; llama fiber: $b 23 per kg; pelts: alpaca/llama adult Sb 10; alpaca young Sb 65; llama young: Sb 40; livestock: cull adult males (alpaca): Sb 360; cull adult females (alpaca): Sb 300; breeding females alpaca: $b 500; breeding males (alpaca): $b 750; cull adult males (llama): $b 490; cull adult females (llama): Sb 450; breeding females (llama): Sb 800; and breeding males (llama) Sb 784.

Sensitivity: Rate of Return Investment cost increased by: 10% = 97, 20%= 8% Operating costs increased by: 10%= 8% 20% = 7% Benefits decreased by: 10% 7% 20% 4%

October 12, 1977 BOLIVIA

IUINA ULLA DEVELOPMENTPROJECT

Co.mercial Farm - Alpaca/Llama (2,500 ha)

Cash Flaw Pr-leatians ($b)

------Project Year ------_ 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15

Cash Inflow

Sales - 212,413 231,528 399,839 471,638 568,255 635,029 777,816 840,480 908,995 932,401 932,401 932,401 932,401 Loan 1/ 670.000 - 1,820,515 ------

Total Ca-h Imflow 670,000 _ 2,032.928 213,528 399,839 471,638 568.255 635.029 777,816 840,480 908,995 932,401 932,401 932,401 932,401

Cosh Ootflow

IaVestment Cost. 670,000 - 1,477,200 ------Operating Costa - 343,315 342,845 351,183 357,735 366.751 375,261 377,963 381.579 382,019 382,055 382,055 382,055 382,055 ,,

Total Cash Outflow 67,0,00 _ 1.820.515 342.845 351.183 3957,735 384.751 3753261 377,963 381,579 382.019 382,055 392.055 382.055 3820055

Cash balance before debt service _ _ 212,413 -129,317 48,656 113,903 201,504 259,768 399,853 458,901 526,976 550,346 550,346 550,346 550,346

Debt S-rvic- 2/

Amortization - - 20,000 50,000 100,000 150,000 300,000 350,000 ,50,000 400,000 400,000 370,515

Cash balance after debt servic- - 2212,413 -129.317 28,656 63,903 101.504 109.768 99,853 108,901 176.976 150,346 150,346 179.831 550,346

1/ For Inve.tment co-ts and first year of operating coats. 7/ nt-erest-free loam - tem years' maotity including two yern' grace from the start of 1perations.

Octoher 12, 1977 - 59 - ANNEX 1 Appendix 1

BOLIVIA

ULLA ULLA DEVELOPMENT PROJECT

Consultants' Terms of Reference

Animal Production

1. The specialist in animal production should have a background in animal or veterinary science, with experience in alpaca and llama production and management, and, at least, five years' experience in laboratory and field research in animal reproduction, diseases and parasites, and feeds and feeding. His experience should be in Latin America, particularly in the Altiplano regions of the Andes, and at least part of it with small indigenous farmers. He should be able to read, write and speak Spanish. The principal duties of the specialist would be to assist the chief of the Experiment Station in:

(a) designing, executing and evaluating laboratory and field experiments to be carried out by research personnel;

(b) designing and evaluating improved herd management practices to be conducted by research personnel and implemented by extension staff;

(c) adjusting herd management practices to suit different alpaca and llama production situations in different localities and environments;

(d) determining priorities for long- and short-term research programs;

(e) establishing and implementing training programs for the livestock research technicians, extension agents and project beneficiaries;

(f) evaluating the effectiveness of training programs;

(g) designing, executing and evaluating field days and demonstrations to be conducted by extension personnel; and

(h) preparing standards for selection of animals for quality and quantity of production of fiber and meat.

Pastures and Forages

2. The expert should have training in agriculture, with a specialization in pastures and forages. He should have at least five years' experience in range and pasture management, part of which should be in Latin America, particularly in the highland areas of the Andean countries. He should be able - 60 - ANNEX 1 Appendix 1

to read, write, and speak Spanish. His principal duties would be to assist the chief of the Experiment Station and the staff in charge of pasture research and extension in:

(a) making an inventory of the native plants found in the range land of the (Altiplano) project area;

(b) determining priorities for long- and short-term research programs in range and pasture management;

(d) designing and implementing training programs for technicians, extension agents and project beneficiaries;

(e) designing research programs aimed at the introduction of grass and legume varieties proven to be successful in other areas of the Altiplano; and

(f) developing a grass and legume seed production project aimed at providing the project beneficiaries with seed of native and introduced plant species.

June 21, 1977 - 61 - ANNEX 2

BOLIVIA

ULLA ULLA DEVELOPMENT PROJECT

Livestock Development (Alpaca/Llama)

A. Project Area

1. The project area is located in the Department of La Paz, northeast of the Lake Titicaca in the upper part of the Suches River drainage basin at an average altitude of between 4,000 and 5,000 meters. The total project area is approximately 300,000 ha, with its lowest elevation of 4,000 meters at its southern border. The ecological area extends north and northeast of Lake Titicaca along the Peruvian border and is referred to as the "Cojata- Plains." It constitutes the main alpaca breeding grounds.

2. About 10% of the project area consists of rocky slopes and water surfaces and the rest is usable land; there are no trees or shrubs. The most northern part is made up of rolling stony foothills gradually giving way to gentle sloping grassy plains; the main habitat of alpacas as well as the vicunas is on these plains at altitudes of 4,000 meters and higher.

Soils

3. A preliminary survey conducted by the Ministry of Agriculture in 1975 provided the following description of the soils found in the area:

(a) shallow gravely soils with a surface layer varying from 4 to 15 centimeters in depth; there were only three ex- ceptions where there was more than 15 cm of top soil -- areas between the river Colollo and Nuber and another area to the south of the Canuma river;

(b) low moraine soils highly variable in slope, soil type, and amount of available water;

(c) large moraine soils found in large areas where there are no closed basins; the top surface is deep and subject to erosion;

(d) mineral soils are found in the valley bottom zones which are the most productive areas. These zones have deep, fine tex- tured soils, with only limited areas where stream action has deposited gravel formations. Water relations range from dry areas of extremely heavy clay where water penetration is too poor to permit adequate water supply to wet areas of inadequate drainage. The major limitation of these zones is the extremes of temperature resulting from their location at the bottom of the valley; and - 62 -

ANNEX 2

(e) organic valley bottom soils. These soils are pure organic matter or bog soils. They are mixed with mineral soils usually wet and poorly drained and probably have more potential for winter use because of water availability.

Land Tenure and Social Features

4. Up to 1900, land was owned either by individuals or by communities. However, while the former were given legal titles, the latter had only a tacit admission by the authorities that the land belonged to them because of their status as "comunidad de origen" or "originarios." In addition, there are the "agregados" who are far-removed relatives or even friends who at one time or another were asked to help work the land and in compensation were allowed to have a part of it to grow their own crops.

5. In 1900, the Government decided that the lack of titles on the part of originarios and agregados was causing complicated legal problems related to property rights. A law was therefore proclaimed by which all the land in possession of the communities reverted to the state and was to be returned to the respective communities after issuing legal titles; however, this exercise has not been completed yet.

6. In August 1953, the Agrarian Reform Law was enacted. It affected all farm land so far owned legally by private individuals. The purpose was to redistribute the land on a more equal basis. The beneficiaries of the distribution were the campesinos who had been living and working as laborers in the affected farm. The former owner was also assigned a portion of land which usually corresponded to the land where the farmhouse was located. The land thus distributed was titled and appraised for tax purpose.

7. A very important feature of the law is the "proindiviso" basis on which the land was distributed; this means that the land cannot be sold or transferred to individuals that are not members of the community. By the same token, individual property owners cannot sell their land without prior authorization of the Agrarian Reform Institute.

Taxation

8. Taxes are paid by the families of the communities on a pro-rated calculation of the assessed value of the land made by the Military Geographical Institute. The collecting agency is the Prefectura Departamental and the tax is called Contribucion Territorial. Communities which still do not have land title pay taxes on a per-family basis as follows:

(a) Originarios: $b 10.45 (US$0.52) per family per year; and

(b) Agregados: $b 5.83 (US$0.29) per family per year.

The above amounts include 10% for school construction and 25% as real estate tax. Additionally, each community must pay $b 15 (US$0.75) for the tax form. - 63 -

ANNEX 2

9. In many cases under either system of tenure, there are individual crop lands in the very small areas where agriculture is possible, lands that are semi-communal and lands which belong fully to the community and are used for pasturing animals.

Climate

10. The climate is generally cool, with marked differences between day and night temperatures. The average annual temperature is approximately 80 centigrade, varying from an average winter night temperature of 60 below the freezing point to 28 above zero centigrade during daytime in the summer. Night frosts can be expected through the year. Average rainfall is estimated between 400 and 800 mm annually, most of it occurring from November through March.

Pastures

11. The most efficient use of the Altiplano, in both a technological and a social framework, is to utilize the range land for livestock development. The project area and other parts of the Altiplano have potential grazing areas, due to high light intensity and relatively favorable climatic conditions for the native grasses and a few introduced species. The cool temperatures increase the economy of water use by the plants, which develop wider leaves and grow rapidly, providing an excellent forage base.

12. There is evidence that the population's economic base has been narrowed through progressive overstocking, with the more nutritious and pala- table grasses having largely disappeared through a process of depletion that has exceeded the natural regenerative capacity of the land. Deterioration is also evidenced by the high winter death losses of domestic animals. Carrying capacity has been reduced to less than one alpaca per ha, only a fraction of its potential, although a delicate balance appears to have been achieved, supporting a constant number of animals on what is left of the ranges. Under improved range management practices, the carrying capacity could be increased to 1:1 adult animals per ha and possibly higher.

13. The potential improvement of forage production on native rangelands in the Ulla Ulla valley and the hilly areas in the southeast of the project area is of the magnitude of three times up to more than six times current production, based partly on actual measurements in the Ulla Ulla valley and partly on data collected in comparable range ecotypes and altitudes, princi- pally in the province of Pacajes. The existence of some of the same species in both areas indicates similar ecological conditions:

Grasses Shrubs

Festuca dolichophylla Lachemilla pinnata Pos. sp. Lachemilla erodifolia Stipa ichu Baccharis sp. Stipa mucronata Ephedra sp. - 64 -

ANNEX 2

B. Livestock in the Project Area

14. Alpacas and llamas have been the mainstay of agricultural activity in the Ulla Ulla area since the more usual types of farm animals -- chickens, sheep, and dairy and beef cattle -- cannot be kept in this harsh environment. There are an estimated 150,000 alpacas, approximately 25,000 llamas, 12,000 sheep and in addition, there are a large number of pigs which contribute to the deterioration of the pastures by digging the soil and eating the roots. A few horses are kept for riding, but their life span is rather short since they are affected by the altitude and they usually die of heart attacks.

15. There is almost no selection practiced in the area; the ratio of males to females is in the order of 50 to 100. Animals are generally kept until they die from natural causes, but low fertility (35%) and high mortality (20%) keep animal numbers down. On the average, not more than 3% of the total herd is available annually for meat production. With improved management practices, this could be increased to 20%. Results at La Raya Experiment in Peru indicate that substantial progress can be made in improving the herd quality by breeding the 10 to 20% best males to the 10 to 20% best females.

16. Alpacas are sheared every two years in a haphazard manner. Tools used for shearing are primitive and consist of knives, tin can lids, and even broken glass. Also, clusters of fibers are left on the animals as ownership markings thus reducing animal fiber yield. No effort is made to separate the fiber according to fineness, which varies from one part of the body to another, and all of it is dropped on the ground where it gets dirty and mixed up. Since the original fleece form is not then recognizable, it cannot be sorted and classified, which limits the end use to products that use only the coarsest type.

17. Present yield per alpaca per year is, on the average, 0.8 kilos, while in Peru under improved herd management practices developed over the last 20 years, the average annual fiber yield is 1.34 kg. Practices such as yearly shearing, the use of shearing scissors and the use of plastic tags for identification would be easily introduced with a fast rate of assimilation and at low cost for the farmer. Such improved techniques would make an immediate impact on production and productivity. Skin diseases in the herds also have a direct impact on fiber yield (para 19). Spraying the animals four times a year has just about eliminated this disease in Peru. The first two spraying are done right after shearing in October and the other two in April of the following year. The interval between each of the two sprayings is 14 days. The spray-type bath is recommended for alpacas over the more traditional dip- vat type used with other types of livestock; the main reason is to avoid a possible ear infection caused when the heads of the animals are dipped in the chemical solution. It is also a faster system and can handle a larger number of animals in a shorter time and with less stress for the animals.

18. Presently in Ulla Ulla, the herds are made up of about 25% white and 75% various other colored animals. The price for white alpaca fiber, however, is almost twice that for other colors. Therefore, farmers would be encouraged - 65 - ANNEX 2 to raise more white alpacas. Crossings between white and color animals would not be encouraged because the hereditary mechanism involved in the transmission of color characteristic has not been discovered yet. The only known fact is that white color would seem to be dominant.

Diseases

19. Animal health problems constitute a serious constraint in the development of the alpaca herds. Veterinary services are not presently available in the project area and no health management practices are being used. Animals subjected to skin diseases are cured by applying burned crankcase oil on the infected parts where no hair will ever grow back. This method, however, does not eradicate the disease because the contamination centers are in the animals sleeping areas.

20. Enterotoxemia or bacillar diarrhea and internal parasites are the main cause of mortality of young animals, while necrobacilosis, estomatitis, metritis, otitis and fasciola hepatica, among others, are prevalent in the adult animal population. The technology required for effective disease control and prevention is available and the cost is reasonable. Additionally, the farmers are aware of the nature of the problem, the probable cost, and are willing to learn and apply health practices.

Grazing Practices

21. Since the pasture land is for the larger part held by communities, each village has its own grazing rights and each family organization has its own assigned grazing areas within the communal grazing ground. However, the grazing rights are not enforced, and larger herds cannot be confined to a particular assigned area because there is no fencing of any kind. This has led to an unrestrictive type of grazing system that has almost destroyed the natural plant cover and animals appear to be stunted and underfed.

22. To attain any increases in production it would be necessary to introduce basic and straightforward range management practices such as range pittin- i/ to improve the rain water utilization in the root zone of the forage plant and to increase the infiltration and storage of natural precipita- tion, this would prolong the available green forage after the rainy season. The cost per hectare for range pitting under Bolivian conditions is estimated at 15 to 20 pesos per year (US$0.75 to US$1.00). Pasture rotation would also be strongly advocated in order to give plants time to recuperate their growth for forage production and for seed production. For pasture rotation, fencing would be necessary, and, since the grazing land is communally owned, agreements would be reached with the various families so that the cost would be shared. This should not be difficult to do since commiunitiesalready have a very well defined organizational system whiclh is communally oriented. They are presently aware of the situation but require the necessary guidance and technical assistance.

1/ The use of a special type of discs or chain-type tool to make narrow shallow grooves in the top soil. - 66 -

ANNEX 2

Livestock Ownership

23. The inhabitants of the altiplano have a historical attachment to animal ownership. Family-owned herds of alpacas in the area of the proposed project are reported to range from 50 to 400 animals, with a distribution that is skewed to the lower numbers. The average number of animals per family is estimated at 100. Alpacas are most frequently combined into herds of 150 to 400 head for grazing purposes.

24. Llamas are found in few discrete herds and in some mixed herds with alpacas. About 3% of the animals are crossbred between alpacas and llamas. It is estimated that 10% of the families own both llamas and alpacas. The vicuna are distributed widely over the ranges in small natural mating bands. Sheep are owned by an estimated 5% of the families located in the lower valleys of the area, and, hence, do not compete with alpacas.

C. Livestock Development under the Project

General Description

25. The project would consolidate an agricultural experiment station, a commercial farm for demonstration purposes and the provision of technical assistance (Annex 1); supervised credit for on-farm investments and incremental working capital would be provided through the National Institute for Development of Wool for a period of five years.

26., Sub-loans for livestock and range development would be subject to approval of the investment plans prepared with the technical assistance of the extension staff of the Project Unit and would be for a period of up to 10 years, with a grace period of up to four years. It is estimated that up to 1,575 families would be eligible for subloans.

27. When considering applications for sub-loans, special attention would be given to forage availability, the need to introduce new animal husbandry and range management methods to substitute or improve the traditional practices, the availability of technical assistance and assurance of marketing channels for the proposed fiber and pelt production.

28. Sub-loans would be made to improve the traditional shearing techniques and the fiber handling and classifying practices, and also for construction of facilities for implementing a sound animal health program including improved animal husbandry and range management practices.

Farm Models

29. In view of the communal organization of the target population, the proposed development models are simple and compatible with the traditional pattern of farm activities and forms of cooperation. The four models (Tables 1 through 21), are based on existing farming systems and farming practices, which - 67 - ANNEX 2 would be upgraded according to available technology and the rate at which farmers can adapt it. The models would serve as a guide to extension personnel in helping farmers prepare investment plans for sub-loan applications.

30. The first model is representative of a typical small herd of 100 alpacas owned by one or two families. The herd is small enough to be herded easily by one person. No fences would be required, pasture rotation would be accomplished by marking the pasturing areas with movable landmarks. The only investment item would be hand shears. Operating costs, mainly for animal health, would need to be financed for only the first two years. The culling of males is kept even for the first four years in order to maintain the integ- rity of the herd and the production of fiber. Annual total net income per farmer would reach $b 16,500 (US$825) by year 12. Details of investment costs on herd and production projections, earnings and cost estimates, and projected cash flow are presented in Tables 1 through 5.

31. The 400-alpaca model is representative of a herd owned by five families. The greater portion of the investments would be made in year 1 for holding corral, shearing platform, hand shears, scale, tools, shearing table, identifying tags, and fences; male replacements would be purchased in years 9 and 10. Investment would also include operating costs for the first year. Annual total net income per farmer would reach $b 19,940 (US$997) by year 12. Details of investment costs, herd and production projections, earnings and cost estimates, and projected cash flow are presented in Tables 6 through 10.

32. The 1,000-alpaca model is representative of a herd-owned by 12 families. The greater portion of the investments would be made during the first two years and would include fencing, holding corral, cement slab for shearing, medical first-aid and equipment, fiber classifying tables, tools and identifying tags. Investment would also include operating costs for year 1. The sales of livestock would increase each year as a result of the increase in the fertility rate and decrease in the mortality rates. The production value triples by year 5 while the net benefit, which includes the family labor, doubles by year 5. All the labor required during the year would be provided by the member families. Annual total cost income per farmer would reach $b 20,770 (US$1,039) by year 12. Details of investment costs, herd and production projections, earnings and cost estimates, and projected cash flow are presented in Tables 11 through 15.

33. The 5,000-alpaca model is representative of an operation managed by 55 families. The size would warrant investing in a mechanical shearing equipment and also in spray-bath facilities. Additional major investments would include holding and shearing corrals, fencing and a warehouse for fiber storage, with a presser to make bales of fiber. Minor investment items would include weighing scales, tables for classifying fiber, medical kit, hoof trimmers and neck identifying tags. Male replacements would be purchased in years 10 and 11. Annual total net income per farmer would reach $b 22,280 (US$1,114) by year 12. Details of investment costs, herd and production projections, earnings and cost estimates, and projected cash flow are presented in Tables 16 through 20. - 68 -

ANNEX 2

34. In all models, it is assumed that shearing would be done annually and that animal husbandry practices such as breeding, calving, and parasite control would be carried out according to the schedule shown in Chart 1.

35. Technical assistance and veterinary services (Annex 1), except medicines, would be considered part of the training and transfer of technology and thus free.

36. Only the 5,000-herd model, because of its size, would have its own spray-bath facilities. For the other models, three spray-bath units would be built and strategically located for use by the various family groups. The investment cost would be assumed by the Agricultural and Social Infrastructure Division; and operating costs would be financed by user-charges of $b 2 (US$0.10) per year per animal. The work would be supervised by the extension agents from the Project Unit. It is estimated that the investment would pay for itself in four years, at which time the facilities would be transferred to the communities.

37. The income of each family group would come from the sale of fiber and livestock, and pelts from the animals that die. The main operating costs would be mainly in relation to animal health, fences for rotational grazing, and land taxes. Labor in all instances is considered family labor and has been costed as such in the cash flows.

38. The proposed project would yield substantial benefits to the farmers participating in the project. Rates of return and sensitivity analysis are shown in Table 21. A summary of producer benefits as illustrated in the farm models follows:

Model 1 Model 2 Model 3 Model 4 (100 animals) (400 animals) (1,000 animals) (5,000 animals)

No. of families 1-2 5 12 55

Investment cost per family (US$) 10 669 625 655

Net income per family /1 (US$)

Present 73 93 98 106 Full development /2 825 997 1,038 1,114

Financial rate of return (%) above 100 40 35 34

/1 Includes remuneration of family labor. /2 Full development would be reached by year 12. - 69 - ANNEX 2

The financial rates of return of the livestock models are high. The high rates may be attributed to the improvement in shearing (annually instead of every second year), improved marketing and extension services and revenues from animal sales.

39. In addition to the impact that the proposed project would have in the project area, benefits would also accrue in other production zones of the Altiplano through the spin-off effects and technical assistance program. Table 22 summarizes the overall production impact.

40. The phasing of the lending program for livestock development is shown in Table 23.

December 8, 1977 BOLIVIA

ULLA ULLA DEVELOPMENT PROJECT

Farm Model No. 1 - 100-Alpaca Herd (1 or 2 families)

Investment Costs ($b)

------Years ------Unit Unit 1 2 3 4 5 6-12 Unit Cost 0 per Farm Cost Unit Cost Unit Cost Unit Cost Unit Cost Unit Cost

Equipment

2 100 - - Hand shears 4 50 2 100 ------100 Total 100

>| September 19, 1977

tI-.K BOLIVIA

ULLA ULLA DEVELOPMENT PROJECT

Eprm Mndpl No. 1 - 100 Alpaca Herd (I or 2 families)

Herd Projection

With Project Without ------Years ------Project 1 2 3 4 5 .6 7 8 9 10 11 12

Herd Composition (at end of Year) Breeding males 40 41 30 22 17 13 12 10 8 6 6 6 6 Breeding females 40 42 42 46 51 56 64 65 65 65 65 65 65 Females 1-2 5 4 6 9 9 12 14 15 18 19 19 19 19 Males 1-2 5 5 7 7 10 11 15 14 18 19 19 19 19 Female calves 6 7 9 10 12 15 16 19 20 20 20 20 20 Male calves 6 7 8 10 12 15 16 19 20 20 20 20 20

Total animals 102 106 102 104 111 122 137 142 149 149 149 149 149

Total adult animals 90 92 85 84 87 92 105 104 109 109 109 109 109 Carrying capacity .80 .80 .80 .90 .90 1.0 1.0 1.1 1.1 1.1 1.1 1.1 1.1

Mortality Adults 8 7 7 7 6 6 7 6 6 6 6 6 Calves 4 4 5 6 6 7 7 6 6 6 6 6

Total _ 12 11 12 13 12 13 14 12 12 12 12 12

Sales Cull adult males - - 12 12 10 10 6 5 5 3 3 3 3 Cull adult females ------10 10 10 10 10 10 Breeding females 1-2 ------1 5 5 6 5 Breeding males 1-2 ------5 10 11 15 16 15 16

Total - - 12 12 10 10 11 25 27 33 34 34 34

Purchases ------

Coefficients Fertility % 35 45 50 60 65 70 70 70 70 70 70 70 70 Mortality adults % 10 8 7 7 7 5 5 5 4 4 4 4 4 Mortality calves % 22 20 20 20 20 18 18 15 14 14 13 13 13 X

October 5, 1977 BOLIVIA

ULLA ULLA DEVELOPMENT PROJECT

Farm Model No. 1 - 100 Alpaca Herd (1 or 2 families)

Production Projection ($b) With Project Without ------Years ------Project 1 2 3 4 5 6 7 8 9 10 11 12

Fiber No. of animals sheared 45 94 91 92 98 110 124 128 137 137 137 137 137 Yield per animal (kg) 0.80 0.80 0.80 0.824 0.849 0.878 0.909 0.941 0.974 1.02 1.06 1.10 1.14

Total production (kg) 36 75 73 76 83 96 113 120 133 140 145 151 156

White (kg) 1/ 9 19 18 19 21 24 40 42 47 63 65 68 70 Color (kg) 27 56 55 57 62 72 73 78 86 77 80 83 86

Pelts Adults 10 8 7 7 7 6 6 7 6 6 6 6 6 Calves 3 4 4 5 6 6 7 7 6 6 6 6 6

Livestock Cull adult males - - 12 12 10 10 6 5 5 3 3 3 3 Cull adult females ------10 10 10 10 10 10 Breeding females 1-2 yrs. - - - - 1 5 5 6 5 Breeding males 1-2 yrs. - - _ _ _ _ 5 10 11 15 16 15 16

1/ Proportion of white to colored is 25% from years 0 to 5 35% from years 6 to 8 45% from years 9 to 12 v

October 5, 1977 BOLIVIA

ULLA ULLA DEVELOPMENT PROJECT

Farm Model No. 1 - 100 Alpaca Herd (1 or 2 families)

Production Value and Operating Costs ($b)

With Project Without ------Years ------Project 1 2 3 4 5 6 7 8 9 10 11 12

Production Value

Livestock Cull adult males - - 4,320 4,320 3,600 3,600 2,160 1,800 1,800 1,080 1,080 1,080 1,080 Cull adult females ------3,000 3,000 3,000 3,000 3,000 Breeding females, 1-2 yrs. - - _ -_ _ 3,000 500 2,500 2,500 3,000 2,500 Breeding males, 1-2 yrs. ------3,750 7.500 8,250 11,250 12,000 11,250 12 000

Sub-Total - - 4,320 4,320 3,600 3,600 5,910 12,300 13,550 17,830 18,580 18,330 18,580

Fiber Sub-Total 2,376 4,958 4,810 5,016 5,486 6,336 7,834 8,304 9,218 10,136 10,490 10,934 11,288

Pelts Sub-Total 295 340 330 395 460 450 515 525 450 450 450 450 450

Total Production Value 2,081 5,298 9,460 9,731 9,546 10,386 14,259 21,129 23,218 28,416 29,520 29,714 30,318

Operating Costs

Permanent family labor 10,500 10,500 10,500 10,500 10,500 10,500 10,500 10,500 10,500 10,500 10,500 10,500 10,500 Occasional family labor - 210 210 210 210 210 210 210 210 210 210 210 210 Animal health - 3,932 3,706 3,720 3,912 4,220 4,776 4,884 5,080 5,080 5,080 5,080 5,080 Land taxes 139 139 139 139 139 139 139 139 139 139 139 139 139

Total Operating Costs 10,639 14,781 14,555 14,569 14,761 15,069 15,625 15,733 15,929 15,929 15,929 15,929 15,929

Investment - 100 - - - 100 ------Investment plus Operating Cost 10,639 14,871 14,555 14,569 14,761 15,169 15,625 15,733 15,929 15,929 15,929 15,929 15,929 Total benefits 2/ 2,081 5,298 9,460 9,731 9,546 10,386 14,259 21,129 23,218 28,416 29,520 29,714 47,868 Net benefit -8,558 -9,573 -5,095 -4,838 -5,215 -4,783 -1,366 5,396 7,289 12,487 13,591 13,785 31,939 Incremental net benefit - -1,015 3,463 3,720 3,343 3,775 7,192 13,954 15,847 21,045 22,149 22,343 40,497

Financial rate of return above 100%

1/ 6 man-days per year. Family labor valued at $35 per day. 2/ Including Incremental herd value of $B 17,550.

Note: Unit prices: white fiber = $b 90 per kg; colored fiber = $b 58 per kg; pelts: young = $b 65; adult = $b 10; livestock: cull adult males = $b 360; cull adult females = $b 300; breeding females = $b 500; breeding males = $b 750.

October 5, 1977 BOLIVIA

ULLA ULLA DEVELOPMENT PROJECT

Farm Model No. 1 - 100-Alpaca Herd (1 or 2 families)

Cash Flow Projection ($b)

With Project Without ------Years ------Project 1 2 3 4 5 6 7 8 9 10 11 12

Cash Inflow

Sales Livestock - - 4,320 4,320 3,600 3,600 5,910 12,300 13,550 17,830 18,580 18,330 18,580 Fiber 1/ 2,028 4,610 4,462 4,668 5,138 5,988 7,486 7,956 8,870 9,788 10,142 10,586 10,940 Pelts 295 340 330 395 460 450 515 525 450 450 450 450 450 Sub-total 2,323 4,950 9,112 9,383 9,198 10,038 13,911 20,781 22,870 28,068 29,172 29,366 29,970 Long-term loan 2/ - 4,032 ------_ _

Total Cash Inflow 2,323 8,982 9,112 9,383 9,198 10,038 13,911 20,781 22,870 28,068 29,172 29,366 29,970

Cash Outflow 3/

Cash Investment Cost - 100 - - - 100 ------Cash Operating Costs 139 4,071 3,8 4 5 3,859 4,051 4,359 4,915 5,023 5,219 5,219 5219 5,219 5,219

Total Cash Outflow 139 4,171 3,845 3,859 4,051 4,459 4,915 5,023 5,219 5,219 5,219 5,219 5,219

Cash Balance before debt service 2,184 4,811 5,267 5,524 5,147 5,579 8,996 15,758 17,651 22,849 23,953 24,147 24,751

Debt Service Amortization - - - - 399 447 501 561 628 706 790 - - Interest, 12% p.a. - 242 484 484 484 436 382 322 255 179 94 -

Total Debt Service _ 242 484 484 883 883 883 883 883 884 884 -

Cash Balance after debt service 2, 184 4,569 4,783 5,040 4,264 4,696 8,113 14,875 16,768 21,965 23,069 24,147 24,751

1/ Production value, excluding domestic use (3 kg of colored fiber per family per year, or $b 348 for two families). 2/ For hand shears and first year veterinary supplies. > 3/ Excluding the value of family labor. 4/ Ten years' maturity, including three years' grace.

October 5, 1977 - 75 -

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~~ULLA ULLA DEVELOPMENT PROJECT~~

~~Farm Model No. 2 - 400 Alpaca Herd (5 families)~~

~~Herd Projection~~

~~With Project Without ------Years ------Project 1 2 3 4 5 6 7 8 9 10 11 12~~

Herd Composition Breeding males 160 164 120 88 68 52 48 40 32 24 24 24 24 Breeding females 160 168 168 184 204 224 256 260 260 260 260 260 260 Females 1-2 yrs. 20 16 24 36 36 48 56 60 72 76. 76 76 76 Males 1-2 yrs. 20 20 28 28 40 44 60 56 72 76 76 76 76 Female calves 24 28 36 40 48 60 64 76 80 80 80 80 80 Male calves 24 28 32 40 48 60 64 76 80 80 80 80 80

~~Total animals 408 424 408 416 444 488 548 568 596 596 596 596 596~~

~~Total adult animals 360 368 340 336 348 368 420 420 416 436 436 436 436 Carrying capacity .80 .80 .80 .90 .90 1.0 1.0 1.1 1.1 1.1 1.1 1.1 1.1~~

~~Mortality~~

~~Adults 32 28 28 28 24 24 28 24 24 24 24 24 0 Calves 16 16 20 24 24 28 28 24 24 24 24 24~~

~~Total 48 44 48 52 48 52 56 48 48 48 48 48~~

~~Sales Cull adult males - - 48 48 40 40 24 20 20 22 22 12 12 Cull adult females ------40 40 40 40 40 40 Breeding females 1-2 - - - - - 4 20 20 24 20 Breeding males 1-2 ------20 40 44 60 64 60 64~~

~~Total - - 48 48 40 40 44 100 108 142 146 136 136~~

~~Purchases breeding males ------10 10 - -~~

~~Coefficients Fertility rate % 35 45 50 60 60 65 70 70 70 70 70 70 70 Mortality adults % 10 8 7 7 7 5 5 5 4 4 4 4 4 Mortality calves % 22 20 20 20 20 18 18 15 14 14 13 13 13~~

~~October 5, 1977 13 BOLIVIA~~

~~ULLA ULLA DEVELOPMENT PROJECT~~

~~Farm Model No. 2 - 400 Alpaca Herd (5 families)~~

~~Production Projection ($b)~~

~~With Project Without ------Years ------Project 1 2 3 4 5 6 7 8 9 10 11 12~~

~~Fiber No. of animals sheared 180 376 364 368 392 440 496 512 548 548 548 548 548 Yield per animal (kg) 0.80 0.80 0.80 0.824 0.849 0.878 0.909 0.941 0.974 1.02 1.06 1.10 1.14~~

~~Total Production (kg) 144 301 291 303 333 386 451 482 534 559 581 603 625~~

~~White (kg) 1/ 36 75 73 76 83 96 158 169 187 252 261 271 281 Color (kg) 108 226 218 227 250 290 293 313 347 307 320 332 344~~

~~Pelts Adults 41 32 28 28 28 24 24 28 24 24 24 24 24~~

~~Calves 12 16 16 20 24 24 28 28 24 24 24 24 24 -~~

Livestock Cull adult males - - 48 48 40 40 24 20 20 22 22 12 12 Cull adult females ------40 40 40 40 40 40 Breeding females 1-2 yrs. - - - - 4 20 20 24 20 Breeding males 1-2 yrs. - - - _ 20 40 44 60 64 60 64

~~1/ Proportion of white to colored is: 25% from year' 0 to 5 35% from years 6 to 8 45% from years 9 to 12~~

~~October 5, 1977~~

~~co. r BOLIVIA~~

~~ULLA ULLA DEVELOPMENTPROJECT~~

~~Farm Model No. 2 - 400 Alpaca Herd (5 families)~~

~~Production Value and Operating Costs ($1,)~~

~~With Project Without ------Years ------Project 1 2 3 4 5 6 7 8 9 10 11 12~~

~~PRODUCTION VALUE~~

1. Livestock 1/ Cull adult males - - 17,280 17,280 14,400 14,400 8,640 7,200 7,200 7,920 7,920 4,320 4,320 Cull adult females ------12,000 12,000 12,000 12,000 12,000 12,000 Breeding females 1-2 yrs. ------2,000 10,000 10,000 12,000 10,000 Breeding males 1-2 yrs. ------15,000 30,000 33,000 45,000 48,000 45,000 48,000

~~Sub-Total - - 17,280 17,280 14,400 14,400 23,640 49,200 54,200 74,920 77,920 73,320 74,320~~

~~2. Fiber 2/ Sub-Total 9,504 19,858 19,214 20,006 21,970 25,460 31,214 33,364 36,956 40,486 42,050 43,646 45,242~~

~~3. Pelts 3/ Sub-Total 1,190 1,360 1,320 1,580 1,840 1,800 2,060 2,100 1,800 1,800 1,800 1,800 1,800~~

~~Total Production Value 10,694 21,218 37,814 38,866 38,210 41,660 56,914 84,664 92,956 117,206 121,770 118,766 121,362~~

OPERATING COSTS Permanent family labor (3 herders) 25,550 25,550 25,550 25,550 25,550 25,550 25,550 25,550 25,550 25,550 25,550 25,550 25,550 m Occasional family labor 4/ - 875 875 875 875 875 875 875 875 875 875 875 875 Animal health - 15,728 14,824 14,880 15,648 16,880 19,104 19,376 20,320 20,320 20,320 20,320 20,320 Land tax 511 511 511 511 511 511 511 511 511 511 511 511 511

~~Total Operating Costs 26,061 42,664 41,760 41,816 42,584 43,816 46,040 46,312 47,256 47,256 47,256 47,256 47,256~~

Investment Costs - 13,090 50,000 1,500 - 2,280 - - - 9,000 9,000 - - Investment plus Operating Costs 26,061 55,754 91,760 43,316 42,584 46,096 46,040 46,312 47,256 56,256 56,256 47,256 47,256 Total Benefits 10,694 21,218 37,814 38,866 38,210 41,660 56,914 84,664 92,956 117,206 121,770 118,766 191,562 Met Benefits -15,367 -34,536 -53,946 -4,450 -4,374 -4,436 10,874 38,352 45,700 60,950 65,514 71,510 144,306 Incremental Net Benefits - -19,169 -38,579 10,917 10,993 10,931 26,241 53,719 61,067 76,317 80,881 86,877 159,673

~~Financial Rate of Return: 40%~~

1/ Cull adult males at $b 6.360 and cull adult females at $b 300; breeding females at $b 500 and breeding males at $b 750. 2/ White fiber at $b 6.90 per kg; color fiber at $b .58 per kg. 2/ Adults at $b 10 and young animals at $b 6.65. 4/ 25 man-days per year. Family labor is valued at $b 35 per day. 5/ Including incremental herd valtue of $b 70,200.

~~October 5, 1977 ' x '0 - BOLIVIA~~

~~ULLA ULLA DEVELOPMENT PROJECT~~

~~Farm Model No. 2 - 400 Alpaca Herd (5 families)~~

~~Cash Flow Projections ($b)~~

~~With Project Without ------Years ------Project 1 2 3 4 5 6 7 8 9 10 11 12~~

~~Cash Inflow~~

Sales 73,320 74,320 Livestock - - 17,280 17,280 14,400 14,400 23,640 49,200 54,200 74,920 77,920 42,796 44,392 Fibers 1/ 8,654 19,008 18,364 19,156 21,120 24,610 30,364 32,514 36,106 39,636 41,200 1,800 1,800 Pelts 1,190 1,360 1,320 1,580 1,840 1,800 2,060 2,100 1,800 1,800 1,800 117,916 120,512 Sub-Total 9,844 20,368 36,964 38,016 37,360 40,810 56,064 83,814 92,106 116,356 120,920 - - - Long term loan 2/ - 29,628 44,575 ------117,916 120,512 Total Cash Inflow 9,844 49,996 81,539 38,016 37,360 40,810 56,064 83,814 92,106 116,356 120,920

~~Cash Outflow 3/~~

9,000 9,000 - - Cash investment costs - 13,090 44,575 1,500 - 2,280 - - - 20,831 20,831 Cash operating costs 511 16,239 15,335 15,391 16,159 17,391 19,615 19,887 20,831 20,831 20,831 20,831 20,831 Total Cash Outflow 511 29,329 59,910 16,891 16,159 19,671 19,615 19,887 20,831 29,831 29,831

~~Cash balance before 97,085 99,681 debt service 9,333 20,667 21,629 21,125 21,201 21,139 36,449 63,927 71,275 86,525 91,089~~

~~Debt Service 4/~~

~~16,274 18,227 - - Amortization - - - - - 2,200 10,000 12,973 14,529 Interest 12% p.a. - 1,778 6,229 8,904 8,904 8,904 8,640 7,440 5,884 4,139 2,186 - -~~

~~Total Debt Service - 1,778 6,229 8,904 8,904 11,104 18,640 20,413 20,413 20,413 20,413 - -~~

~~Cash balance after debt service 9,333 18,889 15,400 12,221 12,297 10,035 17,809 43,514 50,862 66,112 70,676 97,085 99,681~~

1/ Excluding domestic use 3 kg of colored fiber per family per year or $b 850 for five families. < > 2/Cash investment costs of the first two years and first year veterinary supplies. z 3/Excluding the value of family labor. X 41 Ten years' maturity, including four years' grace.

~~October 5, 1977 BOLIVIA~~

~~LILA ULLA DEVELOPMENT PROJECT~~

~~Farm Model No 3 - 1,000-Alpaca Herd (12 families)~~

~~Investment Costs~~

~~($b)~~

~~1 2 3 4 5 10 11 Unit Per Unit Number Numb, Number Number Number Number Number Farm Cost of Units Cost of Unite Cost of Units Cost of Units Cost of Units Cost of Units Cost of Units Cost Construction~~

~~Holding corral 2 2,000 2 4,000 Shearing cement slab with roof 1 10,000 1 10,000 - ' - - - -~~

~~Sub-total - - 14,000O ------_ _ _~~

~~Machinery - Equipment~~

Hand shears 24 50 12 600 - - - - - 12 600 Scale 2 2,000 2 4,000 ------Sharpening wheel 2 500 1 500 - - 1 500 ------Fiber holding table 1 1,800 1 1,800 ------Fiber classifying tables 2 2,000 2 4,000 _ _ _ _ _ - _ _ _ Hoof tritmerS _ _ 6 180 3 540 - - - 3 540 identifying Neck tags 4,000 2 2,000 4,000 1,000 2,000 _ - 1,000 2,000 Medical equipment 1 15,000 1 15,000 - -

~~Sub-total - - 30,440 - - 2,500 - - - 3,140~~

~~Cattle Purchase~~

~~Breeding males 40 900 ------_ _ - 20 18,000 20 18,000~~

~~Sub-total - _, 18,000 - 18,000~~

~~Labor 1/ 10 Km 1,085 _ _ 10 10,850 _ ------~~

~~Sub-total - - 10,850~~

~~Fencing~~

~~New 10 8,915 - - 10 89,150 - -~~

~~Sub-total - - 89,150~~

~~Total - - - 44,440 100,000 2,500 - - 3,140 18,000 18,000 -~~

~~1/ Family labor for construction of feacesa~~

~~May 14, 1977 BOLIVIA~~

~~ULLA ULTLA DEVELOPMENT PROJECT~~

~~Farm Model No. 3 - 1,000 Alpaca Herd (12 families)~~

~~Herd Projections~~

With Project ------Without ------Years - - - 9 10 11 12 Project 1 2 3 4 5 6 7 8 Herd Composition (at end of year) 130 120 100 80 60 60 60 60 Breeding males 400 410 300 220 170 560 640 650 650 650 650 650 650 Breeding females 400 420 420 460 510 120 140 150 180 190 190 190 190 Females 1-2 yrs. 50 40 60 90 90 110 150 140 180 190 190 190 190 Males 1-2 yrs. 50 50 70 70 100 150 160 190 200 200 200 200 200 Female calves 60 70 90 100 120 150 160 190 200 200 200 200 200 Male calves 60 70 80 100 120

~~1,220 1,370 1,420 1,490 1,490 1,490 1,490 1,490 Total animals 1,020 1,060 1,020 1,040 1,110~~

~~870 920 1,050 1,040 1,090 1,090 1,090 1,090 Total adult animals 900 900 920 850 840 1.0 1.0 1.1 1.1 1.1 1.1 1.1 1.1 Carrying capacity .80 .80 .80 .90 .90~~

~~Mortality 60 60 70 60 60 60 60 60 Adults 80 70 70 70 60 70 70 60 60 60 60 60 Calves 40 40 50 60 120 130 140 120 120 120 120 120 Total 120 110 120 130~~

Sales 100 60 50 50 50 50 30 30 Cull adult males - - 120 120 100 - 100 100 100 100 100 100 Cull adult females ------10 50 50 60 50 Breeding females 1-2 yrs. ------50 100 110 150 160 150 160 Breeding males 1-2 yrs. ------

~~100 110 250 270 350 360 340 340 Total - - 120 120 100~~

~~- - - - 20 20 - - Purchases breeding males - - - - -~~

~~Coefficients: 70 70 70 70 70 70 70 70 Fertility rate % 35 45 50 60 65 5 5 5 4 4 4 4 4 Mortality adults % 10 8 7 7 7 18 18 15 14 14 13 13 13 Mortality calves % 22 20 20 20 20~~

~~October 5, 1977~~

~~aJZ BOLIVIA~~

~~ULLA ULLA DEVELOPMENT PROJECT~~

~~Farm Model. No. 3 - 1,000 Alpaca Herd (12 families)~~

~~Production Projection~~

~~With Project Without ------Years ------_ Project 1 2 3 4 5 6 7 8 9 10 11 12~~

~~Fiber No. of animals sheared 452 940 910 920 980 1,100 1,240 1,280 1,370 1,370 1,370 1,370 1,370 Yield per animal (kg) 0.800 0.800 0.800 0.824 0.849 0.878 0.909 0.941 0.974 1.02 1.06 1.10 1.14~~

~~Total production (kg) 362 752 728 758 832 966 1,127 1,204 1,334 1,397 1,452 1,507 1,562~~

~~White (kg) 1/ 90 188 182 189 208 241 394 421 467 629 653 678 703 Color (kg) 272 564 546 569 624 725 733 783 867 768 799 829 859~~

~~Pelts Adults 100 80 70 70 70 60 60 70 60 60 60 60 60 Calves 30 40 40 50 60 60 70 70 60 60 60 60 60~~

Livestock Cull adult males - - 120 120 100 100 60 50 50 50 50 30 30 Cull adult females ------100 100 100 100 100 100 Breeding females 1-2 yrs. - _ - - 10 50 50 60 50 Breeding males 1-2 yrs. ------50 100 110 150 160 150 160

~~1/ Proportion of white to colored is 257. from years 0 to 5 35% from years 6 to 8 45% from years 9 to 12~~

~~October 5, 1977~~

~~- m BOLIVIA~~

~~ULLA ULLA DEVELOPMENT PROJECT~~

~~Farm Model No. 3 - 1,000 Alpaca Herd (12 families)~~

~~Production Value and Operating Costs ($b)~~

~~With Project Without ------Years ------Project 1 2 3 4 5 6 7 8 9 10 11 12 PRODUCTION VALUE~~

1. Livestock 1/ Cull adult males - - 43,200 43,200 36,000 36,000 21,600 18,000 18,000 18,000 18,000 10,800 10,800 Cull adult females ------30,000 30,000 30,000 30,000 30,000 30,000 Breeding females 1-2 yrs. ------5,000 25,000 25,000 30,000 25,000 Breeding males 1-2 yrs. ------37,500 75,000 82,500 112,500 120,000 112,500 120,000

~~Sub-Total - - 43,200 43,200 36,000 36,000 59,100 123,000 135,500 185,000 193,000 183,300 185,800~~

~~2. Fiber 2/ Sub-Total 23,876 49,632 48,048 50,012 54,912 63,740 77,974 83,304 92,316 101,154 105,112 109,102 113,092~~

~~3. Pelts 3/ Sub-Total 2,950 3,400 3,300 3,950 4,600 4,500 5,150 5,250 4,500 4,500 4,500 4,500 4,500~~

~~Total Production Value 26,826 53,032 94,548 97,162 95,512 104,240 142,224 211,554 232,316 290,654 302,612 296,902 303,392~~

OPERATING COSTS Permanent family labor 76,650 76,650 76,650 76,650 76,650 76,650 76,650 76,650 76,650 76,650 76,650 76,650 76,650 0 Occasional family labor 4/ - 12,600 12,600 12,600 12,600 12,600 12,600 12,600 12,600 12,600 12,600 12,600 12,600 Animal health - 38,880 38,600 37,420 38,460 41,100 44,900 48,660 49,700 50,800 50,800 50,800 50,800 Land taxes 1,255 1,255 1,255 1,255 1,255 1,255 1,255 1,255 1,255 1,255 1,255 1,255 1,255

~~Total Operating Costs 77,905 129,385 129,105 127,925 128,965 131,605 135,405 139,165 140,205 141,305 141,305 141,305 141,305~~

Investment Costs - 44,440 100,000 2,500 - 3,140 - - - - 18,000 18,000 - Investment plus Operating Costs 77,905 173,825 229,105 130,425 128,965 134,745 135,405 139,165 140,205 141,305 159,305 159,305 141,305 Total benefits 5/ 26,826 53,032 94,548 97,162 95,512 104,240 142,224 211,554 232,316 290,654 302,612 296,902 478,892 Net benefits -51,079 -120,793 -134,557 -33,263 -33,453 -30,505 6,819 72,389 92,111 149,349 143,307 137,597 337,587 Incremental net benefits - -69,714 -83,478 17,816 17,626 20,574 57,898 123,468 143,190 200,428 194,386 188,676 388,666

~~Financial Rate of Return: 35%~~

1/ Cull adult males at $b 360 and cull adult females at $b 300; breeding females at $b 500 and breeding males at $b 750. 2/ White fiber at $b 90 per kg; colored fiber at $b 58 per kg. 3/ Adults at $b 10 and young animals at $b 65. 4/ 360 man-days per year. Family labor is valued at $b 35 per day. 5/ Including incremental herd value of $b 175,000.

~~October 5, 1977 BOLIVIA~~

~~ULLA ULLA DEVELOPMENT PROJECT~~

~~Farm Model No. 3 - 1,000 Alcapa Herd (12 families)~~

~~Cash Flow Projections ($b)~~

~~With Project Without ------Years ------Project 1 2 3 4 5 6 7 8 9 10 11 12~~

~~Cash Inflow~~

Sales Livestock - - 43,200 43,200 36,000 36,000 59,100 123,000 135,500 185,500 193,000 183,300 185,800 Fiber 1/ 21,788 47,544 45,960 47,924 52,824 61,652 75,886 81,216 90,228 99,066 103,024 107,014 111,004 Pelts 2,950 3,400 3,300 3,950 4,600 4,500 5,150 5,250 4,500 4,500 4,500 4,500 4,500

~~Sub-Total 24,738 50,944 92,460 95,074 93,424 102,152 140,136 209,466 230,228 289,066 300,524 294,814 301,304~~

~~Long Term Loan 2/ - 83,320 89,150 ------~~

~~Total Cash Inflow 24,738 134,264 181,610 95,074 93,424 102,152 140,136 209,466 230,228 289,066 300,524 294,814 301,304~~

~~Cash Outflow 3/~~

~~Cash Tnvestment Costs - 44,440 89,150 2,500 - 3,140 - - - - 18,000 18,000 - Cash Operating Costs 1,255 40,135 39,855 38,675 39,715 42,355 46,155 49,915 50,955 52,055 52,055 52,055 52,055~~

~~Total Cash Outflow 1,255 84,575 129,005 41,175 39,715 45,495 46,155 49,915 50,955 52,055 70,055 70,055 52,055 v~~

~~Cash balance before debt service 23,483 49,689 52,605 53,899 53,709 56,657 93,981 159,551 179,273 237,011 230,469 224,759 249,249~~

~~Debt Service 4/ Amortization - - - - 5,000 6,500 25,338 28,379 31,784 35,599 39,870 - - Tnterest, 12% p.a. - 4,999 15,347 20,696 20,696 20,096 19,316 16,276 12,870 9,056 4,784 - _~~

~~Sub-Total - 4,999 15,347 20,696 25,696 26,596 44,654 44,655 44,654 44,655 44,654 - -~~

~~Cash balance after debt service 23,483 44,690 37,258 33,203 28,013 30,061 49,327 114,896 134,619 192,356 185,815 224,759 249,249~~

I/ Excluding domestic use: 3 kg of colored fiber per year per family, or $b 2,088 for 12 families. 2/ Cash investment costs of the first two years and the first year veterinary supplies. 3/ Excluding the value of family labor. 4/ Ten year maturity, including three year grace.

~~October 5, 1977 BOLIVIA~~

~~ULLA ULLA DEVELOPMENTPROJECT~~

~~Farm Model No. 4 - 5,000-Alpaca Herd (55 families)~~

~~Investment Costs ($b)~~

…------Years ------1 2 3 4 5 10 11 Unit Per Unit Number of Number of Number of Number of _NuTmberof Nuber of Number of Farm Cost Units Cost Units Cost Units Cost Units Cost Units Cost Units Cost Units Cost

~~Constructions~~

~~Holding corral 1 7,000 1 7,000 - - - - - Shearing corral 1 20,000 1 20,000 Warehouse 1 28,000 1 28,000 Spray bath 1 80,000 1 80,000 - - - - - _ ------~~

~~Sub-total 135,000~~

~~Machinery and Equipment~~

Shearing equipment 1 35,000 1 35,000 Hand shears 12 50 6 300 - - - 6 300 Sharpening wheel 2 500 1 500 - - 1 500 - Scale 3 2,000 3 6,000 - Fiber holding table 1 1,800 1 1,800 - - - - Fiber classifying tables 2 2,000 2 4,000 - Neck identifying tags 12,000 2 6,000 12,000 - - 6,000 12,000 Hoof triiers 6 180 3 540 - Medical equipment 1 15,000 1 15,000 ------_ - _

~~Sub-total 75,140 - 12,500~~

~~Cattle Purchase~~

~~Breeding males 200 900 ------100 90,000 100 90,000~~

~~Labor 1/ 50 Km 1,085 - - 50 Km 52,250 - - - - -~~

~~Sub-total 52,250~~

~~Fencing~~

~~New 50 Km 8,915 - - 50 Km 445,750 - -~~

~~Total 210,140 498,000 12,500 300 90,000 90,000~~

~~1/ Family labor for construction of fences. t |~~

~~May 14, 1977 BOLIVIA~~

~~ULLA ULLA DEVELOPMENTPROJECT~~

~~Farm Model No. 4 - 5,000 Alpaca Herd (55 families) Herd Projections With Project Without ------ears ------Project 1 2 3 4 5 6 7 8 9 10 11 12~~

Herd Composition (at end of year) Breeding males 2,000 2,050 1,500 1,100 850 650 600 500 400 300 300 300 300 Breeding females 2,000 2,100 2,100 2,300 2,550 2,800 3,200 3,250 3,250 3,250 3,250 3,250 3,250 Females 1-2 yrs. 250 200 300 450 450 600 700 750 900 950 950 950 950 Males 1-2 yrs. 250 250 350 350 500 550 750 700 900 950 950 950 950 Female calves 300 350 450 500 600 750 800 950 1,000 1,000 1,000 1,000 1,000 Male calves 300 350 400 500 600 750 800 950 1,000 1,000 1,000 1,000 1,000

~~Total animals 5,100 5,300 5,100 5,200 5,550 6,100 6,850 7,100 7,450 7,450 7,450 7,450 7,450~~

~~Total adult animals 4,500 4,600 4,250 4,200 4,350 4,600 5,250 5,200 5,450 5,450 5,450 5,450 5,450 Carrying capacity 0.80 0.80 0.80 0.90 0.90 1.0 1.0 1.1 1.1 1.1 1.1 1.1 1.1~~

~~Mortality Adults 400 350 350 350 300 300 350 300 300 300 300 300 Calves 200 200 250 300 300 350 350 300 300 300 300 300 m Total 600 550 600 650 600 650 700 600 600 600 600 600~~

Sales Cull adult males - - 600 600 500 500 300 250 250 250 250 150 150 Cull adult females - - - - - 500 500 500 500 500 500 Breeding females 1-2 yrs.- - - - _ _ 50s o 250 250 300 250 Breeding males 1-2 yrs. ------250 500 550 750 800 750 800

~~Total - - 600 600 500 500 550 1,250 1,350 1,750 1,800 1,700 1,700~~

~~Purchases~~

Breeding males ------100 100 - - Coefficients: Fertility rate % 35 45 50 60 65 70 70 70 70 70 70 70 70 Mortality adults % 10 8 7 7 7 5 5 5 4 4 4 4 4 Mortality calves % 22 20 20 20 20 18 18 15 14 14 13 13 13

~~October 10, 1977~~

~~aD BOLIVIA~~

~~ULLA ULLA DEVELOPMENT PROJECT~~

~~Farm Model No. 4 - 5000 Alpaca Herd (55 families)~~

~~Production Projections ($b)~~

~~With Project Without ------Years ------Project 1 2 3 4 5 6 7 8 9 10 11 12~~

~~Fiber No. of animals sheared 2,225 4,700 4,550 4,600 4,900 5,500 6,200 6,400 6,850 6,850 6,850 6,850 6,850 Yield per animal 0.800 0.800 0.800 0.824 0.849 0.878 0.909 0.941 0.974 1.02 1.06 1.10 1.14~~

~~Total Production (kg) 1,780 3,760 3,640 3,790 4,160 4,829 5,636 6,022 6,672 6,987 7,261 7,535 7,809~~

~~White (kg) 1/ 445 940 910 947 1,040 1,207 1,973 2,108 2,335 3,144 3,267 3,391 3,514 Color (kg) 1,335 2,820 2,730 2,843 3,120 3,622 3,663 3,914 4,337 3,843 3,994 4,144 4,295~~

~~Pelts Adults 500 400 350 350 350 300 300 350 300 300 300 300 300 m Calves 150 200 200 250 300 300 350 350 300 300 300 300 300~~

Livestock Cull adult males - - 600 600 500 500 300 250 250 250 250 150 150 Cull adult females ------500 500 500 500 500 500 250 Breeding females 1-2 yrs. ------50 250 250 300 800 Breeding males 1-2 yrs. ------250 500 550 750 800 750

~~1/ Proportion of white to colored is: 25% from years 0 to 5 35% from years 6 to 8 45% from years 9 to 12~~

~~October 5, 1977 HID - , oolxCD>~~

~~coN BOLIVIA~~

~~ULIA ULLA DEVELOPMENI PROJI.CI~~

~~Farm Model No. 4 - 5,000 Alpaca lierd (55 families)~~

~~Production Value and Operating Costs (Sb)~~

~~With Project Without ------Years ------Project 1 2 3 4 5 6 7 8 9 10 11 12~~

~~PRODICTION VALUE~~

1. Livestock 1/ Cull adult males - - 216,000 216,000 180,000 180,000 108,000 90,000 90,000 90,000 90,000 54,000 54,000 Cull adult females - _ - - 150,000 150,000 150,000 150,000 150,000 150,000 Breeding females 1-2 yrs. ------25,000 125,000 125,000 125,000 125,000 Breeding males 1-2 yrs. - - - - 187,500 375,000 412,500 562,500 600,000 562,500 600,000

~~Sub-Total _ - 216,000 216,000 180,000 180,000 295,500 615,000 677,500 927,500 965,000 916,500 929,000~~

~~2. Fiber 2/ Sub-Total 117,480 248,160 240,240 250,124 274,560 318,706 390,024 416,732 461,696 505,854 525,682 545,542 565,370~~

~~3. Pelts 3/ Sub-Total 14,750 17,000 16,500 19,750 23,000 22,500 25,750 26,250 22,500 22,500 22,500 22,500 22,500~~

~~Total Production Value 132,230 265,160 472,740 485,750 477,560 521,206 711,274 1,057,982 1,161,696 1,455,854 1,513,182 1,484,542 1,516,870~~

~~OPERATING COSTS~~

Permanent family labor (30 herders) 383,250 383,250 383,250 383,250 383,250 383,250 383,250 383,250 383,250 383,250 383,250 383,250 383,250 Occasional family labor 4/ - 63,000 63,000 63,000 63,000 63,000 63,000 63,000 63,000 63,000 63,000 63,000 63,000 Animal health - 196,600 185,300 186,000 195,600 211,000 238,800 242,200 254,000 254,000 254,000 254,000 254,000 Repairs & maintenance _ 4,203 14,163 16,264 21,494 21,494 21,619 21,619 21,619 21,619 21,619 21,619 21,619 Land tax 6,215 6,215 6,215 6,215 6,215 6,215 6,215 6,215 6,215 6,215 6,215 6,215 6,215

~~Total Operating Costs 389,465 653,268 651,928 654,729 669,559 684,959 712,884 716,284 728,084 728,084 728,084 728,084 728,084~~

Investment Costs - 210,140 498,000 12,500 - 300 - - - - 90,000 90,000 Investment plus operating costs 389,465 863,408 1,149,928 667,229 669,559 685,259 712,884 716,284 728,084 728,084 818,084 818,084 728,084 Total benefits 5/ 132,230 265,160 472,740 485,750 477,560 521,206 711,274 1,057,982 1,161,696 1,455,854 1,513,182 1,484,542 2,394,370 Net benefits -257,235 -598,248 -677,188 -181,479 -191,999 -163,753 -1,610 341,698 433,612 727,770 695,098 666,458 1,666,286 incremental net benefits - -341,013 -419,953 75,756 65,236 93,482 255,625 598,933 690,847 985,005 952,333 923,693 1,923,521

~~Financial Rate of Return: 347,~~

1/ Cull adult males at $b 360 and cull adult females at $b 300; breeding females at $b 500 and breeding males at $b 750. 2/ White fiber at $b 90 per kg; colored fiber at $b 58 per kg. 3/ Adults at $b 10 and calves at $b 65. a x 4/ 360 man-days per year. Family labor is valued at $b 35 per day. 5/ Including incremental herd value at $b 877,500.

~~October 5, 1977 BOLIVIA tLIA ULLA DEVELOPUENTPROJECI~~

~~Farm ModeL No. 4 - 5,000 Alpaca Hlerd (55 families)~~

~~Cash Flow Projection ($b)~~

~~With Project Without ------Years ------Project 1 2 3 4 5 6 7 8 9 10 1112~~

~~Cash Inflow~~

Sales Livestock - - 216,000 216,000 180,000 180,000 295,500 615,000 677,500 927,500 965,000 916,500 929,000 Fiber 1/ 107,910 238,590 230,670 240,554 264,990 309,136 380,454 407,162 452,126 496,284 516,112 535,972 555,800 Pelts 14,750 17,000 16,500 19,750 23,000 22,500 25,750 26,250 22,500 22,500 22,500 22,500 22,500

~~Sub-Total 122,660 255,590 463,170 476,304 467,990 511,636 701,704 1,048,412 1,152,126 1,446,284 1,503,612 1,474,972 1,507,300~~

~~Long-term loan 2/ - 406,740 445,750 ------~~

~~Total Cash Inflow 122,660 662,330 908,920 476,304 467,990 511,636 701,704 1,048,412 1,152,126 1,446,284 1,503,612 1,474,972 1,507,300~~

~~Cash outflow~~

~~Cash investment costs - 210,140 445,750 12,500 - 300 - - - - 90,000 90.000 Cash operating costs 6,215 207,018 205,678 206,479 223,309 238,709 266,634 270,034 281,834 281,834 291,634 281,834 281,634~~

~~Total Cash outflow 6,215 417,158 651,428 220,979 223,309 239,009 266,634 270,034 281,834 281,834 371,834 371,834 281,834~~

~~Cash balance before 0 debt service 116,445 245,172 257,492 255,325 244,681 272,627 435,070 778,378 870,292 844,334 1,131,778 1,103,138 1,225,466~~

~~Debt Service Amortication - - - - 20,000 30,000 126,320 141,479 158,455 177,470 198,766 Interest, 12°, p.a. - 24,404 75,554 102,299 102,299 99,899 96,299 81,140 64,164 45,149 23,853~~

~~Sub-Total - 24,404 75,554 102,299 122,299 129,899 222,619 222,619 222,619 222,619 222,619 - -~~

~~Cash balance after debt service 116,445 220,768 181,938 153,026 122,382 142,728 212,451 555,759 647,673 621,715 909,159 1,103,138 1,225,466~~

1/ Excluding domestic use: 3 kilos of colored fiber per family per year, or $b 9,570 for 55 families. 2/ For cash investment cost of year 1 and 2 and first year veterinary supplies. 3/ Excluding the value of family labor. 4/ ren years' maturity, including three years' grace.

~~October 12, 1977 ANNEX 2 Table 21 -90 -~~

~~BOLIVIA~~

~~ULLA ULLA DEVELOPMENT PROJECT Financial Analysis~~

~~Rates of Return and Sensitivity Testing~~

~~I. Livestock Models~~

~~Model I Model 2 Model 3 Model 4 (100 alpacas) (400 alpacas) (1000 alpacas) (5000 alpacas) % % % % Financial Rate of Return Above 100 40 35 34~~

~~Investment costs increased by 10% Above 100 37 34 33 20% Above 100 34 42 31~~

~~Operating costs increased by 10% Above 100 36 32 31 20% Above 100 33 29 28~~

~~Productionvalue of alpaca fiber dTecreasedby 20% Above 100 34 31 30 40% 90 30 27 26~~

~~Total benefits decreased by 10% 20% 94 28 25 23 40% 49 15 13 11~~

~~All costs increased by 10%, all benefits decreased by 20% 74 23 21 19~~

~~October 8, 1977 8OLIVIA~~

~~ULLA ULLA DFVEIOPMENT PROJECT~~

~~Alpaa., Llama., Vicaa-~~

~~Estimated Production Pro-ection (kg)~~

~~16 11 12 13 14 15 6 7 8 9 10 1 2 3 4 5~~

~~Ulla Ulla 1/ 220,517 232,553 246,925 139,557 148,476 170,113 182,123 207,033 75,427 79,750 94,360 109,816 121,669 prod-ctio- 66,000 66,066 66,132~~

Other Areas 2/ 168,03 190.199 201,594 103,905 114,558 130,755 138,430 157,824 66,198 66,264 74,170 82,090 90,166 Productio- 66,000 66,066 66,132 422,752 448,519 263,034 300,868 320,553 364,857 388,620 146,014 168,530 191,906 211,835 243,462 Total production 132,000 132,132 132,264 141,625

Assumptions 0.17.dt-ring years 1 and 2; fran year 3 onward thn increase a 2%. 1 Herd acne increases at the rain of rates. years 0, 1 and 2; fion year 3 onwards it incre- ses yearly at varying Perrentagn of aninals sheared every year is 55-b duri-g 9; 4% fron year 9 onwards. it increases 3% from year 3 to 5; 3.5% fran year 6 to year Yield per animal per ynar is 0.8 kg from yPor 0 to year 2; 9 anwards. Per- of 0.17, from year I to year 6; 1, years 7 and 8;a-d 1.5% from y-ar 2/ Herd sine increases at the rate dae teclmolagy transfer from Ulla Ulla. 4; fran year 5 onwards, It increases at varying rates to shearing neetage of animals sheared yearly -i 557.from year 0 to year 3% yearly from year 6 onwards. Yield per animal per year cS 0.8 kg from year 0 to year 5; it increases

~~May 14, 1977 - 92 - ANNEX 2 Table 23 BOLIVIA~~

~~ULLA ULLA DEVELOPMENT PROJECT~~

~~Livestock Credit~~

~~Total Lending Program = $b 30 million~~

~~Subloan No. of Amount No. of Beneficiaries Model $b Subloans (Families)~~

~~1. Ulla Ulla~~

~~No. 1 100 animals, 1 or 2 families 4,032 300 450 No. 2 400 animals, 5 families 74,203 200 1,000 No. 3 1000 animals, 12 families 172,470 26 312 No. 4 5000 animals, 55 families 852,490 4 220~~

~~Total 529 1,982~~

~~2. Other Areas~~

~~No. 1 100 animals, 1 or 2 families 4,032 140 210 No. 2 400 animals, 5 families 74,203 60 300 No. 3 1000 animals, 12 families 172,470 6 72 No. 4 5000 animals, 55 families - -~~

~~Total 206 582~~

~~Total~~

~~No. 1 440 660 No. 2 260 1,300 No. 3 32 384 No. 4 4 220~~

~~736 2,564~~

~~October 18, 1977 93 ANNEX 2 Table 24~~

~~BOLIVIA~~

~~ULLA ULLA DEVELOPMENT PROJECT~~

~~Livestock Development~~

~~Phasing of the Lending Program~~

~~------Number of Sub-loans------Model No. Year 3 Year 4 Year 5 Total~~

~~1 100 240 100 440 2 75 110 75 260 3 2 15 15 32 4 - 2 2 4 Total 177 367 192 736~~

~~------Lending Program ($b '000)------Model No. Year 3 Year 4 Year 5 Total~~

~~1 403,2 967.7 403.2 1,774.1 2 5,565.2 8,162.3 5,565.2 19,292.7 3 344.9 2,587.0 2,587.1 5,519.0 4 - 1.705.0 1,705.10 3,410.0 Total 6,313.3 13,422.0 10,260.5 29,995.8~~

~~October 18, 1977 BOLIVIA ULLA ULLA DEVELOPMENT PROJECT FARM MANAGEMENT SCHEDULE~~

~~JAN FEB MAR APRIL MAY JUNE JULY AUG SEPT OCT NOV DEC~~

CALVING _ _ / //// / / / / / /7/ / /////////////////// // /// '7//// /777 /7/7/ ///// /7/// BREEDING - I_ll /// // 77 77 7777/77777 '/7//// ///// 7/7// /7//// /7/// '/777/ 7/7// /777/ 7/77/ 7/77/ SPRAYING (2ND YEAR) ""/// / //// "'/// '/7/7/ 7/7///// /7/ // /7/7/ '/7/7/ /77// 7/77/ 7/7// 7//// /7/7// 7/7// /7/7/ 7/7// /7/7/ PARASITE TREATMENT / /""// """"" i/_ _ '/7/7/ /7/7/ /7//// //// //// '/7/// ///// ///// ///// ///// '/7//// 7/7// /7/// ///// 7/7// HEALTH CHECK //7/ //"' //7/ // //// '///// /7/7/ /7/7/ 7///// /7/// '///// ///// ///// /7//// /7/// WEANING '//7 /// /7/ //7/ // '/7/7/ ///// ///// /7/// /7/// '//// 7//// ///// ///// 7//// SHEARING & PREGNANCY //7 //7 ///// //7/ // DIAGNOSTIC //7// //// //7/ ///7 // '/7/7/ 7/7// ///// /7/7/ /7/// '/7/7// /77// ///// ///// 7//// SPRAYING (FIRST YEAR) ///7/ /77/ //// /7 / '/7//// /7/7/ /77// 7///// /7// '/77// /7/7/ /7//// /7/7/ 7//// SELECTION OF PUNTAS / //7 //7// //7/ // '/7/7/ 7/7/ ///// /7/7/ /7/// '/7/// /7/7/ ///// ///// // PARASITE TREATMENT "/// / "" """",//// / // / '///// /77// ///// ///// /7/7/ '/7/7/ /7/7 /7/7// 7//// z/7/ PREPARATION FOR CALVING ""/"> 7/'t/ /77/ ///// & BREEDING'/7/7/ /77// ///// ///7// /v/ & BREEDING//// / ///// /

~~SUMMER-RAINY SEASON WINTER-DRY SEASON ISUMMER2 rt LOWEST TEMPERATURES RAIN 1~~

~~World Bank-17641 - 95 - ANNEX 3~~

~~BOLIVIA~~

~~ULLA ULLA DEVELOPMENTPROJECT~~

~~Vicuna Conservation and Development Component~~

~~Introduction~~

1. The vicuna, like its cousins the llama and alpaca, lives at high altitudes on the Altiplano of Peru and Bolivia, and small numbers have been sighted in Chile and Argentina. The vicuna belongs to the camel family but unlike the llama and alpaca, attempts to domesticate it have been met with little success. The fact that the vicuna has remained untamed may explain why there is so little meaningful basic data and hardly any scientific literature about its physiology, reproduction, and migration patterns. The sketchy information that does exist has been collected on an ad hoc basis by individuals specifically engaged to make field observations.

2. Two important facts about the vicuna are known. First, it produces one of the world's finest and softest fleece. This fleece commands extremely high prices and it was in strong demand in world markets before the Peruvian and Bolivian Governments clamped down on importation and exportation of vicuna products and on the trading in wool and hides within the two nations. However, the black market for vicuna products still functions in spite of the legal re- striction, and top quality vicuna wool can be bought for about US$25 per pound compared to only 40 cents per pound for high-grade sheep wool. First-class wool fabric sells for US$160 a yard in the United States and up to US$650 per yard in ftaly. Men's vicuna wool suits can be acquired for US$800 to US$1,200 in the United States and Europe. Second, because of the high prices and strong demand for its fleece, the yield per animal being only one-quarter to one-half pound once in two years, poachers killed off an extraordinarily large number. It is estimated that the total vicuna population has been reduced drastically because of this indiscriminate killing, from 400,000 in the early 1950s to only about 5,000 at the end of the 1960s. The majority of these survivors has been saved and numbers have since increased due to the conservation measures taken by Peru and Bolivia, but vicunas are still being killed for their high-valued fleece in the two countries. Currently, there are only about 1,000 vicunas in Bolivia. The proposed project would assist the Government to establish firm control over poachers, conduct detailed research about the habits of vicunas, and evaluate ways of breeding them for commercial purposes.

~~Behavior Patterns~~

3. In addition to its unique coat, the vicuna has a distinct social organization and hierarchical structure. According to information collected in the field, vicunas may be divided, as a general rule, into two groups--those that are members of the family band and those that belong to bachelor herds. The territory of the family band is staked out by an adult male leader who is responsible for protecting his harem and offspring. Each family grazes habit- ually in the same territory which has been carefully scent-marked by the adult - 96 -

ANNEX 3 who feeds separately and remains on guard 20 to 100 meters away from the rest of his family. Under natural conditions, an adult female gives birth between February and March each year. However, for reasons still unknown, the vicuna is unable to multiply in captivity. As the size of the family increases beyond a certain number, parents may chase their own yearlings from the family's grazing patch. It is believed that females are often accepted into the neighboring family, but males must either roam in bachelor groups or challenge the chief of the harem. Bachelor bands, unlike the family herds, do not occupy a specific territory but graze on any land available and have no particular social order or leader.

4. Areas adjacent to rivers are particularly favored by vicuna, which graze on a variety of plants and grass growing at altitudes under the snow line of 5,300 meters. However, because the vicunas prefer to live in separate small groups and to avoid other animals, they frequently wind up on marginal areas which are unsuitable for agriculture or stock breeding.

~~Conservation and Development Programs~~

5. The thrust of the conservation efforts is led by the Peruvian and Bolivian Governments, in whose territories there is the largest concentration of vicunas, although smaller scale programs have also been introduced in Argentina and Chile. Judging by the information available from various publications, it seems safe to conclude that considerable progress has been made in preserving the vicuna since the national vicuna reserves were established in Peru (Pampa Caleras) and Bolivia (Ulla Ulla) in 1965 and 1971, respectively. Tentative estimates indicate that the total vicuna population has reached a respectable size of about 40,000, of which 25,000 were accounted for on the Pampa Caleras and 600 in the Ulla Ulla reserves. A small wildlife management program of vicuna breeding in captivity has been in operation for about 50 years. The program is being implemented in the Cala Cala ranch in Peru and it involves about 1,000 vicunas which are cross-breed with alpacas. Although the results have not been conclusive, the cross of paco-vicuna seems to have a good potential for further development as it combines the high wool quality of the vicuna with the high wool production capacity of the alpaca. Considerable experiments would need to be carried out to obtain meaningful data for eventual commercial replicability.

6. The above conservation programs were further reinforced by the Inter- national Union for Conservation of Nature and Natural Resources in Switzerland when in 1968 it declared the vicuna a rare and endangered species. In 1969, Bolivia and Peru introduced a 10-year moratorium on all killing, marketing and exporting of vicuna and Chile and Argentina became signatories soon after. Pelts, which become available through death by natural causes are safeguarded in warehouses. In 1970, the vicuna came under federal protection in the United States, which means that no vicuna, dead or alive, can be imported without a special permit for scientific purposes, nor can any part--skin or fleece or any- thing else--be imported from another country.

~~Conservation Program in Bolivia~~

~~7. The Ulla Ulla reserve is located in the Department of La Paz and com- prises 200,000 ha of native rangeland stocked with approximately 300,000 alpacas - 97 -~~

ANNEX 3 and about 600 vicunas. The reserve is administered by the Wildlife and National Parks Division of the Forestry Department in the Ministry of Agricul- ture. The Chief of the Division is responsible for planning and implementing the conservation and wildlife development programs. The Division employs 32 guards, three of which are stationed on a full-time basis in Ulla Ulla. Guard duty consists of patrolling the reserve area, making on-the-spot checks to discourage potential vicuna hunters and enforcing the fishing laws; conducting a biennial inventory of the vicuna population; and explaining the purpose of the conservation programs to the local population. The guards are paid by the Ministry of Agriculture but their living quarters, uniforms and one patrol jeep and initial training are provided by the World Wildlife Fund and the Frankfurt Zoological Society of Germany. Although the Government has established the basic infrastructure for the protection of vicunas in the Ulla Ulla reserve, the program suffers seriously from lack of funds, qualified personnel and supporting basis and applied research to permit eventual development of the vicunas as an economic resource, together.with alpacas and llamas.

~~Vicuna Conservation and Development Component Objective and Content~~

8. The purpose of the component would be to find effective ways to protect and develop vicuna resources in Bolivia. Specifically, the project would provide a small sum to strengthen the present protection scheme for vicunas, train guards and introduce research and experimentation activities, which should lead to the establishment of a systematic vicuna management program in the Ulla Ulla reserve and throughout Bolivia.

9. Strengthening of the conservation program would be accomplished through the recruitment of about six additional guards, their training and provision of accommodation facilities, new observation posts, additional vehicles and other complementary equipment which they need in their work. It is highly unlikely that the protection program can be implemented successfully in Bolivia unless the 10-year moratorium, which expires in 1979, on all killing, marketing and exporting of vicunas' skin or fleece, is extended beyond 1979. Assurances would be obtained during negotiations that the Government would discuss this matter with Peru, Chile and Argentina and will support the extension of the moratorium beyond 1979.

10. The research and experimentation effort would focus on the following matters: (a) competition between vicuna and alpacas/llamas and other animals for space and pasture; (b) possibilities for co-existence of vicunas with other animals; (c) identification of the essential inputs for domesticating and managing vicunas; (d) potential for increasing vicuna population by way of modern breeding techniques; (e) the desirability for cross-breeding between vicunas and alpacas to produce more and better quality wool; (f) migration pattern of the vicuna and its natural habitat characteristics; (g) the vicuna's physiology, its reproduction cycle, and parasites to which it is susceptible; and (h) periodic surveys for the preparation and maintenance of a comprehensive inventory of vicunas in Ulla Ulla and other parts of Bolivia. - 98 -

~~ANNEX 3~~

~~Cost~~

11. The total investment costs would amount to $b 544,000 (US$27,200). Annual current cost during the five-year implementation period would be $b 160,000 (US$8,000). Detailed investment and current cash costs are shown in Table 1.

~~Implementation~~

12. The Chief of the Division responsible for the Experiment Station in Ulla Ulla would be in charge of the daily operations of the vicuna component. He would be assisted by specialized staff of the division for the implementation of particular facets. The conservation programs would be coordinated with the Government's overall policies in Bolivia as well as with Peru, Chile and Argentina. The National Institution for Development of Wool (INFOL) would enter into an operational contract not later than one year after loan signing with the Wildlife and National Parks Division to ensure coordinated efforts. INFOL would take the necessary measures to exchange information and experts in this field with Peru, Chile and Argentina.

~~June 21, 1977 BOLIVIA~~

~~ULLA ULLA DEVELOPMENTPROJECT~~

~~Vicuna Conservation and Development Component~~

~~Investment and Recurrent Cash Costs~~

~~------Years…---_-______Total Total Foreign Foreign 1 2 3 4 5 Cost Cost Exchange Exchange Investment Cost ------$b------US$ US$ Four-wheel drive vehicle 160,000 - 160,000 8,000 95 7,600~~

~~Field glasses 7,200 - - - - 7,200 360 80 288~~

~~Field kits 6,000 - - - _ 6,000 300 60 180~~

~~Observation posts 140,000 - - - - 140,000 7,000 10 700 Improvement and expansion of existing buildings 100,000 - - - - 100,000 5,000 30 1,500~~

~~Guards' training 60,000 60,000 - - - 120,000 6,000 - -~~

Miscellaneous 5,400 5,400 - - - 10,800 -540 Sub-total 478,600 65,400 - - - 544,000 27,200 38 10,268 Operating Costs Salaries 120,000 120,000 120,000 120,000 120,000 600,000 30,000 - - Vehicle operating costs 40,000 40,000 40,000 40,000 40,000 200,000 10,000 15 1,500 Sub-total 160,000 160,000 160,000 160,000 160,000 800,000 40,000 4 1,500 Total baseline cost 638,000 225,400 160,000 160,000 160,000 1,344,000 67,200 18 11,768 Physical contingency (10% of investment cost) 47,860 6,540 - - - 54,400 2,720 38 1,034 Total cost including physical contingency 686,460 231,940 160,000 160,000 160,000 1,398,400 69,920 18 12,802 Jn 2

~~June 21, 1977w - 100 -~~

~~ANNEX 4~~

~~BOLIVIA~~

~~ULLA ULLA DEVELOPMENTPROJECT~~

~~Wool Collection, Storage and Processing Component~~

~~I. BACKGROUND~~

~~Bolivian Textile Industry~~

1. The Bolivian textile industry, accounting for almost 20% of the labor force in the industrial sector, has been growing in recent years at a rate of about 3.5% to 4% per annum. Of the estimated 125 mills registered, only seven belong to the wool sector, two of which account for about 75% of the installed capacity. The total installed capacity of the textile industry is estimated at 54,000 spinning spindles and some 1,650 looms. The wool industry alone accounts for about 28% and 20% of spindles and looms of the textile industry, respectively. In terms of labor force, the wool industry employs about 28% of the total labor force in the textile industry, being second to the cotton sector, which accounts for over 60% of the installed capacity.

2. The wool sector, unlike the overall textile industry, has undergone a slight decline in recent years as a result of increased penetration of syn- thetic fibers, mainly acrylics. A study of the industry by Werner Management consultants on behalf of the Bolivian Government in 1974/75, found that mills were usually obsolete, in a poor state of maintenance, and had inadequate processing technology, working methods, and management. The Inter-American Development Bank is expected to finance a modernization program soon for selected areas of the textile industry.

~~Raw Materials~~

3. The principal raw materials for the wool industry are sheep wool, alpaca/llama fiber, and acrylics, all of which are processed by five mills into fabric, yarn, blankets and travelling rugs, and hats. Although Bolivia's production of wool exceeds the industry's requirements, the wool sector must import substantial amounts of better quality foreign sheep wool (Argentina, Uruguay and Peru) since the Bolivian sheep wool quality is not satisfactory for fine combed yarns. Wool imports usually supply about 30% of local processing requirements. Inadequate scouring of raw materials is partly responsible for the processing mill's preference for imported tops and scoured wool.

4. During the 1974-76 period, the wool industry accounted for two-thirds of the total alpaca fiber production which averaged 132 tons annually. Only two enterprises -- the state enterprise, COMBOFLA, and a cooperative, FOTRAMA -- are involved in spinning alpaca fiber. A third enterprise, FORNO, also buys - 101 -

~~ANNEX 4~~

small quantities of fiber, usually from COMBOFLA, to incorporate into its woolen blankets and travelling rugs. Most of the fiber collected is processed into knitting yarns for sale to artisans. Total yarn production has been increasing by about 12% a year since 1974 and in 1976 reached 45 m tons.

5. The amount of llama fiber presently produced is small relative to the potential for large-scale production, the absence of dehairing technology has been the obstacle. COMBOFLA's collection of llama fiber varies considerably from year to year, and has been estimated at about 55 tons per annum in recent years. Except for some sales to FORNO, it has been exported to the USA and Europe, where it is dehaired and processed into fine fabrics.

~~Processing~~

6. Increasing sales of handicraft items have generated a large demand for yarn by low income groups in rural and urban areas where unemployment and underemployment are high. This demand goes unsatisfied, because Bolivia's processing capacity of alpaca wool is limited to an estimated 25% of total demand. There is a critical need for a modernization program to raise this level, introduce improved technology and processing facilities, and improve management and organization.

7. FOTRAMA. The FOTRAMA complex is an integrated cooperative established 17 years ago to provide education, health care and employment to communities in the Cochabamba area. As part of this cooperative, there is a small mill which produces coarse semi-worsted alpaca yarn, which is distributed to its members for making handicraft items such as ponchos, shawls, sweaters, blankets and rugs. The plant is equipped with very obsolete machinery, mostly dating back to the turn of the century. However, it is in better operating condition than the COMBOFLA Pulacayo plant (para 11). Other than replacing some equipment, FOTRAMA does not have any expansion plans.

8. Workers and employees are associates of the cooperative and there are presently about 28 employees at the plant and some 850 associate workers in 10 artisan centers. The plant is operated on one shift, and, in addition to yarn production, carded fabrics and carpets are produced on five wooden hand looms. About 20% of yarn production is used at the plant for weaving fabrics and rugs and the balance is distributed to the members of the cooperative in the various artisan centers for hand-knitting garments. Work methods are deficient and machine and labor productivity is low, plus technical know-how is lacking and basic controls are totally absent. The alpaca raw material is not scoured prior to carding, thus creating undesirable dust in the spinning processes. The yarn is washed in ordinary house detergent prior to weaving or knitting. In spite of these deficiencies, this small plant turns out acceptable yarn for handicraft items and the end products are of high quality.

9. Production of fabrics is about 1,200 meters/month and 17 carpets. In the centers, total production of garments and wool hats is about 1,200 pieces/month. FOTRAMA is engaged in a brisk export business, mainly to the USA and Europe, which accounts for about 40% of its output. Most of the export business is done through religious organizations in those countries. - 102 -

~~ANNEX 4~~

10. FOTRAMA purchases its raw material mostly from intermediaries, although it has recently attempted to collect directly from the producing areas. The management has reported that the cooperative suffers from a chronic shortage of raw material because COMBOFLA has refused to sell raw alpaca fiber or yarns to FOTRAMA, but has continued to export the fiber in excess of Pulacayo plant processing requirements. In addition, since 1972, COMBOFLA has been involved in purchasing handicraft products and is reserving an increasing share of its yarn production for artisans who will sell their end products to the COMBOFLA store.

11. COMBOFLA. The COMBOFLA processing plant in Pulacayo (about 700 km from La Paz) is housed in three old warehouses which are not suitable for textile processing. Raw material must be transported by train, which takes 15 hours from La Paz. The plant processes only alpaca fiber, and production is limited to spinning alpaca yarns on a modified semi-worsted system. It has an installed capacity of 800 spinning spindles although 400 are in no condition to be used. It is operated on one eight-hour shift and employs 49 persons and 12 temporary sorters. Its production rate is just over 10 kg of yarn per hour, about 250,000 kg per annum.

~~12. Under current conditions, the COMBOFLA's plant at Pulacayo does not lend itself to expansion and modernization for the following reasons:~~

(a) The location is poor and results in very high transportation costs. The choice of the plant site was made for socio- political reasons to provide employment to the families in Pulacayo, since the Government had closed an existing mine in the area;

~~(b) The plant layout which had to follow existing facilities is deficient and unsuitable for efficient processing;~~

(c) Most of the equipment is obsolete and in deplorable mechanical condition. Maintenance is difficult since spare parts are not available on the market and under current conditions the plant is not expected to continue operations beyond three to five years from now;

(d) Work methods and plant conditions (safety measures, lighting and humidity control) are deficient; quality control is non- existent at all stages of processing; and technical and supervisory staff lacks the know-how and experience require to run a modern mill; and

(e) The plant has been operating at a loss, and at best, only with marginal profits. Production costs are high and productivity is low. Labor accounts for about 39% of total costs (in Peru, the labor cost of a new alpaca spinning plant is about 7% of total costs). - 103 -

~~ANNEX 4~~

~~MHarketing~~

13. The marketing infrastructure for the alpaca/llama/wool agro-industry complex is inadequate and deficient. There is a critical need to improve and strengthen the selection system and storage facilities, and to place greater emphasis on product quality and export promotion.

14. Raw Material. COMBOFLA accounts for most of the collection of alpaca and llama raw material although FOTRAMA gathers some raw materials from the Central Altiplano. Also, a substantial amount of alpaca and llama fiber is bought by itinerant tradesmen (rescatistas) directly from producers at local fairs. Due to the poor marketing infrastructure at the production level and because of higher prices in Peru, about 40% of total production in the project area is sold across the border.

15. In recent years, COMBOFLA has collected about 45 tons of alpaca fiber, of which 35 tons have been used by the Pulacayo processing plant for the production of yarns. Collection of llama hair has averaged about 55 tons and sheep wool, about 190 tons. Overall, COMBOFLA's gathering system is restricted to selected producing areas, leaving out some remote regions which account for a substantial part of total production. Currently, COMBOFLA operates with three rural agencies (Puerto Acosta, Oruro and Charana), four main gathering posts and 13 secondary gathering posts, operated by a staff of 21 persons. There is one main and five secondary posts in the project area. In general, facilities such as office, warehouse and equipment, are small, inadequate and in poor condition. Transportation facilities are insufficient and constitute a major bottleneck in COMBOFLA's marketing system. COMBOFLA now has only one old truck and one light vehicle. Marketing and price information is scarce, with COMBOFLA providing some at the main gathering centers only. Besides offering lower prices than those in Peru, the fiber brought by the farmers to the collecting points is paid for by the kg, which is equivalent to 2 lb instead of 2.2 lb. This set-up confuses the farmers, who are used to the Peruvian system of buying by the pound. In addition, many times the farmer does not receive immediate cash payments but instead is issued a credit voucher which he will exchange against cash when it becomes available (often a month or two later).

16. Sorting-grading. The wool is sorted in the El Alto Station near La Paz. The sorting and classification system used for sheep wool is limited to six grades and is deficient and generally not acceptable to spinners who prefer to gather and sort their own wool or to import it. Sorting of alpaca and llama fiber is by color only (six), so that the range of yarn colors and shades is limited. Fiber length and fineness are not generally taken into account, which causes problems in spinning and prevents production of fine combed yarns.

17. End Products. Bolivia has developed a profitable tourist and export market of artisanal end products, i.e., sweaters, ponchos, blankets and other garments. This is in marked contrast with Peru, the largest alpaca fiber - 10 -

~~ANNEX 4~~

producer, a country that exports over 90% of its production in unprocessed or semi-processed form. The added value of end products as against raw material is of the order of 150%. Bolivian export legislation discourages the export of raw materials, imposing an export tax of 25% on unprocessed textile raw materials. This has the effect of encouraging their transformation into semi- finished or finished products. Presently, the domestic tourist market for these artisanal products is good and is expected to remain attractive if appropriate product adaptation and market development efforts are undertaken.

18. Additionally, export potential for alpaca/llama products is high, since they are available in Bolivia and Peru only, and world demand is such that present supplies (mainly from Peru) do not satisfy existing demand. Also, export trade requirements of alpaca and llama products are relatively simple. Since these products are not a universal textile raw material traded in commodity exchanges, such as cotton, jute or wool, export trade requirements or price quotations are limited to individual negotiations between buyers and sellers. Further, there are no international quality standards for alpaca and llama fibers or mandatory identification of such fibers in end products. There is also an absence of a universal trade-mark, such as the IWS trade- mark for wool, to identify these fibers.

19. Alpaca/llama meat, hides, and pelts are also marketed on a small scale. There is a low demand for alpaca and llama meat throughout Bolivia, with consumption confined to the producing areas and among miners. Both alpaca and llama meat are of good quality, but there is a superstition among Bolivians that disease can be transmitted by it. At present an excessive number of pelts is being processed for the handicraft industry, mainly for bedspreads, hats, and rugs. The large supply comes from small animals and the increased slaughtering of young animals. Currently, there is no legislation to regulate the production and marketing of pelts. Currently, there is no legislation to regulate the production and marketing of pelts, but to avert a decline in the alpaca and llama population, there is a need for such legislative control of the slaughter of young animals.

20. Prices and Price Setting. Farmgate prices of alpaca fiber have increased substantially over the past year rising from $b 15 per kg for white fiber and an average of $b 5.7 for colored fiber (US$0.75 and US$0.29) in 1976, to $b 90 for white (US$4.5) and $b 56 for colored fiber (US$2.8) in 1977. COMBOFLA is the main buyer and it determines and fixes prices every six months. There have been some fluctuations, as indicated in Tables 1 and 2, but they remain substantially under those in neighboring Peru, where 90% of the fiber collected is exported in processed and unprocessed form at prices determined by world market conditions. Farmgate prices in the Puno area in Peru in 1977 were reported to be between US$5.5 and US$6.5 per kg for alpaca white fiber. The fact that COMBOFLA's buying prices are usually 15 to 25% lower for white wool and 20 to 30% lower for colored wool has thus resulted in substantial outflows of Bolivian fiber to Peru. - 105 -

~~ANNEX 4~~

21. The selling price of COMBOFLA alpaca yarn is currently US$12.50 per kg, which does not allow Pulacayo plant to cover its costs. In Peru, the ex-factory price of alpaca yarn is about US$19 per kg for yarns of about the same quality. This is actually equivalent to a subsidy to foreign tourists in Bolivia. Also, the booming Peruvian handicraft industry shows that an expanding market exists for these products at even higher prices. Lower priced garments could still be produced by mixing alpaca fiber with llama fiber or sheep wool in yarn produced.

22. Prices of yarn should be adjusted to reflect production cost. More- over farmgate prices should be adjusted to follow the Peruvian prices so that the substantial outflow of raw materials to Peru can be stopped and farmers will have sufficient incentive to increase production.

~~II. WOOL COLLECTION, STORAGE AND PROCESSING UNDER THE PROJECT~~

23. The project would finance the expansion and improvement of the collection system, a new centrally located warehouse and a new processing plant. The project would also include consultant services to provide technical know-how, implement the plant control program and train plant workers. In addition the project would make provision for the establishment of a pricing mechanism that would bring Bolivian prices in line with those in Peru.

~~The Gathering System~~

24. The collection network would be enlarged and improved to cover all the producing areas. Facilities would be expanded by renting larger storage rooms, and five new posts would be built (one main and four secondary) and adequately staffed. All gathering posts would be provided with adequate furniture and office equipment. The project would finance the purchase of five new vehicles, three five-ton trucks and two lighter four-wheel drive vehicles for transportation of the fiber to La Paz.

~~Storage Facilities~~

25. Since collection of wool and fiber is seasonal (October/November to March/April), warehouse facilities would be needed for storage of collected raw materials for processing. A warehouse would be built in El Alto, near La Paz, close to the processing plant. It would be equipped with two vehicles (one five-ton truck and one pick-up), three hydraulic wool presses, two forklift trucks and furniture and office equipment. It would have a total staff of 16 persons, as shown in Table 5.

~~Processing Plant~~

26. The project would finance a new spinning plant with a total annual capacity of 595 m tons of yarns (on a three-shift basis, or 300 m tons on a two-shift basis). The plant would also include a scouring unit for the - 106 -

ANNEX 4 processing of 1,800 m tons of sheep wool for the Bolivian wool mills, plus the raw materials to be used by the plant for spinning of yarns (Table 4). La Paz was selected as the site for the new mill for the following reasons:

~~(a) the new mill would do all wool scouring for the Bolivian mills and all are located in the La Paz area;~~

~~(b) La Paz is geographically closer to the Ulla Ulla plains and the Central Altiplano, which are the major production zones for alpaca and llama fiber;~~

~~(c) about 75% of yarn sales are concentrated in metropolitan La Paz;~~

~~(d) most of the machinery agents are in La Paz, thus minimizing problems related to technical assistance and acquisition of spare parts;~~

~~(e) La Paz provides adequate power, water, and communication services, which are vital to a textile processing plant;~~

~~(f) skilled and unskilled labor is readily available;~~

~~(g) it would be easier to hire competent managerial and technical personnel in La Paz than in any other suitable location; and~~

~~(h) there is suitable road or rail transportation between La Paz and the port of Matarani in Peru for shipping the plant's products to the export markets.~~

27. Raw Material for Processing. Requirements of the improved collection network, the warehouse and of the plant have been based on projected availabi- lities of raw material, as shown in Tables 4 and 5. Production of alpaca fiber has been projected to increase from the current 132 m tons to 462 m tons by 1997 on the basis of the implementation of the credit program and extension services and improvement of the marketing system and pricing mechanism (para 37). Llama fiber collected would increase from 55 m tons to 167 m tons and, if the dehairing technology is feasible, to 1,150 m tons. The total volume of wool gathered would increase from about 200 to 2,000 m tons. All raw material would be sorted and classified at the new mill in accordance with improved sorting norms.

28. Production and Product Mix. The variety and types of yarn to be spun in the new mill would depend largely on the increase of alpaca production and the implementation of the llama dehairing processing technology. The production mix has been projected on the basis of increased availability of raw material, as shown in Table 4. However, different mixes would not pose - 107 -

~~ANNEX 4~~

~~any problem since plant characteristics offer a great deal of versatility. The various stages of production by end products are schematically illustrated in Chart 1.~~

~~29. Equipment. The list of equipment required for the new mill and its tentative cost are shown in Table 6.~~

30. Land and Building. The processing plant, including the warehouse, would be located in El Alto area near La Paz. The new mill would occupy an area of about 10,000 square meters, and the proposed one-story shed-type building would have a covered area of 7,000 square meters, including ware- housing, office facilities and worker services such as cafeteria and rest rooms. The cost of the land includes levelling, drainage and water ducts as follows:

~~US$ $b~~

~~Land (US$45/sq meter) 75,000 1,500,000 Building (US$45/sq meter) 315,000 6,300,000 Project and engineering cost 25,000 500,000 415,000 8,300,000~~

31. Labor. Tables 7 and 8 show direct and indirect labor requirements, with annual wages and salaries based on higher levels paid by the Bolivian wool industry in 1976. Prevailing social charges and fringe benefits in Bolivia represent 131% of base salary for hourly-paid workers and 73% for salaried personnel. Labor requirements are based on a two-shift operation.

~~32. Labor and Personnel Costs Prior to Plan Start-up. Plan operations are assumed to begin in year 3 of the project, but the following labor and personnel costs would be incurred prior to start-up:~~

~~(a) Technical and Administrative US$ $b~~

~~1 plant manager (11 months salary) 12,830 256,600 1 textile engineer (11 months salary) 9,170 183,400 1 industrial engineer (11 months salary) 7,600 152,000~~

~~(b) Supervision and Labor~~

2 shift supervisors (3 months salary) 1,440 28,800 6 maintenance mechanics/electricians (3 months salary) 3,150 63,000 Operators for first shift (2 months wages) 4,650 93,000 1 sorting supervisors (2 months wages) 300 6,000 20 sorters (2 months wages) 3,600 72,000 Total labor/personnel costs prior to plant start-up 42,740 854,800 - 108 -

~~ANNEX 4~~

33. Technical Assistance and Training. The new plant would require assistance from a specialized consulting firm, which would provide technical know-how and implement all the mill control programs. External assistance would also be required to set up a training program in order to train operators through rapid and efficient courses based on analytical and scientific methods. The training program would provide courses for the following positions, as a minimum: card tenders, intersecting operators, comber operators, spinners and doffers, winder tenders, and twister tenders. Further, the technical assistance and organization programs to be implemented by an external consulting firm would include:

~~(a) quality control program determination of standards/tolerances;~~

~~(b) determination of job loads and job specifications;~~

~~(c) determination of processing data;~~

~~(d) planning and production control;~~

~~(e) standard labor cost and control;~~

~~(f) maintenance control; and~~

~~(g) waste control.~~

~~34. The following is a breakdown of consulting man-weeks required for the above operator training and technical assistance programs:~~

~~(a) operator training programs 21 man-weeks~~

~~(b) technical assistance for processing data, job load, production standards, quality control, maintenance control, waste control, and labor cost control 22 man-weeks~~

~~Total 43 man-weeks~~

~~It is estimated that the above program would cost about US$110,000 ($b 2.2 million).~~

35. An expert would also be hired for about 12 man-weeks to help in setting up an adequate fiber pricing mechanism, establishing grading norms, and training the sorting operators. The cost of such an expert is estimated at about US$9,000 ($b 180,000).

36. Finally, up to six months' training prior to the start-up of operations would be arranged for the plant manager, textile engineer and industrial engineer in modern and efficient wool mills in Europe and possibly Argentina. They would also attend short specialized courses in those countries. The cost of such travel would be: - 109 - ANNEX 4

~~US$ $b~~

~~Travel 6,000 120,000 Per diems 16,200 324,000 Total 22,200 444,000~~

~~Pricing Mechanism~~

37. Under the project, the Government would be required to establish a pricing mechanismwhich wbuld provide an incentive to producers and artisans to increase production; and ensure a steady and timely supply of raw materials to the processing plant and yarn to artisans. Guaranteed minimum prices would, inter alia, reflect farm production costs, collection and storage costs, operating costs of the processing plant includinga reasonable profit margin, and the prevailing prices in Peru. In order to support this price guarantee scheme, a stabilizationfund would be set up and supported initially by Government'scontribution and built progressivelyfrom the profits of the new processing plant.

~~38. The Planning and Monitoring Division (PM) of INFOL would formulate and regulate purchasing and selling prices of fiber and yarn.~~

~~Cost Estimates~~

~~39. The project would provide financing for the following costs:~~

(a) investment expendituresincurred in the expansion and improvement of the collection network (US$116,132,including physical contingencies),the constructionand equipment of wool and fiber storage facilities (US$144,540),and the installationof a new scouring and spinning plant (US$3,404,896),including operating expenses incurred before start-up of operations, technical assistance and training. Total investment costs amount to US$3,665,568 ($b 73.3 million). Summaries of these costs are given in Tables 3, 4 and 10;

~~(b) incrementalworking capital required to allow the system to start operating at higher levels of activity. More specifically, it would consist of an amount to cover:~~

(i) six months of incremental operating costs incurred during the second semester of year 2 by the collection network in order to gather an initial stock of raw materials before the plant start up (the Pulacayo plant would be stopping operations at the end of year 2). Such incrementalcosts consist mostly of salaries of additional staff and renting of new facilities, amounting to US$9,016 ($b 180,320);

~~(ii) operating costs of the new warehouse for the same six months equals US$18,950 ($b 379,020); and _ 110 -~~

~~ANNEX 4~~

~~(iii) the value of the incremental stock of raw material gathered during late year 2 and early year 3 for the plant to be able to operate continuously in year 3 (US$1.5 million).~~

~~Total costs of wool collection, storage and processing plant are summarized below:~~

~~Total Total Foreign Foreign Costs Costs Exchange Exchange Year 1 Year 2 Year 3 $b '000 US$'000 % US$'000~~

Investment costs Processing plant 11,346 50,561 - 61,907 3,095 84 2,609 Collection and storage - 4,740 - 4,740 237 64 152 Incremental working capital Collection network - 172 _ 172 9 _ _ Storage - 379 - 379 19 - - Inventory build-up - 9,743 20,257 30,000 1,500 - -

~~Baseline cost 11,346 65,595 20,257 97,198 4,860 57 2,761~~

~~Physical contingencies (10% of investment) 1,135 5,530 - 6,665 333 57 190~~

~~Total project cost 12,481 71,125 20,257 103,863 5,193 57 2,951~~

~~Operating Results~~

40. The financial rate of return obtained is 29% detailed calculations for which are shown in Tables 10 and ll. Sensitivity tests have been carried out under various assumptions as indicated below. - 111 -

~~ANNEX 4~~

~~Financial Rate of Return~~

~~Best estimate 29~~

~~Investment cost increased by:~~

~~10% 26 20% 23~~

~~Cost of alpaca fiber increased by:~~

~~20% 28 40% 26~~

~~Cost of sheep wool for scouring increased by:~~

~~20% 17 40% 5~~

~~All operating costs increased by:~~

~~20% 20 40% 5~~

~~Price of alpaca yarn decreased by:~~

~~20% 23 40% 13~~

~~Price of scoured wool decreased by:~~

~~20% 15 40% 1~~

~~Volume of alpaca fiber and yarn decreased by:~~

~~20% 25 40% 19~~

~~Volume of sheep wool and woolen yarn decreased by:~~

~~20% 28 40% 26~~

~~Rate of return with llama dehairing technology 35 - 112 -~~

~~ANNEX 4~~

~~Implementation~~

41. The Marketing and Processing Division (COMPRO) of INFOL would be responsible for the implementation of the collection, storage and processing component, according to the time schedule presented in Chart 2. COMPRO would take over the existing COMBOFLA facilities and would assume full responsibility for the collection, sorting, packing and selling of fleece and yarn to artisans and industrial users. For the wool collection, storage and processing a loan would be made by the Government to INFOL under the project for the total amount of US$5.2 million. It would have a total maturity of 15 years, including a grace period of five years for amortization and two years for interest payments. The rate of interest would be 12%. The schedule of debt repayment is shown in the attached cash flow projections (Table 12).

~~December 8, 1977 - 113 - ANNEX 4 Tables 1 and 2 BOLIVIA~~

~~ULLA ULLA DEVELOPMENT PROJECT~~

~~Table 1: Bolivia - Prices paid by COMBOFLA for Alpaca Fiber~~

~~($b per kg)~~

~~Color 1971 1972 1973 1974 1975 1976 1977~~

White 15.01 14.72 28.56 42.50 38.92 63.23 90.00 Light Fawn 12.45 12.55 22.88 35.75 36.50 60.86 70.00 Coffee 5.75 7.82 21.09 33.92 29.50 39.17 56.00 Black 5.74 7.82 21.04 33.83 28.58 39.17 56.00 Gray 5.71 7.82 21.04 33.83 27.50 39.25 56.00 Mixed 5.68 7.83 18.46 18.67 16.33 21.92 36.00

~~Table 2: Peru - FOB Prices, First Quality Raw Fiber (Greasy)~~

~~(Mostly White)~~

~~Exchange Rate = Soles/ ',US$ Sales/kg US$1 per kilo~~

~~1967 99.7 27 3.69 1968 89.1 38 2.34 1969 69.4 38 1.83 1970 70.8 38 1.86 1971 59.9 38 1.58 1972 68.0 38 1.79 1973 107.6 38 2.83 1974 129.0 45 3.39 1975 109.8 45 2.44 1976 300.0* 69 4.35~~

* Provisional

~~June 6, 1977 BOLIVIA ULLA ULLA DEVELOPMENT PROJECT Processing Plant~~

~~Volume of Raw Material Processed 1/~~

Raw Materials for Production of Yarns Production of Yarns For Scouring Production of (m tons - Greasy Basis) only (m tons of yarns) Scoured Sheepwool Sheep Sheep (m tons) Year Alpaca Llama Wool Acrylic Sheepwool Alpaca Llama Wool Acrylic Total Clean basis 3 1980 56 122 174 115 1350 32 44 73 111 260 675 4 75 140 200 126 1800 43 50 85 122 300 900 5 80 140 190 126 1800 46 50 82 122 300 900 6 100 140 180 122 1800 57 50 75 118 300 900 7 120 145 167 113 1800 68 52 70 110 300 900 8 140 145 155 106 1800 80 52 65 103 300 900 9 165 145 145 97 1800 94 52 60 94 300 900 10 195 150 131 82 1800 111 54 55 80 300 900 11 230 150 113 67 1800 131 54 50 65 300 900 12 250 155 107 38 1800 142 56 65 37 300 900 13 295 155 95 37 1800 168 56 40 36 300 900 14 320 160 83 26 1800 182 58 35 25 300 900 15 355 160 60 16 1800 202 58 25 15 300 900 16 38o 165 10 - 1800 217 59 20 - 300 900 17 390 167 - 1800 222 60 18 - 300 900

~~I/ One shift only during the first 3 months of operation, 2 shifts afterwards. These volumes do not take into account extra benefits from possible future llama dehairing.~~

~~December 6, 1977 D0 -115 - ANNEX .4 BOLIVIA Table 4~~

~~ULLA ULLA DEVELOPMENT PROJECT~~

~~Processing Plant Alpaca Raw Material Available -- Greasy Basis (m tons) Projected Domestic use Processing Year Production Fotrama/Forno Street Trade Plant~~

~~3 (1980) 132 47 29-1/ 56~~

~~4 142 47 20 75~~

~~5 158 47 20 60~~

~~6 170 50 20 100~~

~~7 190 50 20 120~~

~~8 210 50 20 140~~

~~9 245 50 20 165~~

~~10 265 50 20 195~~

~~11 300 50 20 230~~

~~250 12 - 320 50 20~~

~~13 365 50 20 295~~

~~14 390 50 20 320~~

~~15 425 50 20 355~~

~~16 449 50 20 379~~

~~17 462 50 20 392~~

~~1/ Still includes some sales into Peru.~~

~~December 6, 1977 - 116 -~~

~~BOLIVIA ANNEX 4 Table 5~~

~~ULLA ULLA DEVELOPMENTPROJECT~~

~~Collection and Storage~~

~~Incremental Costs ($b) Foreign Exchange No. of Units Unit Cost Year 1 Year 2 Year 3 on US$ % US$~~

~~Collection Network~~

Investment Costs Land and buildings 2 One main post 150 2 500 - 75,000 - 3,750 30 1,125 Four secondary posts 400 m 500 - 200,000 - 10,000 30 3,000 Vehicles Five-ton trucks 3 300,000 - 900,000 - 45,000 95 42,750 Four-wheel drive vehicles 2 160,000 - 320,000 - 16,000 95 15,200 Furniture and office equipment 22 28,023(per - 616,500 - 30,825 60 18,495 trading post) Total investment - 2,111,500 - 105,575 76 80,570

~~Physical contingencies (10%) - 211,150 - 10,557 76 8,024~~

Incremental Operating Costs Rent (new facilities for existing posts) Main posts 4 1,500 - 3,000 6,000 - - - 8econdary posts 13 800 - 5,200 10,400 - - - Salaries (per man years) Agent 1 40,040 - 20,020 40,040 - - - Sub-agents 4 32,200 - 64,400 128,800 - - - Drivers 1 35,000 17,500 35,000 - - - Vehicle operating costs - 55,000 110,000 - 15 _ Office supplies - 7,000 14,000 - 50 -

~~Total incremental operating costs - 172,120 344,240~~

~~Warehouse~~

Investment Costs 2 Land 1 800 m2 200 - 360,000 - 18,000 - - Building 1,800 m 700 - 1,260,000 - 63,000 40 25,200 Vehicle Five-ton truck 1 300,000 - 300,000 - 15,000 95 14,250 Pick-up truck 1 160,000 - 160,000 - 8,000 95 7,600, Machinery Hrydraulicwool piesses 3 70,000 - 210,000 - 10,500 95 9,975 Fork-lift trucks 2 120,000 - 240,000 - 12,000 95 11,400 Furniture and equipment 1/ 98,000 - 98,000 - 4,900 60 2,940

~~Total investment costs - 2,628,000 - 131,400 54 71,365~~

~~Physical contingencies (10%) - 262,800 - 13,140 54 7,096~~

Operating Costs Salaries per man year Manager 1 88,000 - 44,000 88,000 - - - Warehouse supervisors 2 74,900 - 74,900 149,800 - - - Bookkeeper 1 59,920 - 29,960 59,920 - - - Clerk 1 44,940 - 22,470 44,940 - - - Guards 2 29,960 - 29,960 59,920 - - - Laborers 6 28,000 - 84,000 168,000 - - - Typist 1 37,460 - 18,730 37,460 - _ _ Drivers 2 35,000 - 35,000 70,000 - - -

~~Sub-total - 339,020 678,040 - - -~~

~~Vehicles operating costs - 30,000 60,000 - 15 - Office supplies - 10,000 20,000 - 50 -~~

~~Total operating costs - 379,020 758,040~~

~~Including safe box.~~

~~June 2, 1977 BOLIVIA~~

~~ULLA ULLA DEVELOPMENT PROJECT~~

~~Collection and Storage - Project Costs~~

~~Total Total Costs Costs Foreign Exchange (b.'000) (US$) (%) US$ (Year 2)~~

~~I. Collection Network~~

~~Investment costs 2,112 105,575 76 80,570 Incremental operating costs"/ 172 8,606 6 537~~

~~II. Warehouse~~

~~Investment costs. 2,628 131,400 54 71,365 Operating costs- 379 18,951 3 475 H~~

~~Total Baseline Cost 5,291 264,532 58 152,947~~

~~Physical Contingencies (10% of investment costs) 474 23,697 64 15,120~~

~~Total Cost 5,765 288,229 58 168,067~~

~~1/ Incremental operating costs incurred during the last six months of year 2, in order to gather and store increased quantities of raw material prior to the plant start-up.~~

~~CO 118 -~~

~~BOLIVIA ANNEX 4 Table 7 ULLA ULLA DEVELOPMENT PROJECT~~

~~Processing Plant~~

~~Equipment~~

~~Unit Total Total Description No. of Units Price Cost Cost ------US$ ------($b)~~

Opener-teaser 1 18,000 18,000 360,000 5-bowl scouring train with dryer and hopper 1 600,000 600,000 12,000,000 Blender mixed with emulsifier 1 36,000 36,000 720,000 Carding set with hopper feeder 1 138,000 138,000 2,760,000 Intersecting draw frames 2 21,600 43,200 864,000 Rectilinear combers 4 24,000 96,000 1,920,000 Blender intersecting 1 24,000 24,000 480,000 Intersecting with auto-leveller 2 33,000 66,000 1,320,000 Roving frame (84 spindles) 1 53,900 53,900 1,078,000 Ring spinning frames (384 spindles each) 5 72,000 360,000 7,200,000 Yarn vaporizing unit 1 12,000 12,000 240,000 2-for-1 twisted (144 spindles) 1 60,480 60,480 1,209,600 Automatic cone winder (40 spindles) 1 96,000 96,000 1,920,000 Yarn doubler (20 spindles) 1 12,000 12,000 240,000 Ball winder (16 spindles) 1 17,600 17,600 352,000 Bale press 1 6,000 6,000 120,000 Testing equipment (sliver wrap, precision balance. Uster regularity tester, count balance, twist tester, airconditioning, yarn dinamometer, humidity tester, rapid grease extracting apparatus) 60,000 1,200,000 Boiler 1 30,000 30,000 600,000 Humidifying equipment 3 28,330 85,000 1,700,000 Electrical, water and stream installation 40,000 800,000 Material handling equipment (hand trucks, boxes, cans) 7,500 150,000 Truck 1 18,000 360,000 Fork lift truck (battery operated) 1 6,000 120,000 Weighing scales 4 3,600 72,000 Pick-up van 1 10,000 200,000 Spare parts and accessories (8%) 151,900 3,038,800

~~Freight, insurance and erection cost (20%) 410,200 8,204,400~~

~~Total Equipment Cost 2,461,400 49,228,000~~

~~June 6, 1977 ANNEX 4 - 119 - Table 8~~

~~BOLIVIA~~

~~ULLA ULLA DEVELOPMENT PROJECT~~

~~Processing Plant~~

~~Direct and Indirect Labor and Annual Cost~~

~~Yearly Job Classification No. of Workers Wage Cost US$ (US$) ($b)~~

Shift foremen 2 2,880 5,760 115,200 Sorting supervisor 1 (1 shift) 1,800 1,800 36,000 Wool sorters 42 (1 shift) 1,080 45,360 907,200 Scouring operators 2 (1 shift) 1,440 2,880 57,600 Opener operators 2 (1 shift) 1,080 2,160 43,200 Opener helpers 2 (1 shift) 940 1,880 37,600 Blender operator 1 (1 shift) 1,080 1,080 21,600 Draw frame tenders 2 1,080 2,160 43,200 Combing tenders 2 1,440 2,880 57,600 Auto-leveller tenders 2 1,080 2,160 43,200 Roving frame tenders 2 1,080 2,160 43,200 Spinners 6 1,080 6,480 129,600 Doffers 2 1,080 2,160 43,200 Yarn vaporizing operators 2 (1 shift) 1,080 2,160 43,200 Winder tenders 2 1,080 2,160 43,200 Dou-bler tenders 2 1,080 2,160 43,200 Twister tenders 4 1,080 4,320 86,400 Bal.l winder tenders 2 1,080 2,160 43,200 Transport helpers 2 940 1,880 37,600 Floor sweepers 4 940 3,760 75,200 Yarn packers 2 (1 shift) 1,080 2,160 43,200 Bale press operators 2 (1 shift) 1,080 2,160 43,200 Boiler man 1 (1 shift) 1,800 1,800 36,000 Fork lift driver 1 2,100 2,100 42,000 Truck driver 1 2,100 2,100 42,000 Truck driver helpers 2 1,800 3,600 72,000 Fa,Ller,card pin repairman 1 2,100 2,100 42,000 Maintenance mechanics 4 2,100 8,400 168,000 Electricians 2 2,100 4,200 84,000 We:Lder 1 2,100 2,100 42,000 Raw material warehouse 2 1,800 3,600 72,000 Spare parts store attendant 1 1,800 1,800 36,000 Shipping room clerks 2 1,800 3,600 72,000 Gate guards 3 2,100 6,300 126,000

~~Total - Without Social Charges 111 143,54,) 2,870,800~~

~~Total - With Social Charges (131%) 331,577 6,631,540~~

~~June 6, 1977 120 ANNEX 4 Table 9 BOLIVIA~~

~~ULLA ULLA DEVELOPMENTPROJECT~~

~~Technical and Administrative Personnel and Cost~~

~~Annual Salary Total Annual Cost Job Classification No. (US$) (US$) ($b)~~

Plant manager 1 14,000 14,000 280,000 Textile engineer 1 8,300 8,300 166,000 Sales manager 1 10,300 10,300 206,000 Office manager/accountant 1 7,000 7,000 140,000 Salesmen 2 7,000 14,000 280,000 Purchasing agent 1 5,700 5,700 114,000 Accounting clerk 1 4,300 4,300 86,000 Office clerk 1 4,300 4,300 86,000 Secretary 1 4,300 4,300 86,000 Typist 1 2,800 2,800 56,000 Nurse 1 2,800 2,800 56,000 Office boy 1 1,000 1,000 20,000 Laboratory testers 2 3,400 6,800 136,000 Janitor 1 750 750 15,000

~~Total - without social charges 16 86,350 1,727,000~~

~~Total - with social charges (73% of base salary) 149,385 2,987,710~~

~~Based on the foregoing tables, the annual cost of direct/indirect labor and technical administrative personnel is summarized as follows:~~

~~Direct/indirect 111 workers 331,577 6,631,540 Technical and administrative 16 employees 149,385 2.987.700~~

~~Total labor cost/year 127 480,962 9,619,240~~

~~June 6, 1977 _ 121 _ ANNEX 4 Table 10 BOLIVIA~~

~~ULLA ULLA DEVELOPMENT PROJECT~~

~~Processing Plant~~

~~Investment Costs~~

~~Project Year Total Total ($b'000) Cost Cost Foreign Exchange 1 2 ($b'000) US$ % -US$~~

1. Land purchase 1,500 - 1,500 75,000 - - 2. Building (including engineering costs) - 6,800 6,800 340,000 32 110,250 3. Machinery and equipment (including erection costs) 9,846 39,382 49,228 2,461,400 95 2,338,300 4. Office equipment and furniture - 700 700 35,000 55 19,250 5. Labor and personnel expenses prior to plant start-up 855 855 42,760 - - 6. Training and technical assistance

~~i) Plant operators training program - 2,200 2,200 110,000 100 110,000 ii) Training of sorters - 180 180 9,000 100 9,000 iii) Outside training of key personnel - 444 444 22,200 100 22,200~~

~~Sub-total - 2,824 2,824 141,200 100 141,200~~

~~Costs 11,346 50,561 61,907 3,095,360 84 2,609,000~~

~~Physical contingencies (10%) 1,135 5,056 6,191 309,536 84 260,900~~

~~Total investment Costs 12,481 55,617 68,098 3,404,096 84 2,869,900~~

~~June 6, 1977 bOLIVIA~~

~~YLJA TIkLA DEVELOPSMNT PROJECT~~

~~Collection. Storage and Processing of Rgn Material~~

~~Income statetent ($6 '000) Unit With Pcoijet Price --- _----Without Projeet------__------Y------______--- Lnit ($b) Year 1 Year 2 Year 3-20 8 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17-20~~

~~IntenR~~

Sales fron the Pro-.a.iRg Plaot Scoaccd sheep -ool (elean bkner) kg 58 - - - 39,160 52,200 52,200 52,200 52,200 52,200 52,200 52,200 52,200 52,200 52,200 52,200 52,200 52,200 52,200 Alpaca yarn kg 340 6,250 6,250 - 7,000 7,750 10,880 14,620 15,640 19,380 23,120 27,200 31,960 37,740 44,540 48,280 57,120 61,880 68,880 73,780 75,480 Lig.a Yarc kg 2200 - - - 9,600 01,000 11,000 11,000 11,440 11,440 11,440 11,880 11,880 12,320 12,320 12,760 12,760 12,9805 03,2008 She-p .n.. yarn kg 140 -310,220 11,900 81,480 10,500 9,800 94100 8,400 7,700 7 000 6 300 5 600 4 900 3,580 2808 2,818 Accylic yaco kg 120 - - - - - 13,320 14,640 14,640 14.160 13.200 12,360 11,280 9,600 7,800 4,440 4,320 3,000 1,800 - -

~~Sob-total 6,250 6,250 - 7,000 7,750 83,260 104,360 104,960 107,240 109,760 112,300 115,280 119,120 123,420 123,540 131,560 134,740 139,140 141,760 143,698~~

Waste rcnperocloo: 1/ of alpacl proenslng kg 10 - - - - - 40 50 60 70 s0 100 11i 140 160 170 210 220 250 290 290 of llama fiber pro- easing kg 5 - - - - - 40 50 50 50 50 50 50 50 50 55 55 55 55 55 60 of sheep wool procenasig kg 3 - - - - - 27 30 27 27 24 24 21 18 18 15 15 12 9 3 -

~~Sb-otal 107 130 137 147 154 174 182 208 228 240 280 287 314 348 350~~

~~Total sgles proc--uiog plant 6,250 6,250 - 7,000 7,750 03,367 104,490 105,097 107.387 109.914 112,474 115,462 119,328 123,648 123,780 131,840 135,027 139,454 142,108 144,048~~

Sale, fIro the Collection Net-ork (greRsy batin) Alpaca fiber 2/ kg 21 1,000 1,000 4,600 1,000 1,000 1,675 1,684 1,693 1,702 1,711 1,720 1,729 1,738 1,747 1,756 1,765 1,774 1,783 1,792 1,800 Clone fiber kg 45 3/ 2,475 2,475 2,475 2,475 2,475 ------Sh-p -ool kg 26 4.940 4,940 4.940 4.940 4,940 ------_ -_

~~Tetel salet colleation network 0,415 8,415 12.015 0,415 0,405 1,675 1.684 1.693 1,702 1.711 1,720 1,729 1,738 1,747 1,756 1,765 1.774 1.783 1,792 1,800~~

~~InentyrY Adluatmea-t - - - - 9.637 5,504 309 1209) 099 268 375 491 544 344 730 441 679 743~~

~~Total income 14,665 14,665 12,015 15,415 25,002 90.546 106,483 106.501 109,688 111.893 114,569 117,682 121,610 125,739 226,266 134,046 13P,080 141,9180143,900 145,848~~

1/ 7%. of co alpgca and ISNR Other spun and 55. at sPun sheep wool. w/ itroc and tikh project yearn I and 2, glpoct fiber sold 1-celly or enported td $b 100 per htil. WitS, project ypar 3 onnards, 25 taos collected for acd told to FOTRAMA/FORNOat cost (9b 67 to 72 per kilo, according to the color it). 3/ Etport price.

Natn. Total -alioc ti-a of aLpaca fiber in pre-entply a- abo-t 45 coos af alpaca pot yp-r, af which 35 oct pronessed into -ar,,u(25 coos) r e b. the '-n.Yp plant. Thc Palocapo plant in e-pecred to clout at tilc ed of pear 2, hoth nith and withoct tho project, Witoct project, icin astantd chat, bkyood year 2, thie existLng coillec-on ne-ork would continue to giahcr aboat 45 cons of aIpeca per Ypor, 55 coot af leau fiber, mostly for cxport, end ahoar 190 cons tf abtep anal to bc sold tothe local induotry. At p...e.t, .. alpaca yarn i old at a nubnidieed price of 000S2.50 per kilo snd thc plant in op.rcaing at a lots. It heu beenioscd .t,t aith Pr-ject, the pcice ill bs raised to US$14 in pear 1 and USS15.5 in yper 2 to teach an auohubidi-ed I-el of US$17 ohen tih nsw plant starts opsrating.

~~Dscohber 6, 19i7 BOLIVIA lI'LA" ULLA DEVELOP9l7NT~PR03447~~

~~Clcio,Storage and Process io of Ra- Material~~

~~Intone SLtatoset ($b '000)~~

~~With Project ----- wthout Project----...... Yenrl Oear21 Tenrl-on2 3 1, 5 4 -7 0 ~ ~ ~~~EO ~~~-1i ~~~~912 13 14 1L5 1L6 17-20~~

Collection Net-ork Selectee it 740 740 740 740 842 783 703 783 783 783 783 783 783 783 783 783 783 783 783 783 Recta 16 16 10 16 24 33 33 33 33 33 33 33 33 33 33 33 33 33 33 33 V.hitles oPerating and -ialteno-ec-ta 4f 40 40 40 85 150 130 150 130 130 150 110 100 150 150 150 150 150 150 1Sf Offire eoppltes 30 30 30 38 37 44 44 44 44 44 44 44 44 44 44 44 44 44 44 44 Seprecfatian S2/ 1 - - - - 320 32 32 32 _32 320 -- 320 -320 320 320 2580 250 25a 258 200

~~Sob-tOp.tl 82 2 86 86 88 .3 1,330 1,330 1,330 1,330 1,330 1,330 1,330 1,330 1,330 1,260 1,260 1,260 1,260 1,268~~

P)cp..ceeced by the plett sheeP cool forY.OOoor -fnly- - - - 33,750 300 4,0 45,000200 45,000 48,0 200 45.0004,0 45,0001004,000 45.000 45,000 Cheepcool for yarn productIon- - - - - ~~~~~~~~~4,3303,000. 4,730 4,300 4173 3,73 365 ,270 2.875 2.675 2,375 2,075 1,000 250- a1pana fiber 2,317 2,317 - 2.317 2,317 3,707 4,965 3,296 6,700 8,064 8,436 13,187 13,289 15,770 17,250 20,473 22,336 25,623 29,288 29,020 11eno ftieb-- - - - 4.880 5.600 5.600 2.600 5,000 3.000 5.000 6.000 6.000 6.200 6.200 6.400 6.400 6.600 6.6800

~~Sob-totL1 2,317 2.317 - 2.317 2,317 46,687 60,063 61,000 60,646 63,038 64,111 65,612 67,274 69,753 71,125 74,046 75.011 78,523 81,249 01,300~~

~~if) edi-rneo In f-rator-n -- - 9,743 3.15,04 308 2089) 599 260 370 481 244 344 730 441 679 743 - -~~

~~Sub-total (i end ii) 2,317 2,317 - 2,317 13,060 52,181 60,874 61.311 61,245 63,307 64,406 66,103 60,110 70,087 71,055 74,407 76,490 79,266 81,149 81,100~~

Ric naerolcllected fot other porpo- Sheep ..ool 4,750 4,730 4,750 4,756 4,750 ------Alpac-ILber 663 663 2,800 663 663 1.655 1,663 1,672 1,680 1.689 1,687 1,706 1,714 1,723 1,731 1,740 1.348 1,737 1.766 1.775 Llm iEr, 2.240 2.240 2,240 2.240 2.240 ------

~~Sob-total 7,653 7,653 9.970 7,653 7,653 1,655 1.663 1.672 1.680 1,689 1.697 1.706 1.714 1.723 1.731 1.740 1.748 1.757 1,766_ 1.775~~

~~Ttot1 t-1leotion ont-ok 10.796 10.796 10.796 10,796 20.711 55,176 63,867 64,313 64.255 66.326 67.313 69.139 71.162 73.150 74.916 77.495 79.506 82.291 84,183 84.543~~

Wagna ed salarie - - - - 339 670 670 670 670 670 670 670 670 670 678 678 678 670 678 678 Vehicle o:.Pera.tingand ma.te etooc. ... rt - - 30 60 60 60 60 60 60 60 60 60 60 60 60 60 00 60 Depreciatti 2/ - - -- - 210 210 010 210 210 210 210 210 200 210 135 155 155 135 125 - - - - ~~~ ~~~20 ~~1020 20 20 20 20 20 20 20 20 20 20 20 20 20 Tot.1 wa-hoa...- 379 980 968 868 968 968 968 968 968 968 868 913 813 913 9-13 913

Proc..esingPlant Raw ma.teial - agryltt fiber.- - - 4,620 5,040 5.840 4,000 4,520 4.240 3,080 3,280 2.680 1,520 1,400 1.040 640 - - Labor _ng_ 1,430 1,450 - 1,450 1,450 6,632 6,632 6.632 4,632 6,632 6.632 6,632 6.632 6.632 6.632 6,632 6.632 6,632 6.632 6,632 salarica , , ~~~~~~~~~~~~2,900 ~~~~~~~~~2,9002,30 3988 2 ,8082 ,888 2 ,980 2,8882 ,900 2,9882 .980 2,9082 ,9882 ,9882 ,8882:M oth-rcss caias deeregets 380 440 440 440 440 440 440 440 440 440 440 440 440 440 440 electricity 250 250 - 250 250 840 960 960 960 960 860 960 960 860 860 960 960 960 960 960 eater 80 100 100 100 100 100 100 100 100 100 100 100 100 100 100 other 7,263 5/ 2.263 5/ - 2,263 ~ 2.263 v/ 1,000 1,160 1160 1,100 1,100 1,060 1.160 1.160 1,160 1,160 1.160 1,160 1,160 1,160 1,160 M.ct-tenog 4 repairs - - - 1,000L 1,000 1,00010 0 1,00 .080 1,000 1.080 1,000 1,080 1,080 1,080 1,080 1,080 1.080 SeIpr_ciatioc2/ - - - - 5,4000 5,4800 5,0400 5,400 5,400 5,400 5,400 5,400 5.400 5,400 675 675 675 635 675 indIrect ra-a 6/- - -- - 2,335 2.669 2.614 2.643 2.585 2.495 2.419 2,284 2.179 2.013 1,939 1,871 1.820 1.860 1.850

~~Total ptaonn-tng plant 3.963 3,963 - 3,963 3.963 25.335 26.469 26.414 26.283 25.865 25,495 25,059 24.334 23.619 22.293 17.454 16.946 16.495 15.895 15.893~~

~~Total opegating cota 14.759 14.759 10.796 14.759 25.043 81.499 91.304 91.895 01.506 93.159 93.976 9516 9,44 7.3 80P 586 9765 9,91099 1139~~

~~Sat Intone -94 -94 1.219 656 739 9.047 15.179 14,606 18,182 1974 053 22,516 25.146 28,002 28,089 38.184 40.115 42.201 _412909_4 48~~

I/ wit'hootthe project and, oitb tbc project, yea I and 2: i-cloding alr of floeno-tare cperting in iS Alto.. 2/ 2o, on veh ialna, 10% on machinery and eqeip-et, ST .. boildgogo. 3/P-echaing pri...a:alp-c = lb 66,2 per bile wiehoot proignt, and, with projcci, frog $b 66.2 per kilo o- year 1, 2 end 3 (25% ahite fiber 9 $6 90 pet kilo and 75% colored fiber 0 $b 58 pcr kilo) te $4 71 by year 17 (407 white, 60% colord). 4/ 15 tone of alpaca fibec, 25 t-e ef llam fib- and 310 to-e of heep -aol 5/ Includes oerheads, tra...portattoo cata iron Pclac.ya ta to Poe, dep-ri.tioo acd Indiret ta-c, and u. -eit tnar-- and repair-, 6/ 15% sal.. tan -0cylic y-rn, 2% aalnsia .on o1paca and 1lan. yan.t.,0

~~D.t.nhb- 6, 1977 BOLIVLA~~

~~ULLA ULLA DEVELOPMENT PROJECT~~

~~Processing, Collection. Storage Financial Rate of Return ($b '000)~~

~~1 2 3 4 5 6 7 8~~

Total Total Net Net Operating Investment Costs Total Benefit Incremental Year Costs Depreciation (1 - 2) Costs (3 + 4) Benefits (6 - 5) Benefit -94 _ Without Project 1 14,759 * 14,759 - 14,759 14,665 _ 2 14,759 * 14,759 - 14,759 14,665 -94 3-20 10,796 * 10,796 - 10,796 12,015 1,219 - -11,731 With Project 1 14,759 * 14,759 12,481 27,240 15,415 -11,825 2 25,043 * 25,043 60,831 85,874 25,802 -60,072 -59,978 3 81,499 5,930 75,569 - 75,569 90,546 14,977 13,303 19,890 4 91,304 5,930 85,374 - 85,374 106,483 21,109 19,317 5 91,895 5,930 85,965 - 85,965 106,501 20,536 6 91,506 5,930 85,576 - 85,576 109,688 24,112 22,893 7 93,159 5,930 87,229 2,360 89,589 111,893 22,304 21,085 8 93,976 5,930 88,046 - 88,046 114,569 26,523 25,304 27,227 9 95,166 5,930 89,236 - 89,236 117,682 28,446 10 96,464 5,930 90,534 - 90,534 121,610 31,076 29,857 11 97,736 5,930 91,807 - 91,807 125,739 33,932 32,713 12 98,177 5,930 92,247 3,710 95,957 126,266 30,309 29,090 13 95,862 1,088 94,774 - 94,774 134,046 39,272 38,053 14 97,365 1,088 96,277 - 96,277 137,480 41,203 39,984 15 99,699 1,088 98,611 - 98,611 141,980 43,369 42,150 16 100,991 1,088 99,903 - 99,903 143,900 43,997 42,778 17-19 101,349 1,088 100,261 - 100,261 145,848 45,587 44,368 20 101,349 1,088 100,261 - 100,261 172,408 1/ 72,147 70,928

~~Financial Rate of Return 29%~~

* negligible

~~M 4 1/ Including residual value: Land $b 1,500,000 Buildings (15%) 680,000 Machinery & equipment (8%) 4,000,000 Raw materials - inventory 20,380,000~~

~~Total $b 26,560,000~~

~~December 6, 1977 SQL [VIA~~

~~,LLA LLL OEPJP3IEOT P0R0JECC~~

~~CoLLectioo, Storage and Processing of Raw Matecrial~~

~~Cash PFsowfeelectiose~~

~~(lb '505)~~

~~Slit Project~~

~~Year 1-2 Year 3 Year 4-20 5 2 3 4 5 i 7 97 10 11 12 13 14 15 16 17-20~~

Cash Inflow PJla-ayo Plsnt Seloago Valon - 3,OO 3,000 ------Sales from the precessing plane 6,250 - - 7,000 7,750 83,367 104,480 105,)97 107,387 109,914 112,474 115,062 119,328 123,648 123,780 131,840 135,027 139,454 142,108 144,048 from tin collecttion etecrk 8,415 12.015 12.015 8,415 8.415 1,675 _ 1.684 1,693 1,702 1,711 1.720 1,729 1,738 1,747 1,756 1.765 1,774 1.783 1.792 1,800

~~Sob-tocal 14,665 15,015 12,015 15,415 16,165 88,940 106,174 106,790 109,089 111,625 114,194 117,191 121,066 125,395 125,536 133,605 136,801 141,237 143,900 145,848~~

tong-term Loan Proones.ig PlacIt far i__o_tmeot - - - 12,481 55,617 ------Colleitten Netoork torlotostototi . . . 2,323 for -etlletc of raosetls - - 9,743 20,257 ------for ie---tal ope..tiog -ost (6 os.) - 172 2D-257 S torago forgeveetmeo- 2,891 - for eperstiog Pots (6 mos.) - _ _ 379

~~Sob-total 12~~

~~Total caoh ioflow 14.665 15.015 12,015 27,896 87,290 108.299 106,174 106,790 109,089 111,625 114.194 117,191 121,066 125,395 125,536 133,605 136,801 141,237 143,900 145,848~~

~~Cash Outflow~~

loves tonot tm(i-ldig pbyei-al cootiogeeotes9 1/ 2/ plant _ _ - 12,481 55,617 - - - - 2,360) - - - - - 3,710 - - - -5- rollottioc - - - - 2,323 -2 - stora8e - - - - 2,891 ------2- opematino Costs 14.759 10.796 10.796 14.759 25.043 81.499 91,304 91.895 91,506 93.159 93.976 95,166 96.464 97.736 98,177 95.862 97,365 99.699 100,991 101.349

~~Total ca-1b -otfloe 14,759 ID.796 10,796 27.240 85.874 81.499 91.304 91.895 91.506 95.519 93.976 95.166 96.464 97.736 101,887 95.862 97.365 99,699 100.991 101.349~~

~~Cath Bailace beform Debt Service -94 4,219 1.219 656 1,416 26.800 14,870 14,895 17.583 16,106 20,218 22,025 24,602 27,659 23.649 37.743 39,436 41,538 42,909 44_499~~

Debr Service Omortloeioe _------2,000 2,000 4,000 5,000 10,DOD 12,000 12,000 18,000 20,000 18,863 - - oerenest 125. p.a. _ _ _ - - 13,208 13,298 13,208 13,208 12,968 12.728 12,248 11,648 ID.448 9,008 7.568 5,408 3,908 -30

~~Total bebseroict - - - - - 13.208 13,208 13.208 15.208 14,96 B 16,728 17,248 21,648 22.448 21,008 25.568 25.408 21,871 -~~

~~Cash b1ao... after debt o-r-iro -94 4.219 1.219 656 1.416 13.592 1.662 i,687 2,375 1,138 3.490 4,777 2,954 5.211 2,641 12.175 14,028 19,667 42,909 44499~~

Tao no profit (2O2.) - 844 844 131 283 2,718 332 337 475 228 698 955 591 1,042 528 2,435 2,806 3,933 9,494 9,968 tacIt balance after debt service aod ten -94 3,375 375 525 1,135 10,674 1,330 1,350 1,900 910 2,79 5,92 2,363 4,169 2,113 9,740 11,222 15,734 33,415 34,939

~~1/ Replacemeni of v-hLio.s ($b 2.36 million). 2/ Rep lacoont of vehicles, pltr toetieg nquopamo-t (Sb 1.2 millen) sod oarmial heodlieg equipm-nt SOb 150,000).~~

~~Tlornb-r 6. 1977 ANNEX 4 Chart 1 BOLIVIA ULLA ULLA DEVELOPMENT PROJECT PROPOSED PRODUCTION FLOW FOR THE PLANT~~

~~WOOL WOOL ALPACA LLAMA ACRYLIC FOR SALE YARN YARN YARN YARN~~

~~STORAGE~~

~~SORTING~~

~~OPENING~~

~~SCOURING/DRYING~~

~~BLENDING~~

~~CARDING~~

~~PRE-COMB DRAWING~~

~~COMBING 0~~

~~. ' *,,~* *+~~

~~POST-COMB DRAWING~~

~~ROVING~~

~~SPINNING~~

~~VAPORIZING~~

~~WINDING~~

~~DOUBLING~~

~~TWVISTING~~

~~BALLWINDING~~

~~PACKING~~

~~World Bank-1 7639 BOLIVIA ULLA ULLA DEVELOPMENT PROJECT PROCESSING,COLLECTION & STORAGE COMPONENT IMPLEMENTATION SCHEDULE~~

~~YEAR 1978 1979 1980~~

~~MONTH J F IMIA M J J A S 0 N D J FI M A M J .1i A IS 0 N D 1 F M A M J J A S 0 N D~~

ELAPSED MONTHS 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 1. PROCE=SSING: *Consult machine makers for bids * Receive price quotations *Analyze bids & select equipment Order equipment Prepare plant layout Select & buy land site Obtain bids for land preparation Consult eng/conistruction firms Obtain bids for building construction Land preparation Building construction - - - Hire managerial/technical personnel Orientate personnel on project Train personnel - courses, modern mills abroad- - - - Hire supervisors/maintenancn personnel Erect machinery/assemble plant equipment Hire labor for 1st shift * Set up training centre & prepare courses * Administer training to lst shift oper. * Prepare quality control program * Start production -1lst shift- -- - Hire labor for 2nd shift * Administer training to 2nd shift oper. * Start production - 2nd shift * Establish processing data & standards * Set production standards/job loads * Develop/implement maint. program * Develop/implement maste control program * Prepare labor cost control

~~II. COLLECTION AND STORAGE Preparation of specifications * Proturement procedures U Building Construction (storage)------* Purchase of vehicles * Hiring of staff, renting of r facilities -. c~~

* indicates consulting technical assistance. VVorld Bank-17640 - 128 - ANNEX 5

~~BOLIVIA~~

~~ULLA ULLA DEVELOPMENT PROJECT~~

~~Handicraft Component~~

~~A. Background~~

~~Introduction~~

1. The Bolivian handicrafts industry, particularly its wool-based components, is a vital source of supplementary income and employment for about 200,000 poor rural and urban families. In addition, the industry has generated about US$4 million in foreign exchange annually since 1975 and there is strong evidence that production and exports of handicraft items could be expanded even further. The realization of such expansion plants, however, is contingent on the successful introduction, on a pilot basis and beginning with the wool-based industry, of essential improvements which have backward linkages to the production of wool, its spinning into yarn, and its pricing and marketing. Improving the production, processing and marketing aspects of wool production is indispens- able to the development of a viable wool-based handicrafts industry.

2. Thus far, Bolivia has realized only a fraction of the possible benefits usually associated with handicraft trade because of (a) shortages of alpaca/llama/sheep wool and yarn; (b) lack of credit for purchase of wool, yarn, tools, machinery and for establishment of workshops; (c) lack of essential technical assistance programs; (d) inadequate pricing of raw materials and finished goods at the producer level; (e) deficient promotional and marketing programs; and (f) weak organizational arrangements. In order to ensure that adequate measures are taken to alleviate these weaknesses in the wool-based handicrafts industry, a credit and technical assistance compenent for farmers/ artisans would be included under the proposed project since farmers/artisans serve as the forward linkage of the project as they are the final users in the production chain of alpaca/llama wool.

~~Current Situation~~

3. The bulk of Bolivia's small artisans (estimated at about 200,000 families) depend mainly on subsistence farming for their livelihood, and supplement their basic income from sales of handicrafts. Families have ample time to engage in handicrafts as the agricultural season is concentrated in a period of about five months of the year, which leaves them about seven months for other activities. It is estimated that local artisans produce an assort- ment of about 400 varieties of typical handicraft items ranging from wood products and straw boats for use of Lake Titicaca, to garments made of alpaca/ llama/sheep wool. Customarily, women prepare the wool for further processing and do spinning and knitting, while men do mostly weaving. They knit and weave sweaters, ruanas decorative bags, colorful hats, ponchos and the like, all made from alpaca/llama wool. The alpaca wool is famous for its special - 129 -

~~ANNEX 5~~

features. It comes in a variety of natural colors, and it is light in weight and high in thermal retention. Products made of alpaca/llama wool as well as from other materials have distinct design patterns, and are quite colorful. The quality of workmanship, however, varies considerably and, with the exception of a few major producers, the standards are relatively low by international comparison. Production is usually on a small scale and timely delivery of large orders cannot be relied on. The bulk of the country's handicraft work is done in about 150 family-operated artisan shops and/or production centers. Most of them are located in the Departments of La Paz and Cochabamba, although fairly large quantities of items are also made in Oruro, Potosi, Santa Cruz, Tarija and Sucre. Many of the products made by local artisans contain some style features, which help to distinguish products made in one department from those made elsewhere.

4. Generally, knitting and weaving of garments and other wool-related handicrafts are done by able family members living in sparsely inhabitated villages remote from the major urban centers. Frequently, families engaged in knitting and weaving of alpaca/llama/sheep wool also raise and depend on the animals for their livelihood. Fleece is used to clothe members of the owner's family and the surplus is made into handicrafts and/or is bartered for essential commodities needed to sustain the family throughout the year. It is estimated that a typical artisan family with three of its members engaged in making alpaca/llama wool-based handicraft items could earn under favorable con- dictions about US$973 equivalent annually. The single family unit accounts for the major share of handicraft work done in the villages throughout the countryside. This form of organizing handicraft production is being modified through efforts by public and private entities to help the individual artisans in forming cooperative and loose associations. There are strong indications that a great deal of progress has already been made in formation of artisans cooperatives and associations -- about 100 such groups have been set up in the past three years.

5. Making alpaca/llama wool-based handicraft items is a long process. Work usually begins with shearing or purchasing fleece; preparation of the fleece for spinning, dyeing, weaving or knitting; the actual production work; and finally selling the end product (either to the visiting intermediaries or to affiliated commercial firms). The production process is tedious and requires long working hours. Spinning and knitting is often done by hand or with the help of wooden looms. Dyeing techniques are primitive, and the coloring chemicals are extracted from vegetable substances that tend to fade after exposure to the sun. An inventory of the finished products is maintained at the artisans' adobe huts until the intermediaries or representatives of the commercial firms arrive in the village to make purchases. The prices offered by the purchasing agents for the items, however, are very low compared to what could be obtained by selling directly in urban centers.

6. Overall, the role of the private sector in the handicrafts trade has been positive but limited in scope. A few individuals with limited capital but with much imagination and drive have taken the initiative and - 130 -

~~ANNEX 5~~

organized a relatively small number of artisans into production cooperatives to whom they sell wool and yan at subsidized rates in exchange for the right to purchase their end products. The prices paid to the artisans, however, are so low that they barely cover the production costs.

~~Institutional Support~~

7. Growth of the industry has been slow but prospects have improved with the establishment in August 1974 of the National Institute for Small Industries and Handicrafts (INBOPIA) as a decentralized institute under the auspices of the Ministry of Industry, Commerce and Tourism, to plan and promote the development of small industrial enterprises and of the handicrafts industry in Bolivia. The Minister of Industry or his Undersecretary is the Chairman of INBOPIA's Board of Directors, which is composed of one representative each from the Ministries of Education, and of Finance, Planning and Coordination and one delegate each from the small industry sector and the small handicrafts association, plus INBOPIA's General Manager.

8. INBOPIA has three main departments: (a) Economic and Financial; (b) Technical; and (c) Administrative. The Economic and Financing Department has 10 operational Divisions with responsibility for development, promotion, and technical and financial assistance for small industry and handicrafts; while the Technical Department is responsible for assistance to small industries. INBOPIA's budget for 1977 amounts to US$150,000 equivalent and it has a total staff of 25, of whom 17 are professionals. Since the beginning of its operations in 1975, INBOPIA has carried out socioeconomic studies on artisan activities; it has launched a nationwide registration campaign for all artisans in the country; it has participated in international fairs to promote export of Bolivian handicrafts; and it has helped to organize nine artisan cooperatives in the Omasuyos with assistance of the Inter-American Development Bank (IDB). INBOPIA's programs for the next five years will concentrate on strenthening its operation in the small industrial sector and particularly on increasing its involvement with the handicraft trade.

~~B. Handicraft Component~~

~~Objectives and Content~~

9. The proposed credit and technical assistance to help about 3,400 small rural and urban artisan families in the Departments of La Paz and Cochabamba to increase production and exports of typical handicraft items is the first comprehensive program ever attempted in this sector in Bolivia. The component would be developed on a small, pilot scale, being confined to providing financial and technical assistance for the purchase and production of articles made of alpaca/llama/sheep wool. Alpaca/llama/sheep wool produced and processed under the project would be allocated first to supply the needs of the - 131 -

~~ANNEX 5~~

Local artisans and then for export. Inclusion of financial and technical assistance for development of handicraft would make it possible to generate value added from working the wool in Bolivia before it is exported as a handicraft article; increase employment opportunities; decrease underemployment (particularly in rural areas); and expand exports.

10. The handicrafts component would consist of: (a) a US$2.0 million lending program to finance the capital rquirements of small rural and urban artisans working with alpaca/llama/sheep wool; (b) a US$1.0 million technical assistance program to help INBOPIA organize artisan production and marketing groups, finance the cost of quality control and standards, promote exports of Bolivian handicrafts by preparing a national catalogue of handicraft, participate in international fairs, monitor radio broadcasting programs, supervise the training program of the National Manpower Development Service (FOHO) for the participating artisans, and coordinate with the State Bank (BE) the implementation of the credit component; and (c) a US$100,000 purchasing fund to enable INBOPIA to buy and sell on a very modest scale some of the handicraft articles produced by artisan organizations during the life of the project. Details of the handicraft component are discussed below.

~~Lending Program~~

11. The lending program for the handicraft component would be managed by the Artisan Division within BE in close cooperation with INBOPIA. BE was established in November 1970 as a state development bank, with headquarters in La Paz, and was given a principal function of assisting the private sector in development-oriented programs such as industry, mining, housing and agriculture. Presently, BE has 35 district offices in rural areas and eight r'egional offices. BE would on-lend the Bank's funds at 12% for working capital and would finance investment costs for urban and rural artisans. The program would give priority to making sub-loans to individuals or groups of rural artisans although urban artisans and shops involved in the production of alpaca/llama/sheep wool would also be considered.

12. The maximum amount any individual artisan would be eligible to borrow under this program would be US$3,000 equivalent, in order to ensure that a large number would be able to obtain credit without endangering the technical and economic viability of each sub-project. Groups of artisans would be entitled to an amount not in excess of US$100,000 equivalent per group, association or cooperative. Authority to approve sub-loan applications up to US$5,000 equivalent would rest with each district office, while applications for between US$5,000 and US$20,000 equivalent would require approval by the regional offices. Sub-loans above US$20,000 equivalent would be granted by the headquarters office in La Paz. Priority for lending would be given to individual or groups of artisans in the Departments of La Paz and Cochabamba. Sub-loans would be up to six years, including up to one year of grace for the purchase of raw materials and for the purchase of knitting and working machinery, and for the establishment of small shops for production of items. As BE recovers the outstanding amounts, it would establish a special revolving - 132 -

ANNEX 5 fund in the project account (Central Bank) for further on-lending for handicraft production. Collaterals for capital investment would consist of the machinery and equipment of the sub-borrower, and for the working capital it would consist of the raw material and finished goods. The phasing of the lending program for handicraft development is shown in Table 9.

~~Technical Assistance~~

13. The bulk of the technical assistance program would be directed at strengthening INBOPIA's handicrafts operations and at enabling it to play a major role in the coordination and management of the alpaca/llama/sheep handicrafts component under the proposed project. To help in the implementation of the handicrafts program, INBOPIA would recruit an international expert with extensive experience in organization and management to help organize the staff and the implementation program for a period of 24 months. The organization expert would assist INBOPIA's Executive Director in preparing the detailed procedures and train the staff in the Artisan Division to help the rural artisans to obtain credit from BE; form production and marketing groups, cooperatives and associations; supervise FOMO's training program for the artisans; monitor the radio broadcasting programs; and coordinate with BSB the implementation of the lending operations. In order to avoid creating a bottleneck in the marketing and handicraft items, INBOPIA would embark on a modest program to promote and develop international outlets for Bolivian products. A second internationally recruited expert in handicraft marketing, organization of fairs, and preparation of a national handicraft catalogue would be contracted by INBOPIA for 24 months over a period of three years. He would also be responsible for training the Bolivian marketing specialist who would be working on a full-time basis within Artisan Division. In addition, INBOPIA would also recruit short-term international consultants in the fields of textile engineering and design to assist its staff in developing a program for quality controls, standards for production of alpaca/llama/sheep wool- based handicrafts, and for introduction of minimum prices for such items. The international expert would work closely with the Director of the Economic and Finance Department of INBOPIA but he would report directly to the Executive Director of the Institute. INBOPIA would also hire Bolivian staff to work with the international expert in organizing and implementating the handicrafts components. Specifically, INBOPIA would reinforce the Artisan Division by recruiting one full-time marketing specialist, two promoters of artisan organizations and a part-time textile engineer and one designer.

14. In order to facilitate formation of artisan groups and to inform the potential beneficiaries about prices of wool, and finished handicraft articles; terms and conditions of the credit line at BE; and the training program managed by the National Manpower Development Service (FOMIO),INBOPIA would contract the services of a local radio station to prepare broadcasting programs for the Aymara and Quechua speaking population about the handicraft program under the project. - 133 -

~~ANNEX 5~~

15. The component would also finance a training program to be implemented by FOMO. Although FOMO has some experience in training of artisans, this would be the first comprehensive training program for artisans to be undertaken in Bolivia, and therefore, the number of courses would be kept to a minimum and they would be simple and in line with FOMO's capabilities in this field. It is estimated that FOMO would conduct about 56 courses and train about 850 artisans over four years. The training program would help participants to improve techniques of selection of raw materials, washing, spinning, dyeing, improving and constructing weaving and spinning equipment, carding, design, and knitting as well as accounting, organization and marketing methods. The training courses would be carried out by mobile units which would be managed by specialists trained for the purpose. Financing would be available for the establishment of the training program, purchase of equipment and the mobile units, tools for working with raw materials, and fellowships. The training program would be managed by a professional who would be assigned by FOMO for this purpose. He would be incorporated into the Project Unit established by FOMO to implement the vocational training component financed by the Bank under the Education and Vocational Training Project. His principal functions would be to review the content of training courses, schedule courses, monitor progress of training, resolve outstanding problems, and coordinate with the Artisan Division of INBOPIA.

~~Fund to Purchase and Sell Handicrafts~~

16. At present the handicraft producers have few alternatives regarding selling of their finished products. Purchasing of these items is almost exclusively in the hands of commercial enterprises or the middlemen who often exploit artisans. INBOPIA has already helped on a very limited scale to form artisan cooperatives and has purchased and sold some handicraft items and has purchased and sold some of their output abroad. The purchasing fund would be established on a small scale (US$100,000) for purchasing and selling activities of wool-based handicrafts. Such activities would also help INBOPIA to supervise and introduce minimum prices in order to maintain competitive prices in the domestic market and standards of quality control for the products it would purchase.

~~Cost Estimates and Operating Results~~

17. The total cost of the handicraft component would amount to $b 62.0 million (US$3.1 million), including $b 40.0 million (US$2.0 million) for the credit program, $b 2.0 million or US$100,000 for establishing a special fund for purchasing handicraft articles, and $b 20.0 million (US$1.0 million) for the technical assistance program to INBOPIA and FOMO for the development of the handicraft industry (Tables 7 and 8). INBOPIA alone would account for about 80% or US$875,000 of the total funds ($b 3.1 million) for the technical assistance program.

~~18. Investment costs of the single family model (two to three artisans) and the group model (30 artisans) are shown in Table 1. Earnings and cost - 134 -~~

ANNEX 5 estimates appear in Tables 5 and 6 and cash flow projections are shown in Tables 3 and 4. Annual total net incomes of the single family model and the group model would reach $b 18,278 (US$914) and $b 123,450 (US$6,173) under project conditions, respectively. The financial rates of return on both models are 100%; the high rates of return may be attributed to the small investments and to the incremental benefits which are generated in a relatively short period of time.

~~Implementation~~

19. INBOPIA's Economic and Finance Department, working with the Artisan Division, would have primary responsibility for the implementation of the handicraft component. For the implementation of the lending program for the training portion and for radio broadcasting, INBOPIA would enter into operational agreement with each of the respective entities involved. In order to ensure that satisfactory progress is maintained on the handicraft component and to ensure that overall project objectives would be met, INBOPIA would enter into a separate agreement with the National Institute for Development of Wool (INFOL) for the implementation of the handicraft component.

~~Monitoring,~~

20. The experimental nature of this component, the complexity involved in forming artisan groups, provision of technical assistance and the need to build up the Bank's knowledge in a field in which it still has relatively little experience would require close project supervision as well as monitoring by BE, INBOPIA and INFOL. In this connection, BE, in cooperation with INBOPIA, would submit to the bank and INFOL quarterly and annual reports indicating the number of sub-loans approved, commitments, disbursements, and cancellations both by amounts and by geographic regions. The reports would also give a summary of the purpose of investments for modernization, expansion--machinery, equipment construction, working capital, and would include an evaluation of the economic impact of the component on job creation, reduction in underemployment in the rural areas, value added, and contribution to Bolivia's efforts to export non-traditional products.

~~December 8, 1977 ANNEX 5 Table 1 - 135 -~~

~~BOLIVIA~~

~~ULLA ULLA DEVELOPMENTPROJECT~~

~~Handicraft Component~~

~~Investment Costs ($b)~~

~~No. of Unit Units Cost Total~~

~~Model 1 1/~~

~~Additionalhand loom 1 1,500 1,500 Knitting machine 1 4,000 4,000 Sub-total 5,500 2/ Model 2 -~~

~~Knitting machines 30 4,000 120,000~~

~~l/ One family of two to three artisans. 2/ Group of 30 artisans.~~

~~June 14, 1977 ANNEX 5 - 136 - Table Z~~

~~BOLIVIA~~

~~ULLA ULLA DEVELOPMENTPROJECT~~

~~Handicraft Component~~

~~Credit to Artisans~~

~~Total Lending Program = $b 40,000,000 (US$2 million)~~

~~Subloan Amount No. of No. of $b Subloans Families~~

~~Model No. 1-One family of 3 artisans 28,570 680 680 Model No. 2_Group of 30 artisans 228,400 90 2,700~~

~~Total 770 3,380~~

~~Phasing~~

~~…------…Years------1 2 3 4 5 Total~~

~~1. No. of subloans To artisan families 150 150 130 130 120 680 To groups 10 20 20 20 20 90~~

~~Total 160 170 150 150 140 770~~

~~2. Amounts ($b '000) To artisan families 4,286 4,286 3,714 3,714 3,428 19,428 To groups 2,284 4,568 4,568 4,568 4,568 20,556~~

~~Total 6,570 8,854 8,282 8,282 7,996 39,984~~

~~May 19, 1977 137 ~ ANNEX 5 - - 137 ~~~~Table3~~

~~BOLIVIA~~

~~ULLA ULLA DEVELOPMENT PROJECT~~

~~Handicraft Component Handicraft Model No. 1 - One Family of 2 to 3 Artisans~~

Cash Flow Projection ( $b) With Project Without ------Year…------…-______Cash Inflow Project 1 2 3 4 5 6 7-10 Sales 120,820 245,560 245,560 245,560 245,560 245,560 245,560 245,560 Loan 1/ - 28,578 ------

~~Total inflow 120,820 274,138 245,560 245,560 245,560 245,560 245,560 245,560~~

~~Cash Outflow - Investment Costs - 5,500 ------Yarn 101,248 238,608 208,607 208,607 208,607 208,607 208,607 208,607 Maintenance and repairs 100 100 300 300 300 300 300 300~~

~~Total outflow 101,348 244,208 208,907 208,907 208,907 208,907 208,907 208,907~~

~~Cash Balance after Debt Service 19,472 29,930 36,653 36,653 36,653 36,653 36,653 36,653~~

~~Debt Service 2/ Interest 12% p.a. - 3,429 3,429 2,889 2,285 1,608 849 - Principal - - 4,499 5,039 5,643 6,320 7,077 -~~

~~Total - 3,429 7,928 7,928 7,928 7,928 7,926 -~~

~~CELsh Balance after Debt Service 19,472 26,501 28,725 28,725 28,725 28,725 28,727 36,653~~

~~$b 1/ Loan for: additional loom 1,500 knitting machine= 4,000 incremental yarn requirements = 23,078 (1.5 months)~~

~~Total loan 28,578~~

~~2/ Six years maturity, including one year grace.~~

~~MEy 17, 1977 ANNEX 5 - 138 - Table 4~~

~~BOLIVIA~~

~~ULLA ULLA DEVELOPMENTPROJECT~~

~~Handicraft Component HandicraftModel No. 2 - Group of 30 Artisans~~

~~Cash Flow Projection ($b '000) With Project Without ------Years------Project 1 2 3 4 5 6 7~~

~~Cash Inflow~~

~~Sales 369.6 864.0 864.0 864.0 864.0 864.0 864.0 864.0 Loan 1/ - 228.4 ------~~

~~Total 369.6 1092.4 864.0 864.0 864.0 864.0 864.0 864.0~~

~~Cash Outflow~~

~~Investment cost - 120.0 ------Cash operating cost 181.4 636.3 556.8 556.8 556.8 556.8 556.8 556.8~~

~~Total 181.4 756.3 556.8 556.8 556.8 556.8 556.8 556.8~~

~~Cash Balance before Debt,Service 188.2 336.1 307.2 307.2 307.2 307.2 307.2 307.2~~

~~Debt Service 2/ Interest - 27.4 24.6 20.5 15.9 10.7 4.8 - tPrincipal - 15.3 33.3 37.4 42.0 47.2 53.1 -~~

~~Total - 42.7 57.9 57.9 57.9 57.9 57.9 -~~

~~Cash Balance after Debt Service 188.2 293.4 249.3 249.3 249.3 249.3 249.3 307.2~~

~~1/ 100% of investmentcosts ($b 120,000), plus two months incremental yarn needs ($b 108,410) 2/ Six years maturity, including six months grace.~~

~~May 17, 1977 139 -ANNEX 5 Table 5~~

~~BOLIVIA~~

~~ULLA ULLA DEVELOPMENT PROJECT Handicraft Component Handicraft Model No. I - One Family of 2 to 3 Artisans~~

~~Sales and Operating Costs ($b)~~

~~No. of Unit Without With Project Units Cost Project Year 1 Year 2-10~~

~~Sales Woven garments 1/ 350 per year per artisan 310 108,500 217,000 217,000 Knitted garments 2/ with factory yarn 119 per year 240 - 28,560 28,560 with home spun yarn 56 per year 220 12,320 - -~~

~~Total Sales 120,820 245,560 245,560~~

Operating Costs Raw materials (alpaca) hand spun yarn (for knitting) 0.6 kg per 180 per garment kg 6,048 - - factory yarn for knitting 0.45 kg per 340 per garment kg - 18,207 18,207 or weaving 0.8 kg per 340 per garment kg 95,200 190,400 190,400

~~Total raw materials 101,248 208,607 208,607~~

~~Family labor man-days 35 12,250 18,375 18,375 Maintenance of equipment 100 100 300~~

~~Total Operating Costs 113,598 227,282 227,282~~

Net Income 7,222 18,278 18,278 Minus: Investment costs - 5,500 - Net benefit 7,222 12,778 18,278 Net incremental benefit - 5,556 11,056 Financial Rate of Return: 100% Sensitivity: - (i) incremental operating cost + 8% = 94% + 107 - negative (ii) incremental sales - 8% = 27% - 10% = negative

1/ With factory yarn = two per day per loom per worker, 25 days per month, seven months per year. Without project = one loom, one artisan. With project = two looms, two artisans. 2/ Without project = one hand-knitted garment in four days, eight per month, seven months per year (one artisan). With project = one machine-knitted garment in one and a half days (with hand-made design), 17 per month, seven months per year (one artisan).

~~June 14, 1977 - 140 - ANNEX 5 Table 6~~

~~BOLIVIA~~

~~ULLA ULLA DEVELOPMENT PROJECT Handicraft Component Handicraft Model No. 2 - Group of 30 Artisans~~

~~Sales and Operating Costs ($ b)~~

~~No. of Unit Without With Project Sales Unit Units Cost Project Year 1 Year 2-10~~

~~Knitted garments l/ with factory yarn 120 per year 240 - 864,000 864,000 per artisan with hand spun yarn 56 per year per artisan 220 369,600 - -~~

~~Total 369,600 864,000 864,000~~

~~Operating Costs~~

Raw material (alpaca) Pactory spun yarn kg 0.45 per garment 340 - 550,800 550,800 Hand spun yarn kg 0.6 per garment 180 181,440 - Family labor man-days 2/ 35 183,750 183,750 183,750 Maintenance and repairs of knitting machines - 6,000 6,000

~~Total 365,190 740,550 740,550~~

~~Net Income 4,410 123,450 123,450~~

Minus: Investment - 120,000 - Net benefit 4,410 3,450 123,450 Incremental net benefit - (960) 75,360 Financial Rate of Return = 100% Sensitivity: (i) incremental operating costs + 8% = 100% + 10% = 100% + 25% = 25% + 30% = negative

~~(ii) incremental sales - 8% = 100% - 10% = 100% - 15% = 59% - 20% = negative~~

1/ Without project: one hand-knitted in four days, with home spun yarn - (eight per month). With project: one garment in one and a half days, with factory spun yarn (17 per month). Handicraft production is assumed to occupy artisans full time during seven months a year in the Altiplano.

~~2/ 175 man-days per artisan per year.~~

~~June 14, 1977 BOLIVIA~~

~~ULLA ULLA DEVELOPMENT PROJECT HandicraftComponent FOMO - Total Costs~~

Unit--- -Years------Total Total Foreign Foreign No. of Cost L 2 3 4 Cost Cost Exchange Exchange Units …$b…------_------US$ I. Staff Salaries 323,650 413,170 287,170 287,170 1,311.600 65,555 - Local travel and per diems - 57,100 103,400 92,600 92,600 345,700 17,285 - - Staff training (monitors) 15 800 12,000 - 12,000 600 - - Sub-total 392,750 516,570 379,770 379,770 1,668,860 83,443 - - II. Vehicle 4 wheel drive van 1 250,000 250,000 - - - 250,000 12,500 95 11,875 Operation and maintenance - - 25,000 25,000 25,000 100,000 5,000 36 Sub-total 1,800 - - 275,000 25,000 25,000 25,000 350,000 17,500 78 13,675 III. Teaching Equipment Washing and drying equipment 10 8,000 80,000 - - - 80,000 4,000 40 1,600 Spinning machine 5 6,000 30,000 - - - 30,000 1,500 60 900 Carding machine 2 20,000 40,000 - - - 40,000 2,000 Weaving machine 80 1,600 - 15 10,000 150,000 - - - 150,000 7,500 50 Knitting machine 3,750 5 5,000 .25,000 - - - 25,000 1,250 Tools 80 1,000 - - 10,000 - - - 10,000 500 50 250 Raw materials (56 courses) - - 120000 226700 226,700 226,700 800,000 40,005 Sub-total - - - - 455,000 226,700 226,700 226,700 1,135,100 56,755 16 9,100 IV. Fellowship for trainees (260) - 600 23,400 44,200 44,200 44,200 156,000 7 800 - - V. Maintenance of teaching equipment - - 10,000 10,000 10,000 10,000 40,000 2,000 50 1,000 VI. Miscellaneous supplies - - 10,000 10,000 10,000 10,000 40,000 2,000 50 1,000 Total baseline cost - - 1,166,150 832,470 695,670 695,670 3,389,960 169,498 15 24,775 Physical contingencies(10% of vehicle and teaching equipment) - - 70500 ,22.670 22,670 22,670 138,510 6,925 30 2,097 Total 1,236,650 855,140 718,340 718,340 3,528,470 176,423 15 26,872

~~{D >Cnan BOLIVIA~~

~~ULLA UjLA DEVELOPMENTPROJECT~~

~~Handicraft Component~~

~~INBOPIA - Total Costs~~

~~Foreign Foreign No. of Unit ------Years------Total Total Cost Exchange Exchange Units Cost 1 2 3 4 5 Cost US$ 7 US$~~

National Staff $b Salaries (man-year) Textile engineer 5 140,000 140,000 140,000 140,000 140,000 140,000 700,000 35,000 - - Designer 5 140,000 140,000 140,000 140,000 140,000 140,000 700,000 35,000 Marketing specialists 5 140,000 140,000 140,000 140,000 140,000 700,000 35,000 Promoters (4) 20 70,000 280,000 280,000 280,000 280,000 1,400,000 70,000

~~Sub-total 700,000 700,000 700,000 700,000 700,000 3,500,000 175,000~~

~~Local travel and per diem 200,000 200,000 200,000 200,000 200,000 200,000 1,000,000 50,000~~

~~Vehicles and Equipment~~

~~4-wheel drive vehicles 2 160,000 320,000 - - - - 320,000 16,000 95 15,200 Office equipment 75,000 - - - - 75,000 3.750 60 2,250~~

~~Sub-total 395,000 - - - - 395,000 19,750 88 17,450~~

Technical Assistance Salaries Coordinator /advisor (man-years) 2 1,200,000 600,000 1,200,000 600,000 - - 2,400,000 120,000 100 120,000 Expert' in marketing and fair c.ganization (man-year) 2 1,000,000 500,000 1,000,000 500,000 - - 2,000,000 100,000 100 100,000 Short term coasultants (man-month) 6 100,000 - 200,000 200,000 200,000 - 600,000 30,000 100 30,000

~~Sub-total 1,100,000 2,400,000 1,300,000 200,000 - 5,000,00 250,000 100 250,000~~

~~International travel 4- Internationl experts 80,000 60,000 60,000 40,000 - 240,000 12,000 100 12,000 National staff (study tours) 80,000 80,000 80,000 80,000 80,000 400,000 20,000 100 20,000~~

~~Sub-total 160,000 140,000 140,000 120,000 80,000 640,000 32,000 100 32,000~~

~~Participation in International Fairs 331,000 502,000 502,000 502,000 502,000 2,339,000 116,950 98 114,611 Number of fairs 18 (2) (4) (4) (4) (4)~~

~~Catalog (national handicraft) 400,000 - - - - 400,000 20,000 55 11,000~~

~~Radio Broadcasting (handicraft promotion) 480,000 480,000 240,000 240,000 240,000 1,680,000 84,000 - -~~

~~Initial Working Capital Purchase of handicraft items 2,000,000 - - - - 2,000,000 100,000 - -~~

~~Total baseline cost 5,766,000 4,422,000 3,082,000 1,962,000 1,722,000 16,954,000 847,700 50 425,061~~

~~Physical contingencies (10% of technical assistance and equipment) 149,500 240,000 130,000 20,000 - 539,500 26,975 99 26,745~~

~~Total 5,915,500 4,662,000 3,212,000 1,982,000 1,722,000 17,493,500 874,675 52 451,806~~

~~June 11, 1977 ANNEX 5 - 143 - Table 9~~

~~BOLIVIA~~

~~ULLA ULLA DEVELOPMENTPROJECT~~

~~Phasing of the Lending Program~~

~~1) Number of Subloans Model No. Year 3 Year 4 Year 5 Total~~

~~1 100 250 100 450 2 75 110 75 260 3 2 14 14 30 4 - 3 2 5~~

~~Total 177 377 191 745~~

~~2) Lending Program ($b '000) --- __------Model No. Year 3 Year 4 Year 5 Total~~

~~1 377.6 944.0 377.6 1,699.2 2 5,457.1 8,003.7 5,457.1 18,917.9 3 343.1 2,402.0 2,402.0 5,147.1 4 - 2,537.7 1,691.8 4,229.5~~

~~Total 6,177.8 13,887.4 9,928.5 29,993.7~~

~~May 19, 1977 - 144 -~~

~~ANNEX 6~~

~~BOLIVIA~~

~~ULLA ULLA DEVELOPMENTPROJECT~~

~~Road Component~~

~~Background~~

1. The project area is linked to La Paz by primary road No. 2, running in a northwesterly direction to Pumasani (229 km), and a penetration road (35 km) that branches off the northwest to Ulla Ulla (Map IBRD 12907). The remaining road network (97 km) consists of dirt roads and tracks, which are usually in poor condition. As far as Pamasani, roads are permanently maintained in terms of existing drainage and regraveling. However, beyond Pumasani to Ulla Ulla and from Ulla Ulla further north, they receive only occasional maintenance from the National Roads Service (SNC).

2. There is also an airstrip about 2.5 km from Ulla Ulla. The airstrip is on firm ground and is about 1,400 m long and 125 m wide. It has good approaches and is at an altitude of about 4,300 m. Currently, the airstrip has no commercial use and is occasionally used by the military.

3. The existing road network is almost impassable during the rainy season (January-March) and during the winter months (July and August), and any increase in the present volume of traffic would completely destroy most of the existing roads and cause complete interruption of traffic during these four or five months of the year. This would delay and hinder the construction of the Project Unit facilities, establishment of health and education facilities and community programs; and impair the flow of goods and services to and from the project area.

~~Project Works~~

~~4. The proposed road program would include construction and improvement of about 54.1 km of all-weather roads in the project area, as follows:~~

~~Pumasani - La Cabana 33.0 Access to Acequia 2.0 Acequia - Ulla Ulla 3.3 Ulla - airstrip 2.5 Airstrip - Ichicollo 11.8 New road to Ucha Ucha 1.5~~

~~54.1 - 145 -~~

~~ANNEX 6~~

5. The proposed roads would be 4 to 5 m wide and would be constructed on firm soil, which would require topsoil or peat excavation in variable depths. The roads would have a 10- to 15-cm gravel surface and a height of 30 to 70 cm above ground level to provide for adequate transversal drainage (Table 1).

~~6. The road program would be completed in 18 months, with priority given initially to the Pumasani - Ulla Ulla road network and the access road to Ucha Ucha.~~

~~Cost~~

7. The total cost of the road component including physical contingencies would be about $b 18.4 million (US$919,000), with a foreign exchange cost of about $b 6.8 million (US$344,000). The investment cost on equipment would amount to $b 6.0 million, or US$300,000 (Table 2). The road maintenance cost during construction would be $b 1.2 million (US$61,800).

8. The investment cost per km of the new road would be about $b 344,000 (US$17,000). MIaintenance cost per km per year after the proposed road program is completed would be $b 6,000 (US$300). Details of investment and operating costs are shown in Table 3.

~~Implementation~~

9. SNC would implement the road program under the direction of the Agricultural and Social Infrastructure Division (ASI) of the National Insti- tution for the Development of Wool (INFOL). ASI would advise SNC on the priorities for road construction and would review the detailed work program prepared by SNC.

10. The road construction work would be carried out by force account by SNC, with 40% of road works completed in year 1 and the remaining in year 2 (Chart 1). SNC would also conduct field investigations, prepare engineering plans and design and cost estimates, operate equipment financed under the project, and supply skilled labor to carry out the work program. Annual maintenance of project roads would be carried out by SNC also by force account and would include repair of earthwork failures, regrading spot graveling, and upkeep of drainage clearance. After road construction, equipment purchased under the project would be utilized by SNC for maintenance of project area roads only.

~~June 8, 1977 - 146 6 AMN>Fv' 6 Table 1~~

~~BOLIVIA~~

~~ULLA ULLA DEVELOPMENT PROJECT~~

~~Road Component~~

~~Suggested Design Standards~~

~~Design Standards Minimum Maximum~~

~~Roadway width 4 m 5 m~~

~~Surface thickness 10 cm 15 cm~~

~~Capacity H-10 H-15~~

~~Radius of curves 20 m -~~

~~Fill slopes 1:1 1.5:1~~

~~Cut slopes 0.5:1 1.5:1~~

~~Grades: cut 0.3% 10%~~

~~fill - 10%~~

~~Gross slopes 2% 4%~~

~~May 25, 1977 147 _~~

~~ANNEX 6 Table 2~~

~~BOLIVIA~~

~~ULLA ULLA DEVELOPMENT PROJECT Road Component~~

~~Equipment InvestmentCost~~

~~$b'000 US$~~

~~1 Bulldozer type cat,D-6 1,400 70,000~~

~~1 Motorgrader 1,000 50,000~~

~~1 Loader, 1 m -capacity 600 30,000~~

~~4 Dump trucks, 4 m capacity 1,800 90,000~~

~~1 Screening equipment 200 10,000~~

~~1 Pneumatic roller 400 20,000~~

~~1 Light four-wheeldrive truck 200 10,000~~

~~Spare parts 400 20,000~~

~~6,000 300,000~~

~~May 25, 1977 BOLIVIA ULLA ULLA DEVELOPMENT PRO)ECT~~

~~Road Component - Total Costs~~

~~Unit ------Years------Total Total Foreign Foreign No. of Cost 1 2 3 4 5 Cost Cost Exchange Exchange Unit Unit US$ -- - $b'000------US$ *h~~

~~1. Construction/Improvement Costs~~

Pumasani - La Cabana km 33 11,050 364,550 43 156,800 Access to Acequia km 2 11,050 22,100 43 9,503 Acequia - Ulla Ulla km 3.3 20,080 66,264 45 29,819 Ulla Ulla bridge - - - 11,000 30 3,300 Ulla Ulla - airstrip km 2.5 20,080 50,200 45 22,590 Airstrip - Ichicollo km 11.8 12.850 151 630 45 68,234 New roads to Ucha Ucha km 1.5 20,080 _30,120 45 13,554 54.1 8,352 1/ 5,567 1/ - - - 13,919 695,964 44 303,800

~~2. Design km 54.1 1,550 )_J67_7- - __ 83,855 _ - Sub-total 10,029 5,567 - - - 15,596 779,819 39 303,800~~

~~3. Maintenance 2/ km 54.1 270 pa. _ 240 290 290 290 15_35 a22920201 Total Costs 10,029 5,807 290 290 290 16,706 835,319 37 312,125~~

~~Physical Contingencies 10,003 581 29 29 29 1,671 83,532 37 13 Total 11,032 6,388 319 319 319 18,377 918,851 37 343,338~~

~~1/ 60'hof 541 km in year 1 and 407.in year 2. 2/ Including operation and maintenance cost of equipment.~~

~~May 26, 1977 BOLIVIA ULLA ULLA DEVELOPMENT PROJECT Road Component Implementation Schedule~~

~~1978 1979~~

~~J F M, A M J J A S 0 N D A J A S O N D~~

~~A. CIVILWORKS~~

~~Engineering~~

~~Construction ------~~

~~Maintenance~~

~~B. EQUIPMENT~~

~~ICB procedure~~

~~Equipment delivery~~

~~Equipment use L - - - -~~

~~C. SUPERVISION~~

~~World Bank 17846 - 150 -~~

~~ANNEX 7~~

~~BOLIVIA~~

~~ULLA ULLA DEVELOPMENT PROJECT~~

~~Health Component~~

~~I. BACKGROUND~~

1. Health conditions of the 3,000 families in the project area are poor and similar to those in other depressed rural areas in Bolivia. Erup- tive diseases such as measles and whooping cough, along with communicable diseases (respiratory and gastrointestinal), trauma, malnutrition and pregnancy complications are the major causes of morbidity and mortality. Health facilities are non-existent in the project area. Improvement in health conditions would eliminate at least 50% of prevalent diseases (mainly exanthematic typhus, scabies, tuberculosis, and fecally-related gastroenteric diseases).

~~The Community~~

2. The people in the project area are of the purest Aymara extraction in the country. They live in small clusters, following the ancient Aymara social organization characterized by extended families where women participate actively in decision making. Although most of them are declared Catholics, they retain their Aymara gods (the sun or "willika" and the moon or "packamama") in a rather stable syncretism. Their principal occupation is raising alpaca and llama. Pasture land is community-owned, while the home is privately owned. Marriage is a well-established institution; divorce is non-existent. The people have a well-defined concept of the etiology of disease: some are caused by "foreign bodies" that enter the body (such as parasites), while others are caused by "spirites" producing "emanaciones," which, in turn, produce pain and disease. In Charazani village, there is an ancient group of Aymara medicine men (Callahuallas) who are greatly respected among the people. Another group of Aymara medical doctors hold the seat in Tiawanaco (which is also the name of the medicine god), with three types of specialties: the Collakamama, similar to the western internist; the sirkakamama,similar to the western surgeon; and the jamphiri, similar to the western psychiatrist. Although the health care they provide in the project area is neither frequent nor systematic, it must be taken into account when setting up organized health services in the project area.

~~Health Program~~

3. The health status of the population in the project area is poor. "Eruptive" diseases such as measles and whooping cough are highly prevalent. In 1976, there were two outbreaks of exanthematic typhus, and the same year an epidemic of measles or whooping cough (data are not sufficient to determine which of the two diseases was involved) killed 25 children in Ulla Ulla and eight children in Ucha Ucha. Two adults also died that year, which - 151 -

ANNEX 7 resulted in a total of 27 deaths in Ulla Ulla out of a total population of 270. This implies an exceptionally high crude mortality rate of about 100 per 1,000. Eliminating deaths resulting from epidemics, the number of deaths in Ulla Ulla fluctuates from six to seven per year (two adults and four or five children), which gives an estimated crude mortality rate of between 22 and 26 per 1,000 -- one of the highest in the world -- and an early mortality rate (under five years old) of about 18.5 per 1,000 population. The most common causes of death, besides eruptive diseases in children, seem to be infectious diseases and biliary problems. Rickettsiasis (exanthematic typhus) and fasciolopsiasis (fasciola hepatica or fasciola buski) are common causes of death in adults.

4. The most prevalent morbidity problems are upper respiratory infections; bacterial dermatitis mainly around the nose; pulmonary tuberculosis; scabiosis; parotiditis, and eruptive diseases. There are two cases of osteomyelitis at Ucha Ucha (320 inhabitants), probably originating from tuberculosis (both present fistulae with coseum and torpid evolution). The Indian population is apparently highly susceptible to this disease.

5. Malnutrition is not as severe as suspected. The children in various villages show no signs of severe rnalnutrition (kwashiorkor, marasmus, hair flag sign, or skin signs of severe vitamin deficiency), which might be explained by the fact that during the child's first two years of life, he is usually with his mother and is breast fed. Diet is mainly "chargui" (dried alpaca meat) and "chuno" or "tunta" (dehydrated potatoes) with heavy amounts of chili. Sheep or alpaca milk is seldom consumed. The type of algae that grow in streams appear to have high protein content (about 20%). This is consumed as snacks, mainly by the school children.

~~6. Houses are usually in dilapidated condition and there is a lack of adequate water supply and waste disposal facilities.~~

7. Personal hygiene practices are almost non-existent. People generally defecate in yards near homes or in alpaca corrals. Contacts with animals both in and around homes are close. An entire family usually sleeps together in one bed made of adobe, under which hamsters are raised. Lice and fleas are common under these conditions, increasing the risk of the family developing exanthematic or murine typhus. Also, ecological conditions are perfect in the area to reproduce the biological cycle of fasciolopsiasis. This disease has been reported in alpacas and llamas. There are snails in streams where algae are also growing and the people use this crude algae for food.

~~Health Facilities~~

8. Health facilities are non-existent in the project area. The only accessible health facility for people living in the northern part of the project area is a health post located in the Peruvian village of Cojata, a three-hour walk. This health post is ill-equipped and receives only sporadic visits from a medical doctor. There is also a medical post in Charazani (or - 152 -

~~ANNEX 7~~

Gral. Gonzales), located in the eastern boundary of the project area, linked by trail to Ulla Ulla (north project area) and Huallpacallo (south project area), about 30 km from each village. The building was upgraded to a health center hospital last year but it still has not been equipped. There is one medical doctor but no auxiliary personnel (the last auxiliary nurse worked only three months because she did not speak Aymara). There are four traditional midwives in the northern project area, who when needed assist during childbirth.

~~II. PROJECT HEALTH FACILITIES~~

9. The primary objective of the health component would be to provide health care services and to improve housing conditions and the personal hygiene practices of the 3,000 families living in the project area. A health facilities network would be established to provide minimal health services. The network would be structured and organized around the existing communities in the area.

~~Community Organization~~

10. Aymara communities have a well defined organizational and leadership structure. There is a long history of community programs among these people as well as ancient Aymara traditions of common land ownership and joint efforts for civic and religious activities. The project would therefore organize existing communities in the project area into "group units" for the delivery of health care services. The primary functions of the group units would be:

~~(a) participate in gathering children for mass immunization;~~

~~(b) implementation of home improvement schemes;~~

~~(c) adoption of personal hygiene practices;~~

~~(d) construction of protected channels for streams supplying water for domestic use;~~

~~(e) construction of pit privies; and~~

~~(f) fund raising to co-finance "health kits" expenditures.~~

~~Health Facilities Network~~

11. A micro-health post would be established in each village under the control of a community health worker. The post would be equipped with a first aid kit containing basic drugs for treatment of the most common ailments in the community and would be located either at a community health worker's home or at the village school. This would make construction of health facilities for each village unnecessary. A total of 30 micro-health posts would be required for the project area. - 153 -

~~ANNEX 7~~

12. A medical post with six beds, attached to the Ulla Ulla administrative project unit, would be constructed. Patients referred there by health auxiliaries would be attended by a physician and an auxiliary nurse. Recently, the health facility at Charazani was upgraded to a 12-bed medical post, but it is still unequipped. The Ministry of Social and Public Health (MPSSP) has proposed a $b 282,665 investment budget for this facility which would partially cover the cost of equipment. Under the project, this facility would be equipped as a medical post, with six beds for hospital care as described for the Ulla Ulla medical post. This facility would serve the population of the southern part of the project area (10,000) and the population of neighboring communities living in the northeastern part of Franz Tamayo province, the western part of Saavedra province, and the northern part of Camacho province (about 6,340 people).

13. The newly constructed health facility outside the project area (in Achacachi), about 120 km from Charazani and about 150 km from Ulla Ulla, would be equipped by the MPSSP and operated as the main referral hospital for all the project area. It would provide a 20-bed capacity and basic hospital care services such as medicine, pediatrics, obstetrics, gynecology and surgery.

14. The facilities described would thus form a network to provide primary, secondary and tertiary health care, with referrals of patients to La Paz for special treatment. The health facilities network would have an ambulance located strategically at the Ulla Ulla medical post to transport referrals from the northern project area to Charazani and from any of the other health facilities to Achacachi or La Paz.

15. The total manpower requirement for the health system would be two physicians, two auxiliary nurses, and 30 community health workers. Community health workers would be selected and trained for a period of six months in the project area by the Department of Public Health University of San Andres, which has expertise in Aymara culture and Aymara medicine, in collaboration with the MPSSP School of Public Health. The training would focus on community organization, personal and community health care, home improvement programs, construction of water supply systems, pit privies facilities, and health education programs.

16. The Ministry of Education is willing to allow local teachers in the project area to receive training and participate as community health workers, an arrangement that has the advantage of training people already accepted by the Aymaras. In this case, the teacher would play a dual role, namely, school teacher and health worker, with well-defined responsibilities in both jobs. Teaching activities are basically carried out during the morning, which would allow the teacher to work in health activities during the afternoon. The paid stipend as a community health worker would be in addition to the earned salary as a teacher, which would represent an economic incentive to improve performance in both duties. - 154 -

~~ANNEX 7~~

17. The Ulla Ulla and Charazani medical posts would be staffed by one physician and one auxiliary nurse each. A one-week workshop on the organization, objectives and implementation of the rural health system would be held for the community health workers in Ulla Ulla. The physician of the Ulla Ulla medical post would be in charge of attending the referrals of 11 health workers in the northern part of the project area (from Suches to Jahuaca) and would supervise their work. He would also make a quarterly report on the health component development in the northern part of the project area.

18. The physician for the Charazani medical post would be in charge of implementing the health component in the southern project area. He would make a quarterly report on health component developments and would share the supervision of 13 health auxiliaries' work with the other physician in Ulla Ulla, who would also attend referrals. Both physicians would participate in training aspects such as home care, programs for immunization, protection of streams, and the construction of pit privies and their use.

~~Monitoring~~

19. There is not basic health information (births, deaths, morbidity, use of health services and such) available for the project area. Therefore, a simple and efficient information sub-system for primary health care services would be established with the following monitoring purposes:

~~(a) organization of domiciliary visits provided by the community health worker to each family of the "group units";~~

~~(b) registry of health activities performed by the community health worker;~~

~~(c) collecting vital health statistics information to set the baseline during the first year of activities, which would allow the quantification of the health system activities and evaluation; and~~

~~(d) provision of a source of information for programming and implementing supervision of community health workers.~~

The information sub-system would include a kit with a series of cards (for family group unit data), a morbidity list, a risk classification of pregnant women, a nutrition band scale for measuring nutritional status, and a map showing the location of families belonging to the "group unit."

~~Supervision and Evaluation~~

20. The two physicians (Ulla Ulla and Charazani) would implement a supervision program in cooperation with the auxiliary nurses. The following supervision schedule would allow him to make at least one monthly visit per health auxiliary. - 155 -

~~ANNEX 7~~

~~One day/week - personal supervision of three to four health auxiliaries.~~

~~One day/month - general supervision meeting at the health facility of all community health workers from the surrounding area of influence (Ulla Ulla or Charazani).~~

After the first year of project implementation, the physician would delegate some personal supervision visits to the auxiliary nurse, once she has achieved a thorough understanding of the scope of the community health workers' activities. The "master kit" would be the key instrument for personal visits. The supervisor would select a sample of cards belonging to two or three families and check the type and quality of registration data. He would then review the program visits for the day and accompany the community health worker on his field work. At the end of a domiciliary visit, he would comment on the performance of the health worker, always keeping in mind the construc- tive, educational purpose of the supervision. The average time spent on each visit would be about two hours, including travel time.

21. The health system would be evaluated, first, by assessing the changes in mortality and the conditioning factors of personal hygiene, home improvement, construction of pit privies and their use, and protection of streams supplying water for human consumption; and second, by developing a before and after household sample survey to obtain information from villagers about availability, accessibility, and satisfaction with health care services delivery.

~~Cost~~

22. The total investment cost of the health component would be $b 1.9 million (US$95,000). Total recurrent cost would be $b 6.2 million (US$311,590). Investment and current cash costs are detailed in Table 1.

~~Cost Sharing and Recovery~~

23. Based on MPSSP's established price list of changes for health services delivered through its health facilities, cost recovery for drugs, medical supplies and food would amount to about $b 51,500 per annum. The remaining costs would be financed by the Bank and the Government and would not be recovered from the beneficiaries. Cost for the sixth and subsequent years would be borne by the Government.

~~Implementation~~

24. MPSSP would be responsible for the construction of health facilities, procurement of equipment, and administration of health facilities. The Department of Public Health (DPH) of the University of San Andres, under an - 156 -

~~ANNEX 7~~

operational agreement with I4PSSP,would be responsible for inplementing the training, monitoring, supervisiorn arn evaluation aspec_s of the proposed health system. The operational agreement between MPSSPand DPH would include the following features:

(a) the MPSSP would delegate the responsibility for implementing the organization of "group units" for health services delivery and training, monitoring, supervision and evaluation of the health component to DPH;

(b) a health component committee wuid be organized, with participation by a member of the MPSSP planning office, a member from the MPSSP Division of Epidemiology, and two faculty members of the DPI-1. This committee wouid be direc£etd by the Chairman of the DPH or his delegate. Th-is committee would also take the responsibility of providing full support (administration, logistics, and coordination) for the implamentation of health component;

(c) the DPH would follow the contents o£ the appraisal document to implement the organization of 9group units" and the development of training, monitoring, supervlsion and evaluation elements of the health system;

(d) according to DPH proposed time and manpower sched'ules, there would be two faculty members in the project a--ea for six full months to de-velop the training course. Once the community health workers have been trained and -he health services started, one DPH facult y member T'p-ould visit the area for supervision and evalua-ion of health component for one week every 45 days. One of the MPSSP committee members would accompany him every other visit for three days. Per diem stipends have been provided in the budget;

~~(e) interns or residents could be brought in to work as physicians in the medical posts of the project area,~~

(f) funds for training materials, salaries of teach&ig staff; micro-health posts installation and supervision and evaluation would be managed by the DP}{ under authorized and audited account by the I4PSSP;

~~(g) the DPH would submit written progress reports eve:y six months to the MPSSP; and~~

~~(h) drugs and medical supplies for the project area health facilities would be channeled through DPH.~~

~~June 8, 1977 - 157 -~~

~~BOLIVIA~~

~~Ul.it ULIA D2I:0TI)PMJ:lit PROtJECT ANNIX 7~~

~~Health Component Table 1~~

~~I-veetment and Operating Cost Phaning~~

~~Unit ----- _ --- Toa------lYeas------__Tota Tetal Foreign Foreign No. of Coot 1 2 3 4 5 Cost Coot E.hobege Ex-hange Units ______------b-----… ------US$ _ 00~~

I. Inoentmeot Cootn A. Trainig 1. Shoblarships 30 6,750 202,500 - 202,500 10,125 2. Traointn matersalo M.nuals 35 300 10,500 - - - - 10.500 525 50 262 MCater kits 35 680 23,800 - - - - 23,800 1,190 60 714 Miorn-he-Ith 2 2,500 5,c00 - - - - 5,000 250 55 137 Slide proje-tor 1 7,000 7,000 - - - - 7,000 350 40 140 Bicycles 30 3,000 90,000 - - - - 90,000 4,500 40 1,800 Offi-e nupplies 2 20,000 40,000 - - - - 40,000 2,000 70 1,400 3. Sslarieo of toaching staff -n an-eonthn 12 6,020 72,000 - - - 72,000 3,6pO - Sub-total 450,800 - - - - 450,800 22,540 20 4,453

1;. IlaltI, F-oiltti-o and Eqiip-ent 1. Medical pont _ UlIn Ella a) Coontrottion - m2 255 2,522 642,600 - - _ - 642,600 32,130 30 ' 9,639 b) Eqoip-ent Furnt-re 85,800 - - 65,800 4,290 50 2.145 Appliances 16,750 - - - _ 16,750 838 7$ 587 sterilioat-on 22,620 - - - _ 22,620 1,131 70 792 Mat.resses and linen 19,56D - - - _ 19,560' 978 60 587 Linen for de,i-ey roan 5,160 - - - 53,160 258 60 155 Medionl eqoipnent ,8250 - - _ _ 8,250 413 70 248 Ubntetic.,eqnip-ent 14,930 - - _ _ 14,930 746 70 448 Mano snrgeny 7,930 - - - - 7,930 396 70 238 Applianoen for dreosing tables 1,510 - - - - 1,510 76 70 46 Laboratory 20,390 - - _ _ 20,390 1,019 70 611 c) Vohicle - 4-wheel drion 1 1000 16000 1601,000 5 7,600 Sob-total 1.005,500 _ _ _ - 1,005,500 50,275 46 23,096 7. Merdimal pont - Charazani a) Equip-nt (nane on for Ulla Ullo nedicol post) 202,900 - - _ - 202,900 10,145 5s s,857 b) Vehiole - 4-bheel dri-e 1 160,000 160,000 - 10,000 8,000 95 7,600 Slb-total 362,900 - - _ 362,900 18,145 74 13,457

~~C. Miorohealth Posts 1. Fit. 30 800 24,030 - - - - 24,000 1,200 25 300 2. Drags 30 1,700 51,l00 - - _ _ 51.000 2,550 70 1,785 Sob-total 75,000 - - - - 75,000 3,750 55 2,005~~

~~otal intes tment 1,894,200 _ 1,894,200 94,6710 45 43 091~~

I10 OPneotieg Cost A. Peesonel 1. Ulla ills nedical post (nan-year) Physi-san 11) 5 116,690 116,690 116,690 128,359 128,359 134,777 624,875 31,244 Aoniilary -- rse (1) 5 25,466 25,466 25,466 28,013 28,013 29,413 136,371 6,818 Laundry - cleaning personnel 5 21,000 21,000 21,000 23,100 23,100 24,255 112,455 5,623 Driver (1) 5 21,000 21,000 21,000 23,100 23,100 24.255 112,455 5 623 Sob-total 184,156 184,156 202,572 202,572 212,700 986,156 49,307 2. Charazan.i edgool post (name en Ulla Ulla) 184,156 184,156 202,572 202,572 212,700 986,700 49,308 3. Counoity health workers (30) 150 12,733 381.990 381,990 420,189 420.189 441,198 2,045,556 102,278 Sob-total 750,302 750,302 825,333 825,333 866,598 4,017,868 200,893 - - 0. localKark Technical Premiums 1. peofessiona7 27,300 p,.o Ulla Ullo (1) 13,500 27,000 29,700 29,700 31,185 131,085 6,554 Charazani (1) 27,000 27,000 29,700 29,700 31,185 144,585 7,229 2. Auxiliaries 0,8000 p.a. Ulla Ulls (1) 5,400 10,800 11,880 111800 12,474 52,434 2,622 Choac-ani (1) 10.800 10.800 11_880 11,880 12,474 57 834 26892 sb- total 56,700 75,600 83,160 83,160 87,318 385,930 19,297 - 3. Pond Ulla Ella 17,500 35,000 38,000 38,000 40,000 168,500 8,425 25 2,106 CheZoani 35,000 353000 38,000 38,000 40,000 186,000 9,300 25 2.325 Sob-total 52,500 70,000 76,000 76,000 80,000 354,500 17,725 25 4,431 4. Drals and Mledical Onpelien 2. EllRa Slo52,500i 105,000 115,000 105,000 121,000 508,500 25.425 70 17,797 2. Ch-aronoi 105,l90 105.000 j,90 15,000 121,000 5A1,000 2805 70' 15,635 Sob-total 157,500 210,000 230,000 230,000 242.000 1,069,500 53,475 70 37,432 5. Supervision and Evaluation 1. Office suppli-e - 7,500 8,000 8,000 8,000 31,500 1,575 60 945 2. Salaries of soper-isons

~~- 16,000 17,500 17,500 19,100 70,150 3,505 - _~~

3. P-r diom stieoeds _ 15.800 17_500 17,500 18.100 68,900 3.445 Sob-total. ,,. 7 0 810 6 90 34, Sub-total 6 39,300 43,000 43,000 45,200 170,500 8,525 11 945 6, Teransportation (fool and maietenance) 24.000 48.000 53_000 53_000 55,500 233,500 11,675 15 1,751

~~1,310.493 6.231,806 31,590 14 44_559 Total oPerating costs 1.041.002 1,153,202 0_31493 1.376.616~~

~~Total -ost (investment and operating) 2,935,202 1,193,202 1,310,493 1,310,493 1,376,616 8,126,006 406,300 22 87,650~~

~~Physioal .o.tingenoies - 1T/. oe heaIth facilities, equipment and nicrobolth pats 144 - _ - - 144,340 7,217 54 3897 547 Total 1.193,202 i1 4 93 1,310, 49 1.376,616 4130 225704346~~

~~Jane 0, 1977 - 158 -~~

~~ANNEX 8~~

~~BOLIVIA~~

~~ULLA ULLA DEVELOPMENT PROJECT~~

~~Water Supply and Human Waste Disposal Systems~~

~~Background~~

1. Most of the Ulla Ulla villagers depend for their water supplies on open ditches, which are polluted by local overland drainage, and on conventional dug wells, which are also unsanitary for drinking since they are unprotected. Their pit privies are poor and unsanitary with human waste scattered and unprotected. Under these ecological conditions, a safe water supply system and sanitized waste are complementary to each other and should be treated together, as would be done under the project.

2. Unlike many other areas, Ulla Ulla has enough water for its inhabitants. Snowmelt and natural lake runoffs help keep streams and village ditches running year-around. Also good shallow aquifer and spring waters are plentiful to the extent that a certain portion of the project area is water- logged. However, the lack of a sanitary water supply and human waste disposal system is considered to be a social constraint to increasing productivity in the project area since it would be optimistic to expect the project to generate the full benefit if its people are in poor health.

~~The Project Sanitary Systems~~

3. Since any improved measures to be introduced for use by the rural poor must be simple, effective, long-lasting and, of course, afforadable, the project proposes to provide a water supply system that uses a locally made hand pump from a protected well dug inside the villages or close to them (similar to that of the Ingavi Project). Field interviews show that such a system would be welcomed in the project area.

~~4. The main features of the well and pump are as follows:~~

~~Well - Average diameter 1.00 m Depth 4 - 5 m Brick chamber for sand protection at bottom, if needed Back-filled after pump installation~~

~~Pump - The main body: 3" ¢ p.v.c. pipe with a steel handle Piston rings: plastic or leather with a 1/2" steel rod Screen: p.v.c. pipe Capable of discharging about 0.7 liters/stock - 159 -~~

~~ANNEX 8~~

Pumps would be fabricated in La Paz. By using p.v.c. for the body, not only will the cost be less, but the pump will be simple, easy to install and operate, and inexpensive to maintain. Also, back-filling the well and providing a covered concrete platform after installing the pump will help protect the well from local contamination. Other alternatives, such as a central system pumping water from a deep well by windmill or gravitationally pipelining surface water from its sources, have been reviewed, but they are prohibitively expensive and more sophisticated to operate and maintain.

5. In dealing with human waste, the project would provide a protected system of pit privies designed to cope with the high groundwater table prevailing in the area. The main features of these pit privies are as follows:

(a) the pit will be about 2.00 m deep, protected by casings of 4 x 1.00 m 0 x 0.60 m concrete pipes, and about 0.50 m above the ground surface, covered by a concrete platform with a ventilation system and seat cover; and

~~(b) the enclosure will be a simple dirt hut with a grass roof.~~

~~Village Homesteads~~

6. Generally a village homestead consists of four buildings built around a rectangular playground about 150 x 150 m in size. Each building has five to 10 compartments, each of which is occupied by a family of about five persons. Schools, if any, are within about 300 m. Therefore, the proposed hand-pump well system would appear ideal since pumps could be installed for use by a cluster of families.

~~Water Demands and Pump Capacities~~

7. The proposed pump is capable of supplying at least 500 liters per day, which, on an average consumption of 60 liters per day per capita (15 gpd), could serve a minimum of eight persons. Thus, three pumps would be adequate to serve a cluster of five families.

~~Scope of Work~~

8. The project would serve only about 67% of the population because villagers are scattered widely and many are in high rugged areas barely accessible even by existing earth tracks. Priority would be given to the more critical areas. About 1,200 pumps would be installed over the project construction period. With three pumps per five families (para 6), the project could serve about 2,000 families out of the total 3,000.

~~9. Along with the pump installation, about 1,000 pit privies would be provided for these 2,000 families - an average of about one unit per two families. - 160 -~~

~~ANNEX 8~~

~~Costs - Water Supply System~~

10. The investment cost (cash) of the hand-pump dug well is about $b 5,500 (US$275), excluding the labor cost for well excavation which would require about 18 man-days. About 25% of the cost is the foreign exchange component. Details are given in Table 1. The total investment cost, 25% of which would be for spare pumps, would be about $b 7,650,000 (US$383,000); of this, about $b 2,000,000 (US$100,000) would be the foreign exchange cost. The average per capita investment is computed at US$38.30 (based on 2,000 families of five persons each).

11. The annual operation and maintenance costs that are detailed in Table 1 are estimated to be about $b 200 (US$10.00), of which about 90% ($b 180) would be borne by beneficiaries and 10% ($b 20) by the Government for annual inspection.

~~Costs - Pit Privy System~~

12. The unit cost of a pit privy would be about $b 1,800 (US$90.00), excluding labor cost for pit excavation which would require about 14 man-days. The foreign component would account for about 15% to reflect transportation requirements. Details are given in Table 2. The total investment cost (cash) would be $b 1,800,000 (US$90,000); of this, about $b 260,000 (US$13,000) would be the foreign exchange component. The per capita investment is computed at US$9.00.

~~13. The annual costs, that are detailed in Table 2 are estimated at $b 50 (US$2.50), of which about $b 25 would be borne by beneficiaries and $b 25 by the Government for annual inspection.~~

~~Cost Sharing and Recovery~~

14. The beneficiaries would be expected to contribute to the investment in the form of labor (US$61,000), because of their weak financial position. For this, they could supply about 18 man-days ($b 630) digging and back- filling a water supply well, and about 14 man-days ($b 490) excavating a pit privy. The Government would bear the remaining costs without recovery. Also, the beneficiaries would be expected to maintain the facilities, while the Government would provide at-site inspection services to ensure proper working condition of the systems.

~~Implementation~~

15. The Ministry of Social Security and Public Health (MPSSP) would be responsible for installing the hand-pump wells and pit privies. This agency is, at present, undertaking similar work for the on-going Ingavi Project (Loan 1211-BO) and its limited capacity is being expanded to cope with that project's requirements. The technical assistance being provided in the Ingavi, - 161 -

~~ANNEX 8~~

plus the expanded capacity and experience gained from implementing these facilities, should make MPSSP adequately competent to handle works under the proposed project. On this basis, no consultants would be required.

~~June 4, 1977 162 - ANNEX 8~~

~~BOLIVIA~~

~~ULLA ULLA DEVELOPMENT PROJECT~~

~~Water Supply System~~

~~Details of Cost Estimates for Hand-pump Well~~

~~Foreign Exchange Total Requirements ------$b------~~

~~Investment Costs (cash)~~

1. Pump set and accessories 3,000 1,000 2. Installation - Excavation and backfill (beneficiaries)1/ - - Concrete platform 175 - Pump stand 250 - - Transportation 200 200 - Engineeringand supervision (30%) 1,000 - - Miscellaneous (10%) 163 20

~~4,788 1,220 - Physical contingencies(10%) 479, 122~~

~~Annual 0 & M Costs~~

~~- Replacementof piston/rings 80 2/ - Other repair 3% (of $b 3,000) 100 2/ - Annual inspection 25 205~~

~~1/ 18 man-days ( @$b 35). 2/ By beneficiaries (cash)~~

~~June 4, 1977 ANNEX 8 Table 2 - 163 -~~

~~BOLIVIA~~

~~ULLA ULLA DEVELOPMENT PROJECT~~

~~Pit Privy System~~

~~Investment Costs (Cash)~~

~~Foreign Exchange Total Component ------$b------~~

~~Materials and Installation~~

- Concrete culveris (4) x 0.35 m /m x 0.60 x $b 1,000 840 - - Concrete platform 100 - - P.V.C. pipe 2"0 x 0.60 m 50 - - Seat and cover L/S 100 - - Excavation (beneficiaries) 1/ - - Adobe structure " 200 - Transportation 200 - - Engineering and supervision (15%) 200 - Miscellaneous (5%) 80 - 1,570 200 - Physical contingencies (15%) 230 25 1,800 225

~~Annual 0 & M Costs~~

~~- General repair 1.5% ($b 1,800) 25 2/ - Annual inspection 25 50~~

~~1/ 14 man-days(@ $b 35). 2/ By beneficiaries (cash).~~

~~June 4, 1977 BOLIVIA~~

~~ULLA ULLA DEVELOPMENT PROJECT~~

~~Water Supply - Total Costs~~

~~Unit _--_------Years------Total Total Foreign Foreign No. of Cost 1 2 3 4 5 Cost Cost Exchange Exchange Units ------$b------US$ _ _ US$~~

Cash Co0ts Investment Costs Pump sets 1/ Installed 2/ 1,200 3,000 360,000 810,000 810,000 810,000 810,000 3,600,000 180,000 33 59,400 Spare 3/ 300 3,000 90,000 202,500 202,500 202,500 202,500 900,000 45,000 33 14,850 Concrete platform 1,200 175 21,000 47,250 47,250 47,250 47,250 210,000 10,500 25 2,625 Engineering and supervision 1,200 1,000 120,000 270,000 270,000 270,000 270,000 1,200,000 60,000 - - Transportation 1,200 200 24,000 54,000 54,000 54,000 54,000 240,000 12,000 - - Miscellaneous 1,200 163 19.560 44.010 44,010 44,010 44.010 195.600 9.780 - - 4 Sub-total 634,560 1,427,760 1,427,760 1,427,760 1,427,760 6,345,600 317,280 24 76,875 Operating Costs (maintenance) 1,200 200 24,000 78.000 132,000 186.000 420,000 21.000 25 5.250 Total baseline cost 634,560 1,451,760 1,505,760 1,559,760 1,613,760 6,765,600 338,280 24 82,125 Physical contingency 10% of cash investment costs 63.456 142.776 142.776 142.776 142.776 634.560 31,728 24 7.615 Total Costs and physical contingency 698,016 1,594,536 1,648,536 1,702,536 1,756,536 7,400,160 370,008 24 89,740 Phasing of installation No. of sets 1,200 120 270 270 270 270 - - - -

~~1/ Hand pump with PVC casing, locally manufactured. 2/ Three pumps for five families, serving 60% of the total number of families in the project area (3,200). 3/ 25% of 1,200.~~

~~July 6, 1977 BOLIVIA~~

~~ULLA ULLA DEVELOPMENTPROJECT~~

~~Waste Disposal (Pit Privies)~~

~~Total Costs~~

Unit ------Years------Total Total Foreign Foreign No. of Cost 1 2 3 4 5 Cost Cost Exchange Exchange Units ------$b------US$ % US$ Cash Costs Investment Costs 1,000 1/ Concrete culvert (pipe) 840 84,000 189,000 189,000 189,000 189,000 840,000 42,000 25 10,500 Concrete platform 100 10,000 22,500 22,500 22,500 22,500 100,000 5,000 25 1,250 PVC pipe ventilation 50 5,000 11,250 11,250 11,250 11,250 50,000 2,500 50 1,250 Seat and cover 100 10,000 22,500 22,500 22,500 22,500 100,000 5,000 - - Engineering and supervision 200 20,000 45,000 45,000 45,000 45,000 200,000 10,000 - - Transportation 200 20,000 45,000 45,000 45,000 45,000 200,000 10,000 - - Miscellaneous 80 8.000 18,000 18,000 18,000 18,000 80,000 4,000 - - Sub-total 1,570 157,000 353,250 353,250 353,250 353,250 1,570,000 78,500 17 13,000O Maintenance Costs 27 2,700 8,775 14,850 20,925 27,000 74,250 3,712 25 928 Total cash costs 159,700 362,025 368,100 374,175 380,250 1,644,250 82,212 17 13.928

Total baseline costs 163,200 369,900 375,975 382,050 388,125 1,679,250 83,962 17 13,928 Physical contingency 2/ 15,700 35,325 35,325 35,325 35,325 157,000 7,850 17 1,300 Tbtalcosts and physical contingency 175.400 397,350 403,425 409,500 415.575 1,801.250 90,062 16 14.300 Phasing of Investment No. of pit privies 1,000 100 225 225 225 225 - - - - -

~~1/ One pit privy for two families, serving 60% of the population in the project area (3,200). 13 2/ 10% of cash investment costs. a~~

~~July 6, 1977 X - 166 -~~

~~ANNEX 9~~

~~BOLIVIA~~

~~ULLA ULLA DEVELOPMENT PROJECT~~

~~Education Component~~

~~Background~~

1. The education program administered by the Ministry of Education and Culture in the Ulla Ulla region are poor. It is commonly accepted that the majority of graduates from local schools are as ill prepared to contribute to the welfare of their communities as their counterparts who never set foot in a classroom, mainly because courses are irrelevant to the actual needs of the local population. While parents in the project area still maintain that it is important for their children to get an education, they all agree that neither the facilities nor the teaching staff are adequately equipped to help their children learn something useful for the practical world in which they live. Consequently, when the decision must be made as to whether children should be sent to school or kept home to help around the house and with the animals, they often choose the latter, with little misgiving. The poor attendance is also influenced by the fact that: (a) the academic year runs into the peak seasons of agricultural activities when children are expected to help with field work rather than attend class; (b) many children have to stay away from school because of a lack of medical attention; and (c) the majority of the students who enroll in the first grades know only Aymara, so they cannot understand what is being taught in Spanish.

2. Rural education in general has had relatively low priority in Bolivia until recently, but Ulla Ulla has additional handicaps: the region is remote from any major population centers; accessibility during the rainy season is difficult, if not impossible; and its low, widely distributed population has inhibited the Government's provision of assistance for the development of human resources.

3. The lack of Government aid is particularly noticeable in the poor and inadequate school facilities in the project area. Conditions of the adobe school structures are such that, in many cases, renovation would be more expensive than constructing new schools. Classrooms are damp and cold, roofs usually leak, rooms are improperly ventilated and poorly illuminated. Addi- tionally, the schools lack adequate drinking water facilities and pit privies. Most schools are inadequately furnished, lack basic teaching aid materials and equipment, and teachers use Peruvian textbooks in many courses because of unavailability of locally produced teaching materials. The courses taught in the project area also have a built-in urban and academic bias, which has little relevance to the students' environment and eventual work needs. Attendance rates are low, dropout rates are very high, and the proportion of over-aged pupils with respect to average-aged students is relatively high by comparison with other regions. - 167 -

~~ANNEX 9~~

4. The zones selected for implementation of the educational component have been confined to an area containing 17 schools, 16 of which offer primary education (grades 1 to 5) and one intermediate school (grades 6 to 8), located in Ulla Ulla. In 1976, the primary schools had a total enrollment of 730 students, of which only one-third were girls. Eighteen pupils were at the intermediate level. Enrollment records for children show that only 26% of the total number of children between the ages of six and 11 living in the area attended classes in 1976, and there were no arrangements for vocational training for graduates from the primary and intermediary schools or for adults.

5. The schools in the area are administered by an absentee superinten- dent who lives and studies at a university in La Paz, and by 29 teachers residing permanently in the designated area. About 50% of the teaching staff have not attended teacher training colleges and under ordinary circumstances would not be permitted to teach in public schools. Many of them are students who have been appointed as temporary substitutes for titled teachers, who make all possible efforts not to be transferred to rural areas, particularly not to the Ulla Ulla region. Those who do accept such appointments use the time to gain experience and to get on the payroll of the Ministry of Education. Their living conditions are hard, by comparison with other teachers living closer to La Paz, and salaries are low, not exceeding US$100 per month equivalent. Accommodations are inadequate and teachers often have to live in houses lacking basic facilities such as heating, light, ventilation, water and pit privies.

~~Project Scope~~

6. Elements. Except for the radio program, the education component would contain, with some minor modifications, the same items financed for the basic and intermediate levels under Loan 1404-BO, Education and Vocational Training Project. The component would initiate a modest program to rebuild and improve the existing schools, furnish and equip them, provide teaching materials, upgrade teachers' skills, introduce bilingual programs, bring school calendars in line with agricultural cycles, develop new curricula teaching materials, and establish, on a pilot basis, a community education program. Specifically, the component would finance:

(a) Basic Education Infrastructure - construct 25 and renovate two classrooms, to bring the total of adequate classrooms in the project area to 39 by 1981. Construct 20 pit privies; build 30 houses for the teachers and their families and install new furniture in the 39 classrooms. This program would enable the schools to support a total enrollment of 1,254 students by 1981. Detailed enrollment projections are provided in Table 1. All schools would be provided with water supply.

~~(b) Intermediate Schools - replace the existing intermediate school of Ulla Ulla with a new school to accommodate 50 students; work would include construction of dormitories, - 168 -~~

~~ANNEX 9~~

~~cafeteria, library, a science laboratory, a workshop, a water supply and pit privy system, and a multipurpose conference room to serve the school and the community.~~

(c) Textbooks and Learning Materials - finance the provision of textbooks and education aids, bilingual programs and other materials developed under the Education and Voca- tional Training Project. The school would charge students a small rental fee for the books and other education aids, which would be refunded when they were returned to the school in good condition.

(d) Teachers' Training - finance travel and subsistence of the 29 teachers to Warisata College to participate in upgrading courses that would be given by personnel trained under the First Education and Vocational Training Project.

~~7. Design Standards. The following norms would be applied in designing the schools:~~

~~Square meters per student~~

~~Classrooms 1.30 - 1.40 Science laboratory 2.00 Workshop 4.00 Library 1.60 Pit privies 1.20 Dormitories 6.00 Other areas 1.00 Dining room 1.40 Kitchen 0.84~~

The schools and teachers' housing would be built according to prototype designs already decided upon for the First Education Project. Design of the basic schools and of the intermediate school would be prepared by professional staff of the Project Unit. Teachers' houses would cover a total area of 46.9 sq m for married teachers and include two bedrooms, a living-dining room, bathroom and kitchen. For single teachers, floor area would be 23.45 sq m and include a bedroom, a living-dining room, a kitchen and a bathroom.

~~Cost~~

~~8. Total cost of the education component would amount to $b 12.2 million (US$604,000) and would include: - 169 -~~

~~ANNEX 9~~

(a) Investment Costs - school infrastructure, learning material, teachers training and one vehicle for the supervisor. It also would include travel and subsistence expenses on one specialist from the Education and Vocational Training Project implementing agency to supervise construction works. Total investment cost would amount to $b 9.4 million (US$472,000). Detailed costing is given in Tables 2, 3 and 4.

(b) Incremental Operating Costs - these costs would amount to $b 1.7 million (US$85,000) during the five years (Table 4). They would include salaries of the supervisor and his driver, operation cost of the vehicle, housing costs of the supervisor (rent) and school maintenance costs.

~~(c) Physical Contingencies - 10% would be allowed on investment costs -- $b 944,625 (US$47,000).~~

~~Implementation~~

9. The main responsibility for the implementation of this component would be delegated to a specialist who would be contracted by the Project Unit managing the Education and Vocational Training Project and seconded to the National Institute for Development of Wool (INFOL). The matters of daily operations, the specialist would report to INFOL's Chief of Agricultural and Social Welfare Division, but he would follow the outline of the detailed action program for the implementation of the education component prepared by the Project Unit. The specialist would live in the main compound of the Agricultural Division in the Ulla Ulla area and would work closely with the teaching staff in the selected area. The project would finance his salary and housing for five years and the costs of a vehicle and a driver. The teachers involved would report directly to the project specialist. The Project Unit in the Ministry of Education would monitor the progress of this component with the assistance of the specialist and would prepare semi-annual progress reports.

10. Construction works (see Chart 1) would be carried out by local con- tractors, selected through local competitive bidding. The alternative of entrusting construction to SNDC (Servicio Nacional de Desarrollo de la Comunidad), as in the First Education Project, does not seem feasible at this time as SNDC appears already overcommitted under the Bank's Education Project. The Government would provide adequate budgetary allocations for the maintenance and repair of all buildings, furniture and equipment provided under the project.

~~June 14, 1977 BOLIVIA~~

~~ULLA ULLA DEVELOPMENT PROJECT~~

~~Education Component - Estimated Enrollment 1976-81~~

~~No. of Grades in ------Projected Enrollment------No. of Classrooms Nucleus and Satellite Schools 1976 1976 1977 1978 1979 1980 1981 Needed by 1981~~

Basic Schools Ulla Ulla Ulla Ulla Central School 5 54 62 71 81 92 105 3 Antaquilla 3 30 34 39 44 50 57 2 Coolo 3 28 32 36 41 47 54 2 Canuhuma 3 34 39 44 50 57 65 2 Hichocollo 5 63 72 82 94 107 122 3 Huacochani 3 28 32 37 42 48 55 2 Nuvepampa 3 31 35 4t 46 52 59 2 Puyo-Puyo 3 30 34 39 44 50 57 2 Suchez 3 30 34 39 44 50 57 2 Ucha-Ucha 3 30 34 39 44 50 57 2

~~Sub-total 358 408 466 530 603 688 22~~

~~Amarete Llachuani 5 89 98 109 121 135 150 4 Jotajoko 3 30 33 37 41 46 51 2~~

~~Sub-total 119 131 146 162 181 201 6 Kaata Morokarka 4 31 33 35 37 40 43 1 Apacheta 3 35 37 40 43 46 49 2 o Chullina 4 86 92 98 105 112 119 3~~

~~Sub-total 152 162 173 185 198 211 6 Ococoya Huarachani 4 41 45 49 53 58 63 2 Pallanani 4 59 64 70 76 83 91 3~~

~~Sub-total 100 109 119 129 141 154 5~~

~~Total basic enrollment 729 810 904 1,006 1.123 1,254 39~~

~~Ulla Ulla Intermediate School 2 18 21 25 29 34 40~~

~~Total enrollment 747 831 929 1,035 1,157 1,294 44~~

1/ Projections are based on the following assumptions: 1976 1981 Total estimated population 6,500 6,605 In age group 6-11 1,593 1,618 Enrollments 729 1,254 In age group 6-11 425 731 ( X Attendance rate 26.3% 45.2% -

~~May 25, 1977 _ 171 _ ANNEX 9 Table 2~~

~~BOLIVIA~~

~~ULLA ULLA DEVELOPMENTPROJECT~~

~~Basic Education Schools~~

~~Costs of Construction and Furnishing~~

~~Number Unit Cost Total Cost …---$b000…-_-_-__- Classrooms~~

~~Reconstructedor constructed 25 72 1,800 Renovated 2 18 36~~

~~Pit Privies 20 7 140~~

~~Teachers' Houses 30 81 22,430~~

~~Total 4,406~~

~~Outside works (8%) 352~~

~~Total constructioncosts 4,758~~

~~Classroom Furniture 39 sets 14 546~~

~~Total investment costs 5,304~~

~~June 9, 1977 - 172 - ANNEX 9 BOLIVIA Table 3~~

~~ULLA ULLA DEVELOPMENTPROJECT~~

~~IntermediateSchool (Ull-aUlla)~~

~~Costs of Construction, Furniture and Equipme_t ($b)~~

~~No. of Cost per sq meters sq_Leters Total Cost~~

Civil Works Classroom (one for 36 students) 50 Science lab (for 15) 30 Multiple workshop (for 15) 60 Library (for 20, plus shelves and audio-visualequipment) 50 Bathrooms 15 Dining room/conferenceroom (for 50) 70 Kitchen 42 Dormitories(for 50) 300 _

~~Sub-total 617 1,380 851,460~~

~~Outside walls (+ 28%) 238,409~~

~~Total 1,089,869~~

~~outside works (+ 25%) 272,467~~

~~Total 1,362,336~~

~~Professionalfees 213,235~~

~~Total civil works 1,575,571~~

~~Furniture Classroom 16,000 Science lab 10,000 Workshop 15,000 Library 13,000 Dining!conferenceroom 25,000 Kitchen 10,000 Dormitories 20,000~~

~~Total furniture 109,000~~

~~Equipment (bathroom,kitchen) 43,200~~

~~Total investment cost l727,771~~

~~June 9, 1977 BOLIVIA~~

~~ULLA ULLA DEVELOPMENT PROJECT~~

~~Education Component - Total Costs~~

~~Unit ------Years------Total Total Foreign Foreign No. of Cost 1 2 3 4 5 Cost Cost Exchange Exchange Investment Costs Units ------$b'000-----_-__ _ US$'000 ¾ U0'$'000~~

School infrastructure Basic education schools 1/ Civil works 4,758 - - - - 4,758 238 30 71 Furniture 546 - - - - 546 27 50 14 Equipment 360 - - - - 360 18 80 14 Sub-total 5,664 - - - - 5,664 283 35 99 Intermediary School Civil works 1,576 - - - - 1,576 79 30 24 Furniture 109 - - - - 109 5 50 2 Equipment 43 - - - - 43 2 80 2 Sub-total 1,728 - - - - 1,728 86 33 28 Total infrastructure 7,392 - - - - 32369 34 127 Vehicle (1) 160 - - - - 160 8 100 8 Textbooks and learning material 1,000 - - - - 1,000 50 60 30 Supervision of construction 2/ 20 - - - - 20 1 - - Teachers' training 3/ 874 - - - - 874 44 16 7 Total investment costs 9,446 - - - - 9,446 472 36 172

~~Operating Costs~~

School maintenarce costs 66 66 66 66 66 330 17 29 5 Operation and maintenance of vehicles 40 40 40 40 40 200 10 10 1 Other supplies 10 10 10 10 10 50 2 20 "\ 4 Salaries: supervisor man/year 5 168 168 168 168 168 840 42 - - driver man/year 5 54 54 54 54 54 270 13 - Housing (rent) 1 1 1 1 1 5 1 - _ Total operating costs 3339 339 339 1 69 85 12 10

~~Total costs (baseline costs) 9,785 339 339 339 339 11,141 557 33 182 Physical contingencies (10 on investment costs) 945 - - - - 945 47 36 17 Total 10,730 339 339 339 339 12,086 604 33 199~~

1/ Including teachers' housing. a 2/ One supervisor and one driver @ $b 180 per day each, three days every second week for eight months, plus some margin. 3/ Per diems and local travel of teachers to Warisata.

~~June 14, 1977 BOLIVIA ULLA ULLA DEVELOPMENT PROJECT Education Component - Implementation Schedule 1, (Year 1)~~

~~J F M A M 9 J A S 0 N D~~

~~CONSTRUCTION~~

~~Civil Works -~~

~~Completion works - -~~

~~Ordering of furniture and equipment~~

~~Manufacturing furniture ______= _ _ E _~~

~~Del ivery~~

~~TEACHERS TRAINING~~

~~Training for directors (two weeks)~~

~~Teachers' training (one month)~~

~~1J Coordinated with the programs for the other areas of the First Education and Vocational Training Project.~~

~~May 25, 1977 World Bank - 17845 - 175 - ANNEX 10~~

~~BOLIVIA~~

~~ULLA ULLA DEVELOPMENT PROJECT~~

~~Women's Participation Component~~

~~I. INTRODUCTION~~

1. The objective of the Ulla Ulla Rural Development Project is to initiate, on a modest scale, an integrated development program to raise the living standards of about 3,000 farm families residing in the project area. Since women play a predominant role in economic activities in rural areas and their involvement and support in the development efforts proposed would be crucial to the success of the project, a component to increase women's participation has been included. This is the first rural development project to make a deliberate effort to increase women's participation in the development process.

~~Current Situation~~

2. The living conditions of typical housewives in the project area are extremely harsh and the rewards very limited. They work hard and die at the relatively young average age of about 45. Girls mature fast and assume adult responsibilities at a young age. Five year old girls are assigned to herding alpacas, spinning, hauling water over long distances, collecting dung for cooking fuel, washing dishes, and sweeping the house yards. Teenage girls continue to look after alpacas/llamas, but begin to spend more of their time taking care of their brothers and sisters, and in spinning, weaving and cooking. Average age for marriage is about 15 years, at which time they are accepted as full and equal members of their communities. Economic considera- tions are the crucial factors for both boys and girls in selecting a partner. Parents are very careful to ensure that their children marry into a family better off than their own, or at least that they select a partner that is serious and hard working. Women who have reputations for being hard working and enterprising are in great demand since the wife is expected to help her husband improve the economic welfare of the new family. Married women continue the work to which they have been accustomed since early childhood, but with greater intensity. Feeding, clothing, and bearing children and managing the financial affairs of the family keeps them constantly occupied. Their work schedule is governed by the requirements of the various agricultural seasons--shearing alpaca/llama; collecting the fleece; washing, spinning and selling it; herding animals; and visiting fairs. During slacks in the agricultural cycle, women do spinning and knitting and make handicraft items to supplement the income derived from sales of alpacas and their fleece.

~~3. The powerful economic role played by women, who comprise about 51% of the total population in Bolivia, is analyzed in a special report 1/ in~~

~~I/ La Situacion del Rol Social de la Mujer Rural en Bolivia, by CODEX (consultants) October 1975, La Paz, Bolivia. - 176 -~~

ANNEX 10 which it is pointed out that about 48% of women, compared to 42% of men, are engaged in productive activities. Approximately 37% of the total female population in the rural and marginal urban areas are mainly concerned with looking after their household, about 32% are engaged in cultivation of crops, and 23% have full responsibility for livestock management. In addition, they handle about 42% of the total minor commodities sold each year in the villages, compared to 20% by men. Women are as mobile as men in the rural areas and both make frequent visits to urban centers to look for temporary work during the agriculture slack and/or to sell their merchandise in urban markets. Only about 5.5% of these surveyed came to the cities to seek medical help and/or to look for recreation. Approximately 63% of those surveyed preferred to seek help from the traditional herb doctors residing in their villages and they seemed to be suspicious of services provided by university trained doctors. About 72% of the women are illiterate, a higher percentage than the rate for men, and most do not participate in social organizations and/or production or marketing cooperatives, although over 50% belong to various religious groups.

~~Government Efforts~~

4. The Government has recognized the economic and social contribution made by women in rural areas and has organized special programs to help them participate more meaningfully in the development process. The focus of these programs is to teach women improved health practices, nutrition, elementary educational courses, and basic skills. There are a variety of schemes being implemented by a multitude of Government and private agencies, which seem to have a grate deal of enthusiasm and zeal for their own programs, regardless of the work of others in the field. Although the intentions of each agency are commendable, a great deal of funds and trained manpower are wasted on unnecessary competition and duplication of functions. One obvious improvement would therefore be to establish a central planning and coordination mechanism to be exclusively responsible for women's affairs.

5. The most important development programs for women in urban and rural areas are being carried out by the Nutrition Division in the Ministry of Social Security and Public Health, the National Council for Social Action (operated by the office of the President of the Republic), and the National Service for Community Development (sponsored by the Ministry of Agriculture). The main efforts of the Nutrition Division have been aimed at organizing mothers for training in health, nutrition, selling and purchasing of food, and making of handicrafts, as well as providing them with elementary education courses. Since the initiation of its program in 1972, the Division has helped to establish about 588 Mothers' Clubs in urban and rural areas throughout Bolivia. Members of the clubs are given food in exchange for a monthly contribution of not less than US$0.75 per member. The clubs open savings accounts in private banks on behalf of their members, who are encouraged to build up savings and earn interest on deposits. Membership in the Mothers' Clubs range from a minimum of 15 to a maximum of 100 mothers per organization. It is estimated that the average savings account per club amounts to about US$25 for recently established clubs in rural areas and about US$2,400 for those in urban and - 177 -

ANNEX 10 marginal areas which have been in existence longer. Total membership in all the clubs organized by the Nutrition Division is estimated at 100,000 mothers. The Nutrition Division has about 80 professionals working on this program, assisted by experts from other institutions. The clubs serve as educational and training centers for the mothers as well as other members of the families, and mothers are often encouraged to form handicrafts production pre- cooperatives as well as to purchase food in bulk. Recently, the World Food Program signed a contract with the Ministry of Social Security and Public Health which stipulated that basic food will be sold at subsidized prices to club members and the earnings invested on behalf of members in profitable enterprises on the advice of professional investment experts hired for this purpose.

6. The National Council for Social Action (NCSA), which began operations in 1971, has constructed 32 service centers for women throughout Bolivia and achieved an estimated membership of about 8,000. Beneficiaries of NCSA range in age from 15 years to a maximum of 59 years, and they are eligible to receive vocational training in preparation for a career; upgrading courses in health, nutrition, elementary education, and child care; and instruction in the formation of pre-cooperatives. About 450 professinals are involved in managing the ongoing programs, with each of the 32 centers headed by a director and supported by social promotion experts, auxiliary nurses, and doctors working in cooperation with other particiapting institutions.

7. The National Service for Community Development (SNDC) began its assistance program for women in 1973 with promotional campaigns to organize women in rural areas and to motivate them to adopt new practices in health, home improvements, and agricultural production methods, to participate in community-sponsored works and functions of pre-cooperatives; and to undertake basic education courses. The program is being carried out with USAID technical assistance and is managed by SNDC's Division for the promotion of rural women. SNDC implements its promotional and training activities for rural women using staff from its regional centers, and local training centers in each rural area. The regional centers are directed by a sociologist, supported by locally recruited women specially trained to serve as promotion agents in their villages. At present, SNDC has about 40 of these agents responsible for training women in the formation and development of pre-cooperatives, handicraft production, planting of vegetable gardens, agricultural production, and improved family care.

~~II. PARTICIPATION OF WOMEN UNDER THE PROJECT~~

~~Objectives and Content~~

8. The proposed component would help initiate, on modest scale, a program to help about 2,000 women living in the project area to improve their health and nutritional home care and to better their education. The component - 178 -

Ah-NEX 10 would also provide for training local women in handicraft production and marketing. Since women in the project area are unusually cautious and suspicious of outsiders because of their almost total isolation from the rest of the country and since there is very little information about their attitudes and particular needs, the proposed component contains funds for the construction of five Mothers' Clubs Centers in strategic locations and provides for the recruitment and training of talented local women to become promotion agents. The construction of the five centers and the recruitment and training programs would be phased so that the lessons learned in initial efforts could be incorporated into later work.

~~Component Cost and Financing~~

9. The estimated total cost of this component is $b 1.3 million (US$63,250), of which $b 650,000 (US$32,500) is for construction of five Mothers' Clubs and $b 550,000 (US$27,500) for training. No costs are expected to be recovered under this component.

~~Implementation~~

10. The Agricultural and Social Infrastructure Division of INFOL will be responsible for the implementation and coordination of this component. A sociologist/anthropologist (a woman) would be hired to organize and manage this component under the supervision of the Chief of the Agricultural and Social Infrastructure Division. She would be responsible for recruiting five local women and training them as promotion agents. Upon completing the course, the promoters would visit villages in the project area and organize women into working groups, which would gather in the three clubs constructed under this component. The promoters, under the supervision of the sociologist/anthropolo- gists, would be taught how to improve health standards; practice preventive medicine; prepare meals with high nutritional content; and make home improvements. They would also be instructed in child care, basic reading, writing and arithmetic skills; organization of production and marketing groups and associations; and the techniques of handicraft production and marketing. The five Mothers' Clubs would be furnished with the equipment needed to conduct the training programs. The implementation of this component would be watched closely by the monitoring unit in the Agricultural and Social Infrastructure Division in Ulla Ulla.

~~June 11, 1977 BOLIVIA~~

~~ULLA ULLA DEVELOPMENT PROJECT~~

~~Women's Participation Component~~

~~Total Costs~~

~~Unit ------Years------Total Total Foreign Foreign No. of Cost 1 2 3 4 5 Cost Cost Exchange Exchange Units ------US$$b------% US$~~

~~Investment Costs Construction (5 ceniters) 5 100,000 - 500,000 500,000 25,000 30 7'500 Furniture and equipment - - 150,000 - - - 7,500 - - Total investment costs - 650,000 - - - 32500 23 7,500~~

Operating Costs Salaries - 5 promotors man-year 15 10,000 - _ 50,000 50,000 50,000 150,000 7,500 - _ - 1 anthropologist man-year 4 100,000 - 100,000 100,000 100,000 100,000 400-000 20,000 Total operating costs - 100,000 150,000 150,000 150,000 550,000 2 -

~~Total baseline cost - 750,000 150,000 150,000 150,000 1O200,000 60,000 13 7,500~~

~~Physical contingencies (10% of investment costs) - 65X000 - - - 65X000 3,250 23 750~~

~~Total - 1530000 13 8 250~~

~~June 13, 1977~~

~~0D 2 - 180 -~~

~~ANNEX 11~~

~~BOLIVIA~~

~~ULLA ULLA DEVELOPEIENTPROJECT~~

~~Technical Assistance~~

~~A. Llama Fiber Dehairing Research~~

~~Background~~

1. There are about 2.2 milion llamas in Bolivia, but the absence of suitable technology for dehairing 1/ llama raw material has inhibited large- scale production of llama fiber. Traditionally, llama fiber has been considered inferior to that of alpaca or vicuna fiber due to heterogeneity, which results from the presence of varying amounts of coarse hair mixed with fine, soft fibers. The presence of these coarse fibers creates processing problems in conventional spinning, weaving and dyeing, and gives a rough and unpleasant texture to the fabric. For these reasons, llama fiber is used mainly for blankets and heavy woolen fabrics, thus accounting for the relatively small demand in the world market.

2. Very little research has been done in Bolivia to develop a dehairing processing technique. However, dehairing processing technology has been developed by several countries, but the details remain a "trade secret" of specialized firms in both the USA and Europe. The methods, which are used largely for cashmere and camel, are based on mechanical separation by a com- bination of carding and combing principles. A breakthrough in developing a practical and economic dehairing processing technique would have substantial impact on livestock production, the Bolivian wool industry and the handicraft sector. It would also increase the animal resource base for the production of high quality fiber by over five-fold.

~~3. Studies carried out in Peru have demonstrated that there are three types of llamas, classified according to fleece characteristics:~~

~~(a) CCARA - fiber is composed of short staples where the upper and under-coat fibers are clearly distinguishable;~~

~~(b) LANUDO - fiber is composed of longer staples where coarse and fine fibers are not clearly distinguishable; and~~

~~(c) INTERMEDIO - fiber texture has characteristics of both CCARA and LANUDO and the coarse and fine fibers can be distinguished.~~

~~1/ Mechanical process used to separate coarse hairs from the finer fiber contained in the fleece of llama. - 181 -~~

~~ANNEX 11~~

The CCARA and INTERMEDIO type offer the greatest possiblity for dehairing, while LANUDO could be improved genetically to produce fibers similar to alpaca. Potential production of llama fiber after dehairing is estimated at 800 metric tons annually, based on the following assumptions:

Total llama population 2,200,000 CCARA and INTERMEDIO poulation (50%) 1,100,000 Animals used for transport exclusively (20%) 220,000 Offspring (not suitable for shearing) 110,000 Total number of animals available for shearing 770,000 Yield/animal based on annual clip 1.5 kg Estimated llama fiber production (suitable for dehairing) 1,155,000 kg Available llama fiber after dehairing (accounting for 30% loss) 808,500 kg/year

4. The potential llama fiber production, when added to alpaca fiber production would be more than sufficient to operate the new processing plant at full capacity (three-shift operation) and replace the acrylic and wool yarns expected to be used by the plant in its initial years of operation. In addition, there would be sufficient fiber to supply other plants or to sell abroad.

~~Llama Fiber Dehairing Research~~

5. Inasmuch as purchased dehairing processing technology could be applied almost immediately, the project would initially make provision for the Government and the National Institution for the Development of Wool (INFOL) to initiate negotiations for the purchase of dehairing technology and submit a proposal for Bank consideration not later than six months after loan signing.

6. In the event that the dehairing technology cannot be purchased by the Bolivians, a research program would then be established within the country for the development of a Bolivian technology. The services of a well established and specialized research organization would be contracted to carry out the research program. The project would provide for a pilot processing plant (Table 1) equipped with the necessary used textile machinery and equipment, a complete fiber testing laboratory equipped with up-to-date instruments, and a qualified and experienced research staff. The research facilities would be located next to the proposed alpaca/llama spinning plant and the research program would be carried out over a three-year period. Yarn regularity tests would be undertaken at the proposed spinning plant; however, critical laboratory analysis such as protein composition, fiber friction, fiber tensile properties and surface topography would be performed by specialized labora- tories in Europe under contract. On completion of the research program, the building, equipment, and machinery would be used for subsequent dehairing operations on an industrial scale. Also, the laboratory testing equipment would be incorporated into a central quality control testing laboratory under INFOL for the Bolivian textile industry. - 182 -

~~ANNEX 11~~

~~Research Staff~~

7. A nucleus staff would be established to execute the proposed research program. The head of the research team, the assistance researcher, and the mechanical engineer would be contracted from outside Bolivia. Key personnel with the following job qualifications and estimated salaries would constitute the research team.

~~Annual Position Job Qualifications Salary (US$)~~

~~1 head of research Senior research scientist 40,000 with proven knowledge of fiber science, spinning research and general processing~~

~~I assistant researcher Textile graduate with broad 25,000 experience in animal fiber processing~~

~~1 mechanical engineer Experienced in textile 30,000 machinery maintenance and erection~~

~~I mechanic Experienced in textile 5,500 machinery, maintenance, and adjusting~~

~~1 machine operator Some mechanical knowledge 3,500 desirable~~

~~2 laboratory technicians Previous experience in 4,500 (each) textile testing desirable~~

~~Cost~~

8. Total investment cost for the research program would be $b 5.1 million (US$254,450). Total operating cost would be $b 13.1 million (US$656,250). Cost of consultant services (36 man-months) would amount to $b 5.7 million (US$285,000). Table 2 shows the investment cost of machinery and equipment for the pilot processing plant and facilities for the testing laboratory; Table 3 gives the investment and operating costs for the component.

~~Implementation~~

~~9. The proposed research program would be carried out by COMPRO. Research planning and execution of day-to-day business would be the responsibility fo the head of the research team. - 183 -~~

~~ANNEX 11~~

10. Implementation would be carried out over three and a half years. The head of the research team and the mechanical engineer would be recruited in year one, and the assistant researcher would be employed in year two. The pilot processing plant and laboratory facilities would be built in year two. In the initial period, COMPRO would conduct a survey to determine availability of llama resources, prepare raw material projections and formulate a detailed research program from the development of a suitable dehairing technique. The Planning and Monitoring Division (PM) of INFOL and the textile expert of INFOL would review the detailed research program and give advice on research priorities.

~~B. Solar Energy~~

~~Background~~

11. Over 60% of Bolivia's 5.6 million people live in the difficult rural conditions of the Altiplano, where, despite average daily temperatures below 10 C, there is a very low rate of power consumption and the majority of the people depend on non-commercial energy sources for cooking purposes only. Fuels used in the home are those most readily available, usually consisting of dried animal dung, grass knots, scrib twigs and roots, and firewood. Currently, animal dung is the single most important source of energy for household consumption in these areas, but non-commercial resources in the rural areas are inadequate to meet household requirements, providing only for limited cooking and no heating during the harsh winter months. Also, the use of dried animal dung to generate energy eliminates its use as fertilizer. Alternative sources of energy for use in rural areas is thus of critical importance.

12. Solar energy is a potentially usable resource in the Altiplano, and the Government places high priority on its exploitation and development. The Altiplano receives high levels of solar energy, r2nging from about 400 cal/cm / day in the winter months, to more than 600 cal/cm /day in summer, well above the minimum limits for the economic operation of solar energy devices. The physical conditions of the Altiplano, at an average altitude of more than 13,000 feet above sea level and with an average of 2,500 sunhours per annum, thus make the region especially suitable for the use of solar energy as one of the substitutes for conventional energy.

~~Current Work Program~~

13. Bolivia has already initiated a solar energy program at the Instituto de Investigaciones Fisicas (IDIF) of the University of San Andres in La Paz, which is well known for its research in cosmic ray physics. A highly trained team of experts is carrying out the work. To date, water heaters, food driers - 184 -

~~ANNEX 11 and metalurgicaland mineral devices using solar energy have been developed and tested to some extent.~~

14. The solar energy work program currently envisioned by the Instituto de InvestigacionesFisicas will place emphasis on an extensive study of solar radiation in the Altiplano, on conversion and accumulationof solar energy, and on applied solar energy. The latter will focus on the development of simple and low cost devices for heating, cooking, food drying, and greenhouse agriculture.

~~Project Solar Energy Program~~

15. Although IDIF has some trained personnel and a viable work program, there is a critical shortage of funds for equipment and tools for the workshop and for carrying out further research and experimentation.

16. The project would thereforestrengthen local facilities and expertiseby providing financing for purchase of equipment and tools for the workshop presently used by IDIF, and funds for the development of simple, low-cost energy collection and utilizationdevices for use in the Altiplano. It would also provide scholarshipfor training abroad and a solar energy expert to assist IDIF in developing and testing solar devices that would be economicallycompetitive with conventionaltechnologies and readily acceptable in the rural areas.

~~Costs~~

~~17. Total investment cost over a four-year period would be $b 1.8 million (US$90,000). Consultant services for 12 man-months would amount to $b 1.2 million (US$60,000)(Table 4).~~

~~Implementation~~

18. To implement the solar energy component, the National Institute for the Development of Wool (INFOL)would enter into an operationalagreement with IDIF and would contract a solar energy expert to assist with the research program, particularlyin developing and testing simple and.low-cost solar energy devices for heating, cooking, pumping, drying and greenhouse agriculture. Demonstrationsof the practical uses of solar energy devices would be carried out jointly in selected areas in the Altiplano by the Agricultural and Social InfrastructureDivision (ASI) of INFOL and IDIF. In the initial period, IDIF would conduct a survey to:

(a) collect informationregarding the present energy use of the rural population in the Altiplano, including lighting, cooking, heating homes, heating water, and minor industrial (workshop)or agro-industrialuses;

~~(b) determine additional energy needs in the rural areas; - 185 -~~

~~ANNEX 11~~

~~(c) collect basic data regarding climatic conditions of the Altiplano which may relate to the development of alternative low-cost power sources; and~~

~~(d) collect information on availability and cost of materials which might be used in the construction of simple solar energy devices.~~

~~Solar Energy Expert~~

19. The solar energy expert should have had thorough training (preferably an advanced degree) in physics or electrical or mechanical engineering, and not less than five years of practical, responsible experience in research or development of low-cost solar energy applications, including solar driers, cookers, and water heaters. This expert would reside in the city of La Paz, where he would advise and assist the IDIF in the design and implementation of solar equipment and in testing and demonstration activities to be conducted in the Ulla Ulla project area. Specifically, he would provide advice and assistance with respect to:

~~(a) collection, analysis, and documentation of all project area climatological data;~~

~~(b) collection, analysis and documentation of data describing all current and anticipated energy needs of the project area (including sources and costs of energy);~~

~~(c) collection of relevant literature describing successful applications of solar energy to drying, cooking and water heating;~~

~~(d) selection from the above, adaptation of these designs and construction of prototypes; and~~

~~(e) installation, testing, documentation of results (including all economic aspects) and demonstration of successful applications to the local population in project area.~~

~~June 4, 1977 - 186 - BOLIVIA ANNEX 1l Table 1 ULLA ULLA DEVELOPMENT PROJECT Llama Fiber Dehairing Research Suggested Specification for Pilot Processing Plant~~

~~Item M_2~~

~~Raw material warehouse 100~~

~~Opening carding room 200~~

~~Gilling and combing room 100~~

~~Spinning room 100~~

~~Sample room 40~~

~~Laboratory 80~~

~~Offices 120~~

~~Library and reading room 60~~

~~Meeting room 40~~

~~Cafeteria, rest rooms 60~~

~~Workshop 100~~

~~Total 1,000~~

~~June 4, 1977 BOLIVIA - 187 - ANNEX 11 Table 2 ULLA ULLA DEVELOPMENTPROJECT Page 1~~

~~Llama Fiber Dehairing Research Costs of Machinery, Equipment and Laboratory Facilities ($b)~~

Machinery and Equipment Total Cost 1 Picker or teaser 120,000 1 Compact worsted card 600,000 1 Gill box 130,000 1 Intersecting gill base 140,000 humidifying equipment 600,000 1 Rectlinear comb 150,000 1 Wooden card 1,000,000 1 Spinning frame (48 spindles) 90,000 1 Small press 50,000 spare parts and accessQries 144,000 Workshop tools 50,000 Subtotal 3,074,000

Laboratory Facilities 1 air-conditioning unit with precision 140,000 controls (210 C + 20, 65% RH + 2%) 1 Research microspose, complete with 160,000 lenses, magnification up to 2,000 x micro - photograph attachments 1 Precision balance sensitive to 0.001 gr 30,000 1 Micro - projector (lanameter) 32,000 1 Fibergraph 200,000 1 Yarn dynameter (Uster) 240,000 1 Sonic or airflow firmness tester 16,000 1 Saclet extraction apparatus 6,000 1 Oven 5,000 3 Grass - section cutting device 6,000 1 Pilling test apparatus (for knits) 44,000 ANNEX Table 2 Sp 138Page 2

~~1 Nep tester 12,000 Miscellaneous equipment for chemical 40,000 and net tests i.e., alkali solubility, vegetable matter carbent, PH test, etc. 1 Office calculator 3,000 subtotal 934,000~~

~~Total Cost 4,008,000~~

~~June 4, 1977 BOLIVIA~~

~~ULLA ULLA DEVERICPiENT PROJECT~~

~~Llama Fiber Dehairing Research Total Costs~~

~~Unit -- Total Total Foreign Foreign No. of Cost 2 ar 3 4 5 Cost Cost Exchange Exchange Units ------US$ 70------1% US$~~

I. Investment Costs Rcsearch acilities 2 Building - m 1,000 900 900,000 - - - - 900,000 45,000 35 15,750 Textile machinery and 3,074,000 i13,700 95 146,015 equipment 3,074,000 - - - - 30400 13709 4,1 Laboratory equipment 934,000 - - - - 934,000 46,700 95 44.365 Office furniture and equipment 181,000 - - - - 181,000 9,050 50 4,525

~~Total investment costs 5,089,000 - - - - 5,089,000 254,450 83 210,6SS~~

II. Operating Costs Salaries (man-year) Head of research 3 1,200,000 1/ 600,000 1,200,000 1,200,000 1,200,000 - 4,200,000 210,000 100 210,000 Assistant researcher 3 1,000,000 1/ - 1,000,000 1,000,000 1,000,000 - 3,000,000 150,000 100 150,000 m Mechanical engineer 3 1,000,000 T/ 500,000 1,000,000 1,000,000 1,000,000 - 3,500,000 175,000 100 175,000 vo Mechanic 3 110,000 - 110,000 110,000 110,000 - 330,000 16,500 - - Machine operator 3 70,000 - 70,000 70,000 70,000 - 210,000 10,500 - - Laboratory testers (2) 6 90,000 - 180,000 180,000 180,000 - 540,000 27,000 - - Secretary (bilingual) 3 140,000 - 140,000 140,000 140,000 - 420,000 21,000 - - Janitor 3 35,000 - 35,000 35,000 35,000 - 105,000 5,250 Sub-total 1,100,000 3,735,000 3,735,000 3,735,000 - 12,305,000 615,250 87 535,000

Raw material - kg 3,000 40 -440,000 40,000 40,000 - 120,000 6,000 - - Tests in foreign labs 30,000 35,000 35,000 - 100,000 5,000 100 5,000 Office supplies, bocks, laboratory materials, 2000 2000 2000 0 utilities - 200,000 200,000 200,000 - 600,000 30,000 50 15,000 Total operating costs 1,i00,000 4,005,000 4,010,000 4,010,000 - 13,125,000 656,250 85 555,000

~~Total cost (baseline) 6,189,000 4,005,000 4,010,000 4,010,000 - 18,214X000 910,700 84 763,655~~

Physical contingencies - 10%.un investment costs and consultants 619,000 320,000 320,000 320,000 - 1,579,000 78,900 94 74,186 Baseline cost and physical432008960 88526 contingencies 6,808,000 4,325,000 4,330,OCO 4,330,000 - 19,793,000 989,600 84 835,296

~~1/ Including travel and relocatitn expenses.~~

~~June 4, 1977 BOLIVIA~~

~~ULLA ULLA DEVELOPMENT PROJECT~~

~~Solar Energy~~

~~Investment Costs Unit ------Years------Total Total Foreign Foreign No. of Cost 1 2 3 4 5 Cost Cost Exchange Exchange Units ______------$b------US$ /_ US$ Investment Costs~~

Equipment and materials 1,000,000 - - - - 1,000,000 50,000 90 45,000 Solar energy devices 100,000 230,000 230,000 240,000 - 800,000 40,000 60 24,000 Sub-total 1,100,000 230,000 230,000 240,000 - 1,800,000 90,000 77 69,000 Technical Assistance

Expert in solar energy man-year 1 100,000 - 200 000 I - - - 2 (O00LO 60,000 100 60,000 Baseline cost 1,100,000 1,430,000 230,000 240,000 - 3,000,000 150,000 86 129,000 Z Physical contingencies - 10% 110,000 143,000 - 24 000 00 000 15 000 6 190 Total cost and physical contingencies 1,210,000 1,573,000 253,000 264,000 - 3,300,000 165,000 86 141,900

~~June 4, 1.977~~

~~oDZ - 191 -~~

~~ANNEX 12~~

~~BOLIVIA~~

~~ULLA ULLA DEVELOPMENT PROJECT~~

~~Project Administration~~

~~3ackground~~

L. The grazing land on the Altiplano supports about 2.2 million llamas, :300,000 alpacas and 7.5 million sheep, thus constituting an important economic resource. The development of this resource has been lagging, however, due to the lack of strong institutional support. In 1962, the Government established the Bolivian Committee for Development of Wool Production, Processing and Marketing (COMBOFLA) as an independent state enterprise under the auspices of the Ministry of Agriculture, but it has not fulfilled its responsibilities for the integrated development of the wool industry. Instead, it has concentrated its work exclusively on collecting and processing alpaca/llama fleece for export, marketing yarn to its affiliated artisans, and selling artisanal products. It haas also mishandled the purchasing of wool from alpaca/llama owners, which has resulted in about 50% of Bolivia's total fleece production being smuggled into Peru, where prices are higher and there are other incentives as well to Bolivian producers. Because of the comparatively lower price it offers, its involvement with the artisan industry, and its failure to promote integrated development of alpaca/llama and sheep, COMBOFLA has been steadily losing the confidence of both the public and private sectors.

2. The lack of a national organization responsible for improving alpaca/ liama fleece production, processing and marketing has impeded the development of a modern alpaca/llama textile industry, has hindered expansion of export- related production and retarded the economic development of farmers raising alpaca/llama. The Government has now established a national institution which will be responsible for the orderly development of the wool agro-industry complex. Establishment of a well managed independent national institution under the Ministry of Peasant Affairs and Agriculture and the Ministry of Industry and Commerce is essential to revitalizing the alpaca/llama textile industry and to helping improve incomes of the rural poor on the Altiplano. Such an institute, which would incorporate COMBOFLA, would be responsible for the formulation of long-range integrated development strategies for the alpaca/llama textile industry and for ensuring a supply of fleece for all the textile plants and for Bolivian artisans. It would prepare the overall policy and strategy for the wool industry, annual production plans, coordinate credit and extension services required to meet production targets, and establish and monitor wool pricing policies and allocation quotas for alpaca/llama wool for use by farmers, textile processing firms, and artisans. Also, the newly created national institution would be responsible for the implementation of the proposed project, and, in the future, for projects that deal with the wool industry. 192

~~ANNEX 12~~

~~The National Institution for the Development of W4ool (INFOL)~~

3. The National Inst:itutzionfox the OfGfvexient Wool (INFOL) has been formed as an independent- state institute under the auspices of the Minis- tries of Peasant Affairs and Agriculture, and Co-.nmerceand Industry with headquarters in La Paz. Its scope of fespo wb 7y and authority is established by decree and statutes, INFOL would h2 its owna organization structure, administration, operations, and f:dcs, a scard of Directors would be composed of one representative froimrthe 1-1inistrrvof Peasant Affairs and Agriculture (rotating chairman), Ministry of Comimerce and Industry (rotating chairman), the Ministry of Planning and Ccord .ra `orn,t.he Mlnistry of Finance, the Bolivian Institute for Agricultural Techriaogy (IBTA), Alpaca Wool Processing and Marketing Company (FOTRAYIA)and the National Institute for Handicrafts and Small Industry (INBOCPIA) two dlaegates from private marketing firms dealing with handicrafts; a representative from small artisan associations, and the general manager of INFOLe In addition to reviewing policy matters, the Board would appoint key staff of 1NF , a-pproveannual development programs, approve budgets and work plans, and en:e effective coordination and implementation of development programs in t uJm£cLor,

4. The general manager of INFOL. has bee-n ap-poi.nted. He would be responsible to the Board of Directors for the' implementation of the technical and financial aspects o' t1he proposed groject. He would be responsible for programming and control of proj eCt ob ctives and would be in charge of day-to-day activities. He would coordLuate - ,-ehiring of staff and consultants, participation of Government agencLes in p-.o,ect execution, and supervision of all sub-lending operations. INFOL's general aanager would be supported by a deputy manager and a small core of highly qualified professionals: four division chiefs, two economists, one f4inancial analyst, one statistician, one veterinarian, credit and past-ure e:xper-tsand administrative and support staff. An internationally recruited expe-rt ina addministration and management would help INFOL's general manager coordinate the institute's activities and manage the project (Appendix 1) lie1 would also prepare operational manuals and train INFOL's management to use them (Appendix 1).

~~5. The following key staff personnel wouldh b rcr-u-itedby the dates indicated to ensure that INFOL would have adeqclate staffi-n-g to implement the project on schedule: - 193 -~~

~~ANNEX 12~~

~~Jan 1978 Jan 1979 Jan 1980 ______-- No. ------…~~

General manager 1 Deputy general manager 1 Division chiefs: Planning and monitoring - I Marketing and processing 1 - Agricultural credit and extension - Agricultural and social infrastructure 1 - Economists - 2 Financial analyst 2 Statistician 1 Veterinarian - Agronomist (credit and pasture) - -

~~6. The following salaries would be offered to attract and retain qualified staff:~~

~~Monthly Salary Annual Salary ------b$ ------~~

General manager 30,000 420,000 Deputy general manager 20,000 280,000 Division chiefs: Planning and monitoring 14,000 196,000 Marketing and processing 14,000 196,000 Agricultural credit and extension 14,000 196,000 Agricultural and social infrastructure (in Ulla Ulla) 25,500 357,000 Economists (2) 14,000 196,000 Financial analyst 14,000 196,0vG Statistician 14,000 196,000 Veterinarian 14,000 196,000 Agronomist (credit and pasture) 14,000 196,000

~~Functions~~

7. INFOL would have five divisions, as follows (Chart 1): Planning and Monitoring (PM), Marketing and Processing (COMPRO), Agricultural Credit and Extension (ACE), and Administration in La Paz, and Agricultural and Social Infrastructure (ASI) in Ulla Ulla. ACE would prepare and monitor investment programs designed to improve the production quality of alpaca/llama fiber. To ensure an adequate supply of alpaca/llama fleece for the artisan and textile industry, ACE would promote credit among farmers and make arrangements for provision of credit and extension services to farmers in Oruro and Potosi - 194 -

ANNEX 12 that would complement ASI's developmentactivities in Ulla Ulla under the project. ACE would also be responsiblefor promoting the introductionof courses relating to alpaca/llamaand sheep developmerntirn the -niversity in La Paz, Oruro and Potosi and for coordinating training programs at the La Raya Experiment Station in Peru.

8. INFOL's PM would collect data and prepare annual wool production forecasts and estimates of demand for fiber and yarn, and, on the basis of such information, would establish quotas for textile and handicraft users and formulate minimum selling and purchasing prices for fiber and yarn. PM's production and demand forecasts would be based on past production trends, taking into account the new processing capacity and production of fiber under project conditions. With this information, PM would prepare annual allotment lists that would be used by COMPRO to plan its annual processing programs and by the Marketing Division for its purchasing schemes for alpaca/llama fiber and for selling fiber and yarn to artisans and industrial users. PM would also prepare marketing information and brief trade bulletins containing up-to- date information about alpaca/llama development programs in Bolivia and Peru, research, textiles, fashions, and prices for fiber and yarn in Bolivia, Peru, Europe, USA and Asia. It would review with INBOPIA, the Export Promotion Division (FOMEX) in the Central Bank and the Ministry of Tourism, the projected demands for handicrafts for the domestic and export markets to determine production and processing levels for fiber and yarn. In the future, all requests for construction of new processing plants or expansion of existing capacity would require the approval of INFOL's general manager and the recommendation of PM's Division Chief. PM would also monitor the overall progress of the project and other development programs and preparation of new projects for eventual implementation by INFOL.

9. COMPRO would take over existing COMBOFLA facilities and assume full responsibility for the collection, sorting, packing and selling of fiber and yarn to artisans and industrial users. It would purchase all fiber (clean and dirty) at comparable prices to those prevailing; use the same weight measure- ment (pound) as applied in Peru; and pay cash to farmers for raw materials. COMPRO would be responsible for purchasing fleece from producers and for storing, sorting and transporting it from collection points in the countryside to the storage facilities in El Alto near La Paz. The Division would also be responsible for establishing and maintaining an efficient grading and quality control system. Staff from the COMPRO would be located in La Paz, Oruro, Potosi and Cochabamba, where they would operate small stores selling fleece and yarn according to quotas and prices established by PM. Proceeds from the sales would be used to finance the cost of purchasing fleece from producers, and administrative costs of the Division, and any surplus would be used to support the stabilization fund.

10. ASI, with headquarters in Ulla Ulla, would have five units staffed by Bolivian experts who would be directly responsible for the implementation of the Ulla Ulla Integrated Development Project: the Commercial Farm, the Experiment Station and Vicuna Reserve; Credit and Extension; Monitoring and Evaluation; and Administration and an ad hoc committee. ASI's staff including - 195 -

ANNEX 12 consultants working in the project area would receive training in Aymara under the guidance of the specialist who would be responsible for the education component of the project. Given the remoteness of the project area '-romthe main centers of population and the harshness of living conditions in :he area--the compensation program for the staff in Ulla Ulla would be made considerably more attractive than in traditionally offered in Bolivia. ASI's chief would have overall authority and responsibility for execution of project work in the project area, reporting directly to INFOL's general manager. Specifically, he would be responsible for reviewing and approving the annual work programs submitted to him by the five units; clear the annual budgets and work program documents with INFOL's general manager and present them to Board meetings; coordinate and supervise implementation of the project; and appoint the chiefs for the five units. In addition, he would be responsible for supervising and coordinating the social components of the proposed project. Each of the social components would be managed by a specialists, who would *prepare annual action programs for the approval of ASI's chief.

11. The Commercial Farm. The chief of the commercial farm would have practical experience in livestock operations and in administration and would be responsible for implementing this component; preparing annual investment and work plans for the farm; hiring and supervising the work of local labor on farm; purchasing and selling the farm's alpacas and llamas; and preparing a program to demonstrate to local farmers the benefits of applying pasture rotations, utilization of veterinarian services, and introduction of improved range and alpaca breed management. Also, he would coordinate the farm's programs with the work of the Experiment Station.

12. The Experiment Station and the Vicuna Reserve. The chief of the Experiment Station would be a professional with practical experience in managing an Experiment Station in Bolivia or elsewhere. His principal responsibilities would be to initiate preparation of annual investment and research work programs, establish priorities, coordinate and supervise the work of the technical staff of the stations, and report to ASI's chief about the progress of implementation. In addition to his responsibilities for implementing the vicuna conservation program, he would also supervise implementation of the experimental irrigation component under the project.

13. Credit and Extension. The chief of this unit would be highly qualified professional with practical banking experience and with a strong background in agricultural extension. His main responsibilities would be to prepare annual programs to help project beneficiaries obtain the necessary technical assistance and credit for investment, supervise and coordinate the work of the technical staff, and promote the project among the beneficiaries. The extension and credit experts of the unit would assist participating farmers in the preparation of farm plans and applications for sub-loans.

14. Monitoring. This unit would have a staff of two professionals--an agricultural economist and an anthropologist sociologist--working full-time on collecting and interpreting progress of the project in Ulla Ulla. The staff would report directly to ASI's chief. Information collected to fill 1961 -

~~ANNEX 12~~

as well as influence design and preparatJo,n Of proj ects with similar components for the Alt- lano. Data te 1-io-dIrected towards providing project management with rapid feedback to permit appropriate modifications to be made and towards enabling an evaluation of how well the chosen strategy is achieving basic project obectives-aa) to imorprove the welfare of the rural poor; and (b) to provide a model for further development efforts. Cross-section and time-series data would measure welfare cha-ages by looking at per capita incomes, health, income distribution, and other such indicators. Information would be collated according to the means used to effect these changes: (a) improvement of livestock husbandlry; lb' formulation of buying/ selling tactics for inputs/outputs; and (c) o'o;SionOL social infrastructure, increased participation by women in the project, improved production and marketing of handicrafts made by local farmers, and applicability and acceptance by farmers of solar energy applianlces produced under the project. Types of information collected would be:

~~(a) Sociological: number of users of healt h services and changes in nutrition, family incomes, wowen's participation in project and the social impact oF the project;~~

(b) Financial: prices paid and received at the farm and group level, costs and returns Lor producticve investmtents, on-farm consumption, costs of services provided and recovery of costs, and credit data;

~~(c) Technical: the effect on fertility and mortality rates of improved techniques, breeding program, vicuna coniservation, and the like; and~~

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

15. Administration. The chilef of this uni v -wou d 'De an experienced manager with a background in agricultural operations. The unit would provide all the administrative support to each of the operation units to ensure successful project implementation, maintaining b5ildings and storage places, providing transportation for project staff, 'handling the bookkeeping, and other similar tasks.

16. Ad Hoc Technical Committee. The committee would be established in the project area as an advisory body to coordinate the programs undertaken by the project, review annual investment plans, agree on a common approach for the implementation of the project, and resolve any outstanding issues which might arise between the participation farmers and project management. ASI's chief will chair the meetings of the Committee. In adtiono to the above mentioned Unit Chiefs two representati-ves of proj3ect beneficiaries and two - 197 -

~~ANNEX 12~~

~~women from the project area would also attend as elected delegates, who would serve one-year terms. The meetings of the Committee will be convened at the request of the chairman.~~

~~Cost and Cost Sharing~~

17. The cost of establishing INFOL (all of which would be cash cost), including rent, salaries, vehicles, office equipment and one consultant for INFOL, would be $b 19.9 million (US$1.0 million) over the five-year project period (Table 1). Recurrent costs (also all cash), starting at $b 4.2 million (US$210,000) in the sixth year and decreasing gradually thereafter, would be borne fully by the Government.

~~December 8, 1977 BOLIVIA~~

~~ULLA ULLA DEVELOPMENT PROJECT~~

~~National Institution for the Development of Wool (INFOL) Total Cost~~

~~------Years------Total Total Foreign Foreign 1 2 3 4 5 Cost Cost Exchange Exchange ------$b------US$ % US$~~

Lnvestment Costs Vehicles (2) 320,000 - - - - 320,000 16,000 95 15,200 Furniture 269,000 - - - - 269,000 13,450 43 5,847 Office equipment 135,000 - - - - 135,000 6,750 65 4,387 Administration and management expert 600,000 1,200,000 600,000 - 2,400,000 120,000 100 Sub-total 1,324,000 1,200,000 600,000 - - 3,124,000 156,200 93 145,434

Dperating Costs Salaries 1,096,200 1,304,520 3,528,600 3,528,600 3,528,600 12,986,520 649,326 - - Rent and utilities 250,000 250,000 250,000 250,000 250,000 1,250,000 62,500 - - Office supplies 300,000 300,000 300,000 300,000 300,000 1,500,000 75,000 50 37,500 o Vehicle, maintenance and operating costs 80,000 80,000 80,000 80,000 80,000 400,000 20,000 15 3,000 Miscellaneous 60,000 60,000 300,000 15000 - - Sub-total 1,786,200 1,994,520 4,218,600 4,218,600 4,218,600 16,436,520 821,826 5 40,500

Baseline cost 3,110,200 3,194,520 4,818,600 4,218,600 4,218,600 19,560,520 978,026 19 185,934 Physical contingencies . (10% on investment) _132,400 120,000 60,000 - 312,400 15,620 70 14,543 Total cost including physical contingencies 32~42 600 3,314,520 4,878,600 4 4,218,600 19,872,920 993,646 20 200,477

~~July 12, 1977 hmX - 199 -~~

~~BOLIVIA ANNElX 12 Ul,l.A tlLLA l)liVILOPMENT PROJECT Table 2~~

~~Pro jec t Staf f~~

~~No. of Staff -- Years------Responsible 1 2 3 Total Agency _ Reference~~

~~Research and Extension Research 1 3 - 4 ASI Annex 1 Laboratory technicians - 2 2 4 Extension agents 1 6 - 7 Farm manager - I - I Laborers and herders - 15 10 25 Sub-total 2 27 12 41~~

~~Vicuna Conservation Program ASI Annex 3 Guards 6 - - 6~~

Wool Collection, Storage and Processing COMPRO/INFOL Annex 4 Collection: Agents - 4 - 4 Driver - 1 - 1 Warehouse: Manager - 1 - I Supervisors - 2 - 2 Administrative staff - 3 - 3 Guards - 2 - 2 Drivers - 2 - 2 Laborers - 6 - 6 Processing: Plant manager - I - 1 COMPRO Annex 4 Textile engineer - 1 - 1 Sales manager - 1 - 1 Office manager - 1 - 1 Administrative staff - 12 - 12 Technical staff - 111 - 111 Sub-total - 148 - 148

~~Handicraft Training monitors 15 - - 15 FOMO Annex 5 Textile engineer 1 - - I INBOPIX Annex 5 Designer 1 - - 1 Marketing specialist I - - 1 Promotors 4 - - 4 Sub-total 22 - - 22~~

~~Health Physician 2 - - 2 MPSSP/DPH Annex 7 Auxillary nurse 2 - - 2 Community health workers 30 - - 30 Sub-total 34 - - 34~~

~~Education ASI/Project Annex 9 Supervisor 1 - - I Unit of the Driver 1 - - 1 Education and Sub-total 2 - - 2 Vocational Training Project~~

~~Women Participation ASI Annex 10 Anthropologist - 1 - 1 Promotors - - 5 5 Sub-total - 1 5 6~~

~~Llama Dehairing COMPRO Annex 10 Mechanic - 1 - 1 Machine operator - 1 - 1 Laboratory technicians - 2 - 2 Administrative and support staff - 2 - 2 Sub-total - 6 - 6~~

Project Administration (INFOL) General manager 1 - _ Deputy general manager 1 - - Division chiefs 4 - - 4 Economists 2 - - 2 Financial analyst 2 - - 2 Veterinarian - I - I Agronomist - I - I Administrative and support staff 14 - - IA Sub-total 24 2 - 26

~~Total 90 184 17 291~~

~~September 7, 1977 BOLIVIA ULLA ULLA DEVELOPMENT PROJECT THE NATIONAL INSTITUTION FOR THE DEVELOPMENT OF WOOL (INFOL)~~

~~BOARD Or DIRECTORS~~

~~| GENERAL MANAGER DEPUTY GENERAL MANA(;ER~~

~~ADMINISTRATION AND MANAGEMENT EXPERT S 73 (INTERNATIONAL)~~

~~rI-.CUi IUF A_CRtJ L 1 1 t j Pl.ANNING AND | ADMINISIRAFE(N I MRJ AND IjlVIS01'AND EXTLHSlUNj N DIViSIDN LIVIS'IOJD 0 c S'S IE.S.S' DI I ID'>IN |~~

~~IN ULLA ULA,.A~~

~~AGRICULTURAI AND SOCIAL. INFnASTRUCTL JrW K DJVISION~~

~~COIAIMITTEL MDNITOR11NG AND~~

~~.. , . \ 9 . t w~,;R~.i4i...... 1i EALllA 10!\ t UN~~

~~EXPERIMENT STATION I COMMERCIAL FAiAAND ADMINISTRATION CREDIT AND EXTENSION U!9,TI I UNIT ,_ | VICUNA RESERVE UNIT UNIT~~

~~EDUCATION AND WOMEN ArFAIRS UNIT~~

~~World Bank-17638 - 201 -~~

~~ANNEX 12 Appendix 1~~

~~BOLIVIA~~

~~ULLA ULLA DEVELOPMENT PROJECT~~

~~Terms of Reference for the Administration~~

~~and Management Expert~~

1. The management and administration expert should have a strong academic background and the necessary practical experience in organizing and administering entities engaged in livestock and textile development. The expert should have managed by himself or served as top adviser in a company with outstanding reputation in working with livestock and textiles. The expert should have at least five years of relevant experience and he should be able to show, among other things, that he played important roles in organizing enterprises, recruiting staff, preparing operational manuals, and devising training and career development programs. Preference should be given to recruiting a specialist who has also worked with livestock and textiles in Latin America for at least one year. The expert should be able to read, write and speak Spanish. He will work as a special adviser, reporting directly to INFOL's General Manager and assisting him in the following tasks:

~~(a) establishment of the operational and administrative divisions;~~

~~(b) recruitment of staff for key positions and preparation of their Terms of Reference;~~

~~(c) establishment of an annual and five-year planning and introduction of an overall monitoring system for the project;~~

~~(d) preparation of annual work programs, their implementation and follow-up;~~

~~(e) preparation of annual budgets;~~

~~(f) development of training programs;~~

~~(g) preparation of guidelines for, and the establishment of a staff career development program;~~

~~(h) preparation of operational manuals and training of staff in their use in the daily work; and~~

~~(i) preparation of concrete proposals to coordinate implementation of all project components with participating agencies.~~

~~June 28, 1977 BOLIVIA~~

~~ULLA ULLA DEVELOPMENT PROJECT~~

~~Investment Cost Phasing ($b '000)~~

------Project Year -…- - - 1 2 3 4 5 Total Livestock Component Project facilities 18,612 20,309 12,945 9,915 9,915 71,696 Commercial farm 735 - 1,960 - - 2,695 Credit - - 6,315 13,425 10,260 30,000 Vicuna conservation 686 232 160 160 160 1,398 Sub-total 20,033 20,541 21,380 23,500 20,335 105,789

~~Collection storage and Processing 12,481 71,125 20,257 - - 103,863~~

Handicraft Credit 6,570 8,854 8,282 8,282 8,012 40,000 INBOPIA (administration) 5,916 4,662 3,212 1,982 1,722 17,494 FOMO (training) 1,237 855 718 718 _ 3,528 Sub-total 13,723 14,371 12,212 10,982 9,734 61,022

~~Roads 11,032 6,388 319 319 319 18,377~~

~~Health 3,080 1,193 1,310 1,310 1,377 8,270~~

~~Water supply and waste disposal 873 1,992 2,052 2,112 2,172 9,201~~

~~Education 10,730 339 339 339 339 12,086~~

~~Women's participation - 815 150 150 150 1,265~~

~~Llama dehairing 6,808 4,325 4,330 4,330 - 19,793~~

~~Solar energy 1,210 1,573 253 264 - 3,300~~

~~Administration (INFOL) 3,243 3,314 4,879 4,219 4,218 Total 83,213 125,976 67,481 47,525 38,644 362,839~~

~~1/ Base cost plus physical contingency.~~

~~October 18, 1977 BOLIVIA~~

~~ULLA ULLA DEVELOPMENT PROJECT~~

~~Total Project Costs ($b '000)~~

~~Foreign ------Project Years ------Total Exchange~~

~~1 2 3 4 5 Costs _____~~

Civil works 21,121 23,098 523 523 523 45,788 32 Corrals and fencing(commercial farm) 670 - - - - 670 52 Livestock purchase - 1,420 - - 1,420 52 Equipment 29,337 42,382 2,394 1,724 1,258 77,095 78 Furniture and office equipment 1,401 2,359 35 - - 3,795 51 Vehicles (27) 1/ 2,690 (16) 2,520 (11) - - - 5,210 95 Training 1,385 1,189 685 - - 3,259 - Consultant services 2,800 11,500 6,340 3,200 - 23,840 100 Credit 6,570 8,854 14,597 .21,708 18,217 70,000 48 Design and maintenance(roads) 1,677 240 290 290 290 2,787 15 Other investment 2/ - 855 - - - 855 - Operating costs 9,503 25,008 39,480 19,344 18,358 111,693 9

~~Total baseline cost 77,154 118,005 65,764 46.789 38,700 346,412~~

1/ Figures in brackets indicate number of vehicles purchased. 2/ Includes miscellaneous investment from the water supply and waste disposal component as well as labor and other expenses prior to plant start-up from the collection, storage and processing component. < 3

~~October 18, 1977 -p. -204-~~

~~0062014~~

~~2612 ULU. M-nlrsnT PR0022Tabe~~

C-c i-l Fans5 Corralaaolfeo-ot 670 - - - - 6700 $ OLiesSo-k - - 1,4200 1,420 52 Oqoipsant - - ~~~ ~- ~ ~~~~~~~- 0 ~~~~~~~5752 - Oprnolc.ts 3 3 6 57 264 313 52 Sob-total ~~~~ ~~~~~~~6733 1,483 50 064 2Z,45 52 Ans1, Table 9.

~~04th _ar. 3500 8,696 .....1,19 27~~

~~690i -t 9.4 39.83 - 960 9 Paotrn ffice eqopees 1~,414 - - - 140 3 OtbsloetSb/ 3 - - 55 - Conaoltantearoioea- - 2.300 -: - . - ~~~~~~~~~~~~~2,300100 Crai.i. t i -. 28044- 444 -~~

~~11,346 63,595 200,75 - -. 4 .l.~~

~~Oatdioraft Credit 6,530 8,050~ 4,202 8,282 0,012 is0~1 hoe5. Table 9.~~

~~Cr-dit to .art. ad Cohnibies -- 6b, 31 13,425 '4460 3O,00i 55 An-a 2, Table 24. -~~

~~Poodoctioaitosetseot Sb-total 28.509 74.452 36.200 22.22 10-220 i6b~A678 47~~

Ohoil sock 89,9 7,812 - - 1636971- Eqoipeets ~~~~~~~~~~~5,534029 022 -76 03 0 toa-itorerndoffi-seqoip-r - - 03 3 - - 030 43 Vehlrbe.. ,1,20 040 - -- 2,000 95 Tre-ioo 60 50 - 1,370 -- CoeUtor 11 -- -2 020 1,440 - - 2,160 100 Oprting7onet 9005-9913'O43030460 9915b3.613 OSob-tol 10,17~051 19t,14 12,660 9,91 9,915 60,669 2 lb~3 ma

cinieoks240 - - - - 240 95 VabiolecIII 2~~ ~ ~~- ~- ~ - ~~~~60- 160 30 foamier ~~~ ~~~600 ~ ~ ~~~~~~60120 - t5aie.sat ~~~ ~~6 ~- ~ ~- ~~~~~10- 24 5 Ossa.t.. orae 160 60 11 61 10 80 4 Sob-tto .. 30 22.10 0 160o -12,404 10 300, Table 1.

~~nabiclas 113 ~~~~ ~~~~~- - - ~~250 0320 93 aqc,hpsarr t ~~~~~~~~~~~4355 220 ~ 22 226 1,135 lb Sob-nonal 1,366 03~~~~~~~~~~:'2-06- 696 ,1 135 r 5, Table 7.~~

Civil sari 2,332 5,$62 - ,919 5 E.t :O020 6,000 95 0 asalji ~~~~~~~~ . ~ ~~~~1.677 1,670- - Oaiot.aaaoe - - ~~~~ ~~~~~~240290 . 290 290 .10 15 Sob-canal - 00,~~~~~~18029 5,8000 290 290 20 6,100 37 A-nr 6, Table 3.

Civil -rbs 900 - -- 0 35 Eqaipesa 3 4,008 - .10080 4. 95 ronioaaoffi_rcqocp-on le, ~ - 102 5 ioesc.t 31 1,0 3.200- 3.200 5 ,200 . 2 10,700 100 nob-tonal 0,~~~ ~ ~~~~~~~1894,005. 4,01 4..,0 - - 1,24 ~ 04a, 11, TabOc 3.

~~Eqipanad -asrials 1,100 230 330 240 - 1,000 00 to (lao111 1.,200 -- - -- . 0 lobtrnl 0100 1,30 2-30' 240 - 3oo 96 ArH1,Tbc4~~

~~ftodoocivs.oprnrtSob-notal - ~~36,17331.440 180503 15,311 10.365 1-t1.343 36~~

Cill noa- 643 - - - - 643 30 Vebile 121 320 - - 2I-- 3 Eqoipsen 394 V - - 394 39 __a_ig 450 - - - 431 - Portinocs - 0~ ~ ~~- ~ ~ ~- ~- ~~~~~666 0 Operaing cos ta 0,042 1.193 1,3101. 1.III .1.307 6.232 10 lob-nonal ~~~~~~~~~2,9361,13 ,1013 1 0 237 -726 - 2 A- 7. Tabla 1.

Ciilsrk 233 5 23 523- 523 323 2,323 .24 Eqoipeot sod sateria1 559 1,259 1,258 1,258 1,258 3,391 20 Opertonea- 3 03 93 152 - 213 494 25 Sob-consa 0~~~~~~~~~~~~951,004 1,004 1,933 1.994 9,410 23 5sav TeOb2- 34 4. tdocation Civil scs- 6,354 - ,354 ~ 30 eqoiast -1,403 - - .,403- 46-- vrin3ft - 74 8 74 -

~~Oebio2- 011 160 - - - S 1oo Oprai~ cases 339 339 339 339 - 336' 1.694 12 Sob-tonal 9,783 339 339 339 -338 11,140 - 33 Oor 9, Table 4.~~

~~Cinilsarie - 300 - ~~- ~ ~ ~~~~~500- ~~~~~~~~-30 foroltoreandeqoioaect - ~~~~~~150 -- - 15 - oprsior crt 0 3 3 5 50 - 1 0 Sob-nasl - 50 150 130 - 150- L,200 - 13 A- e TabIa I.~~

~~Social iafv- - -cat ab-aonl 13,514 4,090 3,674- 3,7332 3.864 28.676 26~~

Osila 21 320 - - - 320 95 Offic eqaipeort 75 -75 - 0 60 ooosabs a - i.a.. 1,10 2,400 1,306 200 - ,00 100 to OprnAgcon 4,271 2,022 L01203 1.7t2 1.022 1. 559 20 nob-tonal 3~~~~ ~ ~~~~,7664,422 3,02 1,'962 1,722 16,054 50 inte S. Tale S.

Vabirtse (23 - - ~~~~ ~~- ~~~~320- - - 320 95 Forni_ -dsa ffoo-eqaiOn- 404 - -. - - 404 51- C-slta- 020 600 1 200 600 - 2,400 I10 Operting orat 1 1.086- 1.994 4,219 4.209 4.219 16.430 3 Sob-tOne ~~~~~~~~~3,13I0- 3,194 4,019- 4,219 4,219 1956 19 4A-s 12e Table 1,

~~Aoiitretio Sob-totl 8.976 7.616 79011 0.181 5 3941 36.313 -33 Ttota baslia cost 07,132 117.604 05,963 40,990 30 701 346.412 - 41~~

~~3/Inclode $3 3.1 ailion fon ose ,eipeent.~~

~~Otnb-r 10 19077 - 205 - ANNEX 15~~

~~BOLIVIA~~

~~ULLA ULLA DEVELOPMENT PROJECT~~

~~Estimated Schedule of Disbursements~~

~~Cumulative Disbursement Fiscal Year and Quarter at End of Quarter Us$ '000 1978/79~~

~~September 30, 1978 200 December 31, 1978 1,000 March 31, 1979 2,300 June 30, 1979 3,600~~

~~1979/80~~

~~September 30, 1979 4,900 December 31, 1979 6,200 March 31, 1980 7,800 June 30, 1980 9,500~~

~~1980/81~~

~~September 30, 1980 10,500 December 31, 1980 11,500 March 31, 1981 12,200 June 30, 1981 12,900~~

~~1981/82~~

~~September 30, 1981 13,600 December 31, 1981 14,300 March 31, 1982 15,000 June 30, 1982 15,600~~

~~1982/83~~

~~September 30, 1982 16,200 December 31, 1982 16,800 March 31, 1982 17,400 June 30, 1982 18,000~~

~~July 22, 1977 BOLIVIA~~

~~ULLAULIA DEVELOPMENTPROJECT~~

~~Prolart feet Flow~~

~~(Sb '000)~~

~~lnfloM 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 TorOl~~

Withdrawals from iDACredit aod Bark Loot Non .r-dit ope.ati.o. 55,380 42,752 36,484 35,532 19,525 ------189,673 Livsta-k credit 2,439 9,629 18,288 ------Handi-reft credit 30,356 5,182 7,827 8,166 8,954 9.515 - - - - - _ _ _ _- _- - 39,644 Credit for collection, stora-g d pro.ees.ig 11.376 68.565 20.386 - - - 100.327 Sb-t 171_938 119,144 67.475 54_5 473 7.3 - - -28 360.000

~~Oosort,oott Coorribotiors~~

Nan credlt oparati-os 170750 13,667 11,120 10,494 4,462 ------7,493 Liveotonk credit - - 1,148 4,532 8,606 ------14,286 Hendi-raft credit 2,439 3,683 3,843 4,214 4,478 ------_ - - 18,657 Credit for colleotton, stor-ge and proco.siog 2_436 18.508 9.594 - 30 136 Sob-total 22.625 35,8585 25.7052751_4.940 jj,449 17,5461734i ____ - - - -262- 120=9_4 Aasortlatioo of Slb-loans

Livestock credit - - - - 96 1,874 4,258 5,644 6,545 7,325 8,210 7,192 3,298 ------44,642 Handioraft -redit 177 1,567 3,498 5,725 8,399 10,931 10,191 8,337 6,130 3,346 - - - - _ - _- 58,301 Credit f-r collection, oto-ogo sod processing - - - 2 520 2,520 5.040 6_300 12 600 15120 1515,020 22,680 25,200 23,765 - - - - 130_865 Slb-toteS _ 177 3.16 490 5,72 5 8,399 13.547 14.585 17,635 1 274 22 491 22,445 23,330 29,872 28 90 23,765 - - - _ - 233 808 Irt-roRt 00 Sob-loans (122. p.o.)

Livestook credit - - 215 1,279 3,766 5,356 5,345 5,120 4,611 3,900 3,123 2,243 1,258 395 ------36,611 Handicraft credit 915 2,263 3,491 4,617 5,572 5,602 3,206 2,007 1.040 346 - - - - 29,059 Credit fotrcolloction, storage crd pro.e.steg - - 16.642 16.642 16.642 16.642 16.340 16.037 15_432 14,676 13_164 11.350 9,536 6_34 3,790 - - .. 173,707 Sob-total 915 2,263 20,348 22.538 25,980 27.600 24,891 23_164 21, 83 18,922 16,287 13.593 10.794 ,4209 3,790 -_ - - - 239.377

~~Terol inflow ss 158.832 117.D26 101.618 99,253 41.147 39,476 40,799 39 357 41,413 38,732 36,923 40.666 3,7D 7,555 - - - - _ 954 159~~

~~Non Crrdit Onecotioro 73,130 56,420 47,604 46,026 23,986 - - - - 247,166 a Credit Ocer tior-~~

slb-lo-n for ltiostoeldnoelopot - - 3,587 14,161 26,894 ------44,642 Sob-loose for handicrafe 7,621 11,510 12,009 13,10B 13,993 ------_ 58,301 Slb-loses for rolle ctior, tororgeand pro-es.oig 13_812 87,073 29,980 - - 130.865 Orb-tat-l 21,433 98,583 45,576 27_329 40,887 - - - - - _ - - _ - - - - - _ 233.808

~~Marefos Ratofeedby~~

c-eitcl Bark 3/ 19 47 77 123 195 228 178 148 118 88 65 4/ 26 8 - _ _ _ _ 1,367 BAB 4/ - - 36 212 628 892 890 854 769 650 520 374 210 66 - _ _ _ _ _ 6,100 005/ ~~~~~~~~ 707 ~~~~~~1.091 ~~~~~~206j4 1,741 1.751 1,002 627 325 108 - - - 92.231 Sob-totol 305 754 L,204 t 2.564 2,871 2,070 1,629 42541 4-6 585 421 236 74 - _ _ _

~~Crodif/Loar 0061 Scrvice~~

AOortsoo- ion 6/ ------900 900 900 900 900 900 900 900 900 900 8,000 S.rsie chacge 7/ 135 493 843 1,071 1,261 1,350 1,350 1,350 1,350 1,350 1,350 1,350 1,350 1,350 1,350 1,350 1,350 1,350 1,350 1,350 24,053

0,0k 1000 Cowil-oee fee 8/ 1,181 859 507 779 92 ------2,918 Ao-rtlisti- 9/ - - - - 12,000 12,000 12,000 12,000 12,000 12,000 12,000 12,000 17,000 12,000 12,000 12,000 12,000 12.000 12,000 100,000 Intee 0 0 719 5261 8,035 1, 13,454 1i,160 13,200 12,240 11,280 2 9 360 8,400 7,440 619,70 24456 3460 2,640 17680 720 151.452 15,52 5 lob-edo ~~~~~~~~~~~~~~~~20_356,613 19 343 1275 14,807 27_510 26.550 25,590 24_630 2360 23,ill 22_650 2160 20,730 19,770 10,010 17,850 10,890 15_930 14,970 2a

TotaS o,flow 96,903 162,920 104,727 242407,900 02,244 30 381 28,620 27.219 75,841 24 516 04,195 23,071'i1 18,810 ,22042 0,8041 19,778 16,890 13,930 14,970 064 945 Genshbalance -1,240 -3,530 12,299 13,710 17,009,6 10,056 13,500 03,516 16,807 14,537 13,15213-852 18,740187411 14_90317.050937i4537 -16,090 -151930 -14,970 821

1/ Including centingentio. 21 IDCrdA ofS09 millIon ord look 1oo of 0029nlio.es 3/ 1/4%. oo overage oerotoding bol.ooe- of lioestock rod hoodieroft sob-loo., .. .co.e..dnlraratioo cools. 4/ 27.or orecogeoi.standiog balareas of li- etoek .s6-loss 10 co-ec odoioisf000te roots. 5/ 3-3/4% os avcrige oo -ornding bela.ees of Oondl.ra.. sob-loses, to ervec adsirioLciiOOcost. and fliaoeiol Ii eke. 6/ 1/2% of loo_n anoint 7/ 3/4% or prioelipI .ooo.r of Credit niekdrooeand solesoodlof. b/ 3/4% os averge C ,odlrburr-dboo bolo-ee. 9/ 20 year rotorsty,irelodieg fi e-y-or 81000 period (30 equ0l s i-e.tiaollooal lmer.l). 10/ 8% per aroseon oaerage o- toodlodglean balance.

~~D-eo,ber 8, 1977 ANNEX 17 BOLIVIA ULLA ULLA D EVELOPMENT PROJECT~~

~~AE1, S1~~~~~~~~~~~~~~11I JIplmnttin cedleI~~

~~111EI lEIEL.-NT ~ ~ I 19 91 0..., *9,1.,, O.o.*l1,91*,, 1~~

~~9,,.,-. 1 ,O --,9 ------~~

~~9,11.1 1~~~~9 114 09,111991N'.~~

~~I,1,I9 9-III - E9 *911190. E,l~9~,, 9.90~~

~~LI IL.,,1 l9 9,,1 l,l 91 A9C~~

~~9 1111 111~~ 9,,,12,111,91 99,89 2191-E ,,1,9., 19O.19l9911 951 912I-~~

~~WOOLCO.LECrlON.9909*09 299 99009991U* :1pi! 0,,A' -. 098190 I - -~~

~~9., 99,1*119119 *09'980,-1E 80lS 9991 T-O9~9I*990~I~~

~~9.,1,9,,,*,, S- 099* 1811,9M~~

~~9,9*, 992911.1114,9,,91110911L91,l4 9.9*, 18091~~

~~...... E.,o,., -l~~

*1 -19119l,09 - ! I .S * S.".O

*.919 9,9E 92WSI9 PSL89 II

~~91,1119091E--,~~

~~11,991119191E*1.9, -A1991 - -~~

~~.9079997~ 9*99~ 919*1101,~ ~ ~~~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~~ ~~~~~~~~~~~~~~~~~Al9 99191191911111,91992.1191 1-. 2E,9-, P, 9 ,99A,,1*219 C-10911 - 208 -~~

~~ANNEX 18~~

~~BOLIVIA~~

~~ULLA ULLA DEVELOPMENT PROJECT~~

~~Economic Analysis~~

~~A. Economic Values of Labor and Goods~~

~~Economic Price of Labor~~

1. Livestock. Incremental labor required is well within the limits of available unused family labor, even though many male family members go to the La Paz area several times a year for temporary work or to the lower rural areas of the Altiplano to work as hired laborers during planting and harvesting seasons. Time spent outside the Ulla Ulla area may average 60 to 80 man-days per family annually. Alpaca breeding under improved conditions would require the family to work full-time about 30 to 50 man-days a year--health care, in April-May and shearing in October-November. The first period coincides with the cropping season in the lower areas and the second may coincide with a trip to La Paz; however, requirements during the rest of the year would not prevent any other present occasional activity. Therefore, labor is shadow priced at about 30% of the value given in the models.

2. Handicraft. The handicraft activity in the rural areas is carried out only during the slack agricultural season. Since, without the handicraft activity, family members would at best be underemployed in low-productivity jobs in the marginal urban sector, artisan labor has been shadow priced at 50% of the value assigned in the models.

~~Economic Price of Goods~~

3. Fibers and Wool. Ex-plant scoured wool is valued at US$2.9 per kg in the financial analysis of the plant. The CIF prices of imported clean wool from Argentina and Peru, currently about US$2.6 per kg, is projected to be about US$2.8 per kg from the period 1980 to 1985 in constant 1977 terms. Therefore, the price of clean scoured wool from the processing plant has been adjusted to reflect the above projected price. Almost all llama fiber presently collected by COMBOFLA is exported. Price at the collection level (US$2 per kg) adequately reflects its economic value. Alpaca fiber is purchased in Bolivia at prices lower than in Peru, which causes substantial contraband export. Since 90% of the alpaca fiber collected in Peru is exported unprocessed, farmgate prices offered to the Peruvian farmers at the border with Bolivia may be considered as economic prices reflecting the international value of alpaca fiber. Those prices are about 20% above the Bolivian prices, i.e., $b 79.4 per kg in years 1-3, to $b 85.2 in year 17. Acrylic fiber would be entirely imported and has been valued at its economic price (US$2 per kg) in the financial analysis. - 209 - ANNEX 18

4. Yarns. Prices of woolen and acrylic yarns adequately reflect international prices. Local production is in direct competition with yarns imported from Argentina and Peru and receive little protection. Llama yarns are not produced in Bolivia currently and the selling price prevailing in Peru, which is the world's only producer, has been taken as a representative economic price. Although unsubsidized, the price of US$17 per kg of alpaca yarn considered in the financial analysis of the processing plant is lower than its equivalent in Peru (US$19 per kg), partly reflecting lower financial costs of raw material. Since alpaca yarn is produced in Peru under conditions of relatively fair competition and as the industry benefits from little protection, the Peruvian price there is considered a more realistic economic value.

5. Import Duties and Internal Taxation. Equipment for the textile plant, vehicles imported directly through international competitive bidding, raw materials used by the textile industry, live animals, and the most important agricultural inputs are free of internal taxation and of import duties. Diesel and fuel oil are produced locally and are free of internal taxes. On locally procured tradeable goods other than wool, fibers and yarns, the most significant import duties are:

~~office equipment = 20% ad valorem on CIF value wiring for fences = 11% ad valoren on CIF value~~

In addition, they bear a general sales tax of 5% over their CIF - plus duties price:yarns bear a sales tax of 2% (alpaca, wool, llama) to 15% (acrylic yarns) which has been deducted from the processing costs. Land taxes have been deducted from the cost of the livestock credit component.

~~6. Standard Conversion Factor (SCF). On all non-tradeable goods, a general SCF of 0.85 has been applied, which is the last six years average of:~~

~~X + M X + T + M + T x m where X represents the value of exports, M, the value of imports, and T and T , the value of export and import duties.~~

~~B. Economic Rates .of Return~~

~~Productive Components~~

~~7. Economic rates of return have been calculated separately for each of the productive components. Results are as follows:~~

~~(a) Livestock production including the cost of the project facilities in Ulla Ulla = 18%~~

~~(b) Collection, storage and processing = 30% - 210 -~~

~~ANNEX 18~~

~~(c) Livestock production, collection, storage and processing including the costs of roads and INFOL administrative costs = 20%~~

~~(d) Handicraft including costs of administration and training = 70%~~

8. The high rate of return on the handicraft component can be explained by the low capital investment requirements of the activity. Incremental working capital needed is substantial and constitutes most of the credit requirements, with rapid returns; however, the handicraft component is highly sensitive to small changes in the cost of yarns and/or the selling price of the end product since artisans work on a very small margin per item. The livestock and processing components are not too sensitive (in the most un- favorable circumstances, i.e., with a 10% increase in all costs and a 10% decrease in all benefits, the economic rate of return of the livestock component will not fall below 12%); however, the rate of return of the handicraft component may become negative when costs or benefits vary by 10%.

9. The overall economic rate of return is 25%. The economic rate of return (Table 1) is calculated on the basis of the costs of (a) livestock production; (b) project unit facilities in Ulla Ulla; (c) collection, storage and processing of raw materials; (d) roads and administrative costs of INFOL; (e) handicraft production; (f) incremental administrative costs of INBOPIA; and (g) the cost of artisans' training (FOMO). Benefits taken into account include those from livestock farm development, the alpaca commercial farm, the. collection system, the processing plant and the handicraft credit component.

10. The number of beneficiaries from the livestock and handicraft credit lines has been calculated over 20 years. The number and amount of additional sub-loans generated from the revolving credit funds have been calculated on the following basis:

(a) All principal repayments and 8.5 percentage points of the interests (12%) would revert to the fund to be immediately relent for the same purposes, to a similar blend of beneficiaries. The 3.5 points not reverted to the revolving fund are assumed to cover administrative costs and financial risks;

(b) The total annual amounts obtained have been deflated by projected inflation over the next 20 years (12% on year 1 of the project, 10% on years 2 and 3, 8% on years 4 and 5, 7% from year 6 to 15 and 6% from year 16 to 20); and

~~(c) On the above basis, it would be theoretically feasible to relend the initial credit lines about five more times for handicraft and 2.5 more times for livestock. However, in - 21.1-~~

~~ANNEX 18~~

order to take into account possible slippage, arrears and further defaults, it has been assumed that they would revolve only 3.5 and two times respectively. Thus the number of additional sub-borrowersreached remains well within the limits of total potential sub-borrowers.

11. SensitivityAnalysis and Risks - The economic viability of the project depends partly on the ability of INFOL to motivate the farmers to improve herd and range management practices, borrow for livestock development, and to sell in Bolivia rather than in Peru. The proposed plant capacity has been based on production as projected in Annex 2. It could be assumed that the viability of the new plant and of the handicraftcomponent would depend on an increasedand steady supply of alpaca raw material. Thus, sensitivityof the economic rate of return to changes in the supply of alpaca and other raw materials and concurrent decrease in output of yarn has been tested under various assumptionsand the results are as follows:

~~Economic Rate of Return~~

~~(a) Decrease in volume of all types of raw materials (would affect, to various extents, the benefits from livestock, the costs of the plant and the benefits of the plant)~~

~~- 20% 22% = 50% 16%~~

~~(b) Decrease in volume of alpaca fiber (would affect the same streams as above)~~

~~- 20% 22% - 50% 21%~~

~~(c) Increase in price of all raw materials (would affect the benefits from livestock and the costs of the plant)~~

~~- 20% 21% - 50% 16%~~

~~(d) Increase in price of alpaca fiber (would affect the same streams as above)~~

~~- 50% 24% - 212 -~~

~~ANNEX 18~~

12. These tests show that the economic rate of return is not too sensitive to changes in the supply and prices of alpaca. The reasons for that seeminglyparadoxical situation are that sales of fiber account only for one- third of farmers' sales (the rest being mostly breeding livestock) and one- fourth of the raw material used by the processingplant.

13. Selling prices of alpaca yarns to the artisans are presently subsidized. In the financial analysis, it has been assumed that, under the project, the subsidy would stop and that the price of handicraft end-products would adjust upward. It is believed that competition among buyers and exporters of handicraft products is sufficientlystrong and that the planned interventionof INBOPIA would be effective enough for this adjustment to occur. However, the extreme sensitivityto small changes in this relation is evidenced by the following tests:

~~(i) Decrease in price of handicraftend products~~

~~- 10% 17% - 15% 12% - 20% 5%~~

~~(ii) Increase in price of yarns (would affect the benefits of the processing/collectingunit and the costs of the handicraft component)~~

~~+ 10% 19% + 20% Negative~~

~~14. Sensitivityto cost overruns and decreases or increases in overall incrementalbenefits and costs is indicated below: - 213 -~~

~~ANNEX 18~~

~~Economic Rate of Return~~

~~All Investment Costs~~

~~+ 10% 24% + 20% 23%~~

~~IncrementalOperating Costs~~

~~Livestock + 20% 24% Processing/collection+ 20% 20% Handicraft + 10% 17% + 20% 8% All operating costs + 10% 14% + 15% 7%~~

~~IncrementalBenefits~~

~~Livestock components - 20% 23% Collection/processing - 20% 18% Handicraft - 10% 17% - 15% 11%~~

~~These figures confirm the fact that project returns are most sensitive to increases in the operating costs of the handicraft component or decreases in its benefits.~~

15. Also, it should be noted that if a breakthrough in the llama dehairing technology is made, the economic rate of return could increase to 32%. The economic rate of return on llama dehairing research is estimated at 60% (Appendix1).

16. A reduction in the number of sub-borrowerswould not substantially reduce the economic rate of return. For instance, if the credit lines were not revolving, the economic rate of return of the project would be 20% instead of 25%. As far as the livestock and the handicraft components are concerned, their own economic rate of return would still be 12% and 58%, respectively. The economic rate of return on livestock,processing, roads and administration would be 17%.

~~July 14, 1977 BOLIVIA~~

~~ULLA ULLA DEVELOPMENTPROJECT~~

~~Economic Rate of Return - Summary of Caicolations ($b '000)~~

~~1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 Incremental Costs~~

Livestock component Farm in-est-ent (sob-borro-ors) - 965 5,876 9,493 6,475 2,014 2,129 2,437 2,597 3,049 4,989 5,793 5,170 3,598 3,186 3,483 3,737 3,217 3,893 Caomercial farm 578 536 1,420 ------other proJect faciliti-s 1/ 16,764 11,680 3,053 ------

~~Sob-total 17,342 12,216 5,438 5,876 9,493 6,475 2,014 2,129 2,437 2,597 3,049 4,989 5,793 5,170 3,598 3,186 3,483 3,737 3,217 3,893~~

Collection, storage, processing 12,256 59,326 - - - - 2,360 - - - - 3,710 ------Handicr-ft Tos-bborrowero 2,252 3,924 4,323 4,814 5,326 2,700 2,832 2,832 2,832 2,832 5,084 6,378 7,306 7,797 8,347 5,627 5,948 5,948 6,042 6,099 INBOPIA (admntistr-tion) 4,657 3,260 1,810 580 320 - 320 - - - - - 320 ------FOMO (ta-iiag) 695 _ - - 514 135 - - - 514 135 - - - 514 135 - - -

~~SRb-total 7,604 7,184 6,133 5,394 5,646 3,214 3,287 2,832 2,832 2,832 5,598 6,513 7,626 7,797 8,347 6,141 6,083 5,948 6,042 6,099~~

~~Roads 11,032 6,148 ------Adoinistration (INFOL) 866 - - - - 320 - 232 - - 320 - - - 232 - 320 - -~~

~~Total investment costs 49.100 85.074 11.571 _11.270 15,139 9.909 7,661 5,193 5.271 5,429 8,647 15,532 13,419 12.967 11.945 9,559 9,566 10.0D5 9,259 9,992~~

Incremental Operating Cents livestock component To sb-borrowrs - - 1,706 5,664 8,418 8,906 8,771 10,983 12,301 13,587 14,798 16,199 17,733 19,019 18,211 14,985 13,213 14,099 16,641 14,952 Commercial fern _ - 160 181 188 183 183 184 184 185 186 186 186 186 186 - - - - other project facilities - 6,571 8,665 8,690 8,690 8.690 99 8.690 8,690 8,690 8,690 8,690 890 8,690 8,690 8.690 8,690 8.690 8,690 8.690

~~sub-total 3,418 6,571 10,531 14,535 17,296 17,979 17,644 19,857 21,175 22,262 23,674 25,075 26,559 27,895 27,087 26,675 21,903 22,889 25,331 23,642~~

Collection, storoge ond processinf - 10,284 62,910 72,635 73,349 73,213 75,198 76,382 78,000 79,847 81,731 82,634 85,882 88,427 90,871 92,860 93,316 93,316 93,316 93,316 Roads maintenance - 229 260 260 260 260 260 260 260 260 260 260 260 260 260 260 260 260 260 260 Handicraft To shb-borrowero 22,046 51,384 82,332 106,961 154,731 174,975 196,210 217,445 238,680 259,915 281,150 303,092 325,459 347,826 370,476 392,418 415,776 439,134 463,200 487,691 Traininf (FOM) 581 832 696 696 696 696 696 696 696 696 696 696 696 696 696 696 696 696 696 696 Adoinistration (INBOPIA) 1,231 1,402 1.402 1,402 2,402 1.442 1.402 1.402 1.402 1.402 1.402 1.402 1.402 1.402 1.402 1,402 1.602 1.402 1.402 1.402

~~Sib-total 23,858 53,618 84,430 109,059 156,829 177,073 198,308 219,543 240,778 262,013 283,248 305,190 327,557 349,924 372,574 394,516 417,874 441,232 465,298 489,789~~

~~Adimnintration (INFOL) 1,705 1,914 4,138 4,138 4,138 4,138 4,138 4,138 4.138 4.138 4,138 4,138 4,138 4,138 4,138 4,138 4,138 4.138 4,138 4.138~~

~~Total increncal operating costs 28,981 72,607 162,269 200,627 251,872 272,463 295,548 320,180 344,351 368,520 393,051 417,297 444,396 470,644 494,930 518,449 537,491 561.835 588,343 611,145~~

~~Incremental Benefits~~

~~To shb-bhrrowers . - 2,622 9,201 16,444 18,799 24,644 32,881 41,245 49,665 58,875 67,410 74,417 88,582 92,483 69,228 49,175 55,469 59,235 61,185 Conmercial farm 225 299 675 775 836 864 90 9 - -~~

~~So,b-total 1 - 2,847 9,500 17,119 19,574 25,580 33,745 42,145 50,614 59,824 68,416 75,423 89,588 95,012 69,228 49,175 55,469 59,235 61,185~~

Collection, stor-ge -nd processing (1,660) 8,817 78,606 94,471 96,192 105,251 100,906 103,714 107,280 111,784 116,729 119,268 126,430 130,558 135,899 145,225 145,199 145,199 145,199 171,759 Handicraft 24,467 57.477 92,386 131,436 174,065 196,838 220,726 244,614 268,502 292,390 316.278 340,962 366.124 391,286 416,767 441,451 462,768 494,005 521,078 548,629

~~Total incrmental bhenfits 22,807 66,294 173,839 235,407 287,376 321,663 347,212 382,073 417,927 454,788 492.831 528,646 567,977 611,432 647,678 655.904 657.142 694,673 725,512 781_573~~

~~Net incremental benefits -55,274 -91,387 -1 21,510 20,365 39,191 44,003 57,060 68,787 81,439 89,637 94,857 110,882 128,421 141.403 128.736 110,085 122,833 127.910 160.436~~

~~Economic rate of et-rn = 25Y~~

~~!/ Including irrigation infrast--cture.~~

~~July 13, 1977 - 215 -~~

~~ANNiEX 18 Appendix 1~~

~~BOLIVIA~~

~~ULLA ULLA DEVELOPMENT PROJECT~~

~~Llama Dehairing Research~~

~~Economic Rate of Return~~

~~Incremental Benefits~~

1. Benefits are expected as the collected llama fiber (up to 1,155 m tons per year 9) is processed into yarns, or sold to the domestic industry, or exported. The assumption has been made that the processing plant would start working on a three shift basis by year 7 in order to process as much llama dehaired fiber into yarns as possible. Since dehaired llama yarn is closer in quality to alpaca yarn, it has been valued at US$15 per kg. Alpaca yarn is valued at US$17 per kg in the financial analysis and US$19 per kg in the economic analysis. The dehaired fiber is excess of what the processing plant would utilize (595 m tons of yarn per year on a three shift basis) would be sold or exported at US$4 per kg (unclean). The new fiber mix of the plant yarns is shown in Table 1.

~~Incremental Costs~~

2. To the costs of the research program, other incremental costs would be added, such as (a) the cost of the incremental llama fiber collected, minus collection costs associated with sheep wool and the value of sheep wool and acrylic raw material which would be substituted by llama fiber; (b) incremental collection costs ($b 98 per m ton); and (c) incremental processing costs (one shift from year 7 on).

~~Economic Rate of Return and Sensitivity Analysis~~

~~3. A summary of the calculations is presented in Table 2 and the rate of return obtained is 60%. Sensitivity tests show that if the cost of development or purchase of the technology increase by:~~

~~(a) 2 times, the rate of return would still be 44%; (b) 6 times, the rate of return would still be 24%; and (c) 10 times, the rate of return would still be 15%.~~

~~This would imply that, buying the technology at close to US$10 million would still be justified.~~

~~July 15, 1977 BOLIVIA~~

~~ULLA ULLA DEVELOPMENTPROJECT~~

~~Llama Dehairing Technology~~

~~Production Mix of the Processing Plant (m tons)~~

~~Llama Yarns -- Llama Dehaired Llama Hair Dehaired Llama Alpaca Sheep Fiber left Year Collected Fiber non-dehaired dehaired (unchanged) Wool Acrylic Total for Sales~~

3 122 - 44 - - 32 73 111 260 - 4 140 - 50 - 43 85 122 300 - 5 230 161 - 92 46 82 80 300 - 6 460 322 - 183 57 60 - 300 7 690 483 - 275 68 80 172 595 - 8 920 644 - 367 80 80 148 595 - 9 1,155 808 - 460 94 41 - 595 - 10 1,155 808 - 460 111 24 - 595 - 11 1,155 808 - 460 131 - 4 - 595 - 0 12 1,155 808 - 453 142 - - 595 12 13 1,155 808 - 427 168 - - 595 58 14 1,155 808 - 413 182 - - 595 82 15 1,155 808 393 202 - - 595 118 16 1,155 808 - 358 237 - - 595 179 17-20 1,155 808 - 355 240 - - 595 184

~~June 2, 1977~~

~~.. ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~c a f -0;f ;f : - ,~'3I >,;g f; f S; ff$Xt,0Q Hp r ,I f S f f f; i l_ t .xi11 ,-. 0 E 1x *; i BOLIVIA~~

~~ULLA ULLA DEVELOPMENT PROJECT~~

~~Llama Dehairing Technology - Economic Rate of Return - Summary ($b '000)~~

------Year ------12 13 14 15 16 17-20 1 2 3 4 5 6 7 8 9 10 11 _ncremental Costs 1/ ------Cost of the research program 6,808 4,325 4,330 4,330 - Incremental raw material costs: 45,225 45,225 45,000 45,000 44,775 44,7/5 44,550 44,460 - - - - 3,600 12,800 21,800 31,000 40,400 Llama 375. (475) (775), (1,150) (1,625) (1,000) (875) (i) (250) - Sheep - - - - (375) 250 1.920 (3,600) (3,000) 2,400) (1,800) (1.200) (800) (400) - Acrylic - _ _ (1,680) (4,720) 2,480 36,325 41,450 41,675 41,575 42,800 43,100 43,700 44,300 44,460 Sob-total 1,720 7,705 24,530 33,295

~~Incremental collection co-ts 98 98 98 98 97 97 _ _ _ 9 31 53 76 99 98 98 Llama (1) - (1) 1 1 (2) (3) (5) (6) (4) (3) (2) Sheep - - - - - 75 97 95 93 92 94 95 96 96 97 Sub-total - - - - 9 30 52~~

~~9.070 9,070 9.070 9.070 9,070 9,070 9,070 Incremental processing costs - -~~

~~42,442 45.492 50,615 50.838 50,737 51,964 52,265 52,866 53,466 53 627 Total incremental costs 6,808 4,325 4.330 4,330 1,929 7,735 33,654~~

Incremental Benefits 106,520 113,100 112,780 112,480 112,180 106,580 103,840 100,640 93,020 93,300 Incremental value of yarn sales - - - _ 12,080 27,640 79,900 - - - - - 960 4,640 6,560 9,440 14,320 14,720 Incremental value of fiber sales (llama) - -

9 106 520 113,100 112,780 112,480 113,140 111,220 110,400 110,080 107,340 108,020 Totel incremental benefits . - - - 12.080 27,640 79 53,874 54,393 19,905 46,248 64,080 67,608 62,165 61,642 62,403 59,256 58,135 57,214 Net incremental benefits (6,808) (4,325) (4,330) (4,330) (0,351

~~Economic rate of return = 607,~~

> 1/ The costs of purchase and operation of developed dehairing machines are not included for lack of information, but it is not empected that their inclusion .ould substantially change the rate of return obtained.

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