FINAL EVALUATION OF USAID/PERU POVERTY REDUCTION AND ALLEVIATION (PRA) ACTIVITY May 2008 This publication was produced for review by the United States Agency for International Development. It was prepared by Weidemann Associates, Inc. FINAL EVALUATION OF USAID/PERU POVERTY REDUCTION AND ALLEVIATION (PRA) ACTIVITY FINAL REPORT Submitted by: Weidemann Associates, Inc. Submitted to: USAID/Peru Contract No.: Raise Plus IQC No. AEG-I-00-04-00010-00 Task Order No. 360 Period of Performance: February – May 2008 DISCLAIMER The authors’ views expressed in this publication do not necessarily reflect the views of the United States Agency for International Development or the United States Government. ACKNOWLEDGEMENTS Weidemann Associates Inc. appreciates the extensive support and cooperation of all who participated and assisted in the conduct of this evaluation of the Peru Poverty Reduction and Alleviation (PRA) Project. Of particular note is the contribution of many companies, producers, communities and the Government of Peru who took the time to patiently explain their relationship with PRA and how it affected their lives and work, and in that process provided the team with an improved understanding of how the project functioned in the field. Many of these people traveled at their own expense to be able to meet with the evaluation team members. We thank them for their sacrifice. Our special thanks go also to the USAID/Peru staff for all their support in facilitating this study, for providing us with direction and assistance in obtaining the information needed to conduct the study, and in particular the contributions of Mr. Juan Robles, the Task Order CTO. We also thank the PRA project staff for their extra efforts to provide the contacts and introduction to the many community groups and clients that were interviewed by the evaluation team and to provide background information about the methodologies and activities of PRA. Our sincere appreciation to those who dedicated many extra hours to provide data that was requested by the evaluation team and many times to sort or filter the data in many different ways to illuminate operational aspects of PRA. In addition many thanks to Araly Muñoz of PRA and Ana Toledo for helping the team make the best use of their time. Arvin R. Bunker Robert C. Flick Jose Lazarte Farfan Alfredo P. Mendívil Luis Fernando Talavera Ballon Gladys Mónica Triveño Chan Jan List of Abbreviations and Acronyms AD Alternative Development (also referred by project name PDA) ADRA Adventista para el Desarrollo y Recursos Asistenciales CONFIEP Confederación Nacional de Instituciones Empresariales COP Chief of Party CTO Contracting Technical Officer ESC Economic Service Center FFS Farmer Field School GOP Government of Peru HCN Host Country National, i.e., a Peruvian IBRD World Bank IDB Inter American Development Bank IMF International Monetary Fund MEDA Mennonite Economic Development Agency MYPE Micro and Small Enterprise Development Project – USAID funded project to Competitiva strengthen the competitiveness of micro and small enterprise NGO Non-government organization PAT Poverty Assessment Tool PDA Programa de Desarrollo Alternativo (also referred to as AD) PRA Poverty Reduction and Alleviation RAISE Rural and Agricultural Incomes with a Sustainable Environment SOW Scope of Work T/TA Training/Technical Assistance UN United Nations and its agencies such as the FAO, UNDP, etc. USAID United States Agency for International Development Table of Contents Executive Summary........................................................................................................................ 1 Introduction..................................................................................................................................... 6 Background..................................................................................................................................... 6 PRA’s Strategy and Focus .............................................................................................................. 8 Principal Findings ......................................................................................................................... 10 PRAs Direct and Indirect Impacts ............................................................................................ 10 Economic Service Centers ........................................................................................................ 18 PRA and Alternative Development .......................................................................................... 23 Assistance to Agriculture vs. Other Sectors ............................................................................. 24 Operational Issues..................................................................................................................... 28 Conclusions................................................................................................................................... 38 Recommendations......................................................................................................................... 40 Lessons Learned............................................................................................................................ 41 Unresolved Issues ......................................................................................................................... 42 Annexes......................................................................................................................................... 44 Annex A: Contacts by the Evaluation Team............................................................................. 45 Annex B. Literature and References......................................................................................... 50 Annex C. Sales, Investments and Work Days Generated by Year by ESC.............................. 51 Annex D. PRA Active Clients 2008 ......................................................................................... 53 Annex E: PRAs 36 Largest Clients........................................................................................... 57 Annex F: Sector Analysis ......................................................................................................... 60 Annex G. Benefits Cost Ratio by Product ................................................................................ 75 Annex H: Examples of PRA and PDA Collaboration .............................................................. 76 Annex I: Evaluation SOW with Response to Questions........................................................... 79 Final Evaluation of USAID/Peru Poverty Reduction and Alleviation (PRA) Activity Executive Summary This report is an external evaluation of the Poverty Reduction Alleviation (PRA) Activity that was established under USAID/Peru Strategic Objective Number II, Increased Incomes of the Poor, as an outgrowth of the 1994 USAID/Peru Food Security Strategy. The Strategic Objective determined that food insecurity is principally a question of poverty, that poverty is concentrated in corridors where people have limited access to markets, and that low-labor productivity reflects inadequate investment in human and material capital as well as poorly developed public policies and institutions. Consequently, USAID/Peru adopted an approach to link poverty-stricken rural areas (economic corridors) to markets in cities in Peru and abroad. PRA began in September 1998 with an agreement between USAID and the Confederación Nacional de Instituciones Empresariales (CONFIEP), an institution representing private sector companies. CONFIEP was to apply a private business focus to optimize resource use in the economic corridors to reduce poverty through employment generation. The design expected that private businesses would implement creative market mechanisms to purchase inputs from the economic corridors. They would be supported by project established Economic Service Centers that were located in the economic corridors. It was expected that the business associates of CONFIEP would become the buyers. Implementation of PRA by CONFIEP did not meet Selection of chocolate beans in Ayacucho (VRAE): CAC VRA (Timoteo Vargas Aguilar, president; y Wilder expectations. In April 2002 Rocha, Manager) USAID asked Chemonics to become the full implementing institution. Chemonics was already providing technical advice, international consultants and monitoring and evaluation services to this project. This evaluation provides quantitative and qualitative analysis of the direct and indirect impact, cost effectiveness, and strengths and weaknesses of PRA-supported activities and operations. Five key areas were evaluated: 1) Direct and indirect impacts; 2) the role of Economic Service Centers (ESC); 3) the Weidemann Associates, Inc. Page 1 relationship between PRA and Alternative Development (AD, implemented by a project known as PDA); 4) the level of assistance to agriculture versus manufacturing and services sectors; and 5) operational issues. PRA Methodology PRA only provides assistance when a market-pull situation is identified. Market-pull means an identified buyer needs a specific product and has funds to pay for it. Typically, a company located in a city center, within or outside an economic corridor, requests PRA to assist in either sourcing products from the economic corridors, or finding buyers for products that are or can be produced in the corridors. When a request for assistance meets PRA feasibility