Document of The World Bank FOR OFFICIAL USE ONLY t Report No. 3231-ME STAFF APPRAISAL REPCORT MEXICO INTEGRATED RURAL DEVELOPMENT PROJECT - PIDER I June 30, 1981 Agriculture and Rural Development Department This document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contents may not otherwise be disclosed without World Bank authorization. CURRENCY EQUIVALENTS Currency Unit = Mexican Peso (Mex$) US$1 = Mex$23.0 Mex$l = US$0.0434 Mex$1 million = US$43,478 WEIGHTS AND MEASURES Metric System 1 hectare (ha) 10,000 m2 = 2.47 acres 1 kilometer (kin) 0.62 miles 1 square kilometer (km2) = 0.39 square miles = 100 ha 1 kilogram (kg) = 2.2 pounds 1 liter (1) - 0.26 gallons 1,000 kg = 1 metric ton = 0.98 long ton GOVERNMENT OF MEXICO FISCAL YEAR January 1 to December 31 PIDER PROGRAM FISCAL YEAR January 1 to December 31 FOR OFFICIAL USE ONLY GLOSSARY OF ABBREVIATIONS (English and Spanish) BANRURAL - National Bank for Rural Credit (Banco Nacional de Credito Rural) BORUCONSA - Rural Warehouse System (Bodegas Rurales CONASUPO) CAPFCE - Administrative Committee for the Federal School Construction Program (Comite Administrador del Programa Federal de Construccion de Escuelas) CECADE - Training Center for Development (Centro de Capacitacion para el Desarrollo) CFE - Federal Electricity Commission (Comision Federal de -Electricidad) CIDER - Research Center for Rural Development (Centro de Investi- gacion para el Desarrollo Rural) CONAFRUT -' National Fruit Development Commission (Comision Nacional de Apoyo a la Fruticultura) CONASUPO - National Company for Popular Subsistence (Compania Nacional de Subsistencias Populares) COPLADE - State Committee for Development Planning (Comite de Planeacion para el Desarrollo Estatal) COPLAMAR - General Coordination of the National Plan for Depressed Areas and Marginal Groups (Coordinacion General del Plan Nacional de Zonas Deprimidas y Grupos Marginados) CUC - Master Coordination Agreement (Convenio Unico de Coordinacion) DGCSA - Directorate General of Soil and Water Conservation (Direccion General de Conservacion de Suelo y Agua) DGDRI - Directorate General of Integrated Rural Development (Direccion General de Desarrollo Rural Integrado) DGDUT - Directorate General of Rainfed Districts and Units (Direccion General para los Distritos de Temporal y sus Unidades). FICAR - Trust Fund for Credit to Irrigated Areas (Fideicomisos Instituidos para Credito para la Agricultura de Riego). FIRA - Agriculture Trust Fund of the Bank of Mexico (Fideicomisos Instituidos en Relacion a la Agricultura) This document has a restricted distribution and may be used by recipients only in the performance of heir official duties. Its contents may not otherwise be disclosed without World Bank authorization. Glossary of Abbreviations (Continued) IDB - Inter-American Development Bank (Banco Inter-Americano para el Desarrollo) IFAD - International Fund for Agricultural Development (Fondo Internacional para el Desarrollo Agricola) IGC - Coconut Promotion Agency of Guerrero (Impulsora Guerrense de Cocoteros) IMSS - Mexican Social Security Institute (Instituto Mexicano de Seguro Social) INI - National Indigenous Institute (Instituto Nacional Indi- genista) INIA - National Insitute for Agricultural Research (Instituto Nacional de Investigacion Agricola) INIP - National Institute for Livestock Research (Instituto Nacional de Investigacion Pecuaria) INMECAFE - Mexican Coffee Institute (Instituto Mexicano del Cafe) JEAP - State Potable Water Board (Juntas Estatales de Agua Potable) NAFINSA - Nacional Financiera, S.A. OHDR - Directorate of Hydraulic Works of Rural Development (Direccion de Obras Hidraulicas para el Desarrollo Rural) PIDER - Integrated Rural Development Program (Programa Integrado de Desarrollo Rural) PLANAT - National Plan for Rainfed Agriculture Development (Plan Nacional de Agricultura de Temporal) PPM - Department of Fisheries (Productos Pesqueros Mexicanos) SAHOP - Secretariat of Human Settlements and Public Works (Secretaria de Asentamientos Humanos y Obras Publicas) SARH - Secretariat of Agriculture and Water Resources (Secretaria de Agricultura y Recursos Hidraulicos) SHCP - Secretariat of Public Finance (Secretaria de Hacienda y Credito Publico) SPP - Secretariat of Programming and Budgeting (Secretaria de Programacion y Presupuesto) SRA - Secretariat of Land Reform (Secretaria de Reforma Agraria) SSA - Secretariat of Public Health and Assistance (Secretaria de Salubridad y Asistencia) MEXICO INTEGRATED RURAL DEVELOPMENT PROJECT - PIDER III STAFF APPRAISAL REPORT Table of Contents Chapter Page I. INTRODUCTION ............................................... 1 II. MEXICO'S RURAL DEVELOPMENT STRATEGY ........................ 2 A. Background - Mexico's Rural Poverty Problems .... ....... 2 B. The PIDER Program - Evolution of the Program and Process .......................................... 3 C. Recent Development Programs in Mexico .... .............. 8 III. THE PROJECT AREA ........................................... 10 A. Selection of States .................................... 10 B. Micro-regional Selection Criteria ............. i ........ 10 Table 3.1: Project Area, Population, Agricultural Area, Average Farm Size and Rainfall .......... .. ............... 11 IV. THE PROJECT ................................................ 12 A. General Description .................................... 12 Project Objectives .................................. ; 12 Project Strategy ..................................... 13 Implementation Strategy and Distribution of Responsibilities ................................... 14 Project Composition .................................. 16 B. Detailed Features .................. .................... 17 B.1 Directly Productive Investment .... ................ 17 B.2 Productive Support Investment ..................... 25 B.3 Social Infrastructure ............................. 31 This report is based on the findings of an appraisal mission which visited Mexico in May/June 1980, comprised of Messrs. A. Schumacher and R. Cuca, Misses C. Hamann and W. Stickel (Bank), Messrs. W. Mactier and J. Pines (Consultants). A post-appraisal mission comprised of Ms. C. Hamann, Mr. V. Freeman (Bank), Messrs. W. Mactier, E. Miller and K. Swanberg (Consultants), visited Mexico during August 1980. This report was prepared by Misses C. Hamann and C. Mejia, with contributions from Mr. K. Swanberg (Consultant). Table of Contents (Continued) Chapter Page V. ORGANIZATION AND MANAGEMENT .................................. 33 Organizational Structure ..................................... 33 Project Implementation .............. ......................... 36 Monitoring and Evaluation .......... .......................... 37 Chart 1: Organization at Federal Level ..... ................. 38 Chart 2: Project Organization ........ ....................... 39 VI. COST AND FINANCING ........................................... 40 Financing ........................... 40 Budget Authorizations ........................... 40 Project Cost Summary ........................... 41 Accounts and Auditing ........................... 42 Procurement ........................... 43 Disburs'ement ........................... 44 VII. ECONOMIC JUSTIFICATION ................................... 45 A. Production ........................... 45 B. Marketing ........................... 46 C. Beneficiaries' Income ......... .................. 46 D. Nutritional Impact ....... .................... 47 E. Employment Impact ........................... 48 F. Environmental Impact ........ ................... 48 *G. Economic Analysis ........................... 48 H. Project Risks ........................... 50 I. Sensitivity Analysis ........ ................... 50 J. Cost Recovery and Fiscal Impact .......................... 50 VIII. SUMMARY OF MAIN AGREEMENTS REACHED AND RECOMMENDATION .... ..... 51 ANNEXES ANNEX 1: The PIDER Program: Assessment of Impact A. Institut4onal Impact B. PIDER Physical Impact ANNEX 2: Description of the Micro-regions Table of Contents (Continued) ANNEX 3: Components, Main Executing Agencies, and Disbursement Categories ANNEX 4: Agricultural Production, Benefits, and Crop Budgets Table 1: Crop Budgets by State: A. Sinaloa B. Guerrero C. Zacatecas D. Yucatan Table 2: Mocorito: Crop Production Without PIDER Table 3: Mocorito: Crop Production With PIDER - Area Cultivated Table 4: Mocorito: Crop Production With PIDER - Yields Table 5: Mocorito: Crop Production With PIDER - Volume of Production Table 6: Mocorito: Crop Production With PIDER - Value of Production Table 7: Mocorito: Crop Production With PIDER - Costs Table 8: Mocorito: Crop Production With PIDER - Incremental Benefits and Costs ANNEX 5: Project Cost Estimates Table 1: Total Costs and Phasing of Investments - Summary Table: Seventeen Micro-Regions Table 2: Cost Estimates and Phasing by Class of Accounting Category Table 3: Total Investments Programmed - By Eight Micro-Regions Table 4: Mocorito: Total Costs and Phasing of Investments Table 5: Sur de Yucatan: Total Costs and Phasing of Investments Table 6: Estimated Disbursement Schedule ANNEX 6: Table 1: Incremental Volume of Production - Crops Table 2: Incremental Livestock Production Table 3: Farm Income With and Without the Project by Micro-Region (Crops Only) Table 4: Farm Labor Generated by the Project by Micro-Region Table 5: Economic Rate of Return and Sensitivity Analysis Table 6: Economic and Financial Prices MAP: IBRD 15264 - Mexico: Integrated Rural Development Project - PIDER III MEXICO INTEGRATED RURAL DEVELOPMENT PROJECT - PIDER III STAFF APPRAISAL REPORT I. INTRODUCTION 1.01 The PIDER program (Integrated Program for Rural Development) was initiated in 1973 to focus the activities of Government agencies on selected rural areas (micro-regions) which have substantial productive potential, but whose populations lack the resources necessary to tap this potential. The Government of Mexico continues to give priority to improving the incomes and welfare of the nation's twelve million rural poor, who make up 50 percent of the rural and 20 percent of the total population. By January 1980, Mexico had invested US$1.6 billion in 119 micro-regions estimated to include 50 percent of its rural poor. PIDER investments are curently running at an annual rate of US$450 million. 1.02 Early in PIDER's development (1973), the Government requested World Bank support for the PIDER program. A loan for US$110 million was approved by the Bank in May 1975 to assist activities in thirty micro-regions (PIDER I). A second loan of US$120 million assisting development in twenty micro-regions was approved in July 1977. A separate appraisal of two micro- regions in the state of Oaxaca was made by the Bank for the International Fund for Agricultural Development (IFAD) and a loan for US$22 million was approved by their Board in May 1980. The Inter-American Development Bank (IDB) is supporting the program in an additional fifteen micro-regions. The Government has now requested a third loan to support the consolidation and extension of activities in seventeen micro-regions (PIDER III). Looking at the larger context of overall Bank lending to Mexico, as of October 31, 1980, Mexico had received 66 loans from the Bank amounting to US$4,243.9 million net of cancellations and terminations. Of these, 24 loans for US$1,864.4 million, or 43 percent of total lending, had been for agriculture and rural development. 1.03 Based on the experience gained from PIDER I and II, PIDER III is a departure from the usual rural development project in Mexico. The preparation and programming periods for PIDER III have begun a process of devolution of authority for planning and implementation of federally funded rural development programs to the state level. This process of decentrali- zation of authority is especially significant in the Mexican context, in which the federal Government is extremely strong and in which federal funding has until recently been synonymous with central planning. In the context of the PIDER program, this process has meant a surge of new interest and energy at the local, micro-regional, and state levels--for the first time, communities, line agencies, and state governments have been actively involved in planning the investments which each will have an important role in implementing. The investment plans resulting from the first programming process are judged by both Mexican authorities at the federal level and by the Bank appraisal team better adapted to both local conditions and the expressed needs and wants of beneficiaries. - 2 - 1.04 The Government recognized that to make such a decentralized planning process both effective and efficient, a workable mechanism would need to be implemented initially on a controlled scale. For this reason, four states with demonstrated planning capability were chosen to initiate the new planning process. The seventeen micro-regions selected within these four states are representative of the variety of difficult ecological conditions for which Mexico is seeking technological solutions suitable for small-scale use and of the varied socio-cultural characteristics of its rural poor population. The goals of PIDER III (outlined in detail in paras 4.01-4.02) include developing such technological solutions, and coincide with both state and federal goals of raising the productivity of both human and natural resources and the welfare of the rural poor. II. MEXICO-S RURAL DEVELOPMENT STRATEGY A. Background - Mexico's Rural Poverty Problems 2.01 While Mexico has obtained a high growth rate of GDP (an average of 7.0% per year since 1960), not all Mexicans have shared equally in the fruits of this growth. In the early twentieth century, Mexico sought to promote rapid economic development through high profits, low wages, forced saving via inflation, regressive taxation, and minimal expenditure on social projects. The resulting income distribution and investment patterns produced large productivity differences between the rural and urban sectors. These differences have tended to perpetuate themselves. Mexico's average GDP per capita in 1978 was about US$1,350, but 50 percent of the rural population earned less than US$100 per person. 2.02 A similar pattern of uneven development has characterized growth within the agricultural sector itself. Over the last thirty years, a well- organized public agency for hydraulic resources developed large-scale irrigation, while the Ministry of Agriculture had little effect on rainfed areas. While the one third of Mexican cropland that is irrigated produces 55 percent of total agricultural output, small farmers in rainfed areas have not adopted modern agricultural techniques. As a result, half of the country's five million farmers produce only 4 percent of total agricultural output, some not growing enough to feed their own families. 2.03 One effect of this dualistic growth pattern in the rural sector is an increasing dependence on imported foodstuffs. In the 1940s, Mexico imported about 15 percent of its cereal grains. From 1950 to 1965, with the adoption of "Green Revolution" seed varieties by large farmers and a rapid increase in irrigated area, output burgeoned, growing at an average annual rate of 5 percent. Increased population pressure and the onset of diminishing returns to high-yielding varieties resulted in a slowdown in this rapid growth. Between 1965 and 1978, the agricultural growth rate averaged about 1.4 percent annually, and production is once again lagging behind demand-- Mexican grain imports more than quadrupled between 1976 and 1980, and Mexico now ranks among the world's four largest importers of grain. - 3 - 2.04 Population growth has been so rapid that one third of the agricultural labor force is landless. Many of these landless laborers are the sons of peasants with inherited tenure to ejidos /1 too small to support their increasing population of ejidatarios. In 1975, the rural population was distributed among 1.5 million ejidatario families farming 22,500 ejidos, 1.2 million privately owned farms, and 1.3 million landless families. 2.05 Increased under- and unemployment in rural areas has led to a dramatic rise in rural-urban migration. United Nations projections indicate that Mexico City will be the most populous urban area in the world by 1990. Other urban areas in Mexico are also growing at a rapid rate. At the other extreme, more than one third of the population live in some 20,000 rural localities with populations of 300-2,500 where the prospects for productive employment and a decent income are poor. 2.06 Social infrastructure in these areas is minimal. According to recent estimates, more than half of rural families had no access to potable water. Excreta disposal systems meeting acceptable sanitary standards were generally not available. Thus, while the national average infant mortality rate is about 60 per 1,000 live births, the infant mortality rate for rural areas is significantly higher, over 100 per 1,000 in some zones. Gastro- intestinal diseases, pneumonia, and malnutrition are the principal factors leading to infant and preschool deaths. B. The PIDER Program - Evolution of the Program and Process 2.07 In the early 1970s, Mexico began to focus on the productive potential of the poorer segments of the rural population, while continuing to support large-scale agriculture. Up to this time, the principal public investment effort for rural development was sporadic and consisted primarily of small-scale irrigation and credit. However, these efforts were not coordinated nor well focused. In 1973, the Government shifted its strategy to focus on small, well-defined regions, called micro-regions, where a number of complementary programs could be coordinated through planning and supervision. The Investment Program for Rural Development (PIDER) was established to channel resources for this purpose. 2.08 When PIDER began, its principal strategy for alleviating rural poverty was through social infrastructure investments. By 1975 it had evolved into a more comprehensive program aimed at increasing productive and production-support activities through selected packages of goods and services, while continuing to improve social infrastructure. The goals were to increase levels of employment, incomes, and living standards in poor rural areas with productive potential. /1 The term ejido is derived from the Spanish equivalent of the village "common". In present Mexican law, the ejido is basically a group of families with joint--and inalienable--rights of usufruct to land. The head of such a family is called an ejidatario. Ejidos accounted in 1979 for 43%, or 60 million hectares, of Mexican farmland. - 4 - 2.09 PIDER is a coordinating program, not an institution, and as such was never intended to make investments nor provide servi^es directly. Rather, it is an administrative and financial mechanism, within the Secretariat of Programming and Budgeting (SPP), which serves to coordinate the rural develop- ment activities of a number of separate agencies. In PIDER I and II, SPP staff assigned to PIDER planned the package of investments for each micro-region. Each executing agency was then requested to make those investments which fell under its purview, and was provided with PIDER funds in order to carry out the work. 2.10 In 1978, the Government, with Bank assistance, undertook a mid- term evaluation of PIDER I (Annex 1). The report examines the progress of PIDER I as representative of the program as a whole, on the sub-project, component, and organizational, or institutional, levels. The report was done only four years after the beginning of PIDER, before most of the productive investments had reached full development. Therefore, most of its conclusions regarding impact are qualitative. The few cases in which an attempt is made to quantify results are indicative of the results of a small sample of sub- projects rather than of program-wide impact. The summary in this section and in Annex 1 is largely based on the mid-term evaluation and should not be interpreted as a final evaluation of PIDER's impact. 2.11 In general, the early-financed components which required least organization of beneficiaries and coordination among agencies for their operation (e.g. roads, electrification, schools) were most likely to be operating with few problems. Those requiring a high degree of beneficiary training or cooperative management (e.g. large livestock, rural industries, water supply) were more likely to be functioning at an unsatisfactory level. 2.12 Productive Projects. Productive investments under PIDER I emphasized small-scale irrigation (the largest volume of productive projects) and, to a lesser degree, livestock development. Small-scale irrigation works have usually resulted in significant increases in production and income and created additional jobs, most of which were taken by landless individuals. In general, livestock projects financed under PIDER I had a relatively small effect on production, income and permanent employment. A number of livestock units have encountered serious technical and organizational problems and have not resulted in the expected benefits. In general, problems have been encountered because large units with 15-50 participating farmers have been proposed and the organizational problems have proven too difficult. In other cases, livestock programs attempted were not fully appropriate on technical grounds; the lack of alternative technologies hampered planners who sought to increase farm productivity. These difficulties were compounded in those cases where construction or installation of infrastructure was carried out by one agency, while credit for stocking or assistance for making the project productive was provided by another. - 5 - 2.13 Changes are being made in PIDER's livestock program to take advantage of experience--both the problems mentioned above and the successful cases. Smaller units are being promoted; greater emphasis is being placed on the generally more successful small-stock projects (goats, pigs) and api- culture, where organizational problems are fewer. Technical support has been increased through major improvements in the Secretariat of Agriculture and Water Resources' Rainfed Agricultural Districts Program which will help ensure the viability of future livestock investments and strengthen the involvement of credit institutions (paras 4.40 and 4.48). Better criteria for design and operation of livestock sub-projects are being developed and would be applied under the project (para 4.40). 2.14 Productive Support. The quality and impact of productive support programs (e.g. extension, beneficiary organization, roads, and credit) under PIDER has been uneven but improving. Agricultural extension, for example, has been strengthened by the reorganization of the service along the lines of the training-and-visit system through the rainfed agricultural districts (DT) program (para 4.51). The DT program has been particularly useful in promoting involvement of agricultural credit institutions in development programs of SARH, thereby ensuring that credit is provided to complement extension and infrastructure programs. The rural roads component of PIDER has accounted for the bulk of productive support investments. CIDER evaluations found that road investments typically resulted in 70% reduction in cost of goods transport, making feasible the use of purchased inputs and the marketing of agricultural surplus. Roads have also had an important, but transitory effect in generating jobs. 2.15 Social Infrastructure. Benefits from social infrastructure are difficult to quantify, but evidence is that communities have valued access to potable water, schools, and health clinics. Improved health services may have substantial financial benefits, since very often sickness is the major cause of family financial problems. Easier access to water has improved family health, enabling many families to start small irrigated vegetable gardens, and giving women additional time to devote to raising of small animals or employment in cottage industries. Water supply projects have, in a large number of cases, been troubled by poor operation, inadequate maintenance, and breakdown of the systems. Inadequate attention was devoted to the organi- zation and training of villages to operate and maintain the systems once installed and beneficiary communities did not fully understand that collection of adequate water charges was necessary to pay for the upkeep of the system. Both PIDER and the Secretariat of Human Settlements and Public Works (SAHOP) have taken corrective measures. Beneficiary participation in the planning of water supply projects has increased with the decentralization of micro-region planning (para 2.17); maintenance and operation requirements are reviewed with the beneficiaries before works are started; and local management--State Potable Water Boards--has been strengthened. With these measures, there has been a marked improvement in the performance of potable water systems. This trend would be consolidated under the proposed project (para 4.77). 2.16 Based on the results of this evaluation, SPP began to consider several important strategy questions regarding the future of the PIDER program. In a report to President Lopez Portillo dated January 18, 1980, SPP proposed that rather than continue to expand geographically at a rapid rate, PIDER should be reprogrammed and "consolidated" in the existing 119 micro-regions. The report also noted the need for a new strategy that would eliminate a number of problems, including: (a) a lack of capability for multi-year investment programming at the state level; (b) poor individual project preparation, particularly in the productive sphere; (c) limited beneficiary participation, especially in program and project selection; and (d) poor federal- and state-level inter-agency coordination. 2.17 It was decided that several of these problems could best be solved by giving state governments a larger role in the planning and implementa- tion of PIDER activities and by assigning responsibility for coordinating the programming process at the micro-regional level to state-level SPP staff. The result of this decision was the decentralized programming process which was initiated in 1980 to plan investments for PIDER III. The process began at the community level,. Groups of beneficiaries in the communities included in the micro-regions were asked by SPP micro-regional coordinators to draw up lists of community needs and to arrange those needs in order of priority. The line agencies, assisted by state-level SPP planners, were then asked to draw up investment plans which would meet those needs. Coordination and guidance was provided by SPP state delegates. Overall state policy for the rural sector was provided by the State Committee for Development Planning (COPLADE). This was a much more complex planning process than that attempted in PIDER I and II (para 2.09) and in all other rural development projects in Mexico. As already mentioned, however, the extra effort is providing dividends in the form both of greater commitment from the communities, the state and municipal authorities, and the agencies, and of plans tailored more closely to beneficiaries- felt needs. 2.18 It was recognized that to successfully carry out this process, considerable guidance would be required, so that plans prepared in the states would be consistent with PIDER objectives and with sound planning methodology. The following steps were taken: (a) a policy paper outlining new directions and objectives for the PIDER program was prepared; - 7 - (b) a manual for multi-year micro-regional programming was issued jointly by PIDER and the Research Center for Rural Development (CIDER). This manual was revised after the first eight micro-regions had been programmed; (c) a series of regional meetings of senior federal- and state- level SPP staff was held to discuss aspects of the consoli- dation process and to review the proposed programming methodology; (d) a strategy which proposed the sequential reprogramming of investment plans for the existing (119) micro-regions was developed. This strategy was to begin in March 1980 with a "pilot" phase involving eight micro-regions in four states. The lessons learned from this pilot phase of the reprogramming would be incorporated in a second phase involving, first, nine micro-regions in the same states, and then all the other states with PIDER micro-regions; and (e) a series of seminars were held with Mexican officials at various levels and Bank staff, both in Mexico and at the Bank, to review the reprogramming process. The Bank was asked to participate in the financing of the investment programs in seventeen micro-regions. 2.19 The appraisal mission reviewed the reprogramming process and investment plans produced in the four pilot states: Sinaloa, Yucatan, Zacatecas and Guerrero (see para 3.01 for selection criteria). The state delegations then modified the plans on the basis of this review. The revised drafts of the plans were finally revised jointly by the state planners, SPP federal planners and members of the Bank mission. This assured that each met a set of standard requirements. The final stage of this process was a comprehensive review of the programming manual by the planners who had used it. The manual was then thoroughly revised on the basis of this feedback, so that it could be used in the next phase-- reprogramming of all the other PIDER micro-regions nationwide. 2.20 At the same time that the work of reprogramming was going on, institutional changes were effected on a higher level as well. The role of PIDER in relation to other rural investment programs was re-examined, and in July 1980, it was decided to incorporate PIDER into the investment plan called Master Coordination Agreement (CUC), while retaining PIDER's distinctive characteristics. Agreements which define procedures, function, and scope of the two programs are being signed by the state Governors and representatives of the federal Government. Within SPP, revised regulations were prepared and approved, which defined the responsibilities of the separate SPP directorates concerned with PIDER and the relationship among them. 2.21 The past year, then, has been one of reassessment for the PIDER program. The program-s objectives have been clarified, the strategies for reaching those objectives have been redesigned, and the new strategies have been put into action. C. Recent Development Programs in Mexico Master Coordination Agreement (CUC) 2.22 CUC was begun in 1977 as a centrally coordinated system of development works programmed and implemented by the state governments. Funding for these infrastructure works is drawn from federal revenues (60%), state revenues (30%), and village cash, materials, or labor (10%). From 1977 to 1980, the principal works financed were roads, schools, water supply systems, and public buildings. General Coordination of the National Plan for Depressed Areas and Marginal Groups (COPLAMAR) 2.23 COPLAMAR was begun on a limited scale in 1977 to coordinate activities of line agencies in areas with very limited productive potential, where programs such as PIDER and Rainfed Districts had little chance of success. The focus of public investments channeled through COPLAMAR was on directly improving living conditions and social services, such as health and education. In 1979, President Lopez Portillo approved expansion of the program. The sectors to be financed are: rural roads, potable water, health clinics, housing improvements and rural stores. Rainfed Districts Program 2.24 Initiated in 1977, the purpose of the Rainfed Districts Program under the General Directorate of Rainfed Districts and Units (DGDUT) of the Secretariat of Agriculture and Water Resources (SARH) is to coordinate all productive agricultural activities receiving Government support to 123 Rainfed Districts. About 70% of Mexico-s farm families live in rainfed areas, but these areas have received only 10% of all public investment funds for the agricultural sector since 1945. 2.25 In recent years, there has been a gradual policy shift in Mexico away from large-scale irrigation projects and toward the promotion of rainfed agriculture. The reasons for increased attention to rainfed areas are threefold. First, in areas of adequate rainfall (above 700 mm annually) there is still important potential to increase productivity of rainfed crops and livestock through application of available technology, and to increase cropped areas through improved drainage. The average costs of bringing about these changes in some cases are lower than those of large-scale irrigation. Second, investments in rainfed agriculture are an important means to redress the social imbalance now evident in Mexican agriculture; while rainfed - 9 - areas produce only 50% of the value of agriculture output, their population includes 87% of all farmers. Third, the Government has been particularly concerned about the steadily increasing imports of basic staples, due to inefficient domestic production of these commodities; nearly 80 percent of rainfed cropped area is given to maize and bean production, but yields have grown very little in the past decade. 2.26 The Rainfed Districts program aims primarily to reinforce extension, research, and credit services and to provide a structure to ensure participation of farmers, the various Government agencies, and the banks to coordinate the planning (carried out in a bottom-up process, beginning at the community level), budgeting, and execution of local development activities. More than twenty agencies are directly or indirectly involved in promoting agricultural production in rainfed areas. Mexican Food Plan (SAM) 2.27 In March 1980, the President of Mexico announced a new Mexican Food Plan--a national policy calling for self-suffiency in corn and beans by 1982, and elimination of net imports of these staples by 1985. The policy also calls for special emphasis on improving the declining nutrition levels of some 35 million poor in both rural and urban areas. The work to date has involved analysis of the problem and identification of "Critical Nutrition Zones". These are defined as areas "in which the federal Government should take the responsibility for supplying food--either gratis or at subsidized prices--in order to eliminate malnutrition in those groups whose alternatives for improvements are severely limited." In the urban areas, the critical zones include the "belts of poverty" surrounding the major cities, areas in which inadequate distribution of food and low incomes make malnutrition a serious problem. In the rural areas, the zones include primarily areas where agricultural productivity is either limited by soil and terrain or is highly vulnerable to drought. 2.28 The strategy called for by SAM emphasizes an expansion of applied research, credit, use of inputs (especially fertilizer and insecticides), technical assistance, annual increases in the guaranteed prices of maize and beans, and readjustment of the price ratios between maize and beans and competing crops to encourage cultivation of these staples. 2.29 On the side of food marketing and distribution, the SAM strategy for eliminating malnutrition consists of nutrition education campaigns and provision of more facilities for the distribution of food through a network of small stores. Together with the Rainfed Districts program, PIDER will play an important role in helping to achieve SAM's goals, particularly in the seventy or so PIDER micro-regions which wholly or partly coincide with "critical zones" indicated by SAM. Of the thirty programs financed by PIDER, thirteen contribute to achievement of the goals stated in SAM. - 10 - III. THE PROJECT AREA A. Selection of States 3.01 The project area is comprised of seventeen micro-regions located in the states of Sinaloa, Zacatecas, Yucatan and Guerrero (see map). The four states were chosen to represent widely different socio-economic conditions and ecological areas of the country, as well as for the experience of their planning personnel and institutional capability (para 3.02 (d)). Sinaloa, a highly productive state on the central Pacific coast with very uneven income distribution, is characterized physically by sharp transition from coastal plain up through the hills and valleys of the piedmont and into the cool- temperate, jagged sierras. In Zacatecas, a poor state in the central zone, plains predominate, interspersed with steep ridges and valleys. Scattered throughout the state are extensive areas of moist organic soil, though rainfall is generally low. Yucatan, located in the tropical southeastern part of the country, has a very limited resource base with which to support its very rapidly growing population. The state presents a unique combination of conditions: dry flatlands of shallow soil with severe rock outcroppings undermined by subterranean caverns and pools, where the Mayans farm the milpa system/l. Guerrero, a poor, mountainous state, presents additional contrast, with a highly productive tropical coastal belt, bordered by steep foothills where maize and associated crops are cultivated. This area is followed abruptly by the low mountains, where the economy is based on coffee. In the lower portion of the state, the coastal belt extends inland to include extensive areas of fertile soils where flood control and drainage are major agricultural problems. Basic information on the micro-regions is presented in Table 3.1, page 11. B. Micro-regional Selection Criteria 3.02 Micro-regions are comprised of three or more adjacent municipalities within a state. In the four states described above, micro-regions were selected on the basis of: (a) productive resources, but lack of infrastructure to exploit this potential; (b) a high proportion of the economically active population with total net annual family income less than 500 times the regional minimum daily rural wage (para 4.07); (c) size of target villages ranging from 500 to 5,000 inhabitants, but including smaller communities when these involve the grouping of small, scattered villages below 500 in population; (d) capability of the state-level staff for programming, coordinating, and executing multi-year investment programs. /l Slash-and-burn mixed maize and bean cultivation using planting sticks, with a fifteen-year fallow per½d following each season of production, so that cultivated area shifts each season. Table 3.1 Project Area, Population, Agricultural Area, Average Farm Size and Rainfall Infant Agricultural Area Avg. Average Population Morta- Cropped Farm Annual Area Nbr. of Literacy Ratye Total Irrigated Rainfed Size/b Grazing/c Rainfall State/Miicro-Regian _(kin_ Iuiiis Ttal 7. Rural RateLa Rate - 00ha) (000 ha) (000 ha) (ha)'- (000 ha) (mm Sinaloa Norte de Sinaloa 14,500 3 167,000 85 (7874 (223.5 175.6 2.1 79.1 4.0 170 700 Mocorito-Badiraguato-Culiacan 12,000 3 137,000 88 C C 108.3 7.7 77.2 3.9 300 600-1,000 Guerrero Atoyac 6,114 4 178,000 60 55.4 (279 5 95.0 4.4 54.0 3.8 70 900-2,400 Costa Chica 4,309 7 164,000 80 ( C 210.0 8,3 53.2 6.7 110 1,000-1,200 Zacatecas Tlaltenango 4,000 8 73,000 76 (81.23 (514 9 68.5 3.2 42.3 5.7 200 700- 800 Valparaiso 9,000 5 143,000 69 ( ( 152.7 5.7 110.7 8.3 374 700- 800 Yucatan Sur 9,000 8 96,000 23 (73.78 (471.2 108.4 6.4 80.3 32.9/d 100 900-1,200 Litoral Norte 8,024 12 118,500 37 ( ( 244.6 2.4 193.3 27.7 218 800-1,300 Source: Secretariat of Programming and Budgeting /a Literacy rate (per 1,000 persons) and infant mortality rate (per 10,000 live births) are figures for each state and are used as indlcative figures for the micro-regions. /b Average farm size estimate based on cropped area divided by 80% of the rural population (90% for Yucatan and Costa Chica) times 5.6 (number of family members). /c Mission estimates. /d Actual area under production-in any given year is farm area divided by 15, due to the prevalence of the milpa system (page 8, footnote 1) which requires fifteen years of fallow following one year of production. Tecembvr 1, 1980 - 12 - 3.03 A description of the principal characteristics of the eight micro- regions/i chosen for review during appraisal appears in Annex 2. The map shows the location of these and the remaining micro-regions. The remaining nine micro-regional plans would be assessed by the Bank prior to disbursement for those areas. Since, for the first eight micro-regional plans, the mission's focus was to appraise SPP-s and line agencies capability to program and implement the project, the assessment of the remaining nine micro- regional plans would be based mainly on the following criteria: (a) whether the revised national guidelines for programming were followed and satis- factorily incorporated into the micro-regional programming process; (b) analysis of the sub-project investment proposals as spelled out in the SPP planning manual; and (c) a minimum economic rate of return of 12 percent for all productive sub-projects. 3.04 During negotiations, agreements were reached that the plans for the nine remaining micro-regions would be appraised by the Bank as a condition for disbursement for those areas. These plans will be assessed against the criteria outlined above. IV. THE PROJECT A. General Description Project Objectives 4.01 According to the PIDER Policy Paper of July 1980, PIDER's central objective is to promote a self-sustained development process within rural communities, and to guarantee access to goods and services which provide adequate living standards. The main objective of PIDER III is to increase the development impact of the existing program by supporting Government's efforts to expand and intensify activities in seventeen selected micro-regions located in four states. The purpose of specific PIDER III investments would be: (a) to increase production of basic foods; (b) to generate higher productivity and per-capita income levels; (c) to raise the level of employment in rural communities; and (d) to improve living conditions in terms of nutrition, health, education, housing and drinking water. /1 The eight that were appraised: Mocorito-Badiraguato and Norte in the state of Sinaloa; Valparaiso and Tlaltenango in the state of Zacatecas; Costa Chica and Atoyac in the state of Guerrero; and Litoral Norte and Sur in the state of Yucatan. The remaining nine are: Cosala- Elota and Sur in the state of Sinaloa; Rio Grande, Fresnillo-Calera and Pinos in the state of Zacatecas; Oriente in the state of Yucatan; and Costa Grande, Ometepec and Cuauhtemoc in the state of Guerrero. - 13 - 4.02 In addition, PIDER III would contribute to: (i) improved micro- regional investment planning; (ii) increased beneficiary participation in the program planning, execution, and evaluation stages, and in the operation and maintenance of infrastructure through the framework set up by the Rainfed Districts program; (iii) increased effectiveness of extension, credit, and farmers' organization, through the framework set up by the Rainfed Districts program; (iv) provision of resources for feasibility studies for productive investments and for applied research; (v) provision of resources for training and specialized technical assistance; and (vi) improvement of the monitoring and evaluation system. Project Strategy 4.03 As described in Chapter V, a major shift in PIDER's overall program strategy was effected in 1980. Increased participation and authority was assigned to state governments, and assisted by SPP state delegates and planners, the state governments are now responsible for the programming, budgeting, and coordination of PIDER development investment programs. The governments have proposed three-year investment plans based on needs identified by the rural communities and line agencies. Revision and detailed specification of actual investments will be done on a yearly basis. Benefiting communities will continue to participate in this revision process. 4.04 PIDER's strategy for achieving the specific goals outlined in para 4.01 is embodied in the investment plans. Each objective and the investment strategy designed to achieve it is presented below: (a) To increase food production, directly productive and productive support investments are planned to improve productivity of both crops and livestock. These would include improvement of land and stock, infrastructure for irrigation, soil and water conservation, perennial crop development, installations for livestock raising, and credit, as well as extension and applied research. (b) To generate higher income, in addition to the investments listed above, improvement of rural roads and marketing facilities will enable beneficiaries to retain higher levels of economic surplus. Credit and technical assistance for development of rural industries would generate both income and additional employment. (c) All of the productive investments mentioned above would contribute to raising the level of employment in rural areas. In addition, all investments in infrastructure (whether productive, support or social) would offer employment to beneficiaries in the target group during - the period of construction. (d) Nutritional levels, health, and living conditions would be improved through increased incomes, increased - 14 - availability of food, provision of basic infrastructure for health services and potable water, nutrition and health education, elementary education, and provision of materials with which beneficiaries can improve their housing and the public areas of their villages. 4.05 In order to assure that the benefits of these actions reach the target group, emphasis would be placed on continuing applied research and farm trials for improved technical packages, particularly for rainfed food crops. Strong emphasis would also be placed on strengthening the agri- cultural extension and credit delivery systems in the micro-regions, in conjunction with the SARFL Rainfed District Program. Finally, beneficiary participation would be required in sub-project design, implementation and evaluation. 4.06 The objective of building the capability of agencies involved in planning and implementing the PIDER program would'be achieved through the following strategy: (a) continued guidance for the programming of development plans at the micro-regional level; (b) provision of funds for additonal staff, equipment, and training to improve the ability of executing agencies to reach a larger proportion of the target group; (c) provision of funds for personnel, data-processing hardware and software, and technical assistance to improve the effectiveness of the monitoring and evaluation system of PIDER (paras 5.12-5.16). Implementation Strategy and Distribution of Responsibilities Project Beneficiaries 4.07 Project activities would be directed to individual beneficiaries or groups of beneficiaries with a total family net annual earnings less than 500 times the relevant regional minimum daily rural wage./l About 50% of the rural population is classified under this category. In view of the diversity of the proposed activities (paras 4.14-4.17), a given group of rural population may be expected to benefit from more than one project activity. Some 1.2 million families or approximately 80 percent of the target population would be expected to benefit from project activities over a three- year period, either through increased income and employment opportunities generated or from the use of the infrastructure built. /1 Minimum daily wages are established annually by the Government for 111 regions of the country and, for 1980, these range from US$3.91 in the poorest states (Guerrero, Zacatecas) up to a maximum of US$7.39 in the northern border states. The unweighted national average minimum daily rural wage is US$6.65. - 15 - Beneficiary Contribution 4.08 Beneficiary participation has begun at the planning stage for PIDER III. In each locality meeting selection criteria within the project micro-regions (para 3.02), communities were called together to discuss their investment needs with representatives of line agencies and of state and municipal governments. It was on the basis of these discussions that the eight micro-regional plans were produced. This same procedure will be followed for the remaining nine micro-regions and as sub-projects are specified in detail (Chapter IV.B. Detailed Features). 4.09 Beneficiaries will be responsible for contributing part of the cost of investment under some components. Beneficiary contribution may be in the form of labor, draft power, machinery, or materials. The proportion of sub-project cost to be borne by beneficiaries will be agreed upon by beneficiary groups and implementing agencies. Line Agencies 4.10 In PIDER III, line agencies would be responsible for drawing up investment plans assisted by SPP state staff and in consultation with communities and state and municipal government representatives (paras 2.17 and 4.08). As under previous PIDER projects, execution of the various project components would continue to be the responsibility of the existing line agencies and state governments. To strengthen PIDER's integrated and decentralized approach to planning and execution of project implementation, working agreements with main implementing agencies at the national level outlining individual agency responsibilities and mechanisms for inter-agency coordination have been drawn up and signed. Secretariat of Programming and Budgeting 4.11 SPP would be responsible for overall project strategy by assisting the state government, the Rural Development Sub-committees, and the COPLADE in: (a) establishing investment priorities and identifying target groups; (b) ensuring consistency between the programs proposed for the micro-region; (c) releasing the PIDER funds authorized in the budget for each region according to the progress of program execution; (d) monitoring the compliance with norms, procedures, and guidelines established by SPP at the federal level; and (e) supervising implementation of PIDER components at the local level. 4.12 Since there is some geographical overlap between Rainfed Districts (though not the Bank-assisted areas of this program) and PIDER III micro-regions, and since DGDUT objectives coincide with those of some PIDER III components (especially small-scale irrigation, and soil and water conservation), special attention would be given to coordinating mechanisms between SPP and SARH in the project areas. Coordination of planning and implementation of project activities in the agricultural sector would be the responsibility of the Rainfed District Chiefs. The SPP coordinator for micro-regions which coincide with or overlap Rainfed Districts would be a member of both the Executive and Technical Committees organized by the Rainfed Districts Program, and the Rainfed - 16 - Districts Chief would be a member of the Regional Sub-committee for Rural Development (Chapter V - Organization and Management). The Technical Committee would review all agricultural and livestock projects to be carried out in the micro-regions prepared by SARH, BANRURAL, CONAFRUT and other agencies, prior to presenting the projects to SPP for funding. Monitoring and Evaluation 4.13 The monitoring and evaluation system would be strengthened to: (a) report physical progress of project activities; (b) detect and expeditiously resolve implementation problems; (c) evaluate on an ongoing basis the impact on beneficiaries and their communities of project activities; and (d) execute in-depth studies of constraints to development, as well as unexpected positive effects arising in the course of project progress (paras 5.12-5.16). Project Composition 4.14 It should be noted that the figures for investment presented throughout are estimates, to be revised according to annual plans, in which actual sub-projects are enumerated and specified. The proportion of project costs allocated to various components is therefore indicative and flexible. Directly Productive Investment (61%) 4.15 The project would provide support for: agricultural development, including small-scale irrigation facilities; soil and water conservation; land rehabilitation; rainfed grain production; and fruit production development; livestock development, including stock and pasture improvement, infrastructure installation for large and small stock, and beekeeping; physical infrastructure; husbandry and management advice; fishery development; rural industry, including mainly preservation, processing, or transformation of agricultural primary products; development credit for small-scale irrigation, livestock, fruit production, and small-scale industry. Productive Support Investments (26%) 4.16 Investments would be provided for expansion of the extension service and technical assistance, applied on-farm research and demonstration plots, marketing and food distribution facilities, construction of rural roads, rural electrification, farmers and beneficiaries- organization and training, and feasibility studies. Social Infrastructure (10%) 4.17 The project would support improvement or construction of primary schools and of basic community health facilities; provision of materials for - 17 - self-help village housing and improvement projects; nutrition, including installation of home gardens and raising of small livestock, nutrition and health education, and surveillance of the nutritional status of the beneficiaries. Project Organization and Management (3%) 4.18 Support would be provided for the organization and management of the project, including establishment of a Micro-Regional Rural Development Office at the micro-regional level; technical consultants; training for SPP and for executing agencies' staff; incremental funding for staffing state and micro-regional offices; and monitoring and evaluation. (See Chapter V for complete discussion). B. Detailed Features B.1 Directly Productive Investment (61%) 4.19 Investments would be made to expand rural infrastructure facilities and to stimulate increases in agriculture, livestock, forestry, and rural industries' output in the selected micro-regions. These invest- ments would be complemented by productive support investments, without which implementation constraints would arise. Agricultural Investments (25%) 4.20 Small-scale Irrigation (11%). The project would develop small irrigation schemes, consisting mainly of construction of tubewells or small dams with related distribution systems. Some 17,000 ha of irrigated land would be developed at an average cost of US$2,000 per ha, and would directly benefit some 6,600 families. The development of small earth dams'would be concentrated in the mountainous regions of Zacatecas, and the medium to high altitude ranges of Sinaloa and Guerrero. In the lowlands and plains of all four states, investments would concentrate on tubewells and small pumps. 4.21 The small irrigation works would be carried out by the Directorate of Hydraulic Works for Rural Development (OHDR), through its regional offices, which have gained substantial experience with these types of works under previous Bank loans (PIDER I and II and Small-scale Infrastructure). Prior to construction, technical and socio-economic feasibility studies would be carried out for each proposed irrigation project in accordance with existing OHDR guidelines, which are satisfactory to the Bank. Once the feasibility studies have been carried out, sub-project designs and estimates of costs and benefits would then be prepared by OHDR. Typically, OHDR enters into agreements called "Acceptance Acts" with the local users' association, specifying what works and services OHDR will provide, and what are the conditions to be met by users concerning operation and maintenance of the works, water use, and use charges. The users' association selects the tariffs that best suit its own needs. - 18 - A.22 Under the existing Federal Water Law, the Government is permitted ,o recover a maximum of 30% of the. cost of small-scale irrigation works, but farmers are obliged to pay the full cost of operation and maintenance. Under the PIDER program, the policy of SPP and SARH is to achieve higher effective levels of capital investment cost recovery by limiting public investment and encouraging farmers to participate in financing infrastructure through long-term credit. SPP and OHDR would verify with banks that the ejidos and/or individuals comprising the users association are eligible for bank credit before starting construction. Construction of sub-projects is usually done by contractors following the usual tendering procedures of SARH, with supervision of the contractor by OHDR field engineers. 4.23 During negotiations agreements were obtained that: (a) within each sub-project, the maximum grant per family would be US$15,000; and (b) the Government or its agencies would clear with the credit institutions that users would be eligible for bank credit before starting the construction of works. Soil and Water Conservation (6%) 4.24 The main focus of the resource conservation program would be on the development of a production-oriented soil and water conservation system. The emiphasis would be on helping farmers to use engineering measures to improve the productivity of their own land and to reduce the impact of drought. To insure adherence to the new focus of the soil and water conser- vation program, PIDER III-financed soil and water conservation works would be restricted to agriculturally productive soils with slopes less than 6%. 4.25 The PIDER III project would support the construction of some 48,000 ha of soil and water conservation works in four micro-regions, benefiting 8,900 families. The project would concentrate on: (a) introduction of water harvesting practices; (b) construction of flat channel terraces to collect and hold water for soil infiltration and contour furrows with level beds combined with small reservoirs to be used for supplemental irrigation by gravity or sprinkler systems; (c) land clearing--rock, tree, stump, and brush removal--which would increase the cultivable area and improve cultivation practices; (d) testing of techniques for conserving soil and water on a small watershed basis; and (e) provision of funds for improvement of technical assistance. 4.26 Because conservation works would be carried out at the farm level, approval for construction would be sought from the farmers or ejidatarios in the selected areas. Project off-farm costs would be borne by project funds but some on-farm costs of labor, draft power and some machinery would be contributed by the farmers themselves (para 4.28). Beneficiary farmers - 19 - or ejidos would be responsible for the maintenance of work. Beneficiary contribution to investment costs would be agreed upon by the SARH representatives and the farmers. As conservation works lead to demonstrated increased productivity, all operation and expansion costs would be financed under medium- or long-term credit from local banks under normal bank terms, repayable by farmers. 4.27 Survey:, demonstrations, preparation of conservation plans, and construction w ld be the responsibility of the General Directorate for Soil and Water Conservation (DGCSA) within SARH. The Rainfed Districts Program would be responsible for the identification of works needed, the selection of farmers or farmers' groups, and for coordination of conservation activities at the micro-regional level. All soil and water conservation activities would be approved by the Rainfed Technical Committee. 4.28 During negotiations agreements were obtained that: (a) benefiting farmers or ejidos would provide a fraction of the on-farm costs, the exact proportion to be agreed upon by farmexs and SARH; (b) technical plans would be prepared prior to construction and discussed with the farmers concerned to reach a formal agreement on the work to be done; and (c) grant per family would not exceed US$10,000. Crop Development (8%)/l 4.29 Seasonal Crops. The major agricultural activity in the micro- regions selected for PIDER III is the production of seasonal crops. The principal crops are maize, beans, sorghum, sesame, and groundnuts. Other crops are grown in lesser proportions. Most seasonal crops are grown under traditional cultivation practices and rarely receive modern inputs such as improved seeds, fertilizers, fungicides, and pesticides. As a result, yields are low. Maize yields average around 700 kg/ha in the rainfed areas. Under irrigation, seasonal crops do receive higher levels of input use and yields are substantially higher in such cases. PIDER III would provide investment funds for land clearing and preparation, upgrading of soils (paras 4.24-4.28), extension and adaptive research (paras 4.51-4.54). Agricultural inputs would be financed through seasonal credit provided by BANRURAL or commercial banks. About 76,000 ha of maize would be cultivated under the project. At full development (by Year 5) yields of maize are expected to increase from the present level of about 700 kg/ha /1 This percentage of project cost applies only to fruit, coffee, and coconut development. Cost allocation for seasonal crop development is covered under specific sub-components (irrigation, soil and water conservation, extension and adaptive research). 20 - to 1,800 kg/ha under rainfed conditions on farms receiving direct investments for crop development and 3,500 kg/ha under irrigation (Annex 4). 4.30 Fruit Crops (4%). The project seeks to promote the development of the micro-regional fruit production potential in seven micro-regions. Under PIDER III funds would be provided for the establishment of new irrigated orchards of avocado, mango, peaches, plums, and citrus. PIDER would finance small-scale irrigation syslems (paras 4.20 to 4.23), land improvement and preparation, nurseries, agricultural chemicals, and fertilizers associated with the start-up period, and maintenance during the first two years of the pre-productive period. About 14,000 ha would be planted with fruit, benefiting about 6,200 families at an estimated average cost of US$965 per ha. 4.31 In addition, PIDER would also finance the rehabilitation of deciduous fruit trees such as apples and peaches in Zacatecas. It would include elimination of old trees, replanting, pruning, control of pests and diseases, and fertilizers. Acquisition of farm machinery and equipment would be financed under development credit (paras 4.48 to 4.50). The benefi- ciaries would provide all labor inputs for orchard establishment and maintenance. For most fruit, yields in Year 5 of orchard development are expected to be sufficient to cover all operating costs, and at that time, the farmer would be responsible for assuming all production costs (Annex 4) through his own resources or production credit financed by BANRURAL or private banks. Farmers would be organized into groups to facilitate provision of inputs and technical, financial, and marketing assistance. 4.32 Technical assistance to farmers and communities would be provided by a team of technicians (working through the National Fruit Development Commission (CONAFRUT)). The team would draw extensively on the support of SARH Rainfed District extension agents located in each micro-region. The project would strengthen the existing CONAFRUT technical assistance program in the project area by increasing the number of technical staff and by providing vehicles and equipment. 4.33 Perennial Crops (4%). The principal crops in the Guerrero micro- regions are coffee and copra. Coffee is an important smallholder cash crop in the higher areas of Guerrero, and yields of coffee in the micro- regions are 300 kg/ha. Under the coffee rehabilitation sub-component, yields are expected to rise to 900 kg/ha by Year 12 of the project. Investment financed by the project would be used to rehabilitate about 14,260 ha of existing plantation, at a cost of about US$800 per ha. The Mexican Coffee Institute (INMECAFE), responsible for the design and implementation of this sub-component, has developed and tested a technical package to improve coffee production. This package includes improved weed control, pruning, rejuvenation through coppicing, replanting of unproductive trees with improved varieties, providing better shade trees, fertilizing, and disease and insect control. - 21 - Development credit would be available for the purchase of fertilizer, agri- cultural chemicals, and equipment. About 3,000 families would benefit from this sub-component. 4.34 INMECAFE technicians, together with the farmers, would design the rehabilitation program for each farm. INMECAFE would be responsible for input supply and would process and market a substantial portion of the incremental coffee production. INMECAFE would also be responsible for the development of new processing plants and improvement of reception marketing centers. In additon, the INMECAFE technical assistance system would be strengthened through the recruitment and training of new staff, agronomists, and agricultural technicians (peritos), who would work with farmers in close coordination with the SARH extension agent. 4.35 Copra is a major cash crop along the coast of Guerrero, produced mostly by ejidos. Many groves of coconut palm consist of old trees, however, and productivity has been declining in recent years. The Coconut Promotion Agency of Guerrero (IGC) would be responsible for planning and implementing the activities of this sub-component. Prior to the implementation of this component the IGC would define with the farmers a complete work plan and would submit it to the Rainfed Technical Committee for revision. The IGC has an ongoing research program, is adapting a number of new varieties of coconut palm to specific local conditions throughout the state, and has developed locally adapted technical packages. The project would finance the cost of rehabilitating or replacing about 13,000 ha of coconut palm at an estimated average per-hectare cost of US$807. Investment items would include land improvement and preparation, removal of unproductive trees, planting materials, fertilizers, agricultural chemicals and hired labor. Livestock Development (19%) 4.36 Beef and Dairy /1. Under PIDER I and II, relatively large- scale beef and dairy development received the major share of livestock investment support, with sheep, goat, pork, and poultry development receiving relatively minor attention. Past failures to manage large-scale units efficiently have led to a reorientation. Under PIDER III, beef and dairy development support would be aimed at improving existing units, and at establishing units on a smaller, less expensive and more manageable scale than under PIDER I and II. New livestock sub-projects would be installed mainly in those ejidos where most of the land is useful only for grazing-- mainly because of unreliable rainfall, unsuitable terrain, or poor soils-- and where Government initiative would be justified because the farmers, due to their limited resources, are not eligible for commercial credit and therefore could not finance the infrastructure works themselves. Once such works were constructed, however, beneficiaries would finance the acquisition of livestock under the ongoing credit programs for low-income producers. (See para 4.09 for beneficiary contribution to investment cost.) /1 Though 15% of total project cost has been allocated for beef and dairy development, this allocation is flexible pending the outcome of studies described in para 4.40. - 22 - 4.37 Three types of activities would be supported under this sub- project: (a) dual purpose beef/dairy raising on improved pastures in Guerrero and Yucatan; (b) beef fattening on improved pastures in Yucatan, Sinaloa, and Zacatecas; (c) beef breeding in Zacatecas based on range grazing supplemented by areas of rainfed pasture or irrigated forage. PIDER III would provide funds for: (a) land clearing, pasture establishment or improvement, and fencing; and (b) construction of watering areas and handling facilities. Investment credit for stock purchase and working capital would be financed under BANRURAL, Agriculture Trust Fund of the Bank of Mexico (FIRA) or private banks. A total of US$49 million would be invested in beef and dairy cattle during the life of the project, benefiting about 10,700 families. Average estimated cost per family would be US$4,600. Assistance for beef and dairy sub-projects would be provided mainly by SARH Rainfed Districts staff. PIDER would provide funds for: training of farmers and organization of producers, project design, implementation, and supervision. 4.38 Small Stock. This sub-project would be aimed at increasing the productivity and profitability of existing household pig and poultry units, and to introduce some larger units in those areas where markets are nearby and purchased feeds are readily available. SARH would give major emphasis to increasing technical assistance. PIDER would provide funds for the infrastructure needed for the different classes of livestock, feed storage, water and handling facilities. Purchase of breeding stock and working capital would be provided through BANRURAL and private banks, to be rediscounted by FIRA. Some 5,200 families would benefit from this sub-component at an average cost of US$2,000 per family. 4.39 Beekeeping. The demand for honey from the urban areas of Mexico plus increasing potential for exportation has stimulated great interest in communal beekeeping operations. Such operations begun under PIDER I and II have been quite successful and extremely profitable for the beneficiaries. In each micro-region, PIDER would fund about 400 new beekeeping installations, including starter hives, which would benefit about 3,000 families. Costs would average about US$730 per family and US$5,500 per unit. SARH would be responsible for providing technical assistance on an ongoing basis. 4.40 During the first year of project implementation, SPP would carry out a full review of selected livestock and beekeeping schemes financed under ongoing PIDER projects, with the purpose of developing appropriate design of livestock infrastructure, composition and management of livestock units, and criteria for the evaluation of such units. Aspects of such projects which require evaluation include: forms of organization, management of the enterprise, financial accountability, and internal regulations of individual ejidos covering rights of participating ejidatarios and of the ejido as a whole. The outcome of this review would guide SPP in the selection of livestock sub-projects to be provided under PIDER III. 4.41 During negotiations agreement was obtained that: (a) SPP would submit to the Bank terms of reference for the review mentioned in para 4.40 and - 23 - interim design guidelines based on experience PIDER I and II;(b) these interim guidelines would be applied until the final, agreed guidelines became available, up to a maximum of US$3 million disbursement; (c) prior to disbursement, beyond the initial US$3 million, a Mexican technical pannel would carry out the review and develop and furnish to the Bank adequate design guidelines and evaluation criteria to be systematically applied in the financing of livestock sub-projects; and (d) a ceiling of US$10,000 per family would be placed on investment made through direct grant by PIDER. Forestry (2%) 4.42 The project would support reforestation and afforestation invest- ments of about US$2.3 million in selected ejidos in the states of Sinaloa and Zacatecas. These activities would be an expansion of the work the forestry service is already carrying out with ejidos or associations of ejidos. For the execution of these sub-projects the forestry service would cooperate with the extension and soil conservation services and obtain the necessary participation agreement with the farmers or group of farmers. All investment costs would be financed under the project, but farmers would contribute labor. Fishery (1%) 4.43 The project would attempt to increase the efficiency of production and marketing of fish in two micro-regions of Guerrero and Litoral Norte in Yucatan. Project actions would include: (a) construction of small docking, reception, processing, and marketing facilities; (b) establishment of training courses and extension activities; and (c) installation of repair shops with the necessary tools and equipment. Investment for the acquisition of boats, outboard engines, fishing gear, coolers, and working capital would be made available to cooperatives through FIRA, private banks or the Fisheries Bank (Banco Nacional de Fomento Pesquero (BANPESCA)). 4.44 In the state of Yucatan special emphasis would be given to technical assistance and training for fishermen, with an initial focus on organization of fishermen, in-the-field training for management of cooperatives, and promotion of associations for independent fishermen. Practical training would include promotion and demonstration of improved technology, to be carried out by intermediate-level fisheries technicians. Managerial and administrative training would be offered by existing staff of the Department of Fisheries to literate fishermen, preferably leaders of cooperatives and/or associations. The Department of Fisheries (Productos Pesqueros Mexicanos) would be responsible for the implementation of this component. About 800 fishermen will benefit through this sub-component. Rural Industries (3%) 4.45 PIDER II financed development of a broad variety of rural industries. A special evaluation of this component carried out in 1978 showed rather disappointing progress. A significant number of the sub-projects experienced difficulty in getting started, stemming from both technical and managerial problems. In the judgment of the appraisal mission, however, development of small industries which would complement the principal agricul- tural and livestock activities of one area is important to the overall develop- ment of that area; they have the potential for overcoming marketing and other bottlenecks as well as improving incomes and employment. For this reason, - 24 - PIDER III would continue to finance development of a very limited range of rural industries, specifically, those which process or utilize commodities produced by PIDER III-financed productive activities within the micro-region. In areas where forestry development is being financed, for example, such industries would include sawmills and factories for the production of tool handles, produce crates, and simple furniture. Other industries include processing plants for production of fruit preserves, honey packing, and fish and meat quick-freezing. Development of such industries would facilitate the marketing of perishable produce (especially important in the case of fruits, vegetables, and fish), would provide additional employment within the micro- region, and would increase the value added of agricultural prcducts exported from the micro-region. 4.46 Project actions would focus on: (a) rehabilitation of existing enterprises which would include: in-depth analysis of the causes for the irregular operation of those units and selection of remedial measures; provision of technical assistance on preventive maintenance; product design; and quality control; development of standards and surveillance systems; establishment of procedures for the transfer of legal ownership of the enterprise to the beneficiaries or to the ejidos; (b) development of new enterprises which would include: provision of technical assistance for the identification of enterprises and for project preparation (feasibility studies, selection of technology, construction and implementation); improve- ment of executing agencies' capabilities in providing management, technical, and marketing assistance and supervising the enterprise; deve'lopment of studies to identify possible linkages between small-scale enterprises and larger industries for sub-contracting and marketing arrangements; (c) training of entrepreneurs which would include: promotion of campaigns to provide information on the rural industries program (its objectives, policies, participation, procedures, benefits, incentives and training opportunities); establishment of demonstration units and service workshops in the micro- regions; establishment of technical expert teams to provide assistance to field staff and to entrepreneurs; utilization of experienced entrepreneurs to provide practical advice on project identification, operation, and marketing problems; and (d) provision of credit. 4.47 The Agro-Industries Department of SARH would be responsible for the execution of this program. In addition to the actions outlined in para 4.46, SPP would coordinate with SARH to: (a) limit the Government agencies involved to those which have demonstrated technical expertise; (b) assure that feasibility studies are done more thoroughly; (c) assure that technical assistance is available to beneficiaries throughout the life of the enterprise investment; and (d) check that credit for working capital and initial operating costs is provided for the enterprises by a financial intermediary before approving the PIDER investment. In view of the difficulties encountered under PIDER II with the rural industries component (para 4.45), the project would provide technical assistance to assist the Government of Mexico in developing the capacity to implement this type of project. Development Credit (11%) 4.48 Under the first and second PIDER loans, medium- and long-term farm development loans were made by public (BANRURAL) and private banks to small farmers under criteria established by the Agricultural Trust Fund in the Bank of Mexico (FIRA), and supported by the Bank in several credit and - 25 - agricultural development projects. Medium-term credit was not, however, restricted to supporting infrastructure investments made by PIDER. Under PIDER III, medium-term credit requirements would be planned and authorized as an integral part of the technical feasibility study (expediente tecnico) for each directly productive sub-project: a restriction would thus be introduced that medium-term credit financed under the PIDER III loan would be provided to beneficiaries of PIDER-financed directly productive projects. Other requests for medium-term credit from farmers in the project area would be channeled to the appropriate bank and financed from normal Government sources or from the Bank's sixth or seventh agricultural credit loan, as appropriate. Assurances were obtained at negotiations that this restriction would be applied for PIDER III. 4.49 Under PIDER III, farm loans would be made by commercial banks and the public National Rural Credit Bank (BANRURAL). The majority of BANRURAL's clients are low-income small farmers and ejidatarios. The Government would finance this farm lending through two trust funds. One is FIRA, which would rediscount eligible commercial bank loans. The other is a trust fund under BANRURAL. Its loans would be rediscounted through FICAR (Trust Fund for Credit to Irrigated Areas). Medium-term credit reimbursable from the proposed Bank loan would be used for breeding stock; farm machinery and equipment for irrigation and land preparation; pasture establishment and orchard maintenance during the initial pre-productive years; and rural industries. During nego- tiations, it was agreed that agreement between the Government and the Bank regarding interest rate structures would be a condition of disbursement for the credit component. 4.50 No short-term credit for farm production inputs would be financed under the PIDER III loan. Short-term credit would be provided by BANRURAL to PIDER beneficiaries, using BANRURAL's standard criteria and procedures, for provison of short-term credit, which are the same as those applied under the Bank-assisted Rainfed Agricultural Development Project (PLANAT). B.2 Productive Support Investment (26%) Extension and Applied Research (8%) 4.51 SARH, through the Rainfed Districts Program, would be responsible for all extension programs in the project areas with the assistance of CONAFRUT, INMECAFE, and IGC, in fruit-, coffee-, and coconut-producing areas respectively. Activities would include: (a) promotion of technical packages composed of improved cultivation practices, modern inputs, and more efficient animal husbandry techniques; (b) linking of cooperating farmers with the applied research program; (c) supervision of on-farm trials and demonstration; (d) encouragement of farm families to utilize Government services and to take an active role in development activities; (e) assistance for the organization of farmers for credit and input provision; and (f) promotion of nutrition education, household gardens, raising of small animals, and sanitation and housing improvements through a small group of extensionists from SARH's Home Education program. The PIDER III project would finance: (a) the incremental cost of agricultural extension agents, livestock extension agents and home economist agents; (b) training (by SARH) of extension staff in technology and extension methodology; and (c) vehicles, field equipment, and materials. 4.52 In order to ensure that PIDER objectives would be actively pursued by SARH, a formal agreement has been signed by SPP and SARH Rainfed District - 26 - program specifying the exact responsibilities of each agency and the terms of coordination between them, as well as the coordination mechanisms within SARH among the Rainfed District Program and the other programs (Department of Livestock, Soil and Water Conservation, Irrigation). The agreement specifies, inter alia, that: (a) SPP would allocate PIDER funds for agricultural and livestock investments for the micro-regions through the Rainfed District system. (b) All agricultural and livestock-related investments would be approved by the Rainfed Districts Technical Committee and that District Chiefs would have responsibility for PIDER-funded extension staff. (c) The SPP micro-regional coordinator would actively participate on Rainfed District Exequtive and Technical Committees and that the Rainfed District Chief would participate in the Regional Rural Development Sub- committee. 4.53 Adaptive research would be carried out by interdisciplinary production-systems research teams from the National Institute for Agricultural Research (INIA) and the National Institute for Livestock Research (INIP). These teams would work in farmers' fields, following the model pioneered by the Puebla Project and subsequently refined through Plan Mexico, Plan Tlaxcala, PRONDAAT, and the PRODERITH programs. This system requires three basic components. First, existing production activities must be studied to determine input-output relationships, and to identify the farmers' limitations in terms of available resources. Then, the new technologies from the research centers must be field-tested in order to assure that their requirements fall within the farmer's set of limitations. If requirements are too great or if the packages are not financially attractive to farmers (taking risk into consider- ation), then further modifications must be made. 4.54 The emphasis of applied research would be linked to identification of farming systems applicable to specific localities and environmental circumstances; within this frame INIA would initially focus on varietal selection, disease and insect control, crop response to fertilizer, effects of soil and water management, pasture improvement, and fodder production. In assembling packages of recommendations, attention would be given to both production and consumption considerations: labor, capital, and risk constraints within the small-scale mixed production system would be taken into account, as would alternatives for achieving family nutrition adequacy from consumption of home production and from cash proceeds of crop sales. INIP would direct its attention toward improved pastures and ruminant nutrition, breed improvement, reproductive efficiency, and disease control. 4.55 Marketing (1%). This component would improve marketing of farm surplus through the Rural Warehouse System (BORUCONSA), a marketing subsidiary of the National Popular Subsistence Company (CONASUPO). BORUCONSA compensates the ejidatarios for transportation and shelling services and also lends them bags. The cost of these services amounts to about US$2.50/ton. BORUCONSA has beguun tr- integrate its operrtions with those of other agencies at the state - 27 - and local levels by signing agreements and developing coordinated work plans with SARH and BANRURAL. Under the project, support would be provided for the construction of grain storage warehouses with a total capacity of about 26,000 tons and about 50 small rural stores. 4.56 Beneficiary Organization (3%). Farmer organization and agrarian reform activities were financed under PIDER I and II primarily through the Secretariat of Agrarian Reform (SRA). In most micro-regions, however, the more politically urgent land tenure issues often took precedence over the organizational activities. With the recent creation of the Directorate of Rural Community Promotion in SPP, more emphasis will be given to the organization of beneficiaries for all phases of the PIDER program. 4.57 Under PIDER III, SPP would establish in each micro-region promotion teams, which would cooperate with SARH teams and other line agencies to: (a) increase communities' awareness of development opportunities and of government services; (b) promote beneficiary parteicipation in all phases of the PIDER program; and (c) act as liaison between beneficiaries and implementing agencies regarding community reaction to project actions. SRA would be responsible for the resolution of land tenure and land titling issues. The clarification of such issues would facilitate the organizational dimensions of the project and make possible the provision of credit for productive activities. A training program would be developed for SPP's diffusion/promotion teams, SARH, and SRA teams. The training program would be discussed with the Bank prior to its implementation. 4.58 The project would provide SPP, SARH, and SRA with financing for: (a) incremental technical personnel; (b) support equipment (vehicles, furniture, and field equipment); and (c) training for both field staff and supervisors. An agreement, satisfactory to the Bank, has been reached by SPP and SARH outlining the specific implementation responsibilities and the condition under which the PIDER program would finance farmers' organization activities. Legal aspects relating to land titling and land use would be carried out by SRA. 4.59 Rural Roads (5%). During the period of 1973-1980 the PIDER program allocated 16.2% of its total investment in the rural roads program. Construction was mainly devoted to three types of roads: secondary roads, feeder roads, and roads to production units. All three forms employed local labor. Heavy machinery was also utilized. Under PIDER III, particular attention would be given to: establishing work schedules and appropriately timed budget authorizations to avoid conflict with seasonal agricultural labor requirements; increasing the effectiveness of the community construction and maintenance committees; and improving inter-agency coordination. 4.60 Activities financed by the PIDER III project would include: (a) construction or rehabilitation of 1,030 km of roads (all-weather standard), benefiting about 240 communities and 120,000 inhabitants; (b) generation of paid temporary labor through implementation of (a); and (c) promotion and support for village-based committees for road construction and maintenance. The rural roads component would support PIDER's development objectives by facilitating delivery of agricultural inputs and transport to marketing centers of food or cash crops, by improving beneficiaries' access to food stores, education, and basic health services, and by providing employment for local inhabitants. The Secretariat of Human Settlements and Public Works (SAHOP) - 28 - would be responsible for the preparation of the Dreliminary pkan based on rural communities petitions, proposals submitted by local officials, and SAHOP's overall program. The proposals would be screened through technical and socio-economic studies./l Final selection of plans would be based on: community commitment and avallability of local labor; concentration of productive investments in area; potential for incremental production; and cost per kilometer and per beneficiary. The preparation of the final road program for the PIDER micro-regions is a shared endeavor between state-level SPP and SAHOP staff, and submitted to the Sub-committee for Rural Development and the Committee for the Promotion of Socio-eccnomic Development of the States (COPRODES) for state approval. The plan is forwarded to SPP headquarters for final approval and budgetary authorization. 4.61 SAHOP would be responsible for the implementation of the rural road component, following its normal operation procedures, which are acceptable to the Bank. In executing the program, SAHOP would utilize labor-intensive methods wherever technically and economically feasible./2 The major constraint to achieving this last objective is that the PIDER program is penetrating increasingly difficult terrain. SAHOP would use its own equipment or hire local contractors- services when necessary. Construction and maintenance would be supervised by SAHOP's Zonal Office. Assisted by SPP promotion teams, SAHOP would set up and supervise local committees, which would play a major role in both construction and maintenance activities by recruiting local labor and supervisory assistance. Road maintenance cost would be covered wherever possible by the local committees, and where this is not feasible, SAHOP would be responsible for maintenance. 4.62 During negotiations, it was agreed that SPP and SAHOP would monitor the rural roads construction and maintenance program with the methodological support of the SPP state evaluation and monitoring unit. Both SPP and SAHOP, assisted by CIDER, would develop effective analytical tools to evaluate the longer-run effects of the labor-intensive road program developed under PIDER II and III, and its specific impact on the quality of life in rural Mexico. It was further agreed that SPP's impact analysis of the PIDER program would give specific attention to the long run impact of the labor-intensive road construction program. /1 The socio-economic surveys focus on community characteristics (number of households, etc.), economic activity in the community and surrounding areas, infrastructure endowment, availability of Government services, and quality of life in the community. The technical investigation examines the road alignment, terrain conditions, construction requirements, local availability of construction materials, and related factors. /2 Labor-intensive construction methods are generally used when the earth- works are less than 5,000 m3/km. A mix of labor and equipment is used when the volume of earthworks, especially of difficult materials, is in the range of 5,000-8,000 m3/km. Equipment-intensive techniques are justified when the volume of earthworks is substantially higher, when labor availability is low, and/or when the soil is mostly rocky - 29 - 4.63 Rural Electrification (5%). The project would supply electricity to some 86,000 inhabitants living in some 280 rural communities at an average cost of US$175 per beneficiary. The total to be invested is the equivalent of US$15 million, of which 10% will be for the electrification of directly productive investment and the rest for servicing the population. The Federal Electricity Commission (CFE) would be responsible for planning, building, operating, and maintaining electricity-generating and distributing facilities. PIDER finances only connections to main cables and lines to schools, other public facilities, and enterprises; major additions to the national grids are not to be made under PIDER auspices./l Where such large investments are needed to implement the PIDER electrification projects, the outlays are made through CFE-s regular budget. 4.64 Rural electrification plans of micro-regions are prepared jointly by state CFE and SPP staff. Final selection of plans is based on a number of socio-economic factors. First, eligible villages should have a population of at least 500 inhabitants and an access road. Villages with less.than 500 inhabitants would be eligible either if they are located near a main power line or if electricity is needed for directly productive investments. Second, beneficiaries must have sufficient resources to contribute to invest- ment costs in cash or labor, to bear the cost of internal household wiring and connection to the main line, and to pay user charges for operation and maintenance. These are the normal selection criteria used by CFE, and they are satisfactory to the Bank. Once selected, the final plans would be subject to approval by the Sub-committee for Rural Development and COPLADE. SPP would monitor and evaluate the implementation and impact of this component. 4.65 Productive Projects for Women (1%). Of the 2,600,000 Mexican women employed in 1975 (27% of the total labor force), 55% worked in the industrial and commercial sectors, 35% in the service sector, and 10% in the agricultural sector. The small number of women working for wages in agriculture reflects the fact that it is precisely in rural areas, where the majority of Mexico's poor live, that the greatest demand and least supply of remunerative employment opportunities exist, particularly for women. Although various Government agencies carry out programs for peasant women, very few focus on technical training or employment opportunities. 4.66 The Mexican Government proposes to include in PIDER III a productive activities component for rural women. PIDER funds would be used for: (a) Studies to identify: (i) the types of productive projects currently operating in Mexico that have proven most successful in providing earning opportunities for women; (ii) types of local resources (human, financial, and physical), existing in the micro-regions, that would provide potential for such projects. /1 The ceiling for single project investment under PIDER is about US$.5 million. - 30 - (b) Training for women, communities, and staff of Government agencies to promote acceptance of a greater number of women in productive sectors. (c) Training and technical assistance for specific productive projects financed under PIDER III. This would include assistance in setting up effective cooperatives and marketing organizations as well as training in technical skills. 4.67 SPP, assisted by selected agencies, would be responsible for the design, implementation, monitoring, and evaluation of the component. Feasibility and Socio-Economic Studies (3%) 4.68 SPP has recognized the need to improve ttie quality of feasibility studies for investments in such areas as irrigation, soil and water conservation, livestock, small-scale industries, marketing, and rural roads, and to emphasize more careful analysis of the studies before construction begins. After a thorough review of the feasibility studies prepared by its Project Preparation Teams for investments now being implemented, SPP is in the process of establishing more stringent standards and procedures. Its plan is to have the feasibility studies themselves carried out by the relevant Government agencies or by consultants, and to devote resources to recruiting more experienced staff to analyze and evaluate the results and reliability of the studies. 4.69 PIDER III would also include a component to support socio- economic studies at the community level. The purpose of these studies would be to: (a) assess the development potential and socio-economic structure of communities within the micro-regions; (b) assist in the identification of productive sub-projects; (c) provide baseline data (including data on nutritional status) against which to measure the impact of PIDER-supported activities; (d) promote pilot testing of alternative sectoral strategies in such areas as livestock, water supply, and marketing; and (e) identify requirements for specialized technical assistance or training for new or existing sub-projects (particularly under the rural industries and livestock components). 4.70 Agreement was reached at negotiations that a proposal outlining a specific work program for socio-economic studies would be agreed upon by the Government and the Bank as a condition of disbursement for this component. - 31 - B.3 Social Infrastructure (10%) 4.71 Education Facilities (3%). The PIDER I and II effort to renovate, construct, and furnish primary-level classrooms would be continued under PIDER III. The Administrative Committee for the Federal School Construction Program (CAPFCE) has been the agency responsible for implementing this component and has demonstrated an impressive capability to construct well- designed, low-cost school buildings, often in isolated areas. The project would improve or construct some 2,200 primary-level classrooms accommodating some 14,500 students. New classrooms would cost about US$4,400 each, including furniture. CAPFCE would coordinate with the Ministry of Education in selecting classroom locations to ensure adequate provision of teaching materials and staff. In carrying out the program, CAPFCE would continue to require beneficiary ejidos and communities to provide a site, and would encourage local contribution of labor and building materials (normally equivalent to about 20 percent of the total costs) as well as lodging for the school teachers. 4.72 Health Facilities (2%). Under PIDER III funds for rural health facilities would be provided for construction or rehabilitation of about 140 rural health clinics or centers. These would provide services to about 225,000 people. This component would be implemented in the communities selected for implementation of the nutrition and/or water supply components. The Secretariat of Public Health and Assistance (SSA) would supervise construction and would either execute the work or hire contractors. The beneficiaries would be organized to monitor the efficiency of the health! nutrition and water-supply services. Staffing, training, and supervision for these clinics or centers would be the responsibility of SSA. 4.73 Nutrition Component (2%). Under PIDER III, the directly productive components would increase food production in the micro-regions (Chapter VII). In keeping with SAM policy, the nutrition component has been included in order to assure that this food surplus is directed to improving the nutritional intake of malnourished rural families. Under this component, funding would be provided for: (a) supplementary home food production--home gardens and small-animal raising; (b) installation of CONASUPO rural stores to increase access to food staples at reasonable prices; (c) promotion of education of beneficiaries to awareness of proper nutritional balance, and to possibilities for increased nutritional efficiency in purchase, preparation, and consumption of foods; (d) establishment of a nutritional surveillance system to: identify malnourished groups, to prevent serious malnutrition by early referral to the Health System of those clearly at risk; monitor seasonal fluctuations in food production in order to anticipate food shortages and identify areas where assistance will be required; - 32 - (e) evaluation of the impact of the PIDER program on the nutritional status of beneficiaries. The community organization efforts planned as an indispensable prerequisite for other PIDER III activities are also essential to achievement of nutrition component goals. Wherever beneficiary organization is undertaken under any PIDER III component, this same organization would be used for implementation of nutrition component activities. 4.74 Implementation of the component would utilize the capability and experience of institutions already active in the states and in the micro- regions (such as SARH, CONASUPO, and health agencies), but would require in some cases reorientation of their current activities. The nutrition component would first be implemented on a pilot basis in selected communities in the states of Zacatecas, Guerrero and Yucatan. A detailed plan of operations, including specific targets, has been prepared by SPP and executing agencies. 4.75 Water Supply (3%). Under PIDER III, about 150 water supply systems would be constructed, rehabilitated, or expanded, and would benefit some 62,000 persons. Selection of communities would be based on: (a) size of community, with priority given to those with more than 500 inhabitants; (b) location of complementary project investments; (c) technical feasiblity of simple, low-cost systems with minimum maintenance problems; and (d) community willingness to contribute a portion of the labor costs and to establish village construction and maintenance committees. Three different types of systems would be utilized: gravity systems, pump systems, and hand-dug wells with handpumps. These systems would include collective hydrants or household connections, depending on topographical factors and population dispersion. Household connections would only be installed on a cost-recovery basis, but the design of some of the systems would allow beneficiaries to install household connections at a future date. Each community would be responsible for the operation and maintenance of its system. 4.76 Implementation of the component would be the responsibilty of: (a) SAHOP (design and construction); and (b) the State Potable Water Board (JEAP) (operation and maintenance). The state and regional offices of SAHOP would supervise all construction and would either directly execute the works or hire the necessary contractors. JEAP, through its regional units, wouid organize the village construction and maintenance committees and provide all necessary technical and administrative assistance to them. These committees would be responsible for a broad range of operation and maintenance activities, including the monitoring of water use and the establishment and collection of user charges for operational and repair expenses. - 33 - 4.77 Self-help/l. The project would provide support for self-help construction activities at ejido and village level. Material costing a maximum equivalent of US$65 per capita (1980 price) would be made available to beneficiaries, who would develop projects mainly on a group basis. All labor would be provided by beneficiaries. Self-help sub-projects would include a variety of activities such as workshops, vegetable gardens, fencing for children's playgrounds and community centers. V. ORGANIZATION AND MANAGEMENT 5.01 Chapter II.B outlines recent institutional changes which will affect the implementation of PIDER III. As in PIDER I and II, project actions would be implemented by existing agencies, under the national coordination of the Secretariat of Programming and Budgeting. According to the recent changes, responsibility and authority for program implementation would be assigned at the federal, state, micro-regional, and beneficiary level as outlined below. Organizational Structure 5.02 Federal Level. General PIDER programming policy is developed by the Directorate of Regional Programming of SPP within the Subsecretariat of Programming (Chart 1, page 38). Supervision and control of PIDER invest- ments are the responsibility of the General Directorate of Integrated Rural Development Programs (DGDRI) (within the Subsecretariat of General Coordina- tion of State Delegations), which has the following functions: (a) to esta- blish policies, provide guidelines and support for the preparation, implemen- tation, and monitoring and evaluation of integrated rural development programs; (b) to promote coordination among the various line agencies participating in the PIDER program; (c) to establish budgetary procedures, allocate funds, and authorize expenditures; and (d) to review the micro-regional investment programs. The DGDRI is supported by two directorates: (a) Directorate of PIDER Operations, which supports the states' efforts for micro-regional medium-term and annual programming and budgeting, reviews the plans, and monitors their implementation; and (b) Directorate of PIDER Promotion and Support for Rural Communities, which is responsible for assisting the state-level SPP staff in the identification and promotion of productive projects, socio-economic studies, beneficiaries training, technical assistance to productive projects, and promotion of farmers' and beneficiaries' organization. 5.03 State Level. It is at the state level that the most significant change in the concept of PIDER will be manifested. The state government's participation in the program has been considerably enhanced by PIDER's incorporation into the CUC scheme. Coordination of sectorial development programs at the state level is handled by a State Economic Development Planning Committee (COPLADE). The COPLADE includes the heads of all federal and state agencies operating at the state level, under the chairmanship of the Governor /1 Cost of this component is estimated at US$1 million, less than 1% of base cost. - 34 - (Chart 2, page 39). The Committee normally meets every other month, but it can meet more frequently if necessary. COPLADE's functions are to: (a) establish guidelines for investments in the state, determine strategies, and define priorities; (b) coordinate all agencies involved in all development programs in the state and resolve conflicts or overlap of authority among agencies; and (c) approve project plans, annual budget proposals and progress reports. The SPP delegate is the Technical Secretary of COPLADE. 5.04 Within each COPLADE a Rural Development Subcommittee is being formed. These committees will be concerned not only with PIDER but with all other programs channeling funds to rural areas, and will have the authority to formulate policies and strategies of integrated rural develop- ment for the state. They will be chaired by the Governor or his representative, with the SPP state delegate acting as Technical Secretary. Representatives of the federal and state agencies directly involved in rural development programs will sit on these subcommittees. The primary functions of the subcommittees are to: (a) coordinate the work of participating agencies and provide linkages among rural programs; (b) provide the linkage between annual operating plans and medium-term strategies; and (c) monitor the programs, including physical and financial progress, and evaluate their impacts. 5.05 The SPP state delegation is divided into five units: (a) programming; (b) budgeting; (c) monitoring and evaluation; (d) national information system; and (e) administrative support. The shift of responsibility from SPP to the COPLADE will be most apparent in the coordination of agency activities and in supervision and control. Since the COPLADE is under the Governor's chairmanship, it is perceived as the more appropriate body to exercise authority over state agencies. SPP will retain the responsibility for monitoring and evaluation, and in carrying out this function, will coordinate with the supervision and control unit of the State Government. The national information system, which is in the process of being computerized, will be used by SPP to help identify and allow follow-up on problems in implementation. 5.06 Micro-regional Level. A Development Subcommittee will be formed in each PIDER micro-region prior to project implementation and will be chaired by a representative of the state government. The SPP micro-regional representative will be the Technical Secretary. The group will include mayors (presidentes municipales), representatives of the rural communities selected by the beneficiaries, and technicians of the state and federal implementing agencies working at the local level. Functions of the Subcommittee will include: (a) short- and medium-term programming for the micro-region; (b) facilitating coordination and execution of the PIDER micro-regional program components; and (c) monitoring of program performance and supervision of program operation, with special emphasis on beneficiary participation. - 35 - 5.07 In each micro-region, SPP would establish a Micro-regional Rural Development Office (MRDO) as an innovative element in the PIDER structure. The office would be mainly responsible for: (a) assisting in the coordination of PIDER actions among the participating agencies in the project area; (b) provision of elements of strategy for the annual and multi-year plans; (c) promotion of local participation in the establishment of development priorities; (d) execution of community socio-economic studies; and (e) monitoring of project progress. Typically, the MRDO would include five members, two from the SPP promotion team, two in charge of community socio-economic studies, and one in charge of the monitoring of project progress. The MRDO would work under the supervision of the SPP micro-regional representative. The representative should be a professional with previous field work and administrative experience, and would be responsible for programming, implementing, executing, and monitoring the PIDER program in the micro-region. In addition, he would assist the state government in the organization of the Micro-regional Rural Development Subcommittee and would be the Technical Secretary of this committee. He would also be a member of the Technical and Executive Committees of the Rainfed District Program. 5.08 As under PIDER I and II, execution of the various components of PIDER III will be the responsibility of the appropriate line agencies (paras 4.20 to 4.80). Coordination of planning and implementation of project activities in the agricultural sector would be the responsibility of the Rainfed District Chiefs. Hence, the role of the representative in this sector would be limited to that of: (a) providing a liaison with the chief of the Rainfed District and its units; (b) ensuring consistency between the programs proposed in this sector and those of other agencies such as SAHOP and CFE; and (c) assisting the Rainfed District Program in its relationships with local communities (especially in the establish- ment of the communities' development priorities). Administratively, the MRDO would be part of the SPP state delegation and the representative would answer directly to the state SPP representative. He would establish close links with and receive support from the programming, supervision and control units. The micro-regional representative would not have financial responsibility for the project; this responsibility belongs to the Governor's office. Because of the key role of the MRDO at the local level, the full staffing of the MRDO in the eight micro-regions already appraised would be a condition for loan effectiveness. 5.09 Participation of Beneficiaries. A methodology for the promotion of community participation in the planning phase of the PIDER program has been recently established by SPP and the Research Center for Rural Development, CIDER. This methodology has been applied in the programming of the micro-regional plans. A series of meetings held in the communities allowed a dialogue between groups of beneficiaries and technicians to take place. Through this process, beneficiaries were able to indicate their priorities - 36 - for types of projects to be implemented in their area. The SPP diffusion/ promotion teams located within the MRDO would be responsible for the continued promotion of beneficiary participation in the planning, execution, and evaluation stages of PIDER III (para 4.57). 5.10 Staff Development and Technical Assistance. Under PIDER III emphasis would be placed on training of staff directly involved in rural development programs (principally SPP and SARH staff). SPP proposes that the following types of training program be financed under the project: (a) Seminars for SPP's state and federal staff and line agencies' staff, aiming at: (i) discussions of the revised PIDER programming methodology; and (ii) sharpening of staff awareness of the role of PIDER in the perspective of an overall rural develop- ment effort. The seminars would combine the discussion of normative conceptual elements (e.g. theoretical foundation of the programming methodology) with the analysis or evaluation of micro-regional cases based on staff's experience with the PIDER program. (b) Training Courses (two weeks to three months), for personnel at the federal and state levels directly involved in the designation of rural development policies; project preparation and evaluation; analysis of micro-regional investment plans; preparation or analysis of productive projects, or feasibility and communities' socio-economic studies; and community and farmers' organization. The General Directorate of Rural Development would be responsible for the preparation of these training programs, which would be carried out by specialized institutions such as SPP's Training Center (Centro de Capacitacion para el Desarrollo, CECADE), CIDER and others. The presen- tation to the Bank of a plan for the training program would be a condition of disbursement for this component. In addition, the project would provide funds for twelve man-months of local or expatriate consultants who would assist SPP in the development of the PIDER program. The consultant's terms of reference would be presented to the Bank prior to the signing of his contract with SPP. The estimated average cost per man-month of consulting services would be approximately US$8500 for fees plus US$1200 for travel and subsistence. Project Implementation 5.11 Execution of the various project components would be the responsibility of existing line agencies rather than a special project authority (see Annex 3 for list of agencies and their functions). An integrated approach, stressing inter-agency cooperation, particularly in the planning and execution phases of project implementation, would be utilized. A detailed description of how each component would be implemented is included in the description of the components (Chapter IV.B). - 37 - Monitoring and Evaluation 5.12 Monitoring of project effort and evaluation of project impact would be the responsibility of SPP at the micro-region, state, and federal level. In collaboration with the participating agencies and assisted by CIDER and/or consultants, SPP would establish an information system for: (a) reporting physical progress of project activities; (b) evaluating the impact of these activities on an ongoing basis; and (c) identifying short- comings in performance in a timely manner. 5.13 At the micro-regional level, the monitoring of agricultural activities would be carried out by Rainfed District staff, using the methodology and system assigned for the Rainfed District program. This information would then be transferred to the SPP Micro-regional Rural Development Office. At the state level the SPP Monitoring and Evaluation Unit would analyze the information collected at the micro-regional level and carry out impact evaluation of those PIDER activities which would help to readjust the sub-projects or find alternative strategies or programs for the micro-regions. 5.14 At the national level, the SPP Directorate of Operations would execute comparative analysis of PIDER's micro-regional evaluations, and provide technical support to the state and micro-regional units in such fields as sample design, survey format, statistical analysis, data processing and software, and analytical methods. It would also identify studies designed to investigate and suggest alternative solutions to specific project-related problems or issues arising during project execution. When necessary, SPP would contract specialized services. 5.15 To implement the monitoring and evaluation system, the project would support the incremental cost of staff salaries, material, equipment for decentralized data procesing, and technical assistance. 5.16 At negotiations agreement was obtained that as a condition for loan effectiveness, SPP would prepare a detailed proposal for the monitoring and evaluation system for the project, including terms of reference, staff requirements, staff requirements, methodology, indicators for evaluation, and procedures for adjusting project strategy to monitoring results, and that this proposal would be mutually agreed upon by SPP and the Bank. Assurances were obtained that SPP would maintain an adequately staffed organizational unit to carry out the monitoring and evaluation of the project. In addition, assurances were obtained that SPP would: (a) furnish to the Bank semi-annual reports, of scope and format to be mutually agreed upon, on project physical and financial progress, including the findings of the monitoring and evaluation units; and (b) prepare within one year after project closing date a project completion report, which would include, in addition to physical achievements, an evaluation of project impact, in a format and scope mutually agreed by the Government and the Bank. Chart 1 MEXICO INTEGRATED RURAL DEVELOPMENT PROJECT - PIDER IlI Organization at Federal Level Secretariat of Programming and Budgeting Secretary Internal Administration Programming Under-Secretariat Under-Secretariat Under-Secretariat Under-Secretariat eneral Coordination General Coordination General Coordination of of of of Procurement of National Statistics, of State of Control Programming Budget l Evaluation and Auditing . Geographic and In Delegations and Management Programming Budget Evaluation and Auditing ~~~~~~~formation Services Directorate General |I Development l Directorate ll| Directorate of l of PIDER Promotion PIDER of Community operations Programs for the for the for the In the Rural of Productive North Zone Central Zone South Zone n Communities Projects SPP State |Representative| World Bank -22398 - 39 - Chart 2 MEXICO INTEGRATED RURAL DEVELOPMENT PROJECT - PIDER III Project Organization F E Secretariat of Programming and Budgeting R (SPP) A ~~~~~~~~~~~~~~~~SecretarY L L SPP E ~~~~~~~~~~~~~~~~~~~~~~~~General Coordination E L State Delegations State Governor S IlllI T A T SPP E . DelSet9aatteOn _ _ __ __ _ _ __ __ __ _ __ COPLADE l E V L l I I l l l Monitoring l l l l J Rurya Development Programming Budgeting Administration and Information State Sub-committee Micro-regional Rural Development Rural Development Regional p Office Sub-committee R 0 B C T Studies and Support for Monitoring and Proiect Promotion of Evaluation of l A Identification Rural Communibes PIDER Program A | Rural Communities C COPLADE Chairman State Governor Technical Secretary: SPP State Representative Members: Representatives of federal and state agencies; social and private institutions Rural Development State Sub-committee: Coordinator Representative of State Government Technical Secretary SPP Representative Members. Federal and state agencies; social and private sector, municipal authorities directly involved in the development of PIDER Program. PIDER - Micro-regional Sub-committee Coordinator. Representative of State Government Technical Secretary SPP Micro-regional Representative Members Technicians of federal and state agencies; social and private sector; municipal authorities directly involved in development of PIDER Program in rural areas; and representatives of rural communities. World Bank- 22399 - 40 - VI. COST AND FINANCING 6.01 The total project cost over the three-year project period is estimated at US$506.0 million, of which US$96.0 million, or 19 percent represents the foreign exchange cost. The baseline costs, estimated at US$325.0 million, are based on detailed plans of eight micro-regions and extrapolated for the remaining nine micro-regions. Baseline estimates are based on June 1980 prices. 6.02 Physical contingencies have been estimated at US$22.8 million, or 10 percent of baseline costs for construction, civil works, machinery, and equipment. Price contingencies have been estimated at US$158.2 million based on the Bank's revised estimates (as of October 1980) of domestic inflation (28% for 1980, 20% for 1981, 18% for 1982, and 18% for 1983) and international inflation (9% for 1980, 8.5% for 1981, 8% for 1982, and 7.5% for 1983). Import duties, taxes, and other levies are not included in project costs. Project costs are summarized on page 41. Financing 6.03 The proposed Bank loan of US$175.0 million equivalent, amounting to 35 percent of project cost, would cover foreign exchange cost of US$96.0 million plus US$79.0 million of local currency cost. Of the remaining cost the Government would finance US$268.0 million or 53 percent of the total, through regular budget appropriations. Beneficiaries would contribute about US$63.0 million (including contingencies) or 12 percent of total project costs in cash or in kind (labor and materials) to the cost of electrification, perennial crop development, rural industries and livestock infrastructure, soil and water conservation, and land improvement. Of the cost financed by Government and the Bank, US$36.1 million, or 11 percent of total cost would be development credit to be repaid by beneficiaries. Incremental production credit required for the project would be financed by the Government, and would be transferred principally through the BANRURAL credit network using BANRURAL's standard procedures and norms, which are the same as those applied in the Rainfed Agricultural Development Project. 6.04 The loan would be made to the Nacional Financiera S.A. (NAFINSA), a Government agency designated as official borrower from the Bank, and would be for fifteen years, including a three-year grace period. Budget Authorizations 6.05 In 1978, new budget authorization procedures for PIDER were issued in order to resolve past problems in budget authorizations and funds release. These problems include: (a) delays in proposal presentation by the agencies, and in the consolidation work by the state SPP staff; (b) delays in authorizations from the federal level SPP; (c) delays in submission of vouchers to the SPP state delegates; and (d) insufficient or delayed funds in the state SPP bank account. As a result, the commencement of new construction and other activities for each fiscal year has usually been delayed until the cropping season, when labor is scarce, resulting in the use of capital- intensive techniques and a reduction in local employment benefits. - 41 - MEXICO INTEGRATED RURAL DEVELOPMENT PROJECT - PIDER III PROJECT COST SUMMARY % of Local Foreign Total Local Foreign Total % Total Foreign Baseline ------ Mex$ Millions ------ ------ US$ Millions ------- Exchange Costs Productive Agricultural Development Irrigation 623.3 207.0 830.3 27.1 9.0 36.1 25 11 Soil and Water Conservation 158.7 25.3 184.0 6.9 1.1 8.0 14 3 Land Improvement 167.9 18.7 186.3 7.3 0.8 8.1 10 3 Fruit Crop Development 285.2 32.2 317.4 12.4 1.4 13.8 10 4 Coffee Development 190.9 50.6 241.5 8.3 2.2 10.5 21 3 Coconut Development 41.4 11.5 52.9 1.8 0.5 2.3 21 1 Sub-Total Agricultural Development/a 1,467.4 345.0 1,812.4 63.8 15.0 78.8 19 24 Livestock Development Beef and Dairy 715.3 239.2 954.5 31.1 10.4 41.5 13 Pasture Improvement 128.8 43.7 172.5 5.6 1.9 7.5 2 Small-stock 225.4 75.9 301.3 9.8 3.3 13.1 4 Sub-total Livestock Development/- 1,069.5 358.8 1,428.3 46.5 15.6 62.1 25 19 Fisheries 186.3 20.7 207.0 8.1 0.9 9.0 10 3 Forestry Development 48.3 4.6 52.9 2.1 0.2 2.3 10 1 Rural Industries 142.6 75.9 218.5 6.2 3.3 9.5 35 3 Development Credit 664.7 165.6 830.3 28.9 7.2 36.1 20 11 Sub-Total Productive - 3,578.8 970.6 4,549.4 155.6 42.2 197.8 21 61 Support Extension -b 492.2 121.9 614.1 21.4 5.3 26.7 20 8 Rural Roads 259.9 87.4 347.3 11.3 3.8 15.1 25 5 Rural Electrification 259.9 87.4 347.3 11.3 3.8 15.1 25 5 ,ural Marketing 98.0 0 98.9 4.3 0 4.3 0 1 Earmer Organization and Training 184.0 9.2 193.2 8.0 0.4 8.4 5 3 Feasibility Studies 115.0 11.5 126.5 5.0 0.5 5.5 10 2 Faseline Studies 87.4 9.2 96.6 3.8 0.4 4.2 1n I Productive Programs for Women 57.5 0 57.5 2.5 0 2.5 0 1 Sub-Total Support/a 1,554.8 326.6 1,881.4 67.6 14.2 81.8 17 25 Social Infrastructure Education 193.2 32.2 225.4 8.4 1.4 9.8 15 3 Rural Water Supply 170.2 41.4 211.6 7.4 1.8 9.2 20 3 Health Centers 147.2 16.1 163.3 6.4 0.7 7.1 10 2 Nutrition 103.5 11.5 115.0 4.5 0.5 5.0 10 2 Self-help Materials 20.7 2.3 23.0 0.9 0.1 1.0 5 0 Sub-total Infrastructure a 634.8 103.5 738.3 27.6 4.5 32.1 14 10 Project Management Monitoring and Evaluation 29.9 20.7 50.6 1.3 0.9 2.2 40 1 Organization and Management 142.6 34.5 177.1 6.2 1.5 7.7 20 2 Training and Technical Assistance 57.5 13.8 71.3 2.5 0.6 3.1 20 1 Sub-total Project Management - 230.0 69.0 299.0 10.0 3.0 13.0 23 4 Base Cost - 5,998.4 1,469.7 7,468.1 260.8 63.9 324.7 20 100 Contingencies Physical/- 425.5 98.9 524.4 18.5 4.3 22.8 Price 2,946.3 692.3 3,638.6 128.1 30.1 158.2 Total Cost -/ 9,370.2 2,260.9 11,831.1 407.4 98.3 5D5.7 /a Sums may not add due to rounding. /b Extension includes technical assistance and applied research. /c Physical contingency (10%) calculated for construction and civil works only. 04.01.81 - 42 - 6.06 Under the new procedures, the annual budgetary process begins in July when the SPP state delegation consolidates the preliminary proposals prepared by the executing agencies. The proposals are then sent to SPP in Mexico City for general approval. In September, the state receives notification of the global amount tentatively approved. The executing agencies then finalize a detailed proposal, based on feasibility studies (expedientes tecnicos), for each work. The proposals are then approved by the SPP state delegate, and a summary sent to SPP at the federal level, which authorizes the first tranche of funds (corresponding to about 30% of the total annual budget approved), normally by the end of December. Another 50% is usually authorized about one month later, and the remaining 20% is authorized after final adjustments. To reinforce this procedure and guarantee that construction and other ongoing activities continue without interruption during the dry season, a presidential agreement (Acuerdo de Secas) was issued in October 1977. According to the outlined procedures, funds for the first three months of the year are authorized by November 15, and actual transfer of funds takes place before January 15. All transfers of funds are then made from Mexico City via Banco de Mexico (the official PIDER financial agent) through a system of monthly advance deposits to a local commercial bank which acts as the PIDER banking agent. Actual payments to the various executing agencies are made upon signature of a voucher by: (a) the individual responsible for the work; (b) the state head of the executing agency; and (c) the SPP state delegate, upon confirmation from his supervisory staff that the work has been done. The voucher is then sent to the banking agent for disbursement. The effect of this new procedure has been to speed up the process considerably, reducing delays in PIDER-financed work: in many instances, the lag between the SPP delegate's signing of the voucher and disbursement by the banking agent has been less than two weeks. 6.07 The authorization process would be carefully monitored during the project by the state SPP delegation and the executing agencies. In addition, the present system of monthly advance deposits would be maintained during the project. Accounts and Auditing 6.08 In addition to the regular annual budgetary allocation (Normal Program) the state-level office of each agency participating in the PIDER program receives a separate annual allocation to carry out its approved PIDER-financed sub-projects in the state's micro-regions. Separate accounts for all components of PIDER III except credit would be kept by SPP at the state and federal level. Separate accounts for the credit components of PIDER III would be kept by FIRA and FICART. Accounts kept by SPP are subject to internal audits; SPP auditors are authorized and responsible to carry out audits within other secretariats and agencies as well, when necessary. FIRA and FICART are audited by external auditors appointed by the Ministry of Finance (SHCP). In addition, the audit department of SHCP, Fondos y Valores, has authority to audit any Government secretariat or parastatal with the aim of ensuring correct use of Government funds and carries out such audits occasionally. 6.09 At negotiations assurances were obtained that SPP would maintain separate accounts for PIDER III and prepare annual financial statements adequate to reflect the resources and expenditures of the agencies responsible for --ving out any part of the project. These accounts and annual financial - 43 - statements would be audited annually by the internal auditor of SPP in accordance with normal procedures. Copies of the annual financial statements with the certificate and report of the internal auditor of SPP would be furnished to the Bank within six months of the end of each fiscal year. SPP would also furnish to the Bank such other pertinent information concerning such accounts, financial statements and audit as the Bank shall reasonably request from time to time. Procurement 6.10 The project would include a diversity of many relatively small projects involving Government agencies dispersed throughout the areas. Due to the small size of sub-projects and therefore of goods contracts, contracts are not expected to be of interest to foreign bidders, and little international competitive bidding is expected. A combination of local competitive bidding, negotiated contracts and force accounts would be utilized in accordance with Government's regular procedures. 6.11 Goods, including operation and maintenance equipment; office information and documentation equipment; and vehicles would be purchased by several agencies in small quantities in accordance with implementation requirements, from local suppliers who offer a wide range of international brands, adequate service, and sufficient supplies of spare parts. Where feasible, contracts for the purchase of materials and equipment shall be grouped into packages of at least US$350,000 equivalent and procured through international competitive bidding. Smaller contracts could be procured through local competitive bidding or local shopping in accordance with the Government's ordinary procedures which are satisfactory to the Bank. Because of the competitiveness of local suppliers and the strong representation of international manufacturers through Mexican firms, it is expected that most contracts would be awarded to Mexican bidders. Bidding documents would be kept in the SPP office and made available for Bank review on request. 6.12 Civil works would be scattered over the project area, and individual contracts would not be large enough to attract foreign bidders. Mexico's construction industry is experienced and capable of executing works at costs competitive with international levels. Contracts for construction of civil works would be procured following local procedures satisfactory to the Bank. Due to the small size of individual PIDER works, the physical dispersion of works, and the large number of agencies responsible for executing works, grouping of works into packages for local competitive bidding would not be generally practicable. Under the new Ley de Obras Publicas (December 30, 1980), however, local competitive bidding is required for nearly all works, regardless of size. In addition, SPP will issue guidelines to field staff outlining when grouping would be appropriate. Force account would be used in some cases where the Govern- ment agencies have an established and demonstrated capability, particularly construction of feeder roads and drilling of wells. In cases where bidder interest is low because of the isolation and small size of project works, nego- tiated contracts would be allowed. Experience under previous projects has shown these practices to be reasonable and efficient. - 44 - Disbursement 6.13 The proposed loan would be disbursed against the categories presented below: Disbursement Categories Amount of the Loan Allocated % of Expen- (Expressed in diture to Category Dollar Equivalent) be Financed 1. Civil works for irrigation, 97,200,000 42 soil and water conservation,/_ fruit crop development, coffee development, livestock develop- ment, and roads. 2. Medium-term development 22,500,000 42 credit. 3. Vehicles, equipment, materials, 27,200,000 42 incremental salaries, and per diem for: extension and applied research, farmers' organization and training, productive projects for women, and nutrition. 4. Vehicles,equipment, materials, incre- 14,200,000 42 mental salaries, and per diem for: project organization and management, monitoring and evaluation, staff development, feasibility studies, and socio-economic studies. 5. Unallocated 13,900,000 175,000,000 6.14 Disbursement would be made against statements of expenditures prepared and certified by SPP in the case of expenditures by secretariats. In the case of FIRA and FICART, the statements of expenditures would be prepared and certified by these agencies themselves. All such statements would be transmitted through NAFINSA. Supporting documentation would be retained by SPP and line agencies and made available for examination by the Bank during the course of Bank project supervision missions. A disbursement schedule, assuming a date of effectiveness of June 1981, is presented in Annex 5. /1 All soil and water conservation activities, excluding subsoiling . - 45 - 6.15 Since all eight micro-regions already appraised were PIDER I micro- regions, PIDER-financed development in those areas is ongoing. Disbursements for PIDER I were completed by late 1980. In order to avoid delay in implemen- tation of ongoing investments, and to take advantage of the dry season (Januaary - March), retroactive financing of up to US$5.0 million is proposed to cover eligible expenditures made after January 1, 1981, but before the Loan Agreement is signed. VII. ECONOMIC JUSTIFICATION A. Production 7.01 The production schedules developed by the micro-regional planning teams are based on land expansion, land rehabilitation, and new technology development and use. Each of these strategies generates incremental output. Projections of project benefits have been based on ejido models for livestock and per hectare models for crops. As land improvements are introduced, farmers shift crop mix from traditional, low-productivity, low-value, drought- resistant grain crops, to high-input higher-risk, cash crops. In the initial stages of the project, traditional yields would continue--around 700 kg/ha for maize and 400 kg/ha for beans, based on a ten-year average. This allows for a general probability of two low-rainfall years out of five. Because most of the micro-regions selected for PIDER III have drought problems, except for the coffee-production area in Guerrero, the most important feature of this project would be management and control of water resources. 7.02 When crop production must rely exclusively on rainfed moisture, the assurance of adequate precipitation in any given season is low. For this reason farmers are quite reluctant to make large annual cash outlays for crop inputs such as fertilizers and chemicals. Even with crop insurance to cover input losses, the uptake rate of new crop technology lags over the first few years. However, as more appropriate technologies are developed and introduced, and the complementary delivery system becomes more efficient, the level of technology adoption increases rapidly. The various interventions planned under the project would each result in an incremental benefit stream: (a) land clearing would result in additional cropped land; (b) irrigation on land previously barren or grazed would allow expansion of annual and perennial crop hectareage; (c) irrigation of rainfed areas would result in yield increases of maize or other traditional crops and would allow shift to higher-valued cash crops; (d) improved moisture control, through subsoiling, terracing, and related techniques would result in further yield increases; and (e) development and adoption of new technologies for rainfed conditions would result in yield increases for traditional food crops. 7.03 To estimate total production at full development under the project, the eight micro-regional plans were assumed to represent the investment mix of the seventeen micro-regions. Since the plans themselves are indicative in nature, rather than the sum of specific sub-project investment plans, - 46 - estimates of both production and income (paras 7.08-7.09) as wellC as the economic analysis based on them (paras 7.13-7.15) must be inter':reted as a general (rather than precise) estimate of the expected impact of the project. 7.04 Based on extrapciation from the eight plans, then, some 64,000 hectares now in production would receive project interventions>, and some 18,000 hectares would be brcught into new production. At full :ievelopment, incremental production of basic crops, oil crops and feedgrairn would reach 128,000 metric tons (mt); cocoa, coconut, and coffee, almost l',D000 mt; citrus, 116,000 mt; vegetab-Les, 21,000 mt; fruits, 56,000 mt, and cashew, some 15,000 mt. Total value of production over the baseline (without project) levels/l would be US$72.3 million annually. Details of crop production by year are shown in Annex 6, Table 1. 7.05 in the case of beef and dairy production, productivity increase s a function of genetic improvement; pasture and forage develcpment; and water, fencing, and corral facility expansion. Production increases would be realized directly within the first few years of project activity and would be directly correlated to stock increases and herd mix shifts within the ejido model. 7.06 For small livestock as well, production increase would come from construction of new units and numbers. Livestock production increases appear in Annex 6, Table 2. B. Marketing 7.07 Since most of the incremental production under the project would be for local sale and conEumption, the existing marketing s;stem is judged adequate for most commodities. In the case of coffee, cocoa. copra, and some fruits, local processing facilities and marketing systems are well established and have sufficient capacity to handle production increases. In those situations where storage capacity is inadequate, the project would provide for construction of additional warehouses or silos. In the case of fruits and vegetable produiction in Yucatan, the adequacy of `ce existing marketing organizations will need to be assessed to determine their capacity to handle increased production of perishables. With respect to marketing services, it is envisioned that as production and sales increase, local competitive market responses would serve to ensure that product transfers proceed efficiently. Co Beneficiaries Income 7.08 Traditioral .naize production generates income of roughly Mex$1,000 (net of cash outlays) per hectare in years with adequate rainfall, while maize grown under improved rainfed conditions generates up to Mex$3,000 per hectare for one season. The more highly valued commercial crops, such as fruits and vegetables, coffee, and cocoa, produce substantially more income, ranging from Mex$15,000 to Mex$45,000 (under irrigation) per hectare per /1 Baseline = 1981 withcut-project output. - 47 - season. At full development incremental crop income reaches over Mex$1.4 billion annually, while income from livestock enterprises totals Mex$680 million per year. By combining crop activities into representative family units, per capita incomes before and after project implementation can be estimated for the agricultural component. Annex 6, Table 3 gives the breakdown by micro-region for the eight areas analyzed for appraisal. "Without project" figures are calculated for the base year, 1981, rather than considering the gradual autonomous adoption curve./l The "With project" figures reflect complete adoption of the improved technologies and full impact of improvements to land (Annex 4). It should be noted that the population of direct beneficiaries being considered comprises only those farmers receiving direct project investments on their land. Those receiving only extension are considered indirect beneficiaries, and their incremental production is not included in the figures. In this analysis, per capita incomes from crops increase from about Mex$740 to about Mex$4,150. If one assumes that about 40 percent of per capita income is derived from crops, then this increase would result in an increase in total per capita income of 74 percent, ceterus paribus. 7.09 Induced income from increased hired labor in crop. production and direct income to temporary labor used for infrastructure construction and for land improvements would be substantial within the selected micro- regions. Annex 6, Table 4 shows the change in total labor demand from before project initiation and at full development. D. Nutritional Impact 7.10 Recent research on consumption patterns in developing countries which have maize and beans as their staples, indicates that price and income elasticities for these commodities vary by income group and by season. Using price and income elasticities derived from studies carried out in similar ecological areas, and depending upon the incremental per capita income generated by PIDER III within each micro-region and upon the seasonal occurrence of these impacts, consumption effects by income group could be derived, and then per-family protein and calorie consumption increments. The project would have its greatest impact in those areas where seasonal variation is the greatest, and where drought leads to severe nutritional deficits. Techniques for water management would reduce the severity of crop/income loss during periods of drought and would generate the highest percentage increases in income due to production and employment impacts. Results from areas where the largest proportion of the investment is in commercial crops show that there would be a smaller nutritional impact in those areas, because the initial nutrition levels are generally higher than in drought-prone rainfed areas. However, the overall nutritional effect would still be substantial because of the large employment and income effects related to cash-cropping. Livestock production would also result in a significant nutritional effect due to substantial income generation in that sector. Additionally, increases in meat /1 If the yield level of the autonomous adoption curve were used as the "Without project" situation, the total annual income increment would be about Mex$950 million. - 48 - and milk production would moderate local price increases for those commodities, making them more accessible for more of the population. The baseline studies (para 4.70) would include assessment of nutritional levels, and both qualitative and quantitative changes in those levels would be monitored to determine if the expected impacts occur. E. Employment Impact 7.11 Application of modern inputs to subsistence agriculture results in higher employment requirements. Since labor demands for subsistence agriculture often equals the supply at peak periods (seeding, first weeding, and especially harvesting, for perishable crops), introduction of new technol- ogies which demand increased labor at those peak periods may be constrained by labor shortages. To address this problem, PIDER III would concentrate on soil and water conservation to allow slight shifts in seeding dates to even out the peak demand periods. In this way, the effect of the new technologies would be a higher demand for labor with less fluctuation of demand during the growing season. Traditional maize production requires about 30-40 workdays per hectare per season. Improved maize with some mechanization uses about 30% more labor. Irrigated land in annual cash crops doubles the demand for labor compared to traditional maize. Some orchard production requires about 70-120 workdays per season. Annex 6, Table 4 shows the employment potential from project activities at full adoption. F. Environmental Impact 7.12 The productive components of the project are expected to have a neutral or favorable effect on the environment. Soil and water conservation in particular would be of great importance in establishing and demonstrating conservation practices, which, if proven, could be adopted more widely and have a major role in the reduction of soil erosion, one of the main long-term problems in Mexico's countryside. Reforestation and afforestation would also be important in those areas where planned. Rural roads would be designed and constructed to control run-off. Although the use of agro-chemicals would increase under the project, use would be limited to those with low toxicity, and extension officers would stress safety and avoidance of excessive application. G. Economic Analysis 7.13 Economic and financial analysis was based on investment plans, drawn up by state planners, for each of the eight micro-regions. (These plans are of an indicative nature, rather than the sum of detailed sub-project proposals.) Each plan contains cost estimates of both investment and operating costs and the financial analysis for a representative ejido in the micro-region. Each plan also contains an aggregate analysis for the micro- region, including projected production with and without PIDER, by crop and type of intervention for agriculture, and by type of livestock. The appraisal - 49 - team, in consultation with Mexican agronomists, evaluated the technical parameters used by state planners to determine how closely they represented the average (over-time) baseline situation, and how realistically they projected the effects of project interventions. In some cases, the agronomists adjusted yields, uptake rates, phasing, and area to be affected by project investments. In all cases, parameters chosen were considered relatively conservative. Prices for tradable outputs were derived from international market prices, and adjusted according to World Bank price projections. A standard conversion factor of unity was assumed. Costs were valued at market prices plus physical contingencies for non-labor inputs. Hired labor was shadow-priced at 50 percent of the official minimum wage rate in Guerrero and Yucatan, to reflect the considerable surplus of agricultural labor in those states. In Sinaloa and Zacatecas, where richer neighboring areas have caused labor to emigrate from the micro-regions, labor was valued at 100% of the official state minimum wage. 7.14 Economic rates of return were calculated for agriculture and livestock, considering investment and operating costs, extension, farmers' organization and training, plus production support investments needed to achieve incremental benefits. These include electrification required for irrigation, feeder roads, and marketing facilities. No benefits were imputed for investments such as roads and marketing facilities to allow for probable increases in real income due to reduction in transport costs and in loss due to spoilage and rodents. Since these benefits will accrue to a larger group of beneficiaries than that benefiting directly from productive investments, both because this infrastructure will be open to the public and due to a multiplier effect, it is likely that the rates of return calculated may be conservative. Rates of return were not calculated for rural industries, since the types of sub-project planned were highly locality-specific, and in many cases experimental, making a region-wide or aggregate evaluation of benefits or costs extremely speculative. 7.15 Among micro-regions, economic rates of return ranged from 14 percent to 44 percent, with the aggregated rate of return calculated at 27 percent. This variation results from extreme ecological differences among micro-regions. In some regions, where traditional cropping patterns include mainly maize and beans, at relatively low yields, interventions planned are expected to increase yields of these traditional food crops, and to allow diversification into higher-value fruits and vegetables. In Guerrero, where crops such as coffee, coconut palm, and cocoa are already cultivated, invest- ments have been planned to improve or replace old stands (some are 60-90 years old) as well as to improve yields of food crops. The high prices of perennial crops, particularly coffee, account for the very high rate of return in these areas. - 50 - H. Project Risks 7.16 The main risks associated with the project would be (a) institutional and (b) climatic. The major institutional problem would be to ensure effective coordination between the various line agencies involved in project execution. A number of actions have been taken to minimize this type of risk: (1) the states included in PIDER III were chosen for their experience with such projects, and efforts are already being made to redefine responsibilities and strengthen coordination where it was weak in the past; (2) line agencies have already played a key role in planning overall investments as well as sub-projects, and agency personnel show a higher level of commitment than in the past. The most serious climatic risk would be drought, and the emphasis on better conservation and farming practices built into project design is intended to reduce this risk. Institutional risk factors could result in cost overruns and delays in project benefits derived from one or more project activities; drought would reduce and/or delay benefits from all agricultural and livestock activities in the affected areas. I. Sensitivity Analysis 7.17 Sensitivity analysis was performed to determine how much deviation from appraisal estimates of costs and benefits is tolerable before the economic basis for the project is undermined. With the critical rate of return taken as 12 percent, results indicate that permissible shortfalls in benefits range from 10 percent to 60 percent across micro-regions and 30 percent overall. The permissible range on the cost side is also 10 percent to 60 percent, and 40 percent overall. The analysis indicated that an overall lag in project benefits of about two and one half years caused the rate of return to fall to 12 percent. Across micro-regions, permissible lags ranged from one half to three years. Annex 6, Table 5, summarizes the results of the analysis. J. Cost Recovery and Fiscal Impact 7.18 For all sub-projects affecting individual farmers or ejidos, Government policy is to establish beneficiary commitment to the investment by requiring their contribution to support some fraction of the total cost. Beneficiary contribution to the investment cost of productive infrastructure varies by component. For small-scale irrigation, farmers purchase pumping equipment with long-term credit and may be required to contribute up to 30% of the cost of investment in the form of labor, materials, or cash. They are fully responsible for costs of operation and maintenance. For soil and water conservation and land improvement for seasonal crops, beneficiaries contribute a proportion of investment costs, the amount to be determined in each case by the implementing agency and the farmers. Beneficiaries are responsible for maintenance of work. For fruit and other perennial crops, beneficiaries would provide all labor inputs for establishment of planting and maintenance of orchards or groves and would purchase machinery and equipment with credit. For the livestock, beekeeping, and fishery component, beneficiaries would purchase stock and equipment with development credit, and be responsible for the operation and maintenance of the units. For components involving civil works (forestry, rural roads, - 51 - electrification, construction of schools, health centers, warehouses, and rural stores), beneficiaries would provide labor whenever feasible. For water supply, beneficiaries would contribute labor and be responsible for operation and maintenance, assisted by JEAP, the State Potable Water Board. Though a significant proportion of project costs, including organization and management, studies, extension, and research, is not directly recoverable, these costs are consistent with the Mexican Government's commitment to rural development. At the present time, public investment in programs to assist small farmers and other poor rural groups amounts to about US$3.2 billion equivalent annually. PIDER investments alone were running at US$450 million equivalent in 1980. PIDER III investments for the first year of the project would represent approximately 25% of the PIDER budget, though budgetary alloca- tions for PIDER gave been growing yearly. The mission is confident, therefore, that the Government will continue to provide technical assistance where necessary to ensure continued operation of investments after the project's closing date. It is judged unlikely that fulfilling these responsibilities will cause the Government undue fiscal strain. VIII. SUMMARY OF MAIN AGREEMENTS REACHED AND RECOMMENDATION 8.01 Conditions for Loan Effectiveness. During negotiations agreements were obtained that: (a) The full staffing of the Micro-regional Rural Development office in each of the eight micro-regions already appraised would be a condition for loan effectiveness (para 5.08). (b) Preparation of a detailed proposal for the monitoring and evaluation system for the project, as outlined in para 5.16 and as mutually agreed upon by SPP and the Bank, would be a condition for loan effectiveness. 8.02 Conditions for Disbursement for Micro-regions or Specific Components. During negotiations agreements were obtained that: (a) A condition of disbursement for each micro-region would be that a plan prepared in accordance with para 3.04 had been appraised and found satisfactory by the Bank. (b) Livestock investment would be executed according to guidelines agreed upon by the Bank as a condition for disbursement for the component (para.4.41). (c) Agreement between the Government and the Bank regarding interest rate structures would be a condition of disbursement for development credit (para 4.49). - 52 - (d) A specific work program for socio-economic studies would be agreed upon by the Government and the Bank as a condition of disbursement of this component (para 4.70). (e) Completion of a plan mutually satisfactory to the Bank and SPP for the training program for the staff development component would be a condition of disbursement of this component (para 5.10 (b)). 8.03 During negotiations agreements were obtained that: (a) Requirements for irrigation and soil and water conservation sub-projects, and the ceiling for livestock sub-projects would be met as specified in paras 4.23, 4.28, and 4.41, respectively. (b) SPP would maintain and adequately staff an organizational unit to carry out monitoring and evaluation of the project. (c) With respect to accounts and auditing and procurement, the Government would follow the procedures specified in paras 6.08-6.09 and 6.10-6.12, respectively. (d) With respect to monitoring and evaluation of the project, SPP would furnish to the Bank the specially prepared semi- annual and completion reports as specified in para 5.16, in addition to the normal reporting procedures as set up by SPP. 8.04 With the above assurances and conditions, the project would be suitable for a Bank loan of US$175 million for a term of 15 years, including three years of grace, at an interest rate of 9.6%. - 53 - ANNEX 1 Page 1 MEXICO INTEGRATED RURAL DEVELOPMENT PROJECT - PIDER III The PIDER Program 1. In 1973, the Investment Program for Rural Development (PIDER) was established to channel resources into low-income rural areas with productive potential. Through broad-based rural investment for a wide range of activities, it was designed to reinforce agencies' actions as a nationwide rural development program. It was jointly supported by the Inter-American Development Bank (US$40 million), the World Bank (US$230 million), and the Mexican Government. By the end of 1980 Mexico will have invested US$1.7 billion in 119 micro-regions, covering 8,500 communities with 6.1 million inhabitants (22% of Mexico's rural poor)./l PIDER accounted for an average of 8.8% of total investment in the rural areas during the period of 1977-1980. Investment was targeted to benefit those least developed states with the highest concentration of rural poor. Accordingly, Oaxaca, Guerrero, Zacatecas, and Chiapas received 23% of PIDER's funds. 2. During PIDER's initial years (1973-1975) its explicit objective was to identify the areas with the bulk of Mexico's rural poor and to increase the general standard of living of the rural poor by channelling a variety of productive and social investments and services into these regions. By 1975, PIDER's focus had evolved from that of public expenditure/welfare program to that of providing an investment package of selected goods and services as a means to: (a) raise rural living standards by introducing directly productive activities; (b) increase levels of permanent and temporary employment; (c) strengthen supporting productive activities; and (d) improve social infrastructure. To achieve these objectives, during the period of 1975 to 1979, 44% of PIDER's investments were devoted to productive projects, 41% to productive support, and 15% to social infrastructure investments. The trend between 1975 and 1979 showed an average increase in investment of 24%, 11% and 3% in productive, support and social investments respectively. Assessment of the PIDER Program A. Institutional Impact 3. In 1978, the Mexican Government and the World Bank jointly undertook a mid-term evaluation of the first Bank loan (PIDER I). Assessments of PIDER I performance are interrelated with assessments of the performance of the entire PIDER program. With few exceptions, actions taken to improve the thirty PIDER I micro-regions have been applied program-wide. Similarly, improvements in program-wide actions have directly affected the PIDER I micro-regions. With the completion of PIDER I, SPP is currently assessing /1 SPP, "Programa Integral para el Desarrollo Rural--Analisis de la Situacion Actual y su Incorporacion al Esquema del Convenio Unico de Coordinacion", Junio 1980. - 54 - ANNEX 1 Page 2 the physical progress and the development impact of the PIDER program in Mexico. The results of this evaluation will be available by mid-1981. Because of the thoroughness with which CIDER carried out the mid-term evaluation, space permits only a summary of the main findings of the evaluation. 4. The main results of the mid-term evaluation point to an overall positive balance for PIDER's achievements over the last few years. The most innovative element of PIDER-s effort to address rural poverty has been institutional impact. PIDER has had an important effect on Mexican bureau- cratic functioning through: (a) the decentralization of expenditures to the state level, resulting in a more flexible and efficient funding method for thousands of small projects undertaken in PIDER micro-regions; (b) the provision of some degree of coordination, at both the central and state levels, for the investment activities of numerous executing agencies; (c) the strengthening of the activities of participating agencies involved in rural development; (d) the creation of a professional evaluation agency and the establishment of an innovative system of monitoring and evaluation; and (e) the organization at the state level of the Socio-economic Development Committees, later transformed into the COPRODES. In addition, PIDER has also promoted the reform of the agricultural extension service and has supported technical innovations designed specifically for the small farmer; including irrigation systems, maize storage units, and small-stock programs. B. PIDER Physical Impact 5. PIDER's overall impact in the micro-regions selected for the mid-term evaluation can be summarized as follows: (a) of the thirty programs financed by PIDER, ten received 75.5% of the total investments. The main ones were rural roads (16.2%), irrigation (15.6%), and livestock development (11.1%); (b) the construction phase of the PIDER investments provided substantial increases in temporary employment opportunities to a large number of the rural poor. It was estimated that up to 1978, the PIDER civil works program created approximaely 76,700 man-years of temporary jobs. Twenty-four thousand of these were generated through the construction of rural roads; (c) most of the permanent increases in farmer employment, income, and production resulted primarily from the small-scale irrigation works; (d) larger numbers of rural poor benefited rather equitably from PIDER's social infrastructure works. Below are described some of the findings of the mid-term evaluation, - 55 - ANNEX 1 Page 3 related to the sectors described in para 5. Socio-economic Impact of Rural Roads 6. Of the four micro-regions surveyed, rural roads investments ranged from 7.2% of total investments in Eastern Morelos to 27.6% in Sur de Yucatan. CIDER found that Sur de Yucatan in particular benefited from heavy investments, which led not only to the largest extension in roads built (232.3 km compared to 70, 100, and 154 km in Nuevo Leon, Morelos, and Guanajuato), but also to the highest proportion of roads finished and in use (91.1% compared to 59.1%, 81.2%, and 69.2% in the other three micro-regions. Sur de Yucatan also allotted 39% of its road budget to employing local labor, in accordance with the state PIDER goal of beneficiary participation: figures available for two other regions indicate a much smaller percentage of local use, namely 12.5% and 15.6% in Guanajuato and Morelos. Labor was sought from the localities benefiting directly from road construction, PIDER was also obliged to look for construction workers in neighboring localities as well. 7. Road Benefits. CIDER determined that the roads provided cost reductions of 70% in goods transport. Benefits varied within regions as well. CIDER's overall findings for Northeast Guanajuato indicate that roads were first built in flat zones of the region, to the disadvantage of more needy subregions; a shift in emphasis has tried to correct the strategy. Roads have provided access to fertilizer supplies, stimulating peasant organizations' purchase of such inputs; commercial activities have increased, particularly the sale of fruits to local markets; and access to institutional services such as technical assistance has been improved. Socio-economic Impact of Irrigation 8. CIDER evaluated irrigation projects in four micro-regions. These works had significant effects on: (a) production, (b) employment, and (c) income. In Guanajuato, for example, maize production on newly irrigated plots increased 245%, beans 660%, and chiles 1,850%; and cultivation expanded 22% in land area due to double-cropping alone./l The aggregate value of production per hectare of irrigated land/2 quintupled in the period after the initiation of the PIDER program, reaching some Mex$6,000 per hectare (US$185). The evaluation survey also indicated, however, that within the Guanajuato micro-region, as well as in the other micro-regions, considerable variations occurred within the aggregate production figures. For instance, in the community of Mision de Arnedo (Guanajuato), the aggregate value of production per ha increased 1.5 times, while in the semi-collective ejido Vagui, production increased 22 times. Production value increased 2.6 times on the average in Eastern Morelos, reaching a value of Mex$9,000; in Nuevo Leon, the increases were smaller, varying between Mex$2,500 and Mex$5,000. /1 CIDER, "Evaluacion de los Programas de Riego, Desarrollo Ganadero, y Caminos en Cuatro Regiones PIDER," September 1978, pp. 22-23. /2 "Aggregate value" is defined by CIDER as "equal to the gross value of total production less direct monetary costs, without imputing costs of family labor contributed, or to other inputs contributed by the producer." - 56 - ANNEX 1 Page 4 9. While irrigation works generally did not provide a significant rise in employment during the construction phase, permanent additional employment was created during the operation of the irrigated areas. In Eastern Morelos some 48 man-days per hectare were generated; given the 2,000 hectares irrigated, employment equivalent to 350 permanent jobs was provided./l The sample survey was not in a position to find out who absorbed the labor generated (follow-up and comparative studies are still necessary); but CIDER did find that in Morelos, three of the four ejidos studied employed three landless workers for every family member working. In Northeast Guanajuato, an average 72 man-days of labor was added by irrigation work, an increase of 218% over pre-program opportunities for farm labor./2 Value of work was also estimated as having increased from Mex$50 to Mex$70 per day. This increment compares favorably with the average salary of Mex$6C earned by rural workers in the region./3 10. With respect to income, CIDER estimated that the annual aggregate value of production per hectare in Northeast Guanajuato averaged Mex$8,000, Mex$6,400 of which is attributable to PIDER investment. CIDER also calculates that at least 90% of the aggregate value is absorbed by the peasant family as the principal unit of production and consumption. While CIDER considers that salaries of landless laborers have gone up in the area, the value absorbed by the peasant family itself was higher, since the peasant household members have been working more intensively on the irrigated land. Socio-economic Impact of Livestock 11. Livestock projects financed by PIDER had a relatively small effect on production, income (only a few farmers having benefited) or on permanent employment. For those units that are operating, income and employment effects have been low since income benefits will take at least four to five years from project initiation to be realized. Employment impact has been low since most units required operation by only three to four persons. In Sur de Yucatan, for example, it has been estimated that one new job requires an investment of Mex$l million (US$44,000). CIDER concluded that in most cases, the small livestock program supported by PIDER, especially goatkeeping and beekeeping projects, were more viable than large beef cattle programs. 12. Marked differences, however, exist between states in the technical strategy, extent, and quality of PIDER livestock investments. In Durango, the livestock investment program has been relatively extensive and successful: some 8 pork units and 31 extensive beef ranching units have been completed, the latter being subject to close control of stocking pressures under far- reaching state legislation enacted in 1976. The program in Zacatecas has been more diverse, involving investments in 4 dairy units; genetic upgrading /1 CIDER, "Evaluacion de los Programas de Riego, Desarrollo Gandadero, y Caminos en Cuatro Regiones PIDER,' September 1978, pp. 22-23. /2 Ibid., p.21 /3 Ibid., p.21 - 57 - ANNEX 1 Page 5 of stock through bull and ram exchanges; sheep, goat and pork units; diagnostic laboratories; watering points; and extensive ranching units. Very little livestock investment has taken place in Aguascalientes, and the few units which have been completed (one dairy unit, one ranching enterprise, and several poultry units) have encountered serious technical and organizational problems. PIDER is well aware of these problems and an improving trend exists in the technical and financial viability of recently executed and currently programmed livestock investments. Impact of Social Infrastructure 13. Approximately 250,000 families have benefited from PIDER-s social infrastructure work, which created some 11,000 temporary jobs during its construction phase. Benefits of social infrastructure are especially hard to quantify. Interviews by Bank staff and CIDER evaluators with villagers indicate that beneficiaries, particularly women, have placed a high value on having gained access to schools for their children, potable water and health facilities. They often have expressed a hope that the schools will enable their children to gain a primary education, something they view as necessary for improvement of their children's welfare./l Increased access to potable water has been highly valued by the women, who have saved time and effort. Many have begun to use this extra time profitably through home gardening, raising of small stock, and dressmaking. The beneficiaries welcomed and used the access to improved health services. These services may have substantial (though as yet unmeasured) financial benefits, since very often sickness is the major cause of the family's financial debt. Often the construction of the social infrastructure was speeded up by contribution of local labor resources; this participation reflected the importance attached to social infrastructure to the beneficiaries. 14. PIDER's performance suggests that a number of crucial issues for Mexican rural development remain unresolved. However, PIDER has succeeded in focusing attention upon these issues (para 2.10-2.12) and directing Government decisions toward the specific problems confronting the rural poor. /1 The importance that the parents often attach to providing their children with an education is reflected by the fact that many have used their profits from the irrigation works not for direct productive reinvestment in their farms, but for sending their children to a nearby high school. This pattern was documented by the CIDER evaluation team in Morelos. - 58 - ANNEX 2 Page 1 MEXICO INTEGRATED RURAL DEVELOPMENT PROJECT - PIDER III Description of the Micro-Regions Norte de Sinaloa 1. Norte de Sinaloa, with an area of 14,500 km2 has a population of 167,000 of which 85% are located in rural areas. An average of 4.6% of the rural population migrates to urban centers or irrigated areas each year. 2. Altitudes vary in this micro-region from a high of 2,700 meters to a low of 0 meters. Rainfall is generally low, averaging only 700 mm per year. Over 2,000 hectares are under irrigation, with a potential for expansion of up to 12,000 hectares. Rainfed areas adequate for agricultural production extend over 175,000 hectares, of which about 80,000 hectares are now being cropped. 3. Principal crops in the irrigated areas are safflower, cotton, soybean, wheat, potatoes, and some vegetables; in the rainfed areas, maize, beans, sesame, groundnuts, and sorghum dominate. Productivity is low in the rainfed areas, due to the farmers reluctance to use improved inputs. Droughts of varying severity occur roughly two out of five years, increasing the risk of even short-term investments, such as fertilizer. Moreover, the extension system is inadequate and the availability of credit for rainfed crops is minimal. 4. Livestock represents a major part of the rural economy, with 170,000 hectares devoted to pasture land. Beef, pork, and goat are the principal livestock products. Two dams in the region provide for a substantial fishing industry, and 12,000 hectares of forests are exploited annually. Tin, zinc, copper, silver, and gold are the principal minerals mined in Norte de Sinaloa. 5. The major thrust of the PIDER investments for 1981 to 1983 is in land development. Irrigation, subsoiling, soil and water conservation works, land rehabilitation, and land-clearing operations will be the principal activities which will open up new land as well as improve productivity of land presently being cropped. In addition, technical assistance will be introduced over a widespread area. Expected increases in productivity and total output will result in corresponding increases in employment and income. A constraint co rainfed agricultural development in the area, however, is the fact that laborers migrate to the irrigated areas of the coastal strip during the harvest season in those areas--December to February or March--thereby severely limiting the potential for second season crops in the upland areas. - 59 - ANNEX 2 Page 2 Mocorito-Badiraguato-Culiacan, Sinaloa 6. This micro-region in the center of Sinaloa, comprises 12,000 km2 and has a population of 137,000, 88% of which is rural. The terrain is characterized by the foothills of the Sierra Madre mountains, with altitudes ranging from sea level to over 2,000 meters. Rainfall varies from dry areas of 600 mm to areas with over 1,000 mm per year. Even in the less arid areas, however, seasonal occurrence of precipitation is unfavorable to agriculture, since the rains are concentrated in the late summer months of July, August, and September. There are about 8,000 hectares of irrigated land, 100,000 hectares of rainfed potential, of which only 75% is being cropped, and 1,500 hectares of humedal--areas of rich, moist, organic topsoil. 7. There is considerable variation throughout the region with respect to cropping patterns, and these variations result in corresponding differences in per-hectare value of production. For example, Culiacan has twice the cropped area of Mocorito, but the two municipios produce the same total value of output--Mex$80 million annually. The reason for this apparent difference in productivity is that Mocorito has more hectareage of sesame and groundnuts which yield a much higher value of product per hectare than do maize and sorghum, the principal crops in Culiacan. 8. However, livestock is the major source of income in the region; the value of production from the livestock sector totaled Mex$900 million in 1979, over five times the income from crops. Over 300,000 hectares are grazed by about 300,000 head of beef cattle./l There are about 125,000 hogs and 30,000 goats in the region. 9. In addition to crops and livestock production, fishing from the lakes formed by two dams provides about 100,000 kg of fish per year, valued at about Mex$4 million. Forest products account for about Mex$60 million and mineral extraction about Mex$30 million. 10. Investments planned for this region would improve productivity of agriculture through soil and water conservation, land rehabilitation, small-scale irrigation, and fruit crop development. Livestock investments would introduce small stock and beefkeeping installations as well as beef and dairy installations. Valparaiso, Zacatecas 11. Valparaiso comprises 9,000 km2 with a population of 143,000. The micro-region is quite arid, with rainfall averaging 700 to 800 mm annually. Irrigated area covers about 6,000 hectares, and rainfed crops are cultivated on another 111,000 hectares. Maize is the principal crop, followed by beans. Fruit production is of growing importance. 500 irrigated hectares of peaches /l These are actual numbers of animals, not livestock units from which pasture- carrying capacities can be derived. - 60 - ANNEX 2 Page 3 produced Mex$50 million in 1978, and 3,400 hectares were producing peaches under rainfed conditions. Valparaiso is also one of the principal oregano- producing areas of Mexico. 12. Altogether, roughly Mex$400 million were generated from crop production in 1979. Though only 30% of the land is fertilized, the level of mechanization is relatively high, with 200 tractors in service--four times that or Tlaltenango. Nevertheless, in order to take advantage of all available moisture, more heavy equipment is required. With proper management, the water captured and stored by the dams and wells now in existence is sufficient to double the irrigated area. 13. About 374,000 ha are used for grazing--nearly 2 1/2 times the total cultivated area. The value of livestock production, however, is not quite double that of crop production. Studies conducted statewide show that at least some of the land now used for grazing could be profitably cultivated. 14. Seventy-nine percent of the forested area in Zacatecas is located in Valparaiso. This significant resource has not yet been exploited. 15. The principal investments for Valparaiso would be for soil and water conservation, crop and livestock development, technical assistance, adaptive research, and infrastructure for production of forest products. Tlaltenango, Zacatecas 16. The eight municipalities of Tlaltenango cover 4,000 km2 with a population of 73,000 of which 76% is rural. Rainfall is generally low, averaging 700 mm per year, distributed through the summer months of June to September. Due to the dry conditions, livestock is the leading sector in Tlaltenango. Over 200,000 hectares are grazed by 197,000 head of cattle. There are 61,000 hogs in the region. Income from livestock is roughly Mex$500 million annually from beef cattle and Mex$40 million from pork production. 17. Of the remaining 200,000 ha, 69,000 ha are suited to agriculture, of which 3,200 ha are under irrigation. Of the remaining area with potential for rainfed agriculture, only about two-thirds on average is cultivated, due to farmers perception of risk of drought. Maize is the principal crop during the summer, followed by oats and barley for fodder, groundnuts, beans, and sorghum. In the winter months, wheat, barley, and oats are produced. Crops generate about Mex$100 million per year. 18. Most of the cultivated land in Tlaltenango is privately owned by small farmers who hold an average of five hectares each. The productivity of these small farms is limited by several factors. First, lack of technical assistance results in the continuation of traditional rudimentary technologies even in areas where small-scale irrigation systems have been installed. Second, the vefy poor road system makes access to both inputs and markets difficult; modern inputs are used only in small, irrigated areas, and most farmers produce only for family consumption. - 61 - ANNEX 2 Page 4 19. PIDER investments would be directed at developing improved technical packages, increasing technical assistance, improving the road system, providing facilities for commercial produce marketing, and disseminating market information to farmers. Litoral Norte, Yucatan 20. The micro-region of Litoral Norte, Yucatan, comprises 8,024 km2 divided into twelve municipalities. It had a population of 118,500 as of 1980, of which approximately 37% live in rural areas. About 41% of the land area is owned by ejidos, 40% by small farmers, and 19% is state-owned. Rainfall varies from a minimum of about 400 mm/year on the western coastal strip to 1,300 mm/year in the southeast corner. 21. Though the maximum altitude in the region is only about 800 meters, the terrain is rocky and the soil is shallow. To cope with these unique and difficult conditions, a system was developed by the Mayans known as milpa (footnote page 10), and this sytem continues to be used today. The milpa system is one of mixed cropping, use of high levels of organic matter, and long-term rotation--traditionally, fifteen years of fallow are required to regenerate enough fertility to maintain maximum maize yield levels. In any given year, approximately 15,000 hectares are cultivated to maize out of a total of roughly 650,000 hectares of ejidal and private land in the micro- region. An additional characteristic of the milpa system is its labor- intensiveness: almost 100 work-days are required for one hectare of milpa per season. Maize yields average 500 to 600 kg per hectare, but range from 200 to 1,500 kg per hectare. This extreme variation is due to differences in rainfall as well as variations in soil fertility. 22. In addition to maize, beans represent a major portion of food production. Sisal, a traditionally important crop, has been cultivated less in recent years, in favor of fruit, vegetables, and livestock. Fruit and vegetable production have become increasingly important recently, representing nearly 32% of agricultural production in 1979. Additional potential exists for further development of these crops. 23. The real economic potential in the micro-region lies in the reduction of the fallow period in the milpa cultivation system, the improvement of maize yields, and the development of lands given to fruit and vegetable production. Systematic research to improve yields with the milpa system has only just begun, though several better-yielding varieties have resulted from farmers' own experimentation. 24. Due to the difficult soil conditions as well as to the favorable local beef prices, livestock has been the fastest growing sector in the micro- region. In 1978, there were about 400,000 head of beef cattle, an increase of 200% since 1970. 218,000 hectares--one quarter the total land area of the region--were used for grazing. Since most of the beef is exported from the - 62 - ANNEX 2 Page 5 region while 40% of the locally consumed maize must be imported, PIDER III investments would improve the balance of the region's rural economy by emphasizing activities other than livestock. By strengthening the marketing system for produce, as well as the agricultural extension system, it is hoped that crop cultivation will become more financially competitive with livestock production. Because of the decline of sisal production, there is an excess supply of rural labor. In order to absorb this excess in economic pursuits, plans have been made to expand the fishing industry in the area. Investments would be made to purchase more fishing vessels, to expand and improve port facilities, and to increase fish-processing capacity. Another area which will receive assistance is beekeeping, which has experienced substantial growth recently, and development of which will help to further balance the economy. Sur de Yucatan, Yucatan 25. Sur de Yucatan comprises 9,000 km2 with eight municipalities in the southernmost triangle of the state. Of the population of 96,000, only 23% is classified as rural. Most of the land is privately owned--only 38% of the land is under ejido ownership. About 108,400 ha are dedicated to agriculture, with 6,400 hectares of irrigated land. 26. The region may be divided into two zones, based on soil type rather than climate (rainfall varies between 900 mm to 1,200 mm annually). The northern portion has a rocky soil which cannot be irrigated, and where the milpa system dominates (see description under Litoral Norte). The southern portion is suitable for fruit and vegetable cultivation with some mechanization. The latter zone produces a substantial quantity of oranges, lemons, grapefruit, mango, papaya, avocado, melons, tomatoes, and chiles. Fruit, vegetable, and sugar cane production are all being heavily promoted. There has been a growing problem with soil salinity, but there is great potential for further production increase, if this can be controlled. In the northern zone, development depends on improvements in the milpa system. The potential for expanding livestock production is minimal. 27. Due to the relative isolation of the region, marketing represents a serious constraint to increased production of perishable fruits and vegetables. To help overcome this problem, a citrus processing plant is now under construction. Extension agents must exert caution with respect to the mix of crops to be introduced in the newly opened irrigation areas in order to avoid exacerbating the problem of market saturation at harvest time. In addition, technical assistance and credit are inadequate for annual crop production. By improving these two important factors, a significant increase in traditional crop productivity could be generated. Atoyac, Guerrero 28. The micro-region Atoyac is comprised of four municipalities totaling 6,114 km2. It includes about 150 kilometers of coastline on the Pacific Ocean. Sixty percent of its population of 178,000 is classified as rural. - 63 - ANNEX 2 Page 6 Rainfall is extremely variable, ranging from 900 to 2,400 mm annually. 29. The region may be divided into three distinct agro-ecological zones. The fertile coastal strip, which ranges in altitude from sea level to 400 meters, is suitable for fruit orchards and coconut plantations. The principal fruits grown in this zone are mangos, citrus, papaya, and guanabana. The trees are generally intercropped with annuals--traditionally with maize and sesame, but increasingly with melons and vegetables in response to rising demand from nearby urban centers. 30. The adjacent zone ranges from 400 to 700 meters in the Sierra, where maize and associated crops are cultivated more generally. Orchards are still important in this zone, however, with avocado and tamarind being cultivated in addition to the fruits found in the lower zone. 31. Between 700 and 1,500 meters, 25,600 ha are cultivated with coffee--the principal crop in this zone. Coffee producers in Atoyac have an average of 5 ha each, with relatively low yields--400 kg per ha, compared with the national average of 600 kg per ha. Interspersed with the coffee plantations are avocado, guanabana, oranges, and bananas. 32. There is some livestock production throughout the region, with poultry the most important activity. About 500,000 birds are fattened as broilers annually, beef cattle number about 100,000 head, and hogs number 50,000. 33. Several constraints to development exist for both crops and livestock. Technical packages adapted to local conditions have either not been identified, or have not been passed on to extensionists, whose recom- mendations are often not considered appropriate by farmers. In addition, the extension service lacks sufficient trained personnel, and inputs are not readily available. The result of these factors is that technologies throughout the area are generally traditional. Many coconut palms and coffee plants are old and require rehabilitation or replanting to reverse the trend of declining yields. There is also considerable potential for expanded coffee development. Finally, the marketing system must be improved to handle the perishable fruits and vegetables. The major problems in livestock production are stock quality and animal health. PIDER III investments have been designed to address each of these problems. In addition, some investments will be made to help develop the small fishing industry. Costa Chica, Guerrero 34. Costa Chica comprises seven municipalities with a total area of 4,309 km2. Like Atoyac, it borders on the Pacific Ocean, with 70 km of coastline. Altitudes range from sea level to 650 meters, but most of the region lies between 150 and 300 meters. Of the population of 164,000, 80% is rural, but population densities are rather high due to the relative attractiveness of the region for agriculture. The climate is hot and humid; - 64 - ANNEX 2 Page 7 rainfall averages 1,200 mm per year. Soils are of volcanic origin and drainage is a problem in some areas. There are three agricultural zones in the region. A narrow, 10-kilometer-wide strip along the coast produces most of the agricultural output. The adjacent 10 kilometers is heavily eroded and has poor soils, or lack of topsoil. The third zone is hilly and jagged. In the valleys of the small mountains or hills, patches of suitable agricultural land can be found, but in general the second and third zones are dedicated to livestock production. 35. It is estimated that there are 210,000 ha with agricultural potential in the region, but only about 61,000 ha are actually cultivated. Of this area, 76% is given to maize, 15% to coconut palm, 5% to beans, and 4% to fruit and other crops. A little over 8,000 ha are irrigated. In most areas, technical assistance and modern inputs are not readily available. Total crop production amounts to about Mex$1 billion annually, 60% of which is generated by copra. Of the remaining 40%, 20% is generated by maize and sesame, and 20% by fruit crops. 36. Some livestock is raised in the area, but only poultry fattening is done on a significant scale. 37. Since levels of productivity are low, PIDER investments would be concentrated on land development, technical assistance, and the basic infrastructure for access to inputs and markets. MEXICO RURAL DEVELOPMENT PROJECT - PIDnER III Components, Main Executing Agencies, and Disbursement Categories Project Components Main Executing Agencies Disbursement Categories 1. Directly Productive Investment Irrigation SARH-OHDR-DGDUT/Credit Institutions Civil works/technical assistance/medium-term credit Soil and Water Conservation SARH-DGCSA-DGDUT/Credit Institutions Civil works/medium-term credit Fruit Crop Development CONAFRUT/SARH-DGDUT-Extension/Credit Institutions Civil works/agricultural inputs/technical assistance/medium-term credit Coffee Development INMECAFE/SARH-Extension/Credit Institutions Agricultural inputs/technical assistance/medium-term credit Coconut Development IGC/SARH-Extension/Credit Institutions Technical assistance/agricultural inputs/medium-term credit Livestock Development SARH-DGDUT/Credit Institutions Civil works, equipment/technical assistance/medium-term credit Fisheries PPM/Credit Institutions Civil works, equipment/technical assistance, training/medium-term credit Forestry SARH-DGDUT-Forestry-Extension Technical assistance/medium-term credit Rural Industries SARH/Agro-industries Civil works/technical assistance, training/medium-term credit Development Credit BANRURAL/FIRA/Other Credit Institutions Medium-term credit 2. Productive Support Investment Extension and Applied Research SARH-DGDUT-Extension/INIA/INIP (Applied Research) Equipment and vehicles, technical assistance (operational cost), training Marketing CONASUPO-BORUCONSA Civil works and equipment Beneficiary Organization SPP/SARH/SARH Equipment and vehicles, operational cost, training Rural Roads SAHOP Civil works, equipment Rural Electrification CFE Civil works, equipment Productive Projects for Women . SPP (agency to be identified) Equipment, technical assistance and training Feasibility and Baseline Studies SPP-Executing Agencies Studies 3 Social I,,frastructure Education Facilities CAPFCE Civil works, equipment Health Facilities /1 SSA /1 Nutrition SARH/IMSS/SSA Vehicles, equipment, technical assistance, baseline studies Water Supply SAHOP Civil works, equipment Self-Help /1 SPP/Other Executing Agencies /1 /1 Expenditures covered by project but not reimbursed under Bank loan. - 66 - ANNEX 4 Page 1 MEXICO INTEGRATED RURAL DEVELOPMENT PROJECT - PIDER III Agricultural Production, Benefits, and Crop Budgets Introduction 1. This section serves to illustrate the analytical technique applied to the crops component for each of the eight micro-regions chosen for appraisal. The Mocorito-Badiraguato-Culiacan micro-regions data is used as an example. The methodology used in this analysis correlates to that presented in Chapter VII. Only the direct participants are considered in the economic analysis-- benefits accruing to indirect participants are not included. Direct participants are those whose land is improved through some form of soil and water conservation, land clearing, or small-scale irrigation. Table 4 shows the pattern of uptake rate for Mocorito. Rates of adoption would vary somewhat across micro-regions. The anaLysis does not present overall regional average yields, but only those for land directly improved by project investments. Before embarking on the Mocorito analysis, however, farm level crop budgets are presented for all eight of the pilot micro-regions. These budgets present the before-project input levels as well as the input levels and yields expected at full adoption for both rainfed and irrigated lands. The Mocorito example uses the Sinaloa budgets. Farm Level 2. Crop Budgets. In order to calculate farmer benefits derived from agricultural investments, crop budget analyses are required. In each of the eight micro-regions, the planning team prepared such budgets for all of the principal crops. In some cases these budgets were provided by SARH, based upon field surveys or extension agent estimates and recommendations. In other instances, the budgets were provided by CONAFRUT or INMECAFE. To ensure consistency, SPP agronomists reviewed them and made some logical adjustments and corrections. Moreover, the mission agriculturalists made some additional revisions. Principal crop budgets are presented for each state. Total variable costs in the table are the sum of all mechanization, material inputs, and hired labor costs. Gross margins are calculated by value of product less total variable costs, using local market price estimates. Family labor is derived by subtracting hired labor from the per-hectare total labor value imputed by the mission-s agriculturalists after consultation with the SPP agronomists. 3. Recommendations for application of fertilizer vary somewhat in quantity and type across micro-regions. In Zacatecas, fertilizer recom- mendations average 120 kg of nitrogeni and 60 kg of phosphorus for improved maize and around 60 kg and 40 kg respectively for beans. (The most common fertilizers are Ammonium Nitrate, Triple Superphosphate, and Urea.) Fertilization rates are somewhat lower in Yucatan for maize and beans, but the vegetables are quite heavily fertilized there, with up to 360 kg of nitrogen - 67 - ANNEX 4 Page 2 per hectare. Fertilizer rates in Sinaloa for maize and beans are about half the rates used in Zacatecas and Yucatan. Chemical insecticides and fungicides also differ widely. Parathion, Malathion, Sevin, and Manzate are the most common,but several others are used, depending upon conditions in each region. The budget analyses in most cases specify what is recommended. Although hired labor is listed with a cash value, money transfer does not always take place. Labor based on interchanges within the extended family and payments-in-kind are both considered as hired labor. Hired labor is valued at the local agricultural wage rate. 4. Input Costs. The major costs for annual crop production include land preparation, seeding, fertilizing, cultivation, pest control, and harvesting. The material inputs are seeds, fertilizers, and chemicals. The rest is land, labor, mechanization, and water which may be provided from owned resources, through exchange (labor sharing) or from local hire (hired labor, rented land, tractor services, and water charges). For annual crops in semi-arid regions-, yield increases are closely correlated to seeding densities and fertilization rates. These are costly inputs, which the farmer accepts reluctantly at first until assured that uncertainties which could lead to cash losses are covered by the system. Hence, input costs rise slowly following the pattern of the S-shaped, logarithmic curve until full adoption is reached. It should be noted that as land improvements are made, mechanization becomes feasible and displaces labor in some cases (particularly in the case of beans). Tables IA through 1D present the budget analyses for input quantities and values at traditional input levels (without project) and at full adoption (with project). Since detailed research has not been carried out to determine yield levels corresponding to partial input levels, estimates were made of the number of years required for full adoption, and then yields and costs were taken proportionately over this period. This accounts more realistically for the adoption process than would the usual assumption of full development costs for the first year of production. Micro-Regional Level - An Example 5. Land Development. The maior agricultural activities in Mocorito which PIDER would support are land development projects. The three principal components include improving or rehabilitating rainfed areas, developing new lands for rainfed crops, and opening up new small-scale irrigation sites. It is assumed that subsistence crops were previously grown in areas identified as improved rainfed. Hence, Table 1 presents the corresponding acreages for the "before project" situation. Since plums and prickly pears are new introductions for the improved rainfed areas, they do not appear in the traditional acreage list. Total traditional rainfed acreage equals the total improved ralrifed area--new rainfed or irrigation is assumed to have been under forest or grassland of negligible productivity prior to development. The various crops which would be introduced under each program with their respective hectareages are listed in Table 2. In those cases where mixed-cropping systems may be encountered, the crop listed represents the principal crop cultivated. - 68 - ANNEX 4 Page 3 6. Yields. Yield levels for the baseline productivity rate are generally provided by SARH, and drawn from local farm surveys of the preceding season. These baseline Levels are then adjusted for drought. In this case, the previous season had good rainfall and gave average maize per-hectare yields of 1,000 kg. Since drought in this area is severe one year in five (resulting in yields of 0% of 1,000 kg/ha) and moderate another year (50% of 1,000) with adequate rainfall in the remaining three years (100% of 1,000), the weighted average yield would be 700 kg/ha. For this reason, all initial yields have been adjusted accordingly and are presented in Table 1, and are the first-year yield in Table 3. 7. Autonomous Adoption. Research stations are continually generating new varieties and methods of fertilizer applications for increasing yields. In spite of the fact that these new technologies may not be completely adjusted to local conditions, it is certain that some technological improvements would reach the farmers over time even with no additional extension effort. Hence, it would be expected that some productivity increase would be generated over time without the project. This is called autonomous adoption and becomes the project's baseline output level. Autonomous productivity rates are presented in Table 1 over fifteen years. 8. Direct Participants. The project in the Mocorito micro-region focuses development expenditures on soil and water conservation in rainfed areas, and on opening up new rainfed and small-scale irrigation areas. Those farmers who have land which is directly affected by these developments are the direct participants of the project. In theory, most of their production constraints are overcome and they should use the proper inputs immediately in order to obtain the highest possible yields. Since not all production risks are eliminated, however, and since the farmers need a few seasons to adjust from little or no modern inputs to improved seed and fertilizer and chemical applications, a gradual uptake rate is projected. 9. Volume of Production. Table 5 shows the total volume of production projected for the micro-region for the fifteen-year period considered. Maize yields reach full development in the eighth year, and from then on a total of 20,190 tons of maize would be produced (including both rainfed and irrigated). This represents a 250% increase over production projections (or the "without project" situation (Table 2)). Production of beans is projected to more than double. In addition, some 3,800 tons of fruits (plum, nopal, and avocado) and 1,700 tons of oleaginous seeds (safflower and sesame) would be produced annually. Thus, project interventions would significantly increase production of both subsistence staples and new cash crops. 10. Net Benefits to Farmers. To calculate the value of production, yields are multiplied by hectareages, and then by local financial prices. This calculation is presented in Table 7. Net benefits to farmers are calculated by subtracting the cost of inputs from the value of output. These calculations are made for the with- and without-project situation. These cash flows appear in Tables 2 and 7 respectively. Net incremental farmer benefits can be derived by subtracting the total of without project benefits from with project benefits. This cash flow stream is found in Table 8. - 69 - ANNEX 4 Page 4 11. Additional Benefits. The calculation of net incremental farmer benefits only accounts for output from single cropping for one season per year. In fact, 15% to 30% of the maize area is intercropped with beans. The beans receive the same additional joint inputs as does the maize crop, and the benefit of these inputs is therefore multiplied. These benefits have not been included in the analysis. Secondly, as better soil and water conservation measures are introduced and as new land is brought into production, the potential for double cropping increases. Lastly, when tree crops are introduced, annual crops are intermixed during the years prior to fruit tree maturity, to take advantage of the irrigation works and under- utilized land under the tree stands. Moreover, the annual crops interplanted are most often high yielding vegetable crops because of the irrigation facilities. MEXICO INTEGRATED RURAL DEVELOPMENT PROJECT - PIDER III Crop Budgets Per Hectare/a State: Sinaloa Maize Beans Groundnuts Sesamne Safflower Pluns Rainfed Irrigation Rainfed Irrigation Rainfed Rainfed Irrigation Rainfed Crop Level Technology Without With Without With Without With Without With With _roject Projet Pect ct Project Projet Project Project Project Project Value of Inputs Land Preparation/Mechanization 450 916 1,636 600 980 2,230 600 87h 600 876 1,096 - Seeds 180 210 270 800 1,200 1,400 2,900 3,344 140 140 360 - Fertilizers - 485 703 - 450 573 - 320 - 304 500 1,785 Chemicals 223 340 - 124 124 420 - 116 300 900 Irrigation - - 1,400 - - 920 - - - 1,400 - - Hired Labor Workdays 23.7 31.6 35.5 30.4 20.5 33.4 27.6 34.1 17.9 19.9 27.8 50.7 Cost /b 2,440 3,006 3,371 2,870 1,946 3,173 2,620 3,240 1,700 1,894 2,644 4,815 o Family Labor Workdays 6.3 23.4 34.5 9.9 14.5 26.6 22.4 40.9 12.1 30.3 27.2 20.0 Cost /c 599 2,219 3,279 941 1,379 2,527 2,130 3,885 1,150 2,856 2,581 1,900 Total Variable Costs /d 2,870 4,840 7,720 4,240 4,700 8,420 6,120 8,200 2,440 3,330 6,300 7,500 Yields (tons) .7 1.8 3.5 0.4 0.8 1.6 1.3 1.7 0.3 0.7 2.2 5.3 Price (kg) 4.46 - - 12.00 - - 13.00 - 11.50 - 6.00 4.5 Value Product 3,122 7,582 15,610 4,800 9,600 13,472 16,900 22,100 3,450 8,050 13,200 23,850 Gross Margin 252 2,742 7,890 560 4,900 5,052 10,780 13,900 1,010 4,720 6,900 14,350 TOTAL LABOR (WORKDAYS) 30 55 70 40 35 60 50 75 30 50 55 70.7 /a All costs, prices, and values in Mexican pesos. /b At local wage rate of Mex$95.00. /c At local wage rate for those areas where labor is scarce; 1/2 wage rate for all others. H3B /d Total variable costs do not include family wages. a z >~ m MEXICO TNTEGRATED RURAL DEVELOPMENT PRCJECT =_PIDER III Crop Budgets Per Ilectarc State: Guerrero Coconut Palm Maize Beans Crop Level Technology 'ango (Copra) Oranges Cashew Wlithout Without Irrigation Coffee/e Irrigation Rainfed Irripatioc Rainfed Project PaJrolct Value of Inputs Land Pieparaticn/Mfeclar-ization 500 600 800 1,500 500 470 Seeds - _- - - - 170 700 Fertilizers 1,400 763 2,160 - 213 - - -- Chemicals 501 573 980 - 1,337 600 - -- Irrigation 1,100 - 1,259 - 657 - - - Hired Labor Workdays 39.0 160 28.8 43.5 87.3 40 26.7 38.1 Cost/b 3,900 16,030 9, 880 4,350 8,730 1,000 2,670 3,810 Family Labor F Wlorkdays 20 30 20 76.5 62.7 20 8.3 6.9 1 Cost/c 2,000 3,000 2,000 7,650 6,270 2,000 830 690 Total Variable Costs/d 7,401 17,366 7,879 5,150 12,437 5,100 3,310 4,950 Yields P.O .9 2.5 5.0 10.0 3.5 .8 .4 Price/kg 5.0 76.3 11.3 4.0 4.0 11.3 4.46 12.00 Value Product 3,568 4,800 ross Margin 3'',599 48,304 17,371 14 850 29,563 32*L50 258 150 '0TAL APOR (, (LAYS) 50 100 49 120 153 (0 35 (5 /a All costs, prices, and values in Mexican pesos. ib At local wage rate of Mex$100.00. c At local wage rate for t'iose areas -Inere labor is scarce; 1/2 wage rate for all othelrs /d Total variable cost do not include family wages. ,'e Coffee considered in 8th year of production. (D X FN 14 MEXICO INTEGlRATED RURAL DEVELOPMENT PROJECT - PIDER III Crop Budgets Per Hectare a State: Zacatecas Maize Beans Rainfed Irrigation Rainfed Irrigation Crop Level Technology Without With Without With Project Project Project Project Value of Inputs Land Preparation/Mechanization 340 610 1,140 440 1,108 1,108 Seeds 150 315 315 600 800 800 Fertilizers - 1,387 1,560 - 778 1,043 Chemicals - 95 142 - 133 133 Irrigation - - 353 - - 227 Hired Labor Workdays 21.9 24.3 421 28.5 18.8 50.1 Cost/b 2,190 2,433 4,210 2,850 1,881 5,009 Family Labor Workdays 8.1 30.7 27.9 11.5 12.5 15.0 Cost/c 810 3,070 2,790 1,150 1,250 1,500 Total Variable Costs/d 2,500 4,840 7,720 3,890 4,700 8,420 Yields (tons) 0.6 1.7 3.5 0.4 0.8 1.6 Price (Mex$/kg) 4.46 - - 12.00 - Value Product 2,676 7,582 15,610 4,800 9,600 19,200 Gross Margin 176 2,742 7,890 910 4,900 10,780 TOTAL LABOR (WORKDAYS) 30 55 70 40 31.3 65.1 /a All costs, prices, and values in Mexican pesos. /b At local wage rate of Mex$100.00. /c At local wage rate for those areas where labor is scarce; 1/2 wage rate for all others. /d Total variable costs do not include family wages. r - 73 - ANNE ' Taol] MEXICO INTEGRATED RURAL DEVELOPMENT PROJECT - PIDER III Crop Budget Per Hectare'- State: Yucatan Maize Melon Tomaic s Rainfed Irrigation Irrigation jrrirt on Crop Level Technology Without With Project Project Value of Inputs Land Preparation/Mechanization - 300 1,000 1,000 1,3t Seeds 315 420 440 700 1,12) Fertilizers - 800 1,350 2,600 2,4ClO Chemicals - 400 872 3,240 2,5502 Irrigation - - 1,100 1,550 3,00C Hired Labor Workdays 37.8 41.4 49.2 130.1 1177.1 Cost/b 2,995 2,900 3,938 10,410 9,42'- Family Labor Workdays 32.2 18.6 30.8 50.0 6?. Cost,'c 2,254 1,302 2,462 4,000 4,97 Total Variahle Cost/d 2,961 4,820 8,700 19,500 19,5C7 Yield .8 1.8 3.5 . 17,000 16,00C Price/kg 4.55 - - 3.00 0 Value Product 3,640 8,190 15,925 50,400 50,40 Gross Margin 679 3,370 7,225 30,900 30,9C0 TOTAL LABOR (WORKDAYS) 70 60 80 180 1W /a All costs, prices, and values in Mexican pesos. /b At local wage rate of Mex$80.00. /c At local wage rate for those areas where labor is scarce; 1/2 wage rate for all other /d Total variable costs do not include family wages. - 74 - ANNEX 4 Tab le 2 ME XI CO INTEGRATED RURAL DEVELOPMENT PRCGRAM -- PIDER III CROP-PRODUCTION MICRO-REGION: MOCORITO (SINALOA) WITHOUT PIDER YEAR 1981 1982 1983-1984 1985-1987 1988-1990 1991-1992 1993-1995 AREA CULTIVATED (HA) MAIZE 3020.0 5730.0 9480.0 9480.0 9480.0 9480.0 9480.0 BEANS 1130.0 2110.0 3500.0 3500.0 3500.0 3500.0 3500.0 SESAME 610.0 1090.0 1830.0 1830.0 1830.0 1830.0 1830.0 YIELD (TON/HA) (1) MAIZE 0.7 0.7 0.7 0.7 0.8 0.8 0.9 BEANS 0.4 0.4 0.4 0.4 0.4 0.5 0.5 SESAME 0.3 0.3 0.3 0.3 0.3 0.4 0.4 VOL. OF PROD. (TON) MAIZE 2114.0 4011.0 6636.0 6636.0 7584.0 7584.0 8532.0 BEANS 452.0 844.o 1400.0 1400.0 1400.0 1750.0 1750.0 SESAME 183.0 327.0 549.0 549.0 549.0 732.0 732.0 VALUE OF PROD. MAIZE 9513.0 18723.3 30976.8 31945.7 36509.4 36509.4 41073.0 BEANS 4068.0 7596.0 12600.0 12600.0 12600.0 15750.0 15750.0 SESAME 2196.0 3924.0 6588.0 6588.0 6588.0 8784.0 8784.0 COST OF PROD. MAIZE 9180.8 17419.2 28819.2 28819.2 30715.2 30715.2 32611.2 BEANS 4746.0 8862.0 14700.0 14700.0 14700.0 16100.0 16100.0 SESAME 1488.4 2659.6 4465.2 4465.2 4465.2 4831.2 4831.2 NET BENEFIT 361.8 1302.5 2180.4 3149.3 5817.0 9397.0 12064.6 (1) ASSUMES AN AUTONOMOUS RATE OF ADOPTION. (2) ALL VALUES IN THOUSANDS OF MEXICAN PESOS. (3) COST INCREASE REFLECTS ADOPTION RATE. ANNEX 4 Table 3 MEXICO INTEGRATED RURAL DEVELOPMENT PROGRAM - PIDER III ------------------------------------------------- CROP_PRODUCTION MICRO-REGION: MOCORITO (SINALOA) ________________________________ WIIH PIDER -- AREA CULTIVATED (HA) ---------------------------------- -------------------------------------------_---------------- YEAR 1981 1982 1983-1995 ------------------------------------------------------------ IMPROVED RAINFED MAIZE 3020.0 5640.0 9350.0 BEANS 1130.0 2110.0 3500.0 SESAME 570.0 1060.0 1750.0 PLUM 0.0 30.0 80.0 NOPAL 40.0 90.0 130.0 NEW RAINFED MAIZE 0.0 500.0 700.0 BEANS 0.0 300.0 550.0 NEW IRRIGATED MAIZE 90.0 250.0 600.0 BEANS 60.0 160.0 370.0 SAFFLOWER 40.0 100.0 230.0 AVOCADO 140.0 170.0 240.0 MEXICO INTEGRATED RURAL DEVELOPMENT PRCGRAM - PIDER III ------------------------------------------------- CROP_PRODUCTION MICRO-REGION: MOCORITO (SINALOA) ________________________________ WITH PIDER -- YIELDS (MT/HA) ____________________________ ------------------------------------------------__---------------------------__-----------------------------------------------__---------------- YEAR 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990-1995 IMPROVED RAINFED MAIZE 0.7 0.8 0.9 1.0 1.2 1.5 1.7 1.8 1.8 1.8 BEANS 0.4 0.5 0.5 0.6 0.7 0.7 0.8 0.8 0.8 0.8 SESAME 0.3 0.4 0.5 0.6 0.6 0.7 0.7 0.7 0.7 0.7 PLUM 0.0 0.0 0.0 0.8 1.1 1.9 2.5 3.2 4.5 5.3 NOPAL 0.0 0.0 3.0 4.2 6.2 9.3 11.4 12.0 12.0 12.0 NEW RAINFED MAIZE 0.0 0.0 1.0 1.1 1.4 1.7 1.8 1.8 1.8 1.8 BEANS 0.0 0.0 0.5 0.6 0.7 0.8 0.8 0.8 0.8 0.8 NEW IRRIGATED MAIZE 0.0 2.5 2.6 2.7 2.9 3.2 3.5 3.5 3.5 3.5 BEANS 0.0 1.1 1.2 1.2 1.3 1.5 1.6 1.6 1.6 1.6 SAFFLOWER 0.0 1.8 1.8 1.9 2.0 2.1 2.2 2.2 2.2 2.2 AVOCADO 0.0 0.0 0.0 1.0 2.7 3.3 4.9 6.8 7.6 8.0 MEXICO INTEGRATED RURAL DEVELOPMENT PROGRAM - PIDER III ------------------------------------------------- CROP-PRODUCTION MICRO-REGION: MOCORITO (SINALOA) WITH PIDER -- VOLIM4E OF PRCDUCTION (MT) YEAR 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990-1995 IMPROVED RAINFED MAIZE 2114.0 4512.0 8415.0 9350.0 11220.0 14025.0 15895.0 16830.0 16830.0 16830.0 BEANS 452.0 1055.0 1750.0 2100.0 2450.0 2450.0 2800.0 2800.0 2800.0 2800.0 SESAME 171.0 424.0 875.0 1050.0 1050.0 1225.0 1225.0 1225.0 1225.0 1225.0 PLUM 0.0 0.0 0.0 64.0 88.0 152.0 200.0 256.0 360.0 424.0 NOPAL 0.0 0.0 390.0 546.0 806.0 1209.0 1482.0 1560.0 1560.0 1560.0 NEW RAINFED MAIZE 0.0 0.0 700.0 770.0 980.0 1190.0 1260.0 1260.0 1260.0 1260.0 BEANS 0.0 0.0 275.0 330.0 385.0 440.0 440.0 440.0 440.0 440.0 NEW IRRIGATED MAIZE 0.0 625.0 1560.0 1620.0 1740.0 1920.0 2100.0 2100.0 2100.0 2100.0 BEANS 0.0 176.0 407.0 444.0 481.0 555.0 592.0 592.0 592.0 592.0 SAFFLOWER 0.0 180.0 414.0 437.0 460.0 483.0 506.0 506.0 506.0 506.0 AVOCADO 0.0 0.0 0.0 240.0 648.0 792.0 1176.0 1632.0 1824.0 1920.0 H'1¢ MEXICO INTEGRATED RURAL DEVELOPMENT PROGRAM - PIDER III ------------------------------------------------- CROP PRODUCTION MICRO-REGION: MOCORITO (SINALOA) ________________________________ WITH PIDER -- VALUE OF PRCDUCTION (THOUSANDS OF PESOS) YEAR 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990-1995 IMPROVED RAINFED MAIZE 9513.0 21062.0 39281.2 43645.8 54013.1 67516.4 765 18.5 81019.6 81019.6 81019.6 BEANS 4068.0 9495.0 15750.0 18900.0 22050.0 22050.0 25200.0 25200.0 25200.0 25200.0 SESAME 2052.0 5088.0 10500.0 12600.0 12600.0 14700.0 14700.0 14700.0 14700.0 14700.0 PLUM 0.0 0.0 0.0 288.0 396.0 684.0 900.0 1152.0 1620.0 1908.0 o NOPAL 0.0 0.0 1560.0 2184.0 3224.0 4836.0 5928.0 6240.0 6240.0 6240.0 NEW RAINFED MAIZE 0.0 0.0 3267.6 3594.4 4717.7 5728.7 6065.6 6065.6 6065.6 6065.6 BEANS 0.0 0.0 2475.0 2970.0 3465.0 3960.0 3960.0 3960.0 3960.0 3960.0 NEW IRRIGATED MAIZE 0.0 2917.5 7282.1V 7562.2 8376.4 9242.9 10109.4 10109.4 10109.4 10109.4 BEANS 0.0 1584.0 3663.0 3996.0 4329.0 4995.0 5328.0 5328.0 5328.0 5328.0 SAFFLOWER 0.0 1260.0 2898.0 3059.0 3220.0 3381.0 3542.0 3542.0 3542.0 3542.0 AVOCADO 0.0 0.0 0.0 1440.0 3888.0 4752.0 7056.0 9792.0 10944.0 11520.0 a- z I- t' (D X ax3 MEXICO INTEGRATED RURAL DEVELOPMENT PROGRAM - PIDER III ------------------------------------------------- CROP-PRODUCTION MICRO-REGION: MOCORITO (SINALOA) ________________________________ WITH PIDER -- COSTS (THOUSANDS OF PESOS) YEAR 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990-1995 --------------------------------------------------------------------__-------__----------------------------------------------------------------- INVESTMENT 41743.0 42667.0 37705.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 OPERATING 15735.7 33818.0 66551.8 69705.1 74561.0 81859.4 83624.4 84623.5 84669.9 847717.9 IMPROVED RAINFED MAIZE 9180.8 18273.6 32164.0 34034.0 37774.0 43384.0 44319.0 45254.0 45254.0 45254.0 BEANS 5164.1 . 9706.0 16100.0 16205.0 16310.0 16310.0 16450.0 16450.0 16450.0 16450.0 SESAME 1390.8 2798.4 4970.0 5320.0 5320.0 5827.5 5827.5 5827.5 5827.5 5827.5 PLUM 0.0 0.0 0.0 258.4 294.4 381.6 458.4 505.6 552.0 600.0 NOPAL 0.0 0.0 982.8 1077.7 1188.2 1335.1 1400.1 1417.0 1417.0 1417.0 NEW RAINFED MAIZE 0.0 0.0 2548.0 2688.0 3108.0 3318.0 3388.0 3388.0 3388.0 3388.0 BEANS 0.0 0.0 2530.0 2546.5 2563.0 2585.0 2585.0 2585.0 2585.0 2585.0 NEW IRRIGATED MAIZE 0.0 1500.0 3702.0 3804.0 4014.0 4368.0 4632.0 4632.0 4632.0 4632.0 BEANS 0.0 1040.0 2405.0 2545.6 2689.9 2974.8 3115.4 3115.4 3115.4 3115.4 SAFFLOWER 0.0 500.0 1150.0 1225.9 1299.5 1375.4 1449.0 1449.0 1449.0 1449.0 AVOCADO 0.0 0.0 0.0 1953.6 2618.4 2779.2 3602.4 3398.4 3460.8 3528.0 OFF-FARM COSTS EXTENSION 6590.0 7383.0 8631.0 8631.0 4316.0 725.0 725.0 725.0 725.0 725.0 FARMER ORG. & TRAINING 1835.0 2200.0 2640.0 2640.0 1320.0 530.0 530.0 530.0 530.0 530.0 NET BENEFIT -50270.7 -44661.5 -28850.9 17309.6 37463.8 55952.3 70825.8 77831.8 79343.0 80091.8 () C (1) COSTS ADJUSTED FOR ECONOMIC ANALYSIS. MEXICO INTEGRATED RURAL DEVELOPMENT PRCGRAM - PIDER III ------------------------------------------------- CROP-PRODUCTION MICRO-REGION: MOCORITO (SINALOA) ________________________________ WITH PIDER -- INCREMENTAL BENEFITS AND COSTS (THOUSANDS OF PESOS) YEAR 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991-1992 1993-1995 …-- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - _ _- - - - - - - _ _- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -_ _ - - - - - - -_ - - - - - - - - - - - - VOL. OF PROD. MAIZE 0.0 1126.0 4039.0 5104.0 7304.0 10499.0 126 19.0 126006.0 12606.0 12606.0 12606.0 11658.0 BEANS 0.0 387.0 1032.0 1474.0 1916.0 2045.0 2432.0 2432.0 2432.0 2432.0 2082.0 2082.0 g VALUE OF PRCID. (1) ____________________ VALUE OF PRO). -144.0 11163.2 36512.1 50074.5 69145.5 90712.2 108173.9 111411.3 113031.3 113895.3 108549.3 103985.6 ON-FARM COSTS COST OF PRCD. 320.5 4877.2 18567.4 21720.7 26576.6 33875.0 35640.0 34743.1 34789.5 34837.5 33071.5 31175.5 NET BENEFTT -50632.5 -45964.0 -31031.3 15129.2 34314.5 52803.0 67676.5 72014.8 73526.0 74274.8 70694.8 68027.1 cr 2 0C A - 81 - ANNEX 5 Page 1 MEXICO INTEGRATED RURAL DEVELOPMENT PROJECT - PIDER III Project Cost Estimates 1. The total project cost over the three-year project is estimated at US$506.0 million, of which US$96.0 million, or 19 percent represents the foreign exchange cost. The baseline costs, estimated at US$325.0 million, are based on detailed plans of eight micro-regions and extrapolated for the remaining nine micro-regions. Baseline estimates are based on June 1980 prices. Physical contingencies have been estimated at 10 percent of baseline costs for construction, civil works, machinery, and equipment. Price contingencies have been based on the Bank's revised estimates (as of October 1980) of domestic and international inflation (para 6.02). Project costs are summarized on page 39. 2. Total cost estimates and investment phasing by component for the seventeen micro-regions are shown in Table 1 of this Annex. Table 2 shows the percentage of base cost per component and investment phasing by class of accounting category: (a) civil works, materials, equipment, and vehicles; (b) labor; and (c) staff training, salary, and allowances. Table 3 presents the base cost for investment programmed per year for each of the eight micro-regions. Tables 4 and 5 show individual investment programs for two micro-regions for which crop budgets and economic analysis are presented in detail in Annex 4. 3. Table 6 shows the estimated schedule of disbursement by the Bank. ANNEX 5 MEXICO Table 1 INTEGRATED RURAL DEVELOPMENT PROJECT - PIDER III TCTAL COSTS AND PHASING OF INVESTMENTS SUMMARY TABLE: SEVE NTEEN MICR O-REGIONS (MILLIONS OF MEXICAN PESOS) YEAR 1981 1982 1983 TOTALS PRODUCTIVE AGRICULTURAL DEVEL. 579 641 586 1806 IRRIGATION 293 311 224 827 SOIL & WATER CONS. 45 71 69 185 LAND IMPROVEMENT 74 51 61 186 FRUIT CROP DEVEL. 8o 112 123 315 COFFEE DEVELOPPENT 74 77 88 240 COCONUT DEVELOPMENT 13 18 21 52 LIVESTOCK DEVELOPMENT 431 448 543 1423 BEEF & DAIRY 309 292 350 951 GOATS - 3 6 10 PORK 23 54 78 154 POULTRY 20 30 35 86 BEEKEEPING 14 13 22 50 PASTURE IMPROVEMENT 65 56 52 173 FISHERIES 45 63 97 206 FORESTRY DEVELOPMENT is 26 t0 54 RURAL INDUSTRIES 28 90 100 218 DEVELOPMENT CREDIT 245 279 303 827 SUBTOTAL (PRODUCTIVE) 1347 1548 1639 4534 SUPPORT EXTENSION (1) 198 194 222 613 RURAL ROADS 115 115 116 346 RURAL ELECTRIFICATION 81 101 163 345 RURAL MARKETING 23 29 45 98 FARMER ORG. & TRAINING 54 64 74 193 FEASIBILITY STUDIES 35 42 50 126 BASELINE STUDIES 41 28 28 96 PROD. PROG. FOR WOMEN 20 t9 19 58 SUBTOTAL (SUPPORT) 567 592 716 1675 SOCIAL INFRASTRUCTURE EDUCATION 66 74 85 225 RURAL WATER SUPPLY 52 87 71 211 NEALTF CENTERS 58 59 45 162 NUTRITION 3S 38 42 115 SELF-HELP MATERIALS 7 6 12 24 SUBTOTAL (INFRA.) 219 264 254 737 PROJECT MANAGEMENT MONITORING & EVAL. 15 17 18 50 ORG. & MANAGEMENT 53 60 65 179 TRAINING & TECH. ASSIS 21 24 26 71 BASE COST (2) 2222 2505 2719 7446 CONTINGENCIES PHYSICAL (3) 154 178 191 523 PRICE 523 1154 1950 3627 TOTAL COST 2899 3836 4861 11596 EQUIVALENT IN U.S.$M (4) 126 167 212 506 (1) Extension includes technical assistance and applied research. (2) All costs in 1980 values. (3) Physical contingency (1 09) calculated for construction and civil works only. (4) Exchange rate: MEX23/U..S$1 DEC. , 198Q - 83 - ANNEX S Tab le 2 MEDICO) INTEGRATED RERAL DEVELOPMENT PROJECT - PIDER Ill COST ESTIMATES AND INVESTMENT PHASING a~t-ssa 1Eq-up. Base-Line Service and Prosacs Tear Cost Labac Cant iS,) (Li 198D 1982 1983 Toala I. D-roetly Prodoctioc 61 Ag-r1eul-raE Dcvelteneit 2S l57 §1 5B7 1.8.7 I-rig-ci-D 11 293 311 224 828 Civil works, Ert-ialo and oquip-tnr 70 205 218 157 580 Labor 30 88 93 67 248 SIl sod Weter Cooseroarcon 3 45 71 69 185 CivlD works, iI twrieln and equipmoen 70 31 )O 48 129 Labor 30 14 21 21 36 Land Inp-ooemst 3 74 51 61 187 Material and equipmoot 80 59 41 49 150 Labor 20 15 10 12 37 ,rait Crop Development 4 80 112 123 315 T.terSals ad cqaipeent 75 60 84 92 236 Labor 25 20 2N 31 79 Coffe and Cocoout Develop-ont 4 87 96 109 292 Matorials and oquipm-en 75 65 72 82 219 Labor 25 22 24 27 73 Livastoek l.evolopeoo 19 432 449 544 1.424 Coostr_t_ tion; produat-on and handling f-ailities; maerials and equip-eot 80 346 359 435 1,139 Labor 20 86 90 109 285 F- Ilios Dvlpet p t.. 2 45 63 98 206 'aterials, bo5ts, oquip. & training 80 51 50 79 165 Lsbor 20 9 13 19 41 Foaestry Dovelopooot 1 18 26 10 55 fiasorioin and eqoupment 80 14 21 8 4d Labor 20 4 5 2 11 VRowl ISdusteies 3 28 91 100 218 Coentruwtion of plaont e.quip. aed Leaborsao 580 22 73 80 174 Labor so~~~~~~~~~~~~~~~~~~~~~2 6 ES 20 44 Devolopmeant Crodit 11 ' 245 279 303 827 Materials sod equipn te 85 208 237 257 703 Labor 15 37 42 4k 124 11. Productivc Support 26 567 593 717 1,877 tenokon iowh. ass-itanee and Appliod Resoareh 8 198 194 222 314 hvterialo, oqoip. and _ehieles 20 40 39 44 123 Scoff trainin8, salarois and allowan.ee 80 158 155 148 491 Rural Noans 5 115 IIS 116 346 CiEil works, -uterials and equip-eot 70 80 80 81 242 Labor 30 35 33 33 104 Rural flecirifieation 5 81 101 163 345 iMatorals and oquip-ent 80 65 81 130 276 Labor 20 16 20 33 69 Roral -arke-ing 1 23 29 45 98 Coostruction of uaehoussos and sto pat-rial5 and equipment 80 18 23 36 78 Labor 20 5 6 9 20 Parnoro org0 oioati-n sod ra-ieg 3 54 64 74 193 Materials, equip. and -ohieIe- 20 5l 13 15 39 Staff, farmor t-ralsg; & stff salaries aod I lloao.s s 80 43 51 59 154 Fe-sobility and Basoline Ssudicn 3 76 60 78 222 it-srislsoad eqaipneont 15 11 5 66 189 SooviEes 85 65 9 12 33 Prodsctive Pro8ram for WSaen 1 20 19 19 58 Mia.orioln. equip., aod eonsruction of planto s0 16 15 13 46 Labor 20 4 4 4 12 D1I. Soeial Iufr-stractare 10 219 264 255 738 Iduwarson 3 66 74 85 2 . Conneruetion of class rpoars; osereatlo aed equsp-ent 70 46 52 59 157 Labor ~~ ~ ~~ ~ ~~ ~ ~~ ~ ~~~~~~~~~~30 50 22 26 68 RVowl W..er Sapply 3 52 87 71 211 Constructio-, matorials aed eqaip. 70 36 61 50 148 L.,- 30 16 26 21 63 Oo-lrk ConEer 2 55 59 45 162 Consesuction, seasons In aod oqoup. 70 41 41 31 113 Labor 30 17 18 14 49 Natrit_on 2 35 38 42 115 Eds-asion-l -atsrials, eqoip. snd _h_ele 2 9 9 15 29 Staff benofieiaries trhiniog, and itaif salaries sod alloaaewo- 75 26 29 32 86 SolE-HeN.- 5 7 6 12 24 Plreria1s and aquip-ent 40 3 3 5 10 Labor 60 4 4 7 14 IV. Poreet M ..o -..ent 4 89 101 109 346t MonitoriVg and Evalsation 1 15 17 18 50 hs--orslo and oquipment 20 3 3 4 10 Staff alarfen and allwan1ee 80 12 14 14 40 0oganoastien and Ma.agenont 2 53 60 65 178 M,terialo, equip. and v-hicles 20 11 12 13 36 Se If salanoes and allowancen 80 42 48 32 142 Tweoinig and Towb- ieal Assistance 1 21 24 26 72 Mot-rials and equip-ent 20 4 5 5 14 Sorvi-en sod aIloawanco 80 17 19 21 58 V. Total Basn-Lioo Cose 100 2,224 2.507 2,722 7,453 .VI Cootinoge-ie- A. PIysiwal (10X)calculated for eonst, oEan and wioil works only 154 178 192 524 B. Pei-e 523 1.155 1.952 3.630 T-eal Coat / 2,901 2^84 4.865 11.606 ,'d o n-y -ot odd op duo so roundsng. -84 - ANNEX 5 Table 3 MEXICO INTEGRATED RURAL DEVELOPMENT PROJECT - PIDER III Investment Programmed - By Eight Micro-Regions (Mex$ millions) Project Years State / Micro-Region 1981 1982 1983 Total /b Sinaloa: 1. Mocorito-Badiraguato-Culiacan 195.8 222.9 249.5 668.2 2. Norte 172.7 213.8 226.3 612.8 Zacatecas: 3. Valparaiso 120.8 143.9 156.3 421.0 4. Tlaltenango 71.3 109.7 137.1 318.1 Yucatan: 5. Litoral Norte 107.6 119.3 141.1 368.0 6. Sur 187.9 136.9 94.0 418.8 Guerrero: 7- Atoyac 112.3 127.5 155.7 395.5 8. Costa Chica 112.6 140.7 173.9 427.2 Total Base Cost - 1.081.0 1,214.7 1,333.9 3,629.6 US equivalent (millions) 47.0 52.8 58.0 157.8 (Base Cost) /a Excluding: Feasibility and Baseline Studies, Productive Projects for Women, and Project Management (since these are administered from the federal level). Allocations will be made by federal management to micro- regions. /b Totals do not extrapolate directly to seventeen micro-regions, due to reductions planned for some components in the remaining nine micro-regions. -85 - ANNEX 5 MEXICO Table 4 INTEGRATED RURAL DEVELOPMENT PRCJECT - PIDER III ------------------------------------------------- TOTAL COSTS AND PHASING OF INVESTMENTS -------------------------------------- MICROREGION: MOCORITO (SINALOA) _______________________________ (THOUSANDS OF MEXICAN PESOS) YEAR 1981 1982 1983 TOTALS PRODUCTIVE AGRICULTURAL DEVEL. 41743 42667 37705 122115 IRRIGATION 11000 16820 11150 38970 SOIL & WATER CONS. 4092 8448 9108 21648 LAND IMPROVEMENT 19565 14535 14382 48482 FRUIT CROP DEVEL. 7086 2864 3065 13015 LIVESTOCK DEVELOPMENT 55782 72989 90259 219030 BEEF & DAIRY 49700 52600 67600 169900 PORK - 15000 15000 30000 POULTRY - 3600 3600 7200 BEEKEEPING 500 750 3000 4250 PASTURE IMPROVEMENT 5582 1039 1059 7680 FORESTRY DEVELOPMENT - 1900 4000 5900 RURAL INDUSTRIES - 2800 - 2800 DEVELOPMENT CREDIT 28093 36466 41418 105977 SUBTOTAL (PRODUCTIVE) 125618 156822 173382 455822 SUPPORT EXTENSION (1) 13180 14766 17262 45208 FEEDER ROADS 27233 16596 10200 54029 RURAL ELECTRIFICATION 12650 16180 23540 52370 RURAL MARKETING 3000 - 3000 6000 FARMER ORG. & TRAINING 3670 4400 5280 13350 SUBTOTAL (SUPPORT) 59733 51942 59282 170957 SOCIAL INFRASTRUCTURE EDUCATION 3120 4320 6480 13920 RURAL WATER SUPPLY 2950 5299 7650 15899 HEALTH CENTERS 3680 3680 - 7360 NUTRITION 758 872 1002 2632 SELF-HELP MATERIALS - - 1740 1740 SUBTOTAL (INFRA.) 10508 14171 16872 41551 BASE COST 195859 222935 249536 668330 CONTINGENCIES PHYSICAL (2) 15092 16730 18558 50380 PRICE 21095 23967 26809 71871 TOTAL COST 232046 263632 294903 790580 (1) EXTENSION INCLUDES TECHNICAL ASSISTANCE AND APPLIED RESEARCH. (2) PHYSICAL CONTINGENCY (10%) CALCULATED FOR CONSTRUCTTION AND CIVIL WORKS ONLY. DEC. 4, 1980 - 86 - ANNEX 5 MEXICO Table 5 INTEGRATED RURAL DEVELOPMENT PROJECT - PIDER III ------------------------------------------------- TOTAL COSTS AND PHASING OF INVESTMENTS MICROREGION: SUR DE YUCATAN ___________________________ (THOUSANDS OF MEXICAN PESOS) ____________________________ ------------------------------------------------__---------------------- YEAR 1981 1982 1983 TOTALS -----------------------------------------------------------------__----- PRODUCTIVE AGRICULTURAL DEVEL. 62200 49300 15700 127200 IRRIGATION 50800 44500 1170 0 107C 00 LAND IMPROVEMENT 1900 - - 1900 FRUIT CROP DEVEL. 9500 4800 14000 18300 LIVESTOCK DEVELOPMENT 33600 16500 10100 60200 BEEF & DAIRY 33400 16500 10100 60000 BEEKEEPING 200 - - 200 DEVELOPMENT CREDIT 29070 18824 8352 56246 SUBTOTAL (PRODUCTIVE) 124870 846214 34152 243646 SUPPORT EXTENSION (1) 12800 12200 13200 38200 FEEDER ROADS 9200 1000 1000 11200 RURAL ELECTRIFICATION 13300 12400 16900 42600 RURAL MARKETING 2000 2000 - 4000 FARMER ORG. & TRAINING 3900 4700 5600 14200 SUBTOTAL (SUPPORT) 41200 32300 36700 110200 SOCIAL INFRASTRUCTURE EDUCATION 3700 5000 ,6000 14700 RURAL WATER SUPPLY 8500 7800 10400 26700 HEALTH CENTERS 3700 1600 - 5300 NUTRITION 2800 3000 3000 8800 SELF-HELP MATERIALS 3200 2600 3800 9600 SUBTOTAL (INFRA.) 21900 20000 23200 65100 BASE COST 187970 136924 94052 418946 CONTINGENCIES PHYSICAL (2) 14220 10120 6690 31030 PRICE 20219 14704 10074 44998 TOTAL COST 222409 161748 110816 494974 (1) EXTENSION INCLUDES TECHNICAL ASSISTANCE AND APPLIED RESEARCH. (2) PHYSICAL CONTINGENCY (10%) CALCULATED FOR CONSTRUCTION AND CIVIL WORKS ONLY. DEC. 4, 1980 - 87 - ANNEX 5 Table 6 MEXICO INTEGRATED RURAL DEVELOPMENT PROJECT - PIDER III Estimated Disbursement Schedule (US$ million equivalent) Cumulative Disbursements Fiscal Year at end of and Quarter Amount Disbursed Quarter 1982 September 30, 1981 8.0 8.0 December 31, 1981 14.0 22.0 March 31, 1982 14.0 36.0 June 30, 1982 14.0 50.0 1983 September 30, 1982 11.0 61.0 December 31, 1982 16.0 77.0 March 31, 1983 19.0 96.0 June 30, 1983 17.0 113.0 1984 September 30, 1983 14.0 127.0 December 31, 1983 22.0 149.0 March 31, 1984 11.0 160.0 June 30, 1984 9.0 169.0 1985 September 30, 1984 6.0 175.0 MEXICO INTEGRATED RURAL DEVELOPMENT PRWJECT -- PIDER III ECONOMIC ANALYSIS -- CROPS __________________________ WITH PIDER Incremental Volume of Production (MT) /a ------------------------------------------- ---------------------------------------------------------------------------____--------------------------------------------------------------------------___ YEAR 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 -------------------------------------------------------------------__--------__------------------------------------------------------------------__--------_ MAIZE -4774 /b 15461 26868 44768 61234 81396 94074 94794 93168 93168 93168 BEANS -506 4245 7262 11868 15528 17943 20153 20309 20364 20364 16883 GROUNDNUTS 313 3770 7185 8196 9028 9860 9860 9860 9860 9860 94770 SESAME -19 434 681 1423 1423 2166 2166 2166 2166 2166 1155 SAFFLOWER - 1264 2336 2466 2596 2726 2855 2855 2855 2855 2855 VEGETABLES - 9213 14606 167413 18347 19472 20864 20864 20864 20864 20864 PLUM - - 16 178 254 406 537 698 935 1071 1071 NOPAL - - 2132 24614 5260 8577 11183 12000 12000 12000 12000 AVOCADO - - - 702 2106 3102 41570 6230 6945 7149 7149 MANGO - - 2285 8209 1641014 21798 23011 24734 26917 28615 CITRUS - - - - 3266 13938 34640 58564 97785 107985 115581 ' PEACH - - 457 1151 1974 2585 3519 4772 5402 5638 5638 1 CASHEW - - - - 915 1638 2681 4128 6426 9298 12936 COCOA - - - 22 80 128 185 249 271 271 271 COFFEE -264 -346 386 2406 5031 7521 9894 11664 13731 16083 14836 COPRA - 19 77 115 191 268 306 287 306 306 306 /a For seventeen micro-regions. The total volume of production for eight micro-regions was multiplied by 17/8, and therefore assumes the same output mix in the remaining nine micro-regions. /b Negative values for initial project years are due to shifts in cropping patterns, and in some cases, interruption of production for on-farm investments (particularly irrigation). ax MEXI C0 ItlTEGRATED RURAL DEVELOPMENT PROGRAM - PIDSR III ECONOMIC AND FINANCIAL ANALYSIS -LIVESTOCK -----------_---------------------------- INCIIRENTAL L1VESTOCK PRODUCTION _ _ _ _ _ -_ - - - - - ___ __ __ __ __ __ ___ __ __ -__ _ _ _ _ _ --- -- -______ - ___ -___------_ _ __ _ TEAR 1981 1982 1983 1984 1985 1986 198T 1988 1989 1990 1991 1992 1993 1994 1995 IHEIFEPS (300 rG/HD) - 343 470 818 1061 1B06 2075 2533 2854 3107 3511 3715 3929 3991 3981 STEERS (280 lG/HD) - - 324 1555 3970 5704 6581 7641 7326 7426 7927 8126 8244 8312 8164 CULL COWDS (350 KG/HD) - 126 598 136D 2501 3746 4601 4675 4672 4939 5017 5051 5051 5051 5C51 CULL BULL (350 KG/ND) - - - 8 78 149 403 510 454 284 300 302 302 318 318 YFARI!CG CALVES - 343 779 967 1149 1144 1144 1144 1144 1144 1144 1194 1144 1144 1194 WEANED CALVES - 990°0 195228 268488 260172 252648 24512, 155628 68112 - - - - - CATTLE-FAT.A 400 NG/ED) - 9116 6672 8090 6424 4712 3092 2098 1666 - - - - _ MILK (LT) - 3843000 6069000 11225000 12903000 15395000 15837000 15924000 15952000 16113000 16152000 16152000 16152000 16152000 161520C0 rIGS (90 KG/31D) - 2226 11660 24340 30148 30324 30324 30324 30324 3032 30324 30324 30324 30324 30324 CULL SGVS - 60 180 340 444 412 412 412 412 412 912 412 412 412 )l2 CULL BOARS - 2 a 18 20 20 20 20 20 20 20 20 20 20 20 CHICKENS (2 KG/BIRD) - 272000 56T000 9488000 958000 958000 958000 g5o0 0o9580o00 9580o 958000 958000 958000 958000 958002 HONEY (KG) - 133800 335000 688400 899700 902700 902700 902700 902700 902700 902700 902700 902700 902700 902700 1 wAX (Xs) - 2852 7072 13130 18674 18774 18774 18774 1674 18774 18774 18774 18774 18774 1e774 H7YE UNITS - - - 324 4581 4675 4675 4675 t675 9675 4675 4675 9675 4675 4675 Co KIDS - 1125 3031 3866 4594 4931 9931 9931 4931 4931 9931 4931 4931 4931 CULL GOATS - - 300 822 801 938 938 938 938 938 938 938 938 938 938 tJ m J MEXICO INTEGRATED RURAL DEVELOPMENT PROJECT - PIDER III Farm Income With and Without the Project bv Micro-Region (Crops Only)/a (000 Mex$) Guerrero Yucatan Zacatecas Sinaloa Costa Chica Atoyac Litoral Norte Sur Valparaiso Tlaltenango Norte Mocorito Rainfed Without Project 9,051 37,861 - 910 3,474 2,475 8,995 6,502 With Project 54,819 184,172 - 41 45,925 32,711 68,430 56,174 Incremental 45,768 146,311 - 3,606 42,451 30,236 59,434 49,672 Per Capita/b Without Project 2,055 1,234 _ 267 251 226 234 180 Per Capita With Project 12,448 6,004- 1,324 3,323 2,991 1,777 1,558 Incremental Per Capita Income 10,392 4,770 - 1,057 3,072 2,765 1,543 1,378 Irrigated Without Project 17,859 3,157 14,351 21,717 1,914 282 1,651 1,181 C With Project 71,295 23,973 37,254 56,378 49,594 7,296 24,134 19,519 Incremental 53,436 20,816 22,903 34,661 47,680 7,015 22,483 18,338 Per Capita Without Project 2,159 898 3,075 9,567 314 283 234 180 Per Capita With Project 8,618 6,825 7,983 24,836 8,144 _i23 3,414 2,980 Incremental Per Capita Income 6,459 5,927 4,908 15,269 7,830 7,046 3,180 2,800 Total Income Without Project 26,910 41,018 14,351 22,627 5,388 2,757 10,647 7,683 With Project 126,114 208,145 37,254 60,894 95,519 40,007 92,564 75,693 Incremental 99,204 167,127 22,903 38,267 90,131 37,250 81,917 68,010 Eight Micro-Regions Total Income Per Capita Income Family Income /c Without Project 131,381 741 4,151 With Project 736,190 4,15423260 Incremental 604,809 3,413. 19,109 31,651 farms /a It is assumed that crops represent about 40% of total farm income. /b Per capita figures based on average of 5.6 persons per farm family unit. /c Family income figures based on estimate of 31,651 farm families. D X' MEXICO INTEGRATED RURAL DEVELOPMENT PROJECT - PIDER III Farm Labor Generated by the Project at Full Development by Micro-Region (Thnii.qstrds of Workdavs) Guerrero Yucatan Zacatecas Sinaloa Costa Chica Atoyac Litoral Norte Sur Valparaiso Tlaltenan o Norte Mocorito Hired Family Hired Family Hired Family Hired Family Hired Family Hire amiy Hired Family Hired Family Labor Labor Labor Labor Labor Labor Labor Labor Labor Labor Labor Labor Labor Labor Labor Labor Rainfed Without Projecta/ 90 26 520 192 51 43 234 89 167 64 367 160 334 135 With Project 173 52 2,506 245 55 26 257 250 183 178 376 408 343 389 Incremental 83 26 1,986 53 4 (-17) 23 161 16 114 9 248 9 254 Irrigated Without Project 169 49 60 22 53 78 81 118 106 38 16 6 67 29 61 25 With Project 135 88 46 32 127 81 192 123 194 98 29 14 72 64 65 100 Incremental (-34) 39 (-14) 10 74 3 111 5 88 60 13 8 5 35 4 75 Total Labor Without Project 259 75 580 214 53 78 132 161 340 127 183 70 434 189 395 160 With Project 308 140 2,552 277 127 81 247 149 351 348 212 192 448 472 408 489 Incremental 49 65 1,972 63 74 3 115 (-12) 111 221 29 122 14 283 13 329 1 Hired Labor Income (8 Mex$100/day) ($ Mex$80/day) (@ Mex$100/day) (@ Mex$95/day) (millions of Mex$) Totals for 8 Micro-Regions Hired Labor - 2,377 Family Labor - 1,074 Total - 3,451 (@ Mex$99/day (average)) Incremental - 234.2 Incremental 4.9 197.2 5.9 9.2 11.1 2.9 1.3 1.2 a/ "Without Project" figures are for base year (1981). rD X - 92 - ANNEX 6 Table 5 MEXICO INTEGRATED RURAL DEVELOPMENT PROJECT - PIDER III Economic Rate of Return and Sensitivity Analysis A. Summary Economic Characteristics Net Present Internal Rate Discount Rate Value of Return 12% 3,070,800,000 27% B. Switching Value Percentage Exchanges for Major Benefits and Cost Streams Percentage Change Incremental Benefits - 32 Total Investments 113 Operating Costs 67.6 C. Sensitivity Analysis Assumption Economic Rate of Return Best Estimate 27% Production Lagged 1 Year 17% Production Lagged 2 Years 13% Production Lagged 3 Years 9% Benefits Reduced 20% 18% Investment Costs Increases 20% 24% Total Costs Increased 20% 20% P 199 MEXICO INTEGRATED RURAL DEVELOPMENT PROJECT -- PIDER III ECONOMIC AND FINANCIAL PRICES (MEXICAN PESOS PER MT) YEAR 1981 1982 1983 1984 1985 1986 1987-1990 1991-1995 …-_ ----------------------- ---------------_ ------__ -_ -__ -------------__ -------__ ------------------------------------_ ___ MAIZE 4500 4668 4668 4668 4814 4814 4814 4814 BEANS 9000 9000 9000 9000 9000 9000 9000 9000 GROUNDNUTS 11300 14690 13852 13852 13852 18866 18866 27290 SESAME 12000 12000 12000 12000 12000 12000 12000 12000 SAFFLOWER 7000 7000 7000 7000 7000 7000 7000 7000 VEGETABLES 3000 3000 3000 3000 3000 3000 3000 3000 PLUM 4500 4500 4500 4500 4500 4500 4500 4500 NOPAL 4000 4000 4000 4000 4000 4000 4000 4000 AVOCADO 6000 6000 6000 6000 6000 6000 6000 6000 MANGO 6000 6000 6000 6000 6000 6000 6000 6000 CITRUS 3500 3500 3500 3500 3500 3500 3500 3500 PEACH 4500 4500 4500 4500 4500 4500 4500 4500 CASHEW 11300 11300 11300 11300 11300 11300 11300 11300 COCOA 73814 76344 80254 80254 80254 81180 81180 73354 COFFEE 76340 63000 57940 57940 57940 62770 62770 69440 COPRA 11486 13034 13593 13593 13593 19060 19060 23737 CULL BULLS (PER HEAD) 13385 14166 14322 14737 14737 14737 14789 14789 CULL COWS (PER HEAD) 9638 10200 10312 1p611 10611 10611 10648 10648 HEIFERS (PER HEAD) 9631 10199 10293 10606 10606 10606 10670 10670 STEERS (PER HEAD) 13698 14506 14639 15085 15085 15085 15174 15174 MILK (PER LT) 7 7 7 7 7 7 7 7 CULL COWS (DAIRY) 10708 11333 11458 11800 11800 11800 11831 11831 UNfITO I BRD-15264 UN] T E $~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~N:E?Slts 7" !707\~~~~~~~~7~~~ N. K ~:~U N~ T E D $ T A T - EArO COBR S _1 JAMAICA 30. GUTMLA L ~-> IAAU NICA>&AGUA / ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~~ CANAL~~~~~~~~~~~~~~~~~~L AVD 0 ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~PANAMA t~~~~~~~~~~~~. ~~~~~~~~~~~900 Th,t trp h,t hb-r prApayd by the the& -W-r,lca teecdr tof CHIHUAHUA ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~The d--rti-atort -rd a,dtlha do --trsply - o he p-rt f the LOCATIONS OF MICRO-REGIONS WaddBr-rt-trh.toftrheep,rt 2 >7 COAHUILA ~~~~~~~~~~~~~~~~~~~~~~~~'~~~~E ~~NORTE a rU f ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~~~~~( U- ~~~~~~~~~~~~~~~~MOCORITO T/f a ~~~~~~~~~~~~~~~~~~~~'~73 COSALA-ELOTA SUR St 0 E c CI KU E V ZACATECAh G , L E --N LEON RIO GRANDE C. *C( q ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ - =6 FRESNI LLO-CALERA N -p 7 P~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~ALPARAISO 'p 1\ ~~~~~~~~~~~~~~~~~~~~~~~~~~~r1I~PINOS E C ~ LALTENANGO COTTA GRFANDE TMAULIPASYA 3 COSTA CHICA I s lo,~~~~~ha I OMETEPEC N ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ oro~~~~) ,s I CUAUHTEMOC NAYAR ~~~~~~~~~LITORAL NORTE 200 OCANAJIJATO, rr~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~ . ~~~~ MICRO REGIONS FINANCED UNDERCOML J A L I S 0~~~~HIDLG Is 20'0 r r , I O~~~~~~~~~~~~~~~~~~~~UrTANA ROCI L. ) C~~~~l~1jFD rkXs3 rI r OOLIM~~ ~ MICHOACAN c UULr rGMhRtThhr - t.~~j K CAMPE CHE -ITOIsohyets in Millimeters (Mean Annual Precipiltion o r' < j >IrT I- Stale ~~~~~~~~~aondorien -~~~~~~~~~~~~R R EP O. ~ ~ ~ ~ ~ ~ ~ ~ ~ BELIZE -----International Boundaries 2 h¸o5~ox~ - UU MEXICO C HII RURAL DEVELOPMENT PROJECT-PIDER MI A--~ HONDURAS D 1~0 2.0 300 400 SOD KILOMETERS 1100 100~~~~~~~~~~~~~~~~~~lo 900o.E o'~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~ 14SAILVADOR.0.0