Dominican Republic - Yaque del Norte Irrigation Project

I~T I RETUJ1I TO l _-t DOCUMENT OF INTERNATIONAL BANK FOR R]ECONSTRUCTION AND DEVELOPMENT INTERNATIONAL DEVELOPMENT ASSOCIATION Not For Public Use Report No. PA-148A YAQUE DEL NORTE IRRIGATION PROJECT DOMINICAN REPUBLIC December 22, 1972 Latin America and The Caribbean Projects Department Agriculture Projects Division This report was prepared for official use only by the Bank Group. It may not be published, quoted or cited without Bank Group authorization. The Bank Group does not accept responsibility for the accuracy or completeness of the report.  Currency Equivalents Except where otherwise stated all figures are quoted in U.S. dollars (US$) US$1 = RD$1 Weights and Measures 1 kilometer (km) = 0.62 miles 1 millimeter (mm) - 0.039 inch 1 meter (m) = 3.28 feet 1 hectare (ha) - 10,000 square meters - 2.47 acres 1 square kilometer (km2) _ 100 ha - 0.386 square miles 1 cubic meter (m3) - 1.31 cubic yards 1 million cubic meters (Mfm3) - 810 acre feet 1 metric ton (ton) - 2,205 lb 1 kilogram (kg) - 2.2 lb 1 ton paddy - 650 kg rice (white) Principal Abbreviations and Acronyms Used INDRHI - National Institute for Hydraulic Resources - Instituto Nacional de Recursos Hidraulicos IAD - Dominican Institute for Agrarian Reform - Instituto Agrario Dominicano CDE - Dominican Corporation for Electric Power - Corporaccion Dominicana de Electricidad BNA - National Agricultural Bank - Banco Nacional Agricola FETAB - Cooperative Union of Tobacco Producers - Federacion de Tabacalero INSPRE - National Price Stabilization Institute - Instituto Nacional de Stabilizacion de Precios ICO - International Coffee Organization SOGREAH - Societe Grenobloise d'Etudes et d'Applications Hydrauliques, France CIEPS - Ingenieros, ConsF.tores y Proyectistas, Mexico Fiscal Year Jano4ry 1 - December 31  DOMINICAN REPUBLIC AN APPRAISAL OF THE YAQUE DEL NORTE IRRIGATION PROJECT TABLE OF CONTENTS Page No. SUMnARY AND CONCLUSIONS ........................ i-ii I. INTRODUCTION ......... .......................... 1 II. BACKGROUND ....................... I II. THE PROJECT AREA ........................, 2 General ................................... 2 Topography ................................ 2 Climate ................................... 2 Soils ........ ............................. 3 Land Tenure ............................... 3 Irrigation Facilities ..... ................ 4 Agricultural Production and Research ...... 4 Transportation and Marketing ..... .......... 4 Enviroinment and health ..... ............... 5 IV. THE PROJECT ........ ............................. 5 Description ......... .----------------- 5 Project Works ........... ................. 6 Water Supply, Demand, Quality and Rights .. 7 Engineering Design ........................ 9 Cost Estimates .......................... 9 Financing ............................... 10 Procurement ....... ......................... 10 Disbursements ............................. 10 Accounts and Audits ........................ 10 V. ORGA4IZATION AND MANAGEMENT ..... ............... 10 Implementation of Project Works .... ....... 10 Agricultural Development ..... ............. 11 Project Coordination .... ............. 11 Extension Services ..... .............. 12 Agricultural Credit ..... ............. 12 Land Acquisition and Redistribution .. 13 Consulting Services ..... ............. 14 Training ...... ....................... 14 Operation and Maintenance .... ........ 14 Recovery of Costs ......................... 15 This report is based on the findings of an appraisal mission consisting of Messrs. A. Otten, M. Fireman, W. A. Lucas (IDA) and H. Nelson (Consultant).  -2- Pa8e No. VI. PRODUCTION, MARKET PROSPECTS, PRICES AND FARM INCOME .. ........ I ... 16 ProduCtion ................ .,........... . 16 Market Prospects . ................. , ,. 17 Prices ...... ... *..... 17 Farm Income ....... ....................... 18 VII. BENEFITS AND JUSTIFICATION ..................... 18 VIII, RECOMM4NDATIONS ..................... . , . .... . 19 ANNEXES 1. Soils 2. Existing Irrlgation Development 3. Selection and Formulation of the Project and Project Works A. Selection and Formulation B. Proposed Project Works 4. Water Supply, Demnd, Quality and Rights 5, Coat Estimates 6. Estimated Schedule of Expenditures and Disbursements 7. Consultant Services 8. Operation and Maintenance 9. Present and Projected Cropping Patterns 10. Marketing 11. Farm Budgets 12. Economic Analysis Chart Number 7217 - Construction Schedule Chart NMuber 6892 - Organization Map  DOMINICAN REPUBLIC YAQUE DEL NORTE IRRIGATION PROJECT SUMMARY AND CONCLUSIONS i. This report appraises a project for irrigation development in the Yaque del Norte River valley, for which IDA assistance of US$13.0 million is proposed. The Inter-American Development Bank (IDB) would provide an addi- tional US$13.0 million under a parallel financing agreement. The total loan would be US$26.0 million. The project would increase agricultural production in the valley by replacing or improving the existing but inadequate irriga- tion systems, which serve about 15,000 ha, and by bringing 13,500 ha of new land under irrigation. It would be the Bank Group's first irrigation de- velopment project in the Dominican Republic and its second operation in the agricultural sector. In 1971 IDA extended a credit of US$5.0 million for a livestock development project (Credit 245-DO), which is underway at the present time and making satisfactory progress. ii. During recent years the increase in agricultural production has barely kept pace with the growth in population. Demand for imported agricul- tural products has been increasing at a rate of 20% per annum since 1967, as production had dropped considerably following the 1965/66 disturbances, and Government is giving strong support to agriculture and irrigation devel- opment in an effort to diversify and increase domestic food production. It is also striving to maintain continued growth in the export of agricultural products, which constitute more than 90% of total exports. Diversification of food crops, which is greatly aided by irrigation, is also urgently needed to improve nutritional standards in the country. iii. The valley of the Rio Yaque del Norte, in the northwestern part of the country, is one of the Republic's most important areas for agriculture. With relatively good soils and an adequate water supply, irrigation has been practiced in the valley since 1920 but existing systems in the project area are inadequate and command only about one half of the potentially productive land. Furthermore, the lack of suitable drainage systems has created saline conditions in an area of about 8,000 ha which have seriously reduced the productive capacity of these lands. The proposed project would provide a modern irrigation and drainage system for 23,000 ha on the right bank of the river and an improved water supply to 4,500 ha under an existing system on the left bank. Works would include a diversion and desilting structure, irrigation and drainage systems, and on-farm development. The project would also include support for agricultural extension, research and credit and provide equipment and facilities for operation and maintenance. Concurrently with implementation of the project, Government would carry out an agrarian reform program for acquisition and redistribution of land according to a plan to be submitted to IDA. Under recently approved legislation it is estimated that between 7,000 to 10,000 ha in the project area would be expropriated and divided into small holdings whereby about 2,000 to 2,500 presently landless families would receive land titles.  - ii - iv. The estimated project cost is US$39.0 million, with an estimated foreign exchange component of US$23.0 million, or 59% of the total. IDA anc' IDB financing would cover all foreign exchange expenditures and US$3.0 mil- lion of local currency costs on civil works. The balance of local costs would be financed by Government. The total cost of civil works, on-farm works and equipment to be put out to international competitive bidding would be US$26.0 million. Land acquisition and settlement (US$3.2 million), build- ings (US$0.2 million), consultant services (US$3.1 million) and contingencies (US$6.5 million) account for the balance of project costs. v. The Instituto Nacional de Recursos Hidraulicos (INDRHI) would be responsible for implementing the project and for operation and maintenance. Due to limitations of staff, INDREI plans to engage a consultant firm to take responsibility for engineering and supervision of construction but it would retain authority for final approval of tender documents and construction contracts and for management of funds. The Ministry of Agriculture would have primary responsibility for coordinating the extension, research, and credit activities which would be expanded to meet the project needs. T1'ls would be accomplished through a coordinating committee that would include representatives from Banco Nacional Agricola (BNA), INDRHI, and the Instituto Agrario Dominicano (IAD). Technical assistance for this phase would be provided by a consultant firm specializing in agriculture. The Tobacco Institute, the Rice Growers Association and commercial processing compani.es in the area would also participate in providing research and extension assistance. vi. At full development in 1985, the net annual value of producLioz,, primarily from rice, sugarcane and tobacco, is expected to reach RD$ 10., million, compared with an expected level of RD$ 2.8 million without the project. At forecasted world market prices, the economic rate of return on the project would be 14%. The project would more than double employment opportunities from a present level of about 4,000 man-years to about 8,500 man-years; most of the additional labor requirements would be met by the grossly underemployed labor force in the area. Most of the project's beneficiaries would be smallholders having received land under the land reform; expected farm incomes would vary widely according to farm size and cropping pattern, but would, on average, increase threefold when compared with pre-project conditions. Operation and maintenance costs for the irrigation network would be fully recovered, while the level of investment cost recovery would be determined by a water charges study to be carried out under the project. Foreign exchange savings and earnings would result both from the expansion of import substitution crops and the promotion of export crops, and are expected to increase fro..i RD$ 1.3 million per annum at the end of the construction period to RD$ 8.5 million per annum at full development. vii. With assurances obtained during negotiations, the project is suitable for an IDA credit of US$13.0 million. The borrower would be the Government of the Dominican Republic.  DOMINICAN REPUBLIC YAQUE DEL NORTE IRRIGATION PROJECT I. INTRODUCTION 1.01 The Government of the Dominican Republic has requested IDA assistance in financing construction of the Yaque del Norte Irrigation Project in the northwestern part of the country. This would be the second project in the agricultural sector to receive financial assistance from IDA and the first one for irrigation development. In 1971, IDA extended a credit of US$5.0 million for a livestock development project (Credit 245-DO) to assist about 260 ranchers, as the first phase of a long-term program to increase the production of beef and milk. This project became effective on October 15, 1971. After a slow start in establishing the organization and administrative procedures to implement the project, performance has improved and disbursements are generally in line with the appraisal estimates. 1.02 An initial feasibility study for improvement and extension of existing irrigation systems in the Rio Yaque del Norte valley, downstream from the city of Santiago, was undertaken in 1966 by SOGREAH, a French consultant firm, under a UNDP-assisted project, with IBRD as the executing agency. The project proposed by SOGREAH, based on run-of-river diversions, was appraised by the Bank in 1968. However, since Government decided to proceed with construction of Tavera dam on the Rio Yaque del Norte, the proposed project had to be reformulated and the basic data re-examined. In 1969 the Government therefore contracted CIEPS, a Mexican consultant firm, to undertake a feasibility study taking into account the regulation of the river flow by Tavera dam and reservoir. The CIEPS feasibility report, completed in 1971, constituted the basis for the proposed project. 1.03 This report is based on the findings of an appraisal mission that visited the area in March 1972. The mission included Messrs. A. Otten, M. Fireman and W. A. Lucas (IDA) and H. Nelson (consultant). II. BACKGROUND 2.01 Agriculture is the dominant sector of the economy accounting for 25% of GDP, about 60% of total employment and more than 90% of the value of commodity exports. Of the total land area of 4.8 million ha, somewhat less than one half is in farms and only about one third of the farm area is cultivated. Much of the unused land is owned by the state or by absentee individuals or corporations. Typically, the average farm size is small, with farms smaller than 5 ha, accounting for about 86% of the total but less than 20% of the total farmed area. 2.02 Leading agricultural products are sugar, coffee, cocoa and tobacco representing together about 85% of all exports and cassava, plantain, peas, peanuts, tropical fruits and livestock products, principally for the domestic market. With a rapid increase in demand for agricultural products and the slow growth of domestic production, the imports of agricultural produce,  such as corn, beans, edible oils and processed foods, have increased at the average rate of 20% per year since 1967. 2.03 Despite a heavy inflow of development aid and technical assistance after 1965, the record of agricultural production over the 1960's has generally been poor. The increase of agricultural production has been hampered by an antiquated land tenure system, small farm size, absentee manage- ment, poor production and marketing technology, the absence of medium- and long-term credit facilities and extension services, the inefficient use of water resources and the uncoordinated activities of numerous poorly managed and poorly staffed public agencies. With the help of a USAID agricultural team, many of the obstacles in the way of raising agricultural output and productivity have been clearly identified. The proposed Yaque del Norte irrigation project, which would emphasize the implementation of the agrarian reform program, make better use of existing irrigation facilities and bring a significant area of new land under irrigation would be an important step in Government's overall program for accelerating agricultural production. III. THE PROJECT AREA General 3.01 The project area is located in the northwestern part of the Dor4-ican Republic in the valley of the Yaque del Norte River, one of the most important areas for agricultural production in the country. The entire Yaque del Norte basin covers 7,300 km2, of which about one-fourth is in the mountainous catchment area upstream from the city of Santiago and about equally diviuex between the drainage basins of the Bao and Yaque del Norte rivers, which Join just above Santiago. The zone of agricultural development in the valley extends downstream from Santiago for about 110 km to Monte Cristi on the coast. The total cultivated area is estimated at 80,000 ha, part of which is under irrigation from 12 main gravity systems and many individual diversion or pumping systems. (See Map IBRD 10162) Topography 3.02 Topography relief in the project area varies from moderately hilly and undulating in the upper part of the valley to uniformly flat in the lower part. In the upper part both the right and left banks are characterized by undulating valley lands with slopes of 3% to 5% and numerous natural drainage channels which separate the irrigable areas into irregular non-contiguous zones. In the vicinity of Villa Bisono on the right bank, the terrain becomes more uniform with a transverse slope of 2% to 2.5%. This is the beginning of a large flat contiguous area that extends westward to well beyond the boundary of the project area and has no topographic limitations for irrigation. Climate 3.03 The climate in the project area is tropical and semi-arid and is suited to a wide range of crops; however, there are minor differences in  - 3 - climate between the upper and lower parts. At Monte Cristi on the coast, average minimum and maximum temperatures range from 20