Dominican Republic - Livestock Development Project

Document of The World Bank FOR OFFICIAL USE ONLY Report No. 2052 FILE COPY PROJECT PERFORMANCE AUDIT REPORT DOMINICAN REPUBLIC LIVESTOCK DEVELOPMENT PROJECT (CREDIT 245-DO) May 10, 1978 Operations Evaluation 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 US$ 1 = Peso 1 WEIGHTS AND MEASURES (Metric System) 1 kilogram (kg) = 2.205 pounds 1 ton (t) = 2,205 pounds 1 hectare (ha) = 2.47 acres 1 liter (1) = 0.264 gallon ABBREVIATIONS DIA Department of International Agreement of the Central Bank FIDE Economic Development Investment Fund of the Central Bank IDB Inter-American Development Bank LPD Livestock Project Division RD$ Dominican Peso FISCAL YEAR January 1 - December 31 FOR OFFICIAL USE ONLY Project Performance Audit Report DOMINICAN REPUBLIC LIVESTOCK DEVELOPMENT PROJECT (Credit 245-DO) Table of Contents Page No. Preface Basic Data Sheet Highlights PROJECT PERFORMANCE AUDIT MEMORANDUM I Project Summary 1 II Main Issues 5 Constraints on Production Increases 5 Rate of Return 7 PROJECT COMPLETION REPORT I. Background A 1 II. Project Formulation A 1 III. Project Implementation A 6 IV. Project Impact A 13 V. Financial and Economic Returns A 16 VI. Institutional Development and Growth A 17 VII. Special Issues A 21 VIII. IDA Performance A 23 IX. Conclusions and Lessons Learned A 24 Tables 1 - 15 Annex 1 Map 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 WorM! Bank authorization.  Project Performance Audit Report DOMINICAN REPUBLIC LIVESTOCK DEVELOPMENT PROJECT (Credit 245-DO) Preface This is a report on an audit of performance under the Livestock Development Project, supported by a credit of US$5.1 million to the Government. The credit was signed in May 1971, became effective in October 1971, and closed in July 1977 fully disbursed. A follow-up project proposed has been postponed due to the Central Bank's reluctance to borrow under World Bank terms. The report consists of the Audit Memorandum and a Project Comple- tion Report prepared by the Latin America and the Caribbean Regional Office in July 1977. The Memorandum is based on the PCR, a summary review of project supervision reports, the appraisal report and other relevant Bank documents and discussions with Bank staff. The PCR adequately covers major project developments including the reasons leading to fewer farmers partici- pating in the project than anticipated at appraisal. The Audit Memorandum reviews the productivity and farm management aspects of the post-investment period and discusses the validity of the PCR rate of return calculation.  PROJECT PERFORMNCE AUDIT BASIC DATA SHE3T DONINICAN REPUBLIC LIVESTOCK DEVELOPMENT PROJECT (CREDIT 245-DO) KET PROJECT DATA Appraisal Actual or Expectation Current Estimate Total Project Cost (US$ million) 9.0 10 1 Overrun (Z) - 8 Credit Amount (US$ million) - 5.1 2 Disbursed )- 5.1 Cancelled )8/31/77 Repaid to ) Outstanding to ) 5.1 Date Physical Components Completed. 6/76 6/76 Proportion Completed by Above Date (2) 100 100 Proportion of Time Underrun or Overrun (%) - - Economic Rate of Return (%) 21 1 OTHER PROJECT DATA Original Actual or Plan Revisions Eat. Actual First Mention in Files or Timetable - - 03/21/69 Government's Application - 04/17/70 Negotiations 02/16/71 - 02/16/71 Board Approval 04/27/71 - 04/27/71 Credit Agreement Date 05/19/71 - 05/19/71 Effectiveness Date 08/17/71 10/15/71 10/15/71 6 Closing Date 06/30/7;!- 12/31/76 07/12/77 Borrower Government Executing Agency Central Bank Fiscal Year of Borrower January 1 - December 31 MISSION DATA Sent Month, No. ofL-7 No. of Date of Item B Year Weeks Persona ManeeksL- Report Identification Bank 06/69 1.3 2 2.6 07/03/69 Preparation Bank 09/69 1.0 - 1.0 09/25/69 Appraisal Bank 09/70 3.6 - 14.4 04/06/71 Total 18.0 Supervision I Bank 03/72 1.0 1 1.0 03/22/72 & 04/04/72 Supervision II Bank 08/72 1.0 1 1.0 11/07/72 Supervision III Bank 05/73 1.5 1 1.5 05/29/73 Supervision IV Bank 01/74 1.5 2 3.0 02/11/74 Supervision V Bank 10/74 2.0 1 2.0 12/09/74 Supervision VI Bank 06/75 2.0 1 2.0 06/27/75 & 07/29/75 Supervision VII Bank 02/76 2.0 1 2.0 03/03/76 Supervision VIII Bank 08/76 1.5 1 1.5 09/07/76 Supervision IX Bank 01/77 0.5 1 0.5 01/28/77 Completion Bank 04/77 1.7 2 3.4 07/12/77 Total 17.9 COUNTRY EXCHANGE RATES Name of Currency (Abbreviation) Peso (RD$) Year: -Appraisal Year Average Exchange Rate: US$1 - RD$1 Intervening Years Average US$1 - RD$1 Completion Year Average US$1 - RD$1 /1 Project was sealed dows. 2 Plus exchange adjustment of 0.1 million. 3 Most recent month available. /4 Mid-point between the higher (21%) and lower (5%) audit estiiates. The PCR estimate is higher (21%), principally because of its more optimistic expecta- tions in regard to future project performance, and partly because of differences in the assumptions underlying the calculations of the pre-project situation (see paragraph 22, and PCR, Chapter V). /5 As shown in Credit Agreement. Final disbursement date. /7 Number of 5-day weeks shown in the mission report plus travel time. 78 Number of weeks times number of persons.  Project Performance Audit Report DOMINICAN REPUBLIC LIVESTOCK DEVELOPMENT PROJECT (Credit 245-DO) Highlights The Livestock Development Project was the first agricultural project financed by IDA in the Dominican Republic. It provided funds for large farmers' long-term investments in bedf and dairy operations as well as overseas training for local technicians and a milk marketing study. Despite relatively high pre-project output of milk and beef, the project succeeded in increasing production considerably. It was also successful in the training of local staff, which was greatly expanded and exceeded appraisal estimates. However, due to inflation which contributed to unforeseen cost escalations, the project did not reach the targets set at appraisal and had to be scaled down. Funds available were only suffi- cient to finance 153 farms instead of 260 anticipated. The milk marketing study was never completed due to the inexperience of the hired consultants, but this did not have a negative impact on project outcome. The following points may be of special interest: - continuing need to overcome deficiencies in farm management (PCR, paras. 4.07, 4.11, 5.03, 9.01, PPAR, paras. 17, 19, 23); - project's success in promoting private bank lending for live- stock development (PCR, paras. 2.22, 4.14, 6.05-6.11, 6.16, 7.03, 9.03); - pre-project levels of production much higher than assumed at appraisal (PPAR, paras. 17, 18, 24(b); PCR, paras. 4.05, 4.06); - wide interest in modern ranching techniques led to substantial expansion of training activities for local technicians. (PCR, paras. 6.11, 6.12, 6.16); - selection of inexperienced consultants to undertake milk marketing study (PCR, para. 3.15); - delays in research influencing farm management practices (PPAR, para. 23; PCR, paras. 3.16-3.19, 6.04).  Project Performance Audit Memorandum DOMINICAN REPUBLIC LIVESTOCK DEVELOPMENT PROJECT (Credit 245-DO) PROJECT SUMARY 1/ 1. A Bank Group Economic Mission to the Dominican Republic in January 1969 mentioned the possibilities of a livestock credit project, and in June and September of the same year an IDA livestock specialist visited the country to assist a team of Central Bank technicians in identifying and preparing the project. The loan application was received in April 1970 but, due to staff constraints, the project was not appraised until September 1970 when a four- man IDA mission visited the Dominican Republic. 2. The objective of this project was to increase the supply of beef and milk by raising the productivity of livestock production resources. As the low calving, high mortality and slow weight gain rates encountered were due primarily to unsatisfactory herd and pasture management, the project was designed to provide livestock farmers with credit for on-farm investment and with technical assistance to enable them to adopt modern cattle production techniques. The resulting increase in livestock production was intended to enable the Dominican Republic to continue to export beef as well as satisfy domestic demand. Increased milk production was expected to be absorbed by existing dairy processing plants (principally for the manufacture of fresh milk products and cheese) and by future larger plants, which would produce condensed milk from imported milk products and local whole milk. The project was thereby to help improve the country's balance of payments, and, by develop- ing local expertise in livestock production and its financing, to set the stage for further livestock development. 3. The project was the country's first major effort to supply medium and large farmers with credit for on-ranch investments and technical assist- ance. It was to consist principally of improving 260 livestock farms -- about 100 beef breeding/fattening farms in the Eastern Region, 120 dairy/beef fattening farms in the Northern and Cibao Regions, and 40 dairy farms in the Northern Region. Project funds were to be channeled to participating farmers by the Central Bank through commercial banks, development finance companies and the Agricultural Bank. The alternative of making the Agricultural Bank the sole lending channel was considered but rejected because of the importance of developing additional channels for reaching agriculture and livestock pro- ducers. Sub-loans were to run seven to ten years, with grace periods of two to four years, at a yearly interest rate of 9%. Participating credit insti- tutions were also to finance from their own resources short-term loans, such as for purchase of feeder steers for fattening on surplus feed available during herd build-up. 4. Project farmers were to receive technical assistance from tech- nicians of participating credit institutions, supported by a newly created Livestock Project Division (LPD) within the Central Bank. LPD was to be 1/ Adapted from the PCR. - 2 - headed by a Project Director, assisted by an internationally recruited live- stock specialist during the first three years of the project. Technicians of participating credit institutions were to be approved by LPD and.these, as well as LPD staff, were to be trained in the country and abroad. A provision for pasture field trials and a milk marketing study was also included in the project. 5. The cost of the project was estimated at US$9.0 million. The IDA credit of US$5.0 million was to finance the foreign exchange component of about US$2.4 million and US$2.6 million of local costs. The contributions of IDA, the Central Bank, participating credit institutions, and farmers would be 55%, 15%, 13% and 17%, respectively. To avoid competition with a US$9.2 million IDB-sponsored livestock credit project for smaller farmers, the IDA credit was to be used for ranch development subloans of US$10,000 and more, and IDB funds for those under US$10,000. 6. The project was approved on April 27, 1971 by IDA and became effec- tive on October 16, 1971, two months behind schedule because the Dominican Congress recessed and did not resume its session until after mid-August 1971. Project operations were initiated immediately on project effectiveness with the return of the Dominican Project Director from a two-months briefing tour to Washington, Guatemala and Ecuador and the arrival of the internationally recruited livestock specialist. Overall implementation has gone smoothly, to date. 7. The major deviations from project design were the following: (a) The average subloan was RD$ 38,321 compared to the RD$ 22,800 expected at appraisal, or 68% higher than the appraisal estimate, which clearly reflects inflation estimated to be 73% between project appraisal and end 1976. As a consequence, the number of participating farms was 153 instead of 260, or only about 60% of the appraisal forecast. (b) Whereas almost all projected beef/dairy farms were developed, only about half of the projected number of pure dairy and beef farms were improved under the project. Subloan demand by potential dairy farmers was relatively low because many of them, particularly the larger ones, wanted to continue combined activities either because of habit and/or to diminish the risk of becoming specialized dairy farmers. Subloan demand by beef farmers was less strong mainly because until 1975/76 high sugar prices encouraged farmers to expand their sugarcane culti- vation rather than to intensify beef ranching. Additional factors may have been the uncertainties surrounding the application of land reform legislation and the maintenance of export prohibitions on beef as well as the low beef prices since 1974. - 3 - (c) Eight livestock farms were developed in the South Central Region, which was originally not part of the project area. (d) 60 man-months of overseas training were actually provided instead of only 12 man-months. (e) US$200,000 of IDA credit funds were reallocated to meet the higher than expected costs for management, fellowships, training and pasture research. 8. The evaluation of project performance at the farm level is based on data calculated from a sample consisting of 35 farms, or 23% of total participating farms. This evaluation brought out the following main results: (a) Participating farmers expanded their properties by an average of about 34 ha, or 18% above appraisal estimates. Improved pasture lands increased by about 15% above appraisal forecasts. (b) The amount invested in cattle went up by about 30% per farm compared to appraisal estimates because of higher cattle prices. (c) Projected investments in machinery and equipment were reduced by 43% below appraisal estimates because farmers continued to use readily available cheap hand labor. (d) The actual yearly production value of all project farms (US$3.9 million) in 1971 terms, which represents only about 70% of the projected value of production, is lower due to the smaller number of participating farms. (e) Yearly incremental milk production amounted to 10.7 million liters in 1976, which is slightly above appraisal estimates. However, incremental beef production reached only 1,600 tons liveweight instead of the projected 2,300 tons, 30% lower than the appraisal estimate. (f) The most striking bio-economic results are the milk yields achieved by the project's dairy farms, amounting, on average, to 2,400 liters per cow milked in 1976, which is 600 liters (or 33%) above pre-project production. Their per-ha milk yield for the same year was 3,100 liters. Beef yields were also above pre-project levels, 165 kg per ha per year instead of only 126 kg (or 27%). 9. Project field trials on pasture development and management are not yet conclusive, but should be continued. For this purpose, IDA approved a lump-sum of RD$ 32,000 of the remaining IDA credit funds to be used to carry out seven well-defined pasture trials over the next two years. 10. Total project costs increased by almost 12%, or RD$ 1,103,000, over the appraisal estimate, reflecting an increase in farmer's contribution of about 46% -- from RD$ 1.5 million to RD$ 2.2 million. Farmers were able to mobilize such a large amount of their own resources because about two-thirds of them had other sources of income besides farming and they were convinced that the investment credit and technology package offered under the project was financially attractive. 11. Subloan commitments and disbursements were somewhat behind schedule because of the detailed procedures for evaluating investment proposals and, in the beginning, the lack of sufficient and adequately trained credit analysts. This also resulted in delays of IDA disbursements, which were not completed until early July 1977, nine months behind schedule. 12. With the assistance of LPD, which, due to the project, became the country's leading livestock development institution, eight commercial banks and three development finance companies participated in the project, mobiliz- ing a substantial amount of their own funds, mainly for short- and medium-term lending, and adequate technical expertise to assist livestock producers. For this purpose, they increased the number of livestock technicians/credit analysts on their staff from 14 in 1972 to 34 in 1977. 13. The Central Bank gave the LPD all the authority it needed and, generally, also the personnel and working facilities required to implement the project efficiently (LPD's staff constraints are further analyzed in para. 19). The LPD staff is qualified and highly motivated and its Director was particularly competent. In fact, even after allowing for the favorable response of the Dominican livestock farmers and the excellent performance of the participating credit institutions, he was the single most important contributor to the success of the project. 14. The determination of the full extent of project induced production increase will have to wait until the full development stage (by 1982). There is scope for continued production increases. To this end, there is need for improved herd management, aiming mainly at higher cow fertility rates, and application of more appropriate fertilizer compositions for dairy farming and improving pastures for beef production using little or no fertilizer. Future project performance will also depend on cost/price relations for milk and beef production. At present, producer margins for both the enterprises are favorable and should result in continued expansion and intensification of both production systems. Continued technical assistance of LPD and the participating credit institutions could lead to improved managerial skills and investment and cost control efficiency of project farmers. Moreover, the drastic fall in world sugar prices, which increased the relative profitability of dairy and beef production significantly, should have a positive effect on the increase of project output. - 5 - MAIN ISSUES Constraints on Production Increases 15. Although the level of livestock production, especially dairying, attained in the Dominican Republic is superior to comparable countries in the same hemisphere, the PCR describes a scenario which shows some facets common to other Latin American livestock projects reviewed by OED: the relatively small number of producers, who, in their majority (54%), derive incomes also from non-agricultural activities and do not live on their farms, which are in size far above national averages; 1/ the rapid build-up of herds mainly due to purchases of breeder stock, supported by increased pasture improvement; herd management which is not fully exploiting existing production potentials, a consequence partly of unsatisfactory extension during the post- investment period; and the preference given by absentee producers to more extensive farming systems. 16. It should be noted that the Dominican Republic enjoys ecologic conditions which are most favorable to livestock development, with good weather and soils, as well as farmers who show entrepreneurial drive. Livestock production had reached a high level even before the project. The survey of 23% of the participating farms (PCR, para. 4.01, Tables 5-7) shows that average pre-project yields of milk and beef were well above appraisal estimates. 2/ 17. The PCR assumes that production increases will continue at a fast pace, but it seems that its projections are too optimistic. While there was a significant increase in production due to pasture improvements and purchase of higher yielding cows, basic weaknesses of herd management remain unchanged. Calving rates do not appear to have improved on either dairy farms (from 66% to 68%, according to the survey) or beef/dairy farms (stationary at 59%), and even deteriorated on beef breeding/fattening ranches (78% to 68%). 3/ The PCR correctly identifies the major problems leading to low and stagnant calving rates, i.e., poor cow fertility (PCR, paras. 4.07, 4.11, 9.01), which is a result of improper herd control, heat detection in cows and only marginal use of mineral licks. 1/ The average project farm in the Dominican Republic is relatively smaller than ranches/farms financed under other Latin American Livestock projects. (See Project Performance Audit Report No. 1991, Third Livestock Credit Project, Paraguay; Project Performance Audit Report No. 1920, First Livestock Project, Honduras). 2/ Milk yields, varying according to farm types, were 29%-69% above appraisal assumptions and beef output per hectare was 10%-84% higher than anticipated. 3/ The appraisal report forecasts are based on implicit increases in calving rates from 50% on all three types of farms to 73.8% for year 3.75 on dairy farms, 72.5% for year 3.5 on beef/dairy farms and 65% for year 2-3 on beef breeding/fattening ranches. The PCR statement that calving rates of all three farm categories were in line with appraisal assumptions (para. 4.07) suggests a measure of improvement that is inconsistent with survey results. -6- 18. Output will grow during the next years 1/ to full ranch development, but at a slower rate than during the disbursement period. Further production increases will be possible on dairy/beef and beef breeding/fattening ranches, where stocking rates are 28% below existing carrying capacity and herd build- up is still in progress. Dairy farms already have stocking rates above carrying capacity, the apparent fodder deficit being compensated by concentrate feeding. 19. The appraisal anticipated that technical services would provide assistance to producers by: (a) helping to prepare ranch development plans; (b) recommending such plans to participating banks; (c) supervising the implementation of development plans; and (d) advising ranchers and farmers in matters of herd, pasture and ranch management. Although the Livestock Project Division (LPD) did a commendable job, staff constraints prevented it from fulfilling all functions outlined in the appraisal report. While success- fully cooperating with the commercial bank's technicians in preparing ranch development plans, and also commenting on bank prepared papers, as well as supervision of plan implementation, provision of technical advice to ranchers and farmers after investment fell short of expectations. It would have been impossible to request this task from LPD, overburdened with its other duties and understaffed. Adequate funds should have been provided in the credit to alleviate budgetary constraints preventing the employment of additional LPD staff. 2/ 20. In view of the extension work required to overcome farm management constraints, it is disquieting to see LPD's future in jeopardy due to the follow-up project being in abeyance. There is still much work to be done, be it by advising commercial banks in their continued livestock financing, or by assisting with the completion of development of project farms and ranches. For several years, at least until 1982, LPD should concentrate on supervision and technical assistance to project ranches. In this context, LPD needs to give more attention to monitoring of farms and ranches, including holdings without project credits, to permit early evaluation of recommendations on pasture and herd improvements. 1/ Based on the appraisal and PCR assumptions, full development will be reached in eight years. Consequently, 4.25 years remain until full development for dairy farms, 4.5 years for beef/dairy farms and 5.75 years for beef breeding/fattening ranches. 2/ CPS staff does not agree that credit funds should have been provided for additional extension personnel dealing with medium and large scale farmers who are not directly charged for the cost of their services. However, in the view of this audit the appraisal had assumed that the services would be provided (paras. 3.14(d) technical assistance would be "advising ranchers and farmers in matters of herd, pasture and ranch management")but inadequate attention was paid to secure appropriate funding of this activity. - 7 - 21. Although of less importance another reason for the likely continuation of deficiencies in farm management is the two-year delay in getting started with project field trials on pasture development and manage- ment. Research results to date are not conclusive. Although supervision missions discussed resehrch problems and provided valuable guidance, IDA should have played a more active part in promoting research activities in the past. This could have been done by allocating more funds to this task at appraisal and by arranging contacts between the Dominican institutes carrying out research and other national or international organizations involved in pasture/livestock research in areas of similar ecological conditions. 1/ Rate of Return 22. The PCR estimates the rate of return of project investments to be 21%. According to the analysis by the audit, however, the rate of return is lower and may be as low as 5%. Only under very optimistic assumptions, which the text of the PCR itself would seem to rule out, do the audit's calculations reach the PCR's estimate of 21%. The wide difference between the PCR and the audit's findings stems from a different interpretation of data available, although the basis for both calculations was the same sample survey of participating farms and ranches, undertaken by LPD staff in 1976/77 (PCR, para. 4.01). The main differences are as follows: (a) Instead of reconstructing the projected farm budgets for the three types of enterprises participating in the development program, the PCR simply adopts the appraisal report's assump- tions about annual percentage increases of production costs and sales to arrive at gross and net production values. This method is prone to exaggerate the project's economic performance, because it does not take into consideration the differences between appraisal assumptions and actual on-farm developments. The group of 64 dairy farms, the most important subsector of the project, should serve as a case in point to support the audit's reservations about the validity of the PCR assumptions. (b) The appraisal estimated pre-project milk yields to be about 1,100 1/cow, reaching 1,700 1 at full development, calving rates at 50% going up to 80% and stocking rates of 1.0 animal units (AU)/ha increasing to 1.8 AU/ha. The LPD survey, however, proves that these estimates were far too conservative: pre-project milk yields averaged 1,859 1/cow, calving rates were 66% and the stocking 1/ CPS staff question whether this project would have been a suitable vehicle for promoting research activities on a large scale. However, it should be noted that the Bank agreed to rallocate remaining credit funds to expand research activities belatedly at the end and not at the beginning of the project. - 8 - rate was 1.8 AU/ha. During the almost four years of develop- ment until evaluation, the milk yields increased by almost 600 1 to 2,443 1/cow, stocking rates went up to 2.7 AU/ha, but cow fertility showed little improvement, increasing only by 2 percentage points to 68%. The stagnant calving rates seem to indicate a likely slowing down of future milk output. (c) While the appraisal assumed a modest and possibly too conservative estimate of only a 7% production increase in year one, when about 60% of the investments are made, the PCR, disregarding the law of diminishing returns when starting from a much higher production base, nevertheless considers that an increase in farm sales of 82.5% had taken place. By applying a linear increase in assessing project benefits during the project's initial years -- a much more realistic approach bearing in mind the two-year investment period as well as extended gestation of livestock develop- ment -- the PCR's ROR drops to about 15%. (d) A similar distortion occurs when the PCR, using the appraisal assumptions, arrives at the conclusion that during the remaining four to five years (para. 18, footnote 1) until full development, a production increase of almost 50% will be feasible. The participating dairy farms have reached and surpassed their carrying capacity (made possible through supplementary concentrate feeding). A further increase of milk output commensurate with the 50% sales increase projected in the PCR's rate of return calculation seems too optimistic. Pinning great hopes in F3 and F4 purebred heifers (Annex 1, para. 1(b)) seems to be unrealistic bearing in mind gestation periods and the relatively short time span of four years left for reaching full production. Sales of heifers at RD$800 may materialize in a few instances but in general the average selling price may only reach the prevailing level of RD$500 for local breeding stock (PCR, para. 3.14). Finally, there is no indication that herd management will improve in the near future because of the constraints mentioned in the preceding chapter. 23. The project has been successful in further raising milk and beef production from already high levels of pre-project production. It also demonstrates the difficulties encountered in determining accurately production trends, even after half the development period has elapsed, and points to the need of reassessing project benefits at the end of the development period. The survey results that are now available show that the ranch performance is encouraging, but less than the success previously reported by the Bank and reported in the PCR. DOMINICAN REPUBLIC LIVESTOCK DEVELOPMENT PROJECT Credit 245-DO Completion Report Table of Cotents Page No. I. BACKGROUND ......... o .................... ....* A 1 General . ..................o...... . . ... ... .....* A I II. PROJECT FOPUoLAXION ..... ..... .... o. * ****** *.. A 1 Identification .s......o.................oa*sso6.oo*.. A I Preparation ..*. *.. . *** ..* ** ***** **** *********** A 2 Appraisal .. . .... .... .. ........ o.o .... . ... . ... .... . A 3 Negotiations .. ....... .. ...... ... .... ...... .0.. A 3 Description . ... . . . .............oo* ... o . .. .. * A 3 Targets and Goals *.. ... ... . ... . ... ...... .. . A 4 Sector Significance ............................. A 5 Other Development Agencies' Role in Livestock Development .. o .. . .. ... . .... .......... ............* A 5 III. PROJECT IMPLEMENTATION .. ........ o. ...........o.... A 6 Effectiveness and Start-up ...........o... A 6 Procurement ..o.................. ................. A 10 Cost and Disbursements ........... ....o...... A 10 Covenants o.. .. ..... ....... .....o o o .. .. .... ..... A 12 Markets and Prices ... . ...... ... . . ..................... A 12 IV. PROJECT IMPACT ... ooo. . .. . ...* ... o.o...... .... A 13 Incremental Output ............. ooo..ooo...... ... A 13 Herd Productivity and Bio-economic Parameters ......... A 14 Technological Change ...o.o.... ..... ...... ...... ...... A 15 Selection of Farmers ....o........................... A 15 Employment ............ .................... ......... A 15 Impact on Non-project Farms ...... o............*......... A 16 Table of Contents (Cont'd) Page No. V. FINANCIAL AND ECONOMIC RETURNS ........................ A 16 VI. INSTITUTIONAL DEVELOPMENT AND GROWTH ................. A 17 Design and Growth ..................................... A 17 Supporting Services ............ .. .... *.............. A 17 Livestock Credit .................... A 18 Financial Performance and Returns ..................... A 19 Staffing and Training .................... ............. A 19 Foreign Technicians ................................... A 20 Accounting and Reporting ............................. A 21 Institution Building .................................. A 21 VII. SPECIAL ISSUES ............................ A 21 Substitution and Diversion of Project Funds ........... A 21 Weather and Other Risks ... ..................... A 22 Subloan Recovery ...................................... A 22 Short-term Subloans .......................... ........ A 22 on-lending Rate .................. . a.. ....... A 23 VIII. IDA PERFORMANCE ........ .................. A 23 IX. CONCLUSIONS AND LESSONS LEARNED ....................... A 24 TABLES 1 Number and Type of Farms per Region 2 Distribution of Subloans by Size 3 Distribution of Participating Farms by Size 4 Number and Professions of Subborrowers 5 Dairy Farm: Summary Evaluation of 12 Dairy Farms in the Northern Region (5 farms) and Cibao Region (7 farms) after 3.75 Years of Participation in the Project 6 Beef/Dairy Farm: Summary Evaluation of 15 Beef/Dairy Farms in the Northern Region (5 farms), Cibao Region (7 farms) and Eastern Region (3 farms) after 3.5 Years of Participation in the Project 7 Beef Breeding/Fattening Farm: Summary Evaluation of Eight Beef Breeding/Fattening Farms in the Eastern Region after 2-1/4 Years of Participation in the Project 8 Physcial Accomplishments Financed under the Project 9 Total Project Cost and Cost per Farm 10 Project Financing 11 Subloan Commitments and Disbursement 12 Schedule of Disbursements of the IDA Credit 13 Allocation of Proceeds of the IDA Credit 14 Participating Banks' Performance (Subloans Committed) 15 Short-term Financing Table of Contents (Cont'd) ANNEX I Assumptions Used to Recalculate Rates of Return Table 1 Net Flow from Investment (Dairy Farm) 2 Net Flow from Investment (Beef/Dairy Farm) 3 Net Flow from Investment (Beef Breeding/Fattening Farm) 4 Economic Rate of Return Calculation MAP  DOMINICAN REPUBLIC LIVESTOCK DEVELOPMENT PROJECT - Credit 245-DO Completion Report I. BACKGROUND General 1.01 The mainstay of the Dominican Republic is agriculture, which, in 1976, accounted for 18% of GDP, over 50% of employment, and about 80% of the total export value. About one-third of agricultural output consists of live- stock products of which beef and milk account for two-thirds. Milk production is becoming more and more important, representing 1.5 times the value of beef production. Although the country is particularly well suited to developing its beef and dairy industry and has ready, favorable domestic and export markets, the cattle population increased very slowly, from 1.0 million animals in 1960 to an estimated 1.1 million in 1970. Inadequate technology, excessive slaughter during the 1965 Civil War, drought in 1968, and shortages of develop- ment finance caused this slow growth. Since 1971, however, the cattle popula- tion has increased by an average of at least 100,000 head a year and recent estimates indicate a national herd approaching two million cattle by end 1978. 1.02 Continued expansion of the cattle industry appears likely due to favorable input/output relations (extensive, rich pasture areas and mild climate which permit year round grazing; availability of cheap labor and molasses; and attractive prices for milk, beef and breeding stock) and the efforts of many farmers to diversify their production systems by expanding or starting up beef and milk production since the drastic decline in sugar prices. II. PROJECT FORULATION Identification 2.01 A Bank Group Economic Mission to the Dominican Republic in January 1969 identified the possibilities of a livestock credit project and found that livestock development (especially dairy cattle) showed good prospects. Moreover, it considered that livestock development would favorably influence agricultural diversification, help substitute for imports of dairy products, and increase beef exports. 2.02 At the request of the Government, a Bank Group livestock specialist identified the scope of the project in June 1969, as consisting of: (a) a modest dairy cattle sub-project open to dairy farmers throughout the country A 2 but concentrating on the milksheds of the northwest (Puerto Plata) and of Santo Domingo; and (b) a beef cattle sub-project principally confined to the eastern plains of the country. The dairy cattle component, if included, was to be focussed mainly on import substitution, while the beef cattle sub-project would emphasize production of beef for both domestic and export markets. The project aimed basically at providing livestock credit, managed by the "Fondo de Inversiones para el Desarrollo Economico (FIDE)," which would channel project funds through participating public and private credit institutions to farmers. Preparation 2.03 To prepare the project, a Project Preparation Commission, working under the general umbrella of the Central Bank, was established. The Commis- sion, composed of representatives of the public, private and banking sectors, including economists, financial analysts, and livestock specialists, was assisted by Bank Project Department staff, who made periodic visits. 2.04 In September 1969, the Bank livestock specialist reviewed the first draft of the preparation report, which was little advanced, mainly because only two instead of the four Dominicans originally planned for worked on it. Two members of the Project Preparation Commission visited Washington on December 18 and 19, 1969, two months behind the original schedule. Their work was satisfactory to the Bank livestock specialist, who recommended a last review of the preparation report in the field. This, however, never took place. 2.05 The project was to be concentrated in three regions: (a) the Eastern Region, focussing on beef production; (b) the North Coast Region, emphasizing beef production as well as extensive dairying; and (c) the Cibao Region, concentrating on intensive dairying. 2.06 The Santo Domingo milkshed, the most highly specialized dairy region of the country, was provisionally excluded from the project, awaiting the results of a dairy marketing study. For this purpose, the Bank requested the FAO/IBRD Cooperative Program to carry out the study, using a dairy special- ist and an economist for two months. This study, however, never materialized because of staff constraints. 2.07 By letter dated April 17, 1970, the Governor of the Central Bank of the Dominican Republic sent the loan application for the project, which was estimated to cost US$8.9 million and to benefit 260 farmers in the Eastern, Cibao and Northern Regions, 140 of whom would be engaged in meat production and the rest in milk production. IDA's contribution to the project was estimated at US$4.4 million. A 3 2.08 The loan application was satisfactory to IDA, and, although the dairy study was not available (para. 2.06), it was decided to appraise the project as soon as staff was available and without the originally recommended final review of the preparation report in the field (para 2.04). It was envisaged that a marketing specialist would accompany the appraisal team, paying particular attention to the supply and demand of both fluid milk and milk products, and, if considered necessary during appraisal, a comprehensive dairy study would be made part of the future project itself. Appraisal 2.09 The appraisal mission consisted of two economists, one financial analyst and a livestock specialist, and, due to staff constraints, visited the Dominican Republic only in the fall of 1970, from September 8 to October 2. The mission reported that Government had requested the Inter-American Development Bank (IDB) to appraise in the fall of 1970 a livestock project for small beef and dairy farmers to be financed with "soft funds" and proposed that, to avoid competition between the IDA and IDB programs, the IDB project should concentrate on subloans of less than US$10,000 equivalent, while the IDA Project would make subloans over US$10,000. The resident staff of IDB in Santo Domingo and the Governor of the Central Bank agreed with this in principle. 2.10 The Yellow Cover Report of the project was distributed on December 11, 1970. The Loan Committee Memorandum, dated January 19, 1971, recommended US$5 million for financing of the project and foresaw, apart from the on-lending rate issue, no other major problems to be faced at negotiations. Negotiations 2.11 Negotiations for the project were held in Washington from February 16 to 19, 1971. The only issue on which agreement could not be reached was the interest rate to the ultimate borrower. While IDA insisted on a 9% interest rate, the Dominican delegation favored only 8%, which was the usual rate on livestock loans in the country. No agreement was reached on this issue during negotiations but after numerous letters, cables and telephone conversations the Central Bank finally agreed on April 6, 1971 to charge a 9% interest rate. The project was approved on April 27, 1971 by the Board. Description 2.12 The project consisted principally of improving, through credit and technical assistance, about 100 beef breeding/fattening farms in the Eastern Region, 120 dairy/beef fattening farms in the Northern and Cibao Regions, and 40 dairy farms in the Northern Region. Project funds were to be channeled to participating farmers-by FIDE through credit institutions, including commercial banks, development finance companies and the Agricultural Bank. On-farm development subloans were to be granted for pasture establishment and renovation, farm structures, machinery and equipment and breeding stock. Sub-loans.would be for seven to 10 years, with grace periods of two to four years, at a 9% per-annum interest rate. Participating credit institutions A 4 would also provide short-term loans for working capital requirements from their own resources, namely, to purchase steers for fattening on surplus feed available during herd build-up. 2.13 Participating farmers would receive technical assistance from technicians of participating credit institutions supported by a newly created Livestock Project Division (LPD), which would be established within DIA. LPD would be headed, during the disbursement period of the project, by a qualified Project Director to be assisted by an internationally recruited livestock specialist during the first three years of the project. Technicians of participating credit institutions would be approved by LPD and these, as well as LPD staff, would be trained in the country and abroad. 2.14 The project also provided for overseas training for three or four local technicians for a total of about 12 man-months. A provision for pasture field trials was included, to be subcontracted to the Ministry of Agriculture and the universities and be carried out under the supervision of the Project Director. Finally, the project was to finance the hiring of consultants for a total of about six man-months to assess the economic and market impacts of the dairy processing plants that were being established in the Dominican Republic. 2.15 The cost of the project, including incremental working capital, was estimated at US$9.0 million. The proposed IDA credit of US$5.0 million would finance the foreign exchange component of about US$2.4 million and US$2.6 million of local costs. The financing of a relatively high proportion of local costs was considered justified on country grounds. The Government would make proceeds of the IDA credit available to FIDE for a period of 15 years and FIDE would use rollover funds from subloan repayments for further lending in agriculture. 2.16 Goods required for the project would be procured through existing commercial channels as there would be enough active competition to ensure an adequate supply and satisfactory service. All cattle would be from local sources but frozen semen would be imported to carry out artificial insemination. 2.17 The rate of return of the project to the economy was estimated at 21% while the financial rates of return to participating farmers would range between 21% and 23%. Sub-borrowers' cash balances after debt service would be adequate to encourage their participation. Substantial non-quantifiable benefits were expected, particularly the introduction of superior livestock production techniques, the encouragement of domestic credit institutions to become familiar with livestock development financing, and the building up of local expertise in livestock production. Targets and Goals 2.18 The objective of the project was to increase the supply of beef and milk by raising the existing productivity levels. As the low calving rates, high mortality and slow rate of weight gains encountered in most farms A 5 were due primarily to defective nutrition and, in general, unsatisfactory herd and pasture management methods, the project was to supply participating farmers with credit and technical assistance so as to enable them to adopt modern cattle production techniques. The resulting increase in production would assist the Dominican Republic to continue to export beef in addition to satisfying domestic demand. Increased milk production would be absorbed by existing relatively small dairy processing plants (principally for the manufacture of fresh milk products and cheese) and future larger plants, which would produce condensed milk from imported milk products and local whole milk. Thus, the project would help the country improve its balance of payments, and, by developing local expertise in livestock production and its financing, set the stage for further livestock development. Sector Significance 2.19 The project was the Dominican Republic's first major effort to supply medium and large farmers with credit for on-ranch investments so as to permit them to adopt modern cattle production techniques. At full development (Year 8), the project would involve almost 100,000 beef cattle and over 20,000 dairy cows, or about 10% of the country's 1970 cattle population; after about 10 years, the project was expected to generate annually 2,300 tons of additional beef and 16 million liters of additional milk equivalent, respectively, to 8% and 6% of the 1970 national production, as well as about 7,000 breeding heifers to build up the national herd. Other Development Agencies' Role in Livestock Development 2.20 Besides minor assistance from Israel, the Republic of China and the OAS, the two major agencies involved in livestock development assistance in the country were FAO/UNDP and IDB. Since 1973, IDB has provided US$9.2 million for small- and medium-size livestock development through the PIDAGRO Program (Programa Integral de Desarrollo Agropecuario). Like the IDA project, the IDB project was a livestock credit program. Subloan amounts, however, could not ordinarily exceed US$10,000 but could go up to US$20,000 if authorized by IDB. About 5,000 farmers participated in the IDB program, of whom only about 5% received subloans between US$10,000 and US$20,000. The Government received the IDB funds at 2% interest per year, with a 40-year repayment period and 10 years of grace. Subloans were made only by the Agricultural Bank, which applied an on-lending rate of 9% to individual farmers and 8% to livestock associations or cooperatives. The period of grace was four years, with up to 12 years of repayment. 2.21 All IDB funds are disbursed, and on May 12, 1977 the loan was closed. IDB intends to evaluate the effects of its program by mid-1977, but first impressions are that the program goals were not fully reached, reflecting the difficulties of livestock credit programs that aim at intensifying the production systems of a large number of small traditional beef and dairy farmers, especially if collectively organized. IDB has recently approved a second loan for US$9.5 million for livestock development in the Dominican Republic, which is expected to become effective in fall of 1977. A 6 2.22 There are several institutions in the country which provide credit to the agricultural sector. By far the largest is the Agricultural Bank, which is channeling about 80% of institutional credit in the agricultural sector and has competent technical staff. About 20% of its portfolio has been provided for the livestock sub-sector. The majority of credits was made available to small farmers for the short- and medium-term at an 8% interest rate plus a 1% service charge. The second largest sources of credit were commercial banks and development finance companies. A very small fraction of credits has been provided by three public institutions: La Oficina de Desarrollo de la Comunidad (ODC), supported by USAID; el Instituto de Desarrollo y Credito Cooperativo (IDECOOP), supported by USAID and IDB; and la Fundacion Dominicana de Desarrollo (FDD), basically supported by the private sector. III. PROJECT IMPLEMENTATION Effectiveness and Start-up 3.01 As the Dominican Congress recessed immediately after the signature of the IDA Credit Agreement (May 19, 1971) and could not ratify the project before the orginal deadline of effectiveness, the Central Bank asked for, and IDA approved, a 60-day extension up to October 16, 1971. 3.02 On May 6, 1971, IDA approved the candidate proposed by Government to be the Director of the project. Though the candidate was a most competent Dominican livestock specialist, he was short of experience in the type of livestock lending IDA wished to develop in the Dominican Republic. IDA, therefore, arranged for him to get a briefing at Headquarters, to attend an OAS-sponsored course in livestock financing in Guatemala, and to visit a successful ongoing Bank-financed livestock project in Ecuador from October 11 to November 12, 1971. 3.03 The hiring of the Livestock Assistant to the Director of DIA proved to be difficult. IDA took a lot of pains in identifying potential candidates and, out of two, the Central Bank selected a Mexican national working with the Central Bank of Mexico. While he was interested in taking up the job, he was not released by his employer. Finally, as no alternative permanent candidates could be found, a livestock specialist from New Zealand, who was just ending his appointment as Project Director of a Bank-financed livestock project in Colombia, was seconded by the Bank as Interim Livestock Assistant to the DIA Director for five months, from October 7, 1971 to early March 1972. 3.04 The other conditions of effectiveness were relatively easily met by the Central Bank, and on October 15, 1971, the Credit Agreement was declared effective by IDA. 3.05 Number of Farms and Size of Subloans. The actual number of parti- cipating farms was 153 instead of 260, or only about 60% of the appraisal forecast (Table 1). As a consequence, the average subloan was RD$ 38,321 A 7 compared to RD$ 22,800 expected at appraisal, or 68% higher than the appraisal estimate, which clearly reflects inflation estimated to be 73% between project appraisal and end 1976. Some 75% of the subloans were in the RD$ 10,000 to 50,000 bracket (Table 2). 3.07 Type of Farms. Whereas almost all of the projected beef/dairy farms participated (37 farms instead of 40 farms), only about half of the projected pure dairy and beef farms did so (Table 1). Subloan demand by potential dairy farmers was relatively low because many of them, parti- cularly the larger ones, were traditionally beef producers and wanted to continue this activity either because of habit and/or to diminish the risk of becoming specialized dairy farmers. Subloan demand by beef farmers, mainly in the Eastern Region, was less strong than originally expected because higher sugarcane prices encouraged farmers until 1975/76 to expand their sugarcane cultivation rather than to intensify beef production. Addi- tional factors might have been the uncertainties surrounding the application of land reform legislation (para 7.05) and the maintenance of export prohibi- tions on beef. 3.08 The distribution of participating farms/ranches by different size groups (Table 3) is relatively equal with peaks in the 100- to 500-ha categories. About one-third of the beneticiaries are pure dairy/beaf farmers; 13% have, in addition to cattle, other agricultural and/or livestoCk production activities; and 54% are only part-time dairy/beef farmers, being, businessmen, medical doctors, lawyers and engineers (Table 4). 3.09 Regional Distribution of Project Farms. According to project appraisal, participating farms were to be distributed among the country's three main livestock areas: the Northern, Cibao and Eastern Regions in a proportion of 46:15:39 (Table 1). Actually, however, this proportion changed to 26:41:28, and 5%, as eight sub-borrowers were selected in the South Central Region. No livestock farms were to be financed in the latter region until the outcome of the milk marketing study became available (para 2.06). The study, however, was never completed and IDA agreed in August 1974 that eight promising livestock farms should be financed in this Region, namely, in the provinces of San Cristobal and the National District. The higher proportion of sub-borrowers in the Cibao Region is a result of the strong credit demand by the dairy farmers concentrated in that area. 3.10 Farm Size and Pasture Improvement. Although the appraisal mission did not foresee any expansion of participating farms, properties were expanded significantly, namely, through land purchase and, to a lesser extent, through renting of neighboring farmland. Botn dairy and beef breeding/fattening farms increased their sizes by almost 28%, while dairy/beef farms increased theirs by only about 5%. On the average, each of the 153 participating farms expanded by 34 ha, or by 17.6% (Tables 5, 6 and 7). As a result, pasture improvement -- through renovation of run-down pastures (about one-third of the total) and establishment of new pastures (about two-thirds of the total)--followed this trend. Here again, dairy and beef breeding/fattening farms increased their improved pasture lands significantly, by 44% and 40%, respectively, whereas A 8 the dairy/beef farms increased theirs by 29%, compared with appraisal projec- tions of 25% for dairy and beef/dairy farms and 17.6% for beef breeding/ fattening farms (Tables 5, 6 and 7). Thus, as projected, practically all pasture lands of the project farms have been improved, bringing the total of pastures improved under the project to about 24,000 ha (Table 8). 3.11 Farm Structures. All participating farms were equipped with suffi- cient and adequate fencing and watering facilities (Table 8). Some 12,800 km of fencing was constructed and a large variety of low cost watering facilities were built, including small dams, ponds, wells, water pumps, troughs and piping. Investments in both fencing and watering facilities were about the same, RD$ 540,000 and RD$ 570,000, respectively. 3.12 Approximately the same amount was spent for corrals and dairy barns. Trench silos, as suggested at appraisal, were, with two exceptions, not constructed since (a) they are not necessary under the prevailing favorable climatic conditions; and (b) many farmers have learned to grow Pennisetum and fodder sorghum varieties, which are usually handcut and stallfed during the dry seasons. Only a few new corrals were erected under the project, but the bulk of the existing ones have been repaired, improved and/or expanded. New Zealand style dairy barns were also provided, and, except for three expensive milking parlors financed under the project, the misdion was impressed with the cost efficiency and adequacy of all inspected farm structures. Investment in milking parlors is, under present Dominican conditions, economically not justified. First, they are very expensive to construct, operate and maintain; second, they are delicate to operate; third, spare parts are often difficult to obtain; fourth, they reduce labor cost only marginally; and, fifth, farmers with parlors cannot take full advantage of the availability of cheap and hard- working labor. Good hand milkers are easily obtainable, milking up to 20 cows twice a day all year round at a cost of only around RD$ 100 per month. Con- sequently, farmers are fully aware of the relative profitability of hand- milking versus machine-milking. In fact, the three milking parlors financed under the project were constructed because of prestige and hobby inclinations of their owners. 3.13 Machinery and Equipment. While investments in pasture renovation/ establishment under the project are in line with appraisal estimates and those in farm structures 19% higher than projected, investments in machinery and equipment amount to only 57% of the appraisal estimates (Table 8). This is one of the most striking positive achievements of the project as it shows clearly the cost awareness and spirit of enterprise among participating farmers. They substituted cheap and readily available hand labor for invest- ments in machinery and equipment. As a result, farmers usually have only a minimum of hand tools and milk cooling facilities and only about 50% have tractors, including relevant machinery, which are used sparingly for the cattle business, serving mainly for other agricultural activities. The remaining 50% of the farmers rely on hand labor or rent machinery, principally for pasture establishment. A 9 3.14 Breeding Stock. About 30% more than projected was spent for breeding stock financed under the project (Table 8), which is explained by a price increase of about 50% for local breeding stock since appraisal. As a result, dairy farms and beef/dairy farms have less Animal Units than projected, about 5% and as much as 50%, respectively. The beef breeding/ fattening farms, on the other hand, increased their Animal Units by about 25% over the appraisal estimate. Altogether, about 5,000 breeding heifers/young cows and some 120 breeding bulls were procured under the project. 3.15 Dairy Marketing Study. The carrying out of a dairy marketing study (para 2.06) was considered by the appraisal mission as essential for the development of the industry in view of two dairy plants to be established under the Industrial Incentive Law and of the country's vague dairy import and milk price policies. The study was, with IDA agreement, to be carried out by the Dominican consulting firm INDOTEC, which was, however, inexperienced in this field. As a result, it was never completed, and, with IDA's approval in January 1977, was dropped. In the view of the mission, the taking up of the study is presently not essential, as supply/demand conditions since appraisal have resulted in sufficiently attractive producer prices for milk, and the Dominican dairy processing industry and marketing outlets are well established. 1/ 3.16 Trials. Project field trials on pasture development and manage- ment were initiated in 1973 under contract between the Central Bank and the research branch of the Ministry of Agriculture (CNIECA) at the latter's trial station in San Cristobal (33 ha) and its sub-station at Higuey (7 ha). Both stations received infrastructure such as fences, planting materials and seeds, fertilizer, equipment, feeder steers and necessary labor and funds for machinery rental. Trials were carried out under the superivision of a competent Dominican agronomist, assisted by FAO experts (para 2.22). 3.17 At San Cristobal, emphasis was placed on the response of African Star and Pangola grass -- both common in the country -- to applications of nitrogen and phosphorous under different grazing regimes, using feeder steers to measure input/output relations. In Higuey, trial work was undertaken on legume introduction in Pangola, Guinea and African Star pastures, together with the application of phosphatic fertilizers. Project farmers have not yet profited from the trial efforts, partly because it is still too early to draw definitive conclusions, but also because the recent droughts rendered the interpretation of results difficult. Information on the findings is now being prepared by CNIECA and LPD for distribution among project farmers. 3.18 Preliminary results indicate that the Pangola, Guinea and African Star pastures at both trial stations responded well to net nitrogen applica- tions of 250 and 300 kg per ha, allowing stocking rates of up to 4.5 Animal Units per ha. Fertilizer costs (in 1976 prices), however, amounted to almost RD$ 300 for an estimated additional liveweight increment of 188 kg, worth only RD$ 130. Until cost/price conditions change, the use of fertilizers on grass pastures cannot be justified for beef production. In fact, beef producers are historically aware of this and apply only little fertilizer or none at 1/ A broader study covering marketing of all livestock produce is now underway and this study will adequately cover aspects of milk marketing. (Information received from Central Bank in March 1978) A 10 all on their grass pastures (para 4.09). The situation for dairy farming, which can generate gross incomes of around RD$ 800 per ha per year, on the other hand, is different. There, high fertilizer applications to grass are common (para 4.09). While the results of trials with grass/legume asso- ciations and little or no fertilizer for beef production on rangeland are still inconclusive, an association of African Star grass with Glycini legumes seems to thrive well under the conditions at San Cristobal and may hold some promise. 3.19 Although the trial work carried out thus far has not yet had any effect on project farms, it is the view of LPD and the Completion Mission that it should be continued, namely, to: (a) determine the longevity of grass/legume associations and their maintenance requirements and costs with a view toward improving pastures for beef production on a commercial basis with minimum or no fertilizer applications; (b) test new grass and legume species/subspecies on a small scale; and (c) establish optimal fertilizer formulas for the different ecological and soil conditions of the project area. Such determination is particularly urgent as many project dairy farmers apply standard fertilizer formulas despite the fact, for example, that their soils are generally acid and the costly phosphorous is likely to become fixed. The Completion Mission therefore recommended, and IDA approved, that a lump sum of RD$ 32,000 of the remaining IDA credit funds be transferred to the Central Bank to be used to carry out seven well-defined pasture trials over the next two years. Procurement 3.20 As expected, procurement through existing channels for both local and imported goods was generally adequate (para 2.18). Two procurement problems, however, arose: (a) a continuous shortage of fencing posts as a consequence of the country's strictly enforced reforestation laws, now, however, overcome; and (b) insufficient supply of local heifers/young cows, which made the purchase of breeding stock cumbersome and expensive. As a result, during the initial two years of the project, when price increases of other project inputs were only about 15%, prices for breeding stock went up by as much as 50%. In contrast, there was an adequate supply of feeder steers at reasonable prices. Cost and Disbursements 3.21 Total project cost and project cost per farm are shown in Table 9. Total project cost increased by almost 12%, or RD$ 1,103,000 over the appraisal estimate. Total investments per farm increased by about 87%, A 11 compared with the appraisal forecast -- from RD$ 28,461 to RD$ 53,150 -- mostly because of inflation, estimated at 73% between 1971 to 1976, and farmers readiness to invest their own resources (Table 10). 3.22 Several factors, in addition to inflation, have influenced the relatively large size of subloans under the project. First, larger farmers tend to be the most knowledgeable about availability of credit funds and more willing and able to accept and cope with the risks involved. Thus, they were usually the most active participants in the project. Second, participating banks tend to concentrate on larger clients because costs of credit analysis and supervision are lower relative to the potential profit and there are fewer problems with land titles and/or real estate and chattel mortgages. Finally, even the LPD staff tended to look at subloan applications of larger farmers more enthusiastically in view of the possibility to commit larger credit amounts with the same effort and the better prospects for successful operations. 3.23 The major difference between appraisal estimates and actual per- formance is the increase in the proportion financed by the farmers themselves -- about 46% more than originally expected (Table 10). About two-thirds of the farmers have other sources of income besides livestock farming (Table 4) and this enabled them to mobilize the high amount of own resources as they were convinced that the investment credit and technology package offered under the project was financially attractive. 3.24 Altogether, 170 subloans were approved, 17 of which were cancelled, leaving a total of 153 subloan commitments, amounting to RD$ 5,946,000 (Table 11). Of this amount, RD$ 5,652,000 had been disbursed at the time the Completion Mission was in the country. Subloan approvals were highest in 1972 and 1974 with 29.2% and 29.9%, respectively, of the total. The years 1973 (22.7% of the total) and 1975 (18.1% of the total) were lower because of uncertainties arising from agrarian reform and land tenure laws as well as because of a draft law that would limit the cattle raising to areas not suit- able for crop farming. This made many farmers cautious vis-a-vis new on-farm investments for cattle raising. Instead they used their land to expand and intensify sugarcane cultivation, which enjoyed better protection and incen- tives from the Government and benefitted at that time from very favorable world market prices for sugar. 3.25 Although subloan disbursements were somewhat behind schedule, commitments were approximately as anticipated (Table 11). The slower dis- bursements were caused by the detailed procedures for evaluating investment proposals and by the lack of sufficient and adequately trained credit analysts. Subloan funds were fully committed in the third quarter of 1975, about eight months behind schedule because of the slowdown in business activity in the election year of 1974. To compensate for the subloans cancelled during 1975, three additional subloans were committed in 1976. IDA disbursement (Table 12) was behind schedule, mainly because of a lack of experience in preparing withdrawal applications to IDA in the initial stage of the project and later in 1975 by the reorganization of the Central Bank. As a result,. IDA did not complete disbursement until July 12, 1977, nine months behind the original schedule. A foreign exchange rate adjustment on the amount of the IDA credit A 12 was made in 1973, when the US dollar was devalued. Since some of the IDA disbursements were made in strong currency vis-a-vis the US dollar, the dollar equivalent of the credit outstanding increased by US$78,271.71, over US$5.0 million. Table 13 gives the allocation of the proceeds of the IDA credit. The only significant difference between their projected and actual use is the higher actual costs for expatriate staff, training and research, which come to almost twice the amount originally earmarked for this purpose. To meet this cost, US$200,000 of the IDA credit funds were reallocated. Covenants 3.26 After a two-month delay, all legal covenants conditioning credit effectiveness were complied with as were the other covenants, all of which have been maintained in their original form. Markets and Prices 3.27 The project was favored by significant current price increases for beef and milk. The farm-gate price of beef rose by over 50%, from RD$ 0.40/ kg liveweight in 1971 to about RD$ 0.62/kg in 1976, while farm-gate milk prices rose by over 50% for both pasturized and directly marketed milk as well as for milk for cheese production, from RD$ 0.14 per liter in 1972 to around RD$ 0.23 at the end of 1975. Discounting inflation, these price increases indicate that input/output relations actually did not improve during the project implementation period, as they amount to only RD$ 0.36 per kg liveweight of beef and RD$ 0.13 per liter milk. However, despite these somewhat lower real prices, farmers, particularly dairy farmers, found them sufficiently attractive to raise production significantly. In fact, most of the farmers interviewed by the mission expressed their satisfaction with the present price levels for beef and milk. 3.28 Marketing channels from producers to processors are well established by the private sector for both beef and milk and there was no problem in this respect. Dairy plants send out trucks to collect the milk from each dairy farm. Demand for milk has been strong throughout the disbursement period, and the three main pasteurizing plants of the country (CODAL, Fresca and Rica, which were visited by the mission) as well as artisanal cheese manufacturers are more than willing to increase their output if they can find additional milk. Fresca and Rica, which account for more than two-thirds of the country's pasteurized milk production, increased their daily production from 52,000 liters in 1972 to 128,000 liters in early 1977 and both are presently expanding their processing capacity substantially. A 13 IV. PROJECT IMPACT Incremental Output 4.01 Project performance at the farm level was evaluated by LPD between October 1976 and March 1977, using as a basis, a detailed questionaire pre- pared by the last two Supervision Missions. The sample, comprising 35 farms, or 23% of total participating farms, consisted of 12 dairy farms, 15 beef/ dairy farms, and eight beef breeding/fattening farms. The summary evaluation of these three farm categories is given in Tables 5, 6 and 7. Sixteen of the farms were visited by previous Supervision Missions and 14 by the Completion Mission. The latter could ascertain that the LPD staff, which spent one day of evaluation work for each farm, undertook a serious and comprehensive assessment of the project's results. However, the Completion Mission found generally better results than LPD, which might indicate that farmers had further improved and expanded their cattle business after the LPD evaluation visit, namely, in regard to higher stock numbers and larger sizes of farms and improved pastures. 4.02 . The actual value of the project's total yearly production is esti- mated at about US$6.8 million, compared to US$5.6 million forecast at appraisal. However, in 1971 terms, the actual yearly production value amounts to only US$3.9 million, which represent only about 70% of the projected value of pro- duction. The lower actual total production value is primarily due to the smaller number of participating farms, which was 60% (or 107 farms) lower than originally projected. However, due to the actually achieved high milk yields, the value of yearly incremental production, in 1971 terms, is only about 6% below appraisal forecasts, amounting to US$1.82 million instead of US$1.93 million. 4.03 As to the volume of project output, actual yearly milk production under the project amounted to 16.2 million liters, which is 2.8 million liters (or 21%) above the appraisal estimate. This is a remarkable positive result as it was achieved with only 101 dairy-beef/dairy farms instead of with 160 as originally planned. Accordingly, incremental annual milk production amounted to 10.7 million liters, which is 2.0 million (or 23%) above the appraisal estimate. Beef output of the project in 1976, however, was lower than expected, amounting to only 4,900 tons liveweight, compared to 8,200 tons liveweight estimated at appraisal, thus being about 40% lower. In line with this,-incremental beef production reached only 1,600 tons liveweight instead of the projected 2,300 tons, which is about 30% lower than the appraisal forecast. This reflects the fact that the number of project farms was about 59% under expectation. 4.04 A very rough estimate by LPD and the Completion Mission reveals a yearly milk production of 365,000 tons at present for the Dominican Republic. This would be 115,000 tons, or almost 50% more than the country's 1970 milk output. About 10% of this incremental output is estimated to be supplied by project participants. Beef production, however, increased much more slowly A 14 during the last years (from 37,000 tons in 1972 to 40,000 tons in 1976), mainly due to attractive prices of sugarcane and the recent drought years (para 7.04). Herd Productivity and Bio-economic Parameters 4.05 The most positive results in herd productivity are the milk yields achieved under the project (Tables 5 and 6), basically resulting from better than expected management. The sample of 12 dairy farms indicates an average milk yield per cow milked of 2,400 liters in 1976, which is 900 liters (or 60%) above appraisal estimates, and per-ha milk yields for the same year amounting to 3,100 liters, or 2.7 times above projections. The best dairy farm averaged almost 3,500 liters per cow milked in 1976. Beef/dairy farms achieved similarly high milk yields vis-a-vis projections, averaging 2,000 liters per year, which is almost 2.4 times higher than the projected milk yields. At the same time, dairy farms increased the size of their cow herds by almost 40% above appraisal estimates, while beef/dairy farms increased theirs at about the same rate as projected. 4.06 Total annual beef production of the pure beef farms also increased significantly under the project, being 44% higher than originally projected. This is reflected in highef liveweight yields per hd Per year, actually esti- mated at 165 kg compared to the appraisal forecast of only 130 kg (Table 7). Beef production on the dairy and beef/dairy farms was however lower than proj- ected (38% and 71%, respectively), which reflects the greater interest of these two farm types in expanded milk production. 4.07 Calving rates of all three farm categories were in line with appraisal assumptions. In this connection, three categories of farms could be distinguished, each comprising about one-third of the participating farms: those with calving rates around 90%, 70%, and 50% to 60%. This clearly in- dicates the wide scope and possibility for improvement of cow fertility through mineral licks (there is widespread phosphorous deficiency), more intensive vaccination campaigns against brucellosis, and better herd manage- ment (namely, the elimination of sterile cows through pregnancy tests; the provision of sufficient breeding bulls; and, in some of the dairy herds, personnel training in recognizing cows in heat). 4.08 Adult and calf mortality rates are low by any standards. Some of the farms visited by the mission had an almost zero percentage mortality rate, but the average mortality rate of the participating farms is in line with appraisal forecasts. There is no foot and mouth disease. The most important diseases, apart from external and internal parasites, are tuber- culosis and brucellosis, which, since 1972 have been reduced drastically through Government-sponsored vaccination programs. 4.09 Actual stocking rates for the dairy/beef and beef farms increased since appraisal by about 10% and 30%, respectively, and are more or less in line with appraisal projections (Tables 6 and 7). The dairy farms, however, increased their stocking rates by 65% above projections, reaching an average A 15 of 2.7 Animal Units/ha (Table 5). This relatively high stocking rate is mainly a result of high concentrate feeding and of fertilizer applications of up to I ton per ha per year (usually compounded fertilizer formulas), whereas the beef/dairy and beef farms, with stocking rates of only about 1.4 Animal Units/ha generally apply much less fertilizer (around 200 kg/ha/ year) or none at all. 4.10 The encouraging results mentioned are, to a large extent, attri- butable to the project since only limited credit and technical assistance for livestock would have been available without it. Other factors which stimulated project output favorably are undoubtedly the seemingly attractive milk prices since 1975 (para 3.27), generating gross incomes from milk production alone of around US$800 per ha per year, and the recent drastic fall in world sugar prices, which increased the relative profitability of dairy and beef production significantly. Technological Change 4.11 Under the project, technical targets set at appraisal were largely achieved, particularly under the dairy component, where rational milking (twice per day), feeding and pasture management techniques were successfully introduced. Further improvement of herd management, however, aiming mainly at higher fertility rates, Ao well as the applicatidt of more appropriate fertilizer compositions is still required. Selection of Farmers 4.12 One of LPD's tasks was to describe to potential sub-borrowers and participating credit institutions the features and lending procedures of the project, including special eligibility requirements. This comprised (a) sound investment plans; (b) real estate mortgages or chattel mortgages on livestock and equipment, or both; (c) a 20% farmers' participation in total investments; and (d) the condition that no more than 50% of the proceeds of the subloans or of the total amount of the respective investment plans, whichever was considered more appropriate by LPD, was to be used to purchase breeding cattle. Investment plans were prepared by participating banks and approved by LPD. Altogether, 371 subloan applications were received by LPD and it approved 306. Out of these, 152 applications were cancelled, leaving a total of 154 approved subloans. The reasons for subloan cancellation were primarily loan security issues, but also included the fact that some potential sub-borrowers did not like to have LPD prescribe and approve on-farm investment projects and strictly control their execution. Employment 4.13 While the appraisal report does not claim any specific employment effects due to the project, about 600 farm hands found full-time jobs. Assum- ing that the project created another 100 jobs within related supply, marketing and processing facilities, the average investment cost per job created was about RD$ 13,000. This compares with RD$ 6,000 per job created in the Dominican Republic's manufacturing sector. A 16 Impact on Non-project Farms 4.14 This impact is difficult to quantify as LPD has no data available on the subject and the Completion Mission's stay in the country was too short to analyze it. Several non-project dairy farms were pointed out, however, which had about the same standards of on-farm development and yields as the farms participating under the project. They were developed following the technical patterns of project farms, usually using farmers' own funds, but sometimes supported by short- and medium-term finance from private credit institutions, which, in some cases, also provided long-term development loans. In view of the mission, it is justified to state that the project has already contributed and will continue to contribute substantially in the future to the development of non-project farms. V. FINANCIAL AND ECONOMIC RETURNS 5.01 Actual financial and economic rates of return have been calculated assuming a linear increase in sales and operating expenses between the pre- project situation and the situation at the time of the LPD Survey. For the future, the calculation is based upon the annual rates of increase projected at appraisal, which is justified in light of the fact that the actual performance under the project is, thus far, generally in line with appraisal forecasts. The validity of this assumption and the resulting financial and economic rates of return rest on the expectation that the beef and dairy industry will continue to enjoy favorable cost/price relations for milk and beef, and that herd and pasture management will further improve as a result of adequate follow-up technical assistance by both LPD and the participating credit institutions. Should however the comparative position of the dairy and beef industry deteriorate or management performance of beneficiaries remain below expectation, the financial and economic rates of return would be lower than the projected rates without however being expected to drop below an acceptable level. 5.02 At the time of appraisal, financial rates of return were estimated at 22.7%, 22.6%, and 21.3% for dairy farms (100 ha), beef/dairy farms (250 ha), and beef breeding/fattening farms (400 ha), respectively. Based upon the findings of a sample survey (para 4.01), the rates were recalculated and results showed about 25% for dairy farms, 21% for beef/dairy farms and 16% for beef breeding/fattening farms (Annex 1, Tables 1, 2 and 3). Thus, dairy farms improved above the appraisal forecast, while beef/dairy farms and beef farms remained under expectations. However, even the latter two farm categories gained a satisfactory net income after debt service. 5.03 For dairy farms, improved pastures increased by about 19% over the appraisal forecast, allowing 40% higher stocking rates at full development. This improvement resulted in an increase of both investment and operating costs, which, in 1971 prices, increased by respectively 52% and 100%. However, the higher costs are more than compensated for by increased production. Thus, gross operating income increased by 123% above the appraisal forecast. In the case of beef/dairy farms, improvements are greater than expected, but less than those achieved by dairy farms. For beef breeding/fattening farms, it is too early to judge the real impact of the project as most of the A 17 farms surveyed have participated in the project only for about two years. Preliminary observations, however, indicate that profitability is less than estimated at appraisal due to higher extraction rates (21.6% in Year Two as compared to the appraisal projection of only 10.4% for the same year), result- ing in a much slower herd build-up than originally expected, and, consequently, in a lower total profitability during the 12-year period for which the rate of return has been calculated. 5.04 The economic rate of return of the project has been reestimated at 21%, the same as the appraisal estimate (Annex 1, Table 4). The relatively poor performance of beef farms is expected to be compensated for by the higher productivity of dairy farms. VI. INSTITUTIONAL DEVELOPMENT AND GROWTH Design and Growth 6.01 LPD was given all the authority needed to execute the project and it has enjoyed the cooperation and support of the senior staff of the Central Bank. However, there were times when personnel and transport facilities to handle the growing volume of subloan applications were not adequate. At present, for example, LPD needs to recruit two livestock credit analysts. The present staff (six professionals and three secretaries) is sufficient to handle only the appraisal of new subloan applications -- to be funded to a large extent with the Central Bank's own resources -- with the result that the follow-up of subloans already approved and the necessary consultation with participating credit institutions fall short of needs under programs of this kind. This personnel shortage also limits highly desirable technical assistance activities, including the introduction of farm records and simple accounting systems, which, at present, are practically non-existent. 6.02 The LPD staff is qualified and highly motivated. In particular, its Director deserves high praise. In the view of the mission, the fortunate selection of the Project Director was, besides the favorable response of the Dominican livestock farmers, the single most important reason for the success of the project. 6.03 The reason that LPD could attract this high caliber staff is attri- butable to a program of performance evaluation within the Central Bank under which salaries and promotion possibilities are reviewed annually, resulting in salaries which are up to 50% above the average paid in the Dominican Republic to technicians in comparative categories. Participating credit institutions pay similar attractive salaries. Supporting Services 6.04 Aside from Government-sponsored effective vaccination programs (para 4.08), project farmers received no additional outside technical services, as the National Livestock Extension Service of limited efficiency promotes A 18 basically small-scale farmers and cooperatives only and the pasture and livestock research activities have not yet resulted in an appropriate feed- back to the farm level. Efficient milk marketing services were, however, provided to project farmers by the private milk processing industry. 6.05 A most significant positive effect on project performance has to be attributed to the eight commercial banks and three development finance companies participating in the project (Table 14). Although, at project start-up, LPD had to work hard to get them involved in its program, they soon showed substantial interest in it and have been very active in identifying, processing and supervising subloans. The indicator reflecting this active participation is the number of livestock technicians/credit analysts hired by these credit institutions, which increased 2.5 times, from 14 in 1972 to 34 in 1977. Most of them spent about one-third of their time in the field to give technical assistance in bringing about the success of the project and have been much appreciated by the farmers. Since about 20% of the project farmers had no previous experience in livestock production at all and the bulk of the remaining 80% had only little know-how in rational livestock production methods, they could not have turned into successful producers without the active support of the participating credit institutions. 6.06 There is a wide variety of technical competence among the partici- pating credit institutions. Among the best are the Agricultural Bank and two development finance companies. The latter are very keen to provide long-term investment funds to agriculture, especially in the livestock sub-sector. They have capable technical staff (many were trained overseas under the project) and their importance in livestock lending is growing. One characteristic of the development finance companies is their concentration on larger loans and larger farms, compared with commercial banks; for example, the average size of subloans in 1975 made by the companies was RD$ 75,600, compared with RD$ 13,200 for commercial banks. 6.07 The Agricultural Bank is the most important participating bank under the project, financing almost 30% (or RD$ 1.8 million) of the project's on-farm investments, followed by the Chase Manhattan Bank, which financed about 16% (or RD$ 1.0 million) of the on-farm investments (Table 14). The Agricultural Bank has a very competent technical service team of 10 livestock technicians, and mainly because of IDB funding, its outstanding loan portfolio in the livestock sub-sector increased from RD$ 13.3 million in 1974 to RD$ 19.2 million in 1976 (with average loan sizes of around RD$ 2,700). With the forthcoming IDB loan and capital contribution of RD$ 18 million, as well as the support of the Central Bank, the Agricultural Bank will be the most dominant financial institution lending to agriculture and livestock. Livestock Credit 6.08 Though the bulk of institutional credit to the livestock sub-sector in the country has come from official sources (predominantly the Agricultural Bank), with only a modest participation by commercial banks and development finance companies, the latter have been playing an increasing role in the A 19 supply of livestock credit in the last two or three years. The amount of commercial bank loans outstanding in the livestock sub-sector has grown from RD$ 7.1 million in 1972 to RD$ 24.3 million in 1975, or by almost 3.5 times, while total commercial bank loans have gone up only 2.4 times during the same period. In particular, development finance companies have increased their portfolio of agricultural investments mobilizing a substantial amount of their own funds (most of which was invested in the livestock sub-sector), from RD$ 1.5 million in 1972 to RD$ 10.2 million in 1975, or by 6.8 times. This substantial increase in the share of livestock lending in the port- folios of sources of funds since the project started was stimulated to a large extent by the project itself. In addition, by participating in the project, financial intermediaries acquired technical staff and expertise in livestock lending. They also discovered the profitability of short-term lending, which, under the project, was exclusively provided through their own resources. The project thus established an efficient livestock credit channel from commercial banks and development finance companies to relatively large farmers on a commercial basis. Financial Performance and Returns 6.09 Participating banks borrow funds from the Central Bank at 5% per annum and lend them to the ultimate borrowers at 9% per annum, which brings them a 4% spread. Short-term loans for working capital also give them a 4% spread. On an average, participating banks have two livestock technicians, each receiving a basic annual salary of about RDS 8,000. In order to cover their total basic salaries of RD$ 16,000 per annum, each participating bank would have to maintain a loan portfolio of at least RDS 400,000. In addition, loan processing causes additional costs for transport, supporting staff and field allowances. Thus, it is estimated that a loan amount of at least RD$ 800,000, on average, would have to be outstanding to make this activity financially attractive. However, the total amount of the project subloans and short-term loans is at present only about RD$ 7.0 million, which would allow, at most, eight participating banks to break even. 6.10 Apparently, project lending alone could not provide participating banks with sufficient financial incentives, but after they gained the necessary experience, they started to use their own funds for livestock lending, concen- trating mainly on short- and medium-term loans that require lower adminis- trative costs than long-term credits. They were thus able to increase their lending volume in the livestock sub-sector substantially, with a modest increase in related administrative costs. Although the spread of 4% is marginal to cover the costs of the lending intermediaries, both commercial banks and development finance companies participated actively in the project to obtain the necessary experience and skill in livestock lending in antici- pation of growing livestock credit activities in the near future. Staffing and Training 6.11 Altogether 26 new professional staff positions within the Central Bank and the participating banks were created under the project. All of them received additional training through LPD, which organized (a) five two- to A 20 three-day training courses in preparation and analysis of livestock development plans at the farm level; (b) a one-week seminar in dairy and beef production in 1975; (c) a 10-day seminar in dairying for two livestock technicians in Gainesville/ Florida; and (d) three 1.5- to 3-month training courses in livestock production, including pasture establishment and management, in New Zealand, in 1972, 1973 and 1975 for 19 livestock specialists and five veterinarians. This New Zealand stay had an important influence on the project. It is visible on each of the participating farms, namely, in the cost-efficient way ranch structures are built and in the rational methods used for pasture and cattle management. Altogether, 60 man-months of overseas training was provided, which is five times greater than appraisal projections, amounting to only 12 man-months. 6.12 While the training of project-related staff of the Central Bank and the participating credit institutions was a full success, project farmers, including foremen, received, apart from farm visits by LPD and participating credit institutions, no additional training. LPD intends now to overcome this lack with the assistance of the Asociacion para el Desarrollo, Inc., a private development association of businessmen of Santiago, which is equipping its Centro de Investigacion y Mejoramiento de la Produccion Animal (CIMPA) near Santiago to serve as a training center in livestock production for farmers and foremen. Participants would live at thd cetiter for one to two weeks and attend theory classes and demonstrations. The about 50-ha center already has adequate staff, a 300-head cattle herd and related facilities but it lacks a dormitory, including kitchen and dining room, and didactic material. These logistics require an additional investment of RD$ 41,000, to be financed, following Government's request and IDA's approval, out of the remaining IDA credit funds. Foreign Technicians 6.13 Technical assistance of only two years and two months instead of three man-years in terms of the service of foreign experts was provided under the project. IDA had difficulties in identifying suitable candidates. A sheep and pasture specialist from New Zealand (October 71 to March 72) preceded a Chilean dairy specialist (March 72 to December 73). Whereas the former was employed under a Bank contract, the latter had a two-year contract with the Central Bank which caused disagreements with the Central Bank about exemption from income tax and import duty on his car, education and retirement benefits, and stipulation of vacation time. 6.14 The influence of the two specialists on project implementation was described to the mission by Dominican officials as rather positive, while IDA supervision mission staff reported less favorably on their perform- ance, giving them only limited credit for the success of the project. It appears that the sheep and pasture specialist from New Zealand was too much of a pure technician, while the Chilean dairy specialist saw himself as more of an adviser to the Director of FIDE. He thus seems to have neglected, to a large extent, essential day-to-day project management work, particularly field work. A 21 Accounting and Reporting 6.15 The performance of LPD and the Central Bank in accounting and progress reporting has been satisfactory. Auditors' reports on FIDE accounts have been adequately prepared and sent to IDA on time. Since FIDE is not an independent entity, but a department of the Central Bank, depreciation and overhead costs were borne by the Central Bank. Although this practice resulted in slightly overstating the FIDE income, the auditors' reports fairly represented the financial position of FIDE. Quarterly progress reports of LPD have been adequately prepared and sent to IDA on time. LPD also put consider- able effort into preparation of a final project evaluation report (para 4.01), dated March 10, 1977, which was the basis for the preparation of this Comple- tion Report. Institution Building 6.16 With the assistance of LPD, which, due to the project, became the country's leading livestock development institution, commercial banks and development finance companies mobilized a substantial amount of own lending funds, mainly for short and medium terms, and technical expertise, for supporting the livestock producers. Institution building effects attri- butable to the project are primarily reflected in the itteaed tumber of livestock technicians/credit analysts employed by the fiftAncial intermediaries (para 6.05). However, not only has the number of livestock technicians increased, but their skills and experience have been improved by the training courses under the project. 6.17 Unfortunately, the failure thus far to fund a follow-up livestock project and the limited financial resources available to LPD have given rise to many uncertainties as to its future. Without new funds, LPD will have to reduce its personnel and the scope of operations within the next two years. VII. SPECIAL ISSUES Substitution and Diversion of Project Funds 7.01 Project funds did not substitute for other funds that would have been invested without the project. Most of the farmers interviewed stated that they would not have invested at all if the project had not been imple- mented, since the National Livestock Extension Service did not provide enough technical assistance and the financial institutions had only limited technical staff and funds, particularly long-term loan funds, available. The Agricultural Bank concentrated on small farmers, while other credit institutions dealt, until the beginning of this project, with only few of the largest farms on loan security grounds. Thus, practically no funds or tech- nical assistance would have been available to the medium-size farmers, the main target group of this project, without the project. A 22 7.02 The funds were provided to ranchers in three installments. The setond installment was provided only if inspection of investments made under the first installment showed that farmers had used the borrowed funds in accordance with the investment plan approved by LPD. In turn, the third installment came after verification of proper use of the second. This prac- tice has been applied efficiently and practically eliminated any diversion of project funds to activities other than those called for. In fact, at the beginning of the project, a few farmers cancelled their subloan after finding out that they could not use the funds for purposes other than those earmarked by LPD. 7.03 Among participating credit institutions, project funds, as well as other funds of the Central Bank, were, with only few exceptions, the only available sources of long-term loans in the livestock sub-sector. Besides, the part of the portfolio of participating credit institutions invested in the livestock sub-sector increased sharply during the disbursement period (some institutions increased it by six times) because of the attractiveness of livestock lending. Participating credit institutions invested not only project funds but also an increasing amount of their own funds in the sub- sector and thus could not substitute for other sources. Weather and Other Risks 7.04 Weather has been rather unfavorable during the disbursement period. Farmers suffered from droughts, especially in 1975, causing beef exports to drop to 57% of the previous year's level. Without these droughts, the project output would have likely increased much more. To better sustain production during future droughts, in particular, dairy farmers are now growing pennisetum and fodder sorghum varieties which, in many cases, can be irrigated. 7.05 The political and social uncertainties prevailing around 1974 pre- vented many ranchers from committing themselves to new investments. However, as agrarian reform efforts by Government after the elections were only hesitantly implemented and as world sugar prices dropped drastically in 1975, many farmers turned back to intensifying their livestock operations. Subloan Recovery 7.06 Subloan recovery has been good so far, but many subloans are still in the grace period. Officials of some participating credit institutions said that the livestock sub-sector has the best record of repayment. This can be attributed to the relatively large size of the loans, which encourages the credit institutions to maintain close contacts with the farmers. On the other hand, farmers are willing to keep good repayment records to get good technical services. The profitability of the livestock investment also allows farmers to fulfill their debt service obligations. Short-term Subloans 7.07 Short-term subloans needed to cover incremental working capital of project farmers were estimated during appraisal at RD$ 1.15 million. However, there is insufficient data on the actual volume of short-term subloans made A 23 to them because LPD, due to manpower shortage, only recorded farmers' first short-term allocations, which amounted to RDS 1.32 million, or 15% above appraisal projection (Table 15). There is strong evidence, though, that the actual amount is significantly higher. The majority of short-term subloans went to beef breeding/fattening farms to purchase feeder steers. The demand for short-term subloans in dairy farms on the other hand, had been low because of the regular income realized from milk production. The repayment period varies between one and two years and interest rates between 10.5% to 12%. On-lending Rate 7.08 Between 1971 and 1976, the price level in the Dominican Republic rose at an annual rate of 12.6%. Thus, the 9% nominal interest rate to the farmers, implied a negative real rate during this period. Beef and milk prices, on the other hand, rose by an average of 8.5% per year during the same period. The real interest charged to project farmers was therefore low by any standards. As a matter of fact, all farmers interviewed by the Completion Mission were satisfied with the 9% interest rate and some of them indicated that they would borrow even at rates up to 12%. MI. IDA PERFORMANCE 8.01 IDA's performance contributed most significantly to the smooth implementation of the project and was considered by Dominican officials to be excellent. The Completion Mission fully supports this judgment. The project was identified by an IDA livestock specialist whose report very carefully outlined the project concept and expected results. The Project Preparation Report was prepared by local technicians, who receive substantial guidance from the IDA livestock specialist. The report is of high standard and was completed, at very low cost, within a relatively short period (about six months). The appraisal report served as a very useful guide for project implementation and is well in line with actual project results thus far obtained. Although the Dominican project preparation team and IDA suffered serious staff constraints, it took only 22 months between project identifica- tion and Board presentation. Worth mentioning also is the fact that IDA project staff spent only 18 man-weeks in the field for identification, preparation, and appraisal of this well conceived project. 8.02 Ten supervision missions, including the Completion Mission, visited the country from 1972 and 1977, an average of two per year, which was adequate. An excellent working relationship developed between IDA supervision staff and LPD. The latter stated that, without IDA's efficient assistance and com- petent advice, the technology transfer realized-under the project would not have been possible. 8.03 There is only one major criticism of IDA's performance: no price contingencies were included in cost estimates. Thus, when inflation increased project costs substantially, the number of farmers that could participate had to be cut significantly. It should be recalled, however, that it was not A 24 the practice to allow for price contingencies at the time that this project was appraised since high inflation rates had not yet seemed likely. IX. CONCLUSIONS AND LESSONS LEARNED 9.01 The lending and investment program objectives of the project have been achieved. The same applies largely to its technical and economic targets, particularly under the dairy component. Although the final impact on production increase of participating farms will have to wait until the full development stage by 1982, it is likely that the projected incremental milk production of 16 million liters per year will be reached. The projected incremental production of 2,300 tons of beef and 7,000 breeding heifers per year may also be reached as farmers presently tend to expand their herds due to the drastic fall of world sugar prices, which increased the relative profitability of beef production significantly. To reach the projected output targets, improved herd management, aiming mainly at higher cow fertility rates, is still required as well as the application of more appropriate fertilizer compositions for dairy farming and improving pastures for beef production using little or no fertilizer. 9.02 Further performance will also depend on cost/price relations for milk and beef production. At present, producer margins for both enterprises are favorable and should result in continued expansion and intensification of both production systems. Expected continued technical assistance of LPD and the participating credit institutions should lead to improved managerial skills and investment and cost control efficiency of project farmers. 9.03 With the assistance of LPD, which, due to the project, became the country's leading livestock development institution, eight commercial banks and three development finance companies participated in the project, extending for the first time long-term loans for livestock development and mobilizing a substantial amount of their own funds, mainly for short- and medium-term lending, and providing adequate technical expertise to assist livestock producers. There is no doubt that LPD and the credit institutions will have to play an important role in future livestock development, but a decision on how to fund them adequately will require special attention by the Government. As yet, the Central Bank is not ready to borrow under World Bank terms for a second livestock project, given the current interest rate and structure for official lending to agriculture. 9.04 In sum, the project was successful because of the following: (a) Very favorable ecological environment for beef and milk production; (b) Favorable input/output relations for beef and milk, including the availability of cheap and efficient hand labor; A 25 (c) Cost awareness and spirit of enterprise among project farmers and the excellent working relationship which developed between them, LPD and participating credit institutions; and (d) The great care with which the project staff, namely, the Project Director, were selected and briefed, trained and supported by IDA.  DOMINICAN REPUBLIC LIVESTOCK DEVELOPMENT PROJECT - Credit 245-DO Completion Report Number and Type of Farms per Region Actual as % Northern Reion i Region Eastern Region South Central Region Total of Appraisal Appraisal Actual App Actua Appraisal Actual Appraisal Actual Appraisal Actual Estimates Dairy/Farm 8o 22 40 34 - 2 - 6 120 64 53.3 BeefFarm - 8 - 16 100 26 - 2 100 52 52.0 Beef/Dairy Farm 40 9 - 13 - 15 - - 40 37 92.5 Total 120 39 40 63 100 43 - 8 260 153 58.8 May 20. 1977 [I Table 2 DOMINICAN REPUBLIC LIVESTOCK DEVELOPMENT PROJECT - Credit 245-DO Completion Report Distribution of Subloans By Size Average Total Amount of Value Amount of Loan Subloans No. % -RD$ % -----RD$------ 0 - 10,000 8,500 2 1.3 17,000 0.3 10,001 - 20,000 16,088 23 15.2 370,035 6.1 20,001 - 30,000 24,660 36 23.5 887,787 14.8 30,001 - 40,000 35,439 28 18.3 992,285 16.5 40,001 - 50,000 45,331 27 17.6 1,223,950 20.3 50,001 - 60,000 53,823 14 9.2 753,523 12.5 60,001 - 70,000 65,621 11 7.2 721,827 12.0 70,001 - 80,000 75,074 3 2.0 225,223 3.7 80,001 - 90,000 84,955 4 2.6 339,820 5.7 90,001 - 100,000 96,934 5 931 484,670 8.1 TOTAL 39,321 153 100.0 6,016,120 100.0 June 15, 1977 Table 3 DOMINICAN REPUBLIC LIVESTOCK DEVELOPMENT PROJECT - Credit 245-DO Completion Report Distribution of Participating Farms by Size and Farm Type Average Total Size % of Size of Farm size of Farms of Farms Total Size (ha) Farms (ha) No. % (ha) of Farms 10 - 20 15.6 5 3.3 78 0.2 21 - 40 33.4 9 5.9 301 0.8 41 - 60 48.0 14 9.1 672 1.8 61 - 80 69.1 11 7.2 760 2.1 81 - 100 91.8 8 5.2 734 2.0 101 - 150 122.9 24 15.7 2,949 8.0 151 - 200 177.6 16. 10.5 2,842 7.7 201 - 300 248.2 28 18.3 6,949 18.8 301 - 500 353.0 22 14.4 7,766 21.0 501 - 1,000 727.6 14 9.1 10,187 27.5 more than 1,000 1,875.0 2 1.3 3,750 10.1 TOTAL 241.8 153 100.0 36,988 100.0 Farm Area Farm Type Number of Farms (ha) % Dairy Farms 64 6,319 17.1 Beef Farms 52 21,106 57.1 Beef/Dairy Farms 37 9,563 25.8 Total: 153 36,988 100.0 November 22, 1977 DOMINICAN REPUBLIC LIVESTOCK DEVELOPMENT PROJECT - Credit 245-DO Completion Report Number and Professions of Subborrowers South Profession Northern Cibao Eastern Central % Region Region Region Region Total of Total Dairy/Beef Farmer 14 17 17 2 50 32.7 Dairy/Beef Farmer plus other Agricultural/Livestock Produc- tion Activities 4 10 5 1 20 13.1 Businessman'/ 11 20 10 2 43 28.1 Medical Doctor 1 5 2 - 8 5.2 Lawyer - 3 4 1 8 5.2 Civil Engineer 3 2 2 - 7 4.6 Government Economist 1 2 - 1 4 2.6 Government Veterinarian 1 1 - 1 3 119 Government Agronomist 1 - 1 - 2 1.3 Military Man - 2 - - 2 1.3 Mechanical Engineer 2 - - - 2 1.3 Cheese Manufacturer 1 - 1 - 2 1.3 Politician - 1 - - 1 0.7 Accountant - - 1 0.7 Total 39 63 43 8 153 100.0 1/ / Includes entrepreneurs, exporters of agricultural products, milk and cattle dealers, automobile dealers, real estate agents, hardware and/or grocery store owners. May 20, 1977 DOINICAN REPUSLIC LZVZS T DMLOPMT Frolert - Credit 24.5-DO Completion Report DaLrI ara: Suey Valuation of 12 Dairy Farms in the Northern RetionA(O farms) and CMao lqion (7 fanam after 3.75 Years of Participation in the Project RValatiom Average Ranpe Appretsal Repp stimg Results Kinus Bare At loeesse bfaore Development At Evaluation Before reject lacrease Appraisal at Development Raltign Am mintmn K Minimum Haxisom Development Esaas 4 in % gotLnates to % Yarn Size and Carrving Capacity FarM Site ha 46.0 54.0 27.7 12.0 88.0 12.0 88.0 100.0 100.0 0.0 27.7 Improved Pastures ha 36.0 52.0 44.4 11.0 78.0 12.0 88.0 80.0 100.0 25.0 19.4 Carrying Capacity A.T./ha 1.7 2.4 41.2 1.4 3.0 1.0 4.0 n.a. n.a. n.a. 41.2 Actual Stocking atmV A.U./ha 1.8 2.7 50.0 0.6 2.8 1.5 4.0 1.0 1.7 70.0 (20.0) Incremental T"vestment Costs Total Incramental lwvesment Cose 3D$ * 56,373.0 - * 29,930.0 95,033.0 25,000.0 * Total Increrental Investment Cosat s/ha 627.0 & - i17.0 1.034.0 250.0 * an&-ters Loan SD* 28,198.0 - - 20,000.0 43,900.0 20,000.0 * Short-term LoaV RD$ 630.0 - - 3,000.0 4,800.0 3,000.0 - A-al Onerat!nt Costs Total Operating Costsz/ 3D$/year 7,009.0 25,134.0 258.6 1,130.0 20,375.0 7.570.0 62,400.0 4,011.0 7,170.0 78.0 179.6 Total Operating Costa per beW' D/ha 152.0 465.0 205.9 21.0 460.0 304.0 1,181.0 40.0 72.0 80.0 125.9 Total Operating Costal RD$/A.U. 90.0 195.0 116.7 32.0 238.0 240.0 416.0 43.0 43.0 &.4 112.3 MiWk and Beef troduction ,otal Cattle Hard head 100.6 163.4 62.4 11.0 167.0 58.0 277.0 118.0 214.0 81.4 (19.0) Total Anizal Units No. 78.1 128.6 64.7 8.0 142.0 40.0 232.0 93.0 159.0 70.1 (5.4) Total Cows head 39.8 75.3 89.2 7.0 77.0 27.0 130.0 40.0 61.0 52.5 36.7 Total Cows in Milk head 26.3 51.4 48.8 5.0 55.0 18.0 90.0 25.0 55.0 120.0 (71.2) Total Calves "or 4/ bead 20.3 51.4 86.7 3.0 34.0 11.0 - 75.0 25.0 55.0 120.0 (33.3) Calves Uaned head 16.0 40.8 155.0 3.0 30.0 25.0 65.0 23.0 50.0 117.4 37.6 Average Milk Production of Cov Milked 1/year/ow 1,839.0 2,643.0 31.4 694.0 2,665.0 1,095.0 3,468.0 1,100.0 1,500.0 36.4 (5.0) Milk Production 1/ha/year 1,518.0 3,095.0 103.9 525.0 3,270.0 759.0 6,24.0 275.0 825.0 200.0 (96.1) A-:sal Beef Production kg/1iveeiaht 7.226.0 6,014.0 (16.8) 400.0 32,800.0 1,000.0 12,900.0 8,562.0 10,937.0 27.7 (".5) Arual beef Production kg/liveveight/ba 157.0 138.0 ( 9.6) 21.0 841.0 24.0 339.0 85.0 109.0 28.2 (37.8) Eztractiob Rate % 16.3 12.1 (25.8) 10.0 25.0 3.4 29.4 15.2 11.2 (26.3) 0.5 Annual Sa1ysLRD$ 13,968.0 40,927.0 193.0 3.110.0 29,400.0 13,430.0 100,405.0 8.375.0 14,230.0 69.9 123.1 Cross !ccell I 6,959.0 15,793.0 143.5 1,630.0 10,000.0 7,115.0 38,005.0 4,364.0 7,060.0 61.8 81.7 1/ Actual stocking rate sursounts carrying capacity due to feeding of molasses and concentrates. 7V Evaluation results are in 1976 RD$ terms ; appraisal estimates in 1971 RD$ terms. Figures reflect actual costs and benefits to the former. / Only two farners received short-term loans. 4' Esti=ated to equal the nuIber of cows in milkbecauseof inconsistent survey result. 11 So=e of the male calves are usually sold for slaughter. '' Annial sales anbus annual operating costs. Novec-er 22. 1977 DE CAN 1RIE LIC 2.9E20C DtE92IE2NET RiOJECT - Crodit 243-00 Comgleton Ie*ort Šef/Dair, Tarmt Sm y valuatio, Of 15 zeøf/Dairy ?arm in the Northern egion (5 farem). Cibao egin (7 farm) Mmd .aotern tegion (3 farms) after 3.5 Yeare of Participation *n the Proiect nalmatte Average RangL Amratsal laiert Estt=mte Reults Ninmm Before At Increase Before Develo~ment At tvaluation Befor. Project Increas* Appraisal Dett eDøve ent Døye*eso~t in % Kinimum raxtmum WIniu Mexm Develoffient Year 3 in UtEstnatø ie Ta= Sit. end Car itng Caty aru Sim. ba 318.0 335.0 5.3 180.0 359.0 288.0 373.0 250.0 250.0 0.0 3.3 Iprøved Pa*twrns ha 258.0 332.0 28.7 214.0 334.0 288.0 364.0 200.0 250.0 25.0 3.7 Carrying Capaeity A.U./ha 1.5 1.8 20.0 1.4 1.7 1.6 2.0 a. a. Ik. a. M. a. a.&. Actual Stocking Zate A.U./ha 1.3 1.4 7.7 1.0 1.6 1.2 1.6 0.9 1.6 77.8 <70.1) crnerm.ttal Investumnt Coot. Total Incræntal lavegtmt Cotam RD$ - 68,615.0 - 30,804.0 81,150.0 - 27.500.0 • Total Incr~tal lawagtiment CoetaV 1D$/ha • 238.0 - - - 166.0 182.0 - 110.0 • Lon-t*r Lan RD$ • 51,239.0 - - - 32,060.0 99,500.0 22.000.0 - Short-ter Loa RD$ • 11,733.0 - • 0.0 61,500.0 - 7,600.0 At:al otratina CoM Total Operating Ct. »D$/yar 19,228.0 45,618.0 137.2 18,430.0 22,612.0 37,784.0 54,879.0 6.299.0 16,130.0 136.1 (18.9) Total OperatIng CostmW RDO/ha 60.0 136.0 126.7 52.0 178.0 84.0 166.0 23.0 65.0 160.0. (33.3) Total Operattin Cost;11 RD$/A.U. 47.0 95.0 102.1 42.0 54.0 69.0 105.0 28.0 43.0 33.6 <48.5) 2.1,i and setf Productim Total Cattle Herd head 500.0 580.0 16.0 486.0 524.0 332.0 641.0 242.0 383.0 58.3 (42.3) Total Animal Units mo. 410.0 481.0 17.3 396.0 426.0 441.0 534.0 222.0 371.0 67.1 (49.8) T?tal C,s head 162.0 250.0 54.3 154.0 174.0 218.0 290.0 78.0 124.0 59.0 ( 4.7> To-al Ceis in MIlk head 59.0 110.0 86.4 53.0 88.0 86.0 154.0 50.0 102.0 104.0 (17.6) To:al Calves barn head 95.0 147.0 54.7 89.0 121.0 111.0 174.0 50.0 102.0 104.0 (49.3) Total Calves Veani/ head 59.0 97.0 64.4 53.0 110.0 67.0 153.0 39.0 87.0 123.1 (58.7) Averate Xilk odeetie of CoU 1iæd I/yaar 1,095.0 2,008.0 83.4 694.0 1,825.0 1,497.0 2,336.0 850.0 850.0 0.0 83.4 .l1k ProductL6n 1/ha/year 175.0 818.0 367.4 233.0 409.0 701.0 1,285.0 169.0 347.0 105.3 262.1 3eaf Prod-'uction kg livevaightly.ar 34,221.0 42,666.0 24.7 24,978.0 41,439.0 34,912.0 53,076.0 24,000.0 43,700.0 82.1 <57.4) Stef Production kg liveveight/ha 106.0 118.0 11.3 83.0 138.0 109.0 131.0 96.0 175.0 82.3 (71.0) uxtraction Kate % 23.0 20.0 (13.0) 19.0 30.0 18.0 23.0 17.3 10.2 <41.0) 28.0 .ual a lee s&/D$ 33,889.0 63,718.0 88.0 24,860.0 49,979.0 61,522.0 65.267.0 17,295.0 28,572.0 65.2 22.8 Cres Inconal/&f 14,661.0 18,100.0 23.5 2,260.0 13,990.0 10,030.0 28.800.0 10,996.0 12,442.0 13.2 10.3 / Ealuation rmulte are in 1976 RDS terme; appraisal estimates in 1971RD terms. Figure rafiet actual coat, and benefits to ti farmer. : Som of the male calves ar usually oold for slaughter. } A a sal2 s ødnus a operating coste. Sove=bar 22, 1977 DOMINICAN REPUBLIC LIVESTOCK DVSOPMr ~ R~JECT - Crodit 24-DO Completton Report Beef BreedinglFattening Farm: Summary Evaluation of EiRht Beef Breeding/Fattin lar i g» zamta g*timn after 2-1/4 Years of Participation in the Proiget Evaluattm Averaft Range ~,rausal Rhort Etimt* Esstalu Na Before At Incr*as& Before Development At Evaluation Prf.re rojest Ierss~ App~algal Unie Devolopmant Evaluation in % Minmum Maxiu~ Minitum Maxi~u 6 lM n gg i 1 EsLimte tina Fa- Size and Carrvint Capacity 1a=ch Site ha 278.0 355.0 27.7 33.0 599.0 160.0 599.0 4«0 400.0 0.0 27.7 =ved Pasturas ha 254.0 355.0 39.8 12.0 599.0 160.0 599.0 340.0 600.0 17.6 22.2 Carryin£ Capacity A.^./ha 1.3 1.8 38.5 0.8 1.6 1.3 2.4 9.8. 13. a. I.L. a.a. Actual Stocking Rate A.U./ia 1.1 1.4 27.3 0.5 1.6 1.5 2.0 0.8 1.1 37.5 10.2 :=>=«=.:al In,vestment Costs Zz,:l Inicremental Investmnt Costall &D$ • 50.864.0 - - - 16,250.0 89,745.0 - 33,000.0 - 7,tal 'cre=e.tal Investm~nt CostaY D$m/ha 143.0 - - - 71.0 219.0 --• Leng-ters Loan RD$ - 40,020.0 - - • 12.00.0 74,660.0 - 2,400.0 Shzt-ra a Ls RD$ - 4,343.0 - 0.0 31,250.0 - 9.000.0 An..al Overatieq Costs Tora1 c-rsting Costal/* ~D/year 14,097.0 20,528.0 45.6 5,53.0 28,910.0 7.93.0 3.200.0 9,91.0 1M.110.0 82.7 37.1 T3til 0,rating Cost*s/ha lD/ha 50.7 57.8 14.0 13.6 110.0 26.9 207.0 24.8 43.3 82.7 68.7 .etal Operating Cotts/A.0.l ~D$/A.9. 47.5 42.9 (9.7) 16.7 144.0 2.2 127.0 30.1 41.4 37.3 47.2 3e PTroductn T.-tl Cattle Eerd ha 380.0 577.0 51.8 52.0 763.0 194.0 1.07e.0 34.0 473.0 33.6 1U.2 T,:al Anizai Uits mø. 297.0 479.0 61.3 52.0 549.0 152.0 758.0 322.0 438.0 36.0 25.3 T.tal c~a head 141.0 213.0 - 51.1 46.0 328.0 66.0 491.0 111.0 1M4.0 51.4 (0.3) Total Calves Borm head 111.0 145.0 30.6 33.0 273.0 42.0 320.0 72.0 125.0 73.6 (43.0) Calve Wea=.ed head 105.0 137.0 30.3 95.0 124.0 30.0 302.0 56.0 109.0 94.6 (64.1) Annual Beef Production ba llve~eight 30,800.0 57,200.0 85.7 5,600.0 46,800.0 9,600.0 114,700.0 36,500.0 51,687.0 41.6 44.1 A-=l Beef Production hg liv~veight/ha 126.0 165.0 3.@ 19.0 292.0 33.0 329.0 91.0 129.0 41.8 (1.8) E.raction R4te x 14.7 21.6 46.9 9.0 19.9 14.4 45.0 17.8 10.4 (41.6) 8.5 An=als Salesi4 1/ 1.D 29,429.0 35,758.0 21.3 4,470.0 34,260.0 11,335.0 34,230.0 19,665.0 27,430.0 39.5 (1.0) Cr.ss Incoal/J iD$ 15.332.0 15,230.0 (0.7) 917.0 15.990.0 3,492.0 28.800.0 9,750.0 9,320.0 (0.4) (0.3) I' ival.a:ten resulte are in 1976 &D$ terms; appriasal aotiat*8 in 1971 RD$ terms. Figur&& refleet actual cetand b= fis to the farmør. 2' 1:cludes incoe fram =ilk sal*& before developimnt. VIth the project, dairying ha& been abandoned. 3, Anual sale£ Minus a a1 oprating coato. ovber 22, 1977 DOMINICAN REPUBLIC LIVESTOCK DEVELOPMENT PROJECT - Credit 245-DO Completion Report Physical Accomplishments Financed under the Project (RD$) Actual Actual/ Minus Appraisal Actual Appraisal Appraisal Estimate Unit Units Cost Estimate Estimate 1. Pasture Renovation/Establishment ha 24,100 1,871,700 1,865,000 6,700 100.4 2. Farm Structures/ 2,483,500 2,085,000 398,500 119.1 3. Machinery and Equipment 574,000 1,005,000 (431,000) 57.1 4. Breeding Stock 3,202,900 2,445,000 757,900 131.0 Total 8,132,100 7,400,000 732100 109.9 Includes 12,800 km of fencing at a total cost of RD$ 541,000 or RD$ 42.3 Der km, and RD$ 570,000 for watering facilities. June 13, 1977 DOMINICAN REPUBLIC LIVESTOCK DEVELOPMENT PROJECT - Credit 245-DO Completion Report Total Project Cost and Cost per Farm a2/ Actual Cost Appraisal Estimates/ Actual- per Ranch as Cost Cost Percentage of Amount Percentage per Farm Amount Percentage per Farm the Appraisal (RD$'000) (7) (RD$) (RD$'000) (M) (RD$) Estimates (7.) On-Ranch Investment Pasture Development 1,865 20.7 7,169 1,872 18.3 12,235 170.7 Installations 2,085 23.1 8,015 2,483 24.6 15,386 192.0 Machinery and Equip- ment 1,005 11.2 3,865 574 5.7 3,752 97.1 Cattle 2,445 27.2 9.404 3,203 31.8 21,778 231.6 Sub-total 7,400 82.2 28,461 8,132 80.4 53,150 186.7 Technical Services 450 5.0 1,731 649 6.4 4,242 245.1 Incremental Working Capital 1,150 12.8 4,423 1,322 13.2 8,641 201.6 Total 90 100.0 3013100.0 66,033 191.6 260 ranches are assumed to participate in the project. 2 153 ranches actually participated the project. June 9, 1977 DOMINICAN REPUBLIC LIVESTOCK DEVELOPMENT PROJECT - Credit 245-DO Completion Report Project Financing Sources of Financing Category IDA Credit Central Bank Participating Banks Farmers Total -------------------------------- (RD$ '000) ---------------------------- Appraisal Estimates On-Ranch Investment 4,700 1,200 - 1,500 7,400 (Percentage Share) (64%) (16%) (20%) (100%) Technical Service 300 150 - 450 (Percentage Share) (67%) (33%) (100%) Incremental Working Capital - - 1,150 - 1,150 (Percentage Share) (100%) (100%) Total 5,000 1,350 1,150 1,500 9,000 (Distribution) (55%) (5a (13%) (17%) (100%) Actual Applications On-Ranch Investment 4,500 1,446 2,186 8,132 (Percentage Share) (55%) (18%) (27%) (100%) Technical Service 500 149 649 (Percentage Share) (77%) (23%) (100%) Incremental Working Capital - - _1.322 - 1,322 (Percentage Share) (100%) (100%) Total 5,000 1,595 1,322 2,186 10,103 (Distribution) (49%) (16%) (13%) (22%) (100%) 0 0 June 28, 1977 DOMINICAN REPUBLIC LIVESTOCK DEVELOPMENT PROJECT - Credit 245-DO Completion Report Subloan Commitments and Disbursement Loan Approved Loan Cancelled Loan Committed Quarter Ending Number Amount Number Amount Number Amount Disbursement (RDS'000) (RD$'000) (RD$'000) (RD$'000) 1972 March 31 5 174.7 1 24.5 4 150.2 57.1 June 30 11 416.6 - - 11 416.6 178.2 September 30 16 723.2 - - 16 723.2 300.5 December 31 14 621.3 - - 14 621.3 248.6 1973 March 31 12 366.4 3 209.1 9 157.3 277.0 June 30 7 291.8 - - 7 291.8 418.9 September 30 10 358.9 - - 9 358.9 192.6 December 31 13 489.1 4 128.9 10 360.2 273.7 1974 March 31 11 634.2 1 36.0 10 598.2 333.5 June 30 4 92.3 1 24.8 3 67.5 283.5 September 30. 6 247.3 - - 6 247.3 339.3 December 31 11 490.4 2 46.0 9 444.4 267.4 1975 March 31 22 749.0 - - 22 749.0 443.5 June 30 7 203.0 - - 7 203.0 442.8 September 30 11 476.0 1 36.0 10 440.0 647.1 December 31 7 212.5 - - 7 212.5 344.3 1976 March 31 3 142.0 - 28.5 3 113.5 302.0 June 30 1 57.8 4 266.8 (3) (209.0) 226.5 September 30 - - - - - - 75.5 December 31 - - - - - - Total 171 6,746.5 17 800.6 154 5,945.9 5,652.0 July 18, 1977 DOMINICAN REPUBLIC LIVESTOCK DEVELOPMENT PROJECT - Credit 245-DO Completion Report Schedule of Disbursements of the IDA Credit Actual Disbursements Cumulative Disbursements (US$'000) as a Percentage of Date Appraisal Estimate Actual Disbursements Appraisal Estimate (%) 71/72 March 31 150 - 0.0 June 30 350 14 4.0 72/73 September 30 600 14 2.3 December 31 900 261 29.0 March 31 1,250 774 61.9 June 30 1,650 1,045 63.3 73/74 September 30 2,100 1,380 65.7 December 31 2,600 1,568 60.3 March 31 3,100 1,855 59.8 June 30 3,550 2,128 59.9 74/75 September 30 3,950 2,387 60.4 December 31 4,250 2,387 56.2 March 31 4,450 2,659 59.8 June 30 4,600 2,888 62.8 75/76 September 30 4,700 2,888 61.5 December 31 4,800 2,888 60.2 March 31 4,900 4,448 90.8 June 30 4,950 4,700 95.0 76/77 September 30 5,000 4,946 98.9 December 31 5,000 5,001 100.0 March 31 5,000 5,0011/ 100.0 July 13 5,000 5,078- 101.5 Due to foreign exchange rate adjustment# July 18, 1977 Table 13 DOMINICAN REPUBLIC LIVESTOCK DEVELOPMENT PROJECT - Credit 245-DO Completion Report Allocation of Proceeds of the IDA Credit Projected Actual Allocation Allocation (5/19/71) (4/18/77) Category US$ I. Disbursements made by the Central Bank under Part A Loan 4,500,000 4,500,000 II. Technical Services: (a) Remuneration of the Livestock Assistant to DIA Director, fellow- ships and training, research grants and dairy marketing con- sultant's fee 183,000 351,138 (b) Project Director's remuneration 50,000 66,853 (c) Vehicles and equip- ment 15,000 25,480 (d) Remuneration of other professional and secretarial staff and gasoline in respect to LPD 52,000 56,529 III. Unallocated 200,000 -- TOTAL 5,000,000 5,000,000 June 15, 1977 DOMINICAN REPUBLIC LIVESTOCK DEVELOPMENT PROJECT - Credit 245-DO Completion Report Participating Banks Performance (Subloane Committed) 1972 1973 1974 1975 1976 Total Participating Banks Number of Amount Number of Amount Number of Amount Number of Amount Number of Amount Number of Amount Subloana (RDS'000) Subloane (RD$'000) Subloans (RD$'000) Subloans (RD$1000) Subloans (RDS'000) Subloans (RDS'000) Banco Agricola R.D. 11 501 20 658 6 253 15 387 * 1 (28) 52 1,771 Banco de Reservas R.D. 7 254 4 79 6 270 2 47 ± 1 17 19 667 Banco Popular Dominicano - - 3 154 4 161 2 47 - - 9 362 Chase Manhattan Bank, N.A. 6 303 4 184 3 192 6 299 1 (11) 20 967 First National City Bank 2 137 1 17 4 249 3 139 (2) (91) 8 451 Corp. Financiera Asociads, S.A. 1/ 10 436 - (5) 2 80 2 85 1 51 15 647 Cia Financiers Dominican&, S.A. 1/ 9 280 3 81 1 84 2 70 - (12) 15 503 Banco de Santo Domingo - - - - - - 1 48 - 1 48 Royal Bank of Canada - - - - 1 68 - - - - 1 68 Financiers Agroindustrial i/ - - - - - - 12 426 - (21) 12 405 Banco Condal Dominicano - - - - * - 1 57 - - 1 57 Total 45 1,911 35 1,168 27 1,357 46 1,605 0 (95) 153 5,946 jl Development Finance Companies. June 15, 1977 DOMINICAN REPUBLIC LIVESTOCK DEVELOPMENT PROJECT - Credit 245-DO Completion Report Short-term Financing Number of Farms Amount of Short-term Average Size of Short-term Region Number of Farms Receiving Short-term Financing Financing ('0OORDS) Financing ('OOORDS) Milk Only Beef Total Milk Only Beef Total Milk Only Beef Total Milk only Beef Total North Coast 22 17 39 3(16%) 12(75%) 15(43%) 15,500 272,740 288,240 5,167 22,728 19,216 Cibao Valley 34 29 63 10(32%) 16(57%) 26(44%) 80,050 376,565 456,615 8,005 23,535 17,562 Eastern Region 2 41 43 1(50%) 16(47%) 17(47%) 15,000 470,300 485,300 15,000 29,394 28,547 South Central Region 6 2 8 _2k33%) 1(50%) 3(38%) 16,450 75,000 91,450 - L2 75.000 3)_483 Total 64 89 153 16K28%) 56) 61(44%) 127,000 1,194.605 1,321.605 47 6 June 15, 1977 June 15, 1977  ANNEX I Page 1 of 2 Assumptions Used to Recalculate Rates of Return A. Financial Rate of Return 1. The computation of the Financial Rate of Return (Tables 1, 2 and 3, this Annex) rests on the following additional assumptions to those used in the appraisal report: (a) Except for cattle, which reproduce indefinitely, investments financed under the Project have an assumed useful life of 12 years. Therefore, participating ranchers' expected cash flows have been computed over 12 years and the incremental value of the herd has been imputed as a cash inflow in year 12. (b) Sales and operating expensed increase linearly between the pre-project situation and the situation at the time of the LPD survey. For the future, the annual rates of increase projected at appraisal have been applied. This applies also to dairy farms, despite the fact that at evaluation they had already reached a relatively high level of milk yield per cow because: (i) project cows have a higher than forecasted genetical potential for milk production which is expected to improve further over the next years since F , F and purebred heifers and cows will replace low yielding and steri e cows; (ii) the bulk of the cows will reach their highest productive lactations over the next four years; (iii) as most of the dairy farms have now reached maximum carrying capacity, low milk yielding and sterile cows will be replaced usually with on-farm bred heifers; (iv) farmers will get substantial income from heavy cow culling and sale of breeding heifers, the latter fetching up to RD$ 800 per head; (v) due to expected comprehensive cow culling and better feeding and management, fertility rates will go up; and (vi) due to low sugar prices, dairy farmers, who in many cases also cultivate sugar-cane, are expected to make particular efforts to increase income from milk production. (c) 60% of on-ranch investment are made in the first year and 40% in the second year which is based on the actual disbursements of sub-loans. (d) The deflation of investment costs is based upon the assumption that the integer portion of the base year represents the year 1976; if, for example, the base year is 3.5, the year 1974 would become year 1. (e) Inflation rates, transforming current prices into 1971 constant prices, are taken from the general price index published by the Central Bank, which are 100.0, 107.8, 124.1, 140.4, 160.8 and 173.3 for years from 1971 to 1976. (f) Interest rates for short-term working capital loan range from 10% to 12%, and the average rate of 11% is used to calculate the interest payment. ANNEX 1 Page 2 of 2 (g) Interest payments on the short-term loan without the Project are taken from the appraisal report. This does not apply to dairy farms since they can't get any short-term loans from the credit agencies without the Project. (h) Based on the findings of a survey conducted by the Central Bank, working capital loans have the following amounts,and repayments periods: RD$ 1,000 and two years for dairy farms; RD$ 8,000 and four years for dairy/beef farms; and RD$ 26,500 and six years for beef breeding/fattening farms. ' (i) Incremental herd values were adjusted based on actual herd sizes in 1976 and estimated stocking rates at full development. B. Economic Rates of Return 2. Since financial prices for inputs and outputs reflect reasonably well their economic values and because transfer payments such as taxes and subsidies are negligible, the assumptions used to calculate the Economic Rate of Return (Table 4, this Annex) are essentially the same as those for the Financial Rate of Return calculation, except for the following adjustments: (a) Interest payments are excluded from the cash fla stream. (b) Participation of farms in the project is based on the actual commitment of sub-loans: Project Year Farm Type 1 2 3 4 Total ------- Number of Farms ------------ Dairy farms 23 19 11 11 64 Dairy/beef farms 12 6 6 13 37 Beef farms 9 10 11 22 52 Total 44 35 28 46 153 (c) The cost of operating the project-related technical services of the Central Bank during the disbursement period, are subtracted from the benefits. DOMINICAN REPUBLIC LIVESTOCK DEVELOPMENT PROJECT - Credit 245-DO Completion Report Net Flow from investment (Dairy Farm) End of Year Category Without 1 2 3 3.751/ 4 5 6 7 8-11 12 Project --------------------------------------------------RD$---------------------------------------------- sales Actual performance, 1976 price 13,698 n.a. n.a. n.a. 40,297 - - - - - - Actual performance, 1971 price 8,060 n.a. n.a. n.a. 23,616 - - - - - - Projection based on the actual performance 8,060 12,208 16,356 20,504 23,616 23,403 27,158 29,945 33,724 34,999 34,999 Ilerd Value Appraisal estimates - - - - - - - - - - 31,365 Projection based on the actual performance - - - - - - - - - - 20,466 Total Inflow Total 8,060 12,208 16,356 20,504 - 23,403 27,158 29,945 33,724 34,999 55,465 Increment - 4,148 8,296 12,444 - 15,343 19,098 21,885 23,664 26,939 47,405 Operating Expenses Actual performance, 1976 price 7,009 n.a. n.a. n.a. 25,134 - - - - - - Actual performance, 1971 price 4,044 n.a. n.a. n.a. 14,505 - - - - - - Projection based on the actual performance 4,044 6,834 9,624 12,414 14,505 14,360 13,388 11,822 13,142 12,156 23,156 Investment 2/ Current price.- - 0 33,824 22,549 0 - 0 0 0 0 0 0 Constant 1971 price 0 24,091 14,023 0 - 0 0 0 0 0 0 Interest Payment on Working Capital Loan Constant 1971 price (11%) 0 110 110 0 - 0 0 0 0 0 0 Total Outflow Total 4,044 31,035 23,757 12,414 - 14,360 13,388 11,822 13,142 13,156 13,156 Increment 0 26,991 19,713 8,370 - 10,316 9,344 7,778 9,098 9,112 9,112 Net Incremental Flow (22,843)(11,417) 4,074 - 5,027 9,754 14,107 16,566 17,827 38,293 Financial Rate of Return - 25.3% 1/ LPD survey was conducted in year 3.75 2/ 60% of investment was made in 1974 and 40% in 1975 April 5, 1978 DOMINICAN REPUBLIC LIVESTOCK DEVELOPMENT PROJECT - Credit 245-DO Completion Report Net Flow from Investment (Beef/Dairy Farm) End of Year Category Without 1 2 3 3.5 4 5 6 7 8-11 12 Project ---------------------------------------------------RD$------------------------------------------------ Sales Actual performance, 1976 price 33,889 n.a. n.a. n.a. 63,718 - - - - - - Actual performance, 1971 price 19,555 n.a. n.a. n.a. 36,767 - - - - - - Projection based on the actual performance 19,555 24,473 29,391 34,309 36,767 36,142 33,384 36,510 41,841 44,120 44,120 Herd Value Appraisal estimates - - - - - - - - - 61,985 Projection based on the actual performance - - - - - - - - - - 67,156 Total Inflow Total 19,555 24,473 29,391 34,309 - 36,142 33,384 36,510 41,841 44,120 ' 111,276 Increment 0 4,918 9,836 14,754 - 16,587 13,829 16,955 22,286 24,565 91,721 Operating Expenses Actual performance, 1976 price 19,228 n.a. n.a n.a 45,618 - - - - - - Actual performance, 1971 price 11,095 n.a. n.a. n.a. 26,323 - - - - - - Projection based on the actual performance 11,095 15,446 19,797 24,148 26,323 25,744 20,427 16,189 14,425 14,425 14,425 Investment 2 Current price 2 0 41,169 27,446 0 - 0 0 0 0 0 0 Constant 1971 price 0 29,323 17,068 0 - 0 0 0 0 0 0 Interest Payment Working Capital Loan Constant 1971 price (11%) 315 880 880 880 - 880 0 0 0 0 0 Total Outflow Total 11,410 45,649 37,745 25,028 - 26,624 20,427 16,189 14,425 14,425 14,425 Increment 0 34,239 26,335 13,618 - 15,214 9,017 4,779 3,015 3,015 3,015 Net Incremental Flow (29,321) (16,499) 1,136 - 1,373 4,812 12,176 '19,271 21,550 88,706 Financial Rate of Return - 21.0. 1/ LPD survey was conducted in year 3.5. a11 2/ 60% of investment was made in 1974 and 40% in 1975. April 5, 1978 DOMINICAN REPUBLIC LIVESTOCK DEVELOPMENT PROJECT - Credit 245-DO Completion Report Net Flow from Investment (Beef Breeding/Fattening Farm) End of Year Category Without 1 2 2.25 1/ 3 4 5 6 7 8-11 12 Project --------------------------------------------------------RD$-------------------------------------------------- Sales Actual performance, 1976 price 29,429 n.a. n.a. 35,758 - - - - - - - Actual performance, 1971 price 16,982 n.a. n.a. 20,634 - - - - - - - Projection based on the actual performance 16,982 18,605 20,228 20,634 19,004 23,255 28,950 32,560 33,757 34,562 34,562 Herd Value Appraisal estimates - - - - - - - - - - 53,870 Projection based on the actual performance - - - - - - - - - - 42,916 Total Inflow Total 16,982 18,605 20,228 - 19,004 23,255 28,950 32,560 33,757 34,562 77,478 Increment 0 1,623 3,246 - 2,022 6,273 11,968 15,578 16,775 17,580 60,496 Operation Expenses Actual performance, 1976 price 14,097 n.a. n.a. 20,528 - - - - - - - Actual performance, 1971 price 8,134 n.a. n.a. 11,845 - - - - - - - Projection based on the actual performance 8,134 9,783 11,432 11,845 11,419 12,698 13,942 13,669 13,124 12,911 12,911 Investment 2/ Current price - 30,518 20,346 - 0 0 0 0 0 0 0 Constant 1971 price 18,979 11,730 - 0 0 0 0 0 0 0 Interest Payment on Working Capital Loan Constant 1971 price (117) 496 2,915 2,915 - 2,915 2,915 2,915 1,749 0 0 0 Total Outflow Total 8,630 31,667 26,077 - 14,334 15,613 16,857 15,418 13,124 12,911 12,911 Increment 0 23,047 17,447 - 5,704 6,983 8,227 6,788 4,494 4,281 4,281 Net Incremental Flow (21,424)(14,201) - (3,682) (710) 3,723 8,790 12,281 13,299 66,215 Financial Rate of Return - 16.2% 1/ LPD survey was conducted in year 2.25. 2/ 60% of investment was made in 1975 and 40% in 1976. April 6, 1978 DOMINICAN REPUBLIC LIVESTOCK DEVELOPMENT PROJECT - Credit 245-DO Completion Report Economic Rate of Return Calculation Year Ending December 31 Category 1972 1973 1974 1975 1976 1977 1978 1979 1980 1981 1982 1983 1984 1985 1986 ---------------------------------------- R$OO-------------------------------------------------------D$O............................. Aggregate Flow from Investment Small Dairy Farms (64) (525) (697) (374) (184) 239 609 811 987 1,086 1,127 1,141 1,612 1,120 617 421 Dairy/Beef Farms (37) (352) (374) (261) (396) (6) 272 351 511 662 768 797 1,602 941 812 1,153 Beef Breeding/Fattening Farms (52) (193) (342) (411) (670) (326) 27 224 422 581 669 692 1,078 1,001 911 1,237 Technical Services Central Bank (12) (144) (97) (23) (118) (42) - - - - - - - - - Balance (1,082) (1,557) (1,143) (1,273) (211) 866 1,386 1,920 2,329 2,564 2,630 4,292 3,062 2,340 2,811 Economic Rate of Return: 20.6% April 4, 1978 ,SANTIAGO RODRIGUEZ A M Sanchez -~- r' --- ONTE- RISTI O NIIS Ak%REPUBLIC .4f ---- VERDE DEVELOPM44,RÖJ9CT- DAJABON4 \. MAOP - - EC SANTI O A RODRIGU1 S Å- ..OR G A . .O . . 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