Peru - Public investment program 1966-1967 (Vol. 6 of 7) : Irrigation

RESTR I CTED F-- TURI TO RE"PORTS DESK WH155 WITHIN Vol. 6 o iE _ ___ This, report was prepared for use within the Bank and its affiliated organizations. They do not accept responsibility for its accuracy or completeness. The report may not be published nor may it, be quoted as representing their views. INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT INTERNATIONAL DEVELOPMENT ASSOCIATION AN APPRAISAL OF THE 1966-1967 PUBLIC INVESTMENT PROGRAM OF PERU (in seven volumes) VOLUME VI IRRIGATION December 28. 1965 Western Hemisphere Department  CURRENCY EQUIVALENTS 1 US $ = 26. 82 Soles 1 Sol (S/. ) = 3.7 US cents 1 million Soles = US $37, 286  TABLE OF CONTEN'TS Page c. Prefatory Note IRRIGATION Existing Situation ......................... . 1 Organization of Irrigation . ............. ..... ..... . . .1 General Development Goal ................2... 0. ..... . 2 Development on the Costa . ............... ....... , ., 2 Some Major New Projects in the Costa Irrigation Program ...... 3 Chira-Piura . ........ ......... ..* ........... * .. 3 Olmos Project ............ ............... ......... 4 Chao y Viru Project .. ... . ..... ... .. ... . t4 1Hiajes y Lagunillas Projects O...C.4 ..... 5 lvlajes Project ........... ,......... . ........... 5 Lagunillas Project . .......... .......... 5 Improvement of Existing Irrigation ........ ............ 5 Tumbes Project ......... ..... ...... ,... O... . ...... ..... 6 Ica Valley *...............e..*....... ...e..... 6 Pisco Valley ........... .... 6 Moquegua Project .........7. ....... ..... ....O.. 7 Groundwater ..... . . . O.... ................... 7 The Sierra Irrigation Program.. 7 Past and Future Investment in Irrigation ................ 8 Statistical Appendix  PREFATORY NOTE The focal point of reference in this report is the investment program prepared in early 1965 by the National Planning Institute (INP) as a proposed basis for the Government's investment outlays for 1966. Subsequently, the Government's Budget proposals of August 1965 intro- duced changes in the INP prepared program. While it has not been pos- sible to revise this report to take account of these changes and comment on them, certain comments are made and some new information included in the main report (particularly Chapter II and supporting Tables). The main aspects of the analysis and policy conclusions in the present report, are still applicable in broad terms, and many of the details provide useful reference material.  IRRIGATION Existing Situation 1. On the virtually rainless Costa of Peru, agriculture is wlholly dependent upon irrigation in the 52 val'eys draining the western slopes of the Andes. Approximately 685,000 ha of land (5.1 percent of the 134,000 square kilometers of the Costa region) are irrigated to produce cotton (over 200,000 ha), sugar cane (over 60,000 ha), rice (also over 60,000 ha), pasture, wheat, maize, fruits and vegetables. Because of unequal dis- tribution of water resources, both in time and space, only some 40 percent of this area received ample and assured waUer supplies; for some further 30 percent of the area, supplies are adequate in an average year, but the remaining 30 percent suffer deficiency. 2. Water is the property of the state and its method of sale to irrigators varies from valley to valley; in some there is a charge per hectare irrigated, in others a charge for a percentage of available supplies, and in others it is sold by volume. In all cases the charge is low, being fixed to cover only the cost of administration of the distribution systems. An exception is in the modern project of San Lorenzo where the water charges, together with the proceeds of the sale of land are adequate to cover the amortization of the cost of' the project as well as operation and maintenance. Water rights are governed by the 1902 Water Code; the modification of which would aid the better distribution of supplies in accordance with the prin- ciples of the Agrarian Reform Law (1964) which states that the supply for each farm shall be determined on the basis of its needs, yet, pending a new water law, safeguards existing rights which are, in many cases, in excess of needs. A new draft water law, prepared by the Direccion de Agua i, would limit rights to needs and permit water thus released to be used; the mission hopes that this will soon be enacted. 3. In the valleys of' the Sierra, a summer rainfall of 300 to 900 rmm is supplemented on some 200,000 ha (0.5 percent of the total area of 385,OCO square kilometers) by small. scale irrigation works. In view of the altitude and of the constant danger of night frost in the valleys, there is a l'mited choice of crops: quiua, potatoes, oats, vetches and other small grains are cultivated everywhere while stone fruits, olives and grapes are planted only at the lower elevations. Organization of Irrigation 4. A number of govermment departments are concerned with irrigation (either wholly or partly) and are responsible, for the purposes of invest- n'ent planning and project programming, to the Agricultural "Sectorial".? of the WIational Institute of Planning. The departments wholly concerned are the Direccion de Irrigacion of the Ministry of Development and Public Works (responsible for the planning and implementation of new works) and the Direccion de Aguas de Regadio of the Ministry of Agriculture (responsible for operation and maintenance of existing irrigation). Partly concerned 1/ The Water Department, M'inistry of Agriculture. 2/ The sector planning group representing interested agencies.  are the Fondo Nacional de Desarrollo Economico (which has responsibility for some of the Sierra projects) the Public Regional Development Corpo- rations (which may be responsible for projects in their areas), pafticu- larly the Corporacion Peruana del Santa (responsible for the Chao y Viru Project), the Corporacion de Tacna, the Corporacion de Miooquegua and the Junta de Rehabilitacion y Desarrollo de Arequipa, 5. In practice, there is no overall body with responsibility for planning and coordinating water resources development. This situation is causing concern in Peru and consideration is being given to the formation of a more unified organization or means o2 coordination of effort. The mission was not in a position to make a detailed study of the problem of organization, but it urges that this subject be actively exanined and action taken soon to achieve better organization and direction of the irrigation program. General Development Goal 6. A very considerable increase in areas irrLgated is hoped for over the next few years as part of the Miillion Hectares Plan which con- templates that 200,000 ha of new lands will come under irrigation on the Costa and a similar area in the Sierra during the President's tenure of office (until 1969). The objective of the Plan as stated is to improve the "land-man ratio" (there is only one-fifth of a cultivated hectare per head of population) and has not yet been expressed in termns of agricultural production. Development on the Costa 7. A provisional National Plan formulated by the Direccion de Irrigacion of the IMinistry of Public Works looks to the ultimate irrigation on the Costa of some 640,000 ha of new lands in 32 projects (thus almost doubling the present area) and the improvement of water supplies to 270,000 ha (about L0 percent) of the lands presently irrigated. Iviore immediately, the pub- lished program envisages that nearly 260,000 ha of new lands shall be developed in 24 projects (many of them first stages of the ultimate plan) and impro-ted water supplies given to nearly 170,000 ha of existing irrigation by 1969. The works necessary for the projects consist of the regulation and diversion of water from those watersheds where there is an abuindance (presently wasted) to new lands and to existing irrigation in other valleys which suffer a water shortage. In some of the most important cases, the source watersheds are on the eastern side of the Continental Divide and it is planned that these should be connected to the western side by tunnels. Related to the irrigation works, hydro-e:Lectric plants to a capacity of some 300 M.W. are incLuded in the general p:Lan. 8. The projects included in the immediate program, or under current investigation, the areas of new lands they will serve or improve, the esti- mated engineering cost, the present status of the projects and mission comments are summarized in Table 1. The projects (or stages) not officially considered part of the i:llion Hectares Plan in April 1965 are marked with an asterisk. Apart from La Joya and Tinajones, none of the major publ;c projects have progressed beyond the study stage. The San Lorenzo Project is not irclilded since the construction of the civil irrigation works has  - 3 - been completed; its programi for colonization is well underway and is being aided by a recent (1965) Bank loan of $11 million. 9. Because feasibility studies for most projects have not been com- pleted, cost estimates for the Government's program are approximate only. They are usually based on a round figure general estimate of the cost per hectare of nez land irrigated, based on preliminary studies (varying between 10,000 and 30,000 soles per hectare - and usually nearer the higher figure for the larger projects) multiplied by an estimate (o'ten in advance of the soil survey) of the area to be irrigated. The program is under continuous review but, when originally formulated in 196h I! it was envisaged that the investment necessary would rise from 0.1 billion soles in 196h through 0.5 billion in 1965, and 1l. billion in 1966 to a peak of 2.0 billion in 1967, falling to 1.8 billion and 1.5 billion in 1968 and 1969 respectively. Of this total of 7.3 billion soles, three billion soles financing would be sought from external sources. Costs may prove to be higher than the esti- mates. Tumbes Project first stage was originally estinmated to cost 88 million soles, whereas the feasibility report estimate was 135 million soles, an escalation of 54 percent and, in the case of Tinajones darm and related works, the engineer's estimate was 444 million soles while the low bid proved to be 535 million soles, an increase of 20 percent. 10., These cost estimates cover only the engineering works necessary to bring the water to the farm boundary and do not include on-farm develop- ment costs. Land leveling, ditching, fencing and the provision of buildings would cost about an additional 10,000 soles per hectare, a figure based on experience in San Lorenzo. Thus an additional investment of some 2.6 billion soles would be necessary to complement the engineering cost of the plan. Some Major New Projects in -the Costa Irrigation Program 11. Four major irrigation projects which the Government hopes to begin in the near future for which international finance will be sought and which were visited by the mission are: Chira-Piura, Olmos, Chao y Viru, and Majes y Lagunillas. 12. The Chira-Piura feasibility report has already been completed. The 63 km. length canal with a capacity of 50 cubic meters/second from the abundant River Chira to the deficient River Piura, which comprises the pro- posed project, would supply the lower Piura Valley. In all, the operation of the Chira-Piura Canal, in conjunction with the San Lorenzo Reservoir would regulate water supply for nearly 170,000 ha (San Lorenzo 45,000, Upper Piura 35,000, Lower Piura 5t),000, Chipillico 2,500, and Chira 37,000). she necessary related investigations of drainage problems in the Lower Piura, are expected to be completecd towards the end of 1965, and it cannot yet be estimated how much any necessary complementary drainage works will add to 1/ "Plan de Incremento del Area Cultivada en un Millon de Hectareas 1964-69", Oficina Sectorial de Planificacion Agraria, Dec. 1964.  the cost of the canal which is presently estimated at 470 million soles ($17.6 million). The mission has assumed for general plinning purposes that the total cost will be 600 million soles (Table 2). 13. A feasibility study of the Olmos Project is presently being pre- pared by Italconsult, engaged by FAO which in turn is the executing agency for this UN Special Ftuid Project. The project contemp'ates the collection of water from several rivers and a reservoir on the eastern side of the Andes (in several stages) diverted by a 20 kma. tunael through the Continental Divide, leading to a reservoir on the Pacific side and thence to a distri- Oution system to serve initially 40,000 ha and ultimately 100,000 ha on the Pampas de Olmos. The mission noted the good quality of the soi'ls, although because of their high silt content, they are particularly prone to erosion and care must be taken in planning the distribution systam to ensure that surplus flows are not disposed of into ephemeral channels. 14. The full feasibility report is scheduled for completion by rmid- 1966 but the Government, considering that construction of the tunnel would take a longer time (estimated at four and one half years) than other works :n a possible first stage (perhaps three years), has requested the consultants to provide interim data on all aspects of the project (topography, hydrology, geology, engineering, agronomy, economics) by about August 1965. The govern- merit hopes that these data will provide adequiate justification to attract external finance for the construction of the tunnel without waiting for com- pletion of the entire report. A very provisional estimate of the cost of the first stage of the project is 1.8 billion soles ($67 million) or h5,000 soles per hectare ($1,700) of which the tunnel would cost almost 40 percent. The total engineering cost is expected to be of the order of 3.3 bill-on soles ($125 million) or 33,000 soles per hectare. Farm development costs to be publicly financed have not as yet been estimated, but to give a rough orcler of magnitude might be put at about one billion soles; thus a total investment of some $160 million is envisaged which would be spread over at least a decade. 15. The Chao y Viru Project which would utilize the waters of the Santa Rivrer has been under investigation for many years by the Corporacion de Santa, a regional public development corporation. A feasibility report has been submitted to the Bank which, after preliminary investigation, recommended that further studies be made, including completion of agrologic investiga- tions, drainage of areas presently irrigated, hydrology, colonization and a recasting of the project to exclude the previously included Conococha Reser- voir. These studies are expected to be completed toward the end of 1965, and to be incorporated in a new overall feasibility report. Physically, the project consists of diverting water from the abundant Santa River along the valley side in a 50 km., length feeder canal which includes 48 tunnels of. total le'ngth 19 km., ahd thetice northwards to the CRiao, Virui, Iioche'and Chicama Valleys where tVh existing irrigation (76,000) will receive imv - proved water supplies and a further new 60,000 ha will be irrigated. In a  first stage, 17,000 ha new lands will be irrigated and 12,000 ha improved. Possiblyr, a 300,000 K.W. hydor-power plant will be constructed in the main canal. 16. The Santa Corporation estimates the cost of the complete project to be 2.2 billion soles ($83 million) for engineering works and 2.0 billicn solesl/($75 million) for the colonization cost of the 60,000 ha of new lands, a total of 4.2 billion soles ($158 million). Tne first stage is estimated to cost 1.2 billion soles for engineering and 0.6 billion for colonization, a total of 1.8 billion so]es. The new lands to be irrigated are generally steep and sandy and the earlier benefits of the projects would stem rather from improved yields in the eodsting irrigation. 17. In the south of the country, the Majes y Laguni2las Projects are being investigated by Electroconsult whose feasibility report will be com- pleted in mid-1966. These projects are considered by the Peruvian Govern- ment as particularly important because of population pressure in the Arequipa region; it was originally hoped that the two projects would develop 80,000 ha of new lands and improve water supplies to 6,000 ha of presently irrigated land. Cost data are not yet available to refine the rough preliminary esti- mate that the engineering works would cost three billion soles. 18. The Majes Project contemplates a trans-Andean diversion of the upper Rio Apuriaiac (13km.,of tunnels) into the Rio Co'ca, a reservoir in the upper Colca and 130 km. diversion (including 45 km. tunnels) for lho cubic meters per second into the Rio Siguas whence it is diverted uo the MaJes and Siguas Pampas on the right and left banks respectively. The soils of the intended service area are generally very thin, overlaying un- dulating gravel. Leveling for surface irrigation would rermiove much soil and the land therefore would only seem suitable for sprinkxle" development; the consultants are study-ing this aspect. 19. The Lagwnillas Project has the object of further expanding irri- gation on the Pampas de La Joya by the diversion of the Rio Verde and Laguna Lagunillas into the Rio Chili. Initially a route via the Rio Tambo was in- vestigated because of 120 M.W. power potential at Sagay but because of the ex-pense of' this route (a 127 km. conduit including 77 km. tunnels) a less expensive scheme (:yielding 17 cubic meters per second instead of 30) has been investigated whereby water is pumped from Laguna Lagunillas to the Rio Sur-bay (upper Chili). Rio Verde and Laguna Lagunillas are tribu- taries to take Titicaca. Improvement of Existing Irrig_tion 20. The published Costa Irrigation Program of the Direccion de Irrigacion, while primarily conceived to bring new lands under irrigation, also intends to supply extra water to some existing irrigated areas which suffer a deficiency, and plans (in some cases) the internal improvement of ! T'rhese costs include an item for land purchase.  the systems which are to receive the extra water. The Direccion de Aguas is also formulating plans for a general improvement program of the existing irrigation. 21. Internal improve,nent is needed in most of the systems on the Costa whether or not they are scheduled to receive extra water under t'le Direccion de Irrigacion's program. Particular needs are the lining of canals (it is estimated that half tlle waber diverted is los-t by seepage from the canals), improved water control devices, and the provision of drainage for the 200,000 ha estimated to be affected by salinity. Such improvement could enable a more effective use to be made of available water supplies and permit more land to be irrigated. The extra land to be served by the water saved would not necessarily be "new" land but rather the marginal lands at the bottom of the valleys and nominally already irrigated (that is included in the 675,000 ha of present irrigation) but which in many years do not receive enough water tc) produce a crop. 22. The recormendation that emphasis should be placed on the improve- ,ient of existing irrigation has been made in the reports of two recent missions to Peru 1/ 2/, and is endorsed by the present mission. The French mission 2/ estimated that an increase of production of 30 percent in the Costa could be achieved by a general improvement program. Costs of such a program can- not be estimated with certainty but per unit of area they are unlikely to exceed 30 percent of the costs of developing new lands, partictlarly as investment will nou be needed for infrastructure; moreover, benefits would often be realized more quickly than from new lands. It would therefore appear that a well-studied program of improving existing projects should have a high priority. 1:3. As a first step towards formulation of a general improvement pro- gram, a preliminary inventory of the improvement needs of 42 Costa valleys is now under preparation by the Direccion de Aguas de Regadio and is ex- pected to be completed by the end of 1965 or early 1966. A series of feasi- bility reports which will contain an improvement component are being pre- pared for the Direccion de Irrigacion and are also expected to be ready at the same time. They are for the following projects: TumbesProject (consultant's report completed). Thae report pro- poses as a first stage the improvement of the distribution system and the provision of drainage for 6,000 ha at an estimated cost of 85 million so'les ($3.2 million). Ida Valley. The project under study will contemplate works for the improvement of 36,000 ha at a possible cost of 300 million soles ($11 million). Pisco Valley. The current study is investigating drainage works f_orl-5,00 ha at a possible cost of 65 million soles ($2.4 million). This study is not scheduled for completion until 1966 but the Director of 'rrigation is hoping to accelerate its progress. lt '"Thle Agricultural Development of Peru" FAO-IBRD 1959 2/ "Las Irrigaciones en el Peru" by Lafont Miqsion (French Tochnical CooDera6ion Serviee) 1961.  -7- Hoquegua_Project. In addition to the 10,000 new ha being inves- tigated improvemnent of 3,000 ha is contemplated in this study. Cost unknown. T'he mission feels that a "package" of these inprovement projects might be a subject for international finance both for construction of those projects which are then ready and for a further program of feasibility studies of the remaining valleys 30 that there may be a continuous fiow of improvement projects ready for financing over the next few years. Groundwater 24. The mission supports the viewpoint of the Direccio.1 de Irrigacion and Direccion de Aguas that the potentialities for the use of groundwater on the Costa could be more fully explored and that this source may well prove less expensive than the importation of distant surface water. Several reconnaissance reports by visiting experts have pointed to the considerable promise of such development, but no systematic survey of sources and recharge capability has yet been made. There seems to be particular promise of abuin- dant groundwater in the Tacna l/ area. The need for a systematic survey has been recognized by the Direccion de Irrigacion in its setting up of a new groundwater division for this purpose and, also a request has recently been made to the UM Special Fund to establish an institute 'or the training of groundwater technologists. The mission recommends thatu this effort be strengthened by the engagement of one or more firms of foreign specialists to make comprehensive surveys of specific areas, initially Tacna. The Sierra Irrigation Program 25. The second component of the Million Hectares Plan is the irrigation of 200,00() ha in the Sierra. The area presently irrigated in this region is not authoritatively known but is believed by the Direccion de Aguas (Ministry of Agriculture) to be about 200,000 ha; thus the intended program, if ful- filled, would approximate:Ly double the area. 26. The Government program lists 137 projects totaling 214,000 ha and situated at altitudes of between 1,000 and 4,000 meters. The overall construction cost of the program has been roughly estimated by the Govern- ment to be approximately 1.6 billion soles ($60 million), an average of 7,500 soles ($280) per hectare, excluding lateral canals which, the Govern- ment assumes, will be constructed on a self-help basis. At present 15 projects totaling 10,000 ha are under construction (one project accounts for nearly half of this area)2,/, and construction is scheduled to start on a further 15 projects totaLing 25,000 ha in 1965 at an estimated cost of 240 million soles (average 9,600 soles or $360 per hectare). Feasibility studies have been completed for 30 more projects totaling 33,000 ha, but only very preliminary studies have been made of the remaining 77 projects which total 146,000 ha. 1T Report of L. Picard, (Israeli Technical Assistance) July 1964 2/ Mantaro Project of the Direccion de Irrigacion; the others are i nder the jurisdiction of the FNDE.  - 8 - 27. The engineering works for the projects are siimple, consisting of a small diversion structure at the head of a mountain valley and a canal (usually with a capacity of less than one cubic meter per second) around the hillside. In some sclhemes, low season discharge is augmented by the provision of storage (small earth or rockfill dams). The hydrological basis for many of the schemes is not strong; in some cases feasibility reports were based on less than a year of streamflow records. 28. The mission found the administrative aspects of the Sierra Irri- gation Program to be confusing and in need of clarification. Initially, the investigation and construction of the projects were the responsibility of the Dlreccion de Irrigacion (Aiinistry of Development and Public Works) or the now dissolved SCIPA. A few years ago, the Fondo Nacional de Dessarollo Economico (National Economic Development Fund) engaged consultants to pre- pare feasibility reports for a number of projects, and secured a loan from the Inter-Anerican Development Bank (IADB) to finance seven Projects. The Fondo, having wide responsibility for a great variety of projects in the Republic, has encountered difficulty in arranging for preparation of their definitive designs and for supervision of construction. It has therefore passed this responsibility to the Direccion de Irrigacion, remaining solely the channel for funds. Given the need for coordinated planning and careful selection of all irrigation projects, it would seem natural for all respor.- sibility for the planning, engineering and financing of the Sierra projects to be passed to the Direccion de Irrigacion, although the Fondo might con- tinue to provide funds for projects of interest to it. 29. Arrangements for the operation and maintenance, land tenure, agii- cultural development, credit and extension services for the Sierra projects after their completion have yet to be made. By Government Decree, and in- corporated in the Loan Agreement with IADB, a cormittee consisting of re- presentatives of the Fondo, Direccion de Irrigacion, Direccion de Aguas, Oficina Naclonal de Reforma Agraria (ONRA) and the Servicio de Investigacion y Promocion Agraria (SIPA) will recommend these arrangements. In the few existing schemes the mission was able to visit, the farm holdings were small, of the order of one or two hectares. Under present conditions of agriculture and land distribution in the Sierra, the small irrigation works contemplated generally appear to offer the possibility of rather small direct economic returns though they may also yield important indirect social returns. The major usefulness of these small schemes in relation to increasing production and relieving socio-economic pressures in the Sierra would, the mission be- lieves, be best achieved if there were consolidation of holdings and resettle- ment of economic units in connection with them. The mission has suggested pilot studies in connection with Agrarian Reform in which small irrigation schemes might play a most useful role. Past and Future Investment in Irrigation 30. In the Peruvian investment context "irrigation" means only the study and engineering construction phases of irrigation development; settle- mnent is considered separately. For consistency, this meaning is retained here.  - 9 - 3:L. Figures for investment in irrigation in recent years supplied by various authorities are not wholly consistent with each other, but they show that, following the completion of San Lorenzo Project engineering works in 1959, activity was at a low level (less than 50 million soles per year) during 1