Mexico - Second Agricultural Marketing Project

 Second agricultural marketing project Report No: ; Type: Report/Evaluation Memorandum ; Country: Mexico; Region: Latin America And Caribbean; Sector: Agro-Industry & Marketing; Major Sector: Agriculture; ProjectID: P007598 December 29, 1995 Mexico: Second Agricultural Marketing Project (Loan 3141-ME) The Mexico Second Agricultural Marketing project (Loan 3141-ME) for US$100 million was approved in FY90. The Implementation Completion Report (ICR) was prepared by the Cooperative Programme of the Food and Agriculture Organization of the United Nations(FAO/CP) and the Latin America and the Caribbean Regional Office. The Borrower commented on the draft report and prepared an evaluation report, the executive summary of which is attached as Appendix B to the ICR. The loan closed on December 15, 1994, at which time a remaining balance of US$0.16 million was canceled. The principal objectives of the project were to: (a) improve the efficiency of Mexico's food marketing system through the adoption of modern technology and marketing practices and through a better dissemination of information on price and volume of product traded; and (b) consolidate the institutional development of FIDEC (Trust Fund for Commercial Development, a government second-tier lender to commercial banks). Important institutional goals were to get FIDEC to increase its long-term credit lending and decrease the percentage of its on- lending for working capital, and to rationalize FIDEC's interest rates. Apart from US$1.5 million used for institutional development of FIDEC and the National Marketing Information Service, the balance of the US$100 million loan was to be on-lent by commercial banks, mainly as long-term credit for investment in agricultural marketing infrastructure. A large portion of the loan funds were disbursed quickly to finance wholesale and retail markets. Because FIDEC did not have an adequate monitoring and evaluation mechanism, there is no systematic evidence on the quality and impact of sub-projects. Implementation of the component to strengthen FIDEC was mixed. While computerization of FIDEC's lending led to a four-fold increase in loans processed per staff member, FIDEC did not develop the capability to promote marketing organizations with technical assistance, training and other non-lending services. Nor did FIDEC turn principally into a long-term lender. Finally, although loan funds were intended to be on-lent at market rates over five years, poorly drafted loan conditionality resulted in interest rates below levels expected by the Bank. The ICR rates project outcome as satisfactory, institutional development as modest and sustainability as uncertain. The Operations Evaluation Department (OED) agrees with the institutional development and sustainability ratings, but concludes that the project outcome merits a marginally satisfactory rating. OED also agrees with the ICR rating of overall Bank performance as unsatisfactory. The lessons learned were that: (a) greater care should have been taken in the wording of legal conditionalities to ensure lending at agreed rates; (b) the on-lending institution did not have the skills to provide institution-building support to its borrowers (thus provision of these services should have been "unbundled" to business schools or other specialized agencies); (c) more frequent supervision missions and greater staff continuity were needed; and (d) monitoring and evaluation need to be an integral part of project design, especially with decentralized projects. OED assesses the ICR as being adequate. No audit is planned.