Honduras - Second Livestock Development Project

Z040e, -I - /0 3 ee6atd: /0 /.g - FilLE COP2 DOCUMENT OF INTERNATIONAL DEVELOPMENT ASSOCIATION Not For Public Use Report No. P-1293a-HO REPORT AND RECOMMENDATION OF THE PRESIDENT TO THE EXECUTIVE DIRECTORS ON A PROPOSED CREDIT TO THE REPUBLIC OF HONDURAS FOR A SECOND LIVESTOCK DEVELOPMENT PROJECT September 25, 1973 Latin America and the Caribbean Regional Office This report was prepared for official use only by the Bank Group. It may not be published, quoted or cited without Bank Group authorization. The Bank Group does'not accept responsibility for the accuracy or completeness of the report. Currency Unit Honduras Lempiras (L) US$ 1.00 = L 2.00 L 1 US$ 0.50 L 1,000 US$ 500.00 L 1,000,000 = US$ 500,000 Fiscal Year = January 1 to December 31 INTERNATIONAL DEVELOPMENT ASSOCIATION REPORT AND RECOMNDATION OF THE PRESIDENT TO THE EXECUTIVE DIRECTORS ON A PROPOSED CREDIT TO THE REPUBLIC OF HONDURAS FOR A SECOND LIVESTOCK DEVEIDPMENT PROJECT 1. I submit the following report and recommendation on a proposed development credit to the Republic of Honduras for the equivalent of US$6.6 million on standard IDA terms to help finance a project for livestock de- velopment. The proceeds of the credit would be relent to the Central Bank of Honduras for 20 years including 10 years of grace with interest at two percent per annum. PART I - THE ECONOMY Recent Developments and Prospects 2. A report entitled "Basic Report on the Economy of Honduras" (CA-19a) was distributed to the Executive Directors in June 1972 (R72-190). The main recommendations of this report stress the importance of policies to diversify the economy, especially through Government action to encourage forestry, the necessity of negotiating a reasonable basis for renewed full participation of Honduras in the Central American Common Market (CACM), and the desirability of increasing tax revenues. A mission to update economic information visited Honduras in August 1973. Its findings are reflected in this summary; an Updating Economic Report is scheduled for distribution to the Executive Directors late this year. A country data sheet is attached as Annex I. 3. Honduras has a small open economy, heavily dependent on the export of bananas, although a modest degree of diversification has taken place in the last decade through the development of new export products such as meat, simple manufactures, cotton and tobacco. Its limited resources consist mainly of the fertile coastal plain in the north, a few fertile valleys in the east, and extensive but largely unexploited natural pine forests. Known mineral deposits are not extensive; they include silver, lead and zinc, which have been exploited on a small scale for decades, and low-grade iron ore. Although the average population-to-land ratio is favorable, population has traditionally concentrated in the mountainous west, the poorest agricultural area of the country, and on the north coastal plain. In the future, as population pressure increases in these areas, heavy investment in physical infrastructure will be necessary to facilitate the movement of population to less heavily settled areas further to the east. This process has already started as the road network was improved and expanded in recent years. 1/ 4. With per capita income of about US$290 in 1971, Honduras is the poorest country in Central America. Real GDP rose at an average annual rate 1/ Calculated according to World Bank Atlas methodology. - 2 - of 4.7 percent during 1965-72, but much of this expansion took place during the first three years of this period, as a consequence of substantial investment and large increases in output and export of bananas. From 1969 through 1972 economic growth has been quite low,real per capita income growing at a yearly rate of 1.2 percent. Inflation has been limited: the consumer price index rose at a rate of 2.1 percent per year from 1965 to 1972. Several factors contributed to the slow growth of the economy during tne last few years, including severe hurricane damage to banana and other crops in 1969,coinciding with the armed conflict between Honduras and El Salvador and the consequent reduction in private investment and the withdrawal by Honduras from the..free trade arrangements of the Central American Common Market (CACM), a move which adversely affected a number of export industries. Widespread drought in 1972, and storms and floods in the banana plantations in 1973 have resulted in a large loss in agricul- tural production. By mid-1973, however, there were signs that the economy was pulling out of this period of relative stagnation. Export prices were improving and the Government's budgetary position was stronger. Following the severe deterioration in the balance-of-payments in 1969-70, the net international reserves' position improved during 1971-72, a move which will probably be continued in 1973. The rate of inflation in 1973 will, however, be above the historical rate and may be of the order of 5 percent, both because of the production problems in the agricultural sector and because of higher import prices. 5. The CACM was an important element in the growth of the Honduran economy during the 1960's. The CACM absorbed Honduran exports of staples which have no ready market elsewhere, and it provided the additional markets necessary for the establishment of factories making textiles, clothing, chemicals and metal products. The Honduran authorities felt, however, that the benefits of integration, especially in terms of industrial investment, were unequally distributed among the member countries. The other CACM members recognize the basis for the Honduran complaints, and during the past two years have sought solutions to the problem. As an interim solution to basic Common Market problems, Honduras has negotiated bilateral trade agree- ments with all its CACM partners except El Salvador. In the meantime, the Common Market Secretariat (SIECA) has prepared a study which proposes solu- tions to existing problems, and makes recommendations geared to the formation of a Central American Economic Conmnity. The report has been well received by the CACM member governments, including Honduras. Once a political settlement is reached between Honduras and El Salvador -- which the two governments have indicated they expect to reach in early 1974 -- there should be more rapid progress toward integration objectives. 6. During most of the 1960's the Government sharply increased its investment in development projects. Among the major achievements in this period were the establishment of a basic transport network connecting the main population centers, the expansion of electric power and telecommuni- cations services, and the doubling of primary school enrollment. Until 1968, there were no financial difficulties in carrying forward these schemes, mainly because of the fast growth of government revenues based on the intro- duction of a general sales tax and higher income tax rates in 1964, and larger tax payments by the banana companies. After 1969, however, the public sector -3 - experienced a sharp deterioration in its finances, initially because of defense and other emergency expenditures connected with the 1969 conflict with El Salvador, and later because the normal growth of Government current expenditures outstripped the current revenues. Public sector savings declined from an average of 2.7 percent of GDP in 1966-68 to 1.6 percent of GDP in 1969-71. In-spite of this, the public sector maintained an impressive investment effort with the average investment ratio rising from 3.6 to 6.2 percent of GDP over the same period. A large increase in net foreign financing did not cover the overall public sector deficit, and the Central Bank was required to finance the gap, equivalent to about 1.3 percent of GDP in 1969-71. In 1972 the Central Government was able to improve its financial position, but this was in large part the result of a 20 percent drop in investment expenditures. In the first half of 1973, the Government's financial position continued to improve, but this year it was the result of an increase in current revenues and tight control over current expenditures. Investment expenditures, although not being further reduced, continued at relatively low levels in the first half of 1973. This low level in both 1972 and early 1973 results from the small number of new project starts in the preceding years. One of the Government's major concerns at present is building up a new pipeline of sound development projects responsive to the country's development objectives. 7. The military Government that took power in December 1972 announced its intention to pursue progressive development policies, and to tackle the country's fundamental economic and social problems. The new Government's development plan -- mainly a definition of objectives and policies rather than specific projects -- is expected to be ready in December 1973. Pending its completion, the new Government has been working closely with international agencies in an effort to revise and accelerate the execution of a tentative investment program prepared last year. The program provides for continued investments in physical infrastructure, especially power and transport, and a substantial increase of investment in the social sectors, particularly education and water supply and in directly productive sectors, giving special emphasis to agricultural diversification. The forestry sector offers the best opportunity for the medium-term diversification of production with good export potential. Since the first of the year, the Government has taken a number of important actions, among them the enactment of agrarian reform measures designed to resolve emergency land tenure problems while a long-term agrarian plan is designed, the formation of the long-awaited skilled labor training center and steps towards the development of forest-based industries. The new Government has indicated that it intends to introduce any necessary tax measures when the financing needs of the revised development and public investment plans are fully established. 8. Over the next five years or so, the economy is exrected to recover from its recent stagnation. Banana exports, which still constitute slightly more than 40 percent of Honduras' total exports, will grow only moderately, but this is expected to be more than offset by rapidly rising exports of coffee, meat, timber and cotton. Ttal export growth may be of the order of 8 percent per year, thus strengthening Honduras' balance-of-payments and contributing to a faster rate of growth of GDP. The more intensive development effort expected in the public sector, along with the renewed private sector expansion (stimulated by Government activities, favorable export markets and the expected re-establishment of regional integration arrangements) will add to both import demand and development financing requirements. Thus in the medium-term the favorable prospects also mean an increased need for external assistance. External Assistance 9. The external lending agencies have strongly supported public invest- ment in Honduras. Outstanding external public debt, including undisbursed, amounted to US$252.4 million as of December 1972. Of this total, more than 32 percent is repayable in local currency, and the ratio of debt service payable in foreign exchange to export earnings is very low- 3.4 percent. Excluding the large proportion of the external debt repayable in local currency, the Bank's share of external debt - including undisbursed - is 34.3 percent and the IDA's share is 14.6 percent. During 1972, the percen- tage of Bank Group debt service in total debt service repayable in foreign currency was about 50 percent. 10. Apart from the Bank Group, external financing is provided by USAID, the Inter-American Development Bank (IDB) and the Central American Bank for Economic Integration (CABEI). USAID has been active in education, health, feeder road construction, water supply and agriculture; it was also instru- mental in the formation of a private industrial finance company. IDB has been involved in housing, education, water and sewerage, and highways. It also supports agricultural and industrial projects by means of general credit lines to the government-owned development bank. CABEI is financing projects with a regional impact, primarily in transport, industry and telecommunica- tions. Past lending of these agencies is summarized below. CONMITMENTS BY MAJOR OFFICIAL LENDING AGENCIES (Net of cancellations, as at June 30, 1973) (US$ millions) IBRD IDA AID IDB CABEI Lending 1950-65 25.9 11.9 26.7 27.2 18.3 Lending 1966-72 63.3 12.1 26.6 62.5 77.5 Transport 38.0 - - 11.6 32.9 Power 25.3 9.5 - - 7.2 Telecommunications - - - - 4.4 Education - - 9.0 7.6 - Health - - 2.6 - - Housing - - - 12.5 9.7 Agriculture - 2.6 13.0 28.6 0.1 Industry - - 1.5 2.2 19.8 Other - - 0.5 - 3.4 Total 89.2 24.0 53.3 89.7 95.8 -5- IDB and CABEI are expected to continue financing projects in the sectors which they have financed in the past, although CABEI will focus increasingly on tourisn. USAID, on the other hand, may concentrate its future lending in agriculture, depending on the results of an ongoing sector survey which it is financing. 11. Since its poverty, meager resource endownent and balance-of-payments performance have made it difficult for Honduras - one of the least developed countries in Latin America - to borrow substantial amounts ozf conventional terms, external agencies have extended financial assistance on fairly soft terms so that debt service, while it has risen significantly in the last few years, is still low. Honduras does have some margin for borrowing on con- ventional terms; assuming that the average terms of external borrowing were to remain more or less the same as in the past, the debt service ratio would rise to about 6.5 percent by the end of the decade, which is manageable for the Honduran economy. However, in view of Honduras' poverty, it is H-esirable to maintain reasonably soft average terms of assistance in the future in order to limit the burden of debt service upon both the budget and the balance-of- payments; further IDA credits are accordingly being planned. PART II - BANK GROUP OPERATIONS IN HONDURAS 12. Honduras has to date received twelve Bank loans totalling $89.2 million and five IDA credits totalling $24.0 million, both net of cancel- lations, making a total of $113.2 million. At the end of JUlY 1973, the Bank and IDA held about $100.1 million, including about $39.1 million not yet disbursed. The most recent loan, for highways, was signed in May 1973. 13. Execution of Bank Group financed projects has, on the whole, been satisfactory. Annex II contains a summary statement of Bank loans, IDA credits and IFC investments as of July 31, 1973, and notes on the execu- tion of on-going projects. 1h. In the past, Bank and IDA lending has been heavily concentrated on transport and power, where inadequate facilities hampered the development of the country. The first livestock developnent credit approved in 1970, how- ever, marked a first step towards diversifying lending. The Bank's lending program for FY73-77 would support the priorities of the Govermmentts invest- ment plan by giving increased emphasis to investment in the social and directly productive sectors while continuing to lend for physical infrastruc- ture, where there are still substantial deficiencies to be overcome. 15. Over the past two years the Bank has been working with the Govern- ment in developing programs in agriculture. The objectives of lending for -6- agriculture sre to assist in diversifying the econory, developing competi- tive exports in high-value produets, and supporting the Governm-ent's efforts in agrarian reform. The proposed project, along with cther projects under consideration, will further our lending chjectives in agriculture. We are working ith the IDB and USAID in preparing our programs and projects in the agricu,ltural sector. In this connection, a joint IBRD/IDB agricultural sector nission, which coordinated its work with the JSAID resident missions, visited. Central America this sunmer. 16. The Bank Group and the Coverrment have also been working in the rield of education. The first education project, scheduled to be presented for your consideration in the next few nonths, includes non-for-mal technical training, agricultural education, and teacher training programs, which are long neglected.areas that deserve the highest priority. 17. in transport, we hope to continue to assist the Governmient to complete the highway 7inks between the mnain regions of the country, but would in the future place greater emphasis on assistance in the construction of a network of feeder and access roads to support the Government's agriculturel program. 18. We plan to assist industry in Honduras as well as in the other Central American countries by lending to the Central American Bank for Eco- nomic Integration (CABEI). Lending for industry through a multinational institution such as CABEI would support the Central American integration effort; foster rational industrialization in the area where national markets are tco sm-all to permit efficient industrial development and assist in diversifying the regionls economy. A first lending operation to CABEI is now being appraised. 19. j7C has participated in two projects in Honduras. A total of $378,000 was invested in a leather tanning project in 1964 and 1966. A second operation was a pilot project for the pulp and paper industry to uti!lize the wood resources of the Clancho Reserve. A pilot company, Compania Pino Ueluldsa de Centroamérica, S.A. (CPOFNO). was established. in June 1.963, under the leadership of International Paper Company IPG), to investigate and possibly carry out a project. :7C invested $75,000 in COMPJN in 1969 and 1970. In March 1971, IPC discontinuocd its participation in COPI,O, and efor-ts to find other technical partners have so far been unsuccessf'ul. The new Goverrnent wishes to exploit the Olancho for4st, but specific plans are still being formulated. PART III - ThE ARICULTURAL SECTOR 20. .riculture constitutes the largest single sector in Hondurast economy. Rougily 35 percent of GDP is derived from the sector, and agri- cultural exports represent 80 percent of m-erchand.ise exports. About 75 percent of the population lives in rural areas, and 6 oercent of the economically active people are engaged, in agriculture. - 7 - 21. Bananas, grown primarily by two U.S. companies, are the most important crop, representing 42 percent of export earnings and 26 percent of agricultural value added. The banana industry has largely determined the per- formance of the agricultural sector, and has traditionally been the source of growth of the econcmy. Coffee, timber and meat are the other major exports, although cotton, tobacco, sugarcane, maize and beans are also ex- ported. The steady increases that have taken place in many of these other extortable commodities are expected within the next few years to lessen the impact of variations in banana output on total exports. 22. Agricultural production is concentrated in the west and north coastal plains, which represent less than 40 percent of the land which could be used for agriculture. inall holdings are generally located in the moun- tainous areas where poor soils prevail, while many of the larger farms are located in the fertile lowlands. Land presently under cultivation is unevenly distributed. with two-thirds of all farms in holdings of less than 8 ha, although few farms ae large by Central American standards. Income distribution, however, is skewed between the urban and rural population. Per capita income in the rural areas is nalf the national average. If earnings of labor working in the banana industry are excluded, average per capita income in the rural sector is even lower - averaging US$50-U3S$60 per year. Agricultural DevelopMent Strategy 23. The Government recognizes that agriculture will continue to be the main source of employment and growth for some time, and has been trying to devise a strategy which will bring about improvement in the living con- ditions of the rural population while at the same time encouraging diversi- fication of the country's exports. The agricultural development policies, some of which are still being elaborated, will constitute a central part of the five-year development plan due to be completed later this year. 24. In the past, there was no effective policy of land tenure reform; in the early sixties an agrarian reform law was passed and the National Agrarian Institute (NAI) established to execute the law. The law, however, was never fully implemented. Partly as a result of the Government's inability to handle the issue of land reform, rural unrest increased in the late sixtieswith the farmers, who are organized in trade unions, demanding government action. Shortly after coming into office, the new Government issued a decree designed to solve short-term tenure problems. The decree empowered the National Agrarian Institute to allocate national and muni- cipal land to the rural poor, and to rent for nominal payments privately owned lands which are not being farmed. The decree is also designed to protect farmers who are genuinely developing land productively. The emer- gency program is now underway, and 7,500 families have already been settled on about 30,000 hectares. The Government is now designing long-term coloni- zation and land redistribution programs, but is giving special emphasis to the former since much of the rich eastern frontier of Honduras remains uninhabited and unexploited. A multipurpose cadaster which the Government has begun should assist in orienting these agrarian programs. The Government has requested Bank assistance in the formulation and implementation of its land colonization - 8 - and distribution programs, and we hope to provide assistance in this field. 25. The Government is also placing special emphasis on forestry develop- ment: it is promoting several projects to export wood and wood-based products, and has requested IDB assistance to organize a forest administration system. Tn the field of agricultural services, the Government is strengthening the agricultural extension service with the assistance of IDB. Agricultural Services 26. The departments in Government dealing with agriculture are not well developed and suffer from a lack of professional staff, poor long-range plan- ning, and a shortage of funds. Extension services to farmers are provided by Desarrollo Rural (DESARRURAL), a semi-autonomous agency under the Ministry of Natural Resources, which works in close cooperation with the National Developnent Bank and NAI, and is one of the more effective public agencies. But the agency, primarily committed to service the needs of the large number of small subsistence farmers and the organizations that represent them, is short of staff. A technical unit was created within the Central Bank to administer the First Livestock Project because it was felt that DESARRURAL was overburdened and could not assume additional tasks. This unit has proved to be effective, and will be expanded in the second project. ARricul- tural research Tacilities are almostY nion-existent: -the Government station at Comayagua distributes cattle rather than conducts applied research, and the banana companies keep the resultE of their extensive research Drogramns for their own use. Agricultural Credit 27. Honduras has a well developed and competitive banking system consisting of the Central Bank (CB), ten private commercial banks and seven specialized institutions, including the government-owned National Develop- ment Bank (NDB). 'NDB was created in 1950 with the purpose of financing and developing a wide range of agricultural schemes. The NDB did not participate in the First Livestock Development Project largely because its administration was weak, its technicians fully extended, and its debt col- lection poor. Since then, however, the institution has improved considerably, and detailed studies by both USAID and IDB have commented favorably on its revamped administration and supporting services. Improvements in NDB qualify it for participation in the second project. NDB would provide useful compe- tition to commercial banks, and since it represents the largest single channel of agricultural lending, may well be an appropriate organization to handle further Bank Group projects in agriculture. A second specialized institution is the Autonomous Municipal Bank (ANB), owned by municipalities and the Govern- ment, and designed to help finance municipal projects such as slaughterhouses. AMB is poorly managed and financially weak, partly because many municipali- ties are not financially independent, and have been reluctant to contribute funds to the bank. AMB does not enjoy the confidence of the municipalities or the Government, and is currently being reorganized with USAID assistance, but it will take at least two years before it is operational again. There- fore, it will not participate in this project. -9 - 28. Agricultural credit is provided by both public and private banks, and is mostly short-tezm. Recently, the private banks have provided some long-term credit although most of it is provided by public banks with cre- dits from international finance institutions. NDB has been the main source of' credit to the agricultural sector,having made about 60 percent of all loans to agriculture. The very small farmer is being assisted by a line of credit from IDB which is being disbursed through the NDB and credit cooperatives. Although total loans to the agricultural sector doubled between 1968 and 1972, much of the increase was short-term credit. There remains a need for long-term credit with appropriate grace periods. The Livestock Sub-Sector 29. The cattle industry is rapidly increasing in importance, and the potential for developnent is considerable. Official estimates indicate a national cattle herd of 1.6 million head. Cattle are widely distributed throughout the country, but 58 percent of all cattle are said to be on small farms of less than 65 ha. Most of the cattle are of the native ty and, though stunted by poor nutrition and bad management, are capable -f greater productivity than is currently achieved. There is very little specialized dairy farming. Most of the milk for human consumption comes from predoni- nantly beef type animals. Cattle husbandry standards are extremely low. The first livestock project has helped to improve this situation, and the proposed second project aims to further assist by providing specialist advisors in the fields of farm management, pasture management, and cattle and pig husbandry. 30. Beef production has increased steadily from 15,400 tons in 1960 uo 38,000 tons in 1971. During this period, exports have risen nearly ten- fold, from 2,400 tons to 22,130 tons, but domestic consumption of carcass meat has remained static at about 16,000 tons per year. Much of the beef, produced is exported, mostly as boneless beef to the United States. Milk production has risen at a more modest rate, from 128 million liters in 1960 to 153 million liters in 1971. Output has not been able to keep up with rising demand and imports have risen correspondingly from 12 million liters to 33 million liters of liquid milk equivalent in the same period. 31. The total pig population is estimated to be 720,000 head, scat- tered mainly among the large number of small subsistence farmers. Special- ized pig production barely exists; few producers own more than five sows, and standards of husbandry are extremely low. Poor nutrition is the primary problem, leading to high mortality and low productivity. Marketing 32. The export meat trade is in the hands of seven export packing plants which are run aggressively, and more are being established. At present, average producer prices paid by the packers provide adequate incen- tives for the producer. Regulations prohibit the packers from including more than 10 percent of females in the animals they slaughter for export, - 10 - which has the effect of channeling most of the cull female stock to the' domestic market. Most animals for domestic consumption are killed by local butchers, in municipal abattoirs, or elsewhere illegally. Most of these abattoirs are poorly equipped and unhygienic. All pig production is slaughtered privately or in the municipal abattoirs within the country. The export packers do not handle pigs, since, for hygienic reasons, United States import regulations do not permit them to slaughter pigs with the same equip- ment that is used to slaughter cattle. The proposed project includes financing of five municipal abattoirs to assist in improving the marketing facilities for locally consumed livestock products. 33. Milk consumption in liquid form is estimated to be 25 perert of total production, the balance being used to make cheese and butter. Most liquid milk is consumed in the heevily populated departments and those with milk processing plants. These plants are either individually ovned or owned by producer cooperatives. First Livestock Project 34. The Association became involved in the development of the livestock sub-sector in 1970 when it made a US$2.6 million credit to help finance medium and. long-term loans to farmers for beef and dairy enterprises, and funds for technical assistance. The project was carried out by the Central Bank, which channelled funds to farmers through the commercial banking system. The project has been well received by local farmers, who viewed it not only as a means of obtaining scarce long-term financing they required, but also as a means for _uproving their production techniques. Project staff have performed well, and the President of the Central Bank has given the proiect his personal support. As a result of the project, the commercial banking system has for the first time become a source of supervised long-term credit. Despite delays caused by rural unrest in late 1971 and early 1972, all funds were committed on schedule by March 1973, and IDA has disbursed US$1.5 million. 3$. Durin the first two years, the average size of sub-loans in the first project was about US$40,000, but this average has fallen sharply during 1973. Earlier loans were made mostly to larger farmers, a demand now largely satisfied, and henceforth medium and smaller producers are likely to predominate in the project. The impact of the first project on the farmers, and to some extent on the banking community, has been considerable, and a foundation has been laid for a far reaching program of supervised development credit for the entire livestock industry. The proposed second livestock development project would build on the momentum generated by the first project. PART 7V - THPE IOJECT 36. A report entitled "Appraisal of Second Livestock Development Project - Hoonduras" (No. 196a-HO)'dated September 12, 1973, is being distribu- ted separately. The main features of the loan and project are summarized in Annex III. The project was prepared by the Central Bank of Honduras. It was aDraised in the field in Februar/mrch 1973. Negotiations for the pro- Posed crediu were -held in Washingtcr in August 1973. The Government was re- presented by Messrs. Manuel Acosta Bonilla, Minister of Finance and PuIblic Credit, Roberto Galvez, Anbassador of Honduras to the United States,and Guillermo Bueso, Economic Advisor to the Honduran Embassy. The Central Bank was represented by Messrs. Albeito Galeano, President, Porfirio Zavala, Manager, Adalberto Discua, Lawyer and Mario Nafio, Project Director. Project Description 37. The project, which meets the objectives of the Government's agri- cultural development program, would be an extension and enlargenent of the First Livestock Develoznent Project. Its purpose is to make funds available for the expansion of the cattle and pig industries, including credit to far- mers, financing of municipal slaughterhouses and technical assistance. The project is designed to assist an increasing number of smaller livestock Iroducers. Emphasis will therefore be placed in areas where ecological conditions permit the development of intensive dairying at relatively low capital cost. Such conditions are to be found primarily in the Atlantic zone, where the dis- tribution of rainfall and soil conditions enable high returns from o small acreage. Where natural conditions are not so favorable, the emphasis needs to be on beef production, which is not financially viable in very small units. Under Honduran conditions,analysis indicates a breeding/fattening farm would have an average size of about 150 ha. while for breeding alone 4O ha. is about the average. The proposed project allocates resources about equally between dairy and beef development. 38. The project consists of: (1) Financing of on-farm investments for pasture development, fencing, watering points, breeding stock, and stock hand- ling facilities for approximately 730 cattle farms of five different types: (a) 100 small dairy farms with an average size of 30 has. (b) 200 mediun dairy farms with an average size of 50 has. (c) 200 beef breeding/fattening farms with an average size of 150 has. (d) 200 beef breeding farms with an average size of 400 has. (e) 30 snall pig units, each with about 25 sows. The.average size of loans to farmers would be about $10,000 equivalent,of which IDA's contribution would be about $7,700 equivalent. (2) Construction of three small municipal abattoirs, one medium size municipal abattoir in San Pedro Sula, and the improve- ment of one large municiDal abattoir in Tegucig.lop. -12 - (3) Frovision of four specialist livetock advisors to assist farners and the livestock technici-s employed by, the _ participating banks, ard trainig facilities for project staff. 39. Fxecution of the project is exocted to -;ake five years: sub-loan coxrmitmients are expected to take three years and completion of disbursements five year,. 0....T.....ssimt the impleentationof the project, the Government has -cndertaker to act in two areas. First, the Go-arýnet would provide suita- bly qualified personnel to supervise municipal abattoirs so that only whole- some meat is used for human consumption, and would ensure that municipalities wIll actively take steps to prevent non-inspected reat from reaching the do- nestic market. Secondly, the Government has undertaken to naintain policies with respect tc prices, quotas etc. in the ivestock sector which would provide adequate ineentives to livestock -roducers to e Dand production. Cost Estimtates and Financig ul. The total cost of the project is estinated at $'1.0 million. A detailed break-down of costs is given in Annex III On-fanIn developnent, the largest component of the project. represents 84 percent of total project costs, abatoir construetion 10 pereent and technical assistance 6 percent. The proposed credit of $6.6 million represerts 60 nercent of total project costs, and l finance all foreign exchange erpenditures aCounting to $k. million (41 percent of total project cost), plis $2n milIlion in local cur- rency expnditures. Local currency fiancing is justified on the grounds that, in spite of its efforts to mobi lize local resources for development, the Gomernmentmst still rely upon extema financing in excess o" the foreign excharge component of individual projects to carry forward an ef- fective development program. The partieipating banks wcull contribute 18 Dercent of total project costs, the sub-borrowers ofmers or m,nicipalities) 16 pere-t, ard the Central Bank 6 percent. .Frther detsl are given in para.46.) Organization h2. The Central Bank would act as administering agent for the project and would be responsible for channelling funds for on-.an de-xelopment to parfticipa ting banks who would on-lend to farmers. For abattoir development the Central Bank would lend directly to municipalities, a practice which has been folwd in the recent past, because the Autonomous Municipal Bank, the main channel for lending to mrnicipalities, is being reorganized. The Central Bank is technically capable of carrying out the proposed direct lending operation. Coordinating and supervisory functions would remain with the Project Commission, created by the Government to supervise the First Li?tock Developnent Project. The Comission formulates policies and procedures and is composed of representatives 'rom various Gover.nment agencies, partiipting banks and the National Cat-lemen's Association. L3. The rroject would be anaged by a Project Dirctor with the assistance os two deputies. The four specialist advisors financed under thne project would be responsible to heroject Director. All participa ting - 13 - banks - expected to be several of the large private banks and the National Development Bank - would employ lirestock technicians, whose function would be to assist farmers in the preparation and impleentation of farm develop- ment plans. Such technicians would answer administratively to their respec- tive banks, but would be under the technical supervision of the Project Director. Lending Arrangements 44. The Central Bank would receive IDA funds from the Government at 2 percent. The Government would bear the exchange risk. For on-farm development, the Central Bank would lend to the participating banks at an interest rate of 5 percent. The participating banks would on-lend to farmer clients at 9 percent; this rate is in line with the prevailing interest rate for agriculture in Honduras. For investments in abattoirs, the Central Bank will lend to mncipalities at the prevailing rate of 9 percent. The spreads allowed to the Central Bank would cover the administrative costs of the project including technical assistance w*hich is expected to increase substantially over the first project, becaue of the greater emphasis on assisting small farmers. Any surplus income would revert to the project account for further lending in livestock. The 4 percent allowed to participating banks would be adequate to cover administrative costs (including the employment of livestock technicians) and loan risk, and leave a reasonable profit. 45. The Government would on-lend to the Central Bank for 20 years in- cluding 10 years grace. The Central Bank would on-lend to participating banks for 8 to 12 years including 2 to 5 years grace, which are the same terms at which the participatirg banks will lend to farmers. The Central Bank will lend to muncipalities for 10 to 12 years, including up to 2 years grace. L6. The proposed financing and lending arrangement tends to favor those participants with total borrowing requirements not exceeding US$9,000 equivalent. Sub-borrowers in this category would provide 10 percent of the proposed investment, with the participating bank providing 9 percent and the Central Bank (from IDA funds) 81 percent. Participants with larger borrowing requirements would contribute 20 percent of total investment. vith the participating bank providing 20 percent and the Central Bank (from IDA funde) 60 percent. The municipalities would contribute 20 percent of total investment with the Central Bank providing 20 percent out of its own funds and 60 percent from IDA funds. Procurement 47. Procurement for farm development items through international com- petitive bidding would not be appropriate, because of the diversity of items, srall size of individual purchases and need for free choice by the indivi- dual borrowers. Accordingly, local commercial channels would be used. Hon- duras has a good network of dealers in agricultural machinery and farm inputs, and facilities for maintenance and servicing are adequate. Purchases of breeding stock would be subject tc the aporoval of the Project Director, and since the type and quality of animals required must be obtained fran specific regions of the world, which are free from foot and mouTh desease, interna- tional corpetitive bidding would not be aopropriate for livestock procure- ment. 48. Grouping of orders for the abattoirs would also be -npractical because they are widely dispersed throughout the country and their size, capacities and timing of construction vary. The construction of one abat- toir alone would not attract international bidding. Therefore, for the three small abattoirs, each costing about $5,000, 9t least three bids would be sought before awarding a contract for either civil works or for equipaent. For the larger abattoirs in San Pedro Sula and Tegacigalpa, international ccmpetitive bidding is not expected to lead to a wide res- ponse because of the relatively suall amounts involved ($345,00 and 4557,000 r etiv) the impracticability of grouping contracts for both abattoirs and the specialized nature of abattoir equipment Tenders would therefore be published locally, and submitted to known international suppliers. All official representatives in honduras of countries lkely to be interested will also be notified. Disbursements 41/ The credit would be disbursed against 75 nercennt of loans for livestock development on medium and larger farms and for the municipal abat- toirs; 90 percent of loans for livestock development on small farms and 100 percent of foreign expenditures for services of livestock advisors. and training of project staff. A schedule oif estimated disbursements is included in Annex III. Benefits 50. The economic returns of the project are estimated at 18 percent for the on-farm investments and 24 percent for abattoirs. The project would lead to improved husbandry practices, a larger national cattle herd, higher productivity, and intensification oZ -and use. At full development, the pro- ject's incremental annual production of livestock products would include 22,100 tons of milk, 3,850 tons of beef (a 10 percent increase in the country's total p :: ction), and 635 tons of -ork. In addition, the cattle breeding farms would produce abocut 6,000 heiflers, which would be retained or sold to replace cull cows. Included in the benefits are incremental returns to the Government r n taxes and fees, which at full developnent would amount to approximately $0.1 million annually. At full development the estimated net foreign exchange benefits resulting from the project uould be 52.5 million per annum. The abattoir component would have substantial social benefits in terms of sanitation and better disease control, though such benefits are - li - difficult to quantify. The pig component, though small, would serve as a catalyst for further development and could well be the forerunner of a domestic pig industry. 51. Increased job opportunities would also result from some 730 farms and five abattoirs being more effectively and more intensively run. Total employment would probably be the equivalent of 750 new jobs, plus the incremental manpower requirements for development of supporting services, although this is not easy to quantify. Average annual net income for participating farm families would increase from an average of less than $500 to about $3,000. PART V - LEGAL INSTRUMEINTS AND AUTHORITY 52. The draft Credit Agreement between the Republic of Honduras and the Association, the draft Project Agreement between the Central Bank of Honduras and the Association, the Recommendation of the Camittee provided for in Article V, Section 1(d) of the Articles of Agreement, and the text of a draft resolution approving the proposed credit are being distributed to the Executive Directors separately. 53. The lending arrangements between the Republic of Honduras and the Central Bank are set forth in the Credit Agreement and will be contained in a Subsidiary Loan Agreement. The lending arrangements between the Central Bank and the Participating Banks are set forth in the Project Agreement, but will be included in Project Administration Agreements to be signed between the Central Bank and the Participating Banks. S. Special conditions of effectiveness are that the execution and delivery of the Project Agreement on behalf of the Banco Central, and of the Subsidiary Loan Agreement between the Republic of Honduras and the Central Bank, on behalf of both parties.have been authorized by all necessary action and have become effective,and that all action necessary for the Pro- ject Commission to carry out its functions under the Project shall have been taken. . Before disbursements are authorized in respect of on-fan. sub-loans, a Project Administration Agreement must have been entered into by the Central Bank and the Participating Bank concerned. 56. I am satisfied that the proposed Credit would comply with the Articles of Agreement of the Association. PART VI - RECOMENDATION 57. I recommend that the Executive Directors approve the proposed Credit. Robert S. McNamara President Attachments September 25, 1973  ANNEX I Page 1 of 2 pages COUNTRY DATA - HNDURAs AREA POPULATION DENSITY 115,200 k2 2.61million (mid-1971) 22.7 per km 2 Rate of Growth: 3.4% (from 1960to 1970) POPULATION CHARACTERISTICS (1965-70) HEALTH (1970) Crude Birth Rate (per 1,000) L9.0 Population per physician 3,600 Crude Death Rate (per 1,000) 17.1 Population per hospital bed 592 Infant Mortality (per 1,000 live births) 34.0 INCOME DISTRIBUTION DISTRIBUTION OF LAND OWERSHIP % of national income, lowest quintile ,% owned by top 10% of owners highest quintile ,% owned by smallest 10% of owners ACCESS TO PIPED WATER ACCESS TO ELECTRICITY (1971) % of population 35 % of population 1_6 NUTRITION (1960-63) EDUCATION (1970) Calorie intake as 7. of requirements 90.4 Adult literacy rate % 50 Per capita protein intake 53.6 Primary school enrollment % 83 1/ GNP PER CAPITA in 1971 : US $290 GROSS NATIONAL PRODUCT IN 1971 ANNUAL RATE OF GROWTH (%. constant prices) US $ Mln. % 1960-65 1965-70 1971 GNP at Market Prices 719 100.0 3.7 5.8 3,8 Gross Domestic Investment 125 17.4 9.4 7.3 -20.2 Gross National Saving 95 13.2 0.8 8.1 4.0 Current Account Balance -30 4.2 Exports of Goods, NFS 207 28.8 7.0 10.6 3.6 Imports of Goods, NFS 219 30.4 12.9 8.2 -12.1 OUTPUT, LABOR FORCE AND PRODUCTIVITY IN 1970 2/ Value Added Labor Force7 V. A. Per Worker US_ Mn. % M1n. % USS % Agriculture 240 37.1 0.467 65.3 511 56.8 Industry 130 20.1 0.081 11.3 1,605 177.3 Services 277 42.8 0.167 23.4 1,659 183.3 Unallocated ._.._ Total/Average 37 100.0 0.715 100.0 905 100.0 GOVERNMENT FINANCE General Government Central Government (Lemp.Mn.) % of GDP (Leamp. Min.) % of GDP 1971 1971 1968-70 1971 197 1 1968 Current Receipts 202 13.6 13.7 173 11.6 11.6 Current Expenditure 188 12.6 12.4 152 10.2 9.7 Current Surplus 5lh 1.0 1.3 21 1.1h 1.9 Capital Expenditures 63 4.2 4.2 5L 3.6 3.5 External Assistance (net) 27 1.8 1.5 25 1.7 1.5 1/ The Per Capita GNP estimate is at 1970 market prices, calculated by the same conversion technique as the 1972 World Atlas. All other conversions to dollars in this table are at the average exchange rate prevailing during the period covered. 2/ Total labor force; unemployed are allocated to sector of their normal occupation. "Unallocated" consists mainly of unemployed workers seeking their first job. not available no. applicable ANNEX I Page 2 of 2 pages COUNTRY DATA - HONDURAS Prel. MONEY, CREDIT and 7RICES 1965 1969 1970 1971 1972 (Million LAmp. outstanding end per:od) Money and Quasi Money 167 294 335 378 431 Bank Credit to Public Sector 18 23 51 73 62 Bank Credit to Private Sector 135 299 347 369 16 (Percentages or Index Numbers) Money and Quasi Money as % of GDP 1.5 19.6 21.8 22.4 General Price Inder ('963 = 100) 106.7 no.6 111.9 111.6 Annual percentage changes in: General Price Index * 0.9 1.2 - 0.3 Bank credit to Public Sector . 6.3 134.3 35.2 12,3 Bank credit to Private Sector . 21.0 16.0 6.3 12.7 BALANCE OF PAYMENTS !ERCBADTSE MRORTS -W-rAGE 1969-71) 1969 1970 1971 USL QiI % (Millions US $) Exports of Goods, NFS 187 196 207 Bananas 62 46.6 Imports of Goods, NFS 206 24 220 Coffee 22 12 2 tsource Cap (deficit = T9t Lmber 17 9.4 Beef 9 5.0 Interest Payments (net) - 1 - 2) All other comaiodities 50 27.F Workers' Remittances . .) - 23 Total 10Q,0 Other Factor Payments (net) - 18 - 20) Net Transfers 7 7 6 EXTERWNL DET. DECE& 31, 1972 Balance on Current Account - 31 -- 30 US $ M1n Direct Foreign Investment 9 8 6 Net KLT Borrowing 19 2L 17 Public Debt, Inc. guarantead 1 3 Disbursements 20 25 20 Non-Guaranteed Private Debt. Amortization 1 -1 Total outstanding & Disbursed Subtatal 28 32 23 Capital Grants - - - DEBT SERVICE RATO for 1972 Other Capital (net) 2/ 3 5 1 Other items n.ei 3 13 12 Increase in Reserves (+) - 3 - ll 6 Public Debt, incl. gucranteed 3.4 Non-Guaranteed Private Debc Gross Res(rves (end year) 28 24 24 Total oucstanding & Disbursad Net Reserves (end year) 23 9 15 RATE OF EXCHANGE IBRD/IDA LENDING, Zac, 31- 1972 (Nillion US 5): Through - 1971 IBRD IDA US $ 1.00 Lempiras 2.00 Lemp. 1.00 us $0.50 Outstanding & Disbursed 3JI1 22.2 Undisbursed 24.2 2.6 Since - 1971 Outstanding incl. Undiabursed 3T71 24.6 Us $ 1.00 - Lempiras 2.00 Lemp..00 = US $ 0.50 1/ Ratio of Dz-bt Ice to Exports of Goods end Non-Factor Services. 2/ Net madimr and long-ter- capital to private non-monetary Sector and to the banking systely'. 3/ Debt repayable in foreign currenoy disbursed. . not aveilable * not applicable ANNEX II Page 1 of 4 THE STATUS OF BANK GROUP OPERATIONS IN HONDURAS A. STATEMENT OF BANK LOANS AND IDA CREDITS (as at July 31, 1973) Loan or US$ million Credit Amount (less cancellation) Number Year Borrower Purpose Bank IDA Undisbursed Eleven loans and credits fully disbursed 38.0 21.4 - 495 1967 Honduras Roads 8.6 - 0.3 179 1970 Honduras Livestock developnent - 2.6 1.1 692 1970 Honduras Generation and transmission 5.5 - 5.2 767 1971 Empresa Nacional Portuaria Ports 6.0 -5.8 841 1972 Empresa Nacional de Energia Elec- Generation and trica transmission 12.3 - 7.9 896* 1973 Honduras Roads 18.8 - 18.8 Total 89.2 24.0 39.1 of which has been repaid 12.9 0.2 Total now outstanding 76.3 23.8 Amount sold 2.5 of which has been repaid 2.5 -o- Total now held by Bank and IDA 76.3 23.8 Total undisbursed 38.0 1.1 39.1 *Became effective August 27, 1973 ANNEX II Page 2 of 4 B. STATEENT OF ZFC INVESTMENTS (as at July 31, 1973) Year Obligor Type of Amount in US$ million Business Loan Equity Total 1964/66 Empresa de Curtidos Centroamericana S.A. (ECCASA) Tannery 0.30 0.08 0.38 1969/70 Compania Pino Celulosa de Centroamerica Pulp and (COPINO) Paper - 0.08 0.08 Total gross commitments 0.30 0.16 0.46 less cancellations, terminations, repayments and sales 0.28 0.09 0.37 Total commitments now held by IFC 0.02 0.07 0.09 Total undisbursed ANNEX II Page 3 of 4 C. PROJECTS IN EXECUTION] Ln. No. 495 Western Highway Paving Project: US$8.6 million Loan of May 26, 1967; Closing Date: September 28, 1973. Paving work has been completed, and we are awaiting final disburse- ment applications.The loan is expected to be fully disbursed by the Closing Date. Cr. No. 179 Livestock Development Project: US$2.6 million Credit of March 2, 1970; Closing Date: December 31, 1975. The credit has been fully canitted and disbursements are now pro- ceeding on schedule. Ln. No. 692 Fourth Power Project: US$5. million Loan and US$5. million Cr. No. 201 Credit,both of June 24, 1970; Closing Date: June 30, 1974'. Engineering studies carried out after the signing of the Loan/Credit suggested, partly because of the proposed interconnection with Nicaragua, a number of changes in the design of the project which made necessary amending the original project description. These changes delayed bid preparation for and construction of the project's transission and sub-transmission components by about six months. Disbursements are still expected to be completed on schedule by June 30, 1974. Ln. No. 767 Second Port Project: US$6.0 million Loan of June 25, 1971; Closing Date: June 30, 1975 The project provides for the expansion of Puerto Cortes in the north of Honduras, and the construction of the new port of Henecan in the south. After loan signing, the Honduran Congress, partly for political reasons associated with the border issue with El Salvador, expressed reservations about the construction of a port at Henecan. However, the Government that took office in December 1972 and the Port Authority decided to proceed with the construction of Henecan. As a result of the delays, execution of the project is about 18 months behind schedule. These notes are designed to inform the Executive Directors regarding the progress of projects in execution, and in particular to report any problems which are being encountered, and the action being taken to remedy them. They should be read in this sense, and with the understanding that they do not purport to present a balanced evaluation of strengths and weaknesses in project execution. ANNEX II Page 4 of 4 Ln. No. 841 Fifth Power Project: US$12.3 million Loan of June 28, 1972; Closing Date: June 30, 1976. Construction of the La Ceiba diesel units, the generation component of the project, is expected to proceed on schedule. Delays in negotiations with the Nicaraguan utility (now completed) and major local customers may delay com- pletion of the transmission components of the project; completion of construction and disbursements is still expected by the closing date of June 30, 1976. ANNEX III Page 1 of 3 HONDURAS - SECOND LIVESTOCK DEVELOPMENT PROJECT CREDIT AND PROJECT SUMMARY Borrower: Republic of Honduras Amount: US$6.6 million equivalent Terms: Standard Relending Terms: Interest Government to Central 2% 20 years including Bank of Honduras 10 years grace Central Bank to Munici- 10 to 12 -ears including palities 9% up to 2 years grace Central Bank to Partici- 8 - 12 years including pating banks 5% 2 - 5 years grace Participating banks to 8 - 12 years including farmers 9% 2 - 5 years grace Project Description: The project consists of: (1) Financing of on-farm investments for pasture developnent, fencing, watering points, breeding stock, and stock handling facilities for approximately 730 cattle farms of five different types: (a) 100 small dairy farms with an average size of 30 has. (b) 200 medium dairy farms with an average size of 50 has. (c) 200 beef breeding/fattening farms with an average size of 150 has. (d) 200 beef breeding farms with an average size of 400 has. (e) 30 small pig units, each with about 25 sows. (2) Construction of three small municipal abattoirs, one mediun size municipal abattoir in San Pedro Sula, and the improvement of one large municipal abattoir in Tegucigalpa. (3) Provision of four specialist livestock advisors to assist farmers and the livestock technicians employed by the participating banks, and trainina of project staff. ANNEX III Page 2 of 3 Estimated US$ Million Equivalent Cos-T: Local Foregn Total Small dairy farms 0.5 0.2 0.7 Medium dairy fa:ms 1.7 1.4 3.1 Beef breeding/fattenizg farms 1.2 1.1 2.3 Beef breeding farms 1.8 0.8 2.6 Pig units 0.4 0.1 0.5 Small abattoirs 0.1 0.1 0.2 Medium abattoir 0.1 0.2 0.3 Large abattoir 0.3 0.3 0.6 Total fixed investments 6.1 4.2 10.3 Technical Services 0.4 0.3 0.7 TOTAL PROJECT COST 6.5 b.5 11.0 Financing Plan: Partici- Total Sub-bor- pating Central Pr'oject Category rowers Bank Bank IDA Cost US$ US US$ USF ThS$ mill.$ mil. $ mill % mll. mill. A. Cattle Development 1. Small dairy farm 0.1 10 0.1 9 - - 0.5 81 0.7 2. Medium dairy and beef farm 1.6 20 1.6 20 - - n.8 60 8.0 B. Pig Developmnt 0.1 20 0.1 20 - - 0.3 60 0.5 C. Abattoirs 0.2 20 - - 0.2 20 0.7 60 1.1 D. Technical Services - - - 0.4 57 0.3 43 0.7 2.0 - 1.8 - 0.6 - 6.6 - 11.0 Percent of total 18 16 6 60 ANNEX III Page 3 of 3 Estimated Disbursements: US$ Millions by Fiscal Year 1974 1975 1976 1977 1978 1979 0.5 1.7 1.8 17 7 0.2 Procurement Arrangements: Procurement for farm development items through local commercial channels since international competitive bidding would not be appropriate because of the diversity of items and small size of individual purchases. Purchases of breeding stock would be subject to the approval of the Project Director, and since the type of animals required are best obtained from regions which are free from foot and mouth disease, international competitive bidding would not be appropriate. Grouping of orders for abattoirs would be impractical because they are widely dispersed throughout the country and their size, capacities and timing of construction vary. For the small abattoirs each costing about $45 thousand, at least three bids would be sought before awarding a contract, for either civil works or for equipment. For larger facilities, tenders would be published locally, submitted to known international suppliers and all official representatives in Honduras of countries likely to be interested. Rate of Return: Overall economic rates of return are estimated at about 18 percent for on-farm investments and 24 percent for the abattoirs. Appraisal Report: No. 196a-HO, SeptembAr 12, 1973 s IBRD 10 4 1 1ALARB0EIA (GUANAJA JPAC ISLA4ND ISLAND - C ARPBBEAN SEA. MEXC üA tA CA P A 1 6 00 i A VSE(BELIZS) UTILA ISLAND HONDUIAS GlIl (JF HONlD9AS4 P SALVADOR NALRAUA 'P'ý.PULERTO CAST LL G~~~~~~RE U[A A 0RTE A 0t.A5 1451 14 ORCAC.TO O t CORINTO S. PEDRO LA VEGA ARPADA PPROGR ASA OUCEMADA SANTA PERT 0 E NETWOAI<A0II«osTPLAN GRANDE - 8 AOREBIANA DUZ CE NoMBRE AN s DE- CUL t PAA SAN SF cc E0 L A N C N LOAV /AAJT E'NÅ, CUOLE A0060NT NA MT - N BOA BATA MANTO $AN FRANCISCO C TM"NS - - -IALA A CATACAMA E COPAN LA LOIBERTAD EL PORVI GUAYAPE El TERIOEU5URUS TGNACI CONCORDIA -TIIA - - M$ uAL - GRACIA5 SIGUATEPEQUE JEAN MO RoC m . R- A Z A N"s HONDURAS Q11 "EEEUIE INEL TA AGALIECA ALANGA ..e-SECOND L VSOCK DEVELOPMENT PROJECT E A P IRA EN]5NJAN1- PROJECT AREAS5 Ti - YAAANVl LtOCTAL E FLORE5' 5AkW TAÅAO RA[IUE- .AMAN SAN A LAS ANI A5 OR~~ f iOS EXISTING NETWORK OF MEAT PACKING PLANTS TEGULCIGALPA E L p A S REG1ONAL ZONE BOUNDARIES 4 ~~IEPATERIOUE TERLODANL1 . -- BITUMINOUS SURFACE RAD ? GUACATAL LINACA YUSCARAN GRAVE.. / EARTH SURI ACED ROADS T ERI U 5IMRAT GUINOP JAIAUCA EL PARAdO RA ILROADS A G ENTRA LAS IANO5S- RVR LORE MAJN AIRPORTS E . LV A COROos LANGUE D UEMAIN FORTS- ILI---- DEPARTMENTAL BOUNDAR IES I NL ORCU LAGA T INTERNATIONAL BOUNDARIES EL !JGRE isL Dl LIUERTO C PC PA Cl /f/ IC OC A N l' EDEO TRIU.0 7 5 10 K1tOMETERS