Bolivia - Livestock Projects

CONFIDENTIAL R e p o r t No .33'( INTERNATIONAL DEVELOPMENT A S S O C I A T I O N P R O J E C T PERFORMANCE A U D I T BOLIVIA LIVESTOCK PROJECTS O c t o b e r 11, 1 9 7 4 Operations Evaluation Department  PREFACE C r e d i t 107-BO o f May 1 9 6 7 was c l o s e d i n J u l y 1 9 7 2 a n d C r e d i t 171-BO o f J a n u a r y 1970 i n A u g u s t 1 9 7 3 . The f o l l o w i n g r e p o r t r e p r e s e n t s a n a u d i t of achievements under t h e s e c r e d i t s a g a i n s t t h e o b j e c t i v e s o n t h e b a s i s of which they were approved. The e x c e l l e n t a s s i s t a n c e p r o v i d e d by t h e B a n c o A g r i c o l a d e B o l i v i a and t h e M i n i s t r y o f A g r i c u l t u r e i n t h e p r e p a r a t i o n o f t h i s r e p o r t i s g r a t e - f u l l y acknowledged. US$ 1 = p e s o s 1 1 . 8 8 u n t i l November 1 9 7 2 US$ 1 = p e s o s 20.00 s i n c e t h e n  TABLE OF CONTENTS Page No. Summary i - ii A. Introduction 1 B. The P r o j e c t 1 C. I m p l e m e n t a t i o n o f t h e Lending Program 3 D. The Banco A g r i c o l a and t h e L i v e s t o c k Project Division E. I m p a c t o f t h e Lending Program F. C o n s t r a i n t s t o t h e Program G. Conclusions LIST OF TABLES T a b l e 1: E s t i m a t e d and A c t u a l C r e d i t P e r f o r m a n c e Table 2 : Composition o f On-Ranch I n v e s t m e n t s a n d P u r c h a s e s (%) Table 3: E s t i m a t e d and A c t u a l U n i t C o s t s o f On-Ranch I n v e s t m e n t ( c u r r e n t Bolivian pesos) Table 4: E s t i m a t e d and A c t u a l P h y s i c a l Accomplishments Table 5: E s t i m a t e d and A c t u a l Disbursement P a t t e r n ( t h o u s a n d US$) Table 6 : Summarized B a l a n c e S h e e t s o f Banco A g r i c o l a d e B o l i v i a 1967-73 Table 7: Income and E x p e n d i t u r e o f Banco A g r i c o l a d e B o l i v i a 1967-73 Table 8: Surmnary S t a t e m e n t o f Net O p e r a t i n g R e s u l t s 1969-71. F i s c a l Year Ending J u n e 30 ( i n $b '000) Table 9 : Loans Under L e g a l A c t i o n and Overdues ( F i s c a l Y e a r s E n d i n g J u n e 30) Table 1 0 : C l a s s i f i c a t i o n o f Borrowers by H e r d , Ranch and Loan S i z e Map: Bolivia: I n t e r i m Second Beni L i v e s t o c k Development P r o j e c t L o c a t i o n o f Sub-borrowers Under 107-BO  SUMMARY T h i s performance a u d i t d e a l s w i t h t h e f i r s t two of t h r e e c r e d i t s f o r l i v e s t o c k development g r a n t e d by I D A t o t h e Government of B o l i v i a . Both c r e d i t s ( C r e d i t 107-BO of May 1967, f o r US$ 2 m i l l i o n e q u i v a l e n t and C r e d i t 171-BO of January 1970 f o r US$ 1.4 m i l l i o n e q u i v a l e n t ) helped f i n a n c e a l i v e s t o c k development program i n t h e Department of Beni, l o c a t e d i n t h e t r o p i c a l lowlands near t h e B r a z i l i a n b o r d e r . T h i s program, a d m i n i s t e r e d by a s p e c i a l l y c r e a t e d L i v e s t o c k P r o j e c t D i v i s i o n (LPD) i n t h e Banco A g r i c o l a de B o l i v i a (BAB), h e l p e d f i n a n c e on-ranch investments such a s f e n c i n g , c o r - r a l s , s e v e r a l o t h e r r a n c h f a c i l i t i e s and b r e e d i n g s t o c k , and provided s h o r t - term c r e d i t , e s p e c i a l l y f o r purchases of f a t t e n i n g c a t t l e and v a c c i n e s . The main o b j e c t i v e of t h e program was t o improve c a t t l e management. Most of t h e program o b j e c t i v e s were a c h i e v e d , about one y e a r f a s t e r t h a n expected. Funds from t h e two c r e d i t s were used t o make 300 l o a n s t o r a n c h e r s ( i n c l u d i n g some r e p e a t e r l o a n s ) i n s t e a d of t h e 271 o r i g i n a l l y planned. The a v e r a g e s i z e of l o a n , a t US$ 12,700 e q u i v a l e n t , was s l i g h t l y s m a l l e r t h a n planned, and t h e p r o p o r t i o n devoted t o a c q u i s i t i o n of b r e e d i n g c a t t l e was a b i t h i g h e r t h a n e s t i m a t e d , w i t h consequent r e d u c t i o n i n t h e p r o p o r t i o n used f o r o t h e r on-ranch i n v e s t m e n t s . C r e d i t p r e p a r a t i o n and implementation f a c e d s e v e r a l problems. Almost t h r e e y e a r s passed from t h e time B o l i v i a approached I D A u n t i l t h e I f i r s t c r e d i t was s i g n e d , l a r g e l y because of d e l a y s i n i d e n t i f i c a t i o n and I a p p r a i s a l work. E f f e c t i v e n e s s was delayed seven months because of problems of c o n g r e s s i o n a l r a t i f i c a t i o n of the c r e d i t and of h i r i n g t h e P r o j e c t D i r e c t o r . The f i r s t months of t h e LPD were d i f f i c u l t and a c t i o n slow u n t i l o p e r a t i n g procedures were c l e a r l y e s t a b l i s h e d , and t h e f i r s t l o a n s t o r a n c h e r s were made i n August 1968. The l e n d i n g program was f u r t h e r slowed down i n subse- quent y e a r s by t h e r e s i g n a t i o n of t h e f i r s t P r o j e c t D i r e c t o r and d i f f i c u l t i e s w i t h r a n c h e r s who wished a r e d u c t i o n i n t h e r a t e of i n t e r e s t from 12% t o 10% and postponement o f i n t e r e s t payments d u r i n g 1971 and 1972, when t h e r a n c h e r s ' f i n a n c i a l s i t u a t i o n was weak. The LPD h a s , on t h e whole, performed a s a t i s f a c t o r y job i n a p p r a i s i n g and s u p e r v i s i n g r a n c h e r s ' investment programs i n s p i t e of l o g i s t i c a l problems i n t h e Beni and d i f f i c u l t i e s i n o b t a i n i n g , and r e t a i n i n g , competent t e c h n i c i a n s . I n t h e p r o c e s s , LPD s t a f f has provided v a l u a b l e t e c h n i c a l a s s i s t c n c e t o p a r - t i c i p a t i n g r a n c h e r s . The BAB provided, sometimes w i t h d e l a y , t h r l o c a l funds f o r t h e programs a s r e q u i r e d i n t h e c r e d i t agreement, undertook t h e changes i n i t s a c c o u n t i n g p r o c e d u r e s r e q u i r e d t o a s s e s s t h e p r o f i t a b i l i t y of i t s d i f f e r e n t programs, and c a r r i e d o u t t h e l a n d t e n u r e and beef m a r k e t i n g s t u d i e s r e q u i r e d by I D A . However, i t s f i n a n c i a l s i t u a t i o n has s t e a d i l y d e t e r i o r a t e d l a r g e l y due t o measures t a k e n bytheGovernment: i m p o s i t i o n of u n p r o f i t a b l e l e n d i n g programs, r e d u c t i o n i n t h e i n t e r e s t r a t e and d e v a l u a t i o n . I n a d d i t i o n , BAB'S i n t e r n a l e f f i c i e n c y h a s n o t improved. I n p r a c t i c e , these negative developments do n o t seem t o have i n f l u e n c e d much t h e IDA-financed l i v e s t o c k program u n t i l r e c e n t l y . The l e n d i n g program h a s had a p o s i t i v e impact on c a t t l e management, p a r t i c u l a r l y because of t h e i n v e s t m e n t s i n b r e e d i n g c a t t l e and f e n c i n g . T h i s improvement h a s r e s u l t e d i n i n c r e a s e s i n p r o d u c t i o n t h a t , combined w i t h t h e h i g h e r beef p r i c e s s i n c e 1972, w i l l produce a n economic r a t e of r e t u r n s i m i l a r t o t h e 17-22% margin e s t i m a t e d a t a p p r a i s a l . T h i s c o n c l u s i o n w i l l p r o b a b l y hold i n s p i t e of n e g a t i v e f a c t o r s such a s t h e l a r g e p r o p o r t i o n of t h e o u t p u t t h a t i s smuggled t o neighboring c o u n t r i e s , t h e r e d u c t i o n i n BAB's l e n d i n g elsewhere i n t h e country due t o t h e d i v e r s i o n o f s c a r c e funds t o f i - nance t h i s program, and t h e f a c t t h a t about 80% o f t h e b e n e f i c i a r i e s a r e a b s e n t e e middle and l a r g e landowners. The main n e g a t i v e f a c t o r s t o l i v e s t o c k development i n t h e Beni have been Government c o n t r o l s on t h e p r i c e of beef and e x p o r t r e s t r i c t i o n s , m a r k e t i n g ( i n c l u d i n g p r o c e s s i n g ) and a i r t r a n s p o r t d i f f i c u l t i e s ( o u t p u t r e a c h e s most markets by a i r t r a n s p o r t ) , and l a c k of adequate t e c h n i c a l a s s i s t a n c e and animal h e a l t h s e r v i c e s . I D A has played a n i m p o r t a n t r o l e i n promoting a c r e d i t program w i t h s p e c i f i c t a r g e t s and i n convincing r a n c h e r s of t h e b e n e f i t s t o them o f programs of t h i s n a t u r e . However, I D A e f f o r t s a t e l i m i n a t i n g beef p r i c e and e x p o r t s c o n t r o l s , a l t h o u g h s t r o n g a t t i m e s , have n o t been s u c c e s s f u l due t o i n t e r n a l p o l i t i c a l problems. I n r e t r o s p e c t , i t seems t h a t I D A could have h e l p e d more d i r e c t l y i n t h e s o l u t i o n of t h e marketing, a i r t r a n s p o r t and t e c h n i c a l a s s i s t - ance problems, could u s e f u l l y have promoted s t u d y of t h e p o s s i b i l i t i e s of p a r t i a l - s e p a r a t i n g c a t t l e b r e e d i n g from f a t t e n i n g , t o make b e t t e r use o f t h e e x c e l l e n t g r a s s f a t t e n i n g a r e a s e x i s t i n g i n t h e Beni. More g e n e r a l l y , the i s s u e of t h e development s t r a t e g y of t h e Beni beyond t h e l i v e s t o c k a c t i v i t i e s h a s seldom been r a i s e d by I D A d u r i n g t h i s p e r i o d . F i n a l l y , I D A ' S i n t e r e s t i n t h e Banco A g r i c o l a h a s been, u n t i l r e c e n t l y , mainly focussed on p r e v e n t i n g c e r t a i n prob- lems i n BAB'S o p e r a t i o n from a f f e c t i n g t h e implementation of t h e l i v e s t o c k program. One o f t h e o r i g i n a l o b j e c t i v e s o f t h e program, t o s t r e n g t h e n B h B ' s t e c h n i c a l s t a f f and t o improve i t s a d m i n i s t r a t z v e p r o c e d u r e s , h a s been achieved only p a r t i a l l y .  PERFORMANCE AUDIT OF BOLIVIA LI.VJ3STOCK PROJECTS A. Introduction The I n t e r n a t i o n a l Development A s s o c i a t i o n h a s g r a n t e d t h r e e c r e d i t s t o B o l i v i a f o r l i v e s t o c k development, t o t a l l i n g $10.2 m i l l i o n e q u i v a l e n t . i The f i r s t of them, f o r $2 m i l l i o n e q u i v a l e n t ( C r e d i t 107-BOY of May 1967) helped f i n a n c e t h e f i r s t s t a g e of a l i v e s t o c k development program i n t h e Depart- ment o f Beni. The second, f o r $1.4 m i l l i o n e q u i v a l e n t ( C r e d i t 171-BOY of January 1970) helped f i n a n c e t h e c o n t i n u a t i o n o f t h e same development program. The t h i r d c r e d i t , f o r $6.8 m i l l i o n e q u i v a l e n t ( C r e d i t 261-BO, o f October 1971) provided f i n a n c i a l s u p p o r t n o t o n l y f o r t h e c o n t i n u a t i o n o f t h e Beni program b u t a l s o f o r sheep development i n t h e A l t i p l a n o r e g i o n and f o r c a t t l e s l a u g h t e r - i n g and meat m a r k e t i n g f a c i l i t i e s . T h i s a u d i t r e p o r t c o v e r s o n l y t h e f i r s t two c r e d i t s b u t , s i n c e l e n d i n g under t h e l a s t two more r e c e n t c r e d i t s o v e r l a p over two y e a r s , some of t h e i s s u e s d i s c u s s e d h e r e a r e a l s o r e l e v a n t t o t h e a n a l y s i s of t h e t h i r d c r e d i t . B. The P r o j e c t s The f i r s t c o n t a c t s between B o l i v i a and I D A t o o k p l a c e i n September 1964, when t h e Corporacion B o l i v i a n a de Fomento asked f o r t e c h n i c a l a s s i s t a n c e f o r t h e p r e p a r a t i o n o f a l i v e s t o c k p r o j e c t . B o l i v i a had d e c i d e d , and I D A a g r e e d d u r i n g i t s p r e l i m i n a r y e n q u i r i e s , t h a t t h e f i r s t phase of a l i v e s t o c k development program should c o n c e n t r a t e on t h e Department of Beni, i n t h e t r o p i c a l lowlands l o c a t e d i n t h e n o r t h e a s t p o r t i o n of t h e c o u n t r y , a n a r e a p a r t i c u l a r l y s u i t e d f o r c a t t l e - r a i s i n g a c t i v i t i e s ( s e e map). P r o j e c t i d e n t i f i c a t i o n and p r e p a r a t i o n took a l o n g time. Due t o l a c k of s t a f f and t h e need t o c o o r d i n a t e w i t h t h e FAO, which p a r t i c i p a t e d i n t h e e f f o r t , t h e i d e n t i f i c a t i o n m i s s i o n was postponed u n t i l J u l y 1965 and t h e . m i s s i o n r e p o r t completed o n l y towards t h e end of t h a t y e a r . The p r o j e c t i d e n t i f i e d , p r a c t i c a l l y i d e n t i c a l t o t h a t f i n a l l y approved, was c o n s i d e r e d I adequate by I D A , and B o l i v i a was r e q u e s t e d t o b e g i n p r e p a r a t o r y work, e s p e - c i a l l y i n r e l a t i o n t o t h e Banco A g r i c o l a de B o l i v i a ' s (BAB) f i n a n c i a l p o s i t i o n . The c o u n t r y o f f i c i a l l y r e q u e s t e d t h e c r e d i t i n A p r i l 1966 and t h e a p p r a i s a l , team f i n a l l y v i s i t e d B o l i v i a i n August-September of t h a t y e a r . The main i s s u e s r a i s e d by t h e a p p r a i s a l m i s s i o n were t h e c a p a b i l i t y of t h e B AB t o manage a r e l a t i v e l y complex c r e d i t program such a s t h e one b e i n g d i s c u s s e d and t o pro- v i d e t h e r e q u i r e d l o c a l f i n a n c i n g , t h e problem of a s s u r i n g l a n d t i t l e s f o r r a n c h e r s and t h e r a t e of i n t e r e s t t o be charged by B AB t o participating r a n c h e r s . A s a t i s f a c t o r y s o l u t i o n was found f o r a l l t h e s e i s s u e s d u r i n g n e g o t i a t i o n s , i n March 1967, b u t t h e need t o c l a r i f y a c o n s t i t u t i o n a l problem (whether t h e c r e d i t agreement r e q u i r e d c o n g r e s s i o n a l r a t i f i c a t i o n ) postponed a p p r o v a l u n t i l May 18, 1967.  The c r e d i t f i n a l l y approved was expected t o h e l p f i n a n c e a U S $ 4 . 0 m i l l i o n e q u i v a l e n t p r o j e c t r e p r e s e n t i n g t h e f i r s t s t a g e of a long- term l i v e s t o c k development program, d i r e c t e d p r i m a r i l y a t improvement of beef c a t t l e p r o d u c t i o n i n t h e lowlands. The p r o j e c t was r e s t r i c t e d t o t h e p a r t i a l development o f 150 r a n c h e s i n t h e Beni. Investment p e r ranch, expected t o a v e r a g e US$ 18,000 e q u i v a l e n t ( i n c l u d i n g r a n c h e r s ' p a r t i c i p a - t i o n ) , would be f o r f e n c i n g , c o r r a l s , w a t e r p o i n t s , l i g h t equipment and t o o l s , e s s e n t i a l b a r n s and housing, s e l e c t e d p a s t u r e improvement, and pur- chase o f breeding s t o c k l i m i t e d t o n o t more t h a n 50% o f i n d i v i d u a l ranch development l o a n s . I n a d d i t i o n , t h e BAB was expected t o p r o v i d e working c a p i t a l and t e c h n i c a l a s s i s t a n c e o u t of i t s own r e s o u r c e s . I t was e s t i m a t e d t h a t h a l f of t h e p r o j e c t c o s t s would be covered by t h e US$ 2 m i l l i o n I D A c r e d i t , which would pay p a r t of t h e c o s t s of on-ranch investment and o f t e c h n i c a l s e r v i c e s t o r a n c h e r s ; BAB would c o n t r i b u t e US$ 1 . 5 m i l l i o n equiv- a l e n t , i n c l u d i n g a l l of t h e s h o r t - t e r m c r e d i t r e q u i r e m e n t s , and t h e r a n c h e r s were expected t o c o n t r i b u t e t h e balance. The p r o j e c t was t o be a d m i n i s t e r e d by t h e BAB through a s p e c i a l Livestock P r o j e c t D i v i s i o n (LPD) t o be c r e a t e d . The D i v i s i o n ' s r o l e was t:o a s s i s t borrowers i n p r e p a r i n g ranch development p l a n s , a p p r a i s e l o a n ap- p l i c a t i o n s , s u p e r v i s e p l a n s f o r which l o a n s were made, and p r o v i d e o t h e r t e c h n i c a l s e r v i c e s t o p a r t i c i p a t i n g r a n c h e r s . The s e l e c t i o n of BAB a s t h e a d m i n i s t r a t i v e agency was obvious, s i n c e i t was t h e o n l y i n s t i t u t i o n i n t h e c o u n t r y p r o v i d i n g medium- and long-term a g r i c u l t u r a l c r e d i t . BAB i s an autonomous o r g a n i z a t i o n under t h e g e n e r a l d i r e c t i o n of t h e M i n i s t r y of A g r i c u l t u r e which, b e s i d e s l e n d i n g from i t s own r e s o u r c e s , had a l s o chan- n e l l e d funds from USAID and t h e Inter-American Development Bank. The agreements i n d i c a t e d t h a t t h e Government w i l l : a ) expand t h e foot-and-mouth program t o i n c l u d e t h e P r o j e c t a r e a ; b) e s t a b l i s h a p r o c e s s f o r t h e quick c l a r i f i c a t i o n of land t i t l e s t o p a r t i c i p a t i n g r a n c h e r s ; and c ) e s t a b l i s h a r e v o l v i n g fund a t t h e C e n t r a l Bank f o r reimbursing B A B the p o r t i o n of sub-loans t o r a n c h e r s which would be f i n a n c e d w i t h t h e I D A c r e d i t . The Banco Agricola was expected t o : a ) c a r r y o u t an a n a l y s i s of t h e p r o f i t - a b i l i t y of t h e s e v e r a l types of i t s l e n d i n g o p e r a t i o n s and e s t a b l i s h accountirg procedures t o r e f l e c t a d e q u a t e l y t h e r e s u l t s of such a n a l y s i s , i n c l u d i n g s e p a r a t e accounts i n r e s p e c t of t h e P r o j e c t ; b) have e x t e r n a l a u d i t o r s a c c e p t - a b l e t o IDA; c) e s t a b l i s h a Livestock P r o j e c t D i v i s i o n w i t h an adequate number o f q u a l i f i e d s t a f f , t o be headed by a n experienced l i v e s t o c k e x p e r t ; d) appoint a P r o j e c t Loan Committee t o s c r e e n and approve l o a n s t o r a n c h e r s ; e ) provide r a n c h e r s w i t h working c a p i t a l through s h o r t - t e r m l o a n s ; f ) use s u r p l u s funds from t h e P r o j e c t ( a f t e r expenses and s e r v i c i n g of c r e d i t ) f o r f u r t h e r ranch development i n t h e Beni; g) p r o v i d e f i n a n c i a l a s s i s t a n c e and t e c h n i c a l s e r - v i c e s t o develop r e p r e s e n t a t i v e ranches i n lowland a r e a s o t h e r than t h e Beni; h) conduct a l a n d t e n u r e survey of t h e c o u n t r y ' s lowlands; and i ) c a r r y o u t a n a t i o n a l beef and l i v e c a t t l e marketing survey. Towards t h e end of 1968, when l e n d i n g r e l a t e d t o C r e d i t 107-BO was i n f u l l o p e r a t i o n , and i t was a p p a r e n t t h a t demand f o r c r e d i t was h i g h i n t h e Beni and t h a t a v a i l a b l e funds would be committed f a s t e r t h a n a n t i c i - p a t e d , B o l i v i a approached I D A about t h e p o s s i b i l i t y of a second c r e d i t . This was expected t o be a n i n t e r i m o p e r a t i o n , s i n c e a much more comprehensive e f f o r t ( e v e n t u a l l y C r e d i t 261-BO) was envisaged. Some p r e p a r a t i o n f o r a n o t h e r p r o j e c t was done d u r i n g 1969, e s p e c i a l l y by t h e t h e n P r o j e c t D i r e c t o r . I n August, B o l i v i a o f f i c i a l l y asked f o r a second c r e d i t ; no formal a p p r a i s a l was made and n e g o t i a t i o n s were s u c c e s s f u l l y completed i n October. I s s u e s d u r i n g p r e p a r a t i o n and n e g o t i a t i o n s were s i m i l a r t o t h o s e r a i s e d a t t h e time of t h e n e g o t i a t i o n f o r t h e f i r s t c r e d i t , although I D A was t h i s time more worried a b o u t BAB's d e t e r i o r a t i n g f i n a n c e s , and t h e need t o r e d u c e c o n t r o l s on meat p r i c e s and e x p o r t s and t o improve marketing. However, t h e c r e d i t agreement, a s approved by I D A on December 1 6 , 1969, d i d not r e f l e c t much t h e s e concerns and was v e r y s i m i l a r i n c o n t e n t t o t h a t f o r t h e f i r s t 1967 c r e d i t . T o t a l p r o j e c t c o s t was e s t i m a t e d a t USS2.1 m i l l i o n e q u i v a l e n t , b u t f i n a n c i n g was d i f f e r e n t , with a BAB p a r t i c i p a t i o n p r o p o r t i o n a t e l y lower. Resources would b e provided by I D A through i t s US$ 1 . 4 m i l l i o n c r e d i t , BAB would c o n t r i b u t e US$ 0.25 m i l l i o n e q u i v a l e n t , i n c l u d i n g a l l of t h e s h o r t - t e r m c r e d i t r e q u i r e m e n t s , and t h e r a n c h e r s were expected t o c o n t r i b u t e t h e balance. These r e s o u r c e s were expected t o h e l p about 100 commercial beef c a t t l e r a n c h e r s . C r e d i t covenants were s i m i l a r t o t h o s e agreed upon i n t h e f i r s t credi:, i n c l u d i n g c o n t i n u a t i o n of s t u d i e s about BAB' s p r o f i t a b i l i t y , b u t excluding t h e r e q u i r e m e n t s f o r t h e land t e n u r e and marketing s t u d i e s , which were a l r e a d y planned, o r f o r f i n a n c i n g e x p e r i - mental ranches i n o t h e r p a r t s of t h e country. C. Implementation of t h e Lending Program Both p r o j e c t s experienced long d e l a y s i n e f f e c t i v e n e s s . C r e d i t 107 became e f f e c t i v e on December 1 2 , 1967, seven months a f t e r i t was approved, l a r g e l y because of d i f f i c u l t i e s r e l a t e d t o c o n g r e s s i o n a l approval and t o t h e appointment o f a P r o j e c t D i r e c t o r . C r e d i t 171 became e f f e c t i v e trn ; m e 18, 1970, s i x months a f t e r a p p r o v a l . However, a l t h o u g h t h e d e l a y on t h e f i r s t c r e d i t had a s a consequence a n e q u i v a l e n t d e l a y i n t h e i n i t i a t i o n of t h e l e n d i n g program, t h e problems with t h e second c r e d i t d i d n o t have any impact on o p e r a t i o n s , s i n c e funds from t h e f i r s t c r e d i t were s t i l l a v a i l a b l e .  The i n i t i a t i o n o f o p e r a t i o n s was l a r g e l y dependent on t h e a r r i v a l of t h e P r o j e c t D i r e c t o r and on t h e appointment of t e c h n i c a l s t a f f . Due t o t h e d e l a y s experienced i n t h i s p r o c e s s , a c t u a l work d i d not s t a r t u n t i l A p r i l 1968, and t h e f i r s t l o a n s were made i n August, 1 5 months a f t e r l o a n approval. The l e n d i n g program supported by both c r e d i t s was implemented more o r l e s s on s c h e d u l e , a l t h o u g h o p e r a t i o n s d u r i n g 1969, 1970 and 1971 went f a s t e r t h a n i n t h e two f o l l o w i n g y e a r s (Table 1 ) . O r i g i n a l p r o j e c t i o n s i n d i - c a t e d t h a t C r e d i t 107 would be d i s b u r s e d i n about f i v e y e a r s , u n t i l 1971-72; disbursements were indeed completed i n 1972, b u t 98.6% o f t h e funds had a l r e a d y been channelled by 1970. S i m i l a r l y , C r e d i t 1 7 1 was expected t o b e d i s b u r s e d i n f o u r y e a r s , u n t i l 1974, b u t disbursements were c a n p l e t e d i n 1973. Funds from t h e two c r e d i t s were used t o make 300 l o a n s t o r a n c h e r s (with a few r e p e a t e r l o a n s ) i n s t e a d of t h e 271 o r i g i n a l l y planned (Table 1 ) . The average amount of investment l o a n s , a t US$ 12,700 e q u i v a l e n t , i s some- what lower t h a n t h e US$ 14,400 e q u i v a l e n t e s t i m a t e d a t a p p r a i s a l . Although no d e t a i l e d e s t i m a t e s a r e a v a i l a b l e , i t seems t h a t t h e t o t a l c o s t o f t h e p r o j e c t s t o t a l l e d US$ 6 . 3 m i l l i o n , a s o r i g i n a l l y planned. Of t h e s e , US$ 4.1 m i l l i o n f i n a n c e d b a s i c on-ranch investment, US$ 1 . 9 m i l l i o n were used f o r s h o r t - t e r m c r e d i t and US$ 0 . 3 m i l l i o n was f o r t e c h n i c a l a s s i s t a n c e . By and l a r g e , t h e composition o f on-ranch i n v e s t m e n t s was remark- a b l y c l o s e t o a p p r a i s a l e s t i m a t e s (Table 2) a l t h o u g h r e l a t i v e l y more was i n v e s t e d i n b r e e d i n g c a t t l e (41% i n s t e a d o f 39%) a n l e s s i n f e n c i n g (27% i n s t e a d of 30%) t h a n what was o r i g i n a l l y expected.17 S h o r t - t e r m c r e d i t was used p r i m a r i l y f o r t h e a c q u i s i t i o n of f a t t e n i n g c a t t l e , e s p e c i a l l y d u r i n g t h e f i r s t y e a r s o f o p e r a t i o n s , and v a c c i n e s . Thus, t h e a c q u i s i t i o n of b r e e d i n g and f a t t e n i n g c a t t l e r e p r e s e n t e d 52.4% of t h e t o t a l c r e d i t -- s h o r t - term and long-term - - r e c e i v e d by t h e r a n c h e r s . However, i t was p o s s i b l e t o f i n d some s i g n i f i c a n t v a r i a t i o n s among loans. A more d e t a i l e d a n a l y s i s of t h e s m a l l e r and t h e l a r g e r borrowers (Table 2) shows t h a t t h e s m a l l e r borrowers f i n a n c e d a much lower p r o p o r t i o n of b r e e d i n g and f a t t e n i n g c a t t l e t h a n t h e l a r g e r borrowers, t h e d i f f e r e n c e having been i n v e s t e d i n i n f r a - s t r u c t u r e , e s p e c i a l l y f e n c i n g . This d i f f e r e n c e i s t o a c e r t a i n e x t e n t r a t i o n a l , because t h e l a r g e r r a n c h e r s a l r e a d y had p a r t o f t h e i n f r a s t r u c t u r e which was expected t o be financed by t h e p r o j e c t , b u t i t seems a l s o t h a t t h e l a r g e r r a n c h e r s were a b l e t o p u t up a b e t t e r c a s e f o r a more s u b s t a n t i a l p r o p o r t i o n of c a t t l e purchases. W e have no b a s i s t o a s s e s s whether t h i s p o l i c y was j u s t i f i e d . I n any c a s e , one o f t h e o r i g i n a l agreements, t h a t b r e e d i n g c a t t l e p u r c h a s e s would n o t exceed 50% of t o t a l investment, was complied w i t h i n most c a s e s . 1/ - These f i g u r e s a r e based on approved p l a n s and disbursement p a t t e r n s f o r r a n c h e r s and t h e d i f f e r e n c e w i t h a c t u a l i n v e s t m e n t s i s c o n s i d e r e d t o be very small.  There were, however, some important d i f f e r e n c e s between e s t i m a t e d and a c t u a l u n i t c o s t s of some of t h e investments. U n i t c o s t s of i n f r a s t r u c - t u r e , e s p e c i a l l y w a t e r i n g and s t o c k h a n d l i n g f a c i l i t i e s and f e n c i n g , were much lower t h a n t h e p r o j e c t e d f i g u r e s ; c a t t l e and p a s t u r e e s t a b l i s h m e n t were h i g h e r (Table 3 ) . The r e a s o n f o r t h e lower u n i t c o s t s of i n f r a s t r u c t u r e was n o t a r e d u c t i o n i n p r i c e s (on t h e c o n t r a r y , p r i c e s have been r i s i n g consid- e r a b l y ) , b u t a r e d u c t i o n of s t a n d a r d s from t h o s e p r o j e c t e d a t a p p r a i s a l . Fencing and t h e o t h e r f a c i l i t i e s were b u i l t a c c o r d i n g t o " l o c a l " s t a n d a r d s and methods, which a r e much s i m p l e r ( b u t probably h a v i n g a s h o r t e r u s e f u l l i f e ) t h a n t h e c o n v e n t i o n a l ones cotwidered d u r i n g a p p r a i s a l . Conversely, t h e i n c r e a s e i n t h e p r i c e of h e i f e r s implied t h a t u n i t p r i c e s f o r b r e e d i n g c a t t l e were much h i g h e r t h a n a n t i c i p a t e d . One o f t h e consequences o f t h e s e changes i n u n i t p r i c e s i s t h a t more i n f r a s t r u c t u r e was b u i l t and l e s s c a t t l e bought t h a n what was o r i g i n a l l y planned (Table 4). F i n a l l y , t h e a c h i e v e - ments of t h e p a s t u r e improvement program were much s m a l l e r t h a n expected, a r e a s o n a b l e outcome i n l i g h t of t h e e x t e n s i v e n a t u r e of c a t t l e o p e r a t i o n s i n t h e Beni, which a r e p r i m a r i l y based on n a t u r a l p a s t u r e s . Implementation of t h e l e n d i n g program was n o t easy and f a c e d s e v e r a l s e r i o u s problems. Aside from t h e slow s t a r t due t o d e l a y i n t h e h i r i n g of t h e P r o j e c t D i r e c t o r and of s u i t a b l e t e c h n i c i a n s , t h e program had a t t h e o u t - s e t t o f i g h t t h e i n i t i a l r e l u c t a n c e of r a n c h e r s t o i n v e s t what t h e y c o n s i d e r e d t o be v e r y l a r g e amounts of money i n i n f r a s t r u c t u r e i n s t e a d of i n c a t t l e . P r e p a r a t i o n of t h e f i r s t l o a n s t o r a n c h e r s t u r n e d o u t t o be v e r y d i f f i c u l t and many o f t h e o r i g i n a l r a n c h p r o j e c t s had t o be r e a p p r a i s e d and modified i n subsequent y e a r s . Working c o n d i t i o n s i n t h e Beni, due t o l a c k of t r a n s - p o r t and housing f a c i l i t i e s , a r e d i f f i c u l t and delayed o p e r a t i o n s c o n s i d e r - a b l y . P a r t l y due t o t h e s e d i f f i c u l t i e s and t o d i f f e r e n c e s of o p i n i o n w i t h t h e management of BAB, t h e f i r s t P r o j e c t D i r e c t o r r e s i g n e d towards t h e end o f 1968, which f u r t h e r d e l a y e d o p e r a t i o n s u n t i l I D A seconded a s t a f f member a s Acting P r o j e c t D i r e c t o r i n March 1969. The l e n d i n g program was c o n s o l i d a t e d d u r i n g 1969, l a r g e l y due t o t h e work of t h e Acting P r o j e c t D i r e c t o r . Loan a p p r a i s a l p r o c e d u r e s and s u p e r v i s i o n s t a n d a r d s were c l e a r l y e s t a b l i s h e d and t h e number of l o a n s approved d u r i n g t h a t y e a r was t h e h i g h e s t i n t h e program (Table 1). C r e d i t funds f o r on-ranch investment were f u l l y c o m i t t e d by October, one y e a r ahead of schedule. The p r e s e n t P r o j e c t D i r e c t o r was h i r e d i n December, 1969. The main problems and a c t i o n s t h a t have a f f e c t e d t h e e v o l u ~ i o n and impact of t h e p r o j e c t became a p p a r e n t e a r l y i n t h e p r o j e c t ' s l i f e . IDA s u p e r v i s i o n r e p o r t s i n 1969 a l r e a d y make r e f e r e n c e t o m a r k e t i n g and t r a n s p o r t problems ( t h e s e i s s u e s a r e d i s c u s s e d iri some d e t a i l i n S e c t i o n E) and t h e d i f f i c u l t i e s of d e l i v e r i n g meat t o t h e main markets a t La Paz and t h e t i n mines. During 1970, a i r t r a n s p o r t -- t h e o n l y mode a v a i l a b l e t o move produce o u t o f t h e Beni -- became f o r a w h i l e a r e a l b o t t l e n e c k and meat could not b e d e l i v e r e d t o t h e main m a r k e t s . The i n a d e q u a t e m a r k e t i n g system, t o g e t h e r w i t h p r i c e f i x i n g and e x p o r t r e s t r i c t i o n s by t h e Government, were blamed by t h e r a n c h e r s and I D A a s t h e main c a u s e s o f d i f f i c u l t y . I D A e x e r c i s e d s t r o n g p r e s s u r e throughout most o f t h e p e r i o d t o o b t a i n a l i f t i n g o f p r i c e c o n t r o l s and e x p o r t r e s t r i c t i o n s , b u t w i t h o u t much s u c c e s s u n t i l l a t e i n 1972, when i n c r e a s e s i n world p r i c e s o f beef made i t i m p o s s i b l e f o r t h e Government t o m a i n t a i n i n t e r n a l p r i c e s a t t h e i r p r e v i o u s l e v e l s . Export r e s t r i c t i o n s , however, have been k e p t t o t h i s d a t e e x c e p t f o r s p e c i a l a u t h o r i - z a t i o n i s s u e d from time t o time. During 1970, p e r i o d s o f low demand, e x p o r t r e s t r i c t i o n s and a n a p p a r e n t o v e r s u p p l y o f beef d i s c o u r a g e d r a n c h e r s from i n c r e a s i n g p r o d u c t i o n , c a u s i n g s e r i o u s f i n a n c i a l problems. The number of new l o a n commitments d e c l i n e d from 115 i n 1969 t o 60 i n 1970. Towards t h e end of t h e y e a r t h e Beni r a n c h e r s -- who a r e w e l l o r g a n i z e d , and have a s t r o n g p o l i t i c a l b a s i s - - demanded r e d u c t i o n of i n t e r e s t r a t e s t o t h e 10% o r i g i n a l l y proposed by B o l i v i a d u r i n g n e g o t i a t i o n s , i n s t e a d of t h e 12% p r o v i d e d f o r under t h e c r e d i t , and s u s p e n s i o n o f payments u n t i l economic c o n d i t i o n s improved. Long nego- t i a t i o n s ensued. The Government opened a l i n e of c r e d i t t o h e l p farmers, b u t I D A r e f u s e d t o a c c e p t t h e r a n c h e r s ' demands and s u g g e s t e d t h a t t h e P r o j e c t D i v i s i o n undertake a s p e c i a l s t u d y t o e v a l u a t e t h e r a n c h e r s ' s i t u a t i o n . The s t u d y concluded t h a t t h e demands were j u s t i f i e d o n l y i n a few c a s e s , b u t t h e e x e r c i s e t i e d up t h e s t a f f of t h e P r o j e c t D i v i s i o n f o r a c o n s i d e r a b l e time, - r e d u c i n g t h e c a p a c i t y t o p r o c e s s l o a n r e q u e s t s . T h i s f a c t , combined w i t h t h e g e n e r a l t e n s i o n caused by t h e d i s p u t e between t h e r a n c h e r s and t h e Government and t h e Banco A g r i c o l a , combined t o produce a r e d u c t i o n i n t h e number o f l o a n s approved t o o n l y 30 i n 1971 and 46 i n 1972 (IDA d i s b u r s e - ments appear i n T a b l e 5). Another of t h e consequences of t h i s d i s p u t e was t h e i n c r e a s e i n a r r e a r s i n i n t e r e s t payments, which i n c r e a s e d from a 2-3% l e v e l i n 1969 and 1970, t o 31.5% i n t h e second h a l f o f 1971. These h i g h l e v e l s o f a r r e a r s were f i n a l l y reduced d u r i n g t h e second h a l f of 1972 through t h e b r a n d i n g o f c a t t l e ( t h e p r o c e e d s from t h e s a l e s of branded c a t t l e a r e used t o pay t h e i n t e r e s t d u e ) . Repayment o f p r i n c i p a l has been s m a l l because o f t h e f o u r y e a r s ' g r a c e and t h e f a c t t h a t lending r e a l l y s t a r t e d i n 1969, b u t no problems i n payments have been r e p o r t e d . The p r o p o r t i o n of i n t e r e s t payments i n a r r e a r s evolved a s f o l l o w s : 1969 1st Semester 2nd " 1970 1st " 2nd " 1971 1st " 2nd " 1972 1 s t " 2nd " 1973 1 s t " 2nd "  F i n a l l y , t h e Government of B o l i v i a h a s , i n g e n e r a l , complied w i t h most of t h e covenants included i n t h e c r e d i t agreements ( t h o s e covenants r e l a t e d t o BAB a r e d i s c u s s e d i n t h e next s e c t i o n ) . The C e n t r a l Bank e s t a b - l i s h e d on s c h e d u l e a Revolving Fund which has been used e x c l u s i v e l y t o make and r e c e i v e payments connected w i t h t h e P r o j e c t . The terms and c o n d i t i o n s have been s a t i s f a c t o r y t o I D A and t h e Fund has worked w e l l , a l t h o u g h sometimes payments have s u f f e r e d d e l a y s . A t a p p r a i s a l , I D A was p a r t i c u l a r l y concerned about t h e l a c k o f proper t i t l e s t o l a n d i n t h e Beni and asked f o r a procedure f o r prompt c l a r i f i c a t i o n of land t i t l e s . The Government h a s made s e r i o u s e f f o r t s t o s o l v e t h i s problem, i n c l u d i n g t h e e s t a b l i s h m e n t of a mobile u n i t , and scme p r o g r e s s h a s been made. I n p r a c t i c e , t i t l i n g problems have delayed t h e g r a n t i n g of a f a i r l y small number of l o a n s , b u t do n o t seem t o have p r e - vented t h e g r a n t i n g of a l o a n a f t e r a r e q u e s t h a s been made. However, i t i s n o t p o s s i b l e t o a s s e s s t h e number of r e q u e s t s t h a t were n o t made due t o t i t l i n g problems. F i n a l l y , i t cannot be s a i d t h a t B o l i v i a h a s f u l l y complied w i t h t h e p r o v i s i o n t h a t r e q u i r e d a n e f f e c t i v e foot-and-mouth d i s e a s e c o n t r o l program. The program h a s y e t t o be implemented f u l l y b u t t h e e f f e c t , t o t h i s d a t e , does not seem t o have been too s e r i o u s . T h i s i s s u e i s d i s c u s s e d i n S e c t i o n E. D. The Banco A g r i c o l a and t h e L i v e s t o c k P r o j e c t D i v i s i o n During p r e p a r a t i o n and a p p r a i s a l of t h e f i r s t c r e d i t i n 1966, I D A was p a r t i c u l a r l y concerned a b o u t BAB's f i n a n c i a l c a p a c i t y t o s u p p o r t t h e l e n d i n g program under d i s c u s s i o n and, more i m p o r t a n t l y , a b o u t i t s t e c h n i c a l and managerial c a p a c i t y t o a d m i n i s t e r t h e program. I n t h e end, i t was decided t o c r e a t e a s e p a r a t e L i v e s t o c k P r o j e c t D i v i s i o n (LPD) a t t a c h e d t o BAB, b u t o p e r a t i n g l a r g e l y independently and managed by a n e x p a t r i a t e D i r e c t o r . BAB was expected t o i n t e r v e n e through a Loan Connnittee (which was e s t a b l i s h e d on s c h e d u l e and h a s o p e r a t e d a c c o r d i n g t o t h e p r i n c i p l e s d e f i n e d i n t h e C r e d i t Agreement) and through t h e s e l e c t i o n and appointment o f t e c h n i c i a n s . These t e c h n i c i a n s would b e normal BAB s t a f f . The main purpose o f t h e arrangement was t o e n s u r e t h a t t h e l i v e s t o c k program would be implemented independently of BAB's i n s t i t u t i o n a l d i f f i c u l t i e s . The c r e d i t covenants d e s c r i b e d i n S e c t i o n B a l s o attempted t o h e l p BAB improve i t s f i n a n c i a l p o s i t i o n and oper- ational efficiency. The LPD had a r a t h e r shaky s t a r t due t o d i f f i c u l t i e s i n g e t t i n g t h e program s t a r t e d and t h e need t o r e p l a c e t h e D i r e c t o r b e f o r e t h e D i v i s i o n had been i n o p e r a t i o n f o r a y e a r . However, s i n c e 1969, LFD's performance has been s a t i s f a c t o r y . It h a s played an important r o l e i n t h e p r e p a r a t i o n and s u p e r v i s i o n of t h e r a n c h e r s ' investment programs and, through i t s super- v i s i o n a c t i v i t i e s , i t h a s made a u s e f u l c o n t r i b u t i o n t o t h e improvement of r a n c h management p r a c t i c e s . The D i v i s i o n ' s o p e r a t i o n s have been hampered, sometimes s e r i o u s l y , by l o g i s t i c a l problems i n t h e Beni. To f u l l y understand t h e d i f f i c u l t i e s f a c e d by t h e D i v i s i o n ' s s t a f f i t i s n e c e s s a r y to remember t h a t t h e Beni i s a n extremely p r i m i t i v e r e g i o n , w i t h p r a c t i c a l l y no r o a d s and where s e t t l e r s a r e s c a t t e r e d throughout a l a r g e a r e a . A i r t r a n s p o r t o r h o r s e - back a r e t h e o n l y means of c m u n i c a t i o n and even t h e s e a r e p r o b l e m a t i c d u r i n g t h e r a i n y season. Thus, a v i s i t t o a s m a l l number o f r a n c h e s t o a p p r a i s e o r s u p e r v i s e l o a n s could b e a major e f f o r t . O r i g i n a l l y , BAB and I D A decided t h a t t h e L 2 D should have i t s h e a d q u a r t e r s i n T r i n i d a d , t h e c a p i t a l o f Beni -- the f i r s t Project Director actually lived there -- b u t g e n e r a l l i v i n g con- d i t i o n s and connnunications problems w i t h La Paz made t h i s d e c i s i o n i m p r a c t i c a l . A t t h i s p o i n t , however, t h e need i s f e l t t o d e c e n t r a l i z e o p e r a t i o n s f o r t h e implementation of t h e t h i r d c r e d i t , e s t a b l i s h i n g a Loan Connnittee i n T r i n i d a d , empowered t o a u t h o r i z e c e r t a i n t y p e s o f l o a n s . The LPD has had problems i n h i r i n g and r e t a i n i n g competent t e c h - n i c i a n s . U n i v e r s i t i e s and t e c h n i c a l i n s t i t u t e s i n B o l i v i a do n o t p r e p a r e g r a d u a t e s s p e c i a l i z e d i n l i v e s t o c k o p e r a t i o n s and newly h i r e d t e c h n i c i a n s r e q u i r e extensive on-the-job t r a i n i n g . I n a d d i t i o n , t h e h a r d s h i p allowance p a i d by BAB f o r assignments i n t h e Beni (30%) has n o t been s u f f i c i e n t t o com- p e n s a t e f o r t h e h i g h e r c o s t o f l i v i n g t h e r e and f o r t h e p r e c a r i o u s working c o n d i t i o n s . Technicians f r e q u e n t l y a s k f o r r e a s s i g n m e n t , e s p e c i a l l y t o t h e IDB-financed l i v e s t o c k p r o j e c t i n Santa Cruz, where t h e zoning allowance i s 25% and l i v i n g c o n d i t i o n s much b e t t e r : s t a f f t u r n o v e r i s h i g h e r i n Beni than i n o t h e r r e g i o n s . Also, B AB i t s e l f frequently reassigns s t a f f t o other programs. IDA has r a i s e d t h e s e points with the Bolivian a u t h o r i t i e s , but w i t h o u t much s u c c e s s . F i n a l l y , LPD o p e r a t i n g c o s t s have remained i n r e a l terms i n l i n e w i t h o r i g i n a l e s t i m a t e s and t h e i r s t r u c t u r e has n o t changed. The s i t u a t i o n o f BAB, however, h a s s t e a d i l y d e t e r i o r a t e d over t h e y e a r s . The Bank, f o r a l l p r a c t i c a l purposes, broke even u n t i l 1970, b u t l o s s e s i n c r e a s e d t o $b 1 . 3 m i l l i o n i n 1971, $b 2.2 m i l l i o n i n 1972, and $b 11.9 m i l l i o n i n 1973 (Tables 6 and 7). I t i s a l s o d e c a p i t a l i z i n g v e r y f a s t : p a i d c a p i t a l i n 1969 was $b 88.2 m i l l i o n , and o n l y $b 76.1 m i l l i o n i n 1973. These a r e nominal f i g u r e s ; d e c a p i t a l i z a t i o n i s much more pro- nounced i f i n f l a t i o n i s t a k e n i n t o a c c o u n t . l / BAB h a s continued t o o p e r a t e on t h e b a s i s o f i n c r e a s e d borrowing from I D A , USAID, I D B and Banco do B r a s i l (on a s h o r t e r term b a s i s ) . As a consequence, t h e d e b t - e q u i t y r a t i o i s now 5.5. The l o a n p o r t f o l i o a t June 30, 1973 was f i n a n c e d i n t h e following way: 1/ - I n f l a t i o n h a s been a s f o l l o w s : 11.2% i n 1967; 5.5% i n 1968; 2.2% i n 1969; 3.8% i n 1970; 3.7% i n 1971; 6.5% i n 1972 and 31.5% i n 1973.  $b m i l l i o n s - % Own Resources C e n t r a l Bank IDA IDB USA1D Banco do B r a s i l Corporacion Bol- i v i a n a de Fomento I n s p i t e of t h i s d e t e r i o r a t i n g f i n a n c i a l p o s i t i o n l e n d i n g h a s i n c r e a s e d almost f o u r times between 1967 and 1973, l a r g e l y f i n a n c e d by long-term borrowing, which i n c r e a s e d from $b 21 t o $b 440 m i l l i o n o v e r t h e same period. S e v e r a l r e a s o n s e x p l a i n t h e s i t u a t i o n j u s t d e s c r i b e d . There i s l i t t l e doubt t h a t BAB could p r o f i t from a r e o r g a n i z a t i o n and improvement of i t s o p e r a t i o n s . A s a m a t t e r of f a c t IDA ha r e p e a t e d l y encouraged B AB to undertake s e v e r a l o p e r a t i o n a l improvements.!/ However, i t seems t h a t a l a r g e p r o p o r t i o n of BAB's f i n a n c i a l d i f f i c u l t i e s stem from Government p o l i c i e s , p a r t i c u l a r l y t h e r e d u c t i o n i n t h e r a t e of i n t e r e s t from 12% t o 10% i n 1972, which reduced t h e s p r e a d c o n s i d e r a b l y ; d e v a l u a t i o n i n 1972, which a c c o r d i n g t o BAB's f i n a n c i a l s t a t e m e n t s c o s t t h e Bank $b 59 m i l l i o n , and t h e imposi- t i o n of s e v e r a l c r e d i t and r u r a l development programs which B AB was n o t p r e p a r e d t o h a n d l e and which i n c u r s u b s t a n t i a l l o s s e s (Table 8. Some of t h e s e programs a r e i n c l u d e d under r e g u l a r l e n d i n g o p e r a t i o n s ) . An a d d i - t i o n a l n e g a t i v e e f f e c t of t h e s e s p e c i a l programs i s t h a t t h e y c a r r y a v e r y l a r g e p r o p o r t i o n of l o a n s under l e g a l a c t i o n and overdue: i n 1972, 22.9% of t h e t o t a l amount of l o a n s were under t h i s c a t e g o r y and t h e f a c t t h a t t h i s p r o p o r t i o n comprised 48% of t h e number of l o a n s i s an i n d i c a t i o n t h a t t h e l o a n s under t h i s c a t e g o r y a r e mainly t h e s m a l l e r ones (Table 9 ) . The poor c o l l e c t i o n s e r v i c e by t h e Bank has a l s o c o n t r i b u t e d t o t h i s s i t u a t i o n . I D A h a s been o n l y p a r t i a l l y involved i n B A B ' s e f f o r t s t o improve i t s p o s i t i o n , because i n s p i t e o f a l l of BAB's f i n a n c i a l d i f f i c u l t i e s , i t h a s always been a b l e t o p r o v i d e t h e n e c e s s a r y l o c a l f u n d s t o c o n t i n u e w i t h - 1/ A r e o r g a n i z a t i o n , based on a c o n s u l t a n t ' s s t u d y r e q u e s t e d and a c t i v e l y promoted by I D A , i s p r e s e n t l y under c o n s i d e r a t i o n . I t c o n s i s t s of a new o r g a n i z a t i o n of t h e f i n a n c i a l and c r e d i t o p e r a t i o n s , c r e a t i o n of a new planning department, c o n s o l i d a t i o n of a l l c r e d i t l i n e s , and o f a d d i t i o n a l s t u d i e s designed t o improve management and a c c o u n t i n g o p e r a t i o n s . t h e l e n d i n g program i n t h e Beni, a l t h o u g h sometimes w i t h some delay.- 1/ Already, i n 1966, I D A opposed a l o w e r i n g i n t h e i n t e r e s t r a t e s , and t h e Government d e c i s i o n i n 1972 t o r e d u c e them t r i g g e r e d t h e d i s c u s s i o n t h a t ended i n t h e a p p l i c a t i o n of t h e i n d e x i n g method f o r t h e t h i r d l i v e s t o c k c r e d i t . Only i n 1973, i n r e l a t i o n t o t h e p r e l i m i n a r y n e g o t i a t i o n s r e l a t e d t o a p o s s i b l e f o u r t h c r e d i t , h a s I D A t a k e n a b r o a d e r view o f BAB's o p e r a t i o n s . The Banco A g r i c o l a h a s g e n e r a l l y complied w i t h a l l t h e c r e d i t agreement c o v e n a n t s , i n c l u d i n g t h e c r e a t i o n of t h e LPD and P r o j e c t Loan Committee and t h e p r o v i s i o n of l o c a l f u n d s . I n a d d i t i o n , BAB h i r e d A r t h u r Young and Co. i n 1967 t o s t u d y i t s a c c o u n t i n g s y s t e m , e s t a b l i s h s e p a r a t e a c c o u n t s f o r e a c h program, and s t u d y t h e p r o f i t a b i l i t y of i t s o p e r a t i o n s . Many of t h e recomoendations were implemented, and B AB has had e x t e r n a l a u d i t o r s s i n c e t h e n . However, a c c o u n t s a r e s t i l l not f u l l y a d e q u a t e and, a s c i t e d i n t h e l a s t r e p o r t by t h e e x t e r n a l a u d i t o r s , t h e a l l o c a t i o n of e x p e n s e s among t h e d i f f e r e n t programs i s s t i l l n o t a good r e p r e s e n t a t i o n o f t h e c o s t o f each program. The e x t e r n a l a u d i t o r s ' r e p o r t i t s e l f i s r a t h e r narrow i n s c o p e i n view of BAB's p r e s s i n g f i n a n c i a l problems, and d o e s n o t c o n t a i n a s e p a r a t e a n a l y s i s o f t h e IDA-financed l e n d i n g program. F i n a l l y , BAB p r o v i d e d f i n a n c i a l a s s i s t a n c e a n d t e c h n i c a l s e r v i c e s t o d e v e l o p r e p r e s e n t a t i v e r a n c h e s i n o t h e r lowland a r e a s , which p a r t i a l l y s e r v e d a s a b a s i s f o r t h e p r e p a r a t i o n of t h e t h i r d l i v e s t o c k c r e d i t , and conducted t h e l a n d t e n u r e and beef and l i v e c a t t l e m a r k e t i n g s u r v e y s . However, t h e s e two s t u d i e s were completed w i t h l a r g e d e l a y s -- t h a t on l a n d t e n u r e i n 1972 and a complete v e r s i o n o f t h e one on b e e f m a r k e t i n g i n 1973 -- and s i n c e no follow-up p r o c e d u r e was e s t a b l i s h e d t o a n a l y s e and implement t h e i r recommendations, t h e i r p r a c t i c a l impact t o d a t e h a s b e e n s m a l l . E. Impact o f t h e Lending Program The development scheme contemplated a t a p p r a i s a l was a combined b r e e d i n g l f a t t e n i n g o p e r a t i o n on r a n c h e s t h a t would h a v e a n a v e r a g e h e r d o f 600 head on 2,400 h e c t a r e s of n a t u r a l p a s t u r e s (most r a n c h e s were e x p e c t e d t o remain u n d e r s t o c k e d ; t h e a v e r a g e s i z e o f a r a n c h was 4,000 h e c t a r e s ) . The b r e e d i n g / f a t t e n i n g o p e r a t i o n was c o n s i d e r e d by I D A t o b e t h e most r e a s o n a b l e f o r t h e r e g i o n i n l i g h t of t h e p r i m i t i v e p r o d u c t i o n methods b e i n g a p p l i e d a t t h e t i m e , and t h e need t o a s s u r e r a n c h e s a r e a s o n a b l e c a s h f l o w w h i l e b u i l d i n g up t h e b r e e d i n g o p e r a t i o n . I n view o f t h e r e l a t i v e l y low l e v e l of t e c h n o l o g y b e i n g a p p l i e d , o n l y s i m p l e improvements were i n c l u d e d i n t h e program, namely, f e n c i n g , w a t e r i n g f a c i l i t i e s , and b e t t e r q u a l i t y of b r e e d i n g c a t t l e . Most o f t h e s e improvements were aimed a t improved c a t t l e management. A s a consequence o f t h e s e changes, i t was e x p e c t e d t h a t 1/ - The s i t u a t i o n seems t o have d e t e r i o r a t e d i n r e c e n t months, and BAB's d i f f i c u l t i e s a r e b e g i n n i n g t o h a v e n e g a t i v e r e p e r c u s s i o n s on t h e ad- m i n i s t r a t i o n of t h e t h i r d l i v e s t o c k p r o j e c t .  weaning and s t o c k i n g r a t e s , a d u l t m o r t a l i t y and s l a u g h t e r w e i g h t would improve c o n s i d e r a b l y . A r a n c h model was developed a l o n g t h e s e l i n e s which p r o j e c t e d a 400% i n c r e a s e i n o u t p u t and 300% i n n e t p r o f i t o v e r a 1 2 - y e a r period. The f i n a n c i a l r a t e o f r e t u r n t o p a r t i c i p a t i n g r a n c h e r s was ex- p e c t e d t o be between 19% and 25%, and t h e r e t u r n t o t h e c o u n t r y between 17% and 22%. U n f o r t u n a t e l y , no m o n i t o r i n g o r f o l l o w - u p a n a l y s i s o f t h e impact o f t h e p r o j e c t h a s b e e n made b y B A B or the U D . As a matter of f a c t , t h i s h a s b e e n c i t e d by l i v e s t o c k e x p e r t s i n B o l i v i a a s one o f LPD's main weak- n e s s e s . The c o n c l u s i o n s t h a t f o l l o w a r e t h u s b a s e d on g e n e r a l o r i n d i r e c t information. P r a c t i c a l l y a l l r a n c h e r s f o l l o w e d t h e b r e e d i n g / f a t t e n i n g scheme and t h e c o n d i t i o n s a t t a c h e d t o t h e s u b - l o a n s by t h e LPD have r e s u l t e d i n b e t t e r c a t t l e management and c o n s e q u e n t l y i n i n c r e a s e d p r o d u c t i v i t y i n o p e r a t i o n s . S c a t t e r e d s t a t i s t i c s s u g g e s t t h a t o u t p u t from t h e Beni may have doubled between 1966 a n d 1972. I n t h e l a t t e r y e a r , o u t p u t was e s t i m a t e d a t 30,000 t o n s and growth was p a r t i c u l a r l y r a p i d a f t e r 1969-70. There i s no doubt t h a t a l a r g e p r o p o r t i o n o f t h a t i n c r e a s e c a n b e a t t r i b u t e d t o t h e IDA-financed l e n d i n g program. A few o b s e r v a t i o n s on i n d i v i d u a l f a r m e r s c o n f i r m t h i s t r e n d . It i s p o s s i b l e t h e n , t h a t t h e o r i g i n a l p r o j e c t i o n o f a 400% i n c r e a s e i n o u t p u t o v e r 12 y e a r s w i l l m a t e r i a l i z e . A s r e g a r d s profits, the increase i n the price of yyat, which h a s more t h a n doubled s i n c e 1972, c o u l d a s s u r e , i f s u s t a i n e d - , a f i n a n c i a l r e t u r n t o t h e r a n c h e r s h i g h e r t h a n t h e 19-25% margin e s t i m a t e d a t a p p r a i s a l t i m e , b e c a u s e o p e r a t i n g c o s t s have b e e n growing a t a s l o w e r pace. T h i s c o n c l u s i o n w i l l p r o b a b l y h o l d even i f we t a k e i n t o a c c o u n t t h e f a c t t h a t , a c c o r d i n g t o o u r e s t i m a t e s , , . i n c r e a s e s i n p r o d u c t i v i t y m i g h t n o t be as h i g h a s e x p e c t e d a t a p p r a i s a l time. The f o l l o w i n g p r o d u c t i v i t y i n d i c e s i l l u s t r a t e t h i s p o i n t : Appraisal Estimates Present Estimates a f t e r 5 years' a f t e r 5 years' Development Development Calving r a t e % Adult m o r t a l i t y % Extraction r a t e % Stocking r a t e h a / A . ~ . Dressed w e i g h t t h r e e - y e a r s t e e r s kg. - 1/ P r i c e s a r e s t i l l h i g h e r t h a n i n 1972, i n s p i t e o f r e c e n t d e c l i n e s . Apparently, some i n d i c e s such a s the c a l v i n g r a t e , a d u l t m o r t a l i t y and s t o c k i n g r a t e a r e not a s favorable, b u t t h e e x t r a c t i o n r a t e seems t o be h i g h e r t h a n expected (although high p r i c e s d u r i n g 1973 might be a p a r t i a l explanation) and by now some r a n c h e r s a r e a b l e t o s e l l 3% year-old s t e e r s having a dressed weight of 220 kg i n s t e a d of t h e o l d p r a c t i c e of s e l l i n g 4% year-old s t e e r s weighing 180 kg. I n p r i n c i p l e , r e t u r n s t o t h e country w i l l a l s o be h i g h e r t h a n expected. However, i t i s l i k e l y t h a t t h e d i f f e r e n t i a l between t h e e s t i - mated and a c t u a l r e t u r n i s s m a l l e r f o r t h e country t h a n f o r t h e farmers themselves f o r s e v e r a l reasons. F i r s t , due l a r g e l y t o e x p o r t r e s t r i c t i o n s and i n t e r n a l p r i c e c e i l i n g s , i t seems t h a t an important p r o p o r t i o n of Beni's output i s smuggled t o neighboring c o u n t r i e s , e s p e c i a l l y B r a z i l , a develop- ment t h a t has had n e g a t i v e cansequences f o r Government revenues, and prob- ably f o r t h e economy a s a whole. Another e s t i m a t e of r e g i o n a l production i n d i c a t e s t h a t of 28,000 t o n s produced i n 1973, 10,000 t o n s , o r 36%, were smuggled. Secondly, given t h e s e r i o u s lack of funds faced by BAB and i t s need t o comply with t h e p r o v i s i o n of short-term c r e d i t f o r t h e l i v e s t o c k p r o j e c t , o t h e r c r e d i t programs financed by BAB had t o be s e r i o u s l y c u r t a i l e d . The following f i g u r e s about BAB'S lending p a t t e r n through i t s r e g u l a r programs h e l p t o h i g h l i g h t t h i s problem. BAB C o n t r i b u t i o n t o - BAB Lending through i t s Livestock P r o j e c t Regular Program ($b mln.) No. of Loans Amount ($b mln.) a/ - I n c l u d e s c o t t o n and r i c e programs i n t h e Santa Cruz region. The Banco A g r i c o l a h a s i n d i c a t e d t h a t , a l t h o u g h r e g u l a r programs were a l r e a d y d e c l i n i n g b e f o r e 1968, t h e funds r e q u i r e d f o r t h e l i v e s t o c k program (and t h e s p e c i a l programs f i n a n c e d by I D B ) were a n i m p o r t a n t f a c t o r i n e x p l a i n i n g t h e d e c l i n e a f t e r t h a t d a t e . Most o f t h e programs reduced were f o r small f a n n e r s . The r e g i o n s p a r t i c u l a r l y h u r t were La P a z , Santa Cruz ( u n t i l 1973), Cochabamba and Oruro. It i s t r u e t h a t t h e s e programs were p o o r l y conceived and b a d l y managed, b u t t h e y f u l f i l l e d what t h e B o l i v i a n Government c o n s i d e r e d t o b e an i m p o r t a n t s o c i a l need. A t h i r d f a c t o r d e a l s w i t h t h e d i s t r i b u t i o n o f t h e b e n e f i t s of t h e program. Funds'were e f f e c t i v e l y c h a n n e l l e d mostly t o what, i n t h e con- t e x t o f t h e Beni, a r e medium-size farmers. About 90% of t h e borrowers had h e r d s o f l e s s t h a n 2,000 head; 77% had r a n c h e s o f l e s s t h a n 4,000 h e c t a r e s -- t h e average s i z e considered a t a p p r a i s a l -- and 79% r e c e i v e d l o a n s o f l e e s t h a n $b 200,000 (US$ 10,000 a t t h e p r e s e n t exchange r a t e ) , which a r e f a i r l y s m a l l (Table 10). About 80% o f t h e borrowers a r e a b s e n t e e l a n d l o r d s l i v i n g p r i m a r i l y i n T r i n i d a d o r La Paz, who have o t h e r i m p o r t a n t s o u r c e s o f income. Only r e c e n t l y , w i t h t h e i n c r e a s e i n t h e p r i c e o f meat, a r e some owners b e g i n n i n g t o move t o t h e r a n c h e s and making c a t t l e r a i s i n g t h e i r main a c t i v i t y . S t i l l , most r a n c h e s a r e managed by a d m i n i s t r a t o r s w i t h t h e h e l p of a l a b o r f o r c e which, a c c o r d i n g t o s c a t t e r e d i n f o r m a t i o n , h a s prob- a b l y n o t i n c r e a s e d i n r e c e n t y e a r s . Real wages do n o t seem t o have gone up, e x c e p t f o r t h e imputed v a l u e of t h a t p o r t i o n o f income c o n s i s t i n g i n foodstuffs. I n d i s c u s s i n g t h e p o s i t i v e and n e g a t i v e f a c t o r s t h a t have i n f l u - enced t h e development o f t h e l i v e s t o c k i n d u s t r y i n t h e Beni, i t became c l e a r t h a t t h e c r e d i t program and t h e i n v e s t m e n t s stemming from i t have been t h e most i m p o r t a n t , p o s i t i v e f a c t o r s . I n a d d i t i o n t o i t s d i r e c t e f f e c t s , t h e program h a s convinced r a n c h e r s about t h e u s e f u l a d v a n t a g e s t h a t can b e o b t a i n e d from a c r e d i t and from t h e improved management t e c h n i q u e s propounded by t h e LPD. Improved p r i c e s s i n c e 1972 have a l s o been a major p o s i t i v e f a c t o r i n e x p l a i n i n g t h e i n c r e a s e s i n p r o d u c t i o n t h a t have t a k e n p l a c e . F. C o n s t r a i n t s t o t h e Program r e v e n t e d a f a s t e r development of c a t t l e - S e v e r a l f a c t o r s have p - r a i s i n g a c t i v i t i e s i n t h e Beni, t h r e e o f which a p p e a r p a r t i c u l a r l y important: Government p r i c i n g and e x p o r t p o l i c i e s , m a r k e t i n g and t r a n s p o r t , and t e c h n i c a l assistance. The Government p o l i c y h a s been t o c o n t r o l r e t a i l p r i c e s a t t h e con- sumption c e n t e r s , b u t l e a v i n g p r i c e s t o t h e p r o d u c e r s and marketing margins f r e e . R e t a i l p r i c e s i n La Paz remained a t 8-9 p e s o s p e r kg. between 1966 and 1972, b u t t h e a v e r a g e p r i c e i n 1973 was 12 p e s o s p e r kg. and 25 pesos i n t h e f i r s t h a l f of t h i s y e a r . Because of r i s i n g p r o d u c t i o n c o s t s and r e l a - t i v e l y f i x e d m a r k e t i n g margins, t h i s p r i c i n g p o l i c y h a s g e n e r a l l y a c t e d a s a d i s i n c e n t i v e t o p r o d u c t i o n . The o n l y e x c e p t i o n seems t o b e t h e 1970-71 p e r i o d , when low demand and i n c r e a s e d p r o d u c t i o n r e s u l t e d i n s e r i o u s d i f f i - c u l t i e s f o r t h e r a n c h e r s i n m a r k e t i n g t h e i r o u t p u t . Under normal c o n d i t i o n s , r e t a i l p r i c e s would probably hrsve f a l l e n . S i m i l a r l y , t h e e x p o r t r e s t r i c t i o n , e s t a b l i s h e d t o a s s u r e a s t e a d y s u p p l y f o r t h e i n t e r n a l market, h a s been a d i s t o r t i n g element i n p e r i o d s such a s t h e one j u s t mentioned o r a t p r e s e n t , when e x p o r t s have been p o s s i b l e w i t h o u t harming t h e i n t e r n a l market. The combination o f i n t e r n a l p r i c e s below i n t e r n a t i o n a l l e v e l s , a t l e a s t through 1973, and e x p o r t r e s t r i c t i o n s , i n e v i t a b l y r e s u l t s i n t h e h i g h l e v e l o f contraband d e s c r i b e d above. Marketing ( i n c l u d i n g p r o c e s s i n g ) and t r a n s p o r t a r e probably more p r i m i t i v e t h a n p r o d u c t i o n i t s e l f . C a t t l e a r e s l a u g h t e r e d i n a network of a b o u t 60 v e r y s i m p l e s l a u g h t e r - h o u s e s s c a t t e r e d t h r o u g h o u t t h e Beni. Each s l a u g h t e r - h o u s e h a s a n a d j a c e n t l a n d i n g s t r i p , u s u a l l y unpaved, where c a r g o p l a n e s c o l l e c t t h e meat t o c a r r y i t t o t h e markets. The p r o c e s s has t o be p r e a r r a n g e d and c a t t l e s l a u g h t e r e d a few hours b e f o r e t h e p l a n e a r r i v e s , s i n c e most p l a c e s do not have c o o l i n g f a c i l i t i e s . I f , by any c i r c m s t a n c e s t h e p l a n e cannot a r r i v e o r t a k e o f f , a s i s o f t e n t h e c a s e d u r i n g t h e r a i n y s e a s o n , t h e meat must be d r i e d , w i t h r e s u l t i n g l o s s i n p r i c e . A i r t r a n s p o r t has been, a t b e s t , a r a t h e r p r e c a r i o u s way of r e a c h i n g t h e consumption c e n t e r s . It c o n s i s t s of a f l e e t of over-age p l a n e s which a r e b a d l y m a i n t a i n e d , a f a c t o r p a r t i c u l a r l y i m p o r t a n t i n view of t h e d i f f i c u l t i e s o f t h e Andean r o u t e s and s e r v i c e i s sometimes v e r y u n r e l i a b l e . For example, i n November 1973, t h e r e were 35 p l a n e s o p e r a t e d by 11 companies. Of t h e s e p l a n e s , 1 5 have been o u t of s e r v i c e f o r l o n g p e r i o d s due t o l a c k of s p a r e p a r t s . Of t h e remaining 20, t e n had c r a s h e d and were p u t pennad n e n t l y o u t o f s e r v i c e by March 1974, a s t a g g e r i n g r e c o r d . A t t h e consumer c e n t e r s , m a r k e t i n g i s i n t h e hands of a few whole- s a l e r s , and meat i s r e t a i l e d f o l l o w i n g v e r y p r i m i t i v e p r o c e d u r e s , on t h e b a s i s o f o n l y two c u t s . These p r o c e d u r e s , combined w i t h t h e l a c k of q u a l i t y c o n t r o l f o r e x p o r t , has discouraged r a n c h e r s from producing meat of h i g h e r q u a l i t y . Beni p r o d u c e r s a r e h e a v i l y i n v o l v e d , e i t h e r i n d i v i d u a l l y o r through t h e i r a s s o c i a t i o n , i n t h e marketing o f meat. The M i n i s t r y o f I n d u s t r y and Connnerce r e g i s t e r s 38 w h o l e s a l e r s , w i t h e i g h t o f them h a n d l i n g 76% o f t h e o u t p u t . A t p r e s e n t , t h e p r i c e p a i d t o producers i s 1 5 pesos p e r kg. and meat r e t a i l s a t 25 pesos p e r kg. i n La Paz. The d i f f e r e n t i a l i s t a k e n by s l a u g h t e r i n g (one p e s o ) , t r a n s p o r t (2-3 pesos) and w h o l e s a l e r s ' c o s t s and profits.  The t h i r d n e g a t i v e f a c t o r has been t h e l i m i t e d amount o f t e c h - n i c a l a s s i s t a n c e provided t o r a n c h e r s and ranch workers. No s y s t e m a t i c e f f o r t h a s been made i n t h i s f i e l d and t h e o n l y a s s i s t a n c e a v a i l a b l e h a s been t h a t p r o v i d e d by LPD's t e c h n i c i a n s w h i l e a p p r a i s i n g and s u p e r v i s i n g r a n c h investment programs. The p o s s i b i l i t y o f e s t a b l i s h i n g a model o r e x p e r i m e n t a l ranch, a s proposed by t h e P r o j e c t D i r e c t o r , has n o t been a c c e p t e d by BAB o r IDA. The l a c k of s y s t e m a t i c t r a i n i n g i n r a n c h i n g meth- ods, e s p e c i a l l y t o LPD's t e c h n i c i a n s , probably delayed t h e implementation o f more advanced t e c h n i q u e s i n t h e a r e a . I D A has been concerned about Government p o l i c y and marketing and t r a n s p o r t problems, b u t t h e i s s u e of t e c h n i c a l a s s i s t a n c e and t r a i n i n g has not been g i v e n t h e a t t e n t i o n i t d e s e r v e s , perhaps because IDA'S aims i n terms of improved technology have been modest. A s r e g a r d s Government p o l i c y , I D A has p e r s i s t e n t l y pursued t h e l i b e r a l i z a t i o n o f p r i c e and e x p o r t c o n t r o l s . However, t h e s e e f f o r t s do n o t seem t o have had much e f f e c t . On m a r k e t i n g , I D A ' S main e f f o r t was t o a s k f o r t h e long-delayed s t u d y on t h e s u b j e c t and, a l t h o u g h s u p e r v i s i o n m i s s i o n s d e n o t e p r e o c c u p a t i o n about some of t h e marketing problems, t h e y d i d n o t s u g g e s t a n y s p e c i f i c measures, u n t i l t h e t h i r d c r e d i t , which i n c l u d e s some i n v e s t m e n t s designed t o improve marketing. On t r a n s p o r t , ILlA a l s o suggested a s t u d y , which was c a r r i e d o u t by a c o n s u l t i n g f i r m from New Zealand i n 1969. The s t u d y contained s e v e r a l u s e f u l recommendations about improving t h e s e r v i c e , most o f which have n o t been implemented by t h e Government. A t a p p r a i s a l t i m e , IDA was p a r t i c u l a r l y concerned about t i t l i n g and animal h e a l t h problems. W e have i n d i c a t e d t h a t t h e t i t l i n g problem h a s d e c l i n e d i n importance and does n o t seem t o have been a b a r r i e r t o t h e l e n d i n g program. Animal h e a l t h s e r v i c e s have n o t improved, and t h e t r a d i - t i o n a l problems ( r a b i e s , foot-and-mouth d i s e a s e ) a r e s t i l l t h e r e . However, t h e r e a r e doubts about how important t h i s f a c t o r h a s been i n l i g h t of t h e l a c k o f e x p o r t s and t h e corresponding requirements of q u a l i t y c o n t r o l , and t h e poor marketing-processing system j u s t d e s c r i b e d , which does n o t a l l o w enough p r i c e d i f f e r e n t i a t i o n f o r meat o f b e t t e r q u a l i t y . The b e n e f i t s o f a n adequate animal h e a l t h s e r v i c e , e s p e c i a l l y i n terms of t h e m o r t a l i t y r a t e s , i s n e v e r t h e l e s s obvious a d i t remains one o f t h e p r e s s i n g needs i n t h e r e g i o n . Moreover, i t i s l i k e l y t h a t t h e problem w i l l become more a c u t e i n the future, particularly i n relation t o parasitic infections, a s the number of c a t t l e i n c r e a s e s . G. Conclusions It i s c l e a r t h a t B o l i v i a , w i t h t h e h e l p o f IDA, has succeeded i n promoting important improvements i n o u t p u t and i n o p e r a t i n g c o n d i t i o n s i n t h e l i v e s t o c k i n d u s t r y i n t h e Beni, a n a c t i v i t y working under p r i m i t i v e and d i f f i c u l t c o n d i t i o n s . The main achievements have been i n t h e a r e a of r a n c h and c a t t l e management and i n c r e a s i n g r a n c h e r s ' awareness a b o u t t h e b e n e f i t s of making u s e of a well-managed c r e d i t program. Most o f t h e o b j e c t i v e s set a t a p p r a i s a l t i m e have been a t t a i n e d , some of them f a s t e r t h a n expected, and exogenous f a c t o r s , such a s t h e b i g i n c r e a s e s i n t h e p r i c e of b e e f , w i l l p r o b a b l y r e s u l t i n h i g h e r t h a n expected r e t u r n s t o r a n c h e r s . The o v e r a l l impact on t h e B o l i v i a n s o c i e t y , however, might n o t be a s h i g h because of n e g a t i v e developments such a s smuggling, p r o b a b l e r e d u c t i o n i n l e n d i n g t o s m a l l farmers r e s u l t i n g f r o m l ~ h ep r o j e c t , and a r e g r e s s i v e d i s t r i b u t i o n of t h e b e n e f i t s of t h e program.- I n r e t r o s p e c t , i t i s s u r p r i s i n g t h a t n e i t h e r t h e B o l i v i a n Govern- ment through B AB nor I D A p a i d more a t t e n t i o n t o m a r k e t i n g and t r a n s p o r t problems and l i m i t e d themselves t o f i n a n c e s t u d i e s on t h e problems, which t o d a t e had n o t had much of a n impact. IDA h a s b e e n aware of t h e s e problems throughout t h e p e r i o d , b u t h a s n o t c o n s i d e r e d them t o have been t o o s e r i o u s . The a p p r a i s a l r e p o r t f o r t h e t h i r d c r e d i t even c o n s i d e r s t h e a i r t r a n s p o r t system a s a d e q u a t e . It seems t h a t , had IDA promoted a c t i o n on s p e c i f i c i s s u e s , such a s t h e o r g a n i z a t i o n of t h e a i r t r a n s p o r t i n d u s t r y , t h e adequacy of t h e network o f a i r f i e l d s o r t h e meat r e t a i l i n g system, i t could have had a u s e f u l impact. On t h e o t h e r hand, IDA e f f o r t s i n r e l a t i o n t o l a n d t i t l e s and, t o a c e r t a i n e x t e n t , animal h e a l t h d i d h e l p t o p r e v e n t problems t h a t o t h e r w i s e might have been more s e r i o u s . To have a c h i e v e d s u c c e s s on g e n e r a l -- p o l i c y i s s u e s c o n s t r a i n e d by a l l k i n d s of p o l i t i c a l f a c t o r s , such a s meat p r i c e and e x p o r t p o l i c y , was o b v i o u s l y much more d i f f i c u l t . A l l i n d i c a t i o n s s u g g e s t t h a t t h e o r i g i n a l l i v e s t o c k development s t r a t e g y , a b r e e d i n g l f a t t e n i n g t y p e of e x t e n s i v e o p e r a t i o n , was t h e r i g h t one under t h e c i r c u m s t a n c e s p r e v a i l i n g i n t h e Beni i n t h e mid-1960s. However, i n p r e p a r i n g t h i s a u d i t , we g o t s e v e r a l i n d i c a t i o n s t h a t a f t e r a few y e a r s of o p e r a t i o n , and e s p e c i a l l y by now, i t i s worth s t u d y i n g t h e p o s s i b i l i t i e s of a b e t t e r u s e of t h e e x c e l l e n t g r a s s f a t t e n i n g a r e a s e x i s t i n g i n t h e Beni and b e g i n t o s e p a r a t e , on an i n c r e a s i n g s c a l e , b r e e d i n g from f a t t e n i n g which, i f w e l l planned, could improve t h e p r o d u c t i v i t y of b o t h o p e r a t i o n s . The i s s u e i s i m p o r t a n t i n t h e long r u n , because most of t h e meat p r o c e s s i n g f a c i l i t i e s w i l l have t o b e l o c a t e d i n t h e f a t t e n i n g a r e a s . Also, i t seems c l e a r t h a t t h e Beni h a s needed from t h e o u t s e t some s o r t of i n f r a s t r u c t u r e and s o c i a l s e r v i c e s which a r e s t i l l n o t a v a i l a b l e . It i s u n l i k e l y t h a t l i v e s t o c k and r e l a t e d a c t i v i t i e s could i n c r e a s e t h e i r p r o d u c t i v i t y s u b s t a n t i a l l y w i t h o u t a network of low-cost r o a d s , b e t t e r a i r f i e l d s , a d d i t i o n a l s e r v i c e s r e l a t e d - 11 Income d i s t r i b u t i o n became a n i m p o r t a n t i s s u e i n t h e t h i r d p r o j e c t , which p r o v i d e s a s s i s t a n c e t o s m a l l sheep farmers and c o o p e r a t i v e s i n t h e A 1t i p l a n o . t o animal h e a l t h , and f i n a n c i a l and t r a i n i n g f a c i l i t i e s . The i s s u e o f t h e development s t r a t e g y of t h e Beni beyond t h e l i v e s t o c k a c t i v i t i e s has seldom been r a i s e d by I D A d u r i n g t h i s p e r i o d . Regarding i n s t i t u t i o n a l i s s u e s , I D A l a r g e l y succeeded i n i s o l a t i n g t h e LPD from t h e rest o f B A B a n d i t s problems, a l t h o u g h BAB'S p e r s o n n e l p o l i c i e s have been a major problem i n meeting t h e LPD's s t a f f i n g r e q u i r e m e n t s . I D A ' S interest i n B A B h a s been, u n t i l r e c e n t l y , mainly f o c u s s e d on p r e v e n t i n g c e r - t a i n problems i n BAB1s o p e r a t i o n from a f f e c t i n g t h e implementation o f t h e l i v e s t o c k l e n d i n g program. One of t h e o r i g i n a l o b j e c t i v e s , t o s t r e n g t h e n BAB's t e c h n i c a l s t a f f and t o improve i t s a d m i n i s t r a t i v e p r o c e d u r e s , h a s been a c h i e v e d o n l y p a r t i a l l y , s i n c e IDA d i d n o t s t a r t any t r a i n i n g program nor d i d i t d i r e c t l y h e l p BAB i n any a c t i v i t y beyond t h e LPD, a s i d e from g e n e r a l a d v i c e about ways of improving i t s p e r s o n n e l and management methods.  BOLIVIA LIVESTOCK PROJECT Table 1. Estimated and Actual Credis Performance - 1972 Total 1. Number of Loans Estimated Actual 2. Total lending, including short term credit (US$ million) Estimated Actual 3. Total lending, investment only (US$ million) Estimated Actual 6. Average size of investment loan Estimated Actual 11 Excludes - technical assistance. Source: BAB.  BOLIVIA LlVESTOCK PROJECT T a b l e 2. Composition o f On-Ranch I n v e s t m e n t s and P u r c h a s e s (percentages) T o t a l Lending Average Appraisal Actual/ Smallest Largest - 1968 - 1969 1970 1971 1972 Total Estimates Estimated Borrowers Borrowers A. Investment Breeding c a t t l e 38 44 41 31 43 41 38.9 105.4 Fencing 30 25 28 33 23 27 29.6 91.2 Panch C o n s t r u c t i o n 12 10 11 16 11 11 12.0 91.7 Pas l u r e E s t a b l i s h m e n t 1 0.5 3 1 9 3 3.7 81.0 Tctal 100 100 100 100 100 100 100.0 5. Short-Term F i n a n c i n a l'accines 5 12 14 18 17 12 Tctal 100 100 100 100 100 100 - I/ H a n d l i n g and w a t e r i n s f a c i l i t i e s , l i g h t equipment and a g r i c u l t u r a l m a c h i n e r y . Scurce: BAB.  BOLIVIA LIVESTOCK PROJECT T a b l e 3. E s t i m a t e d and A c t u a l U n i t C o s t s o f On-Ranch I n v e s t m e n t (current Bolivian pesos) Actual Unit Costs Average Actual / Estimated - 1969 1970- 1971 - 1969-71 Estimated Fencing 4,000 2,557 3,036 2,968 2,853 Stock Iinndling F a c i i i t i e s (per u n i t ) 24,000 7,234 7,462 10,166 8,287 Watering F a c i l i t i e s (per u n i t ) Farm Ponds 2,000 15,900 6,006 7,429 9,778 Well M i l l Tanks 24,000 Ranch C o n s t r u c t i o n (per unit) Barns 16,000 10,916 11,713 24,206 15,611 Houses 36,000 Pasture Establishment (per ha.) 400 689 1,860 2,236 1,595 Breeder C a t t l e (per head) Bu 11s 3,000 1,999 3,096 1,157 2,084 Heifers 500 702 898 757 785 S o r ~ r c e : Banco A g r i c o l a d e B o l i v i a  BOLIVIA LIVESTOCK PROJECT Table 4. Estimated and Actual PhysicaI Accomplishments Actual / Unit - 1968 - - 1969 - 1970 1971 - - 1972 Total Estimated Estimated Project Composition A:, Investment Fencing (km) 772 1,857 765 478 526 4,398 4,336 Handling Facilities (No.) 55 169 92 39 36 391 136 Watering Facilities (No.) 69 57 73 35 49 283 678 Ranch Construction (NO.) 58 165 76 29 63 291 271 Pasture Establishment (ha.) 120 149 140 19 910 1,338 5,420 Breeding Cattle (head) Bulls 465 1,225 510 317 332 2,849 2,981 Heifers 899 8,016 2,108 1,287 1,500 13,810 27,100 B) Short-Tern Financing Vaccine (Pesos) 154,000 588,900 441,000 199,000 283,500 1,666,400 Fattening (head) 2,780 8,703 5,489 1,929 2,571 21,472  BOLIVIA LIVESTOCK PROJECT Table 5. E s t i m a t e d and A c t u a l D i s b u r s e m e n t a t t e r n ( t h o u s a n d US$) C r e d i t 107 C r e d i t 171 Years ( c a l e n d a r ) Actual Estimated Actual Total 262.7 Total 1092.8 Total 635.7 Total 12.9 Total 16.3 Grand T o t a l  BOLIVIA LIVESTOCK PROJeCI Table 6 . S u m a ~ a l s n c eS h e e t a o f ~ s n c oA p r l c o l s d e B o l i v i a 1 9 6 7 - 1 9 7 3 Year Ended June 3 0 t h - 1967 1968 1969 1970 1971 1972 1973 5h '00" < $b '000 7 $h ' 0 0 0 % $b ' 0 0 0 7 $b ' 0 0 0 Z $b '000 Z $b ' 0 0 0 7" r a ~ l l i n Ranks 11.539 lnvesementr 1,136 A ~ r i c u l f , l r a lI.oans i&i.lnj Fixed A s s e t s 4,327 IIIher Asset5 23.098 Recei v a h l e A c c o u n t s 895 I o t a 1 A s s e t s ( i n $h ' 0 0 0 ) - T o t a l A s s e t s ( i n OSS '0001 - 15,1R1 LlAR11 ITlES (:api t a l Paid i? 8 8 , IRC ReqrrYes L15 , 12 sp,asz - (1.808) - (66) 97,R1R Short-term Credits I.one-cem C r e d ~ t s O t b e r Liabilities T o t a l L i a b i l i t i e s ( i n Sh ' 0 0 0 ) 1 - 19,721 1 -00.0 - 140,509 - 1 - 82,178 1 -00.0 - 1 242,876 - 00 - O 31P.273 - - 100.01 1 -00.0 633.990 E g r o t a 1 1 . i d l ~ i I i r i e a ( i n USS ' 0 0 0 ) - - 11.709 - - - - 34,143 - S O I I T C P . Banco A g r i c o l s de B o l i v i a  BOLIVIA LIVESTOCK PROJECT Table 7 . Income and E x p e n d i t u r e of Banco A g r i c o l a d e B o l i v i a 1967-73 ( i n $b '000) Year ended June 30 INCOME I n t e r e s t Received Commissions Received Rent F o r e i g n Exchange Other Income T o t a l Income 5,044 12,301 - - 13,452 17,134 23,363 29,928 37.686 EXPENSES Personnel S a l a r i e s & S o c i a l B e n e f i t s 2,897 O f f i c e Expenses 425 S e r v i c e Charges 174 L e g a l Expenses 35 F i n a n c i a l Charges 500 Supervision & Audit. 230 O t h e r Expenses 676 T o t a l Expenses 4,937 NET INCOME 107 KT LOSSES) - Note: The l o s s f o r June 30, 1972 i s e s p e c i a l l y i n f l u e n c e d by: a ) R i c e Program, f o r 1970-71 ( $ b 360,000) and b) O r i e n t a l L i v e s t o c k P r o j e c t ($b 1 , 1 9 3 , 0 0 0 ) . Source: Banco A g r i c o l a d e B o l i v i a  BOLIVIA LIVESTOCK PROJECT Table 8. Sununary S t a t e m e n t o f Net O p e r a t i n g R e s u l t s 1969-71 F i s c a l Year Ending J u n e 3 0 ( I n $blOOO) ADJUSTED NET INCOME OR LOSS L1 LENDING OPERATIONS 1969 1970 1971 1.ivestock Development P r o j e c t - IDA C r e d i t s 107-BO and 171-BO ...... ( 484.8 ) 1119.6 1122.8 P r o j e c t s Assisted by I D B : G e n e r a l A g r i c u l t u r e (BID 1 SF/RO) ................................. 882.6 207.2 229.8 S e t t l e m e n t (BID 29 SF/BO)?/. ...................................... 546.2 ( 101.6 ) ( 103.6 ) R u r a l Development (BID 3 5 SFIBO)? I . . . ............................. 5.5 ( 132.0 ) ( 86.8 ) L i v e s t o c k Development (BID 242 SF/BO) ............................ N.O. N.O. (1221.1 ) Programs A s s i s t e d by U.S.A.I.D.: I m p o r t of A g r i c u l t u r a l Machinery (AID L 028) ..................... 474.0 840.1 1074.6 P u r c h a s e 6nd S a l e o f Wheat (AID 511 LCL 1018) .................... 2.7 ( 49.3 ) ( 21.0 ) P u r c h a s e a n d S a l e of R i c e (AID 5 1 1 LCL 1020) ..................... 214.6 37.5 35.3 P u r c h a s e and S a l e o f C e r e a l s (AID 511 LCL 1028) .................. N.O. k'0.1 92.5 O t h e r Programs and P r o j e c t s : S u g a r Cane Program (Bank of America) ............................. ( 20.9 ) ( 118.6 ) 92.6 C o t t o n Program (Bank o f America) ................................. N.O. N.O. ( 21.8 ) Bermejo Development Program (Banco G e n t r a l ) ...................... 79.4 46.5 43.9 ...... P u r c h a s e a n d S a l e of R i c e - 1969 O p e r a t i o n s (Banco C e n t r a l ) ( 2.5 ) N.0. N.O. P u r c h a s e and S a l e of Rice - 1970 O p e r a t i o n s (Banco C e n t r a l ) ...... N.O. ( 309.6 ) ( 230.7 ) ...... P u r c h a s e and S a l e o f R i c e - 1971 O p e r a t i o n s (Banco C e n t r a l ) N.O. N.O. 78.0 D a i r y C a t t l e Development (Government o f A r g e n t i n a ) ............... 64.3 ( 53.2 ) 245.4 C o f f e e Program ................................................... 4.6 8.2 5.3 R e g u l a r Lending O p e r a t i o n s (by O f f i c e s o r B r a n c h e s ) : S a n t a Cruz....................................................... Cochabamba ....................................................... La Paz ........................................................... Beni ............................................................. Oruro ............................................................ Chuquisaga ....................................................... Potosi ........................................................... Tarija ........................................................... ...................................... Loans b e f o r e R e o r g a n i z a t i o n ...................................... National O f f i c e ( S t a . Cruz) 11 Net o p e r a t i n g l o s s e s of BAB N a t i o n a l O f f i c e i n La Paz a l l o c a t e d t o l e n d i n g o p e r a t i o n s on t h e b a s i s o f g r o s s income. - 21 Under b u d g e t a r y s u p p o r t by G o v e r n r e n t . - S e e p a r a g r a p h 4.08 o f t e x t o f S u p e r v i s i o n R e p o r t . 31 - These l o a n s were c h a r g e d t o p r o p e r o f f i c e s b e g i n n i n g FY 1971. N.O. = Not i n o p e r a t i o n . Source: Banco A g r i c o l a d e B o l i v i a . Based on s p e c i a l s t u d y .  801 IVlA LIVBSTIICK PROJECT Table 9 . Losnr Under L e ~ s lAction and Overdues (Fiscal Y e a r - ending June 30) --I967 1968 1969 - - 1970 No <>f Amount No. a t Amount No. o f Amount No. of haunt I -il."b - m 0 laan. - -- Sb'000 & 000'bS Loan. Sb'000  BOLIVIA LIVESTOCK PROJECT T a b l e 10. C l a s s i f i c a t i o n o f Borrowers by Herd, Ranch and Loan S i z e Number o f Borrowers 1. By Herd S i z e (number o f h e a d s ) 2. By Loan S i z e (thousand pesos) 0 - 100 101 - 200 201 - 300 331 - 400 401 - 500 501 - 600 o v e r 600 3. By Ranch S i z e (ha. ) 0 - 1000 1001 - 2000 2001 - 3000 3001 - 4000 4001 - 5000 5001 - 7000 7001 - 10000 o v e r 10000 Source: BAB.  BOI.IVIA I N T E R I M SECOND BEN1 LIVESTOCK DEVELOPMENT PROJECT LOCATION OF SUB-BORROWERS UNDER 107-BO