Colombia - Caqueta Land Colonization Project

Document of The World Bank FOR OFFICIAL USE ONLY Report No. 2124 Project Performance Audit Report COLONBIA CAQUETA LAND COLONIZATION PROJECT (Loan 739-CO) June 30, 1978 Operations Evaluation Department This document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contents may not otherwise be disclosed without World Bank authorization.  FOR OFFICIAL USE ONLY Project Performance Audit Report COLOMBIA CAQUETA LAND COLONIZATION PROJECT (Loan 739-CO) TABLE OF CONTENTS Page No. Preface Basic Data Sheet Highlights PROJECT PERFORMANCE AUDIT MEMORANDUM I. PROJECT SUMMARY ...............1................... I II. MAIN ISSUES ..................................... 4 A. Roads ............................................ 4 B. Livestock Credit Program ........................ 8 C. Beneficiaries .................................... 17 D. Ecological Issues ... ............. .............. 19 E. Project Evaluation and Monitoring ................ 21 F. Rates of Return .............. ... ........ ...22 G. Bank Performance .-............ ....... .. ..... 23 Attachment: Comments by INCORA PROJECT COMPLETION REPORT I. Background .......................................... A.1 II. Project Formulation ............................... .A.1 III. Project Description .............................. A.3 IV. Implementation ................................... A.4 V. Procurement, Cost and Disbursement ................ A.6 VI. Agricultural and Social Impact ................... A.7 VII. Rate of Return ....... ....................... A.10 VIII. Institutional Performance ...................... A.12 IX. Bank Performance .............. ......... A.13 X. Conclusions ... .......................... A.14 This document has a restricted distribution and may be used by recipients only in the performance of their offcial duties. Its contents may not otherwise be disclosed without World Bank authorization. Annex 1. Farm Development Cost 2. Investment for Road Construction 3. Investment for Health Facilities 4. Investment for Schools 5. Project Cash Expenditures 6. Project Cost and Financing 7. Allocation of Bank Loan 8. Schedule of Disbursements 9. Development of Livestock Value Under Loan 739-CO 10. Investment per Family at Completion (1976) 11. Price and Exchange Rate Indices 12. Farmgate Prices, 1972-76 13. Economic Rate of Return: Benefits and Costs Streams Annex Tables Al. Nominal and Deflated Cattle Prices in Caqueta A2. Size Distribution of Rural Landholdings in Caqueta A3. Size Distribution of Landholdings of Participating Suborrowers Surveyed A4. Gross Incomes of Subborrowers Surveyed A5. Net Incomes of Subborrowers Surveyed A6. Land Values in Project Area, 1971 A7. Land Values in Project Area, 1976 A8. Sources of Gross Income for Subborrowers Surveyed Maps Project Performance Audit Report COLOMBIA CAQUETA LAND COLONIZATION PROJECT (Loan 739-CO) PREFACE This is a report on an audit of performance under the Caqueta Land Colonization Project in Colombia, supported by Loan 739-CO. The project was identified in 1967, prepared in 1969, appraised in January 1970, signed in May 1971, and became effective in September 1971. The execution of the project was governed by a Loan Agreement for US$8.1 m. The original closing date was October 31, 1974, later extended to September 30, 1976. Loan 739-CO was fully disbursed by November 4, 1976. This report consists of an Audit Memorandum and a Project Completion Report issued by the Latin America and the Caribbean Regional Office in July 1977. The Memorandum is based on the PCR, a review of the project supervision reports, the appraisal report, and other relevant Bank documents and discus- sions with Bank staff. An OED mission visited Colombia in December 1977. It had intensive discussions with INCORA and other agencies concerned with the implementation of the project and visited the project area. Further comments by INCORA, which were taken into account while finalizing this report, are attached to the Memorandum. The assistance of INCORA staff, other Government officials, and colonists who provided data and discussed the project so readiLy is gratefully acknowledged.  COLOMBIA CAQUETA LAND COLONIZATION PROJECT (Loan 739-CO) Basic Data Sheet A. Amounts (in US$ million) As of March 31, 1978 Original Disbursed Repaid outstanding Loan 739-CO 8.1 8.1 1.0 7.1 B. Project Data Actual or Original Plan Current Estimate Identification 10/26/67 Government's application 11/15/68 Board approval 5/04/71 5/04/71 Loan Agreement 5/28/71 5/28/71 Loan effectiveness 9/15/71 10/19/71 Last disbursement 6/30/74 11/04/76 Closing date 10/31/74 9/30/76 Total costs (million) Col$ 388.4/US$21.6 Col$ 575.3/US$20.3 Economic rate of return 16.5% 13.0% C. Mission Data Number of Number of Man Weeks Date of Month/Year Persons Weeks in Field Report Identification October 1967 - - - 10/26/67 Preparation I March/April '69 3 2.5 7.5 4/12/69 Preparation II October '69 4 - - 11/01/69 Appraisal Jan/Feb '70 5 3 15 1/29/71 Supervision I July '71 1 1.5 1.5 8/12/71 Supervision II October '71 2 1 2 11/08/71 Supervision III April '72 2 1.5 3 5/05/72 Supervision IV August '72 1 1 1 9/13/72 Supervision V Feb/March '73 2 1 2 3/22/73 Supervision VI August '73 2 1.5 3 9/19/73 Supervision VII Jan/Feb '74 3 3 9 3/06/74 Supervision VIII June '74 2 1 2 7/05/74 Supervision IX Jan '75 2 1.5 3 2/24/75 Supervision X July '75 3 1 3 8/07/75 Supervision XI FEb/March '76 2 3 ~6 4/05/76 Supervision XII Sept '76 1 2.5 2.5 11/09/76 Completion March '77 2 1 2 7/15/77 45.0 D. Follow-on Project Loan 1118-CO of US$19.5 million, signed June 2, 1975 for Caqueta II Settlement Project. The average weighted exchange rate for the disbursement period is US$1 = Col$ 28.34.  Project Performance Audit Report COLOMBIA CAQUETA LAND COLONIZATION PROJECT (Loan 739-CO) HIGHLIGHTS The loan financed a successful project to support spontaneous settlement of smallholders in the Colombian Amazon basin. The project provided for design and construction of penetration and access roads, provision of credit for farm development (mainly livestock), strength- ening the executing agency, establishing research centers, and building primary schools and health centers. Forest reserves were to be demar- cated to provide foc sustained timber production and also to fulfill ecological functions. Thus, this became one of the first Bank-financed integrated development projects trying to cope with regional problems. The Bank underestimated the technical and managerial diffi- culties of implementing such a project in a remote area. Costs were underestimated. After two years, the project had to be scaled down and the closing date extended. The revised goals were met. Ceilings of sub-loans were kept low to benefit mainly the small settlers, of whom 1700 participated; 177 km of roads, 60 schools, 4 health centers, and one hospital were built. Actual unit costs were about 40% higher than anticipated. The research work has been satisfactorily carried out. Although many participating farmers have substantially increased the net worth of their holdings, living standards have remained at extremely modest levels (a development properly anticipated at appraisal). Widespread deforestation in the project area as well as upstream have raised important ecological issues, such as erosion, increased flooding, and siltation of previously navigable rivers. Efforts to set aside a forest reserve failed. The project's rate of return has been re-estimated at 13%, a fair rate though slightly lower than the 16.5% envisaged at appraisal. The following points may be of special interest: - failure of previous organized colonization programs led to Government supporting spontaneous settlements (PPAM, paras 2-4); - poor contracting procedures and problems during construc- tion contributed to delays in road construction (PPAM, paras. 12-15; PCR, paras. 4.05 and 5.01); - traffic above forecasts increased project benefits but will also increase maintenance expenditures; problems in road maintenance (PPAM, paras. 19-20); - the project's main executing agency had difficulties in coordinating activities of other government agencies (PPAM, paras. 21, 34 and 35); - no Bank efforts to coordinate livestock lending policies under this and the Second Livestock Project (Loan 651-GO) in the Caqueta area were made (PPAM, para. 40); - expansion of individual farms was not only achieved by clearing more forest but also acquiring other farms; unsatisfactory social structures may result therefrom (PPAM, paras. 25-28; PCR, para. 6.03); - main reasons for project success (PPAM, para. 63; PCR, para. 10.02). Project Performance Audit Memorandum COLOMBLA CAQUETA LAND COLONIZATION PROJECT (Loan 739-CO) 1. PROJECT SUMMARY 1/ Background 1. The Caqueta Land Colonization Project was designed to support spon- taneous colonization taking place in the upper reaches of the Colombian Amazon basin just southeast of the Andean piedmont. The area was opened to non-Indian settlement at the turn of the century during the short-lived rubber boom and experienced further development when military operations were introduced as a result of border conflicts between Colombia and Peru. Spontaneous colonization continued at a slow pace in the 1950s and increased during the 1960s, spurred by tenancy problems and by civil conflicts (la Violencia) in the Andean high- lands. 2. The Government initiated a program of directed colonization in 1959, administered by the Caja Agraria (CA). Prospective colonists were selected, transported to Caqueta, and provided with plots of jungle to clear and farm. This effort proved a failure not only because inadequate infrastructure and producer credit were provided, but also because many of the colonists selected simply could not accommodate themselves to the difficult conditions faced: tropical humid forest, heavy rainfall during nine months of the year, malaria and contaminated water. In addition, the deep clay soils of the region are not suitable for continuous annual cropping, though they are adequate for permanent pastures. The colonization program was given a different orientation in 1961 when, instead of directed colonization, it was decided to provide assistance to those settlers who had come independently to the zone to claim and estab- lish themselves on public lands. Colonists were to be assisted only after they had shown themselves both willing and capable of living in the area. Under this plan, the Government would incur no expense for moving potential settlers nor for initial land clearing, cultivation and house construction. The administration of i:he new program was assumed by the Instituto Colombiano de la Reforma Agraria (INCORA) and, in the late 1960s, was expanded with financial assistance fcom USAID. 4. Colonization in Caqueta has followed a simple procedure. Access to the area was limited to a poor road running along the foothills of the Andes, a few short penetration roads leading into the jungle, and the network of -ivers which run southwest into the Amazon basin. River transportation has been the principal avenue for new colonists and lands along the rivers were the first to be cleared and settled. Arriving with little more than a 1/ Adapted from the PCR. - 2 - machete, an axe, and perhaps a mule, colonists laid claim to public lands by staking out their property, clearing pieces at the corner boundaries, and gradually clearing larger pieces for cultivation and/or pasture. Because soils are poor, colonists were forced either to continue with slash and burn rotational cultivation producing only for subsistence or develop a larger livestock enterprise. Without financial credit, however, most colonists could not obtain cattle; many colonists spent years in the process of building up even a small herd. Others simply sold their land to wealthier migrants and moved on, returning to towns or seeking to use their capital to develop a farm further into the jungle. The Government assisted colonists by building roads, schools, medical facilities and by providing credit and technical assistance. Efforts to support colonization, however, were hindered by a severe lack of funds, especially when USAID assistance ended. And the population was growing; it was estimated at 170,000 in 1968, rising at 8% per year. Targets and Goals 5. The Bank was approached in 1968 to expand the support being given colonists. On the basis of INCORA's experience, a project was prepared in 1969 and appraised in 1970 to provide about 4,500 settlers with farm develop- ment credit, land titles and technical assistance and to assist indirectly about 8,000 families in total through the provision of 380 km of roads, 90 schools and 6 health centers. The project also was to strengthen INCORA's administrative staff in Caqueta and assist the development of an agricultural and livestock research center in the area. INCORA planned to subcontract specific aspects of the program to other government agencies already operating in these areas. Responsibility for the program within the Bank was divided between the transportation and the agricultural divisions, with the latter assuming principal responsibility. 6. Appraisal of the project was difficult. Relatively little was known about the project area; access to the area was limited; much of the terrain was not fully explored. Overall project concept and design were satisfac- tory. However, some serious errors were made and some particular features proved overly ambitious. The costs of farm, road, and social infrastructure development were also significantly higher than projected. In September 1973, after a careful re-evaluation, the project targets were reduced to 1,600 farms, 200 km roads, 60 schools and 6 health posts; at the same time the closing date was extended by two years. The revised goals were met at completion. Costs and Disbursements 7. The Bank loan financed about 40% of the total project cost (ap- praisal estimate was 38%). Bank loan disbursement for farm development amounted to US$3.8 million instead of US$2.9 million in the appraisal esti- mates, although the number of direct beneficiaries of the lending program was less than half the number originally planned. An appraisal error in budgeting for the purchase of livestock, and higher livestock costs, were responsible. Road costs were also underestimated and were about 45% higher on a unit cost basis than predicted. - 3- Agricultural, Social and Economic Impact 8. The analysis of the project revealed: (i) the average beneficiary had approximately 102 hectares, 50% of which was in pasture, and 19 animals at the time the subloan was received. The average number of animals obtained through the subloan was 16. The median is well below the average in both cases; (ii) the investment per family for farm development was about US$4,900. Investments provided for roads, social infrastructure, and administration are approximately US$5,600 per participating family; (iii) the net incomes of subborrowers increased little during the first six years of development, as expected, because of the slow gestation of the livestock development and subloan amortization; subborrower expenditures on housing improvements and hygienic facilities, nutrition, education and other items remained low; (iv) the value of the subborrowers' net assets increased about 60% to approximately Col$1 million (1977); the number of cattle on participating farms increased during the first five years of the project by 140% and the area devoted to pasture by 40%; (v) 18% of the subborrowers were removed from the development program because of failure to comply with the subloan conditions, 71% continued in the program with satisfactory performance, and 11% cancelled their subloans on their own initiative; (vi) project subloans were purposely limited in size to permit a larger number of farmers to benefit from the project. Subloans went to farmers with viable holdings, but larger and well established farmers were excluded; and (vii) the economic rate of return has been recalculated at about 13% in comparison with the appraisal estimate of 16.5%. 9. The Caqueta Land Colonization Project has demonstrated that squatters in the Amazon forests can be encouraged to properly develop farms, which can provide a reasonable living for themselves and their families. The project has also proved the feasibility of productive land use in the Amazon basin. The project is one of the Bank's first efforts in integrated rural development and should be studied as a source of valuable experience for planning further rural development activities in Colombia or elsewhere under similar conditions. Although the project, as completed, is substantially smaller than originally planned, and although there are a number of development issues which continue to require close supervision, the physical infrastructure completed is pro- viding benefits greater than those expected. INCORA's administration is of high quality, and the credit granted has been distributed equitably and is providing the benefits expected. II. MAIN ISSUES General 10. The Caqueta Land Colonization Project, as completed, has been a success. As a result of the first project, and the follow-up project signed in 1975, the Caqueta region has received a considerable development stimulus consistent with distributional concerns. The findings of the audit concur with the conclusions reached in the PCR. The project, however, experienced substantial early difficulties due to a series of factors including appraisal errors, unexpected administrative and environmental difficulties, and unex- pected cost increases of project investments. In addition, certain ecological problems in or immediately adjacent to the project area, and land distribu- tion concerns require comment. A. Roads 11. At appraisal a dangerous highway in poor condition over the Andes connected Florencia, the capital of Caqueta, with the rest of Colombia. Within Caqueta an unpaved trunk road ran 164 km along the Andean foothills through Florencia northeast to Puerto Rico and southeast to San Jose; six other roads penetrated in southernly directions from the trunk road into the area of colonization, none more than 25 km in length and all of poor standard. The project planned the construction of 380 km of new roads, all with gravel surface, of three classes: 110 km of class B, 30 of class B/C, and 240 of class C. The estimated cost varied from Col$370,000 (US$21,500) per km for the most expensive to Col$190,000 (US$11,000) per km for the least. The more expensive roads were designed to connect the existing road network with river ports not then easily accessible from Florencia and, in doing so, open up new regions. The less expensive roads were designed to provide lower class ser- vice within specific farming regions. 12. By late 1972, at the end of the first season in which large scale construction had been attempted, it became clear that the road program was not materializing as appraised and by mid-1973 it was recognized that drastic alterations would have to be made if work were to be continued. Unit costs of road construction were well above those predicted, physical progress was much slower, and several of the small contractors who had received construc- tion awards were in obvious financial difficulty. As part of the overall project redesign at that time, the road program was reduced to 200 and then to 177 km; 164 were ultimately completed. The principal changes introduced were the elimination of 132 km of access roads, the shortening by 110 km of the penetration roads (these will be completed during the second project, now in progress), and the addition of 39 km of penetration roads not previously planned. The principal problems occurring in the road program were the result of (i) poor contracting procedures, (ii) appraisal errors, (iii) difficult physical working conditions, and (iv) financial and economic changes in Colombia. At appraisal the Bank and INCORA recognized that few qualified - 5 - contractors existed in the Caqueta region, but expected that the opportuni- ties offered by the project would attract contractors from other parts of Colombia. This assumption was probably too optimistic. Between appraisal and the letting of bids urban construction in Colombia boomed and few con- tractors from other regions found it attractive to bid on the road construc- tion projects in Caqueta. Of those contractors who showed interest, several were only minimally qualified, were not familiar with either climatic or soil conditions in the zone, and lacked sufficient equipment. Worse, several of the original contractors, either because they were overly eager or because they were unfamiliar with the region, submitted bids which were unrealisti- cally low. INCORA accepted these bids with Bank approval because they were the lowest, rejecting ia the process the bid of at least one contractor who was already active in the area and who subsequently successfully completed road segments in the first project and again in the second project. The rejected bid turned out to have been much more realistic than those which were accepted. 1/ 13. Insufficient attention was given to the road program at appraisal. The fact that the project was divided between the agricultural and trans- portation divisions, with the latter taking only secondary responsibility, may have been a factor. The Caqueta area is of difficult access, but in- formation from several completed roads was not fully used when estimating construction costs and time requirements. In particular, more attention should have ben given to soil and climatic conditions. Fault seems to lie equally with INCORA and the Bank. INCORA provided the Bank with costs regard- ing roads which had pre,iously been built, but to lower specifications than those in the Bank project. The Bank accepted them without adequate review. 14. Contracting procedures at the beginning of the project were also faulty. INCORA let bids separately for different roads without permitting bidding on the project as a whole, which thereby attracted smaller firms. The Bank and INCORA subsequently discussed the possibility of linking road segments together for bidding, hoping to induce larger and more experienced firms to enter the area, but this was never done. This approach probably should have been adopted at appraisal; once the project was underway, recon- tracting took place on a piecemeal basis making it difficult to link road segments. INCORA felt that it would have been difficult to attract large firms to Caqueta in any event, that it would have been risky to place the entire project in the hands of one firm, and that it was useful to have a number of smaller firms available for construction in the area. In the audit mission's view, the Bank should not have agreed to INCORA's decision. 15. The contractors ran into several problems almost immediately. First, because of heavy rainfall during nine months of the year, most work had to be completed during the dry season, the three months from December through February. The effective work year was much shorter than expected 1/ Individual contractors in Colombia wishing to bid on government projects are required to register, but are not prequalified. Later on, neither INCORA nor the Bank adequately evaluated the qualifications of the winning bidders. - 6 - and it was physically impossible to construct a road system as rapidly as had been planned. Lacking the necessary equipment, several contractors had to delay work and the delay meant that the effective work season was missed, setting the program back an entire year. Second, contractors encountered difficult soil conditions, principally a white clay which was exposed when deep cuts were made in hilly terrain and which proved extremely unstable when wet. Once exposed it was necessary to remove the clay to permit fill and compaction. However, gravel for fill in the Caqueta region is available in only a few areas and, as the road system was extended, it was frequently necessary to transport gravel for longer distances at higher cost. The existence of the white clays could have been determined at appraisal from previous road construction. The problem was alleviated in some areas by making shallower cuts and accepting steeper gradients. Third, most roads originally planned for class C standards were properly upgraded to class B/C. The class C roads were thought at appraisal to be suitable for labor inten- sive construction methods, but labor in Caqueta is scarce. 1/ The annual construction period is also too short to allow time consuming but labor inten- sive construction. Further, most traffic on the roads was expected to consist of heavy trucks for livestock or buses for passenger travel and wider roads were both more suitable and cheaper to maintain. Although as appraised the unit cost of class B/C roads was nearly double that of class C roads, the cost differences in practice were not so great, making the preferred choice between classes clear. The increased traffic in the project area has fully justified the upgrading decision. Fourth, the urban construction boom resulted in a sharp increase in the cost of construction inputs, particularly steel and cement. Fifth, payments to contractors for completed road segments were frequently delayed by INCORA because INCORA was left without funds during a period of acute governmental budgetary difficulties. Because of their weak capital structure, contractors had to borrow to meet their expenses and con- tinue working. The financial costs were high because, again due to the urban construction boom, short term credit markets had become extremely tight. While the above problems resulted in a slower pace of construction and higher costs than predicted, progress since the project's re-evaluation has been steady and close to design plans in both speed and cost. A number of different con- tractors and two consulting firms advising on road design and routing have performed successfully. 16. Several other issues are pertinent. During the 1973 re-evaluation, a decision was taken to eliminate most of the access roads previously planned. Traffic on the roads being built seemed to exceed appraisal predictions, but, given the financial and labor constriction to build the total mileage origi- nally planned, emphasis was placed on penetration roads which were expected to benefit the largest number of individuals. No rigorous cost/benefit study has been made, but the decision appears correct on both economic and social grounds. 1/ The Bank ought to have recognized that labor in an area of colonization is scarce. The same error required changes in the school construction program; see PCR para. 3.07. - 7 - 17. The average cost of the roads constructed, per km, was Col$780,000 as opposed to a predicted Col$252,000, an increase of 210%. The difference is somewhat misleading insofar as the shift in class mix, based on the ap- praisal estimates, should have caused a 23% increase in average road costs and general inflation in Colombia would have caused a 75% cost increase, leaving a 45% increase in real unit costs. There was an enormous variation in the per km costs of the roads actually constructed, even within the same zlass - ranging from Col$252,000 to Col$1,682,000 for B/C roads; the large differences appear to be due to a variety of factors, including contractor efficiency. 1/ 18. Caqueta possesses some of the world's few natural asphalt deposits which can be mined and directly applied as road surfacing. These deposits are found only in the piedmont area and transport is costly. However, the existence of the raw material has allowed some roads to be economically up- graded to a higher level than originally expected, increasing traffic velocity and decreasing vehicle wear and required road maintenance. 1.9. The increase in traffic on project roads beyond the forecasts has increased project benelits, but it is causing roads to deteriorate more rapidly and will require increased maintenance expenditures. The use of heavy trucks is a particularly serious problem. There is no agency in Caqueta institutionally equipped to control the weight of trucks using the roads and bridges constructed by the project. The issue is not discussed in supervision reports and appears to need resolution. 20. The project encountered another problem regarding road maintenance. At the time of loan negotiation, Bank staff sought and received assurance that Caminos Vecinales, a department of the Ministry of Public Works, would main- tain roads after they had been completed. However, Caminos Vecinales had no funds for maintenance and, although the Bank repeatedly pointed out this breach of loan covenant to the Government, urging that funds be made avail- able, such funding of maintenance was not provided during the first project. The situation was alleviated by the fact that the road contractors were required to maintain the segments being constructed until completed and 1/ Contracting procedures originally provided for periodic cost readjust- ments in line with both approved design changes as construction proceeded and with increases in the cost of materials. This procedure placed no incentive on the firm to complete the project within the stipulated period, and a new procedure now provides for cost readjustment only until the contract's stipulated closing date. It does not appear that individual contractors fraudulently enriched themselves; several went bankrupt. The fact that bids were awarded to small contractors, without an adequate capital structure, meant that there was little effective legal recourse against any contractor who, because of inefficiency or justifiable difficulty, simply could not terminate his road segment as agreed. INCORA may have been willing to bear with some contractors overly long, however, before cancelling the original awards and ini- tiating rebidding. - 8 - delivered. Given the delay in road completion, relatively little maintenance was required until 1975, at which time funding was made available to Caminos Vecinales through provisions under the follow-on project. The maintenance of roads is now adequate. 21. The issue nonetheless demonstrates a problem which can easily arise when one central agency, such as INCORA, is expected to coordinate the actions of other government agencies and where the contributions of the latter agen- cies are not directly funded by the project through the coordinating agency. Different government agencies compete for scarce funds and, without specific written accords, general assurances regarding the provision of project compo- nents may turn out to be insufficent to achieve the desired ends. In this case, INCORA was in a strong political position when the project was nego- tiated and the Bank accepted INCORA's assurances that the funds would be forthcoming and the Caminos Vecinales would undertake the work without ade- quately confirming these possibilities. Caminos Vecinales was not a party to the agreement. By the time the project was being implemented, INCORA's political power had declined and the Government was experiencing a difficult fiscal situation. INCORA could not obtain funds from the Ministry of Finance for road maintenance in Caqueta and, without financing, Caminos Vecinales, already short of funds, would do nothing. Had funds been provided in the first loan to assist Caminos Vecinales, as it was done in the second project, the situation would have been improved. The latter approach required that the Bank finance maintenance as well as construction costs, a position which the Bank was reluctant to accept, but the alternative of having roads deter- iorate rapidly, as they do when not maintained in a region like Caqueta, is unacceptable. It is hoped that sufficient local pressure will gradually develop in Caqueta to ensure proper maintenance after Bank financing has terminated. 22. One final issue is important. Although one-half of the project roads were meant to open undeveloped land for further settlement, the pene- tration roads constructed by the project have not kept up with ongoing set- tlement, benefitting chiefly areas which are already settled and largely cleared. The same will be true of most roads constructed under the second project. This is not because roads have been diverted to settled areas, but because the area of colonization is large and growing. New colonization is now occurring in areas several days by horse travel beyond the end of exist- ing roads. Consideration should therefore be given again in future projects to extend roads into areas not yet settled thereby permitting a more care- fully planned colonization of new lands. B. Livestock Credit Program 23. Long-term cattle development loans were expected at appraisal to be made to 4500 colonists over a three-year period. Operated through the Banco Ganadero, the program proposed to make small in-kind loans to farmers, chiefly in the form of breeding animals. In addition to initial management problems, sharp increases in cattle prices made it clear by 1973 that the appraisal tar- get was no longer feasible and it was properly decided to reduce the target to reach 1600 colonists over a five-year period. The reasons for this reduc- tion were (i) the administrative apparatus for on-farm lending developed more - 9 - slowly than expected so zhat fewer than the predicted loans could be processed, (ii) funds provided in the loan were insufficient to purchase the number of animals which had been anticipated in the appraisal report, (iii) the sub- borrowers generally completed the investments far more rapidly than envis- aged at appraisal, and (Lv) an increase in cattle prices further reduced the number of cattle which could be purchased with project funds. 24. INCORA experienced initial difficulties in building up an adequate staff, both for land titling which was an important precondition for lending to colonists in recently settled areas, and for loan promotion and processing. Staff salaries were low and frozen for periods, despite inflation, while working conditions were difficult. Roads had not yet been constructed into most areas and transportation was arduous and time consuming. A shortage of cattle for delivery to subborrowers was an additional problem. And the Banco Ganadero was originally rather conservative in its approach, relying heavily on traditional mortgage concepts for loan security. Loans during the first two years of the project were concentrated in areas close to Florencia and among ranches which had already experienced some development. A study of the subloans made during 1973 indicated that a number had been larger than expected. Because of the sharp reduction in the number of loans which the project was to be able to make, and because the project's cattle development loans were thought chiefly as a means of assisting colonists who could not otherwise obtain financing, Bank and INCORA staff agreed to strictly enforce loan criteria designed to channel farm development loans toward smaller, poorer ranchers initiating their farm development in frontier areas. Improvements in staff and project procedures were gradually brought about and the revised lend- ing targets were met while also directing loans to less developed ranchers. Spontaneous Colonization., Land and Cattle Distribution, and Project Impact 25. The importance of this decision can be understood fully only by examining the dynamics of development in Caqueta. Although the virgin lands of the Caqueta region were seen as offering landless peasants from the densely populated Andean highlands an opportunity to achieve substantial improvements in their economic and social position, recent studies of the Caqueta region suggest that spontaneous settlement has not been as fully successful as had been hoped. I/ The distribution of land ownership in Caqueta is already highly concentrated, replicating the land distribution of the older interior regions of the country. The census data for 1961 and 1971 indicate that in bot.h years the largest 10% of landholdings in Caqueta accounted for approxi- mately 57% of total area. In contrast, the smallest 50% of all landholdings 1/ Pidelta Ltda., Consultores, Plan de Desarrollo del Proyecto de Colonizacion del Caqueta Etapa II, Bogota, December 1973, especially Volumes I and III; R. Roberts, "Migration and Colonization in Colombian Amazonia: Agrarian Reform or Neo-Latifundismo", Ph.D. dissertation, Department of Anthropology, Syracuse University 1975; and M. L. Gomez Rojas, et. al., "Incidencia Socioeconomica del Proyecto de Colonizacion del Caqueta Etapa I", Tesis de Grado, Departamento de Economia, Universidad de Santo Tomas de Aquino, Bogota, Colombia, 1971. - 10 - accounted for only 10% of area. I/ Further, 54% of all landholdings are smaller than 50 hectares and the average holding between 50-100 hectares is only 59 hectares. 2/ INCORA estimates that a minimum of 80 hectares is needed in the zone for the establishment of an economic livestock ranch. Land settlement policy has been inadequate insofar as it has failed to assure either an egalitarian distribution of public lands or ensure that most plots are of economic size. 26. The skewness of landholdings in Caqueta results chiefly from a land titling system which favors those with greater personal resources, both phys- ical and financial, rather than one which simply provides the same amount of land to all, and which attempts to avoid subsequent land fragmentation or concentration through continued sale/purchase. Alternative policies would be difficult, however, because of the stage process through which coloniza- tion has occurred. In the first stage, adventurer-explorers have entered the jungle, claimed large areas and cleared small parts of the same, dedicating themselves to temporary exploitation of forest resources and to subsistence agriculture. Although these individuals have claimed land de facto, they usually do not secure title. In the second stage, colonists interested in permanent settlement have arrived, but usually avoided areas of extremely difficult access. These later colonists were also often of limited resources and thus unable to purchase large amounts of land. Accordingly, they settled where considerable land was already claimed, either purchasing a subdivision of land occupied by another colonist or accepting smaller plots which had not yet been claimed. 3/ Whether purchasing or occupying land, the size of the 1/ The data on land distribution in Caqueta are probably biased toward equality because some landholders have more than one holding and because individuals frequently occupy more land than for which they have legal title. INCORA permits the titling of up to 50 hectares gratis for the husband and wife each (and an additional 50 hectares for any children of majority age). It is common practice (both socially and politically condoned) for an individual to obtain legal title to 50-100 hectares with additional holdings simply being occupied. This practice occurs principally for larger landholders as there is no economic incentive for owners of parcels of less than 50 hectares. INCORA has considered increasing the size of the parcels which can be entitled gratis, but such a policy has negative social effects as well. INCORA has also considered instituting action to preclude individuals from occupying land parcels greater than that to which they are legally entitled. But this would be difficult to enforce from the pure administrative capacity. 2/ As shown in Table A2, this conclusion is not significantly altered if the holdings between 0-10 hectares are excluded (on the assumption that they are urban rather than rural plots). Plots of less than 50 hectares account for 46% of total holdings, but for only 11% of total area. 3/ For comparison purposes, 63% of the project's subborrowers indicate that they obtained their landholdings by purchase rather than the claim of public lands. - 11 - parcel developed is usually associated with the physical capacity of the colonist (his age, strength, etc.), the size of his family (number of other laborers), or his financial capacity (ability to purchase land and to hire other laborers to clear jungle). In an area in which land is relatively inexpensive, a small amount of capital can permit an individual to achieve control over a significant area. In the third stage, wealthier individuals from outside the region, noticing the potential, arrive to purchase land from existing farmers, usually consolidating a number of relatively smaller holdings. The farmers who sell to these entrants may leave the area, move to a nearby town or, if they have sufficient energy and zeal, move farther into the forest to begin again anew. 27. The description given is general; the distinction between the stages is not fixed in chronological time, nor is it always simple to classify individual colonists into one of the three categories. The important issue is that initial possession of greater resources by some colonists permits them to rapidly accumulate substantial amounts of land while other, poorer colonists remain with much less. By increasing the availability of credit for ranchers of smaller size, INCORA and the Bank expected to improve the likelihood that poorer colonists wishing to establish viable farm enterprises would be able to do so, being less pressured to sell their lands. In turn, it was hoped that a large strata of middle sized producers could be preserved, gradually contributing to an improved land and income distribution in the region. 23. The situation described above was not known at appraisal, becoming clear only in 1973 when INCORA commissioned (and contributed to) an evalua- tion of the first project in preparation for the second. At that: time Bank staff became yet more determined to direct assistance to colonists who had not been able to exploit the land they possessed. Agreement was reached with INCORA that subloans would not exceed 15 animals and would not be given to any producer whose total herd would exceed 25 animals after receipt of the loan. The project, as completed, was reasonably successful in this respect. The data in Table A3 indicate that 41% of subborrowers had less than 10 cattle when they received the credit (average 5), 29% had 10-20 (average 15), and 30% had more than 20 animals (average 42). The average number of animals received by subborrowers through their loan was 16. Most o1f the larger subloans, or those received by more developed ranches, were made during the first two years before the decision to adhere strictly to smaller loans was taken. 29. Despite the controls, the statistics on loan size and destination may be slightly misleading. Officials of the Banco Ganadero, the agent during most of the first project, informed the audit mission that they believe it is not economical to initiate cattle production with less than 40 animals. Accordingly, despite limitations on project loans, the Banco Ganadero said their practice has consIstently been to complement Bank-financed INCORA loans - 12 - with additional loans made from their own resources or other credit lines. The full extent of this practice is not known. From one perspective the Banco Ganadero's view is quite correct; given the required infrastructure and labor, it is much more economical for producers to work with additional cattle, especially in the light of prevailing costs of sub-loan funds and meat and milk prices. The only justification for limiting loans to smaller size is the desire to assist a larger number of producers with the scarce resources available, hoping to provide them with additional loans during future programs. The second project has done this in some cases. 30. The lending criteria applied seem more appropriate with respect to the size of landholdings of subborrowers. Although the distribution of land- holdings in Caqueta is skewed, most project borrowers are medium sized land- owners. As shown in Table A3, in a sample of subborrowers who received their loans prior to 1975 (this includes 80% of all borrowers under the first project), there were no borrowers with less than 50 hectares and borrowers with less than 160 hectares account for 83% of loans and 63% of the total area occupied by subborrowers in the sample. Still, 37% of the total funds went to borrowers having more than 160 hectares (average farm size 257 hectares). 31. Although the size of holdings may suggest that subborrowers are substantial farmers, at least at the time loans are received, this would be mistaken. In a subsequent section the available information of subborrowers' gross and net incomes, their gross assets, and changes in these variables over time is presented. Subborrowers were poor and few have passed out of the poor category, although their net asset position has begun to improve. This dis- cussion is postponed, however, until other information specifically relevant to the implementation of the livestock credit program is presented. Cattle Purchase 32. Due to a shortage of breeding animals in Caqueta relative to the growing demand, some of the cattle purchased for delivery to subborrowers had to be brought from other regions in Colombia; of the 28,500 cattle provided to farmers through the credit program, approximately 15,000 were purchased in Caqueta and 13,500 were purchased outside the area. The Banco Ganadero, which was responsible for developing the mechanisms for purchase, transporta- tion and delivery of cattle, originally sought to use commission agents to make the required purchases, but shortly discovered fraud. It subsequently utilized its own employees, over which it felt it had more control, authoriz- ing buyers to purchase no more than 300 animals at a time. The demand for animals was advertized in different areas and sealed bids were requested, the lowest bid of animals of acceptable quality being accepted. A campesino from Caqueta was selected by his peers and sent on buying trips to approve the animals purchased. Once transported to Caqueta the animals were divided into lots, subborrowers drew numbers and, with right of refusal, obtained their animals randomly. - 13 - 33. The purchasing program has been criticized because (i) cattle were allegedly bought in areas in Colombia where the purchasing agencies had exist- ing interests, even when prices there were high, (ii) the project's demand drove prices still higher, (iii) transport to Caqueta was expensive and addi- tional losses occurred through animal deaths and weight loss, and (iv) cattle were frequently pastured for lengthy periods in Florencia before being turned over to borrowers, with the cost of forage being added to the price which borrowers had to pay. Nonetheless, when all additional charges are considered, the cost of heifers purchased outside Caqueta was systematically lower than the cost of those purchased in Caqueta. The price of bulls, in contrast, was slightly higher, but thi-s may reflect a difference in quality. Although the purchasing program might: have been improved, it functioned well as an innova- tional program designed to increase the number of breeding animals available in Caqueta and to distribute these animals to producers in small lots. Short-Term Livestock Credit 34. The short-term livestock credit program, which was instituted in 1973 when it became clear that administrative obstacles would make it im- possible to make the number of long-term loans originally planned, was not very successful. It was thought that livestock loans for fattening animals could be processed more rapidly, thereby speeding the delivery of cattle to colonists, and at the same time strengthen the development of the Caqueta regional cooperative, COOPERAGRO, through which such loans were to be chan- nelled. The type of loans planned had already been made successfully in Caqueta. The Fondo Ganadero, essentially a livestock bank making loans in kind, lends animals to producers and shares the profits of production, on a pre-agreed proportion, when sales are made. It has placed about 40,000 animals with producers throughout the region and its "portfolio" has steadily increased over the last decade. A number of larger ranchers and individual proprietors in Caqueta also provide animals for pasturage on a "share" basis. 35. INCORA's plan was to supplement these sources by permitting CECORA, a national cooperative agency associated with INCORA, to make credit available to COOPERAGRO, which in turn would purchase animals and provide these to its members, splitting the profits with them at the time of sale. The program made 141 of the 300 planned loans, but never functioned well, due largely to political disputes. COOPERAGRO became highly politicized, and its emphasis on financial and business affairs declined. CECORA and COOPERAGRO engaged in disputes over both finances and politics. CECORA refused to provide COOPERAGRO with funds for the short-term credit program, despite the fact that INCORA had made these funds available to CECORA for that purpose, alleging that COOPERAGRO owed it money on other accounts. INCORA, eager to promote a viable cooperative program, struggled to arbitrate for some period before giving up. The short-term credit program is now being operated directly by INCORA with better results. 36. At appraisal it was envisaged that INCORA would also provide seasonal supervised credit, using the Caja Agraria as its financial agent, for other products, principally rice and pigs. The production of both was important to - 14 - colonists during their initial years when clearing forest, although subse- quently such production is phased out as cattle production is begun. Due to a general institutional shortage of funds which required a reprogramming of support to projects throughout Colombia, INCORA made less funds available for seasonal credit in Caqueta than originally planned. Project Loan Allocations and Increases in Cattle Prices 37. As pointed out in the PCR, several serious errors appeared in the appraisal report regarding budgetary allocations for livestock purchases. The appraisal report farm development models call for livestock purchases to be spread over 5 years for 1000 of the 4500 colonists borrowing and over 4 years for another 1,500, but the project was expected to last only 3 years and funds were not included for the purchase of animals after the project's end. Thus, the ostensible target of providing 79,500 cattle to colonists was infeasible because no budgetary provision was made for 22,500 of these animals. Further, using the domestic peso prices for cows and bulls which appear in the appraisal report models, a total of Col$107.25 million (1970 pesos) would have been required to purchase even the 57,000 cattle which were to be purchased during the project's three years. But the project's budget provided only for Col$86.1 million, 20% less than that needed, enough for only 45,800 cattle. 38. Therefore, even had no livestock price increases occurred, the livestock credit targets could not have been met. There were funds for only about 46,000 animals, not 79,000. The actual number of cattle purchased, however, was 28,535; the further reduction in animal purchases was brought about chiefly by an increase in cattle prices. Unit cattle prices measured in constant pesos rose by 25-30% between project appraisal (1970) and proj- ect implementation (1972) and continued rising at a slower rate thereafter (see Table 1). 1/ The price increases which occurred in Caqueta are con- sistent with price increases occurring throughout Colombia during the same period and, in turn, were associated with an upswing in international mar- kets. The appraisal mission also estimated farm prices conservatively when calculating the predicted rate of return, expecting that the then ongoing price downswing would continue. Instead prices rose. Inflation in the U.S. further reduced the purchasing power of the dollar, the currency in which the loan was denominated. Thus, while the average real peso price of breed- ing livestock in Caqueta increased by about 40% over the project, the U.S. dollar price of the same animals increased about 65%. I/ The audit mission agrees with the PCR in nearly all respects, but we find that price increases, principally between 1970 and 1972, rather than after 1972, explain a major proportion of the financing gap encountered for livestock purchases. See PCR, para. 3.05. - 15 - Interest Rates 39. Interest rates for subloans were made at 8% per annum on a linear basis, or 6.3% compounded, plus 1% for life insurance. Inflation at the time of appraisal was about 7-9%, although it accelerated steadily after 1969 and averaged 20% annually during the implementation period. At the time of ap- praisal, another Bank loan (Loan 448-CO) financed cattle development for large commercial ranchers in the Costa and Llanos regions, at 12% interest rates. Because inflation was still moderate, and real interest rates positive, index- ing on subloans in Colombia had not been made a strong issue by the Bank. Moreover, among credit lines available to livestock producers, the Bank- financed subloans carried relatively high interest rates. In discussing the Caqueta project with the Bank, INCORA argued that small colonists ought to receive terms better than those available to larger ranchers. Perhaps partly because the small loans proposed for colonists appeared financially of mar- ginal profitability in any event (see the section on living standards of subborrowers), the Bank agreed. 40. In the second project, due to rising inflation, interest rates were raised to 15%. Rates of the Settlement II follow-on project could not be raised above 15% because in the meantime the Livestock II Project (Loan 651-CO of March 1971) became operational in the Caqueta area in 1972 and charging also 15% interest on its subloans. 1/ Although interest rates were negative in real terms, efforts were made in the Colonization project to ensure that the loans were channeled to smaller, less developed producers and were re- stricted in size, thus reducing the absolute amount of the subsidy received and spreading the benefits over a larger number of relatively poorer pro- ducers. There is no evidence of an effort in the Bank to coordinate lending policy for these two loans in Caqueta. Technical Assistance and Farm Technical Impact 41. INCORA planned to provide subborrowers with a reasonably intensive and sophisticated program of technical assistance. The actual program imple- mented fell short of plans throughout most of the first loan, but has steadily improved and is now reaching adequate levels. The technical assistance pro- gram has several aspects. Technical discussions are held regularly for INCORA staff and short courses on cattle management are given periodically for colo- nists in different regions. On-farm assistance by technicians includes vac- cination against major animal diseases, the construction of cattle dips, corrals, salt trays, and other infrastructure and, to bring about longer run improvements, continual instruction in heifer selection, cow culling and cross breeding. Initial efforts to improve pasture management and to protect natural legumes growing in the area have been made and INCORA has begun the establishment of a few pilot ranches to demonstrate improved techniques to ranchers more directly. The research station on agricultural and livestock problems which was assisted in the loan and which is operated by ICA required 1/ The PPAR on Loan 651-CO was issued on November 9, 1976. - 16 - several years for establishment, but staff are now in place and research pro- grams have been initiated. It has not yet had a major impact on regional production practices, but appears to offer the potential for substantial future benefits. 42. When the project was initiated, INCORA and the Banco Ganadero signed an agreement that each would contribute five professionals to the technical assistance program in addition to the regional loan chiefs and supervisors. During the first years, there were rarely more than seven or eight profes- sionals active; because of difficult working conditions, INCORA staff fre- quently quit and the Banco Ganadero tended to use its technicians on other projects. The technical assistance program was further weakened by the fact that several of the professionals and most of the loan supervisors were trained in agronomy and knew little about cattle ranching. And loan super- visors devoted most of their time to loan control rather than technical assistance. The professional staff is now composed chiefly of veterinarians and a growing population of the loan supervisors are knowledgeable about cattle. INCORA and the Bank considered dividing the staff into one group specifically for loan control and another for technical assistance, but given the difficulty of access to colonists it was decided that one staff could more efficiently carry out both functions. Supervisors are now re- quired to visit each colonist a minimum of three times during the year. The number of visits to colonists averaged about 1300 during the first three years of the project, rising to 3000 in 1974 and to 10,000 in 1975. 43. Good data on farm technical efficiency have not yet been obtained (and are badly needed), but several surveys have indicated that nearly all colonists vaccinate against hoof and mouth disease and a large proportion against other major diseases in the area. Adult animal mortality seems to have declined slightly less than appraisal assumptions, from about 4-5% to 3-4%. Less information is available regarding weaning rates which were anticipated to rise from 50% to 65% during the first seven years of farm development. It appears that weaning rates have risen from about 50% to 60% during five to six years of project development (the average for ranchers with cattle borrowed from the Fondo Ganadero, which also provides technical assistance, was 62% in 1976). Stocking rates were expected at appraisal to remain at about one animal unit per hectare throughout ranch development; although most project farms still have an excess of pasture relative to cattle so that feed availability is not yet a major constraint in the region, carry- ing capacity on ranches which are fully stocked appears now to be about one animal unit per hectare. If ICA is successful in introducing new grass and legume species to the area, carrying capacity will rise. Farm inputs like salt, other minerals, and drugs, which are sold principally through private commerce in frontier regions, are still quite limited in supply and of high cost, making technical improvements more difficult. - 17 - C. Beneficiaries Project Coverage 44. The credit project reached a significant proportion of the target group, but a much smaller number than originally contemplated. Migration into the area continues at a rapid pace and the number of potential borrowers is increasing. In 1971 there were estimated to be 185,000 inhabitants in Caqueta of whom 145,000 were resident in rural areas. With an estimated seven members per household, there were 20,500 rural households, 9,000 of which held plots which were officially registered. Approximately half of these (4500) were thought to be potential subloan beneficiaries. The first loan provided credit to 1600 colonists while the second will provide 2100 loans (some subloans will provide additional assistance to participants in the first project). The total subloans granted would provide good coverage of colonists resident in the area in 1971, but subsequent migration is adding about 500-1000 colonists per year who are potential users of the same type of credit. Living Standards of Subborrowers 45. Living standards of the subborrowers have remained at extremely modest levels even though a number of subborrowers have now begun to accum- ulate considerable net worth. It was fully recognized in the first appraisal report that colonists would not significantly improve their cash flow as a result of receiving credit until around the eighth year of farm development (see the first appraisal report, Annex 2, Table 4). Cash flow is very much restricted until the natural growth of the herd permits sufficient sales to exceed loan repayments. An interesting aspect of the appraisal report, brought forth only within the context of the models themselves, is that the expected sale of cattle would not have produced sufficient income to cover programmed subborrower loan repayments in a world of stable prices. Accord- ingly, the appraisal report models assume that cattle prices will rise at 15% per year due to inflation, although loan repayments remain fixed (there was no indexing). Inflation was thus expected to reduce real interest rates to negative levels, thereby permitting planned amortization of the Loan. Even under these circumstances, however, farm disposable income does not rise until tne seventh year of development. 1/ 46. The appraisal report models appear fairly accurate in their pre- diction of events. Most borrowers have not yet enjoyed a major increase in their living standards. Assuming that most subborrowers spent several years in the jungle prior to receiving their first credit for cattle purchase, and assuming that no major income increase occurs until seven or eight years of farm development, they will have spent ten or twelve years before their living standards rise above subsistence levels given the constraints on their cash flow. 1I This was an additional argument put forward originally in support of the low interest rate charged on subloans. - 18 - 47. A recent study 1/ provides more detailed information on the income position of subborrowers in 1977, indicating a wide distribution. The gross and net incomes for the 138 families sampled are shown in Tables A4 and A5. Several interesting facts emerge: (i) although gross incomes average Col$92,000, net incomes average less than half as much, Col$45,000 (to each of these figures an amount for consumption in kind of farm produce should be added, probably about Col$15,000), (ii) the apparent U.S. dollar equivalent of these incomes, i.e., US$2600 and US$1250, is exaggerated because of the unusual appreciation of the Colombian peso during the last two years, the result of the coffee boom, (iii) a rough interpolation of information avail- able on the distribution of incomes in Colombia suggests that a family earning Col$60,000 (45,000 + 15,000) would be about the mid-point of the distribution of agricultural families in 1976, and in the lower third of all Colombian families, (iv) the average disposable income of colonists is adequate, and may well exceed the levels which would have been achieved by the same indi- viduals had they not migrated, particularly if the implicit wealth gains from the growth in the value of their land and cattle herds are included; nonethe- less, most subborrowers earn substantially less than the average income quoted - as shown in Table A5, 43% of the colonists have annual net incomes below Col$25,000 (10,000 + 15,000) and 70% fall below the average income. These data confirm that most subborrowers have not yet achieved substantial increases in their disposable income levels, although some subborrowers are significant exceptions. 48. The increase in subborrowers' net assets has been substantial, the result primarily of the growth in their cattle herds and of farm improvements, and the implicit subsidy contained in the low interest rate on the credit obtained, rather than of increases in the real prices of land and cattle. The average colonist appears to have had about 115 hectares of land and 45 cattle in 1977. Using a value of Col$6,000 per hectare of land, and Col$8,000 per animal, the gross value of these assets is Col$1 million, or approximately US$28,000 at the current exchange rate. 2/ The average subloan, Col$70,000 (US$3000), has been reduced substantially in real terms by inflation, but this has contributed a maximum of about US$2,000 to the colonist's net assets. Cattle prices remained roughly constant in real terms during project implemen- tation from 1972 through 1975. They increased in 1977, but a sustained in- crease over the long run is not expected. However, given that the number of animals in the herd increased by about 165%, the average colonist enjoyed a substantial increase in total herd value. 1/ Martha Lucia Gomez Rojas, et. al., op. cit. All references are to 1976 pesos. 2/ These figures are in 1977 prices. As seen above, perhaps 70% of sub- borrowers would lie below the average. - 19 - 49. Data on the amount, use and value of land on subborrowers' farms, taken from the 142 colonists surveyed by Rojas, et. al., and given for both 1971 and 1976 in Tables A6 and A7, contain several surprising indications. First, the average farm increased in size by 14% over the period. Second, the area in pasture increased 40%. Third, most of the increase in pasture area is explained by the increase in farm size, not by a reduction in cul- tivated land, uncleared land, or semi-cleared area. Farmers could have been buying uncleared land at the same time they were clearing their own, or simply purchasing already cleared land from neighbors. Fourth, there was no increase in the real unit value of land between 1971 and 1976, in fact, nominal land price increases did not quite keep up with inflation. Using the data on price inflation contained in the PCR, Annex 11, the GDP deflator increased by 133% between 1971 and 1976. Yet the land price data suggest that a hectare of cleared pasture land increased in value over the same period by only 100% (Col$2500 to Col$5000). The data given in these tables are approximate and, accordingly, the conclusion might be changed were better information available. The result is somewhat: surprising insofar as other information had suggested that the provision of improved transport facilities had resulted in an in- crease in the real vaLue of uncleared land so served. These data suggest that the existence of substantial free public land has restricted the in- crease in value of uncleared land and, so long as colonists continue to flock into the area and are interested to clear the jungle, the value of cleared land will not greatly increase (except perhaps within close proxi- mity to urbanized areas like Florencia). 50. In summary, subloans went predominantly to poor farmers with undeveloped landholdings who had the opportunity to become viable cattle producers. The size of subloans was small, lower than the optimum economic size. Nonetheless, colonists who have been able to obtain credLt have bene- fited. Their net incomes are believed to slightly exceed the incomes of colonists who were not able to obtain credit, even after loan repayments are considered, but, more importantly, their asset accumulation will permit rising cash incomes in the near future. Given that land appreciation does not appear to have been great, colonists have not been able to increase their wealth with- out being able to bring land into productive employment. This has made the provision of credit even more important. D. Ecological Issues 51. Erosion, economic use of forests, and preservation of wooded areas were of concern to the Bank and to Government in both the first and second projects. Within the project area, erosion is a minor problem when forests are cleared and land is planted to pastures, even when colonists permit over- grazing. INCORA has worked to instruct colonists on pasture management, including the planting of Kudzu in problem areas, and on-farm erosion seems under control. A more serious problem occurs along the river banks. As - 20 - colonization occurred first by river, and as river lowlands are among the most fertile lands in the region, settlement here is also the most intense. To obtain additional pasture, and to be able to enjoy easy access to the river, colonists removed almost all trees along river banks. Each year erosion has increased, stimulated by a seasonal increase in river flow caused by the denuding of the cordillera, just outside the project area (this is discussed below). Rivers which once provided deep channels through- out the year and which were capable of navigation by paddle-wheel steamers have increased their width several times and, in the process, become much more shallow and filled with shifting sandbars. Navigation of large boats is now impossible in many parts, although smaller boats and canoes continue to provide transportation. The roads being constructed have opened substan- tial new areas and have made transport more rapid and more direct to areas already accessible, but Caqueta has lost important transportation arteries as the rivers have deteriorated - and erosion has also eliminated many hec- tares of the area's most valuable soil. 52. Laws have existed for some time requiring that colonists maintain forests for 50 meters from the river bank, thus providing protection from erosion. These laws simply are not respected, nor enforced, and there appears to be no viable method to achieve enforcement without the use of a police power which does not exist in the zone. In appraising the second project the Bank considered developing a program to encourage tree estab- lishment along river banks, but decided this work could be left to the Government's own initiative. Little has been done to date. There are areas further downstream where erosion is not yet too bad and it may be economical to prevent it before it becomes worse. 53. The Bank was also concerned about appropriate forest use and the general ecological effect of widescale deforestation in this area of the Amazon. Several studies have indicated that at current commercial prices, given the heterogeneity of forest species and the high cost of timber extrac- tion from the zone, exploitation is quite unattractive except for domestic use by settlers or for certain high value species. Although existing laws require recipients of more than 50 hectares of public lands to keep 20% under forest and allow Government to maintain 10% of the area as a protective zone, it has been impossible to enforce farmers' obligation. The Bank and INCORA attempted to set aside a forest reserve of 16,000 hectares during the second project to retain a significant area of forest cover and for study of the indigenous con- ditions. The effort was a failure; although an area of marginal development potential removed from current settlement was selected, political activists decided that there must be something special about the area if an effort was being made to exclude colonists. The activists forced the forest guards out of the area and brought colonists into the reserve. INCORA and the Bank decided to give up the idea of a forest reserve rather than initiate the social conflict which might have occurred had an effort been made to recover the area invaded. No other zone of appropriate size for a forest reserve is available. - 21 - 54. Although the problem of progressive clearance of forest is diffi- cult, the audit mission believes additional analysis and executive force is required if serious long run damage is to be avoided. The first and second projects, by assisting existing colonists, are encouraging further settlement before the issue of forest control is adequately dealt with. 55. Another ecological problem exists in the Andean cordillera. Al- though not located within the perimeter designated for the Caqueta Coloniza- tion Project, the cordillera forms the catchment of most rivers flowing through the project area and accordingly developments there can strongly influence project activities. Many peasants, accustomed to farming on the slopes in the highlands, migrated toward Caqueta in hopes of colonizing land. Discouraged by conditions in the tropical forest, they chose to remain at higher altitudes and established small farms on steeply sloping mountainsides. After deforestation and the planting of crops, or pasture formation, erosion has increased and threatens to devastate large areas. Rainfall now runs off the cordillera more rapidly, causing rivers in the project area to flood and erode during the rainy season and to run dry during the rest of the year. Some claim that the weather itself is changing in the area, with 'Less rainfall occurring as a result of lower soil moisture content. Efforts have been made to reduce erosion on the cordillera slopes, but the problem is extremely sen- sitive socially and politically. The only real solution is to move people out of the zone, prohibiting farming, and to reforest on a broad basis. There is no land, however, on which to place the inhabitants who would be displaced and pressures for land in other parts of Colombia would make new invasions by other peasants almost a certainty. The Government is considering a refores- tation program to pay peasants for planting trees on a portion of their soil and subsequently for tending such trees till maturity. If some radical reduc- tion in erosion in the cordillera is not brought about within the next decade, it appears that damage in the project area may be great. The Bank has recog- nized this problem and discussed it with Government, but the development of a more satisfactory long run solution is important to the Caqueta project and requires greater emphasis. E. ?roject Evaluation and Monitoring 56. The establishment of a permanent project evaluation unit was not envisaged in either the first or second projects. Such a unit has since been discussed by the Bank and INCORA and INCORA plans to establish it soon. Re- gardless, several key evaluations of the project have been undertaken. Prior to appraisal of the second project, INCORA employed an independent consulting firm to evaluate progress under the first and to make recommendations for the second. This study, to which several INCORA staff contributed, is excellent, containing candid recognition of past mistakes as well as thoughtful analysis of how project operations could be improved. Particular attention was paid to the dynamics of regional colonization, the destination of project subloans by farmer size and level of development, the mechanism for cattle purchase and delivery to subborrower, the inadequacy of technical assistance, and the socio- economic conditions of colonists; INCORA also encouraged four students to write - 22 - a joint thesis evaluating the socio-economic impact of the first project. The students collected considerable useful data through sample surveys and their thesis updates and extends the previous consulting study. INCORA provided assistance for two Ph.D dissertations written by U.S. students on Caqueta's development as well, and undertook a small survey of subborrowers to obtain data on farm technical achievements needed for the PCR. 57. Despite these surveys, additional information and evauation on several key aspects of the project are badly needed. Too little is known about highway utilization to make confident assessments of their economic profitability, or of possible design or route changes. Data is needed on the current level of farm technical efficiency. And additional research is needed on the profitability of perennial crops such as rubber and oil palm. These two activities were introduced into Caqueta decades ago but were excluded from project financing because their technological and economic viability was not known. Because of their greater labor intensiveness, and as a useful regional diversification, a re-examination of their potential seems overdue. Additional evaluation of the project's ecological impact, and the design of specific pro- grams to improve the situation, are also important. F. Rates of Return 58. The economic rate of return predicted in the first appraisal report was 16.5%. The PCR estimates that the rate of return would be about 17% even after the substantial revisions in the project's size. The methodology on which these estimates are based could be improved. 59. The rate of return on the project is a weighted average of the returns on its component parts, principally road construction and farm devel- opment. Cattle prices were higher throughout implementation than at appraisal which acted to shrink the number of animals purchased by raising investment costs, but had little impact on the rate of return itself (as sales will be proportionately higher also). The technical assumptions utilized in con- structing the farm models, such as expected changes in weaning and mortality rates, seem realistic, if perhaps slightly optimistic. However, the rate of return estimates quoted assume that family labor utilized for clearing land, sowing pasture, fence building, and subsequent herd and pasture management should be given zero value. In the appraisal report it was argued that a high rate of unemployment in Colombia would justify this assumption. An alternative calculation indicated that if the family labor were given a total value of US$220 per year, the economic rate of return on the entire project would be reduced to 8%. Clearly the economic profitability of the project was highly sensitive to the assumption regarding the value of labor. The second appraisal report assumed that the shadow cost of labor was zero, as did the PCR, without considering the impact on the rate of return of alternative values. While it seems reasonable to use a wage rate somewhat less than what is being paid in the zone, a labor scarce area, to reflect the low level of labor utilization in Colombia under current conditions, and thereby capture the special attractiveness of this project, a zero labor opportunity cost seems extreme. - 23 - 60. The road construction program was significantly smaller than planned and unit construction costs were 45% higher than predicted. These cost in- creases would have reduced the rate of return on this component had it been assumed that the transport savings per mile of constructed road had remained constant. Although there is no adequate information on road use, transporta- tion and maintenance seem heavier than originally expected. The higher utili- zation at least partly offsets the higher cost of construction. Further, the benefits of improved transportation, as estimated in the first appraisal report and the PCR, are conservatively limited to savings on the transport of cattle and grains out of the zone. No savings were estimated for the transport of farm inputs, including cattle, into or within the zone, for the transport of consumer goods, or for personal travel, all of which are signif- icant. 61. When family labor is costed at US$500 per year, about half its market value (1.5 workers per farm), and the other methodological changes are made, the project's. economic rate of return is re-estimated at 13%. 62. This re-estimated rate of return may not fully represent project performance. On the one hand, the price of fat steers in Caqueta has risen in recent years somewhat more than in Medellin, perhaps because of improving market links with the rest of Colombia, or growing local demand. Nonetheless, cattle prices now seem to be unusually high and at unsustainable levels if reference is made to international market conditions. On the other hand, the costs and benefits associated with health and educational investments were explicitly excluded in the rate of return calculations, as is Bank practice, but the administrative costs associated with road construction and project management were included. No benefits were included for admin- istrative services, like the titling of land, which also have been important and which are not fully included in subborrower output increases. G. Bank Performance 63. Appraisal of the project was difficult. Relatively little was known about the area to be developed and communication into the zone of colonization was limited. The Bank had few prior experiences in colonization or rural development programs. Accordingly, while the appraisal mission can be faulted for some serious errors regarding road design, budgeting, costing of activi- ties, and the scheduling of project implementation, it showed imagination and a good entrepreneurial sense in the conception and overall design of the proj- ect. Although predominantly a road construction and livestock credit project, the Bank accepted a perspective on regional problems which permitted support of activities in health, education, nutrition and ecological problems. This made the project one of the Bank's first specific efforts in overall rural development. Its contributions in each of these areas have been important even if much remains to be done. The Bank also supported a regional center for agricultural and livestock research at a time when such support was not - 24 - common in Bank projects; the establishment of this center should provide sig- nificant benefits in the future. The project is also noteworthy for its distributional concerns. An emphasis was placed on assisting colonists with undeveloped lands. Efforts to ensure that credits were directed to poorer farmers were continued throughout the project. 64. Project supervision throughout the project was adequate; reports filed have kept up with developments and the aide memoirs are unusually detailed. When forced to decide in 1973 whether to continue with the project at a level much reduced over that originally planned, or seek to terminate, the Bank chose the former option, calculating that even the reduced project would be economically attractive. The decision seems well taken. The second project corrected some of the faults of the first and is continuing develop- ment along those lines which seemed most promising. ATTACHMENT Page 1 Translation INCORA #09495 Bogota, Col. June 13, 1978 Mr. Shiv S. Kapur Director, OED Re: First Caqueta Project; Loan 739-CO As requested in your letter dated April 27, 1978, we have reviewed the documents prepared by the Bank while post-evaluating the First Caqueta Land Settlement Project. In general, we share the Bank's points of view on the project's implementation and impact, which has been a success, becoming one of INCORA's most effective lines of work. The competence and dedication of INCORA's staff in Caqueta, and the project's good management must be emphasized as important factors for project success. Also, good supervision by the Bank, whose staff, working together with ours, has contributed to producing proper solutions to prob- lems which arose during project implementation. Settlers' behavior must also be emphasized, for they have been in general, quite receptive to technical advice in both credit and farm manage- ment, which makes us optimistic in anticipating a favorable change in the production techniques in the foreseeable future. We are also in agreement with the Bank analysis on start-up prob- lems, which were caused mainly by the difficult local conditions and by the unforeseeable price increases of cattle as well as of construction inputs. Nevertheless, we would like to focus on some points in the two reports, mainly regarding some figures that have been adjusted after finalizing the different project contracts; or other figures mentioned by the Bank, whose origin is not very clear: (i) Total project costs are Col$478.701.000; out of which the Bank financed Col$212.372.000, i.e., 44%. Disbursements for farm development were US$3.6 million. l] (ii) The project target of 69.000 cattle that were to be given to settlers, as presented in the Audit Report, is not clear; the figure of 67.000 cattle appears in the Completion Report, however. [1] Cf. footnote to para. 5.02 in the PCR. ATTACHMENT Page 2 (iii) The economic rate of return has been computed as 17% in the Completion Report, but as 13% in the Audit Report, without indicating how the latter was arrived at. (iv) In reference to a statement in the Completion Report, para. 6.04, it must be made clear that after two or three rice or maize crops, settlers switch to livestock not because of lack of demand for these crops, which does exist, but because soils do not lend themselves to cropping but are more suitable for livestock. We hope this will make some points discussed in the ex-post reports clear; nevertheless, we will readily produce any additional information. I remain, yours truly Juan Jose Rodriquez Acting General Manager COLOMBIA CAQUETA LAND COLONIZATION PROJECT (Loan 739-CO) COMPLETION REPORT Table of Contents Page I. BACKGROUND ........................................... A.1 II. PROJECT FDRMULATION ................................... A.1 III. PROJECT DESCRIPTION .................................. A.3 Initial Program .................................. A.3 Difficulties Experienced with the Initial Program A.3 IV. IMPLEMENTATION ....................................... A.4 Credit Program .................................... A.4 Research and Forest Reserves ............... A.5 Land Titling and Technical Assistance ............. A.5 Road Construction ................................. A.5 Social Infrastructure .A.6...........................A6 V. PROCUREMENT, COST AND DISBURSEMENT ..................... A.6 VI. AGRICULTURAL AND SOCIAL IMPACT .............. ........... A.7 Livestock Development ..................... ...... A.8 Farm Development ................................. A.8 Cultivation of Field Crops .............. ......... A.9 Overall Assessment ................... ........... A.9 VII. RATE OF RETURN ...........................................A.1o0 Economic .......................................... A.10 Financial ....................................... A.12 VIII. INSTITUTIONAL PERFORMANCE .............. A.12 INCORA ........................................... ..A.12 Banco Ganadero ..................................... A.12 CECORA ..... . .................................. A.13 ICA ....................................... A.13 ICCE ............................................. ..A.13 IX. BANK PERFORMANCE ........................ ..A.13 X. CONCLUSIONS ........................ ........... A.14 ANNEXES 1-13 MAP NO. IBRD 2082R2 MAP NO. IBRD 11000  COLOMBIA CAQUETA LAND COLONIZATION PROJECT (Loan 739-CO) PROJECT COMPLETION REPORT I. BACKGROUND 1.01 The Caqueta Land Colonization Project is located in the Intendencia of Caqueta in the eastern foothills of the Andean ridge adjoining the lowlands of the Amazon in southeast Colombia (Map IBRD 11000). Florencia, the main town of the region, was founded during the rubber boom early this century. With the decline of rubber exploitation in the early 1920's, settlers remained in the area and cleared forest land for extensive livestock development. In addition, spontaneous colonization has continued since in many parts of the overpopulated mountain areas of Colombia, peasant farmers have insufficient land to make a reasonable living while much of the country remained unpopulated. The Government estimated in 1971 that about 360,000 families should move to the unpopulated forest areas to make a living as settlers. However, the cost of moving large numbers of people and of making the initial investments required t.o assist them to start with colonization is prohibitive and an earlier directEd settlement project managed by Caja de Credito, Industrial y Minero (Caja Agraria) had not been successful. The National Institute of Agrarian Reform, Instituto Colombiano de la Reforma Agraria (INCORA), created in 1961, evolved a less expensive approach to support spontaneous settlement. Under this plan: (a) only settlers who had already established small faras, or at least had cleared some forest land and prepared pasture using their own resources, would receive technical and financial assistance. Thus, only the most reliable and persistent settlers would receive the support of INCORA's program; and (b) the Government would incur no expense for moving potential settlers from other areas or for initial land clearing, cultivation and house construction. The land in the proposed settlement area is publicly owned and, by Law 135 of 1961, INCORA is responsible for the development and the implementation of regulations for granting land titles. 1.02 Two main supervised credit programs were carried out by INCORA with USAID assistance before the project started: one was for general agriculture in association with Caja Agraria, the other for livestock in association with the National Livestock Bank (Banco Ganadero). Their objective was to provide development loans, coupled with technical assistance to farmers having suffi- cient land and labor resources to constitute viable farm units. II. PROJECT FORMULATION 2.01 A Bank mission, which visited Colombia in 1967 to review INCORA's activities in rural development, also identified the Caqueta Land Colonization Project. In November 1968, the Government submitted an application to the Bank for a loan to finance a settlement project in Caqueta with a total cost of US$20.9 million. ITL March and October 1969, two FAO/Bank CP missions assisted INCORA to complete the preparation of the Caqueta Land Colonization Project. In January/February 1970, the Bank appraised the project which was approved by the Board on May 4, 1971. - A.2 - III. PROJECT DESCRIPTION Initial Project 3.01 According to the appraisal estimates, the project was to benefit directly and indirectly 8,000 families; however, it was later established that there were 12,500 families within the area of influence of the project. It included the construction of about 380 km of roads in the Caqueta area to service some 3,500 partially established settlers and to open up 280,000 ha of undeveloped land for a further 2,800 new settlers. It also was to provide credit for farm development, land clearing, fencing, livestock and other farm inputs for the 3,500 partially established settlers, as well as for about 1,000 of the 2,800 new settlers expected to move into the project area during the development period. In addition, about 90 primary schools and 6 health centers were to be constructed. Project costs were estimated at US$21.6 million. The loan was to finance the foreign exchange costs of US$5.5 million, 25% of total project costs, and US$2.6 million of the local currency cost, thus 38% of total project costs. The Government was to con- tribute 30% and farmers 32% of total project costs through 40% participation in farm investments. Difficulties Experienced with the Initial Project 3.02 By September 1973, which was half-way through the investment period planned for the project, only 20% of the expected number of sub-loans had been made and only 16% of the length of roads and 13% of the number of schools had been completed. The main reasons which led to these shortfalls are discussed in paragraphs 3.03 to 3.07. Paragraph 3.08 presents the main changes in the project targets following the revision of original plans as a result of experience during the initial period of project implementation. 3.03 Credit Program. It took longer than expected by the appraisal mission for Banco Ganadero to set up the procedures and train the staff required to administer the long-term lending program. The sub-loans made in the first two years were larger than expected and made predominantly to established settlers who were already receiving credit. The sub-borrowers (Category A) generally completed the investments financed by the sub-loans in one or two years, whereas the appraisal report envisaged investments spread over three years. Partially established settlers (category B) and new settlers (category C) applying for their first sub-loans also completed their invest- ments far more rapidly than the five years and seven years, respectively, projected at appraisal. Thedraw-down of funds and the total funds required differed substantially from appraisal estimates which, furthermore, appear not to be internally consistent. 3.04 From Annex 2 of the appraisal report, it can be calculated that it was then estimated that the total investment costs necessary to establish 4,500 settlers would be Col$ 342.65 million (US$19 million) equivalent to - A.3 - US$4,220 1 per settler. It was assumed that, of this total, 3,500 settlers would have invested Col$ 98.65 million (US$5.4 million) before the project, leaving a balance of Col$ 244 million (US$13.6 million) to be invested over the following seven years (Annex 1). The project, however, was to enter sub-loan commitments phased over three years, which would indicate that investments were to be made over five years, totalling Col$ 168.55 million (US$9.4 million) leaving a balance of Col$ 75.45 million (US$4.2 million) required for post-project investment. In Annex 9, Table 1 and in the main text, paragraph 4.0L of the Appraisal Report, the total investment in farm development is shown as Col$ 135.4 (US$7.52 million), out of which medium-term loans would provide US$4.17 million and settlers' contribution US$3.35 million; only 80% of the financial requirements for the proposed project period derived from the farm investment models (Annex 2 of Appraisal Report) and proposed numbers and phasing of sub-loans. 3.05 An important factor which affected the early development of the project was the sharp increase in local prices although, in dollar terms, this amounted to a smaller proportional increase because of the devaluation of the Colombian peso. It has been estimated that only 16% of the financial gap can be attributed to price increases for which the 10% contingency item was evidently not able fully to compensate. 3.06 The Road Program. The road program was delayed because of the following factors: (a) difficulties caused by the high rainfall, unstable soils and shortages of construction materials; (b) technical and managerial inadequacies of contractors and their field supervisors; (c) procurement deficiencies due mostly to inadequate standards in bidding and contract involving procedures that, together with the remoteness of the area, did not attract reliable companies; and (d) price increases. To a large extent, these difficulties arose from the lack of experience of both the Bank and INCORA with working conditions in the Amazon region. 3.07 Social Infrastructure. As originally agreed between Instituto Colombiano de Construccions Escolars (ICCE) and INCORA, 90 schools were to be built with free labor provided by the beneficiaries. However, it was optimistic to assume that farmers could spend a part of their time for works in the community since, apparently under local conditions, this cannot be expected for such a major operation from people living and working indivi- dually on dispersed farms. Consequently, the school program was scaled down to 60 schools and labor had to be financed with project funds. Further, ICCE failed in carrying out its responsibilities and INCORA had to undertake the program. I/ Exchange rate at the time of appraisal Col$ 18:US$1.00. - A.4 - The Revised Project 3.08 In September 1973, the project was scaled down as follows: Revised Physical Targets Appraisal Revised Results Credit Program Estimates Targets at Completion (Jan. 1971) (Sept. 1973) (1976) No. of sub-loans for breeding cattle 4,500 1,600 1,716 No. of sub-loans for fattening cattle 300 141 Cattle (no.) 79,500 25,600 28,535 Infrastructure Roads (km) 380 200 177 Schools (no.) 90 60 60 Health centers (no.) 6 6 4 /1 l Instead of six health centers, four health centers and one hospital were constructed. The adjustment to the reality, the growing experience of the INCORA's manage- ment staff, and the selection of better contractors, combined with a better system for tenders and awarding contracts, improved project implementation. IV. IMPLEMENTATION 4.01 The project was declared effective on October 19, 1971 and was closed September 30, 1976, 23 months behind schedule. Despite many initial difficulties the project has been successful in transforming squatters into farmers and converting land of low productivity into fairly productive live- stock farms. 4.02 Credit Program. The original target was to provide 4,500 settlers with credits for an average of 11 head of cattle during the three-year project period. Initially, the sub-loans were considerably larger than had been intended and, following discussions with the Bank in 1973, INCORA agreed to limit the number of cattle to be financed to 15 for any sub-borrower, with the additional proviso that the number of cattle to be purchased would not bring the herd to more than 25 heads. At completion, about 27,000 cows and 1,500 bulls had been distributed to 1,716 families, receiving 1,907 sub-loans - A.5 - for an amount of Col$ 153 million, or about 89% of total investment in farm development, excluding cattle fattening; the rest was invested in farm improvement and housing. The average sub-loan was Col$ 89,033 per family (US$3,142) covering 15.8 cows and the purchase of 0.9 bulls. The r,ub- borrowers' contribution of US$3.35 million could not be obtained for purchas- ing cattle or on-farm improvements as stipulated in the farm models of the appraisal. However, the settler added with his labor for land clearing a considerable value. Since uncleared forest land is abundant in Colombia and has no market value, the price of cleared land is the value of labor input. A sub-loan required a settler's contribution to the project of 5 ha cleared land which had in 1971 a price of about Col$ 30,000 (US$1,660), amounting to about Cot$ 51.5 million (US$2.9 million) in total for 1,716 sub-borrowers. 4.03 Research and Forest Reserves were regarded as integral parts of the colonization scheme. In accordance with a contract between INCORA and the agricultural research institute (Instituto Colombiano Agropecuario - ICA), the research work has been satisfactorily carried out (paragraph 8.05). There was little attention paid to the preservation of forest reserves since a Bank supervision mission, which was particularly concerned with the environmental impact of the project, could find little or no adverse effect within the project area. However, in the following project (Caqueta Rural Settlement Project, Loan 1118-CO) a special component was included for forestry and erosion control. 4.04 Land Titling and Technical Assistance were included as essential elements of the project concept and cost, although the Bank loan financed only vehicles, equipment and building construction under the general heading of administration. When the second project was appraised, it was stated that outstanding problems at that time were the lack of technical assistance to farmers, for which no explicit allowance had been made; these aspects there- fore are receiving special attention under the second project. About 4,700 land titles covering slightly over 207,000 ha have been issued to farmers in the Caqueta area. After slow progress for the period 1973-1974, averaging 649 titles per year, the topographic and land survey unit reached at the end of the Caqueta I Project its full strength to meet the target of 1,500 titles per year under the Caqueta IT project. 4.05 Road Construction. Delays in road construction were principally a result of the difficult physical conditions of the area. The problems of climate, soils, topography and the remote location of the area were, at first, not fully recognized. Thus, although at appraisal, a "few difficulties in finding good road alignments on easy gradients" were anticipated, "unexpected and difficult physical ccndicions" were later reported during supervision to be important causes of delays and cost increases. During the course of the project, INCORA modified its tendering procedures to bring them into line with the standards of the Ministry of Works. This attracted larger and better qualified contractors but, throughout the project period, there was a nationwide difficulty within the construction industry which had serious problems arising from rapid expansion exceeding financial and managerial capacities. The actual cost of the road network (average US$29,499/km) was almost double the - A.6 - appraisal estimates of US$17,222/km. Funds ran short after expenditures of about Col$ 151 million, or US$5.33 million, which financed only 177 km of roads (47% of appraisal estimates), a bridge over the San Pedro River and a part of the cost of a bridge over the Pescado River, instead of a ferry which proved impracticable (Annex 2). The road program was continued successfully under the second phase of the Caqueta project which included retroactive finance for some items of the first phase. 4.06 Social Infrastructure. The health program was slightly modified: out of six planned health centers, four were completed and one hospital was constructed at Cartagena del Chaira instead of the two other health centers (Annex 3). The equipment had been provided by the Ministry of Health; however, it has been difficult to employ enough personnel. The school program was reduced from 90 to 60 schools (Annex 4) during the project revision in 1973. INCORA constructed the schools and the beneficiaries furnished the classrooms. However, there is a lack of teaching material 1/ and there is no correct census of how many children of the region are attending the schools. According to local teachers, each school has about 50 students and the capacity is currently almost fully used. V. PROCUREMENT, COST AND DISBURSEMENT 5.01 The construction of road works was carried out under contracts with local firms. These contracts were advertised according to the Bank's proce- dures for international competitive bidding, but there never was any response from foreign firms due to the low value of the contracts (the largest of which was about US$1 million), the relatively low unit costs offered by local contractors, and the remoteness of the area. INCORA had serious problems in attracting competent contractors and establishing tendering procedures appropriate to conditions in Caqueta. A supervision report mentioned that cutthroat bidding and unrealistic price adjustment formulae led the majority of the contractors to work with insufficient profit margins. Furthermore, credit sources were limited and some contractors claim that their financial charges corresponded to as much as 30% of their operating costs. INCORA revised the procedures for evaluating tenders, giving more weight to the managerial capacity of the applicants, and also adjusted the price formulae so as to attract more experienced and reliable contractors, as in fact has happened with a considerable improvement in the road construction program. In all, 18 contracts for road and bridge construction and four for health build- ings were awarded under the project. 5.02 The total project expenditure as of September 30, 1976 (Annex 5) and project cost and financing are presented in Annex 6; the allocation of the Bank loan is shown in Annex 7 and the schedule of disbursement in Annex 8. 1/ Which will be provided for 500 schools under the Second Caqueta Project. - A.7 - The Bank loan financed about 40% of the total project cost and not 38% as originally approved. Loan disbursements for farm development amounted to US$3.8 million instead of US$2.9 million of the appraisal estimates (Annex 6).1 5.03 The seasonal inputs shown in reports from INCORA totalled Col$ 91.5 million over the project period. These inputs were financed by short-term credit provided by Cala Agraria and INCORA repayable within a year and the maximum amount of seasonal lending of Col$ 28.7 million for one year was dis- bursed in 1972 at the beginning of the project. The accumulated amount of Col$ 91.5 million was included in Annex 6 for project costs and financing. VI. AGRICULTURAL AND SOCIAL IMPACT 6.01 In most agricultural projects, completion of investment for livestock and on-farm developments is far ahead of the full development of output. This is particularly true in settlement projects like Caqueta. Many years must elapse until farms reach their final structure, full herd development and stable size. Thus, production data shown in this report should be considered as giving only an interim picture. At the request of the Bank, INCORA carried out a survey in October 1976 of 38 out of about 600 farms with more than three years in the program. Although the sample of the number of farms is small and not completely representative, it helps to make a tentative judgment and shows the trend. The 38 farms were divided into five categories, according to the number of cattle they purchased with sub-loans under Loan 739-CO. 1/ The Government has indicated that, after finalizing all project expendi- tures and paying all outstanding amounts, total project costs are C$P478.701.000, almost identical to the C$P479.082.000 mentioned in Annex 5. It has also indicated that the Bank loan financed about 44% of the total project cost. The difference with the figure in the text (40%) stems from using different average rates of exchange for disburse- ments (C$P26.4/US$. in the Government figures; C$P23.7/US$l in Annexes 5, 6 and 7). For the same reason, loan disbursements for farm develop- ment are reported by Government as US$3.6 million. - A.8 - Farm Category No. of Cattle No. of Farms I 10 8 II 11-15 9 III 16-20 7 IV 21-25 9 V 26-30 5 Prior to Receiving Credit At Completion (1971) (October 1976) Difference number number number % Total farm area (ha) Aggregate 3,179 3,676 +497 +15.6 Average farm size 84 97 + 13 - Total area under pasture (ha) Aggregate 1,785 2,693 +908 +50.9 Average 47 71 + 24 Total cattle (no. of head) Aggregate 740 1,894 +1,054 +142.4 Average 19 50 + 31 - Livestock Development 6.02 The average initial size of farms was 84 ha, with 19 head of cattle on 47 ha of pasture. These were partially developed farms and not new settlers. This is in accordance with the estimates of the appraisal that about 70% of the loan should first benefit established farmers having a low income. The size of the pasture area was generally twice as big as necessary for the number of cattle. This confirms that these farmers lacked capital but had a good potential for further development. The first Caqueta project was concentrated particularly on these farmers in order that they might attain their agricultural potential (Annex 9). Farm Development 6.03 The increase of farm land was not only achieved by clearing more forest but also by purchasing farm land cleared by pioneering settlers who moved on as the frontier of development advanced. This process of enlarging farms by purchase was accelerated by the soaring cattle prices. Although this development is not yet critical for the social structure of the area, INCORA is watching this process carefully and may have to intervene to avoid serious dis- tortions in the equity of land ownership in the area. Two other significant - A.9 - developments have been noted: some few farmers have employees working on the farm while they live in the nearest town (Florencia) to run another business, and, in some instances, small farmers have sold their cleared land in order to obtain cash. Then, having spent a large portion of this cash, they have moved on again as squatters in a frontier area. Cultivation of Field Crops 6.04 Settlers start with forest clearing and the cultivation of crops for subsistence and sale in the first year. They use the virgin soil for about three years until they have sufficient land cleared and can afford to purchase pasture seed or planting material. This primitive form of agricul- ture provides the basis for developing the first 5 ha of pasture which is a condition for a sub-loan and the purchase of some cows. As the farm activities change to livestock production, and when the farmer receives his first sub-loan, the cultivation of field crops is reduced to subsistence level because the region's lands do not lend themselves to cropping, and there is only limited local market for crop products. Overall Assessment 6.05 Most sub-loans were made to established farmers with an average herd of 19 heads of cattle and, only to a minor extent, to settlers beginning their farm development. It appears that this decision was correct since (a) it takes several years before a settler in the frontier area is linked to the infra- structure system, which is a precondition for including him in a lending and extension service; and (b) the established farmer still has a low-level income and productivity and lacks the capital essential for further sound farm devel- opment. Although the target group of the project did not include the poorest in that area, practical experience has shown that, after providing the more accessible and established settlers with credit, the squatters starting with colonization at the frontier have derived some indirect benefits from INCORA's lending program. This is because as the roads penetrate into the frontier zones and the good experiences of the more established settlers are observed the pioneers are encouraged to seek assistance from INCORA. 6.06 During the project period the value of livestock tripled while the area of pasture was doubled. The impact, however, on lifestyle and standard of living has been less than expected. The expenditure for better housing and hygienic facilities on the farm and for education has remained low, but this pattern will probably be modified through more intensive education efforts. On the other hand, the farmers should accumulate capital, principally live- stock, which after some years would lead to a sounder enterprise rather than to spend it for an unduly high consumption to demonstrate that a high standard of living is achieved under the project. 6.07 The mission which prepared the completion report also reviewed the performance of two groups of sub-borrowers: (a) 251 farmers, 63 of whom received sub-loans in 1972, the first year of the program in the credit zone - A.10 - of Doncello; and (b) 181 farmers, 84 of whom received sub-loans in 1973, the first operative year in the credit zone of Valparaiso. The first group started repayment in 1976 and the second started repayment in 1977. Observations were as follows: (a) about 18% of beneficiaries dropped out of the project due to failure to comply with conditions of the subloans and other various reasons, 71% remain in the program with satisfactory performance, and 11% cancelled the loan on their own initiative; (b) those remaining in the program repaid 116% (including advance payments) in 1976, which shows that their position is fairly sound; and (c) reports from INCORA supervisors, confirmed during the mission by direct interviews with farmers, indicated that these figures are representative of the general pattern throughout the project area. 6.08 Under the project, the average investment per family for farm development was about US$4,900 (1,716 beneficiaries). The total investment excluding seasonal expenses but including transport and social infrastructure (12,500 beneficiaries) was about US$5,600 (Annex 10). VII. RATE OF RETURN Economic Rate of Return 7.01 In calculating the project rate of return to the economy, actual investment costs were adjusted to the Colombian peso of 1972, using the GDP deflator whose annual values, together with the price indices and average ex- change rates, are shown in Annex 11. Farmgate prices used in the calculations are given in Annex 12. The farm investment models prepared for the second phase of the project (Loan 1118-CO, Appraisal Report 50la-CO) were used, with minor adjustments, to estimate the economic benefits to be expected from the first project, since these models are representative of the developments taking place on typical farms. On these bases, if costs and benefits are discounted over a period of 23 years, 1/ the economic rate of return of the project is calculated to be about 17% (Annex 13). To provide a basis for comparing economic rates of return obtained at completion with the previous estimates, the following assumptions should be noted: 1/ Sub-loans have been made throughout the period 1972-75; thus, considering a period of 20 years per farm, the project economic life would be 23 years. - A.11 - Present Completion 1973 Revision During Original Report Caqueta II Appraisal Project Appraisal Investments Public sector Base of comparison Slightly below base Well below base (fewer sub-loans, (costs of roads more km of roads) and livestock underestimated) Private sector Disregarded Disregarded Computed Benefits Farms during Base of comparison Slightly below base Higher than base development (fewer farms) (more farms) period Roads Computed Computed Disregarded Final capital Computed Computed Disregarded value Economic Rate of Return 17% 15% 16.5% 7.02 Farmers participating in the project have reached or are likely to reach a financial position which is acceptably sound and notably higher than settlers in similar conditions who do not participate in the project. On the other hand, except for a few, most participating settlers have not improved their standard of living, which is probably due to educational constraints. A few, however, have improved their houses, spent more money for food, and clothing, and even kept their children in school through to high school level in Florencia. Two factors have contributed to consolidate the set:tlers' position: the sharp increase of cattle prices and the favorable t:erms and low interest rate, which are: (a) terms: 10 years, including a three-year grace period; (b) amortization: seven annual payments at the end of years 4 to 10, these payments being as percentages of principal 5, 10, 10, 15, 20, 20, 20.; and (c) interest rate: 8% p.a. to be computed on the amount of annual rate of 6.3% which is clearly a subsidized rate in relation to the price index (Annex 10). - A.12 - At completion, farmers who received a sub-loan in 1972 had an average annual income of about Col$ 45,000 or about US$1,280 per family. Financial Rate of Return 7.03 When the cash flow of an average farm is discounted over a 10-year period, the loan maturity period, the financial rate of return in about 24%. The return to a settler's equity, estimated as the market value of a 100- ha farm, with some 20 ha of cleared land (about Col$ 40,000 to Col$ 50,000), would be about 40%. VIII. INSTITUTIONAL PERFORMANCE 8.01 INCORA. In 1961, the Colombian Government established the Instituto Colombiano de la Reforma Agraria (INCORA) to be the public entity responsible for modifying the inequitable pattern of land ownership. INCORA has respon- sibility for the administration of 11 colonization projects, not all of which it initiated itself. For the major colonization projects, approximately 53.5% of development expenditure has been directed to credit, 43% to roads, 2.5% to school construction and 1% to health facilities, and this is similar to the allocation of funds in the project. Historically, colonization projects have accounted for approximately 20% of INCORA's direct project expenditure. 8.02 At the start of the project, the INCORA project unit experienced many difficulties; an important underlying problem was the lack of a definition of the duties of the deputy project director. However, during project imple- mentation and after the staff was brought to full strength, INCORA's perfor- mance for this project improved considerably and it is currently one of the most effective INCORA projects. The field staff is competent and dedicated, led by an excellent project manager. Headquarters staff performance in connection with the project was also satisfactory and the quarterly reporting was usually punctual and gave the necessary information. The Project Unit also prepared a completion report. INCORA, however, is now faced with a serious cutback of its activities in all fields except land distribution and land titling. 8.03 Banco Ganadero. In general, the performance of the Banco Ganadero, the banking agent of INCORA for the First Caqueta project, was satisfactory. However, some constraints should be mentioned. On some occasions, Banco Ganadero purchased more cattle than the project could absorb. The maintenance of these cattle for up to a year increased the price considerably for the sub-borrower who had to purchase them from Banco Ganadero, and, second, the employment of the necessary field staff for supervision was often delayed by administrative restrictions which impeded the implementation of the project. - A.13 - 8.04 CECORA. Central de Cooperativas de Reforma Agraria (CECORA) and INCORA signed an agreement for provision of about 300 sub-loans for cattle fattening in cooperation with the Cooperativa Agropecuaria (COPERAGO) de Caqueta. After issuing 141 sub-loans totalling about Col$ 4.3 million, the program was cancelled at the end of 1974 due largely to administrative difficulties between CECORA and COPERAGO. Neither organization was prepared to handle these credits properly and it seems that there was not sufficient preparation before starting the program. 8.05 ICA. The Instituto Colombiano Agropecuario (ICA) is working at the experimental farm of Macagual on several topics, those more directly related to the project being: (a) pasture improvement; (b) cattle genetic improve- ments; and (c) herd management. ICA, with a realistic approach, is carrying out straightforward experiments such as introducing leguminosae/gramineae association for pasture improvement, producing crossbred cattle, and using rotational grazing. Results obtained so far are encouraging; the carrying capacity obtained at Macagual is 1.4 head/ha in comparison with an estimated average of 0.8 head/ha for the entire project area. Under the follow-up project, special efforts are being made to transfer these results to farmers through a more effective extension service. 8.06 ICCE. ICCE did not comply with the requirements of the contract concluded with INCORA, as explained in paragraph 4.04. After this experience, the Bank should be reluctant to consider ICCE for carrying out components in other projects until a major improvement in performance is assured. Unfor- tunately, ICCE is again involved in the implementation of Caqueta II (Loan 1118-CO), with apparently the same poor results. ICCE is also scheduled to provide school furniture and teaching equipment under the Integrated Rural Development Project (Loan 1352-CO). IX. BANK PERFORMANCE 9.01 The Bank underestimated the technical and managerial difficulties of implementing a project in a remote area at the edge of the Amazon basin. Fortunately, after revision in September 1973, the project had new attain- able targets which have been almost completely achieved. 9.02 The main analytical problem arose from the design of [arm models in which the investment period exceeded the project period of three years, without indicating the source of funds to complete the farm development. This was corrected during the revision of the project in September 1973 by reducing the number of beneficiaries and setting attainable investment targets. 9.03 In the road program, delays caused by soil and climate conditions might have been reduced by more complete studies before implementation, but this would have further delayed the initiation of the project as a whole. The problem of attracting reliable contractors for construction work was - A.14 - underestimated, but was eventually overcome with better tendering and con- tracting procedures. Finally, the contingencies of 10% for equipment, con- struction and administration were apparently too low for this type of innovative project. X. CONCLUSIONS 10.01 The Caqueta Land Colonization Project is demonstrating, probably for the first time in South America, that a squatter can be assisted to settle permanently and establish a farm providing a reasonable living for himself and his family. The project has already shown the feasibility of productive land use in the Amazon basin. 10.02 The project concept was developed by INCORA after a long period of practical experience of trial and error. Apparently, there are three main reasons for the general success of the project: first, the settlers selected for the credit program had already cleared enough forest land to cultivate sufficient field crops for their subsistence and 5 ha for pasture; thus only the most reliable and persistent settlers had access to the credit program; second, INCORA prepared the land titles, farm investment plans, a credit program for livestock development and on-farm improvement, and eventually provided technical and financial supervision by specialized field personnel; and, third, INCORA developed the social infrastructure and road system for the project area. 10.03 The following point should be noted as being of more general relevance: (a) whether or not it is necessary to have consistency between the investment periods of illustrative farm models and the period of investment under the project (para 3.03); (b) difficulties in road construction in remote areas of coloni- zation (paras 3.06 and 4.05); and (c) the sound basic concept (para 1.01), implemented by a competent field staff and regular Bank supervision and support, finally led to the successful development of the project. 10.04 This interim analysis of the project can only be concluded when settlers have repaid their sub-loans and the farms have a stabilized input and output structure. The Caqueta I Land Colonization Project has been continued with a second phase and the experience collected under the first project had a major influence on the second project. COLOMBTA CAQUETA LAND COLONIZATION PROJECT (Loan 739-CO) Farm Development Cost (Col$ million) 1/ Project Period Fa]m Development Period - Envestment Period (year) 3 3 3 3 5 7 Farm Model A B C A B C Number of Models 2000 1500 1000 2000 1500 1000 3ub-loan 20.0 60.0 17.0 20.0 60.0 50.0 Settler's Contribution 35.6 23.0 13.0 35.6 40.2 38.2 Sub-total 55.6 83.0 30.0 55.6 100.2 88.2 2/ Total 168.6 - 244.0 1/ Derived from Appraisal Report; Annex 2, Tables 2 and 4. A - Partially established settlers, currently receiving credit B - Partially established settlers, currently not receiving credit C - New settlers 2/ Total investment for farm development was only Col$ 135.4 million in the appraisal report. COLOMBIA ANNEX 2 CAQUETA LAND COLONIZATION PROJECT ( LOAN 739-CO Investment for Road Construction 1971 1972 1973 1974 1975 Total CONTRACT (Col$'000)------------------------------ A. Studies 089/70 Valparaiso-La Solita 580,170 1/ - - - - 580,170 090/70 Maguare-Rionegro-C2 448.244 1/ - 26,586 - - 474,830 092/70 Albania-Curillo 745,874 2/ - - - - 745,874 105/70 Rionegro-C-2 y Libano-Peneya 216,406 1/ - - - - 216,406 228/70 Estudio de Suelos (Libano-Peneya) 22.892 3/ - - - - 52,892 229/70 C-10 Rio Bodoquero y C-11-Bodoquero 302,105 - - - - 302,105 231/70 Libano-Peneya 352,205 - - - - 352,205 232/70 La Esmeralda-Puerto Manrique 143,550 - - - - 143,550 256/70 Estudio de Suelos (Albania-Curillo) Valparaiso-La Solita 160,544 - - - - 160,544 288/70 B-1 Rio Guayas-Rio Caguan 401,144 - - - - 401,144 074/71 8-2 Rio Guayas 119,214 - - - - 115,214 134/71 Riecito-C-2 489,225 430,537 - - - 91S,762 163/71 C-6-C-8 58,500 114,764 - - - 172,264 166/71 C-5-Rio Peneya 58,500 - 125,950 - - 184,450 085/72 C-8 San Antonio - 216,781 24,641 - - 241,622 009/73 Air photographs - - 304,500 - 136,246 440,746 074/73 Soil Studies - - 221,061 76,830 - 297,891 076/73 Photo interpretations - - 640,000 960,000 0 1.600,000 Subtotal 4,128,573 762,282 1,342,738 1,036,830 136,246 7,406,669 B. Construction 144/71 Libano-Peneya 185,000 1,685,182 602,638 464,903 - 2,937,723 145/71 Albania-Curillo 217,500 1,457,005 - 5,112 - 1,679,617 149/71 Maguare-Rionegro 1,012,500 2.602,033 2,126,660 495,011 - 6,236,204 250/71 La Esmeralda-Puerto Manrique - 2,342,446 2,157,576 1,003,463 - 5,503,485 253/71 C-11-Rio Bodoquero - 877,604 303,988 145,787 - 1,327,379 254/71 C-10-Rio Bodoquero - 808,046 601,509 31,137 - 1,440,692 099/72 Valparaiso-La Solita - 1,900,000 1,004,905 92,634 - 2,997,539 004/73 Cajaiarca-Bodoquero - - 1,927,0644 210,198 - 2,137,242 096/73 Albania-Curillo - - 2,239,740 6,009,038 3,614,878 11,863,656 100/73 Transportable bridge - - - 623,600 - 623,600 157/73 Libano-Peneya - - 4,559,250 12,859,308 8,868,210 26,286,768 168/73 C-5-Rio Peneya - - - 5,247,895 3,503,054 8,750,949 173/73 C-11 Rio Bodoquero - - - 6,050,236 3,021,208 9,071,044 091/74 El Aguila-Bl-Rio Caguan - - - 7,628,670 4,987,251 12,615,921 100/74 Doncello-Maguare-Rionegro - - - 3,818,985 4,984,004 8,802,989 106/74 C-10 Rio Bodoquero - - - 2,505,653 2,695,356 5,201,009 112/74 Valparaiso-La Solita - - - 6,343,292 339,117 12,682,409 136/74 C6-C8 - - 1,712,000 3,840,869 5,552,869 160/74 Bridge Rio Pescado - - - 500,000 811,887 1,311,887 Subtotal 1,415,000 11,672,316 15,523,310 55,746,922 42,665,834 127,022,982 C. Supervision 195/71 300.,000 1,947,332 - - - 2,247,332 122/72 - 500,000 1,994,341 - - 2,494,341 - - 3,400,792 - 3,400,792 115/74 - - 2,513,085 2,885,090 5,398,175 Subtotal 300,000 2,447,332 1,994,341 5,913,877 2,885,090 13,540,640 Grand Total 5,843,573 14,881,930 18,860,389 62,697,629 45,687,170 147,970,291 1/ Expenditure in 1970. 2/ US$496,248 paid in 1970. 3/ US$19,740 paid in 1970. May 3, 1977 COLOMBIA CAOUETA LAND COLONIZATION PROJECT (Loan 739-CO) Investment for Health Facilities (Col$'000) Contract Item 1973 1974 1975 1976 Total Health Centers 001/73 San Jose del Fraquaha - Health Center 245,083 20,000 - - 265,083 002/73 Cartagena del Chaira - Hospital 1,016,751 655,163 - - 1,671,914 154/74 Santa Rosa del Caquan - Health Center - 110,573 288.524 - 399,097 155/74 Yurayaco - Health Center - 161,123 179,593 - 340,716 La Union - Health Center - - - 360,343 360,343 Total 1,261,834 946,859 468,117 360,343 3,037,153 COLOMBIA CAOUETA LAND COLONIZATION PROJECT (Loan 739-CO) (Col $) Investment for Schools Name of Schools Municipality 1972 1973 1974 1975 1976 Total 1. La Libertad Curillo 30,005 32,942 62,947 2. Berlin Albania 60,060 35,665 159 95,884 3. Las Iglesias San Jose 207,031 207,031 4. Azabache Belen 285,719 285,719 5. Bagazal Belen 46,633 28,082 74,715 6. Chapinero Belen 199,644 199,644 7. El Salado Belen 194,296 194,296 8. Sarabando Medio Belen 106,110 4,601 110,711 9. Bocana Aguacaliente Morelia 252,906 252,906 10. Carnicerias Morelia 251,493 251,493 11. Kilometro 13 Morelia 82,030 67,685 3,232 152,947 12. Palmarito Morelia 284,435 284,435 13. Pueblitos Bajos Morelia 234,882 234,882 14. El Paraiso Valparaiso 269,810 269,810 15. Florida Nueva Valparaiso 120,562 19,237 139,799 16. San Pedro Bocana Valparaiso 256,394 256,394 17. Trocha Seis Valparaiso 19,008 267,983 286,991 18. Caldas Florencia 176,870 176,870 19. La Holanda Florencia 235,420 235,420 20. La Miranda Florencia 257,899 257,899 21. La Paila Florencia 186,127 186,127 22. Maracaibo Florencia 303,879 303,879 23. Norcacia Florencia 137,067 333,268 24. Santana La Culebra Florencia 249,301 249,301 25. Turbia Abajo Florencia 228,207 228,207 26. El Triunfo Montafiita 126,614 15,475 142,089 27. La Tigrera Montafiita 289,795 289,795 28. Palma Azul Montaiita 271,846 271,846 29. Corea Paujil 162,523 162,523 > 30. La Cristalina Paujil ____233,174 233,174 01 D > Sub-total carried forward 142,_090 589,582 1,667,444 3,548,464 48,2 6,431,002 41 COLOMBIA CAQUETA LAND COLONIZATION PROJECT (Loan 739-CO) Investment for Schools Name of Schools Municipality 1972 1973 1974 1975 1976 1977 Sub-total brought forward 142,090 589,582 1,667,444 3,548,464 483,422 6,431,002 31. La Estrella Paujil 240,562 240,562 32. Los Alpes Paujil 66,150 40,469 106,619 33. San Juan Paujil 255.125 255,125 34. santa Teresa Paujil 240,673 240,673 35. Achapo Doncello 44,609 69,300 14,510 128,419 36. El Cafeto Doncello 11,560 63,043 74,603 37. El Carmen Doncello 29,906 29,906 38. El Cerindo Doncello 249,778 249,778 39. La Ceiba Doncello 276,908 276,908 40. La Trinidad Doncello 308,426 308,426 41. Los Alpes Doncello 236,151 236,151 42. Palma Abajo Doncello 183,021 183,021 43. Tigra Cartuja Doncello 244,212 244,212 44. Trocha A. San Pablo Doncello 254,255 254,255 45. Trocha D. La Libertad Doncello 202.505 202,505 46. Trocha E. Maguare Doncello 117,419 52,196 169,615 47. Trocha E. Nemal Doncello 255,639 255,639 48. Trocha F. Maguaré Doncello 18,587 39,776 53,224 111,587 49. El Aguila Puerto Rico 254,119 254,119 50. El Aguililla Puerto Rico 292,292 292,292 51. El Recreo Puerto Rico 278,940 278,940 52. La Esmeralda Puerto Rico 26,810 85,568 24,900 137,278 53. Lusitania Puerto Rico 42,756 56,654 99,410 54. Caiman Alto San Vicente 206,215 206,215 55. Los Espejos San Vicente 32,542 307, 938 340,480 56. Luz Perdida San Vicente 42,762 139,574 182,336 57. Santa Rosa San Vicente 157,186 189,403 346,589 58. Lusitania II Cartagena 83,955 258,585 342,540 59. El Carmen Solano 112,837 6,524 54,000 173,361 60. La Esperanza Solano 118,654 103,186 221,840 Q z TOTAL 469,981 996,588 2,021,475 7,953,440 1,432,922 12,874,406 - COLOMBIA CAQUETA LAND COLONIZATION PROJECT (Loan 739-CO) Project Cash Expenditures ---------------- (Col$'000) ----------------------- -----------------(US$'000) ----------------------- 1972 1973 1974 1975 1976 Total 1972 1973 1974 1975 1976 Total Lending program for farm development Livestock 14,229 44,594 36,910 18,064 - 113,797 622 1,792 1,287 546 - 4,247 Other 3,142 11,010 11,510 6,544 - 32,206 137 442 401 198 - 1,178 Sub-Total 17,371 55,604 48,420 24,608 - 146,003 759 2,234 1,688 744 - 5,425 Cattle fattening program 1,000 1,000 2,000 - - 4,000 44 40 70 - - 154 Road development Design 4,891 1,343 1,037 136 - 7,407 213 54 36 4 - 307 Construction 13,087 15,523 55,747 42,666 - 127,023 572 624 1,943 1,289 - 4,428 Supervision 2,747 1,994 5,914 2,885 - 13,540 120 80 206 87 - 493 Sub-Total 20,725 18,860 62,698 45,687 - 147,970 905 758 2,185 1,380 - 5,228 Health Centers - 1,262 1,531 779 530 4,102 - 51 53 24 15 143 Schools 470 997 2,021 7,953 1,433 12,847 21 40 70 240 41 412 Administration Current expen- ditures 17,465 10,173 15,296 17,395 5,502 65,831 763 409 533 526 156 2,387 Vehicles equip- ment - 869 61 1,884 295 3,109 - 35 2 57 8 102 Buildings 404 109 1,433 786 963 3,695 18 4 50 24 27 123 Sub-Total 17,869 11,151 16,790 20,065 6,760 72,635 781 448 585 607 191 2,612 Seasonal input 28,703 16,890 15,493 25,602 4,810 91,498 1,254 679 540 774 137 3,384 Total 86,138 105,764 148,953 124,694 13,533 479,082 3,764 4,250 5,191 3,769 384 17,358 ANNEX 6 COLOMBIA CAQUETA LAND COLONIZATION PROJECT Project Cost and Financing (US$ million) Sub- Foreign Exchange borrowers Government Bank Total US$ % Road Development Appraisal - 1.97 4.59 6.56 3.28 50 Actual - 1.50 3.73 5.23 2.62 50 Farm Development Appraisal 3.355/ 1.25 2.92 7.52 0.39 5 Actual 2.9 1.81 3.77 8.48 0.42 5 Administration Appraisal - 1.49 0.13 1.62 0.28 18 Actual - 2.46 0.14 2.60 0.08 3 Health & Education Appraisal - 0.20 0.46 0.66 0.26 40 Actual - 0.15 0.41 0.56 0.22 40 Seasonal Inputs Appraisal 3.45 1.17 3/ - 5.22 1.30 25 Actual 2.78 0.60 - 3.38 0.85 25 Total Appraisal 6.80 6.68 8.10 21.58 5.51 25 Actual 5.69 6.52 8.05 20.26 4.19 21 1/ US$4.17 million to be lent through Banco Ganadero. 2/ US$1.77 million to be lent through Caja Agraria. 3/ Short term loans by INCORA. 4/ Short term loans by Caja Agraria. 5/ Settler's contribution is 5 ha cleared land with a market price oE Col$ 6,000/ha since uncleared forest land has no market price. June 30, 1977 ANNEX 7 COLOMBIA CAQUETA LAND COLONIZATION PROJECT (Loan 739-CO) Allocation of Bank Loan US$'000 Appraisal Disbursement Categories Estimate Revision Revision at Completion Jan.1970 Feb.12,1973 Aug.12,1974 Nov.4,1976 1. Long-term agricultural loans 2,630 2,130 3,470 3,589 II. Cattle Fattening Program - 500 250 185 III. Designs and construction of roads 4,130 4,130 3,800 3,729 IV. Vehicles, equipment and building for administration 120 120 120 144 V. Constructionof schools and health centers 420 420 460 406 VI. Unallocated 800 800 - - Total 8,100 8,100 8,100 8,053 May 9, 1977 ANNEX 8 COLOMBIA CAQUETA LAND COLONIZATION PROJECT (Loan 739-CO) Schedule of Disbursements (US$ million) Bank ' Actual Disbursements Fiscal Appraisal ' Actual Total ' As Percentage of Years & Estimate Disbursements Appraisal Estimate Semester 2 % 1.970/71 ' 2nd 0.2 1971/72 1st 1.67 2nd 3.L7 0.40 12.6 1972/73 1st 4.86 0.50 10.3 2nd 6.26 1.60 25.6 1973/74 1st 7.26 3.20 44.1 2nd 8.10 3.97 49.0 1974/75 1st 6.50 80.3 2nd 7.50 92.6 1975/76. 1st ' 7.90 97.5 2nd 8.05 99.4 1976/77 1st 8.05 99.4 Closing Date: September 30, 1976 f I April 29, 1977 COLOMBIA CAQUETA LAND COLONIZATION PROJECT (Loan 739-CO) Development of Livestock Value Under Loan 739-CO In 38 selected farms October, 1976 1 2 3 4 5 6 7 8 9 No. of Value of No. of Value of Total Value 1/ 1976 Herd 1976 herd value Cattle Purchased Purchased Cattle before Cattle before after Total -7 value (1972 Col$) as % of Farm under Sub-loan Cattle Sub-loan Sub-loan loan Value in 1972 2/ value in 1974 Category 1972 1972 1972 1972 1972 1976 Col$ - before subloan I 10 25,000 20 50,000 75,000 165,000 84,400 169 II 13 32,500 19 47,000 79,000 174,900 89,500 190 III 18 45,000 28 70,000 115,000 253,000 129,000 185 IV 23 57,500 36 90,000 147,500 324,500 166,000 184 V 28 70,000 49 122,500 192,500 434.500 222,300 181 1/ 1970 price per cow Col$ 2,500 1976 price per cow Col$ 5,500 2/ 1976 price index 195.5; see Annex 11. ANNEX 10 COLOMBIA CAqUETA LAND COLONIZATION PROJECT (Loan 739-CO) Investment per Family at Completion (1976) Number of Average Total Project Families Per Family US$ million Benefitting US$ Investments Farm development 8.43 1,716 4,942 Road development 5.23 12,500 418 Administration 2.60 12,500 208 Health & education 0.56 12,500 45 Sub-Total 8.39 671 Total 16.87 5,613 Operations Seasonal farm operations 3.39 Cattle fattening 0.11 141 1,000 May 9, 1977 ANNEX 11 COLOMBIA CAQUETA LAND COLONIZATION (Loan 739-CO) Average GDP Deflator Exchange Rate Price Index % US$1:COL$ 1970 9.8 19.17 1971 10.4 21.50 1972 13.4 22.88 100.0 1973 22.0 24.89 122.0 1974 27.2 28.69 155.2 1975 20.0 33.09 186.2 1976 26.0 35.19 195.5 Source: Bank. May 3, 1977 COLOMBIA CAQUETA LAND COLONIZATION PROJECT (Loan 739-CO) (Col$) ITEM 1972 1973 1974 1975 1976 C-rn1 (kp) 3.10 3.30 3.70 4.30 Rice (kg) 1.79 2.89 3.68 3.64 Steers for fattening 1,400 2,40n 2,950 2,900 4,500 Cow and calf 3,300 4,100 5,380 5,900 7,500 Heifers 2,300 2,900 3,850 3,700 5,500 Breeding bulls 6,300 7,300 9,700 12,800 18,000 Source: Instituto de Mercadeo Agropecuario (IDEMA) COLOMBIA CAQUETA LAND COLONIZATION PROJECT (Loan 739-CO) Economic Rate of Return: Benefits and Costs Streams Project Gross Benefits Project Project Net On-Farm Roads Total Costs Benefits Initial years 1972 1973 1974 1975 Sub-total No. of farms 252 770 613 272 1,907 ---------------------------------------------(Col$ million)--------------------------------------------- 1972 2.0 - - - 2.0 - 2.0 57.4 (55.4) 1973 2.0 6.2 - - 8.2 - 8.2 72.9 (64.7) 1974 2.3 6.2 5.0 - 13.5 - 13.5 86.0 (72.5) 1975 4.4 7.1 5.0 2.2 18.7 4.2 22.9 53.2 (30.3) 1976 3.9 13.6 5.6 2.2 25.3 4.5 29.8 4.5 25.3 1977 5.1 11.8 10.8 2.5 30.2 4.8 35.0 8.0 27.0 1978 6.7 15.6 9.4 4.8 36.5 5.1 41.6 8.0 33.6 1979 6.2 20.3 12.4 4.2 43.1 5.4 48.5 8.0 40.5 1980 6.5 18.6 16.2 5.5 46.8 5.7 52.5 8.0 44.5 1981 8.6 19.8 15.0 7.2 50.6 6.1 56.7 8.0 48.7 1982 8.2 26.3 15.8 6.6 56.9 6.5 63.4 8.0 55.4 1983 8.7 25.0 21.0 7.0 61.9 6.9 68.8 8.0 60.8 1984 5.9 26.7 19.9 9.3 61.8 7.3 69.1 8.0 61.1 1985 7.4 18.1 21.3 8.8 55.6 7.8 63.4 8.0 55.4 1986 7.4 22.5 14.4 9.4 53.7 8.3 62.0 8.0 54.0 1987 7.2 22.6 17.9 6.4 54.1 8.8 62.9 8.0 54.9 1988 9.7 22.0 18.0 7.9 57.6 9.4 67.0 8.0 59.0 1989 18.7 29.5 17.5 8.0 73.7 10.0 83.7 8.0 75.7 1990 17.7 1/ 57.0 23.5 7.8 106.0 10.7 116.7 8.0 108.7 1991 86.0 154.0 / 45.4 10.4 195.8 11.4 207.2 8.0 199.2 1992 - 262.6 - 43.1 I/ 20.1 325.8 12.2 338.0 8.0 330.0 1993 - - 209.1 19.1 228.2 13.0 241.2 8.0 233.2 1994 - - - 92.8 92.8 1 13.9 106.7 8.0 98.7 Economic rate of return = 17% 1/ Including final value of herds. Table Al NOMINAL AND DEFLATED CATTLE PRICES IN CAQUETA 1964 1965 1966 1967 1968 1969 1970 1971 1972 1973 1974 1975 1976 1977 1/ Fat Steers, Medellirr- C$P/kg., 1974 pesos 13.7 16.3 17.7 17.0 15.3 13.7 14.0 14.6 15.1 17.1 14 2 13.4 Index 1964 = 100 100 119 129 125 112 100 102 107 110 125 109 98 Index 1970 100 98 117 126 123 110 98 100 105 108 123 107 96 Index 1972 100 91 108 117 114 102 91 93 97 100 114 99 89 2/ Fat Steers, Caqueta- C$P/kg., nominal 4.9 8.2 12.1 13.6 14.8 18.5 29.0* C$P/kg.. 1970 pesos 4.9 6.7 8.8 8.1 6.9 7.2 9.0* Index 1970 = 100 100 137 179 165 142 148 183 * Index 1972 : 100 73 100 131 120 104 108 134 * 2/ Unit Prices, Farm Gate, Caqueta- 5 Cow and Calf: C$P, nominal 2213'00 7500 13OGI C$P, 1972 pesos 2679 3300 3361 3471 3172 3205 4276 Index 1972 = 100 81 100 102 105 96 97 130 US$ 115 144 165 188 178 213 351 Index 1972 : 100 80 100 114 130 123 148 243 Cow: C$P, nominal 1700 10000 C$P, 1970 pesos 1700 3101 Index 1970 = 100 100 239 US$ 89 270 Index 1970 - 100 100 303 Heifer: C$P, nominal 2300 2900 3850 3700 5500 8000 CSP, 1972 pesos 2300 2377 2484 1989 2350 2632 Index 1972 = 0 100 103 108 86 102 114 US$ 100 116 134 112 156 227 index 1972 0 100 116 134 112 156 227 Bull: CSP, nominal 3500 6300 7300 9700 12800 18000 27000 CSP, 1972 pesos 4242 6300 5984 6258 6882 7692 8882 Index 1972 = 0 67 100 95 99 109 122 141 US$ 156 275 293 338 387 512 730 Index 1972 = 0 57 100 107 123 141 186 265 Thin Steer: CSP, nominal 1400 2470 2950 2900 4500 CSP, 1972 pesos 1400 2025 2132 1648 2130 Index 1972 = 100 100 145 152 118 152 US$ 61 99 103 88 128 Index 1972 = 100 100 162 167 142 208 GDP Deflator, % annual changes 3/ 9.8 10.4 13.4 22 0 27.2 20.0 26.0 GDP Index, 1970 = 100 100 109.8 121.2 137.5 167.7 213.3 256.0 322.5 Wholesale Price Index, % annual changes 3/ 11.5 18.2 28.0 36.0 Wholesale Price Index, 1970 : 100 100 111.5 131.8 168.7 229.5 Average Exchange Rate, US$1 = C$P!/ 17.4 19.2 21.5 22.9 24.9 28.7 33.1 35.2 37.0 * preliminary estimate. I/ Prices taken from PPAR. Colombia Second Livestock Development Project, Report No. 1344 (PCR, Annex 2, Page 2, December 1975). The deflator used is the wholesale price index. 7/ Prices taken from Summary Report, INCORA, December 28, 1976, Page 7 (Project Files and Fondo Ganadero del Caqueta). 1970 prices from Appraisal Report, Caqueta lnd Colonization Project, January 29, 1971, Annexes 2 and 5. 1977 prices from INCORA, December 1977, OED Mission. The deflator used is the GDP deflator; see PCR, Caqueta Land Colonization Project, July 13, 1977, Annex 11. 3/ PCR, Caqueta Land Colonization Project, July 13. 1977, Annex 11. 4/ PCR, Colombia Second Livestock Development Project, Annex 4, Table 4, December 1975. 7 ssumes same ratio between cow-calf unit price and cow unit price in 1970 as prevails in 1977. Table A2 SIZE DISTRIBUTION OF RURAL LANDHOLDINGS IN CAQUETA Average Size Area Landholdings Total Area of Landholdings ha No. % ha ha 0-10 1.304 14.64 4.073 3.1 10-20 776 8.71 10.186 13.1 20-30 897 10.10 20.250 22.5 30-40 951 10.62 30.358 31.9 40-50 839 9.42 35.744 42.6 50-100 2.271 25.50 134.391 59.1 100-200 1.189 13.35 150.905 126.9 200-300 368 4.13 79.793 216.8 300-400 96 1.10 31.125 324.2 400-500 43 0.48 18.152 422.5 500-1000 106 1.20 291.835 2.753 TOTAL 8.907 100 849.707 Source: Instituto Geografico Agustin Codazzi, 1971. Table A3 SIZE DISTRIBUTION OF LANDHOLDINGS OF PARTICIPATING SUBBORROWERS SURVEYED Average size Area Landholdings Total Area of Landholdings ha No. % Cum % ha % m 50-60 31 21.8 21.8 1.605 9.7 9.7 51.77 61-80 33 23.2 45.0 2.420 14.7 24.4 73.33 81-100 22 15.5 60.5 2.139 13.0 37.4 97.22 101-120 11 7.8 68.4 1.214 7.3 44.7 110.36 121-140 12 8.5 76.8 1.585 9.6 54.3 132.08 141-160 9 6.3 83.1 1.365 8.3 62.6 151.67 > 160 24 16.9 100.0 6.183 37.4 100.0 257.62 Total 142 100.0 16.511 100.0 Source: Survey, M.L. Gomez, et. al., op. cit., (Table No. 26). Table A4 GROSS INCOMES1/ OF SUBBORROWERS SURVEYED Average Annual % Total Income Income Bracket Families Income Per Family In Each Bracket C$ No. % Cum % C!P % Cum % 20.000 - 50.000 34 24.6 24.6 36.109.5 9.1 9.1 50.001 - 80.000 42 30.4 55.0 64.601.9 20.2 29.3 80.001 - 110.000 23 16.7 71.7 82.362.2 14.1 43.4 110.001 - 140.000 9 6.5 78.2 124.128.9 8.3 51.7 140.001 - 170.000 10 7.2 85.4 158.583.8 11.8 63.5 170.001 - 200.000 3 2.2 87.6 177.533.3 4.0 67.5 200.001 - 230.000 3 2.2 89.8 213.645.3 4.8 72.3 230.001 - 260.000 7 5.1 94.9 244.252.8 12.7 85.0 260.001 - 290.000 3 2.2 97.1 273.450 6.1 91.1 290.001 - 320.000 4 2.9 100.0 306.115 8.9 100.0 TOTAL 138 100.0 97.720 100.0 1/ Does not include goods produced on farm only for self consumption. Source: Survey, M.L. Gomez Rojas, et.al., op. cit., (Table No. 57). Table A5 NET INCOMES OF SUBBORROWERS SURVEYED Average Annual Annual Per Income Bracket Families Income Per Family Total Persons Capita Income C$P No. % Cum % C$P No. C$P Low Income 0 28 20.3 20.3 - 215 - 1 - 10.000 31 22.5 42.8 10.340.69 238 1.346.89 20.001 - 40.000 26 18.8 61.6 31.078.89 100 4.040.25 Medium Income 40.001 - 60.000 22 16.0 77.6 48.847.48 169 6.358.84 60.001 - 80.000 5 3.6 81.2 69.839.38 39 8.953.76 High Incomes 80.001 - 100.000 5 3.6 84.8 93.840.40 39 12.091.07 100.001 - 120.000 1 0.7 85.5 109.232.00 8 13.654.00 120.001 - 140.000 4 2.9 88.4 131.627.60 31 16.984.21 140.001 - 170.000 3 2.2 90.6 150.509.60 23 19.984.21 170.001 - 200.000 8 5.8 96.4 187.546.50 62 24.299.55 > 200.000 5 3.6 100.0 223.696.04 38 29.433.68 138 100.0 45.217.90 1.062 5.875.77 1/ Does not include farm production for self consumption. Source: Survey, M.L. Gomez Rojas, et. al., op. cit., (Table No. 60). Table A6 LAND VALUES IN PROJECT AREA, 1971 ZONES Pasture Land Cultivated Land Forest Partly Clear Land Total ha C$P (000) ha C$P (000) ha C$POOO) ha C$P (000) ha C$P (000) Doncello 1.060 2.650 58 87 187 93.5 347 347 1.652 3.177.5 Paujil 1.761 4.402.5 418.5 627.75 529 264.5 468.5 468.5 3.177 5.763.25 Puerto Rico 961 2.402.5 169 253.5 735 367.5 509 509 2.374 3.532.5 Belen 710 1.775 102 153 168 84 135 135 1.115 2.147 San Vicente 796 1.990 61 91.5 905 452.5 294 294 2.056 2.828 Valpara(so 809 2.022.5 167 250.5 468 234 155 155 1.599 2.662 Solano 140 350 24 36 228 114 35 35 427 535 Milan 1.043 2.607.5 91 136.5 545 272.5 422 422 2.101 3.438.5 7.280 18.200 1.090.5 1.635.75 3.765 1.882.5 2.365.5 2.365.5 14.501 24.083.75 Source: National Cadaster and Survey, M.L. Gomez, et.al., op. cit., (Table No. 62). Table A7 LAND VALUES IN PROJECT AREA, 1976 Partly Zone Pasture Land Cultivated Land Forest Cleared Land T o t a 1 ha. C$P (000) ha. CF (0 ha. C$P (000) ha. C$P (000) ha. C$P (000) Doncello 1.416 7.080 104.25 417 150.5 150.5 221.75 665.25 1.892.5 8.312.75 Paujil 2.366 11.830 230 920 380 380 391 1.173 3.367 14.303 Pto. Rico 1.758 8.790 231 924 714 714 353 1.059 3.056 11.487 Belen 832 4.160 68.5 274 159 159 57.5 172.5 1.117 4.765.5 San Vicente 1.134 5.670 183 732 1.150 1.150 263 789 2.730 8.341 Valparaso 1.176 5.880 80.5 322 252 252 141 423 1.649.5 6.877 Solano 140 700 24 96 222 222 35 105 427 1.129 Milan 1.336 6.680 182.5 730 416 416 337.5 1.012.5 2.272 8.838.5 10.158 50.790 1.103.75 4.415 3.449.5 3.449.5 1.799.75 5.399.25 16.511 64.053.75 Source: National Cadaster and Survey, M. L. Gomez, et. al., op. cit. (Table No. 63). Table A8 SOURCES OF GROSS INCOME FOR SUBBORROWERS SURVEYED Annual No. of Families Income Average C$P % Sale of Agricultural Products 62 1.331.461 9.8 21.475.18 Sale of Livestock 122 5.503.936 40.6 45.114.23 Sale of Milk 53 2.181.807 16.1 41.166.17 Sale of Cheese 27 962.201 7.1 35.637.07 Other Services 99 3.577.079 26.4 36.132.11 Total 138 13.556.484 100.0 98.235.39 Source: Survey, M. L. Gomez Rojas, et. al., op. cit. (Table 58). 右  -- n > °0 -0n 00r- -mk c(- 4 cZE ci o i9 i [ Z 0oý 0 m 0 60 2 0 10,~ o,-~0 z ' -.0~(.* iJ 2b~ 0r0T1 01 ' 00000 6 o- (V 0100011 (jag>i