Uruguay - Livestock Improvement Project

Lr -- I R E S T R I C T E D IETUFN TO R FZ&PORTS DESK, Repo rt N o.T,O. 233A WITHIN riLt td ONE WEEK This report was prepared for use within the Bank. In making it available to others, the Bank assumes no responsibility to them for the accuracy or completeness of the information contained herein. INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT APPRAISAL OF LIVESTOCK PROJECT URUGUAY December 18, 1959 Department of Technical Operations  CONVERSION FACTORS Currency Exchange Rate for Report Calculations for Irnports under Loan U.S. $1.00 - Pesos 10 Area 1 hecta re - 2.471 Acres  TABLE OF CONTENTS Page Nos. SUMMARY . . . . i- I. Introduction . . . . . . . . . . . . . .1 II. Agricultural Aspects * . a . . . . . 2 III. Organization and Management . . . . . . e 4 A. The Comnissicn . . . . . .. . . 4 B. The Bank of the Republic. . . . . . . . 7 C. Import Procedures . . . . . . . X . . 7 IV. Finance . . . a . . . . e e e . , . . 8 A. Cost Estimates . . . . . , . . . . .8 Foreign Exchange Costs .. . . . . 8 Local Cur-ency Costs . . . . . . . 10 Overall Costs of Project . . . . . . . 12 B. Sources of Funds . . . . . . . . , .12 V. Benefts Resultinm .Jro M the Pro.iect . . . . . 14 VI. CONCLUISIONS . . . . . . . . . . . . . 16 ANNEX 1 - Basic Law of the Livestock Plan AN=EX 2 - Provisional List of Goods ANNEX 3 - Typical Fanrm Development Plan  S U M4 14 A R_ This report is a re-appraisal of a project for the improvement of livestock production in Uruguay which has twice previously been con- sidered by the Bank. In July 1953, the Bank approved the project, in principle, subject to outstanding problems being worked out satisfactorily. This was done, and in September 1954, it was decided that negotiations be invited. It was not, however, until the necessary legislation had been enacted and a Commission to administer the Plan for the Technical Im- provement of Livestock Production had been appointed in February 1958, that the Government requested further consideration of the project. ii. The level of pastoral production has been relatively static in Uruguay although natural conditions for the application of modern tech- niques of pastoral development are exceptionally good. There is great economic need and scope for pastoral development. iii. The factors which are currently limiting the application of modern methods of pasture improvement and management are inadequate technical knowledge among farmers and shortages of essential imported equipment and materi2 s and of developmental credit. The Livestock Plan would channel technical advice, credit and goods imported under a Bank loan to a pilot group of about 600 selected farmers. iv. The Commission has technical autonomy in administering the Plan. Its main functions are to select farmers to participate, work out de- tailed plans of development for each farm and, after appraisal, recommend their credit needs to the Bank of the Republic, and to supervise the im- plementation of the farm plans. Nembers of the Commission are competent. They serve on an honorary basis and operations are to be in charge of an Executive Technical Director who is to be a technician, acceptable to the Bank, with experience in this class of development overseas! The appointment of a suitable man would be a condition of effectiveness of the Loan. V. The Bank of the Republic, which is represented on the Commission, is to extend credits from a Special Fund to participating farmers. The bank must accept the Commission's credit recommendations unless it rejects the farmer for lack of creditworthiness. The bank has good standing and is expected to undertake tiAs function efficiently. vi. The estimated cost of the project is Pesos 111 million (equiva- lent to QJ 11.1 million) including a foreign exchange component equiva- lent to US $ 7 million. Due to depreciation in the value of the Peso, the funds available under the basic law are inadequate fully to meet present estimated costs. However, assurances have been given that ade- quate local currency funds would be made available and the completion of arrangements satisfactory to the Bank would be a condition of effective- ness of a loan.  - ii - vii. Farm development would be profitable to farmers from the third year on. Over the life of the Loan increased foreign exchange earnings from the project should amount to about $30 million equivalent as against foreign exchange costs of about $15 million. Benefits would be much greater if other farmers adopt the modern techniques to be demonstrated by the pilot group. Viii. The project is suitable for a Bank loan of about $7.0 million equivalent with a term of 12 years, including four years of grace. The borrower would be the Government of the Republic of Uruguay.  APPRAISAL OF LIVESTOCK PROJECT - URUGUAY I. INTRODUCTION 1. Few countries are so dependent on grasslands as Uruguay. More than 15 million hectares out of a total area suitable for agriculture of 17 million hectares are used for grazing livestock. The production from these grasslands represents about 58% of the total value of agricultural production and 80% of total exports. 2. The pastoral industry is almost completely dependent on natural pastures which have been grazed for centuries under extensive systems of management. Practica7'y no new land is available so that any increase in the level of productic.