Colombia - Second Cordoba Agricultural Development Project

Document of The World Bank FOR OFFICIAL USE ONLY Report No. 7052 PROJECT PERFORMANCEAUDIT REPORT COLOMBIA CORDOBAII AGRICULTURAL DEVELOPMENTPROJECT (LOAN 1163-CO) December 21, 1987 Operations Evaluation Department This document has a restricteddistributionand may be used by recipientsonly . S . , a . .*. V in the perfonnance of  ABBREVIATIONS AND ACRONYMS Caja Agraria Agricultural, Industrial and Mining Credit Bank CIAT International Center for Tropical Agriculture ERR Economic Rate of Return HIMAT = Hydrology/Meteorology and Land Development Institute ICA = Colombian Agricultural Institute ICCE = Colombian Institute for School Buildings ICEL = Colombian Institute for Electrical Power IFAP Goverunment's Informe Final del Proyecto INCORA = Colombian Institute for Agrarian Reform INPES Colombian Institute for Health OED = Operations Evaluation Department PCR = Project Completion Report PPAM = Project Performance Audit Memorandum SAR = Staff Appraisal Report WFIGHTS AND MEASURES Metric System 1 meter (m) = 39.37 inches 1 kilometer (km) = 0.62 miles 1 hectare (ha) = 2.47 acres 1 square kilometer (km2) = 0.386 square miles 1 kilogram (kg) = 2.2 pounids 1 ton (t) = 2,240 pounds 1 liter (1) = 0.264 gallons Currency Currency Unit = Colombia Peso (Col$) At Appraisal : US$1 = Col$25.3 Col$1 = US$0.040 At Project Completion: US$1 = Col$79.5 Col$1 = US$0.013 At Audit : US$1 = Col$230 Col$1 = US$0.004 GOVERNMENT OF COLOMBIA FISCAL YEAR January 1 - December 31  FOR OFFICIALUSE ONLY PROJECT PERFORMANCEAUDIT REPORT COLOMBIA CORDOBA II AGRICULTURALDEVELOPMENT PROJECT (LOAN 1163--0) TABLE OF CONTENTS Page No. Pretdce .................. Basic Data Sheet ............ i ... iii Evaluation Summary.vi PROJECT PERFORMANCE AUDIT REPORT I. BACKGROUND.............. , .. 1 Country Economic and Social Setting. 1 The Project's Setting...................... 2 Project Desigr. 2 II. PROJECT TMPLEMENTATIONAND OUTCOME. 4 Drainage Infrastructure ... 5 On-farmDevelopment . . 6 Credit ... 6 Agrarian Reform... 6 Social Infrastructure ... 7 Project Outcome..... .. . 7 III. CONCLUSIONSAND MAIN ISSUES. 9 Overview ... 9 Requirements for Sustainability 10 Equity of ProJect Investments . .13 APPENDICES: 1. Comments from Colombian Institute for Hydrology,Meteorology and Land Reform. 15 2. Comments from Colombian Institute for Agrarian Reform .17 This documenthas a restricteddiitribution and may he *lvedhv recinientr only in the nPrf`rmqnrP Table of Contents, cont. Page No. PROJECT COMPLETION REPORT I. INTRODUCTION .................................. 21 II. BACKGROUND ........ ........................... 21 III. IJROJECTFORMULATION ......................... 21 IV. IMPLEMENTATION ............................... 23 V. PROJECT IMPACT ............................... 31 VI. INSTITUTIONAL PERFORMANCE . 34 ................... VII. BANK PERFORMANCE ............................. 35 VIII. LESSONS TO BE LEARNED ..... 36 ................... PCR TEXT TABLES: 1. Main Physical Targets and Accomplishments 2. Beneficiaries of Social Components 3. Land Tenure: Appraisal Targets and Outcome 4. Credit Component: Appraisal Targets and Outcome 5. Land Use: Appraisal Targets and Outcome ANNEXES: A. Withdrawal of the Proceeds of the Loan B. Project Cost by Component C. Cropping Patterns, Yields and Production D. Economic Analysis Map IBRD 11080  PROJECT PERFORMANCE AUDIT REPORT COLOMBIA CORDOBA II AGRICULTURAL DEVELOPMENT PROJECT (LOAN 1163-CO) PREFACE This is a performance audit of the Cordoba II Agricultural Development Project in Colombia for which Loan 1163-CO was approved on June 26, 1975 in the sum of US$21 million and closed on December 31, 1983, with final disbursement taking place on August 29, 1984, after cancellation of US$2.5 million. The audit report consists of an audit memorandum (PPAM) prepared by the Operations Evaluation Department (OED) and a project completion report (PCR) dated June 21, 1985. The PCR was prepared by the Latin America and the Caribbean Regional Office, based on statistical and financial information provided by the Colombian Institute for Agrarian Reform (INCORA), and 1981 and 1984 surveys of non-INCORA beneficiaries on land distribution and use and agricultural production. Tha PPAM is based upon a review of the Appraisal Report (No. 596a-CO) of June 6, 1975, the President's Report (No. P-1655-CO) of June 9, 1975, the Loan and Project Agreements of September 12, 1975, the Bank's PCR of June 21, 1985, and the Government's project completion report (Informe Final del Proyecto) dated March 1985, and received in the Bank on May 6, 1985. Correspondence with the Borrower and internal Bank documentation have been consulted and Bank staff associated with the project have been interviewed. An OED mission visited Colombia in May 1987, almost three years after project completion; thus permitting an assessment of project benefits after it had some time to stabilize, an important consideration in drainage projects. Discussions were held with officials of the Ministry of Agriculture, who included former and present project staff. A field trip to visit the project area and project facilities was undertaken and information obtained in the field was used to test the validity of the conclusions of the Bank's and the Government's completion reports. The audit finds that the Government's completion report is of high standard: comprehensive, thorough, and with analysis which is well documented. The Borrower has also commented, however, that greater coordination between Bank/INCORA staff at the time of PCR preparation would have assisted in finalizing the report in a more cost-effective manner (see Appendix 2). The audit also finds that the Bank-prepared PCR covers the project's salient features, and except for issues regarding the size of the project area, the PPAM generally agrees with its conclusions. In addition to summarizing the project's obJectives and results, the PPAM expands on  ii.- the issues of requirements for project sustainability and the equity of the public agricultural investments. The valuable assistance rendered by the Government of Colombia and project staff met in the course of the country visit is gratefully ackniowledged. A copy of the draft audit report was sent to the Borrower for comments on September 3, 1987. Comments received have incorporated in the report and are attached as Appendices 1 and 2.  j~~~~~~~~~~~~ iii PROJECT PERFORMANCE AUDIT REPORT COLOMBIA CORDOBA II AGRICULTURAL DEVELOPMENT PROJECT (LOAN 1163-CO) BASIC DATA SHEET KEY PROJECT DATA Actual or Actual as % Appraisal Estimated of Appraisal Estimate Actual Estimate Project Cost (US$ million) 35.7 30.5 85 Loan Amount (US$ million) 21.0 18.5 88 Date Board Approval - 06/26/75 - Date Effectiveness 01/15/76 03/30/76 138 Date Physical Components Completed 12/80 06/83 150 Percentage Then Completed (%) - 80 80 Closing Date 06/30/81 12/31$83 146 Economic Rate of Return (%) 27% 9% 33 Number of Beneficiaries of Social Components 35,000 30,000+ 86+ Number of Beneficiary Farms 3,844 4,782 124 (Number of New Land Settlers) (1,000 19 2) STAFF INPUT T FY74 FY7S FY76 FY77 FY78 FY79 FY80 FY81 FY82 FY83 FY84 FY86 OTAL Pre-Appr. 37.3 2.9 40.2 Appraisal 75.1 43.9 119.0 Negotia. 6.6 8.5 Supervi. 5.8 11.2 23.8 18.8 27.7 19.0 18.4 9.9 8.6 20.6 163.7 Other .1 .4 0.5 TOTAL 112.4 63.3 12.3 11.2 23.8 18.8 27.7 19.1 18.8 9.9 20.8 20.6 329.9  - iv - CUMULATIVE DISBURSEMENTS FY76 FY77 FY78 FY79 FY80 FY81 FY82 FY83 FY84 Appraisal Est. (USS mil.) 1.7 6.6 12.2 17.3 21.0 - - - Actual (US$ million) 0.1 0.3 1.3 4.5 6.9 9.9 12.9 14.2 18.5 Actual as % of Appr. Est. 18 20 37 40 47 61 68 88 Date of Final Disbursement August 29, 1984 A.mount Cancelled US$2.5 million on August 23, 1984 Principal Repaid As of October 31, 1987 - US$2.00 million MISSION DATA Specializa- Date No. of Staff/Weeks tions Performance Types of Mission (mo./yr.) Persons in field Represented Rating Trend Problems La Lb /c /d Identification 03/73 Appraisal 02/74 Supervision 1 11/75 1 1.0 b 1 1 M Supervision 2 03/76 1 1.0 b 2 1 M Supervision 3 09/76 1 1.0 e 1 1 M Supervision 4 01/77 2 2.0 a,c 2 2 M Supervision 5 01/77 1 2.0 e 2 2 M Supervision 6 08/77 1 1.0 a 2 1 M Supervision 7 09/77 1 1.0 d 2 1 M Supervision 8 10/77 1 0.5 a 2 1 M Supervision 9 02/78 3 4.5 a,d 2 2 M Supervision 10 03/78 2 2.0 a,c 2 2 F,M Supervision 11 02/79 1 3.0 a 2 1 F Supervision 12 04/79 1 2.0 d 2 1 F Supervision 13 11/79 1 1.0 c 2 1 F Supervision 14 12/79 2 2.0 a,d 2 2 F,M,T Supervision 15 02/80 1 1.0 c 2 2 F,M Supervision 16 03/80 3 2.0 a,c,d 2 3 F,M,P Supervision 17 08/80 3 0.3 a,d 2 3 F,M,P,T Supervision 18 09/80 1 0.1 a 2 2 F,M,P,T Sup2rvision 19 03/81 2 2.0 c,d 2 3 F,M,P Supervision 20 09/81 2 1.7 c,d 3 3 F,M,O Supervision 21 03/82 2 2.0 a,d 3 2 F,M Supervision 22 10/82 2 4.0 c - - * Supervision 23 03/83 1 1.3 d 3 2 F,M,O Supervision 24 05/84 1 1.3 a 3 3 F,M,T Precompletion 1 10/84 1 2.0 Precompletion 2 02/85 1 1.0 Total 42.7 * Mission looked at financial aspects only  -v a OTHER PROJECT DATA Borrower: Republic of Colombia Execut!ng Agencies: Colombian Institute for Agrarian Reform (INCORA), and Colombian Institute for Hydrology, Meteorology and Land Development Institute (HIMAT) Fiscal Year of the Borrower: January 1 - December 31 Name of Currency (Abbreviatior) Colomnbian Peso (Col$) Currency Exchange Rate: Appraisal Year Average US$1.00 = Col$25.3 Intervening Years Average US$1.00 = Col$43.0 Completion Year Average US$1.00 = Col$79.5 Audit US$1.00 = Col$230.0 ,llow-on Project: None La a=agriculturalist; b=agricultural economist; c-financial analyst; d=engineer; and e=silviculturist. lb l=problem-free or minor problems; 2=moderate problems; and 3=major problems. /c l=improving; 2=stationary; and 3=ieteriorating. Id F=financial; M=managerial; T=technical; P=political; and O=other  - vi - PROJECT PERFORMANCE AUDIT REPORT COLOMBIA CORDOBA II AGRICULTURAL DEVELOPLMENT PROJECT (LOAN 1163-CO) EVALUATION SUMMARY Introduction The project was part of Government's policy, enunciated in 1972, of rehabilitating existing or completing ongoing land development projects before undertaking new projects. It is also part of Government's colonization and land reform programs which began in 1961. The project was the sixth lending operation with the implementing agency, Colombian Institute for Agrarian Reform (INCORA), previous support having been extended for one agricultural credit; two colonization; and two irrigation projects. l/ Objectives The Project was designed to promote integrated and balanced development in the Department of Cordoba by completing the land development and agrarian reform begun by INCORA in the mid-1960s. The project aimed at: (i) using drainage works to raise production and expand the agriculturally productive area from 34,000 to 40,000 ha by reclaiming 6,000 ha of flooded land; (ii) land levelling to allow a shift from livestock to crop agriculture; (iii) providing basic social services in 25 villages; and (iv) settling 1,000 landless families through land reclamation and expropriation of land from large landowners. The project cost was estimated at US$35.7 million of which the Bank was to finance 59% or US$21 million, and was to be disbursed over five years. Implementation Experience Project implementation was affected from the outset by problems such as slow start-up, shortage of budgetary support, and scant political support for the land reform objectiv-s. The project was completed with a delay of two and a half years at a cost of 15% below appraisal estimates. Cancellation of US$2.5 million was made on August 23, 1984. 1/ First Agricultural Credit Project (Loan 624-CO), PPAR, OED Report No. 1804 dated November 23, 1977; Cagueta Land Colonization (Loan 739-CO), PPAR, OED Report No. 2124 dated June 30, 1978; Cagueta Rural Settlement II (Loan 1118-CO), PPAR, OED Report No. 5385 dated December 2b, 1984; Atlantico Irrigation Project (Loan 502-CO), PPAR, OED Report No. 1841 dated December 28, 1977; and Second Atlantico Development Project (Loan 849-CO), PCR, OED Report No. 4579 dated June 23, 1983.  - vii - Although the total amount of drains constructed under the project fell short of appraisal estimates, the projecL did meet success in expanding the agriculturally productive area crom 34,000 to about 40,000 ha, benefitting 4,800 farmers. The construction of rural and drainage service roads was double the appraisal estimates. The social components of rural schools, heaich posts, potable water supply and rural electrification in general exceeded appraisal targets with a minor increase in costs, and benefit about 30,000 persons. Medium- and long-term credit benefitted all 1,100 INCORA settlers in the project area. Two components were not implemented--the land reform program and land leveling on half of the project area. Project Impact At completion, average yields for cotton, sorghum and maize were below appraisal estimates. Livestock productivity increased mostly by a doubling of the stocking rate. Data for the 1986 season show that average yields for cotton and sorghum exceeded appraisal estimates and for maize were slightly belo'q the estimates. The project was expected to change the land use pattern from predominantly pastures to crops. At project completion the outcome reflected even more pronouncedly the pre-project situation, because drainage works had not been operative for several seasons. At audit, three years after project completion, crops accounted for over 50% of the area, with a cropping intensity of 148%. The PCR estimates the economic rate of return at completion to be 7% compared with the appraisal estimate of 27%. Because of a reduction in the project area, the audit estimates the ERR to be 5% with the cropping pattern prevailing at completion, and 9% with that prevailing at the time of audit. Non- quantifiable benefits accrue to the 30,000 users of the social infrastructure and to the 100,000 users of the rural road network. Sustainability At completion, the project's sustainability was uncertain because the cropping pattern reflected a predominance of low yielding, low risk livestock rearing. If the trends observed at audit continue, the project is deemed to have consolidated and to now contain the basic requirements for a continued flow of benefits. There are two areas, however, that require further improvement to ensure the project's sustainability: timely maintenance of the drainage and social infrastructure, and regular updating of the technical themes of the extension service provided to medium- and small-scale farmers. Findings and Lessons Several findings and lessons emerge from this project experience: o The Bank did not amend the Loan Agreement when implementation responsibility for the drainage component was shifted from INCORA to HIMAT at project start-up;  - viii - this resulted in coordination difficulties and procurement delays (PPAM, para. 9; PCR, paras. 6.01 and 8.01). * Field visits undertaken after receipt of the Borrower's final report could avoid situations where diLfering or conflicting data are not reconciled and can lead to incorrect interpretations (PPAM, paras. 10, 14 and 18). * OED's experience confirms that execution of land leveling works associated with irrigation/drainage projects are best carried out concurrently with other civil works (PPAM, paras. 12 and 25).2/ * Notwithstanding that the experience of earlier projects in the same subsector irdicated that agrarian reform was difficult to implement, the project was appraised and approved on the basis that land reform and small-scale farmers were central themes of the project (PPAM, para. 14, 23 and 31). * As is typical in irrigation/drainage projects, their outcome tends to be uncertain at their completion, and can evolve positively only after the works have been operating and soils become stabilized (PPAM, paras. 17 and 19).3/ A private and cost-effective extension system emerged at project completion, while government agencies and project consultants, despite considerable effort, did not succeed in establishing a Government-sponsored extension system (PPAM, paras. 29-30; PCR, paras. 4.17- 4.18). 2/ PCR of Colombia - Second Atlantico Development Project (Report 4579), dated June 23, 1983. 3/ PPAR under preparation, Tunisia - Sidi Salem Multipurpose Project.  - 1 - PROJECT PERFORMANCE AUDIT MEMORANDUM COLOMBIA CORDOBA II AGRICULTURAL DEVELOPMENT PROJECT (LOAN 1163-CO) I. BACKGROUND Country Economic and Social Setting 1. The Cordoba II Agricultural Development Project was appraised in 1974 while Colombia was riding the crest of several years of economic growth, although there were indications that negative world economic developments were about to overtake Colombia's economy. Colombian agriculture has grown, albeit erratically, at an annual average rate of 4% since the early 1960s, consistently contributing about one-fifth of GDP growth. Agriculture's share of GDP has declined slowly from 32% in 1960- 64, to 27% in 1972-73, and to about 18% at present. Despite t'.is gradual decline, the sector's contributions to total merchandise exports are significant and fairly constant (62% in 1973, 67% in 1983). Apart from coffee, several crops--in particular, cotton, bananas, tobacco, sugar and sesame--have a significant share of their total production exported. Export growth rates are high for flowers, rice and oil palm. Agriculture is a large net contributor to the balance of payments, cereals and edible oils being the main imported items. 2. Several disquieting signs appeared in the mid-1970s: inflation was accelerating; weaknesses in the country's fiscal system were becoming increasingly obvious, requiring cutbacks in public investment programs; loss of petroleum self-sufficiency was imminent; and there were signs that the rate of economic growth was beginning to decelerate. These factors led to pressures on the agricultural sector to grow and diversify its commodity composition. Gains in crop output had occurred through expansion of plant- ed areas, instead of yield increases. Livestock production had grown fast- er than crop agriculture up to the mid-1970s, utilizing extensive manage- ment techniques. Furthermore, rural poverty and unemployment remained serious problems. In 1972, the sector employed 43% of the labor force, with average per capita incomes in rural areas being half of those in urban areas. The poorest 40% of the rural population received only 12% of total rural incomes, reflecting the concentration of land ownership. In 1960 and in 1970, ten percent of the farms accounted for 80% of all farmland, despite Government's agrarian reform policy formulated through the Colombian Institute for Agrarian Reform (INCORA).  2- The Project's Setting 3. In 1961, the Colombian Government adopted a land reform policy to correct the inequitable land tenure situation. INCORA was established as a lead agency for agricultural development, charged with the activities of land reform, development of irrigation and drainage in selected perimeters, operation of supervised credit programs in association with other intermediaries, and provision of technical assistance to beneficiaries of its land settlement work. The Bank had had a close relationship with INCORA through an agricultural credit project,1/ as well as two colonization projects (Caqueta I and II)2/ and two irrigation projects.3/ In the early 1970s, INCORA's investment priority shifted to completing a large portfolio of semi-finished irrigation and drainage projects rather than beginning new land development schemes. The project was designed to promote integrated and balanced development of the Cordoba II area, by completing the land development and agrarian reform begun by INCORA several years earlier. Specifically the project would help to: (a) raise production by drainage works to eliminate flooding and expand the agriculturally productive area; (b) improve the quality of life for the rural population by increased incomes, provision of basic social services, and settlement of landless families through land reclamation and expropriations; (c) strengthen Colombia's balance of payments situation; and (d) generate employment for surplus or underemployed labor in the project area. Project Design 4. The Cordoba II project is a second stage development in 40,000 ha in the Rio Sinu Valley, where in 1967 a first stage of 7,000 ha was initiated in the southwest of the valley to drain flooded land and develop rainfed agriculture. The project was based on a feasibility report prepared by foreign and local consultants between 1969 and 1971. During the preparation phase, the development of irrigation was discarded as 1/ PPAR of Colombia - First Agricultural Credit Project (OED Report 1804), dated November 23, 1977. 2/ PPAR of Colombia - Caqueta Land Colonization (OED Report 2124), dated June 30, 1978. 3/ PPAR of Colombia - Atlantico Irrigation Project (OED Report 1841), dated December 28, 1977, and PCR of Colombia - Second Atlantico Development Project (Report 4579), dated Juine23, 1983. uneconomical because it would incur large pumping costs. The project as appraised in 1974 sought to: (a) drain 34,000 ha and reclaim 6,000 ha to eliminate both temporary and permanent flooding by the construction of 514 km of primary and secondary drains; (b) level 20,000 ha and construct tertiary canals and on- farm access roads; (c) provide medium- and long-term credit to small-scale farmers (both INCORA settlers and private farms of less than 12 ha), and to 100 Communal Enterprises (associa- tions of about 10 settler families with the objective of joint management and exploitation of the land assigned to them by INCORA); (d) settle 1,000 new families on tracts of about 12 ha in Communal Enterprises by reclaiming 6,000 ha of flooded land and purchasing 7,800 ha of privately owned farms in excess of 50 ha, under INCORA's on-going land reform mandate; (e) establish an agricultural extension service oriented to some 3,800 small-scale farmers, by consolidating the INCORA-provided extension and strengthening the Colombian Agricultural Institute (ICA); and (f) provide social infrastructure to 25 villages by the construction or renovation of schoolrooms and health centers, water supply systems and electrification (PCR, paras. 3.04, 4.10-4.19). 5. The project also required establishing and maintaining a system of charges to recover from farmers full maintenance costs of drainage and flood protection works, as well as not less than 80% of the investments in the latter, over a period not exceeding 20 years and at a nominal interest rate of 12%. 6. INCORA would be responsible for the construction, agriculturel development, and s.ttlement phases of the project; and for fiscal management of all loan funds. Other Government agencies in the Ministries of Agriculture, Education, Health, and Public Works would assist with specialized components through operational agreements with INCORA. 7. Total project costs were estimated to be US$35.7 million, including interest on the loan during construction. The Bank loan of US$21 million was to finance 59% of total project costs, comprising the estimated foreign exchange cost (US$16.9 million), plus US$4.1 million of local  - 4 - costs. The balance of local costs (US$14.7 million) was to be financed by the Governrment. The economic rate of return for the productive components was estimated at appraisal to be 27%. This did not take account of the nlor-quawlLiflable bene-fits arising from the education, health and water supply investments in rural areas. II. PROJECT IMPLEMENTATION AND OUTCOME 8. Project implementation was affected from the outset by problems including slow start-up, shortage of budgetary support throughout project life, increase in unit costs due to higher than expected inflation, and scant political support for the land reform objectives of the project. 9. Between appraisal (February/March 1974) and date of effectiveness (March 1976) the following events took place: (a) internal project processing was delayed since initially the loan was to finance two different perimeters, and one of them (Valle 1) was dropped at Government request when the appraisal report was essentially completed; (b) a new Government in 1974 had to reconfirm the priority assigned to the Cordoba II project; (c) various subsidiary loan agreements took longer than expected to be concluded; and (d) the drainage component was to be executed by a new institution--Colombia's Hydrology/Meteorology and Land Development Institute (HIMAT). HIMAT was created by Decree 132 of January 26, 1976 to assume responsibility for the construction and maintenance of irrigation and drainage systems. By the same law, INCORA retained the responsibility for the national programs of agrarian reform and colonization and, under the project, overall project coordination and management of funds (PCR, paras. 4.04-4.06). It is acknowledged both in Colombia and in the Bank, that this arrangement proved cumbersome and detrimental to progress in the construction of drainage works throughout most of the construction period. INCORA and HIMAT vied for control of the procurement process in tendering the civil works during the first three years of project execution, a situation which led to lengthy approval and coordination processes between INCORA and HIMAT, and to an inordinate amount of Bank staff time of sorting out what tenders had been approved and by whom. The Bank files are replete with duplicate sets of tender documents received from both institutions at different times. The Bank did not strongly press for having HiMAT fully control its responsibilities. In addition, the Bank9s preoccupation with procurement, auditing and budgetary matters--although obviously pressing at the time--led to a perception in some parts of the Colombian Government that the Bank's interest in the supporting components (research, extension and farmer training) was slight. Not until 1980 did Bank supervision missions address comprehensively the non-existence or delays in the research and technological packages. INCORA's taking over the coordination of the social infrastructure, however, proved to be effective, as this type of civil works were of small size and scattered over the project area, and would othernwise have been implemented by several ministerial departments unfamniliar with Bank procurement requirements.  -5- Drainage Infrastruccure 10. At appraisal (1974), the project provided 514 km of primary and secondary drains to be constructed, this in addition to 154 km of drains which had already been completed in the project area, as summarized in the following table. Length of Primary and Secondary Drains (km) SAR PCR PPAM Pre-project (a) 154 270 204 Project objectives (b) 514 514 514 Revised estimates (c) - 229 415 Actual (d) - 146 146 Completion rate under project (d) as % of (c) - 64 35 Total length serving the command area (a) + (d) - 416 350 The PAAM finds that the scope of the drainage works were reduced to 415 km, after a flooded area (zone 6 with 84 km) and another area too costly to be served (15 km) were excluded from project targets, although the former area was not reported in the PCR. At project completion in December 1983, the project had completed 146 km of primary and secondary drains, resulting in a completion rate of 35%. This does not agree with the PCR's completion rate of 64% which is based upon a reestimated target of 229 km of drains. The PCR concluded that 270 km of drains were excluded from the proiect targets since these had reportedly been constructed prior to project effectiveness (para. 4.10, Table 1). The audit questions this total of 270 km excluded from project targets, drawing attention to the fact that: (i) the actual amount of completed works prior to the project is in fact 204 km of primary and secondary drains, and the main collector canal; (ii) the bulk of such works were built long before project appraisal: between 1964 and 1966; and (iii) the works were constructed solely with Goverrment funds. 11. It should also be noted, however, that the available 350 km of drains, being 204 km constructed prior to the project and 146 km under the project, are largely adequate to serve a drained command area of about 40,000 ha.4/ Moreover, cropping intensities are higher than appraisal 4/ During construction, some of the drains envisaged at appraisal did not need to be constructed, particularly those in higher elevations where the main collector and/or primary drains remove sufficient water and additional drainage would lower the water tabie too much.  - 6 - estimates (para. 17) and project costs are 85% of appraisal estimates. Most other drainage structures (dikes, culverts) were built as targeted or as needed; farm access and drainage service roads were constructed at a cost of almost twice the appraisal estimates (para. 4.10, Table 1). On-farm Development 12. The project design originally conceived by INCORA and the Bank included land leveling on 20,000 ha of small farms to be carried out by Government through force account. In 1974 and prior to loan signature, at the request of the new Government and because of insufficient budget to finance all project components, this work was to be financed by the farmers themselves using subloans granted under the project (PCR, para. 4.15). At project completion in 1983, no credit for land leveling was disb-rsed because of farmers' unwillingness to incur costs higher than the returns derived from livestock undertakings, which remained their principal activity. OED's experience shows that such works are best carried out by Government concurrently with the drainage works because farmers do not normally see benefits in land leveling until several crop harvests have taken place. Credit 13. The project was to provide medium- and long-term loans to small- scale farmers (both private and INCORA beneficiaries) for three purposes: on-farm development--land levelling and tertiary drains--(58% of the funds); farm machinery (25% of the funds) and livestock (17% of the funds). Since INCORA serves only the beneficiaries of its agrarian reform program, no private farmers received subloans under the project. Of the US$5.7 million allocated for credit, 85% was disbursed through 1,953 subloans benefitting 1,120 existing and 19 new INCORA beneficiaries. Because civil works were still being constructed, drains were not yet operating and soils had not stabilized while farmer credit was being granted, 91% of the credit went for livestock, 8% for farm machinery and only 1% for on-farm development. The composition of the credit component reflected farmers' aversion to risk while the project was still being implemented, by favoring livestock rearing on pastures that could withstand flooding, instead of crop growing. Agrarian Reform 14. The agrarian reform component (settlement of 1,000 new families on 13,800 ha of reclaimed or purchased land) was a failure. Only two farms were purchased by INCORA during project implementation, amounting to 200.7 ha and benefitting 19 families. (PCR, para. 4.14 shows 950 ha having been distributed under the project). The component as such was doomed to failure from the outset, the record of previous project experience already suggesting that the agrarian reform policy as enunciated was not working. The difficulties of purchasing land from private owners were evident in the  - 7 - Atlantico Irrigation Project, which was approved in March 1967 and closed in December 1975.5/ Beginniing in the early 1970s, political opposition to INCORA's land expropriations heightened, delaying an intricate land tLansfer process which often lasts five years. Since 1971, the budgetary support to INCORA for land purchases became minimal. Finally, there were indications in the project area prior to 1974, and elsewhere in the country, that the sustainability of the associations of INCORA settlers (Communal Enterprises) was low. 15. Although in dollar terms total project costs at completion were estlmated to be US$30.5 million (or 85% of appraisal estimates), in domestic currency they were Col$1,767 million, or 196% of appraisal estimates (PCR, Annex B). While there were changes within the project, the cost overruns can be attributed to continual delays in implementation, and much higher domestic inflation than expected; the latter factor could not have been foreseen at appraisal. Out of the Bank loan of US$21 million, US$2.5 million were cancelled, final disbursement taking place on August 23, 1984. Social Infrastructure 16. INCORA coordinated the implementation of all social infrastructure, and implemented the construction and renovation of schoolrooms and health posts using contractors (PCR, para. 4 12). Overall, the physical targets for social infrastructure were mostly met (health posts, potable rural water and electricity), or exceeded by about 32% over appraisal estimates (new or renovated schoolrooms). The quality of construction in general meets design levels, although there is evidence of uneven quality in the construction or renovation of some schoolrooms. The individual facilities are being operated by the local departments of their respective ministries. Few of the roads provided under the project, however, have been transferred to the respective ministerial department which raises the issue of financing their maintenance. The social infrastructure facilities are being used by 30,000 rural inhabitants, many of whom benefit from more than one of the education, health, water supply and electrification components (PCR, para. 4.13). Project Outcome 17. The project was expected to change the land use pattern from pastures to field crops yielding a higher return. At completion, the area under pastures was higher than the without project situation. Low prices for cotton between 1976 and 1978, coupled with the soils not being stabilized, made livestock raising more lucrative. The table below shows the land use pattern as a percentage of the total land being farmed: 5/ See PPAR of Colombia - Atlantico Irrigation Project (OED Report 1841), dated December 28, 1977, and PCR of Colombia - Second Atlantico Development Project (Report 4579), dated June 23, 1983.  SAR PCR Audit Without With Actual Actual Project Project 1984 1986 1974 1984 -- - - - - - -- - - - - - - - - - -~~~,0 - -- - - - - - - - - - - - - - - Field Crops 43 80 35 58 Pasture 43 20 59 42 Unutilized 14 ^ - - Fallow - _ 6 - Total 100 100 100 100 Cropping Intensity 100 129 111 148 Net Drained Command Area (ha) 34,000 40,000 51,110 40,000+ 18. The PCR (paras. 5.01-5.04 and Annex C) shows a net drained area in the project perinmeter of 51,110 ha at project completion (11,110 ha had been reclaimed, above the 6,000 ha expected at appraisal). This was based on INCORA's final project report which was provided after the Bank's two precompletlon missions. The audit, however, found that this included 1,500 ha of undeveloped land north of the city of San Pelayo and west of the road from Cerete to Lorica, together with an area of about 10,000 ha west of the interceptor canal, which was mostly swampland (see IBRD Map 11080).6/ The total area drained by project investments has, therefore, been adjusted accordingly (see table above and PPAM, para. 22). The audit finds it surprising that an increase of over 10,000 ha in the size of the drainage command area did not result in further research by the Bank. 19. Two years after project completion, the project outcome has evolved in a positive fashion. Pastures now account for 42% of the physical area, tree crops for 10%, while the remaining 48% of the area is double cropped. At completion (1984), the recorded average yields in the drainage perimeter were slightly below appraisal expectations in cotton (2 t/ha as compared with 2.2 t/ha), and much below appraisal estimates in maize (2 vs. 3.2 t/ha) and in sorghum (2.6 vs. 3.2 t/ha).7/ Data for the 1986 crop season show that average yields had increased: cotton 2.6 t/ha and sorghum 3.6 t/ha, exceeding appraisal expectations. Yields of maize increased to 2.7 t/ha but remain below appraisal estimates. Livestock productivity has increased mostly by a doubling of the stocking rate from 0.9 to 1.9 animal units per ha at completion. In addition, the average lactation period has increased from 150 to 180 days and daily milk production from 2 to 3 1/day. Calving rates have remained largely unchanged. T 6/ Planimetric calc lations from INCORAIHIMAT maps, May 1987. 7/ INCORA study on private farmers and INCOPA field survey of December 1984.  -9 - 20. The agricultural components of the project directly benefitted 1,120 existing and 19 new INCORA settled farms (730 of which are solely livestock farms), and 3,643 private farms (PCR, para. 4.14). Since the agrarian reform program did not take place, the size distribution of land in the project aLea remains, at best, as it was before the project (see PPAM, para. 31). Direct and indirect beneficiaries of road construction are est.imated at about 100,000 persons, 30,000 of wvhom also benefit from the social. infrastructure. 21. Despite a recent finding that environmental issues do not normally receive careful attention in drainage projects,8/ such attention was given at appraisal. At audit, the drainage system had been operational and in general regularly maintaincd. The soils have stabilized, the organic topsoils are generally drained, and salinity has been washed out after several seasons of rainfalls. There are no reports that bilharzia or malaria exist in the project area. 22. The PCR estimates the economic rate of return (ERR) at completion to be 7%, compared with the appraisal estimate of 27% (Annex D). U-sing the aggregate data shown in Annex D, the audit estimates the ERR to be 5% at completion as a result of a reduction of 20% in the project's drained area, from 51,110 ha to about 40,000 ha. Because the cropping pattern had changed at the time of audit (PPAM, para. 17), a new estimate of the ERR can be made by taking the cropping pattern prevailing in 1986 and pro- jecting it until the end of the analysis in 1995. The combined effect of shifts from pastures to crop agriculture in 17% of the area, and from fallow to crop agriculture in 6% of the area, results in an ERR of 9%.9/ III. CONCLUSIONS AND MAIN ISSUES Overview 23. From the point of view of public and private productive investments (drainage, and farm inputs supported by credit) and public social investments, the overall impact of the project is favorable. The project area is a source of outputs and incomes which generate spillovers through the demand for services, output processing and farm inputs in the departmental capital of Monteria, and in small towns and villages in the project area and nearby. The Cordoba II Project was the first major land development undertaking carried out by HIMAT right after its creation. HIMAT completed the project at design levels and has become a leading autonomous institution in the public agricultural sector. HIMAT is 8/ OPS/AGR FY86 Project Implementation Review, November 7, 1986. 9/ Government's Informe Final del Proyecto, Table 9, indicates that in 1986, 63% of the area under pastures contributes 17% of net incremental benefits, while the rcmaining 37% of the area under crops contributes G3% of the benefits.  - 10 - satisfactorily carrying out the infrastructure in two Ban-,-financed projects--Irrigation Rehabilitation I (Loan 1996-CO) and II (Loan 2667-CO). The social infrastructure is reaching a large number of users who previously had poor or tno access to schooling, potable drinking water, health services and electricity. This favorable impact is unfortunately offset by the practically non-existent land reform benefits to new settlers and by the continued prevalence in the area of relatively large-scale faimers, contrary to the objectives which were central to the design of the project by the Colombian Government and to the Bank's approval of the loan. These aspects are discussed in paras. 24-31 below. Requirements for Sustainability 24. At completion, the project's sustainability was uncertain because the cropping pattern reflected then a predominance of low yielding, low risk livestock rearing, in contrast to appraisal expectations of a predominance of crop agriculture, particularly double cropping. If the trends observed at audit continue, the project is deemed to have consolidated and to now contain the basic requirements for a continued flow of benefits. There are two areas, however, that require further improvement to ensure the project's sustainability: timely maintenance of the drainage and social infrastructure, and regular updating of the technical knowhow of the extension given to medium- and small-scale farmers. 25. Maintenance of the Drair±age Infrastructure. Because of the physical characteristics of the project area (high temperatures coupled with high but unevenly distributed rainfall), the maintenance requirements of earthen drains are high in terms of proper timing of cleaning and cost of replacing rather specialized machinery. The useful life of the drainage cleaning machinery purchased under the project is nearing its end and replacement will soon become necessary. Because HIMAT's regional office in Monteria maintains good records and uses its machinery economically and efficiently, realistic estimates can be made of the likely cost requirements for maintaining the infrastructure. In 1987, HIMAT was j allocated a total of Col$66.1 million, or Col$1,700 (US$7) per ha, equivalent to 76% of the requirements for operating existing machinery. By comparison, in 1981, HIMAT was allocated about 60% of requirements for the Atlantico Irrigation Project.10/ This points to a pervasive problem of underfunding. In addition, the averagz annual value of new machinery needed to sustain the project's benefits is estimated to be, in 1987, about Col$81 million, equivalent to Ccl$2,000 (or US$9) per ha. Another requisite factor for sustainability which affects the maintenance schedules is the construction of test wells in selected sites for monitoring the level of the water table and the quality of water. Land values are increasing rapidly throughout the project area, giving an indication of the 10/ See Impact Evaluation Report of Colombia - Atlantico Irrigation Project (OED Report 3959), dated June 21, 1982, para. 6.04.  - 11 - perceived returns of the project, particularly from crop agriculture, and of the demand for agricultural land from sources outside the project area. This factor, together with a rising interest by farmers in land leveling, will create pressure for better maintenance of the civil works. F9nally, the audit finds that there exist some complementary works unfinished at project's end because of lack of time and funds. The completion of unfinished lengths of drains and other civil works, and especially drain no. 25 in zone 6, would extend the net benefits significantly as the drainage perimeter has settled and zone 6 is now bec:omingproductive. 26. Cost Recovery in Drainage Maintenance, HIMAT is responsible for the collection of maintenance costs and applies a billing formula so as to recover all maintenance costs and some overhead expenses. Billing of maintenance charges begarL in 1980 as drainage areas were completed. In 1987, the billed maintenance charges amounted to Col$1,464 (or US$6) per ha. Because of lack of coercive measures, only about 20% of billed charges are actually paid. The collected funds remain with HIMAT but are deposited in a general account (Fondos Comunes) not under the jurisdiction of the drainage perimeter. 27. The cost recovery situation in the Cordoba II project is not too different from the one prevailing in the Atlantico Irrigation Project in 1981, where the collection ratio was 10% of billed operation and maintenance charges. The collection ratio is higher in other HIMAT irrigated districts; in 1986 it was 81% in Samaca and 100% in El Juncal.11/ Even though the Cordoba II project is a drainage area, HIMAT could increase collection rates, diminish the drain on its budget, and improve the prospects of project sustainability. Practical measures to be taken to this end within the existing regulations are: updating the cadaster to identify new owners; establishing a unit of motorized collecting agents to visit the beneficiaries at the farm; and establishing users' ascociations, as HIMAT has begun under Loan 1966-CO, which should maintain some of the simple works and organize collections of maintenance charges. 28. Cost Recovery in t-he Social Infrastructure. The social infrastructure provided under the project faces similar problems of inadequate funding for operation and maintenance. The project schools do not have maintenance funds but the students' parents contribute money for minimum upkeep. The health centers and health posts receive their appropriations in kind on a semi-monthly basis. The potable water supply systems charge user fees in the range of Col$300-500 per month (with one exception of Col$1,000 per month). Whether this fee level will be sufficient to cover repair and maintenance costs of equipment and installa- tions is uncertain, particularly in the case of the smaller systems which lack economies of scale. 11/ Supervision Report of Colombia - Irrigation Rehabilitation I Project (Loan 1966-CO), June 15, 1987, Annex 4, Table 3.  -} Upu1, J3 I l Ih qi Te hIo III 0) I TheTe11 of the Extens ion System. The many ;nr,wmr in AI r itCves in Col.ombia responsible for the several aspects . ' .md ofgt:Icutltural development hiave not had a hi.3story of smoot:h 1 ho!e flcnthe1: and( thiis h1as always presented a problem in ,; ; 1S (4htvVlVe¶-iv; of integrated development. In normal practice, * ti2o'\ h. d I AO enot into operational agreemcnts covering thc-' participation <;its 'i lo l > :;i s;pecilc projects, but this procedure has not worked .* ¢.- Ii: -,ca the other agencies may g iv e higher prior-ity t.o their own oy,) r1 it r 1o hnan those of INCORA. Under the project, an extension "it \' *s jo be Lc ated under INCORA's supervision and administra_ion, 'Ixh IWQt'31RA p,tylng salayies anid otlher operating costs (PCR, paras. 4.17- '¾), P.xtnston agents were to be recruited and ttained by the Colombian t,,><I0, f,i )nstitute (ICA), assisted by the International Ceniter for 1-oplicalAgricultuire (CIAT), with ICA and CIAT providing technical guidance to tie agents based on their research programs in the Cordoba II area. Howcver, INCORA was never able to set up an effective extension service. ICA did not .,ave sufficient funds to carry out the required on-farm veseaich, anid its contract with INCORA was cancelled. A private consulting Finr was hired by INCORA towards the end of project implementation (December 1982) to train specialists in livestock farming. The initial orgainizationalwork and on-farm trials with dual purpose cattle started well, but because the project was at a late stage and INCORA did not recruit extra staff to be trained, the trials could not be replicated on a wider scale and few INCORA beneficiaries received assistance in livestock production. INCORA has barely managed, however, to satisfy the extension needs of its beneficiaries through the existing (in 1987) five veterinarians, five agronomists and 12 technicians. A doubling of these staff nulmbers is required, both to meet INCORA's adequate coverage ratio of iO sr,all-scale farmers per week per agent, and to compensate for the administrative duties presently charged to INCORA's staff. 30. Although unforeseen at appraisal, some INCORA beneficiaries and most private farmers benefit from an active system of private extension agents. The University of Cordoba has in recent years graduated a large rt,imber of agricultural and veterinarian professionals, many of whom provide private extension services. These extension agents charge for their services on a per hectare basis, according to the type of crop. In 1987, charoes ranged from Col$2,500 per hectare in maize to Col$4,000 in cotton (or US$11 and US$17 per ha respectively). The record of these extension systemrshas shown them to be successful and cost effective (livestock in Uruguay and crops in Paraguay). Even though the University, ICA, and farmer's federations offer occasional seminars and dissemination courses, rhe,e is no evidence that a comprehensive and systematic system exists to update the agricultural technical knowhow to increase livestock produc- tivity throughout the project area relying on improved breeds and to allow a changt ln cropping patterns to higher value crops (soybeans, sunflower and peanuts in rotation with cotton). Thus, the original project objective of halng a continuous stream of technological change feed into the exi eCosicnI system remains a requisite for further growth (SAR, Aiinex 3).  -13 - Esquiy Vt P_ro tInvesttments 31. Du1ring pro ject itmplementatirin, investment cost!; ( (i cui rchi 1'1ilt:.) tor the dratuage lofi astructure amounted to Col$1.1 bJ. lIio rI o r 11~ ' IQ " rallic:ni, excluding drainage investments made prior to 19 74. A/ n1n, l b-nefit al'a of 40,000 lia, t.Ihe ca.;t poer la nl c ii-rern t Ie rlw roun Col$,,8000 or US$500. Since the project started hI J9/x4l J{- th xiue agricultural land has risen at least by a factr(. of tel, to curicnt. ('ol$'1OO,0(O pex ha .In1987, 01 US$900. There is evidence that s_tlcE have taken place at values of Col$300,000 to (:al$400,000 cjpr hr. Tn a rT-c; tively homogeneous project area, the benefits from the drainage wo)1s ave proportionately correlated with farm size. A stvtvey carried out b INCOC)RA in 1981 covering private farmers in the project area shoJws that about 4,/ of the land is held in farm units betweeni 50 and 500 ha, and that 6A.of the land is held in units over 500 ha. Since land reform did not talkep:l.ee in the area, the private rent accruing to large-scale farmers is substantial3. (even ignoring the fact that some families may own more than one farnii). Surprisingly, TNCORA is still responsible for recovery ot the investments, placing it in a difficult position as fiscal agent for works which are neither its responsibility nor part of its mandate. A law exists (013/75) with a sophisticated formula to recover investments and capture a portion of the rent through a valorization tax. INCORA has taken the preliminary steps to begin the cost recovery process (valorization of land, calculation of agricultural returns and costs), and is planning to reduce significantly the recovery period. However, no actual recoveries have taken place. Though the law contains interest penalties for late payments, INCORA is likely to face difficulties in collecting charges fully throughout the area, because in a pure drainage system there exist no effective coercive measures to induce rnayments, in contrast to irrigated districts where water can be cut off. INCORA is required to approve sales of land, however, .nd could deny such approval to delinquent farmers.  tLq - VA-PIK-  - 15 - APPENDIX 1 Page 1 of 2 TRANSLATED FROM SPANISH Republic of Colombia - Mini cry of Agriculture Colombian Institute for Hydrology Meteorology and Land Development (HIMAT) Bogota 22 October 1987 Mr. Graham Donaldson Chief, Agriculture, Infrastructure and Human Resources Division Operations Evaluation Department World Bank Washington, D.C. 20433 Dear Mr. Donaldson: As you requested in your letter of September 3, 1987, I am sending to you the comments made by Dr. Fabio Petro, Director of HIMAT's Fifth Region, Department of Cordoba, concerning the audit memorandum you sent to us on the implementation and results of the Cordoba II Agricultural Development Project (Loan 1163- CO). Targets: The rate of utilization of drainage works to increase production and expand the productive area is 80% of appraisal targets. Land leveling to allow shifts in crop mix reached 60%. Provision of basic social services reached 90%. In general terms, the targets were met within the framework explained in your Memorandum. The assessments on the project's implementation experiences, its effects and its continuity, are likewise valid and correct.  - Ih - APPENDIX I Page 2 of 2 The dates contained in the Memorandum are in accord with the project's hlstor3cal record, and so are the difficulties xwhich appeared during project implementation. The most important contribution of your Memorandum is, perhaps, th-Ž discussion on the agrarian reform aspect whiclh must be tRken into accou.ntin future investments for programs of land developLment. The totality of the issues discussed during the field aud!t were included in your Memorandum, in a clear and concise way, and without additJons or omissions. Only in the recommendations section, there is missing PPAIM, the one dealing with the need to complete some drainage works, a para. 25 (new) need which is becoming more and more pressing. Jaime Padilla Reyes Chief, Office of Planning  - 17 - APPENDIX 2 TRANSLATED FROM SPANISH Colombian Institute for Agrarian Reform October 29, 1987 Mrm CGraham Donaldsoni Division of Agriculture, Irfrattructure and Human Resour ces Operations Evaluat ion Department World Bank Washingtorn Re: Project Performance Audit Memorandum - Cordoba II Agricultural Development Project (Loan 1163-CO) Dear Mr. Donaldson: Thank you for sending to us the Bank-prepared Project Completion Report (PCR) and your draft Audit Memorandum (PPAM), on which I offer the following observations: - There exists a difference in the command area of the PPAM refers to project between the PPAM (40,000 ha) and the PCR (51,110 net drained area ha). We consider the latter to be correct. within the proj- ect's command area. - The calculated rates of return differ among the Government-prepared completion report, the Bank's PCR Information and the PPAM. Please send to us the breakdown of the provided. monetary flows used by the PCR and the PPAM. - The Bank's PCR notes that 350 kms of drains have been constructed. The actual amount under the project is Endorses 145.9 km, while 204.1 km were constructed before the PPAM, para. 10. project was implemented. - The institutional performance of INCORA as given in the Bank's PCR does not coincide with the equivalent analysis given in the Bank's appraisal report, where the loan is justified by the good performance of INCORA in earlier loans. - Finally, I consider it of great need that for future evaluations, INCORA and Bank staff hold preliminary discussions prior to preparing the report, so as to unify the criteria pertinent to the financial and economic estimates. Sincerely, Natividad Daza Casilimas Deputy Manager for Planning Colombian Institute for Agrarian Reform  - 1P- c -~ A" fe,H elP  .- l 9 - PROJECT COMPLETION REPORT COLOMBIA CORDOBA II AGRICULTURAL DEVELOPMENT PROJECT LOAN 1163-CO June 21, 1985 Projects Department Latin America and the Caribbean Regional Office \lA C-  COLOMBIA CORDOBA II AGRICULTlRAL DEVELOPMENT PROJECT (LOAN 1163-CO) Project Completion Report T. INTRODUCTION 1.O1 Agriculture, a key sector in the Colombian economy, conitributed 26% of GDP in 1973. Ihe overall growth rate for the sector averaged 4.eb%in real terms in 1965-73, compared with ?.7% in the early 1960s. During these years, government policy had been successful in diversifying production and reducing the country's excessive depenoence on coffee. Agricultural exports accounted for about 73% of merchandise export earnings in 1972. 1.02 Rural poverty and unemployment remained serious problems, however. The sector employed 43% of the labor force in 1972, and while unemployment was estimated at only 4%, underemployment and seasonal unemployment were serious problems. Average per capita income in rural areas was only half the level in urban areas; at least half of Colombia's 1.6 million rural families existed at a subsistence level. Moreover, the poorest 40% of the rural population received only 12% of total rural income, reflecting the concentration of land ownership: in 1970, 10% of the farms accounted for 80% of all farmland. This latter figure was the same as in 1960, despite the Colombian authorities' efforts at agrarian reform through the Instituto Colombiano de la Reforma Agraria (INCORA). II. BACKGROUND 2.01 Between 1966 and 1975, when the Cordoba II project was approved, the Bank had approved seven loans for agricultural development, for a total of glmost US$94 miillion. Four projects helped finance land development and settlement; the other three provided credit, two of them specifically for livestock development. 2.02 In the early 1970s, INCORA's priority was to complete its semi-completed irrigation and drainage projects, rather than beginning new land development schemes. In 1972, INCORA staff discussed data for 17 project ideas with the Bank, for 11 of which (including Cordoba II) they were seeking external financing. Work on an irrigation project had begun in the Cordoba II area in 1967, but a feasibility study completed in 1971 proposed instead that a drainage system in the area would allow two crops to be grown a year and was economically justified without supplementary irrigation. III. PROJECT FORMULATION A. Preparation and Appraisal 3.01 In September 1972, the Government and INCORA requested Bank assistance in financing the Cordoba II project, based on the feasibility study carried out by consultants in 1969-71. The project was appraised by a Bank mission in February/March 1974.  - 22 - B. Negotiationsand Board Presentation 3.02 Although the loan documentswere ready for transmittal to the Loan Committee bv February 1975, it was March 1975 before the Government that had come into power in August 1974 unofficially approved the project, subject to several changes being made. Loan Committee submissionwas therefore delayed until early May 1975. Negotiations were held in late May 1975 in Bogota, Colombia. 3,03 Board presentationtook place on June 26, 1975. Several comments and questions were on INCORA's agrariJn reform program. One question particularly relevant for the Cordoba II project concerned cost recovery charges; the speaker was concerned that if these were too high, the smallest farmers might be discouragedfrom participatingin INCORA's program. It was believed that the level of charges would not be beyond the ability to pay of even small farmers. Charges for O&M of the drainage system and partial recovery of investmentcosts would be levied according to farmers' ability to pav, and larger farmers wouild pay, in addition, a tax equal to 25% of the increase in the value of their land. Another question concerned the possibility of using subloan repaymentsto create a revolving fund, so that the farmer credit componentwould be self-perpetuating, but it was pointed out that an upcoming credit project would meet this need. C. Objectivesand Description 304' The project was to promote integrated and balanced developmentof the Cordoba II area, by completingthe land development and agrarian reform begun by INCORA several years previously. Specifically,the project would help to: (a) raise productionin a promising agriculturaldistrict, by drainageworks to eliminate flooding and expand the agriculturallyproductivearea; i(b) improve the quality of life for the rural population, by increased rural incomes, provision of basic social services, and settlementof landless families through land reclamation and expropriations; (c) strengthenColombia'sbalance of payments situation;and (d) generate employmentopportunitiesfor surplus or underemployed labor in the project area, 3.05 The project was to complete the drainage works on 40,000 ha, which, together with land levelling on 20,000 ha, was to eliminate both permanent and temporary ponding and allow reclamationof 6,000 ha of flooded land. The productive area was to be expanded from 34,000 ha to 40,000 ha; double cropping was estimated to be possible on 1,500 ha of this area. Project works would include constructionof primary and secondary drains, a flood protection dike and collector canal, culverts, bridges and all-weathe- roads, INCORA would manage an agriculturalcredit fund in Caja Agraria to provide medium- and long-term subloans to small farmers (with less than 12 ha) for on-farm development,construction,and purchase of farm machinery and breeding stock. The agrarian reform program utider the project foresaw  - 23 - expropriationof 7,800 ha of land from private farms with over 50 ha, which together with the 6,000 ha of reclaimed land would be used to settle about 1,000 familieson 12 ha plots in community enterprises. The project would provide extension services to farmers in farm management and crop technology. Expert technicalassistancewould be provided to help INCORA improve the organizationand efficiency of its accounting proceduresand to set up cost recovery mechanisms. Finally, the project would improve and expand social infrastructure for education, health, village water supply, rural electrification and telephone service. D. Project Cost and Financing 3.06 The total project cost was estimated at US$35.7 million, including physical and price contingenciesand intereston the proposed loan during construction. The Bank loan of US$21 million was to finance 59% of total project costs, comprising the estimated foreign exchange cost (US$16.9 million), plus US$4.1 million of local costs, which was justified on countr; economic grounds (see President'sReport, para. 11). The balance of local costs (US$14.7million) was to be financed by the Government. IV. IMPLEMENTATION A. Key Events 4.01 Loan signing took place on September 12, 1975. Because 18 months had elapsed since appraisal, the constructionof a collector canal and flood protectiondike, which had been included in the project cost, was completed before loan signing. The Loan Agreement was amended on September 2, 1976, to provide US$60,000 in retroactivefinancing for these works. 4.02 The only project-specific condition of effectivenesswas execution of the subsidiaryagreement between the Government and INCORA, and the agreements betre6n lICORA and Caja Agraria and the InstitutoColombiano Agropecuario (ICA). Delays in finalizing these agreements resulted in the original date of effectiveness(January 15, 1976) being postponed twice (to March 15, 1976 and April 30, 1976). The loan was actually declared effective on March 30, 1976, nine months after Board approval. 4.03 The appraisal report anticipated a five-year implementation period, with project completion scheduledfor December 31, 1980. However, the project encounteredserious problems and delays. Moreover, INCORA's inability to resolve accountinginconsistenciesand secure satisfactory audit reports resulted in suspensionof disbursementsfrom February 10 to July 12, 1983. In 1980, the Closing Date (June 30, 1981) was extended to June 30, 1983, and the expirationdate for use of funds in Category 6 of Schedule 1 (Interestand Other Charges) was extended from November 30, 1980, to November 30, 1982, which would allow use of the US$1.9 million not yet disbursed from that category. Subsequentlythe Closing Date was extended for the second time to December 31, 1983. The project was substantially completed and, with the Borrower'sagreement, the amount of the loan outstanding (almost US$2.5 million) was cancelled as of August 23, 1984, the date of the final disbursement.  B. Lln1pleQmetLatiun Ptr o lems ,eorganl. zat ion of I NCOMA 4. 04 T'h tig g Il it e x perience a J th eir 1l er project -s imlp 1cmeIted biy I NCORA, gIl 1,olnkl v0.,. Tht(..o', the agency 's 5cVrions or.izni 7tlonal deliciencies and vJo.lI-ttigielm'ot psroht] et As the (O eM(III llt thaiIt came to pow I in Augus t 1 974 had mentioneri reoiganization of )NCORA as a task it would undertake if elected, the I'rL'1 t Agree ment required INC OK A to at tor i he Baank a reasonaHI e opportiui tv to conmm?nt o any proposed reorgani:?at Ion tihat mighlt at fect project exIr inOrl (ProIjecLAgreerent, Section 1.03). In fact the Bank was not given time to comment on the proposed reorganization of INCORA, but accepted the changes since it anticipated that thev would lead to an improvement thronugh separation of INCORA's agrarian reform and water development ftiict ions. 4.05 This reorganizatiorn of INCORA into two institutions occurred in early 1976 (Decree No. 132 of January 26). The division along functional lines left INC-ORAresponsible for agrarian reform and resettlement, while a new institution, the Hydrology/Meteorol.gy and Land Development Institute (HI11AT), was to be responsible for the construction and maintenance of irrigation and drainage systems. HIMIAT thus acquired responsibility for land development atnd civil works under the Cordoba II project. However, INCORA retainied responsibility for overall project implementation (as stated in the Loan Agreeme !) atnd for the othEr project co7ponents (agrariain reform, credit, technical assistance and social infrastructure). INCORA and HIMAT signed a subsidiary agreement for project implementation on August 23, 197b. iluJune 1978, the Bank requested that HIMAT establish a separate project account and that it be audited. 4.06 The splitting of the role of executing agency between INCORA and H1MAT caused implementation delays and a lack of cooperation. Delays in letting tontracts occurred because overall authority for use of loan funds remained with INCORA, which therefore had to review and approve HIMAT's procurement. A lack of cooperation between INCORA and HII4AT project managers also occurred at the regional level, and as a result a committee established to discuss and implement cost recovery mechanisms never met. Shortage of Counterpart Funds 4.07 The Government's failure to allocate INICORA and HIMAT a sufficient budget also caused delays in project implementation. In particular, implementation of civil works was much slower than anticipated at appraisal, since annual budget allocations in some years allowed HIMAT to do little more than meet existing contract obligations. 4.08 ln view of INCORA's financial difficulties, Bank staff had included provisions for recovery of operation and mainteniance (O&M) charges for the drainage system..For the first time, partial recovery of capital investment by INCORA was also anticipated. Work was Fcheduled to allow sequential completJon of civil works hy zone, so that partial recovery of capital costs could begin during implementation. This approach was not followed, however, so that works were concurrently underway in all zones. In 1981, HIMAT did atterpt to rec.iver part' of the 0&M coF;t for drainage woiks in two zones. AlthoughJ it billed farmersr for only half thie actual 0&0 cost, only Iwo; fai u.s 0t (of01 bill('i onit paLd the ch.iepes. C, Project (Cnponen t s 4,0 '9T11;f I cr so which thfe project met its physt cal tArgots is showrn in Tnlict ] discus-'ion 'ihcfo1h-lo.iJnj by lproject component brieflv note,. the chalnges. anrlachievmcriat.s of eac(h. (i.vil Wortks 4.10 Some minor modifications were made to the design of civil works for tlhedrainiage and road system proposed at appraisal. One canal was dropped from thieproject (see footnote to Table 1), but some new roads and bridges were added. However, some bridges and culverts were never completed because of shortages of couinterpartfunds. The length of drains constructed was 64% of the target, but the length of roads completed was almost double the appraisal estimate. 4.11 Almost 100,000 people benefitted from the project's civil works, comprising 7,600 iNCORA beneficiaries and 89,100 private farmers in and around the project area. The total area of productive land is 51,110 ha, compared to the appraisal estimate of 40,000 ha. The project reclaimed 17,110 ha of swamp land, compared to the 6,000 ha foreseen at appraisal. Tnis increase resulted from an extension of the project area, as well as reclamation of somn low-lying pockets of land not expected to be drained. The roads improved communications, reduced the cost of transporting crops and opened up new markets for farmers. The impact of these improvements on land use and production is discussed in Section V. Social Infrastructure 4.12 The construction and renovation of schoolrooms and health centers/ posts began slowly because the institutions that were to carry out this work (the Colombian Institute for School Buildings, ICCE, and the Ministry of Health) did not fulfill their agreements with INCORA. This led INCORA to contract for construction or replacement of the schoolrooms itself, and to construjct or renovate the health centers/posts with assistance from the Colombian Institute for Health and Health Services for the Department of Cordoba. The two,nospitals were renovated by the Ministry of Health using its own budget. The rural electrification component was completed in 1978 by the Colombian Institute for Electric Power (ICEL) and was then expanded to extend service to two more villages. The water supply component was implemented by INPES, the institute within the Ministry of Public Works responsible for village water supply; although it was the slowest to move ahead Lnitially, it was completed, and in fact expanded to include two additional villages. No telephone connections have been installed in the project area.  - Th - Table 1. Main Physical Targets and Accomplishments (a) (b) (c) Expected Actual (b) as % Completion 06/30/83 of (a) Civil Works Drains (km) 229 a/ 146 64 Dikes (km) 7 7 100 Roads (km) 168 317 189 Culverts, bridges and other structures 24 6 25 Project buildings 1 2 b/ 200 Social Infrastructure Education School rooms - new and replacement 210 81 39 - renovated 100 329 329 Teaching kits (units) 220 100 45 Health Health Centers & health posts - new 6 7 117 - renovated 6 6 100 Hospitals - renovated C/ 2 - - Rural Water System (No. of villages) 11 13 118 Rural Electrical System 4 6 150 Telecommunications System 4 0 0 Agrarian Reform Hectares distributed 13,800 950 7 New community enterprises d/ 100 0 - Families settled e/ 1,000 21 2 a/ The total length of drainage canals in the project area was to be 514 km (see Map IBRD 11080 attached to the Appraisal Report). By the time of project effectiveness, 270 km of main and secondary drains had already been completed. In addition, a 15 km section of one drainage canal was dropped after project approval because of the unanticipated cost of a dike necessary to protect a seasonally flooded area of only 200 ha. Thus the target for completion of drains under the project is given here as 229 km (the supervision mission reports, however, always used the target for the whole system, i.e. 514 km). b/ INCORA's headquarters building was renovated and a new building constructed for HIMAT. cY These two hospitals were renovated by the Ministry of Health using its own budget. d/ 40 community enterprises initially set up under the project have gone bankrupte e/ It is believed that the number of families settled in the project area through INCORA is higher than 21, since this figure is only for families who have been issued land titles. Source: INCORA, December 10, 1984.  - 27- 4.13 Overall, the physical targets for social infrastructtre were mostly met or exceeded, and the ben-fits from the services they provide are believed to he significant. The total number of classrooms provided exceeded the appraisal target, although a much greater number were renovated rather than new classrooms. Similarlv, the components for facilities for health, water supply and power more thanimet their targets. The health centers are satisfactorily equtipped and staffed, and the power and water supply systems can meet present needs but are poorly operated. These facilities serve large numbers in the project area, as shown in Table 2. Although there is clearlv some overlap, with beneficiaries enjoying the services provided by several components, the data sulggestthat the social infrastructure provided under the project serves many of the appraisal target group of 35,000 rural inhabi tatits, Table 2: Beneficiaries of Social Components Beneficiaries Component INCORt Private Total Education 4,211 14,121 18,332 Health 4,579 25,953 30,532 Water supply 5,124 23,744 28,868 Electrification 1,246 3,848 5,094 Agrarian Reform 4.14 INCORA failed almost totally to meet its agrarian reform targets in the project area. It continually faced political opposition and received no strong government commitment to its reform program. INCORA was supposed to produce e plan for-agrarian reform by Match 30, 1977; the plani was finally produced by early 1978, at which time the proposed targets seemed feasible, provided the legal procedures for land acquisition could be accelerated. By 1981, however, it became obvious that lack of government support would prevent further expropriation of private land. Thus under the project only about 950 ha were distributed to INCORA beneficiaries (7% of the appraisal estimate). Most of the reclaimed land is privately farmed: the number of private farms has increased by one third and these farms now account for three quarters of the project area (see Table 3).  2 ?8. - 'fable 3: Laid Tfenure: Appraisal Targets and Outcon- Pro-projoct - Target ActLual No,. of al- Is N.o of area 1No,of area i arm tamaied farms farmed fa rms farmed ha ha % ha % befel c. 1,) 2u 11,ifii. 33 2,120 25,100f 63 19139 12,25() 24 PrTvate , 72 22,7L 67 n.a. 14,900 37 3,643 38,860 76 f armers Total 3,844 34,0008/100 40,000 100 4,782 51,110a/ 100 a/ The project area included6,000 ha of swamp land that was to be reclaimedunder the project. In fact, 17,110ha were reclaimed. Credit Component 4.15 TMe project was to provide medium- and long-term loans to small farmers (both private and INCORA beneficiaries) for on-farm development, farm machinery and livestock development. Demand for credit was strong initially, wiith the first subleas approved in December 1976. At that time, INCORA was plomoting cotton production, though its advice proved ill-founded when cotton prices dropped and scils in the project area were found unsuitable for crops generally. Moreover, during preparation and appraisal, it had been assumed that on-farm land levelling would be carried out through force account, but a change introducedat the Government'srequest required these works to be carried out by the farmers using credit provided under the project. The effec.tof this change only.became obvious during implementation, however: demand for subloans for oh-farm development was restrained by farmers' reltuctance to undertake on-farm improvements for which they could not see the potential benefits, in particular where most of their land was in pasture. As a result, implementation of the credit component slowed for some time, but picked up with the demand for lending for livestock development. 4 16 The credit component appears to have benefitted a large .- umber of small farmers in the project area, although it was used more for livestock development than land improvement as foreseen at appraisal. Land improvement subloans, which the Appraisal Report estimated to account for 58% of the value of all subloans, actually accounted for only about 1% (see Table 4). Livestock subloans accounted for over 90% of the total value of subloans, compared to an estimated 17% at appraisal. Overall, 1,953 subloans were approved, for a total of Col$ 322 million. Beeause INCORA serves only the beneficiaries of its agrarian reform program, no private farmers received sub1oans under the project.  - 29 - Table 4: Credit_Component: Appraisal Targets and Outcome Number of0 Vnlue of Subloans Subloans I1 AirainalSa Est _ Actual AcItnal zJo1$ A! '000 (JlS CO "u Ap, t ral rlc uI iprnc nt qui 47 37,950 2' 2, i78 8 Livestock 1,824 25,3w0 1? 291, b29 9i Land improverert 82 88,550 58 4,030 1 Total 1,953 151,800 lou 321,837 lU) a/ The Appraisal Report does not give an estimate for the number of subloans. Technical Assistance 4.17 Technical assistance under the project comprised two parts: (a) ICA was to carry out on-farm research, help train extension agents and provide assistance to farmers in farm management and improved crop technologv under contract with INCORA; and (b) consultants were to assisL INCORA wiLh: lan_ leveling; setting up a system for the assessment and collection of project charges; organizing an extension service and training extension agents; and improving its organization and fiscal management. Tne 10.5 man-years of consultant services provided under the project were fully used. 4.18 I'NCORAwas never able to bet up an ef-fedtivb.extenslon service0 JCA did not have sufficient funds to carry out its required tasks, particularly on-farm research, and its contract was cancelled. Supervision missions continually reminded INCORA of its obligation to establish an extension service. Because of the increasing importance of livestock, INCORA was urged to employ livestock technicians, but only when it became clear to INCORA that livestock was the predominant type of farming did it agree to hire such specialists. Further delays occurred because of INCORA's reluctance to hire consultants with the level of expertise required by the Bank. In July 1982, the Bank agreed to let INCORA hire local conisultants and a contract was signed in December 1982. The consultants began working in April 1983, but Loan 1163 was closed at the end of the year. Because INCORA had insufficient funds to cover the balance of the contract after the loan was closed, the Bank agreed to finance the remaining 50% out of Loan 1737-CO (Agricultural Credit IllIProject). Despite these efforts, INCORA did not recruit local staff who could be trained by the consultants, with the result that INCORA never developed a livestock extension capacity and very few farmers received assistance in livestock production. 4.19 INCORA was also slow to hire other consultants. Because there was little demand from producers for credit for land-levelling (para. 4.15), the Bank agreed in March 1977 that INCORA need not hire an irrigation engineer. At the same time, in view of INCORA's serious management and accounting  - -0 problems, the Bank began urging INCORA to contract experts in these areas, but it was thenend of 1979 before consultantswere hired to design a fitnancialreporting system for INCORA--andless than a year later, INCORA cancelled the contract because of disagreementswith the consultants. Within a vear, other consultants had been hired but their work has had little irI pa c t a D h Cs and F cn 4,.20 The project was only 80% completed, which resulted in similar dcclines in botlh the total project cost (US$30.5 million, compared to US$35.7 million estimated at appraisal) and the amount of the loan (US$18.5 million, compared to US$21.0 million). The cost of the two main components financed out of the Bank loan - civil works and credit - was close to the appraisal estimates. However, some civil works were never completed, and the cost of goods and equipment to implement this component increased by one third. Loan disbursementsfor the social infrastructure component increased by the same amount, Although these increaseswere partly due to changes in items covered, they also resulted from cost increases caused by continual delays in implementation. The cost of consultantservices was 60% higher than the original allocation,with only a slight increase (0.5 man-year) in services Drovided. Moreover, the balance (Col$ 10 million) of the contract for the livestock consultantswas financedout of Loan 1737-CO (see para. 4.18). E. Disbursements '.21 The disbursementrate was consistentlyslower that anticipated (see Basic Data Sheet). Major reasons for the slow disbursementwere: (a) slowness in processingsubloan requests; (b) major reorganizationof the executing agency, which resulted in lengthy approval procedures for new expenditures(see para. 4.06); and (c) lack of counterpart funds. F. Procurement 4022 Procurementdelays were experienced throughoutmost of the implementation period because: (a) initially project staff (particularlyof HIMAT) were unfamiliarwith the Bank's procuremei;t procedures; this required a considerableBank effort (both from supervisionmissions in the field and through correspondence) to improve HIMAT's performance; (b) there was inadequateadvance planning of procurement;(c) the implementing agencies lacked counterpartfunds; (d) friction between HIMAT and INCORA led to delays in INCORA's approval of procurement;and (e) frequent staff changes affected the management decisionprocess of both INCORA and HIMAT. The bulk of procurement (for vehicles, tractors and equipment for maintenance of drainage canals) was carried out through ICB in accordancewith Bank guidelines. G. Noncompliancewith Covenants 4.23 rhe Borrower compliedwith the covenants in the Loan Agreement, except the timely provision of counterpart funds (Loan Agreement, Section 301 (a) and (b)). However, the implementingagency (INCORA) has failed to meet several major obligationsunder the Project Agreement.  - 31 - (a) Accounts and Audits. Until 1983, when the Bank temporarily stopped disbursements,INCORA failed to comply with the covenants that it: (i) maintain the project account in accordancewith sound accountingprinciples; and (ii) furnish to the Bank within six months of the end of INCORA's fiscal year certified copies of the audited account and an audit report (ProjectAgreement, Section 4.01 (a) and (b)). Audit reports receivedafter resumption of disbursementswere still not satisfactory,nor timely. (b) Collectionof Water Charges. INCORA/HIMAT were to establish, with the help of a consultant, systems to recover from beneficiary farmers: (i) operating and maintenance charges; and (ii) 80% of investmentcosts at not less than 12% interest over a period not exceeding 20 years (Project Agreement, Sections 4.03 and 3.02). No cost recovery systems have been developed. (c) Agrarian Reform, The agrarian reform component of the project could not be carried out, mainly for lack of political support (para. 4.14) (ProjectAgreement, Section 2.09). (d) Credit for Private Farmers. INCORA was to provide credit to both INCORA beneficiariesand private farmers (ProjectAgreement, Section 2.02 (a)(i)). In fact no credit went to private farmers because INCORA serves only the beneficiariesof its agrarian reform program. 4.24 In addition, INCORA did not comply with the conditions relating to the efficiency of its management, organization and operation (Project Agreement, Sections 3.01 and 3.02). It also failed to maintain adequate records on the progressof the project that could be used for monitoring and evaluation (ProjectAgreement, Section 2.06 (b)). Although INCORA did not enter into agreementswith some ministries and agencies that were to carry opt the social infrastructure component (ProjectAgreement7 2.02 (c)), it did carry out this work satisfactorilyitself. 4.25 Two conditionsof the subsidiary loan agreement between the Borrower and INCORA require (a) INCORA to repay to the Government those portions of the Bank loan used to finance: (i) credit to farmers; (ii) 80% of the Bank's contributionto investment in major project works; and (iii) equipment; and (b) farmers to repay to INCORA 80% of the investmentin major project works. The timeframe for fulfillment of these condition is, however, beyond the period covered by this report. V. PROJECT IMPACT A. Agricultural Impact 5.01 Completionof the drainage system in the project area was successful in expanding the net usable area, achieving 110% of the appraisal target (Table 5), This figure includes an expansion of the project area by 11,110 ha (see para 4e11)e  - 39 - Tobl 5i: Liand Use raisal TarEget and Outcoue Ac tual as % of l[re-ao jc. 1 atr>,cCL tua AL, are ha h ;' haa 1 ci d- orT I 7, (9t. 4 I11 80(o 80 17,79(0 35 56 P'a s t tor o 1000 43 , 200 2t) 30, J90 59 3 ,8 i lt 1 ; rOd 09 i 1 1 5 - _ _ Fa 1 ow 3 ,130 n) To'.il 4(;90(i0 4(1,00) 5 1,1 10 128 Double cropping 119500( 5,780 51 Net usable area 34,MGaO 51,500 56,890 110 Source: INCOKA; see Annex C. 5,02l Table 5 shows that the land use pattern did not change to the extent anticipated at appraisal. The area double cropped is half the alplaisal estirate, dne mainly tc cvtruoptimistic assump)tions about the amount of iainfcd production that would be possible with the level of rainfall in tO)e project area. This, togetlherwith low prices for cottoI. during tlheearl' -ears of the project (1976-78) and the inclination of small tarmers to avoim risk, resulted in a shift away from crops into pasture for livestock production0 In addition, much of the former swamp land comprises very heavy soils more suitatble for pasture or rice than for other crops. Overall, the project resulted in a substantial increase in livestock production, with a '78% increane in the area un'de'r pasture, and an -increase of almost 407f'. (including double cropping) in the area under crops. 1.03 Total production of crops (excluding subsistence crops) in year 9 of the project was 25,000 tons higher than in the "without project" situation, even thoughi it was only 48% of the target production tonnage. klthough no figure- on meat production are aviilable, the number of animals increasdci froau2,5.i; in 1974 to 15,443 in 19ba (an increase of over 500%) and milk production irom 2.2 million liters to 17.1 million liters (an increase of almnost 700>). The net value of production, estimated at Gol$58.9 million without the project, had reached Col$95.2 million by 1984, a 62% increase. 5.04 l',c- Project achieved an expansion in croop productioTn, but not the diversific:t-,nn foreseen at appiaisal. Two new crops - soybeans and sesame - were projected to accou-int for 22t,of the cropped area after project completion, but in fact are not grown in the project area. The areas under cotton and sorghum increased as projected (achieving 71Z.and 84/., respectivelv, of the appraisal targets), but Lhe area under maize declined to 74i.of the "withour project" situation. The area under subsistence crops was projected to remain at 2,000 ha, but in fact increased by 73%. 5.,)$ Yields .'he th-,ree ma;jor crops cotton, maize and r.orghum - are all achieving yiikls higher Than the "wlthout project" sitUatioll (which assoried a 1W, JII( lt-ase in 192-3 yiel ds by 1 985 withlout the project). Ac tual increa,;o-s were 18-b4%, corCpared to the 45-88>'anticipated at appralsa] (see \Ijnex Prt) resent yields are abcIut h\alithe levels achfieyed nt nearby J(CA (5 . ''1 ;1t i{l. 'D lIt, Kcal incomes of some 49780 producers in the project area were, on ovct _- , .uI az ,9l; in J964 compartd to the appraisal est-imate of tol~ 1a,,3() withouit he I,rojeet-a Increose o( 30(4_ It is believed--by hoth hnnl a .i IN(A>iRA stafi who lhave been workifig in t ht project arc a--that i nc one di spnr3 ties in the project area have been reduced, and thnt higher incomes and the1 improved social services provided through the project have alleviated migration to urban areas. B. Environmental Impact 5.,u7 The project had a positive impact on the environment. Draining the land and opening it up for agricultural production has both increased the arablc land area and reduced healthi risks associated with mosquitoes and water-borrne diseases. C. Economic Impact UC Iref colrac rate of returc. (LLR) of the pI estiMatLe S.Ct 1S at 7z (Anne-: 0), compared with the appraisal estimate of 27>c. The ERR calculation w-< .r oil irlormation provided b) INCOIKAor the projet l S impact c, production. The benefit stream included only quantifiable benefits derived from on-farm production, 1/ and the cost stream all costs except 90>.of the social infrastructure costs and the cost of INCORA's management consultants. A11 project outputs (except milk) were considered traded commodities. 2/ The difference between the estimated ERR and the actual outcome is due mainly to implementatiop delays 6ecause of institutional problems (para. 4.06) and the strong preference of small farmers for low-risk livestock rearing. Although the strong emphasis on livestock production differed substantially from the production pattern foreseen at appraisal, it nevertheless proved quite economic for smallholders. 1/ It was assumed that by year 10 of the project (1985), the land use and cropping pattern in the project area has stabilized and that further increases in production will come from an estimated 10% increase in produictivityfor the 1986-95 period. HIerdsize and productivity are assumed to stabilize by year 17 of the project (1992). 2/ Efficiency prices were derived according to their net external trade position (i.e. cotton and beef considered as exports, maize and sorghum considered as import substitutes). The price of milk, adjusted by a standard conversion factor of .93, was considered to be representative of its economic price. The future prices of traded commodities were estimated, in constant 1975 terms, according to trends projected by the Bank's Economic Analysis and Projections Department.  -- 34 VI. INSTITUTIONALPERFORMANCE A. Implementing Institutions 6.01 From the beginning it was recognized that INCORA was institutionallyweak. Provision was made in the Project Agreernent for the Bank to review proposais for INCORA's reorganization,which was anticipated when the new government came into power soon after Board Presentation. The reorganizationoccurred, and although the Bank was nct consulted, it accepted the revised structure of INCORA that effectively split off all aspects relating to irrigation and drainage under a new agency, HIMAT. However; despite the autonomy given to HIMAT under the reorganization,the project continued to use INCORA as the executing agency. This inevitably led to conflicts. However, whereas INCORA's institutionalweaknesses persisted throughout the project, HIMAT gradually improved and was functioningquite well by the fourth year of the project. 6.02 Most of the other implementingagencies performed quite well viz., Colombian Institute for Electrical Power (in charge of electricity), Colombian Institute for Health and Health Services for the Departmentof Cordoba (ii charge of health), and the Fund for Feeder Roads (in charge of road prograi,s). An exception was ICA, which was to help establish INCORA's extension service but lacked the resources to do so (para. 4.18). B. Consultants 6.03 The impact of the technical assistance provided under the project (see para. 4.17) was less effective than anticipated,mainly due to INCORA's slowness in hiring consultantsand in acting on their recommendations. In December 1979, INCORA czontracteda local firm of consultantsto improve, their financial reporting system, but thefr'performarinewas unsatisfactory. New consultants were contracted in 1981, but their recommendations had not been adopted by the completionof the project. Delays in hiring consultants for training and setting up a livestock extension service were even greater. After INCORA's initial reluctance to develop a livestock extension capability, a lengthy delay occurred because of disagreementbetween the Bank and INCORA on the level of qualificationsfor livestock consultants. In 1983, a local firm was hired but worked only with INCORA beneficiaries, rather than all producers in the project area. Moreover, INCORA did not organize a technical assistance unit to work with the consultants and only 3 technicianswere trained. The work of the consultantshas thus had little lasting impact. C. Auditing and Reporting 6.04 Throughoutthe project, audit reports were submitted, but the results were unsatisfactory. The Comptroller General, who was responsible for auditing of INCORA accounts, gave adverse opinions in 1982 and 1983 because of: (a) lack of supporting documents related to the Bank's accounts;  - 11) - (b) discrepancies in the project records; and (c) deficiencies In maintaining an adequate accoujnting system. INCORA failed to take necessary corrective action until after the Bank suspended disbursements on February 10, 1983. Disbursements were resume' on July 12, 1983. Similar]y, Progress Reports wiere submitted to tthe Bank on time, but the absence of a mcnitoving arid evaluation unit has meanit that the quality of reports hias been pooY. VII. BANK PERFORMANCE 7.01 The host of problems technical, financial anidinstituitional - Lhat emerged during implementation suggest that potential probleiuswere not fully appreciated in designing the project. Although supervision missions were diligent in reporting problems that occurred during implementation, the Bank was not very effective in Influencing INCORA to take corrective action, as described below. 7.02 On-farm Development. The project design originally conceived by thie Bank and INCORA included on-farm work on small farms to be carried out through force account, but at the request of the government that came into office in 1974, this work was to be financed by the farmers themselves using subloans granted under the project. However, the impact of this change was not fully appreciated; farmers' unwillingness to fund these works because of the predominance of livestock agriculture over crop farming, and also because of HIMAT's failure to maintain the main drains, resulted in a lack of demand for credit to carry out on-farm improvements. 7.03 Provision,for Cost of Maintenance during Implementation. Although problems of drainage canal maintenance were anticipated during appraisal, no steps were taken to ensure that INCORA could maintain main drainage canals already constructed in the project aiea. No O&Mbudget is allocated by government until completion of drainage works; hence rapid growth of waterweeds and silting occurred during the project's protracted construction per.tod. The equipment needed for'O&M was als63underestimated. -Althodghgomte of the early supervision missions noted the problem of canal maintenance, it was not until early 1980 that a supervision mission recommended that INCORA hire consultants to study the extent of the problem and recommend solutions. The study was completed by September 1980, 1hutthe lack of maintenance equipment delayed work until August 1981, when loan funds were reallocated (from Category 7, Unallocated)for the purchase of maintenanceequipment. 7.04 AgriculturalProduction. The level of agriculturalproduction likely to be achieved was overoptimistic. The Appraisal Report foresaw development of crop production rather than livestock raising, and therefore planned for efforts to transfer crop production technologythrough the extension service that INCOKA was to establish. Instead,almost 60% of the project area is used for cattle (unimprovedand improvedpasture). Three factors account for this: (a) inadequate provision for maintenance of drainage systems, which resulted in flooding during the rainy season; (b) overoptimisticassumptions about rainfall and soil quality (reclaimed soils were heavy clays, suitable only for pasture or, with irrigation, for rice; and rainfall distributionwould not support the double-cropping foreseen in the Appraisal Report); and (c) reluctance of farmers to borrow  - 36 fot on-farm land levelling, coupled with their preference for lower risk losvtock production over cropping. Recognizingthese problems, supervision ll3q1oO's in 1980 began proposing that extension advice be provided on livestock production (meat and milk) and rice production by .ue-1Vpurpose pwi'pip, im irowf the drainage canals. However, INCORA was slow to act on this .Svi<,) }, in8 , con,;uLtants only in Dccember 1982 (see para. 4.18). ViII. LESSONS TO BE LEARNED h. t)I Ii-ie Bank's experience in implementing this project highlights the diifciulties inherent in working with a weak executing agency (see lpHra. 4.04). Under this project, the separation of responsibility for water corntrolworks was divested to a new institution, HIMAT. This led to establishment of a stronger institution, which is now capable of handling civil works under subsequent Bank projects for land development. But while INCURA was weakened further by this, it retained the authority over the use of loan funds even by HIMAT. The problems this caused could have been a]leviated by amending the Loan Agreement to give INCORA and HIMAT full responsibility for use of loan funds for their respective components, rather than trying to have one agency control the actions of another autonomous agency. 8.02 Anotlherlesson, reinforcing evidence from other projects, is the ne<, to more carefully assess the attitudes of the project beneficiaries towards the types of development and changes in production patterns planned. :uder this project, farmers were slow to take out credit for on-farm development. In particular, small farmers, preferred lower risk livestock *-aising to the planned land improvement for crop production. There was, however, some resistance--byboth the borrower and the Bank--to accepting that farmers were choosing a pattern of production contrary to the Government'sgoals and the Appraisal Report's assumptions. Greater flexibiiitywould have allow&ci 14CORA to address the real needs of farmers earlier in the project and to make the best of a less economic development. This would have resulted in a faster, and therefore economicallybetter, increase in animal production. 8.03 The Bank's experience under this project also underscores the importance of monitoring and evaluation of progress during implementation. INCORA was reluctant to act on suggestions by Bank supervision missions, particularlyon re-orientingextension advice from crop to livestock production; these suggestions would probably have been more meaningful to INCORA management if they had been generated from within the institution. Moreover, the actual outcome of a project can only be fully and usefully evaluated if accurate data on all aspects of the project are available. Under this project, however, this was particularly difficult, because INCORA deals only with the beneficiaries of its agrarian reform program, and hence was unable to gather mtuch data on the 75% of the project area that is privately farmed.  -~ 37 -ANNEX A COLOMBIA CORDOBA II AGRICULTURAL DEVELOPMENT PROJECT (LOAN 116>CO) PROJECT COMPLETION REPORT Withdrawal of the Proceeds of the Loan Loan Agreement Revised Schedule I Schedule I Actual. Actual/ September 12, 1975 August 1981 Disbursement Allocated …(US$) -------- …-------- 1 Medium and long-term loans (Part A) 5,700,000 5,700,000 4,850,213 85 2. Goods and equipment 1,800,000 2,800,000 2,393,759 133 3-A Major project works (Part B(i)) 5,070,000 5,070,000 5,042,467 99 3-B Major project works (Part B(Ut)) 30,000 186,000 60,194 2'01 4. Social infrastructure (Part D) 1,300,000 2,100,000 1,741,515 13L- 5, Consultant services 700,000 1,600,000 1,127,853 a/ 161 6. Interest and other charges 3,300,000 3,300,000 3,300,000 10' 7, Unallocated 3,100,000 244,000 - - Subtotal 21,000,000 2l,000,00p. 18,516,001 88 Cancelled - 2,483,999 - Total 21,000,000 21,000,000 21,000,000 100 a/ Excluding ColS 10.0 million paid from Loan 1737-CO after the project Closing Date.  ANNEX B COLOMBIA CORDOBA 11 AGRICULTIIIURLDETVE.L.OPMENT PROJECT (LOAN 1163-CO) PROJECr COMPLETION REPORT Project Cost by Component a/ Acteual / Appraisal Estimate b/ Actual Appraisal C/ Col$ USs Col$ US$ (%) ------------ (million) 1. tiajor Project Works 410.3 16.2 709.1 12.1 172 2, Social Infrastructure 55.2 2.2 155.0 2.5 281 3. Agricultural Credit 183.6 7.3 321.8 5.8 175 4a Equi, ot 66.0 2.7 184.8 2.7 280 5. Enginet {lng & Supervision 63.7 2.5 - - 6. Extension Services 16.8 0.7 159.0 2.7 946 7. Consultant Scrvices 21.2 0.8 89.5 1.4 422 Tota]. 816.8 32.4 1,619.2 27,2 198 Intereqt during construction 83.6 3.3 147.5 3.3 176 Total Project. Costs 900.4 35.7 1,766.7 30.5 196 Operation and Raintenance - 480.3 7.5 GRAND TOTAI 900.4 35.7 2,247.0 38.0 af In cuirrent termS, '6/ Physi. -al and price contingencies included, C/ PP zfcentages calculated based on Col$ amounts. Sourcc: INCORA, April 1985  - 1) ANNEX C COLOMBIA CORDOBA11 AGRICULTURALDEVELOP?lENTPROJECT (LOAN 1163-CO) Project Completion Report Cropping Patterns, Yields and Production Appraisal Estimate Actual Actu3l Without With (Year 9 of as 2 of Project Project the Project) Aasal Cotton Area (ha) 11,400 20,000 14,260 71 Yields (m ton/ha) 1.3 2.2 2.0 90 Production (m ton) 14,820 44,000 28,623 65 Maize Area (ha) 2,8u0 7,000 2,070 30 Yields (m ton/ha) 1.7 3.2 2.0 62 Production (m ton) 4,760 22,400 4,120 18 Sorghum Area (ha) 800 4,500 3,790 84 Yields (m ton/ha) 2.2 3.2 3.6 113 Production (m ton) 1,760 14,400 13,605 94 Soybeans Area (ha) - 8,500 - 0 Yields (m ton'ha) 1.1 1.7 - Production (m ton) - 14,450 - Sesame Area (ha) - 1,300 - 0 Yields (m ton/ha) 0.6 0.7 - Production (m ton) - 910 - Subsistence Area (ha) 2,000 2,000 3,450 173 Yield (a ton/ha). n.a. n.a. 1.4 - Production (m ton) n.a. n.a. 4,692 Subtotal Crops (ha) 17,000 43,300 23,570 54 Pasture Area (ha) 17,000 8,200 30,190 368 Yields (beef/kg/ha) 99 174 n.a. - Production-m ton meat 1,685 1,430 n.a. -liters of milk 2,200 n.a. 17,100 ('000) Subtotal Crops and Livestock (ha) 34,000 51,500 53,760 104 Fallow Area (ha) - n.a. 3,130 Not Utilized (ha) 6,000 n.a. - Total for Project (ha) 40,000 51,500 56,890 110 of which double cropped (ha) - 11,500 5,780 5S Total Net of Double Cropping 40,000 40,000 51,110 128 Source: INCORA  - 40 - COR0OA II A(GRICULTURAL 0EVEL0LMENT PiROJECT (LOAN 1163-C0 Prorject Ccupletion Report EcPnocmic AnAlyIls ( 1975 ColS, m11t ions) Incrmriti l Costs 4 ch I nery OporAtIon Not IaCrwa-",A I TTCenICj.I OlyV And SociAl And InCromq.tA bangfits On-FIr'r AsIs1Rtncm lorxs Equlpnt Intrmstructure / nAIntenmnca TotAl 3enofIts 19)6 2'2.4 1).s3 t.7 7.6 0.4 0.8 122.0 (99.61 1977 72.1 117.3 2.1 9.1 - 0.2 3.5 132.7 (60.6) e978 (96.1) 78.0 4.2 35.1 22.4 0.8 12.1 152.6 (248.7) 1979 (13.9) 104.5 5.3 58.2 3.0 0.9 12.8 164.7 (151.8) 1980 70.7 86,6 4.5 41.2 *.I 0.6 14.8 147.8 (77.1) 1981 136.2 138.9 5.4 43.0 - .9 14.3 202.5 (66.31 1962 157.9 133.2 5.9 25.6 - 0. 15.1 179.1 (21.2) 1983 357. I 17(.6 6.' 18.5 5.7 0.8 18.3 219.9 137.2 1984 3 3.2 188.9 5.5 25.0 15.4 - 21.4 256.2 57.0 1985 303.5 189.4 2.2 - - - 8.6 200.2 103.3 1966 514.3 190.0 2.2 - - - 8.6 200.8 113.5 1987 518,6 191.8 2.2 - - - e.6 202.6 116.0 32.1.6 195.6 t. I - - - 8.6 203.5 118.3 1989 523.6 195.5 1.1 - - - 8.6 205.2 118.4 199 325.5 197.4 1.1 - - - 6.4 204.9 120.6 1991 327.7 199.3 - - - - 6.4 205.7 122.0 1992 330.8 2n0.1 - - - - 6.4 207.5 125.3 1995 334.0 202.4 - - - - 6.4 196.n 138.0 1994 337.1 203.0 - - - - 6.4 2n9.4 127.7 1995 3.4 203.0 - - - - 6.4 209,4 13n.7 Econoil c RIeo 1f Retjrn n 7.4% ('1 Including or,y In% of the totAl coSt of th, Comononent MAP SECTION  _ IFRD -1 _ R 4 -. LU i;' '0W - e ' I-"0 W)bj\ ?e'~~~~~~~~00 ;-000___zE \,'0 AX';f $ i\fT 0. -...... . . _ j //C / 0 .. "- IC~~~~~~~~~~~~ 0 -A \ ........ .0~~~~~~~~~~~~~~~~~ 0~~~~~~~~~~~~.......... ...... /....... (--,If ri~~~~~~ ~~~~~~~~~~~~~~~~~~0~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~I ;Z ~a ~- *