Peru - Lower Piura Irrigation Rehabilitation Project

Document of The World Bank FOR OFFICIAL USE ONLY Report No. 8801 PROJECT COMPLETION REPORT PERU LOWER PIURA IRRIGATION REHABILITATION PROJECT II (LOAN 1771-PE) JUNE 29, 1990 Agriculture Operations Division Country Department IV Latin America and the Caribbean Regional Office lbis document has a restricted distribution and may be used by rec oiy in the performane of their officGij dutie Its content may not othewi be disclosed without Wodd Bank sautouxaon.  CURRENCY Currency Unit: 1,000 Soles - I Inti as of 01/01/86 At Appraisal : US$l S/.205 At Completion: US$1 - I/. 16.0 WEIGHTS & MEASURES Metric System ABBREVIATIONS AND ACRONYMS BAP Peruvian Agriculture Bank . aco Agrario del Peru) CENCIRA : -.onal Training Center for Agrarian Reform (Centro Nacional de Capacitacion para la Reforma Agraria) CESPAC : Center for Audiovisual Training Services (Centro de Servicios de Pedagogia Audiovisual para Capacitacion) DEPECHP : Chira-Piura Special Project (Direccion Proyecto Especial Chira-Piura) DDA : Agriculture and Livestock Directorate, DEPECHP (Direccion de Desarrollo Agropecuario de DEPECHP) DRT Directorate for Land Rehabilitation, DEPECHP (Direccion de Rehabilitacion de Tierras, DEPECHP) DGASI : General Directorate for Water, Soil and Irrigation (Direccion General de Aguas, Suelos e Irrigaciones) ENC : National Marketing Company (Empresa Nacional de Comercializacion de Insumos) ENERGOPROJEKT : Energoprojekt Engineering & ^ontracting Co. (Yugoslavia) FAOICP : Food and Agriculture Org./Cooperative Program FONGAN : Livestock Foundation (Fondo Ganadero) GOP : Government of Peru INADE : National Development Institute (Instituto Nacional de Desarrollo) INIPA : National Institute for Agricultural Research and Extension (Instituto Nacional de Investigacion y Promocion Agraria) IECO International Engineering and Contracting Company MAG : Ministry of Agriculture (M,nisterio de Agricultura) ODENORTE Regional Organization for the Development of Piura and Tumbes (Organismo Regional de Desarrollo de Piura y Tumbes) PU Project Unit REHATIC Special Project for the Rehabilitation of Coastal Lands (Proyecto Especial de Rehabilitacion de Tierras Costeras)  FOR O CIAL uSe ONLY TK WORLD BANK Washington. D.C. 20433 U.S.A. Olftofe d Oti.Gswat Op..atimw IVAhaatu June 29, 1990 MEMORANDUM TO THE EXECUTIVE DIRECTORS AND THE PRESIDENT SUBJECT: Project Completion Report on Peru Lower Piura Irrigation Rehabilitation Prolect II (Loan 1771-PE) Attached, for information, is a copy of a report entitled *Project Completion Report on Peru - Lower Piura Irrigation Rehabilitation Project II (Loan 1771-PE)* prepared by the Latin America and the Caribbean Regional Office. No audit of this project has been made by the Operations Evalua- tion Department at this time. Attachment CThis ocument has a estrcted distribution and may be used by recipients o I in the perfonmace of their omcial duties. Its contents may not oterwise be disclsed without Worltd ank authoration.  FOR OFFICIAL USE ONLY PROJECT COIMPLEUON REPORT PERO LOVER PITRA IRRPIGTIOR REE&aILITATION PROJECT II (LOAN 1771-PE) TABLE OF CONTENTS PaLe No. Preface ....-.------....------------------------------- 1 Basic Data Sheet ............................................ Li Evaluation Sumatry . v I. INTRODUCTION ....... .... .. ...... .... 1 II. PROJECT FORMULATION . ................ ... 2 A. Identzfication and Preparation . 2 B. Appraisal and Negotiations . 2 C. Project Objectives . 3 D. Project Description . 3 E. Project Costs and Financing . 4 Ill. PROC T AION. ..................... ... 5 A. Project Effectiveness and Start-Up. 5 B. Implementation ...5 C. Changes During Implementation . .12 D. Di.bursements .. 13 E. Procurement . .13 F. Compliance with Loon Covenants . . 14 G. Reporting . .14 H. Auditing and Accounting ..14 IV. PROJECT DAAC .............14 A. Physical Development ..14 B. Agricultural Impact ..16 C. Economic Impact . .19 D. Environmental Impact . . 20 E. Potential Follow-on Projects ............ ............ 20 V. INSTITUTONAL PEORNCE ....................... ...... 20 A. The Project Unit ................................ 20 B. Project Coordination ................................ 21 C. Consultants . . ........... 22 D. Agricultural Credit ..... . .... 22 E. Agricultural Extension . . .24 P. Water Management and Usage . . 25 6. Water Charges... 26 H. Operation and Maintenance ...26 This document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contents may not otherwise be disclosed without World Bank authorization.  Table of Contents (Continued) Page No. VI. BANK PERFORMANCE ............. .............. 27 VII. CONCLUSIONS AND LESSONS LEARNED .......................... 28 TABLES IN Table 4.1: Physical Development of the Project Appraisal Targets and Actuals .................. 15 Table 4.2: Areas, Production and Yield, With and Without Project ................................ 17 Table 4.3: On Farm Development ZI Penal - Crop Yields and Intensity, 1981-1987 ............................ 18 Table 5.1s BAP Sub-Loans Approved and Implemented ............ 23 ANNEXES Annex I : Flood Emergency - Actions and Outcome ............. 31 Annex 1I: .................................................. 32 Table 1 : Summary Cost Table .. 33 Table 2 : Withdrawal of the Proceeds of the Loan . . 34 Table 3 : Comparative Yields, Costs and Economic Benefits: Demonstration Plots Versus Actuals .. . 35 Table 4 : Crop Production Costs and Profitability: Small Farmers and Cooperatives - 1986 .................. 36 Table 5 : Area Development, Cropping Patterns and Yields, With/Without Project, 1980-1986 .................. 37 COMMENTS FROM THE COFINANCIER Annex III: Comments from ENERGOPROJEKT ..... ................... 39 MAP - IBRD 14159  - i - PROJECT COMPLETION REPORT PERU LOWER PIURA IRRIGATION REHABILITATION PROJECT II (LOAN 1771-PE) PREFACE 1. This is the Project Completion Report (PCR) for the Lower Piura Irrigation Rehabilitation Project II in Peru, for which Loan No. 1771-PE in the amount of US$56.0 million was approved on November 26, 1979. Al- though the loan was closed on June 30, 1987, disbursements to Peru were suspended on May 5, 1987 for non-payment of arrears. 2. Formal closing of the Project has been precluded pending receipt of documentation justifying the remaining balance in the loan Special Account. The Bank has requested that GOP either -eturn the funds or provide the appropriate documentation. 3. The PCR was prepared by the Agriculture Operatioius Division of the Latin America and Caribbean Regional Office and is based inter alia, on the Draf Completion Report prepared by the Borrower, progress reports of the Project Unit (P.U.), the Staff Appraisal Report, the Loan, Guarantee, and Project Agreements, supervision reports, correspondence between the Bank and the Borrower, and internal Bank memoranda. A Completion Mission to Peru was not undertaken. 4. This PCR was read by the Operations Evaluation Department (OED). The draft PCR was sent to the Borrower and the Cofinancier for comments on March 2, 1990. Comments received from ENERGOPROJEKT are attached to the Report as Annex 3.  - ii- PERU LOWER PIURA IRRIQATION REHABILITATION PROJECT II LOAN 1771-PE PROJECT COMPLETION REPORT BASIC DATA SHEET KEY PROJECT DATA Appraisal Actual or Actual as X of Estimate Estimated Actual Appraisal Estimate Total Project Cost (USM1illion) 178.8 182.9 101.7 Loan Amount (USSMillion) 56.0 63.04 95.0 Date of Board Approval 11/26/79 Date of Effectiveness 03/01/80 06/28//80 Date Physical Components Completed 12/31/84 06/30/87 Proportion Then Completed (U) 106 80 80 Closing Date 12/81/85 06/30/87 Economic Rate of Return (X) 1S N.A. Number of Direct Beneficiaries (families) 11,800 31,000 283 CUMULATIVE ESTIMATED AND ACTUAL DISBURSEMENTS FY81 FY82 FY83 FY84 FY8S FY86 FY87 FY88 - - - - - - (USS Millions) - - - - - - Appraisal Estimate 7.9 21.6 86.5 48.4 68.0 Actual 3.18 11.98 16.25 83.61 47.05 51.81 62.79 65.04 Actuals percent of Estimate (U) 40.0 56.0 45.0 89.0 84.0 93.0 94.0 96.0 Principal Repaid to IBRD as of 06/30/88: US$10.78 million Date of Final Disbursement: 04/29/88  - iii- PERU LOWER PIURA IRRIGATION REHABsLITATION PROJECT II LOAN 1771-PE PROJECT COUPLETIL. REPORT BASIC DATA SHEET Stated Date No. of Staff Weeks Specializations Performance Type of Mission (o.7/yr ) Persons in Field Represented Retina Trend Problem Identification _ _ _ Preparation 8/77.2/78/8/78 2,2,3 2,2,6 b,c,d - - - Appraisal 11/78 6 19 a,b,c,d, - - Post-Appraisal 02/79 2 4 c,d - - Supervision 1 2/80 2 2 c,c 1 1 MT Supervision 2 9/80 2 2 *,d 2 2 UT Supervision 3 4/81 2 2 d,e 2 - UT Supervision 4 8/81 1 1.5 * 2 1 FIT Supervision 5 6/82 2 3 *,c 1 1 fUT Supervision 6 3/83 1 2 d S 2 FUT Supervision 7 10/83 1 2 d a 2 FOT Supervision 8 1/84 1 1.5 d 2 1 FMOP Supervision 9 S/84 1 1.5 d 3 2 fMP Supervision 10 3/85 1 1.5 d 2 2 FPP Supervision 11 1/88 2 4 c,d 2 2 FI Supervision 12 9/88 1 2 c 2 2 FUT Supervision 13 2/87 2 2 b 2 1 FI Supervision 14 5/87 1 1 c 2 2 FI Supervision 16 12/87 1 1 c 2 1 F Total (SPN) 21 29 OTHER PROJECT DATA Borrower: Republic of Peru Executing Agency: DEPECHP Fiscal Year: January 1 - December 31 Name of Currency: 1,000 Soles (S/.) a I Inti (1/.) as of 01/01/86 Currency Exchange Rate: Appraisal Year Average USS1.00 - 1/.0.16 Interveni.tg Years Average USS1.00 - 1/.4.49 Last Year Average USS1.00 I/.16.84 Follow-On Project: Irrigation Rehabilitation III - Upper Chira. Planning suspended  - iv - PERU LOWER PIURA MRRIGATION REHABLITATION PROJECT II LOAN 1TIl-PE PROJECT COMPLEtION REPORT BASIC DATA SHEET STAFF INPUTS (Staff Weeks) FY76 FY7 FM FYT79 FY80 FY81 FY2 FY83 FY84 FY8S FY86 FY87 FY88 TOTAL Prepprai*sl 0.2 44.7 16.7 32.6 93.1 Appraisal 85.6 2.0 87.8 4ggottation 6.8 5.8 Supervision 10.9 14.6 15.8 10.9 15.8 8.7 21.8 14.7 -6.8 118.8 Other 0.5 0.2 1.7 6.3 0.9 1.0 2.2 12.8 Total 0.2 46.2 15.9 120.0 24.S 14.8 15.8 10.9 18.5 9.7 21.3 14.7 6.0 817.3  PROJECT COWLT!ON REPORT PER LOVER PIUKA IEBIGRATION RWMILITATION PROJECT 11 (LOAN 1771-PE) EVALUATION SFMMAUY A. Introduction and Obiectives 1. The Irrigation Rehabilitation Project II was a further phase in the Government of Peru's sectoral program to dev;lop and rehabilitate irrigated coastal areas where the potential for increased agricultural production is great and the basic infrastructure already exists. 2. The objective of this project was to increase agricultural production and productivity on 34,700 irri-able hectares and raise the incomes of about 11,800 cooperative and smallholder families in the Lower Piura Valley. This was to be achieved througk onstruction and rehabilitation of irrigation works, completion -,? surface and sub-surface drainage systems. land levelling and reclamation of saline lands, flood protection works, provision of agricultural extension, and medium and long-term investment credit. Studies for a third phase were also included. B. ImDlementation Exverienc - 3. Project implementation was affected from the outset by complexities of design and coordination, management upheavals in the Project Unit, counterpart funding constraints. the floods of 1983 and slow progress of the cradit component. The floods seriously damaged major civil -orks nearing completion causing financial difficulties for ENERGOPROJECT, the principal contractor and cofinancier, and the Borrower. However, the Bank responded promptly and effectively to the 1983 disaster re-dirc_ting funds to reconstruction and adjusting targets during implementation. By late 1985 recovery was impressive and overall implementation satisfactory, with the exception of on-farm development. The five year project was comple-id 1 in seven with a minimal cost overrun (Chapter II1. and Annex I) . C. Results 4. The Project was a qualified success, meeting or potentially fulfilling most of its appraisal targets, but in some cases with coxsiderable delay. The major deficiency was on-farm development which progressed unevenly due to budget shortages, creditworthiness problems especially among cooperatives, and poor demand for sub-loans (paras. 3.18-3.24). 5. Agricultural production in key crops (rice, cotton, corn and sorghum) showed satisfactory, and at times. exceptional results. Production advances were set back principally by poor on-farm development which contributed to continuing salinity problems on about half the project area. Realistically, full development of agricultural production is unlikely before the early 1990's but, based on results already achieved, could eventually surpass appraisal estimates (paras. 4.2-4.15). 1/ Suspended in 1987 for GOP non-payment of arrears.  I - vi - 6. Despite management upheavals, the Project Unit (DEPECHP) achieved its institutional goals, developing comprehensive experience and expertise. A fortified extension service was rewarded with good results from the more advanced small farmers but had negligible effect on those at the lowest levels (paras. 3.27-3.31) 7. Despite sustained efforts by the Banik and DEPECHP. farmers continued at Project's end to pay only nominal water charges with commensurate implications for future operation and maintenance (O&M), cost recovery and the viability of Water User Associations (paras. 5.10-5.18). D. Sustainability A. Project sustainabillty depends heavily on: (a) payment of water charges sufficient to cover O&M costs; (b) sufficient funding to support and boost agricultural extension; and (c) completion of on-farm irrigation and drainage works without which the Project's agricultural prodtvction and income goals over the full extent of the project area cannot materialize. 9. Bank-initiated agreements were finally signed in 1987 to ensure institutional continuity for O&M and extension. Modest hridging funds were earmarked by the GOP pending settlement of the US$10 million flood insurance claim from 1983. Settlement has recently occurred and the first instalment of US$.0 million was deposited by the GOP in the Loan Account in accordance with the Loan Agreement. Further progress has also been made towards completing on-farm works (Annex 1). E. Lessons Learned 10. The following lessons could prove useful for similar future projects: (a) Despite problems, the project succeeded through the dedication of the Project Unit supported by frequent Bank supervision, demonstrating its a'-opriateness as a vehicle for transferring lasting benefits, but one requiring a priori, a strong commitment from the Borrower. (b) The pressures of project planning deadlines can adversely affect the perception of potential problems, depth of preparation and setting of reali.-tic targets, leading to implementation delays. (c) Project pieparation failed to involve or fully understand beneficiaries, leading to over-optimistic projections for the credit and on-farm irrigation components. (d) A more effective Monitoring and Evaluation System might have mitigated such failures at an earlier stage. (e) Appraisal should have foreseen the practical and legal impediments to adequate cost recovery, requiring a more forceful approach to covenant design and maintenance. (f) The project justifiably included funds for preparation of follow- on operations, since precluded by national economic and political turmoil.  PROJECT COMPLETION REPORT PERU LOVER PIURA IRRIGATION REhARILITATION PROJECT It (LOAN 1771-PE) I. INTRODUCTION 1.1 Agriculture plays an important role in the economy of Peru occupying some 402 of the labor force yet contributing only 152 to GDP. Agricultural output e-'d especially food production has lagged population growth for well over 20 years. 1.2 Of a total of 3.6 million ha of cropland, about 1.0 million ha are potentially irrigable, of which 770,000 ha are located in 52 valleys in the coastal zone. This region produces around two-thirds of Peru's agricultural output under irid conditions which require irrigation. 1.3 Many of the existing coastal irrige.tion schemes were privately-built on large estates some 40 to 50 years ago but subsequentlv deteriorated because of a lack of regional investment and management capability. Excess irrigation in the upper valleys and poor drainage below caused progressive salinization, decreasing yields and reducing the area cultivated. 1.4 Following the introduction of the Government's ambitious Agrarian Reform Program in 1969, private investment in agriculture declined with commensurate effects on coastal irrigation systems, which deteriorated further. Facing the problem of scarce land, rapid population growth and increasing dependence on imported foods, the GOP initiated a national program of rehabilitating existing irrigation and drainage systems in the coastal region in preference to investing in costly new schemes. 1.5 At appraisal only 27,400 ha out of the 34,700 ha project area were under cultivation, with a cropping intensity of 106Z. Pima cotton was the main crop on 21,000 ha with corn, sorghum and rice on 3,300 ha and pasture and subsistence crops on 4,700 ha. Average yields were low due to deteriorated infrastructure, inadequate techtical assistance and reduced production credit. The SAR estimated annual income per family as US$1,784 for cooperative members, mostly derived :,n-farm, and US$1,272 for minifundistas 1 of which some 45Z was from seasonal off-farm employment.2 1/ Very small holdings of 0-5 ha. SAR also included communal cooperatives and peasant groups, under this title. Together, they formed the Project's chief target population. 2/ SAR income figures seem unrealistically high. The President's Report (2642-PE) of November 6, 1979 gives per capita fig,ures of US$180 p.a. for farmers working less than 5 ha of which US$100 p.a. derived off- farm. Extrapolation to a per family basis (i.e., with several productive members) would still not produce SAR estimates.  - 2 - 1.6 In keeping with its policy of setting up semi-autonomous units to manage and implement large projects, the Ministry of Agriculture established DEPECHP, the Chira-Piura Special Project, in 1970. Before its management of 1771-PE, DEPECHP was responsible for the construction of other major hydraulic works in the region including the Poechos dam, and was becoming increasingly involved with agricultural development. The second project broadened and consolidated its institutional role in the area. II. PROJECT FORMULATION A. Identification and Preparation 2.1 A feasibility study to develop the Chira-Piura valleys was carried out in 1968 by the International Engineering Company (IECO) USA, with Bank finance. Political conditions in Peru at the time precluded the Bank from financing a project. The GOP proceeded independently and with Yugoslavian (ENERGO) finance, constructed the Poechos storage dam, the Chira-Piura diversion canal and the main drainage networks in the Lower Piura Valley. 2.2 In 1976, the Bank appraised the first Irrigation Rehabilitation Project (Loan 1403-PE) for US$25.0 million, which closed in December 1985. Feasibility studies for the second phase were prepared by a local Peruvian consortium with support from the FAO/CP. Due to limited Peruvian experience with large irrigation schemes, a high FAO/CP input was required to get an acceptable study for appraisal. 2.3 The follow-on project (Loan 1771-PE) would rehabilitate irrigation works and reclaim salinized lands in the Lower Piura Valley, with the goal of increasing the agricultural productivity and incomes of 11,800 families, most of which were at or below relative poverty. Several new elements were included in Stage II: a) a construction company (ENERGO) was scheduled to tinalize design prior to implementation; b) a component was added to strengthen and finance agricultural extension; c) on the job and overseas training was funded for local staff on all project-related matters. especially agriculture, and the operation and maintenance (O&H) of irrigation and drainage systems. B. Apuraisal and Negotiations 2.4 The Project was appraised by the Bank in November 1978 and February 1979, negotiated in September 1979 and approved by the Board in November 1979. 2.5 An early, pre-appraisal mission in August 1976 noted the potential for special difficulties with Project II stemming from: (a) a new, dynamic hydraulic situation following construction of the Poechos Dam and main diversion canal, exacerbating the overall salinity problem due to increased water volume and con-.inued poor drainage; (b) another foreign financing agent (ENERGO) already in the area; and (c' a pre-existing aspecial project' entity in the Lower Piura Valley (DEPECHP).  2.6 A follow-up mission in February 1979 explored the feasibility of cost-effective manual labor for secondary and tertiary canals and drainage, and warned of the need for high quality supervisivn from contractors and the Project Unit, a phased approach to design and implementation, and the importance of a regular flow of funds. 2.7 Negotiations secured assurances from t1e GOP on important aspects including: (a) the implementation of realistic er charges and establishment of of-; -b) setting-up of the creuit component with BAP, upon which loan effect 4tLe-. hinged; (c) role and responsibilities of DEPECHP; (d) periodic revi , adjustment of sub-loan interest rates; and (e) support for agricu_t.xl: extension. The Loan Committee limited its comments to the ju.isdictional relationship between Peru and Ecuador over the Poechos Dam. 2.8 Almost one year elapsed between initial appraisal and Board presentation because of incomplete co-financing arrangements between the GOP and ENERGO, and the need for caution dictated by Peru's severe economic difficulties and questions about creditworthiness. Principal risks foreseen by the Board included: (a) construction delays due to right of way conditions and ongoing farmer operations in areas subject to irrigation and drainage works; and (b) failure to retain qualified staff for the extension service due to low salaries. 2.9 As it turned out, the first concern was valid and targets for on-farm drainage construction were sharply reduced to make use of existing structures, one important reason being the avoidance of interruption to farmers' urgent, on-going needs for water. In the case of b), the extension service was understaffed especially in the later stages of the Project, but attrition was not the cause. C. Proiect Objectives 2.10 The objectives of the project were: (a) to increase agricultural production and productivity on 34,700 Ha in the Lower Piura Valley; and (b) raise the incomes of about 11,800 families with the emphasis on small farmers and cooperative members. This would be accomplished through: (i) rehabilitation of irrigation facilities; (ii) completion of drainage networks; (iii) reclamation of saline soils; (iv) protection against floods; and (v) provision of technical assistance and equipment. D. Prolect Descrintion 2.11 The Project was to consist of: Part (a) irrigation works, including (i) construction of a diversion dam on the Piura River; (ii) construction and lining of a 40 km main irrigation canal; (iii) rehabilitation and lining of 112.1 km of secondary and 77.9 km of tertiary canals and rehabilitation of 1,170 km of lateral and sublateral canals; (iv) construction of administrative buildings for the irrigation district; and (v) consulting services for engineering and supervision of these works;  - 4 - Part (b) drainage works, including construction of 15 km of main drains, 415 km of collector drains and 1,070 km of field drains; Part (c) flood protection works, including Ci) improvement of 12.3 km of flood protection dikes; (ii) construction of 54.1 km of new dikes along both banks of the Piura River; and (iii) realignment of some stretches of the river; Part (d) development credit for land levelling, irrigation ditches, soil leaching and improvements, and other on-farm investments; Part {e) equipment, including maintenance and office equipment, vehicles for land reclamation and extension services, and a soils and water analysis laboratory; Part (f) technical services, including (i) strengthening and expansion of the agricultural extension and research services, with special emphasis on assistance to small-farmers; Cii) establishment of a land reclamation service; and (iii) training of Peruvian technicians abroad; and Part (g) consultant services to (i) assist the project executing authority in project design, construction and provision of technical services; and (ii) carry out feasibility studies for subsequent rehabilitation projects. E. Proiect Costs and Financing 2.12 In 1978, total project costs were estimated at UJS$178.8 million with the Loan providing US$56.0 million (31.3?), the GOP US$74.5 million (41.62) ENERGO US$46.4 million (26?) and project beneficiaries US$1.9 million (1.12). Actual total project cost at completion showed a modest overrun of US$4.07 million principally due to: (a) the floods of 1983, which necessitated major reconstruction and repair to principal and secondary works near completion; and (b) the decision in 1980 by DEPECHP to relocate the site of the main d.version dam 18 km. upstream to Los Ejidos, adding about US$5.0 million to GOP/ENERGO financed components. The Bank shortfall resulted mainly from the suspension of disbursements in May 1987 for non-payment of arrears by the GOP. The Borrower shortfall was ultimately minimal, though intermittent but serious counterpart funding difficulties dogged the Project, with particular impact on the credit component. 2.13 Of the final cost of US$182.87 million, the Loan financed US$53.03 million (29Z), the GOP US$74.31 million (41Z) and ENERGO US$55.53 (30?) (See Annex II, Tables 1 and 2).  III. PROJECT IMPLEMENTATION A. Proiect Effectiveness and Start-up 3.1 Project effectiveness was delayed until May 1980, following Board approval in November 1979 because of the need to secure an agreement between DEPECHP and BAP for carrying out the credit component, and continued lack of an executed agreement between GOP and ENERGO for co-financing the principal works. 3.2 Progress in the first year was slow with evidence of technical difficulties and uneven implementation emerging early on because of: (a) political pressure on DEPECHP to reconsider the design and location of the main diversion dam; (b) serious differences of opinion over design and construction of flood control works; (c) incomplete feasibility studies; (d) Borrower technical inexperience; and (e) management problems in the Project Unit. 3.3 It became evident that Project implementation would benefit from the supervision of an experienced consulting firm and the ISL Consortium was retained. Counterpart funding deficiencies emerged which were aggravated in 1982 by a GOP budget contraction of 20% with negative effects, especially on the credit component. By the end of 1982, disbursements were only 42Z of appraisal. B. Implementation 3.4 Project execution took seven years instead of the planned five mainly due to start-up delays and the after-effects of the 1983 floods. Principal events by component were as follows: Irriaation Works 3.5 The Project successfully completed all major irrigation works foreseen at appraisal or subsequently amended to take account of changed circumstances, but on-farm irrigation works, especially those requiring private investment, did not fare so well. 3.6 Under pressure from ODENORTE, the Borrower's regional entity, DEPECHP decided at the outset to reconsider the location and design of the main diversion dam on the Piura River, to be financed under bilateral arrangements with ENERGO. The site was moved 17 km upstream from Catacaos, to Los Ejidos. Bank staff supported the decision and its rationale (safety, health and socio/political reasons) but warned of delays, cost overruns and the possible need for additional financing. 3.7 Incremental costs associated with relocating the dam and constructing the additional 17 km of canals were around US$5.0 million, held down by cost savings on modifications to flood protection dikes and other works, also ENERGO financed. Construction of the dam proceeded almost one year over schedule and was 95% complete by the end of 1982 (start of El Nino floods). The relocation and additional 17 km of canal brought under irrigation an added 3,000 ha over the appraised target.  3.8 Rehabilitation and lining of secondary and tertiary canals and rehabilitation of lateral and sub-lateral canals, an important prerequisite for the Project's overall on-farm development goals, progressed slowly, especially on cooperative land, due to counterpart funding shorta