Nicaragua - Agricultural Technology and Land Management Project

The World Bank I*)k OMalCAL USE ONLY MICROFICHE COPY Report No. :P- 6071 HI Type: (PM) Title: AGRICULTURAL TECHNOLOGY AND LA Author: ABRAMOVICH, A. Ext.:31870 Room:I7100 Dept.:LA2AG EfRANDUN AND RECO(XMATION OF THE PSIDENT OF TE TRlTIOwhL DEVELPUENlT ASSOCIATION TO THE EEcUTVE DIRECTORS ON A PROPOSED CREDIT IN TE AM=INT EQUIVALENT OF SDR 31.1 InLIoN TO TE REPUBLIC OF NICARAGUA ARGCULTURAL TECNoLOGY AND LAD AMANGMET PROjECT JUNE 29, 1993 This doumet bas a restrited distribun a may be sed by recipients only In the perfomance of teir offcial dutes Its contens may not otewi be disclosed without World Bank Suk otioD  CURRENC Y EQVIVALENTS US$1 = 6 Nicaragua C6rdoba (CS) SDR1.0 = US$1.451 WEIGHTS AND MEASURE Metric system FISCAL YEAR January 1 - December 31 ABBREVIATIONS ANDACRON AGSAL Agrcltural Sector Adjustment Loan BANADES National Development Bank (Banco Nacional de Desarrollo) CONAGRO National Agricultural Council (Consejo Agropecuario Nacional) ERC Economic Recovery Credit GON Govenment of Nicaragua iDB Inter-American Development Bank INEThER Nicaraguan Institute of Territorial Studies (Instituto Nicarageense de Estudios Territoriales) INRA Niaaguan Institute of Agaria Reform (Instituto Ncrglense de Reforma Agraria) INTA Nicaraguan Institute of Agricultural Technoogy (Instituto Nicaragfee de Tecnologta Aropecaria) IPM Integrated Pest Management IRENA Nicaraguan Institute of Natural Resouroes and Envhiment (Instituto Nicaragnse de Recursos Naturales y el Ambiente) MAG Ministry of Agriculture and Ilvestock (Miniterio de Agricutura y Ganaderfa) PCU Project Coordinating Unit SDC Swim Development Cooperation TVT Technology Validation and Transfer  FOR OMCIAL USE ONLY -nw-uU CREDIrr AM EMA^Y B Republic of Niaagua Ministry of Agriculture and Ivestock (MAG); Niara guan Institute of Agritural Technology (INTA); Nkaraguan Ilstitute of Agrarin ReCrm (INRA); and 50,000 small and medium farmers Euouting MAO, INTA, NRA, Nicarguan Institute of Territorial Sudies (NEIER), h Publc Registry of the Nicaaguam Sume Court of Justice; and the Niragua Institute of Natural Resources and n ent (IRENA). cedit SDR 31.1 million (US$44.0 nlln equivalt) Standard IDA term with foty yeas matuity, includig ten yea of grace. r_I& Phm Loa Foreigp Total _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ U S$ m inlon _ _ Govenment 9.0 0 9.0 Farmems 0.3 0 0.3 IDA 182 25.8 44.0 Swis Developmnt Cooperation 1.3 3.2 4.5 Total 28 29.0 57.8 Econamkr, Rate of Retun: Not appicable. $bfflAel Rewrt: Report No. 1180Z dated June 29, 1993 :m IBRD 4o0 24712, 24713, and 24714. I 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.  MEMORANDUM AND REM AO OF THE DENT OF THE NTRNATONAL A".EYEOLPMENT ASSOCITIN DTHE EXECIFlE DIRECIDItS ON A PROPOSED CRED1T TO THE REPUBUC OF MCARAGUA FOR AN AGRICULTURAL TECINOLOGY AND LAND MAGEMENT PROJECr 1. I submit for your approval the faowing emandum and rco mmendation on a proposed redit to the Republic of Nicagua for SDR 31.1 mfiion (US$44.0 milin eqivalent) to help finance the Agcultural TeDolg and Land Mana t PrjecL The credit would be repayable on standard IDA terms with a maturity of 40 years, Inluding 10 yes of grace. The project would be co-financed by the Swis Dvebpment Cooperation (SDC) with a grant of Swis francs 6.75 mMion (US$4.5 million equivalent). 2. l Nicaraguas economic growth and export drive are heavily dependent on agicuiu The agricultural sector accounts for 30% of GDP, generates over 7T% of expt earnings, and direcy employs 33% of the work force. he fi main export ommodities - coffee, cotton, sugar, beef and bananas- account for over 75% of agricultural GDP and 65% of total exportL 3. hIappropriate m no c policies, cvl strife dung the 1980s, and severe trade restrictions are the major factors that have affected the country's productive structu In the agricultural sector, a centrally controled economy with an inapprote incentive framework and producers' dependence on direct and indirect Gove ent s es d to a serious decline in output. Controlled prices and production, and alocation quotas also contrbuted to the downturn in the sector. 4. Since the present Admi n took office in April 1990, attempts haw been made to correct the countrys economic imbalances characterized by uncontroled monetary expansion and a growing fical deficit. In March 1991, the Government implmented economic stabilizatin adjustment program, partially financed by an IDA Economic Recovery Credit (ERC). Under the ERC, the anti-export bias of the trade regime was reduced, government intervention in grain marketing curtailed, and nominal protection levels for basic grains decreased to 10 - 40%. In addition, interest rate and exchange rate management was substantially imprved. 5. Ihe main present impediments to prvate sector led agricutural growth include: weak government institutional performance; inseurity rei land pwperq rights (and its negative impact on farmers' acces to credit), compounded by technical deficencies in the cadastre, land titling, and regtering processes; and an hiadequate agricultura technolog generation and traner system. A particular weakss is the absence of a coherent soil management and erosion control strategy that could effectvely address continuing environmental degradation In addition, pesdcide pollution and poisoning is a sernous onmental and health hazard problem in many rura area  -2- 6. Folowing DA's initial suport to Nicrgas adjustmet progr IDs strategy wt respect to the agrcultue set focIsCss on helping to refmulate the Incentive fhaewmk for private sector involvemet and natudal resource c ation order to reverse the economic and social decie of the past decade, and to set the country on a path of sutained gowth. Pwject pparation acviti - helped to conceive a _ompehive sector growth strategy redefining the role of ke sector institutiom (tbe Minitry of Agricuture and Livstock - MAG-, the Nicargu ksitute of Agarn Reform - INRA and the Nicaraguan stitute of Natual Resourc and the E ment - IRENA) according to a new set of function and responsilities, and the establis int In April 1993, of the Nicaraguan Insdtute of Agricultural Technology (INTA) The changes in suctue and organization bave been a means to increase public sector agenee' capacity to anticipate and influence changes affDcting the factor of producton, and to make hifomed decisions, Improving the dery of basic services and establishing a reglatoy framework to support pive sector developmenit Nohtithstanding these positive de nts, without the cordinated support of the donor community, it is unhkely that the Government woud be ab7e to undertake a comphe program addressing the bgy isues affectig agricultural sector gowtiL 7. e gThe main objective of the prject is to assist Nicara in its move towads a market-oriented economy, and to incease and disfy agricultural output and exports, while preseving the country's natual resource base as one of the few vible alternatives to promote sustainable economic growth. By reactivating land markets, encuging invtmt, ceating employment opportunities and improving agitural productvt and the icomes of small and medium famers through better access to basic agricultural services, the project will help to amelorate the countrys extreme poverty. Specificaly, the project would: (a) establish a sound and balnced agricultural technolog generation and transfer system aimed at optmizig public and private resoure allocation, providing farmers with madret choices, and ensuring their fair shae of costs and pa pation in servioe selction and evaluaton; and (b) pwvide the foundation to secue land property rights by integating project activitis thin a consolidated set of polices and adminsative procedures, including the establishment of a nationa cadaste, titling and registerig progrm based on modem tehical criteria. The prject would also help protect envirni~ntally sensidve areas by layig the bss for appropriate land use and soil consation pracdces, and by cotroUing pestcide poludto 8. PKmjoct Descdpdo. Tue prject would have two min cmpoent The Agiuual Tec1adg _Cmponet (US$21.8 minion) would decentralize agiu public services and sUppOrt the develpment of a demanddrven mechanism for pivate and public research and exeion. It would consolidate public reseamh and techno tranfer services into the newly created and de l INTA, incoporatg si onservation and pestide management as integral parts of the system. Spcificaly, the pject would, through INTA, support pgram for: (a) Tnodoky Validation and Transfr (IVI) to emphasize crop management research and extension focused an small and medum farmers, inclung an artisanal seed progam; (b) Inteated Pest Manament; (c) Soil and Water Conservation; (d) Research Grants-, and (e) Academic Stdie In addition, the Agicultural Technolg Component would support (a) a MAGAIRENA Pestcide Management Pwgram, as part of establishing a national environmentally sound strategy for pesucde use and et; and (b) a Private Technical Asisn Pgram to help famer groups conct technical ssde from the private sector. 9. The Laud p (USS33.6 millon) would support the desi and implemnetation of a nao cadaste, land titing and land regiatio system. Specifcall, the poject would (a) stramline d n and improve inter-ag ooria of RA,  -3- INETE and the Public Regiter (b) establish the basis for an efficient national cadastre; (c) sthen the Public Regt at the central and dep artmental lev*l (d) support the _suae of SO00O land titles, prioritzing benefiiaries by zons (lnd etling modules) accordig to their relatie tchnical lega and te omplexity (e) povide technic a tace and equipment to improve fildsrvison and quaity control of cadastrd surveys and plot demarcaon, titing and egitrn; and (t) finance audies aimd at establihing the lega di d technial grouwork for the fuue demarcation of the boundaries of indigenous lands and natr reseve he project would also support a Project Coordintig Unit (UlS$24 mUion) to coodinate and monitor Implemntation ofboth components, and specia studies 10. &mW g Cost and IgdU& Total project cost is estimated at US$57.8 milon (Schedule A). The credit wold povide SDR 31.1 million (US$44.0 millon equivalet), GON US$9.0 milo, SDC Swis fhacs 6.75 milion (US$45 millon equialent) and frmers US3,000. Of the total prwjc cost, US$47.1 mllon are ivetment cut and US$10.7 miin incmental recuent cos The credit would fund 24% nf icremtal recuten cas on a decling bais, for the pilot Private Technical Assistance Program for agricultural etenksi, given the need to st field acstites and raie the current low lvel of operating xpenditures. he credit would also fund 63% of local costs, a level warrted by the countrs severe mac-economic constrants and prevaing poverty. To promote the smooth start-up of INTA progrms and urgetly needed cadaste and land titlng activdes, retractiv financing of up to US$1.0 milion is recommended for projct expenditues red after March 31, 1993. Schedule B shows tbe amounts and methods of procuement and dis e as wen as the disbSmtedule. The timetable of project procming and the status of Bank Group operations are give ia Scheduls C and D, rpecively. Maps revat to the project and the Staff Appraisal Repot No 11802-NI dated June 29, 1993 are also atthed. 1i. kect ImpimentatLA project coordating unit (PCU) staffed by quied consltants and likd to the Minist of Agiculttue in hi position as Head of the Natoal garian Council (CONAGRO) would be responsible for overall project mplementation of the specific prject compoents will be the respon of the specazed Ule sector agences: MAG, INTA and IRENA for the Agricltural Technolo component; and INRA under technia cooperation agreement with INEIER, the Public Regis and IRENA fir the Land Mnagemet opnent. Spei emphass has been gie to the analysis of key sector agenies in order to assess locd imp capacity and the need for institional strengthenin Techni asstce would be pvided for impoving insttuional capaciy for project supesioni, moniong and reviw. S hi of sor poli planni evaluaon and moni ing capacity at the level of CONAGRO, is aread underway through an IDB/UNDP tehcl cooperat prect 12. 1g= -.A postive effect on sustainable agrultural techology gneration and transfer trends will depend on the redefinion of the publc sectors rol. Under the project, a mainy regulatory publc sector wM be responsible for creating a conducve environmet fo compeition and inovi In addion, the project wM itoduce pmnoritysemt for human and financial resource alocation, and be an inluei tool to create or actvate vertical and hoionta linkages among participant (ivate and public) Land owneship seity deived from the project's Land Magen component wl improve the incentive fiamework for susainable longterm vnt, ru employment and nabt resoume convato  -4- 13. Deu rin i