Mexico - Rio Colorado Irrigation Project

Lo4AJ S62 - AE RESTRICTED Report No. TO-613a This report was prepared for use within the Bank and its affiliated organizations. They do not accept responsibility for its accuracy or completeness. The report may not be published nor may it be quoted as representing their views. INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT INTERNATIONAL DEVELOPMENT ASSOCIATION RIO COLORADO IRRIGATION PROJECT MEXICO December Z1, 1967 Projects Department  CURRENCY EQUIVALENTS US$1. 00 = Pesos 12.50 Pesos 1 US$0. 08 Pesos 1, 000, 000 = US$80,000 FISCAL YEAR January 1 - December 31 WEIGHTS AND MEASURES-METRIC SYSTEM 1 millimeter (mm) = 0. 039 inches 1 centimeter (cm) = 0. 3937 inches 1 meter (m) 2 = 39. 37 inches 1 square meter (m ) = 10. 76 square feet 1 cubic meter (m ) = 35. 31 cubic feet 1 million cubic meters (Mm ) = 810.7 acre feet 1 kilometer (km) = 0. 62 miles 1 hectare (ha) = 2.47 acres 1 liter (1) = 1. 057 quarts (U. S.)  MEXICO RIO COLORADO IRRIGATION PROJECT TABLE OF CONTENTS Page No. SUNIY *** * ** . i -aii I. INTRODUCTION . . . . * a a 0 8 0 0 0 0 . 0 . . 1 II* BACKGROUND *s** * * * ** a 0** *e III. THE PROJECT AREA .. . . . . . . . .*2 General 0 * 0 0 0 0 0* * 9 * 0 * * 2 Climate, Topography and Soils . 0*0000 00 3 Land Tenure a 0* 0 e a 0 0 0 a a a * o e a 0 e 4 Technical Services . . . . . . ... ... .. . 14 Agricultural Credit . . ..* & .*. . 4 Present Production and Values .. . . . . .. . . 5 Ylarketing and Prices . . . . a .00 0 . . . . * 6 VI. THE PROJECT . . . . . . . . . . . . . . . 6 * . . 6 General . . . o* ** * 0 0 0* 0*** 6 Project Works . .. .. .. .. .. .... . 7 Water Supply 0000000a0000*00a0a 7 Water Requirements .... e * a * *o*8 Status of Engineering . . r . . . .*. .. ... a. 9 Construction Cost Estimates . . * * * ** * 9 Financing e o * 0 * e * * * 0 * * , 0 0 10 V. ORGANIZATION AND MANAGEMENT . . . . . . .. 11 General . . . . a . a a . . . . * * . . . 0 0 . 11 The Irrigation District. ........... U Construction . . . . . ......e * 12 Expanded Technical Services 0 . . . . . . . . . 13 Soils and Farm Drainage Studies . . . . . . ' . . 13 Requirements for Farm Credit 0 . * . . . . . . . 14 VI. FINANCIAL RESULTS . . . . . . . . . . . . . . . . . 14 Operation and Maintenance Cost Estimates . . . . 14 Water Charges. *0 o oo oao o o 15 VII. BENEFITS AND JUSTIFICATION . . . . . . e.. 16 Inproved Land Use n se. .o o.ao . 16 Increased Crop Yields... . . . . . . o 17 VIII. CONCUJSIONS A1ND RECOMMENDATIONS . . . . . *. . . . 18  ANNEES 1. Land Tenure and Size of Farms in Rio Colorado District 2. Agricultural Credit 3. Crop Production and Value, Mexicali Valley - 1963/64-1965/66 4. The Existing Irrigation System and Proposed New Works 5. Water Requirements 6. Estimate of Costs 7, Operation and M"aintenance Costs after Rehabilitation 8. Estimated Increase in Net Value of Annual Production Following Rehabilitation 9. Estimated Costs and Benefits CHART Rio Colorado - Construction Schedule MAPS 1. Mexican Rehabilitation Irrigation Program 2. Rio Colorado Irrigation Project This report is based on the findings of a mission which visited Mexico in February/March 1967, composed of Messrs. Greenshields, Bartsch, Kordik and Zarandin of the Bank, Mr. Garnier of FAO, and Mr. Knights (consultant to the Bank).  MEXICO RIO COLORADO IRRIGATION PROJECT SUMMARY i. The Mexican Government has applied to the Bank for a loan to assist in the financing of the rehabilitation of the Rio Colorado Irriga- tion District, located in the lower Colorado River delta, extending south from the United States' border into the States of Baja California and Sonora. ii. The Project would increase the quantity of water for irrigation by the reconstruction and lining of canals, by rehabilitation of existing wells, construction of new wells and integration of groundwater supplies with gravity flows from the Colorado River, and land leveling for greater efficiency in distribution. It would include complete rehabilitation of all drains to enable better control of salinity. The Project would also include new and improved roads, an office building, repair shop, ditch rider houses and a telecommunication system to facilitate operation and maintenance. Technical and extension services to farmers would be expanded and improved. iii. The Project would provide assured water supplies and better water management for approximately 203,000 ha, of which 12,700 ha would be double cropped, in effect bringing the total annual area of irrigated crops to 215,700 ha. iv. The estimated cost of the Project (1968-74) would be approximately US$95 million. In addition, farmers are expected to invest about US$12 million for on-farm drainage over a period of about 15 years. v. The Proposed Bank loan of US$25 million would cover the presently estimated foreign exchange component of civil works for the Project. All other costs including local currency costs would be met by the Government. vi. The Secretaria de Recursos Hidraulicos (SRH) would be responsible for the execution of the Project. SRH has a competent staff and an effi- cient organization for carrying out the Project and their execution of similar Bank-financed projects has been satisfactory. vii. Water users would make payments to the Government over a period of 25 yearsp after the construction has been completed, to assist in de- fraying about 50 percent of the investment cost of the Project. The water users would also pay a water charge to cover the entire cost of operation and maintenance. viii. Annual economic benefits would reach a level of approximately US$16 million in about 15 years. On the basis of these direct agricultural benefits, the internal rate of return to the economy would be about 11 per- cent. In addition, the Project is indispensable for maintaining the com- mercial and industrial economy of the area as these are entirely based on agriculture.  - ii - ix. The Project is suitable for a Bank loan of US$25 million for a term of 20 years, including a grace period of seven years. The Borrower would be the Nacional Financiera, S.A., an agency of the Government of Mexico.  MEXICO RIO COLORADO IRRIGATION PROJECT I. INTRODUCTION 1.01 The Mexican Government has requested a Bank loan to help finance the rehabilitation and consolidation of the Rio Colorado Irrigation Dis- trict comprising 330,000 ha, of which about 203,000 ha would be irrigated. Three previous loans have been made by the Bank for the rehabilitation of irrigation projects: Loan 275-ME in January 1961 for US$15 million; Loan 336-N4E in April 1963 for US$12.5 million; and Loan 450-ME in May 1966 for US$19 million (for location of projects, see Map 1). Construction work under these loans is progressing satisfactorily, except for deferment of a portion of the construction in one district pending completion of further studies to improve drainage and cropping patterns. 1.02 This report contains an appraisal of the Project based on feasi- bility reports prepared by Secretaria de Recursos Hidraulicos (SRH), in- formation supplied by the Mexican Government, and on the findings, field studies and discussions by a Bank Mission composed of Messrs. Greenshields, Bartsch, Kordik, Zarandin, Garnier (FAO), and Knights (Consultant), who visited Mexico in February/March 1967. IIo BACKGROUND 2.01 In Mexico agricultural production contributes only about one- sixth of the total gross domestic product, However, nearly half of the population derive a living from work on the farms and ranches* During the past 10 years the average rate of growth of agricultural output has been over 4 percent per year. This rate of growth has not only enabled the country to cope effectively with the annual population growth of 3.6 per- cent and the increasing per capita food consumption, but has also enabled Mexico to become a net exporter of basic food crops. 2.02 Exports of agricultural commodities in 1965 were valued at US$665 million, amounting to about 65 percent of all exports, Cotton ac- counted for 19.1 percent, cereals for 10.6 percent and livestock products for 4.7 percent of all exports. Mexico has adopted agricultural programs with a view to producing adequate food and fiber products for national needs and to increasing agricultural exports. 2.03 The rugged topography of much of Mexico, combined with arid and semi-arid conditions prevailing in many regions, limits the area of culti- vation to about 30 million ha which is only 16 percent of the total land area. Under these unfavorable natural conditions, continued increased agricultural outputs can be attained only by using the available arable land more intensively. This requires improvement of all major inputs and, in areas where water shortage is the principal limiting factor, the expan- sion and rehabilitation of irrigation. In recognition of this, the Govern- ment has devoted more than 90 percent of its agricultural investment to irrigation in recent years.  - 2 - 2.04 More than 4L million ha of farmland are under irrigation, of wJhich 2 million ha have been brought in during the past 15 years. The IMexican Government, through its Secretariat of Hydraulic Resources (SRH), is operating irrigation facilities on about 2.5 million ha, while farmers with private systems irrigate approximately 1.5 million ha. About 30 percent of the harvested crops of Mexico are from land receiving irrigation. 2.05 An impressive expansion of irrigation development took place in 1930-40. However, too little attention was given to the construction of facilities that would make full utilization of the potential water re- sources. Excessive water losses resulted from unlined canals and in efficient water distribution. In 1960 the Government decided that the rehabilitation of existing irrigation facilities be given priority over the construction of new schemes because of greater economic benefits. The work of rehabilitation has included the redesign of canal systems, lining of canals and laterals, provision of drainage, construction of additional reservoirs, and the redistribution and consolidation of land holdings. In the case of the Rio Colorado Irrigation District, the rehabilitation of works would permit the expansion of the irrigated area by about 27,000 ha and double cropping on about 12,700 ha. III. THE PROJECT AREA General 3.01 The project area includes the Rio Colorado Irrigation District within the Mexicali Valley. This valley is the lower Colorado River delta extending south from the United States-Miexico border into the States of Baja California and Sonora. The gross area of this District is about 330,000 ha, of whiich 176,000 ha are presently irrigated. Water from the Colorado River, the amount of which is established under International Treaty (paras 4.03 and 4.04), is used for the irrigation of 113,000 ha, while 63,000 ha are supplied with water from deep wells. 3.02 The area's population is about 300,000, of which about 220,000 are in the City of Mexicali (see Map 2). Irrigation has been practiced in this area since 1908 and within the past 30 years the Mexican Govern- ment has been improving the irrigation facilities principally through the construction of canals, drainage works and the Morelos Diversion Dam. 3.03 The existing irrigation and drainage system, constructed as it was over a period of years by several private groups, is below standard. Many canals cannot provide adequate volumes of water for optimum applica- tion. Water losses from the unlined canals are excessive. Inadequate land leveling also contributes to inefficient water use. Neglected main- tenance during the past years has contributed to the low efficiency of the system. 3.0a The authorities, as well as the farmers, are aware of these poor conditions in the project area and they are in general agreement that  remedial action has to be taken. The farmers, through their organized groups, have expressed strong support for the proposed rehabilitation program. 3.05 The area is well suited to irrigation farming and has consider- able potential for expanded agricultural output despite the limited water supplies. Present levels of agricultural production are among the highest in Mexico. Most farmers have adequate sized farms to achieve acceptable levels of income and for use of modern mechanized methods. Climate, Topography and Soils 3.06 The climate of the Rio Colorado Irrigation District is arid, with an average annual rainfall of only 36 mm, which occurs principally during the months of December, January and August. During the past 20 years annual rainfall has varied from 6 mm to 77 mm. Temperatures during the sunmier months average about 320C (900F), while temperatures in winter are about 130C (550F). Freezing conditions during nights may be expected between the months of November and February. The minimum temperature recorded was -70C (190F). Hailstorms during winter months have been re- ported only twice in the past 34 years. 3.07 The District is a relatively flat plain within the broad Colorado River delta. The soils are medium to fine grain alluvium and free from coarse sands or gravel deposits. The plain is divided by a 10 - 20 m elevated ridge so that drainage from the northwTestern part f'ows toward the Salton Sea in the United States and from the remainder of the area to- ward the Gulf of California. The northwestern plain has a gradient of 0.46 m/km, while the southern plain is somewhat flatter, with a gradient of 0.42 m/km. Both parts of the area have topography favorable for irri- gation and effective water control. 3.08 The soils of the District have been adequately classified and mapped. According to the United States Bureau of Reclamation's system of land classification, most of the soils are I and II, which classes are suitable for sustained production under irrigation. In general, they are free draining with the exception of about 33,000 ha of heavy clays for which extensive drainage would be provided. The organic matter content is low in al series, therefore, nitrogen fertilizer applications are nec- essary for satisfactory production. 3.09 Salt has accumulated in the soils due to faulty irrigation prac- tices under the desert-type climate. Limited application of irrigation water has precluded leaching and resulted in increasing salinity over about 35 percent of the area. This area will require moderate leaching to restore full productivity. About 22 percent of the total irrigable area will require heavy leaching, and 13 percent of the area with salts in the soil in excess of 2 percent by weight, would be excluded from the Project as well as three limited areas of highly alkaline soils. About 20 percent of the area is nearly salt free.  Land Tenure 3.10 Under the agrarian land reform program, farmers have been allo- cated farms in units of 20 ha with full water rights, which have effective- ly been reduced to 18 ha of irrigated crops under presently available water supplies* About three-fifths of the farmland of the project area are culti- vated by ejidatarios (life-tenants established under Mexican Land Reform) who have use rights but no legal ownership title in the land. The ejidatarios represent about 65 percent of all farmers in the District (Annex 1). The remainder of the District is cultivated by private farmers. The modal-size group of both the ejido and private farm is the 20-ha unit. Although the maximum allocation of water rights to any one individual is 20 ha, some farm families jointly farm several units held by members of their family or leased from others. A family farm can have a maximum of 150 ha if it is in cotton or 100 ha if it is in other crops under present regulations of the agrarian reform law. 3.11 The private landowners have higher incomes than the ejidatarios because they operate bigger farms on the average, have more financial resources, and use more modern techniques of farming. Nine-tenths of the farms with over 20 ha are privately owned. More than 70 percent of the farms of 5 ha or less in size are operated by ejidatarios. Technical Services 3.12 Agricultural research and extension services are the responsi- bility of the Secretariat of Agriculture. The Secretariat maintains a number of central plant breeding and other experimental stations. Trials of best adapted varieties are carried out for the District at a 40-ha sub- station near Mexicali for winter crops, and at a station in the eastern sandy soil part of the District for summer crops. Also at the Mexicali substation, experimental work is undertaken on fertilizer application, irrigation practices and plant protection. The crop research program at these district field stations is considered adequate for providing basic information on present crops and on the crops to be introduced in the project area. 3.13 Agricultural extension services have not been expanded in keeping with needs. Some additional staffing and supporting budgets are needed. The Mexicali Valley has only five extension agents, five home economists and a part-time specialist agent for livestock. To a large extent the effective technical services are now provided by the inspectors of the governmental lending agencies, the Ejidal Bank and the National Agricultural Bank, and by the cotton companies. The Secretariat of Hydraulic Resources provides extension guidance on irrigation and drainage practices primarily through the supervisors of irrigation units. Agricultural Credit 3.14 The principal sources of short-term farm credit in the District are the 12 cotton companies and the two Government banks - the Banco Ejidal which lends exclusively to the ejidatarios, and the Banco Agricola which  - 5 - lends mainly to small private farm operators. The cotton companies finance over 90 percent of all annual crop production in the District. Their fi- nancing, as well as that of the banks, is advanced for each separate major item of work throughout the crop calendar. Each succeeding stage of work is financed only after an inspector has determined the preceding work to be satisfactorily completed. The companies are now employing many gradu- ate agronomists as inspectors. They have one inspector to each 50 to 75 farmers. Private commercial banks make loans to a few large scale farm operators and to farmers who do contract work with agricultural machinery. Their participation in the overall agricultural credit picture is quite negligible. 3015 The two Government banks, as well as the cotton companies, pro- vide a part of their annual credits in kind such as seeds, fertilizers and in contract services. The cash part of most annual loans is based on amount of labor required and is advanced on a month-to-month basis to cover family living expenses. The usual rate of interest charged by all lending agencies on annual crop production loans is one percent per month on the outstanding balance. Details on farm credit are given in Annex 2. 3.16 The Banco Nacional Agropecuario, established in Mexico in 1965, opened an office in Mexicali in September, 1967. This sub-branch will fill an important credit need by the provision of medium and long-term credits not now covered by the two existing official banks. Farmers will need longer term credit for installation of on-farm drainage and for pur- chase of farm implements. In addition, the farmers -who are expected to go into livestoclk production in the project area wTould need a stable ar.d adequate source of medium and long-term credits. Present Production and Values 3.17 About 71 percent of the irrigated acreage is devoted to cotton as the climate and the soils of the area are especially favorable for this crop. Wheat is the second major crop with 24 percent of the irri- gated area. Alfalfa, vegetables and some other crops are cultivated on 5 percent of the land. Average seed cotton yields of 2.9 tons per ha are the highest in Mexico. The cotton lint is fine-long staple, white and clean due to hand picking and absence of rain and insect pests, and there- fore, usually commands a premium price. Good quality hard wheat averages 2.9 tons per ha and alfalfa hay yields 9 tons per ha (Annexes 3 and 8). 3.18 Livestock is presently of minor importance in relation to crop production, but it is increasing. Three commercial dairies in Mexicali are producer-owned and operated. The total investment in dairy cattle and plants in the District is estimated at about 68 million pesos. The output of the commercial plants is roughly 50,000 liters per day. The output of raw milk by small producers is from 10,000 to 15,000 1 per day. About 10,000 1 per day are imported from the United States. Thirteen commercial feed lot operators keep an average of 30,000 to 35,000 head of beef cattle to meet the local demand of about 100,000 head annually. The District is also important as a transshipment area for feeder cattle, mostly from the State of Sonora, destined for export to the United States.  - 6 - Annually about 60,000 head are fed normally 10 to 15 days in commercial feed lots at Mexicali prior to being transported to the United Stateso 3.19 The overall standard of farming is well advanced and this is reflected in the high levels of fertilizer application and the high degree of mechanization. About 5,800 tractors and 19050 combination harvesters are being used in the District according to a 1964/65 machinery census. Ninety-four percent of the farms can be considered fully mechanized. Harketing and Prices 3.20 All cotton production is financed and marketed under contract to the twelve cotton ginning companies in the Rio Colorado Irrigation District. These companies export practically all of the lint output to Japan and Europe. Cottonseeds are processed by two of the companies that have oil mills. The oil is converted into shortening which finds its way into the Mexican market. The cottonseed cakes are chiefly exported to the United States. The fibers grown in the District are straight middling 1-1/16" which are of high grade and have earned a good reputation in foreign cotton markets. These high-strength fibers go mainly into garments. In 1966/67, the average export price per pound of straight middling 1-1/16" was U.S. cents 22.15 fob Ensenada, a port on the western coast of Baja California. 3.21 Wheat prices are fixed under a price support program administered by a federal agency called CONASUPO. The country-wide support price is 800 pesos per ton, which is slightly higher than the world price of 750 pesos per ton. CONASUPO's support price for wheat produced in the Mexicali Valley was 1,100 pesos (US$88) per ton in 1964/65, and 913 pesos (US$73.o4) per ton in 1966. These Mexicali support prices, which are higher than those for the rest of the country, are justified by the high transport cost that would otherwise be involved in bringing wheat to the District from other producing areas of Mexico. 3.22 In addition to wfheat, prices are fixed under the federal price support program for corn and sorghum. The prices for cottonseed, safflower seed, beans, soybeans, and sesame seed are not fixed, but they are supported through purchases by CONASUPO. A complementary agency called ANDSA grades and stores the wheat and other products purchased by CONASUPO. ANDSA has five fully mechanized warehouses in the District, each with a storage capacity of 15,000 tons. IV. THE PROJECT General 4.01 The Project consists of the rehabilitation of the irrigation and drainage facilities of the Rio Colorado District. The principal works would include the following: (i) realignment and lining of canals, con- struction of new wells and rehabilitation of existing wells for improving the water supply; (ii) construction of new drains and rehabilitation of  - 7 - existing drains; (iii) construction of new roads and repair of existing roads and telephone lines; (iv) construction of office, repair shop and other buildings and gauging stations; (v) land leveling and the filling of old canals and ditches; and (vi) purchasing equipment for improving the operation and maintenance of the system. Completion of all construc- tion work is expected to take 61-