Panama - Agricultural Machinery Project

T$ 0 .-25 RESTRICTED This report is restricted to use within the Bank. INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT TECHNICAL REPORT on the AGRICULTURAL MACHINERY PROJECT in PANAMA ' September 2, 1953 Teehnical Operation. Department   TECHNICAL REPORT. AGRICULTURAL MACHINERY PROJECT I. Purpose and Scope of Report 1. The Republic of Panama has requested the Bank t o consider a loan t o Instituto de Fomento Economico (IFE) of approximately $1,200,000 t o cover the foreign currency cost of a farm machinery project. 2. This report is an appraisal of the technical, economic and opera- tional aspects of the project based on personal observations i n Panama, and on conversations with government officials, Point N specialists, bankers, businessmen and farmers. 11. Description of the Project and Estimated Cost 3. The project consists of three parts: (a) Farm machinery pools ~SSO,oOO (b) Farm machinery sold on credit t o farmers 250,000 (c) Small tools sold t o farmers 150,000 $950,000 Spare parts for (1)and (2) Contingencies The aims of the project are the following: (a) Farm machinery pools: would serve chiefly medium farmers (12 - 25 acres) who a t present make only meager use of their s o i l because of lack of equip- ment. The size of these farms does not justify purchase of expensive machinery. (b) Farm nachinery sold on credit t o farmers: would serve chiefly farmers owning more than 25 acres the operation of which warrants the purchase of tractors and equipment. (c) Small tools sold to farmers: would serve very small farmers eking a t present a bare existence on 4 or 5 acres.  (1) Farm machinery pools 40 The farm machinery pools would be patterned on the SCEPA pool operation i n Peru, which the Bank helped t o finance. A Point IV engineer, who has been with the SCIPA organization, but is now stationed i n Panama, assisted with the preparation of the Panama project and it is intended t h a t he s h a l l remain as consultant i f the loan is made. 5 0 Three pools with tractors and t h e i r a w d l l i a r y equipment would be established a t (a) Panama City or its vicinity; (b) David i n Chiriqui, the western province; and (c) Chitre or some other point i n the Central Provinces, 6. The pools would be augmented as needed by some thirty tractors and other equipment i n operating condition formerly belonging t o the Department of Agriculture and other agencies and now turned over t o IFE. 7 Duties of the pools, as i n Peru, would be divided between land clearing and farming. I n Chiriqui, land clearing may predominate, while i n the more closely s e t t l e d central and P3nama province areas plowing and harrowing are l i k e b j t o be the main tasks, Equipment, with operators, would be rented t o farmers a t a fixed price per hour payable i n cash. Credit f a c i l i t i e s would be provided for farmers as described i n paragraph 22. 8 An estimate of the types and quantities of machinery and equipment t o be purchased f o r the pools over a period of three years is given i n Appendix A. (2) Farm machinery sold on credit t o farmers 90 This operation is similar t o the Bank's Agricultural Machinery Loan t o Nicaragua. Uith t h i s $250,000 equivalent, IFE would grant credits t o farmers, on terms satisfactory t o the Bank, f o r the purchase of farm machinery, The creditworthiness of each farmer would be investrgated by 13% prior t o granting a credit and, as i n the case of Nicaragua, IFE would have a l i e n on the equipment u n t i l the credit was repaid, The amounts accruing t o IFE from the servicing of these credits would be held i n a blocked account for the servicing of the Bank loan. 1 0 IF% already has requests for credits from qualified farmers for the purchase of 40 medium-size wheel tractors, 12 pulled type r i c e harvesters and 4 r i c e combines. IFE proposes, however, t o go slowly and t o spread this activity over a period of two years i n order t o obtain the most useful dis- tribution. A principal purpose of t h i s program is t o bring about a more even development of agriculture by providing equipment where the need is greatest and credit f a c i l i t i e s most lacking, 11. As i n the case of Nicaragua, the exact quantities and types of machinery and equipment, totalling $250,000, would be determined during negotiations.  Small tools for sale t o farmers 12. This item, l i k e the two preceding, has Bank precedent through the Small Tools section of the Agricultural bJachinery Loan t o Paraguay. A s i n Paraguay, a high percentage of farmers i n Panama own only a few acres of land which they till with crude, home-made tools on a bare subsistence basis. IF'E plans t o employ a small staff of agricultural advisors t o assist these people. One of the f i r s t concerns of the advisors w i l l be t o provide the most needy farmers with simple basic equipment such as machetes, axes, coas (Indian hole diggers) and barbed wire. Commercial facilities are in- adequate t o do this and IFE proposes t o s e t up its own store system to handle these few items a t cost. Sales w i l l be restricted t o the farmers i n amounts recommended by the agricultural advisors. 13 A loan equivalent t o $150,000 is requested t o assist i n financing this program as outlined i n Appendix B. The Bank's participation would cover the f i r s t 18 months of the program. The amount of the Bank loan is based on supplying 1,500 farmers per a m , working 5 acres of land, with 6 rolls of barbed wire, 10 machetes, 1axe and 2 coas. 111. Background Information l.4. Panama has enough good s o i l t o produce all of its agricultural requirements, but because of underdeveloped famn re-smcea, the country dnes not even produce all of its food. Very l i t t l e land a t present is irrigated, al- though there are some good possibilities. In 1951, $16,000,000 worth of food had t o be imported. Uany obstacles, economic, social and technical, must be overcome before the country is self-supporting i n agricultural pro- duce, but a long step ahead vrould be taken i f farmers had access to modern farm mechanization. 15