Bolivia - Ingavi Rural Development Project

CIRCULATtNG COPY 6-1a --'y 1'2//,, U TO BE RETURNED TO REPORTS DESK Document of FILE GOPY The World Bank FOR OFFICIAL USE ONLY Report No.P-1755-BO REPORT AND RECOMMENDATION OF THE PRESIDENT TO THE EXECUTIVE DIRECTORS ON A PROPOSED LOAN TO THE REPUBLIC OF BOLIVIA FOR THE INGAVI RURAL DEVELOPMENT PROJECT February 5, 1976 This|document has a restriCted distribution and may be used by recipients onlY in the prformiance ther official duties. Its contents May not otherwise be disclosed without WrdBn uhrlto  CURRENCY EQUIVALENTS (As of January 5, 1976) Currency Unit = Bolivian Peso ($b) US$1 = $b2O $bl = Us$O.05 $bl,000 = US$50 .$bl, 000, 000 = US50,0Q00  FOR OFFICIAL USE ONLY REPO.G A.L iqEJOI,30{NDAT ION OF THE PRESIDE2NT TO TIE EMCUMIVE DIREjEORS ON A PIROPOSED LOAN TO THE R.EPUBLIJ OF BOLIVIA FOR THE IN.AVI RURAL DEVELOPMENI PROJEJT 1. I submit the following report and recommendation on a proposed loan to the Republic of Bolivia for US$9.5 million to help finance the In.avi :bural Development Project. The loan would be made on Standard Third Window terms of 25 years, including seven years of grace, with interest at 4-1/2%. PAR' I - THE E3ONOff Introduction 2. An economiz report entitled "C3urrent Economiz Position and Prospects of Bolivia" (786a-BO) dated July 28, 1975, was distributed to the Executive Directors. Country data sheets are attached as Annex I. Back,round 3. Despite the increasing importance of petroleum and natural gas exports, as well as significant mineral deposits, Bolivia remains one of the poorest countries in South America. The majority of the population is engaged in traditional agriculture. Only a small part of the labor force is employed in the modern sectors. rhe infrastructure is primitive and the road and rail networks cover only a fraction of the country. The combination of strong traditional ties within the Indian communities and geographic, health and educational obstacles to population mobility has perpetuated the demographic concentration on the barren, windswept and dry 10-15 thousand feet plateau, the Altiplano. About half of Bolivia's population lives a physically, culturally and economically isolated subsistence existence in this inhospitabla region which is rich in mineral deposits but limited in agricultural potential. 4;. The 1952 revolution sought to put an end to the dual structure which had characterized Bolivia's economy since colonial times and to depri-ve the landowning and mining oligarchy of its economic base. This objective was only partially achieved. Progress was made in eradicating feudal relations, distributing the land and eliminati-ng obstacles to social mobility. The agrarian reform and the nationalization of large mines, however, were followed by falling production. JDP declined in the 1950s and did not recover to its pre-1952 level until 1961. During the sub- sequent decade, output increased steadily at an average annual rate of around 5%, providing for average annual per capita income increases of 2.5%. As a result, GNP per capita which had fallen by 24% in the 1952-60 period had recovered by 1970, to the 1952 level and was more equally distributed. However, the momentum of economi-. growth was again lost in 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.  -2 - 1970/71 because of political instability associated with declining private investment and deteriorating public finances. The deterioration of public finances reflected a structural flaw in the economy. Bolivia's public sector is proportionately one of the largest in South America and a source of livelihood for a sizeable segment of the population. With the scarcity of employment opportunities in the private sector, pressures to expand the ranks of public servants proved difficult to resist. Increased expenditures on wages and salaries, combined with a weak tax system, left few resources for investment. Moreover, the inability of the public sector to generate adequate savin-s limited its capacity to utilize external assistance. 5. On coming to power in 1971, Presiden-t Banzer faced the need to provide jobs for the unemployed and to revitalize investment and output growth. This need was initially faced in the context of a sharp deterioration in Bolivia's terms of trade whizh produced a weakening in the balance-of-payments and a further deterioration in public finances and eventually resulted in a substantial devaluation in 1972. At the same time, however, more rational economic policies were put into effect. To establish a more favorable climate for private investment, new laws offering guarantees and incentives to private investors were promulgated and claims arising from earlier nationalizations were settled. The Government also improved public admLnistration and the pricing policies of some public undertakings. These policies were successful in increasing private investment and in bolstering bhe rate of growth. Recent Economic Developments and Prospects 6. The most important events affecting recent economic performance have been the substantial improvement in the terms of trade in 1974 and the sub- sequent deterioration last year. The sharp increases in petroleum and mineral prices in 1974 allowed a simultaneous and large expansion of both consumption and investment and brought about an unprecedented improvement in public finances and the balance of payments. After current deficits in 1970-73 the Oentral Government achieved savings equivalent to one-third of its capital expenditure in 1974. For the public sector as a whole, savings in 1974 exceeded 10% of .DP and covered nearly 90% of capital expenditure. On the balance-of-payments side, the terms of trade gain in 1974 was equivalent tc about 11 of GDP and the trade surplus exceeded US4150 million. There was a current account surplus of some USs5O million and net capital inflows approached US$90 million, nearly four times their 1973 level, as a result of substantially higher loan disbursements o the public sector and increased foreign investment associated with hydrocarbon exq)loration. The net fcreign reserve gain in 1974--USv125 million--brought total reserves to US6156 million, equivalent to 3.7 months of imports, a high point in Bolivia's recent economic history. 7. After the terms-of-trade related financial improvement in 1974, a deterioration took place in 1975 caused by a worsening of the terms-of-trade and the impact of world wide economic recession. Mineral exports fell by well over 20%. There was a decline of mineral prioes approximating 13%, on weighted average, and saleable volumes of most minerals fell as a direct result of the recession and unloading of speculative stocks accumulated during the commodity boom Df 1973/74. Efforts by the International Tin *ouncil to sustain prices by imposing export quotas did not produce the expected  - 3 - results. Exportable surpluses of crude petroleum were significantly reduced for the second year in a row due to falling production and rapidly rising domestic consumption of hydrocarbon derivatives. A significant price increase for natural gas was obtained from Argentina, but this could not compensate for the overall decline in export earnings because of the contractual limit on the volume of sales. Based on preliminary estimates, merchandise ex)orts in 1975 declined by 20p, while imports rose by nearly one-third in the wiake of the start-up of new public investment projects and the liberalizabion of imports for consumer durables and motor cars earlier in the year. The current account deficit approached US`220 million and despite substantially increased disbursements of medium term loans to the public sector, there was a loss of net foreign exchange reserves of some US360 million. However, this still leaves reserves at US$100 million, or about two months of imports. 8. Bolivia's terms of trade are expected to again improve in 1976 and beyond. Mineral prices appear to have bottomed out in 1975 and hydrocarbon prices have resumed their rising trend. Furthermore, with gradual economic recovery in industrialized countries mineral export volumes should increase. Recent Government measures to increase prices of domestically consumed petroleum products, especially of gasoline, should improve exportable surpluses. The outlook for 1976, therefore, is for somewhat accelerated growth and an improved fiscal and balance-of-payments position. 9. Economic growth prospects over the medium- to longer-term depend on the Government's ability to increase savings and stimulate investments, particularly those for developing the countryt s hydrocarbon, mineral and agricultural resources. Government measures designed to broaden the re-venue base have begun to show results. The firm wage policies that have been applied since 1974 have resulted in a reduction of inflation to an annual rate of about o'. Investment in mining and hydrocarbons is accelerating. Intensified exploration for hydrocarbons by YPFB and private foreign Companies is underway and may lead to significantly increased production and export of crude petroleum and natural gas which would stimulate an acceleration of economic growth towards the end of the decade. Debt Service and 2reditworthiness 10. Service on external public debt in 1974 amounted to 13.6% of exports of goods and norn-factor services net of investment income abroad. This represents a considerable reduction from the debt burden of previous years which frequently absorbed 15-20% of net export receipts. Average terms of the external debt outstanding have remained soft, reflecting the h-Lgh proportion of con- cessionary aid channeled to Bolivia. Average interest in 1973 was 3.5% and average maturity about 22 years. 11. This position is bound to change, however, as it can be expected that lending terms will become harder and the share of loGns on conventional terms will increase. Of new loans attracted during 1974 and 1975, over 40% were financial and suppliers' credits. With subst-antial disbursements envisaged during the next six years, the service on externa.l public debt will move well above its historical average by 1977/73. However3 as a result cf -rowing  -4- exiorts, the debt service ratio should decline in subsequent years. In view of the nature and groATin- size of Bolivia's debt, prudence in selecting and utilizin- extermal capital will have to become an essential element of debt .mana eiment. 12. Bolivia enjoys a substantial resource base in agriculture, minerals and hydrocarbons which has to be developed to sustain rapid economic gro-.swth and, in particular, rapid expansion of export earnings in the foreseeable future. If orcdctlcion in the ep)ort sectors can be increased as planned and prices fcr the country's major export products (oil, gas, minerals) are adequate, Bolivia can be considered creditworthy for substantially increased amounts of external lending on conventional terms. Nevertheless, some additional lendin, on soft terms is justified by Bolivia's poverty and its large and continaing external capital requirements. The country will require substantial external financin- of investment to supplement the domestic savinJs effort at least until the early 1980s. While the 3overnmment is makin- a serious effort to mobilize domestic resources and prepare a development pro gram, implementation of this program -ill require external assistance we]l in excess of the foreign exchun,e component of suitable projects presently available for international financing. Although substantially increased suppliers' and financial credits --il robably become available, they shculd prudently cover not more than 35% of uhe rublic canital inflows required durin- 1975-80 for meeting a .DP gro-wth target of 6-7% annually. The remainder should be obtained on softer terms. preferably from international development financing agencies, includin. an expanded Bank lending program. The need for concessional financing to safe- zuard Bolivia's creditworthiness, together with the country's relative poverty and imoroving development performance, make it eligible for lcans cn Third :.'indow terms. P.ART II - THE BINK J1ROUF OPERATIONS IN BOLIVI.4 13. Bolivia is an original member of the Bank but it did not obtain 'ank 2rour resources until 1964. Bank krou- assistance to Bolivia has been limited by the country's tight budget and restricted capacity to service external debt. Until 1975, lending to Bolivia was in the form of IDA\ credits, except for a rank ioan to help finance an "enclave' project. Because of the narrow scope for private investment, the first IFp investment, amounting to US&3400,000 in a cable and plastic products enterprise, was not made until 1973. =nnex II contains a surmiary statement of loans, credits and investments as of December 31, 1975, and notes on the status of ongoing orojects. IDl has provided three credits exclusively for livestock development (US410.2 millicn), one credit for livestock and crop development (Us.y.5 million), four credits for power generation and distribution (US.;$28.4 million), one credit to the railwajTs (Us.S8 million) and one for mining (US.s6.2 million). In addition to the Bank loan (US.i23.3 million) to help finance a project for the construction of a pipeline to transport natural gas to Argentina, the Bank has financed a loan (U.3.~2 million) for the Second Railway project. 14. Ihe proposed loan would be the Bank's third and the fourteenth Bank .r-un operation in Bolivia. N\et of undisbursed balances, Bolivia's debt to the -ank and IDA in 1974/75 represented 8 .3O of its external public indebtedness.  This ratio might increase slightly by 1980 as might the share of the Bank Group in total debt service, now at about 4%. Although the Bank Group has ranked below the US jovernment and the IDB as a source of financial assistance to Bolivia, its role has been expanding. 15. Future Bank lending will give emphasis to supporting Government efforts to expand production while simultaneously improving the distribution of the benefits of economic growth. Many Bank activities will focus on helping the less developed regions of the Altiplano and the intermediate valleys which contain the majority of Bolivia's rural and urban poor. At present, four projects are at an advanced stage of processing. These include a project to finance the expansion of electric generation and transmission capacity of ENDE, which will be the Bank's fourth operation with ENDE; a project to provide credit for established private and predominantly Bolivian owned medium-sized mining enterprises and private industry, which will operate through a private development Bank and will be the Bank's second operation with that institution; a project with the state owned Mining Bank to provide credit to smaller private mining enterprises that have thus far had little capital investment; and a project for the water supply and sanitation sector for small urban and rural areas. Project preparation has begun for agricultural projects which will be designed to increase the productivity of the poorer farmer and an education project which will seek to improve primary rural and non-formal vocational education. Financing of further economic infrastructure is also contemplated in the trans- portation and power sectors. In transportation, project preparation is under- way for a project to provide access to remote areas of the country through a program of airport develcpment and continued support for the railway rehabil- itation program is planned as well. In the more distant future, further Bank programs in agriculture, industry and mining will be under consideration. 16. A major objective of Bank lending to Bolivia will be to help the Government to improve the performance of agriculture, where priority will be given to the needs of subsistence farmers and to sustaining the production momentum generated by the commercial farmers in order to keep established and develcp new markets for Bolivia's agricultural exports. We see the Bank's role in agriculture as that of a catalyst in identifying and helping the Govern- ment finance high priority projects which would contribute to diversifying Bolivia's exports and at the same time create additional employment opportunities and raise the productivity and income of the farm population. PART III - THE RURAL SECTOR 17. Overall performance of the agricultural sector during 1968-74 was mixed and there was a decline in the sectcr's relative importance. Thus, while GDP growth during 1968-74 averaged about 4.8e p.a., that of agriculture grew only at 3.9% p.a. and the sector's share of GDP decreased from a high of 30% (1962) to about 21% in 1974. In spite of agriculture's relatively small contribution to total exports (about 9%) the volume of agricultural exports has lately been increasing faster than in the past. The increase has come from  - 6 - the exceptional expansion in commercial a-ricultural production of livestock, cotton, sugarcane and soybeans in the Eeni and Santa Cruz re7icns. 18. The farmers and ranchers in the northern and eastern lowlands of the Beni and Santa 3ruz regions have large-size landholdings and enjoy sub- stantia]. financial support from central and local governments. Modern techniques are used, especially in the mechanized production of cotton and sugarcane in Santa !ruz. The marketing arrangements are better developed in this region, as are processing industries and services. Arable virgin land is relatively abundant. The exceptional growth in commercial agriculture stimulated by hi-h prices for cotton, sugarcane and livestock on the world markets, was achieved mainly through bringing additional land under cultivation, a reasonable supply of credit and mechanization. Some small gains in the production of foods for domestic consumption have also been made by the sub- sistence farmers in the Altiplano and the intermediate valleys which account for about 85% of Bolivia's total farm population. They were achieved mainly by additional inputs of labor and utilization of some improved seeds rather than by any si-nificant incre:ase in the flow of credit, increase in acreage and introduction of improved technology. 19. Agricultural credit in Bolivia is supplied by the Banco Agricola de Bolivia (BAB), by the Central Bank through its rediscount operations and by foreign banks operating in Bolivia. In general, medium- and long-term agricultural credit in Bolivia is scarce and its allocation between subsistence and commer- cial farmers has been highly skewed in favor of large-and medium-size commercial farmers. Of all available agricultural credit, about 80% is estimated to have been lent to commercial farmers in the Santa Cruz and Beni regions, despite the fact that Bolivia's rural sector is still composed mainly of smnall farmers. The majority of the latter use primitive plows and digging tools, mostly native varieties of seeds and employ intensively family labor in land preparation, seeding, weed control, livestock management, harvesting and in domestic activities such as weaving and spinning. Labor is the most important of all production factors which is supplied almost exclusively by the family and complemented only as required from the traditional community labor pools. The majority of small farmers live in poor economic and social conditions but are, in general, self-sufficient and somewhat skeptical of efforts by outsiders to change their life styles. The families are usually large, mainly of Aymara origin in the Altiplano and of Quechua origin in the intermediate valleys. Aymara and Quechua also are the native spoken languages which predominate over Spanish in these regions. 20. Landholdings of subsistence farmers range from one-half hectare in the vicinity of Lake Titicaca and the Cochabamba Valley to 25-50 hectares in some of the drier areas of the Altiplano (elevation of 10,000 to 14,000 feet) and the intermediate valleys (elevation of 4,000 to 10,000 feet) and the eastern slopes of the Andes (Yungas). In general, this landholding pattern is largely a result of the Agrarian Land Reform implemented in 1952. Since the initiation of the Reform, large tracts of land in the Altiplano and the intermediate valleys have been sub-divided to accommodate additional members of the family. Productivity in these regions has remained low as the 1952 Land Reform was not  - 7 - followed-up with complementary programs to organize cooperatives, upgrade supplementary services, provide the inputs to bring the land into more productive use and assist the fanmers in marketing the produce. Nevertheless, the small-farm sector produces about two-thirds of the domestic food supply and provides some form of productive employment to about 65% of the rural inhabitants. Population growth is relatively high in the rural areas, but migration to urban centers and to the more productive rural areas of Santa Cruz and the Beni regions keep the net increase low. 21. Agricultural activities in these areas art characterized by stagnant technology and low factor productivity, limited skilled manpower, inadequate factor and product markets, and lack of access to agricultural credit, especially medium- to long-term credit,to finance agricultural infrastructure and agricultural inputs. The problem is further compounded by the lack of viable farmer organizations, adequate infrastructure and supporting serrices. In addition, political and economic instability, lack of institutional coordination and the absence of an integrated approach to rural development have made it difficult to successfully assist the Government in its efforts to develop agriculture, particularly in the Altiplano. 22. However, there is evidence that productivity and living standards of the rural poor can be improved considerably provided the Goverrment takes a number of essential measures. These would consist of the following: (a) preparation and execution of investment programs and the establishnenL. u a proper institutional framework to execute such programs in the Altiplano, the intermediate valleys and the eastern slopes of the Andes (Yungas); (b) channel- ing of adequate credit and technical assistance to small farmers in support of such programs; (c) organizing small landholders into cooperatives or other functional groups; and (d) research to develop appropriate crop varieties for the climatic conditions of the Altiplano, the intermediate valleys and the Yungas. 23. The present administration is well aware of the need to adopt such measures and, with external assistance, has recently begun to channel more financial and human resources to small farmers. A special office to coordinate all the development activities in the Altiplano has been established with the assistance of the UNDP. Capital investmenb projects in the Altiplano are under preparation by IDB. Concurrently, the Government has begun to reform the relevant institutions and to improve sector management capabilities. Thus, in early 1974, the two previous Ministries of Agriculture and Rural Affairs were merged. USAID is presently considering provision of technical assistance to planning and supervision of investment programs. It is also providing technical and financial assistance to the National Commiunity Development Services (SNDC) in order to help this agency expand its role since, so far, it has been active principally in financing infrastructure projects in rural areas. IDB is planning assistance in the field of agricultural research. Under IDA Credit 261-BO a reorganization study for the Agricultural Bank of Bolivia (BAB) is being carried out in order to improve the efficiency of this institution.. These actions are expected to substantially improve planning, coordination and implementation of agri- cultural develcpment programs.  - 8 - FPART IV - THE PROJE`T 24. The Bolivian Government had asked the Bank for assistance in preparing a rural development project in the Altiplano in 1973. A first FAO/Cooperative Program mission visited the Altiplano in October 1973 and a second in November 1974 and reviewed the socio-economic study prepared by the Government for the project. The project was appraised by a Bank mission which visited Bolivia in May 1975. A report entitled "Appraisal of Ingavi Rural Development Project, (No. 936-BO dated February 5, 1976) is being circulated separately to the Executive Directors. A loan and project summary is presented in Annex III. Negotiations took place in Washington from January 5 to 9, 1976. The Government of Bolivia was represented by Messrs. Alberto Valdez and Norberto Galdo. Background 25. The proposed project would be the first Bank operation for inte- grated rural development in the Altiplano in Bolivia. Previous Bank Group lending in the agricultural sector consisting of four IDA Credits has been mainly directed at livestock development. However, the two most recent credit operations, the Third Livestock Project (261-BO) and the Agricultural Credit Project (561-BO) had a special component for small farmers. 26. The project area encompasses about 800 square km of the eastern part of the Ingavi and the southern part of the Los Andes Provinces in the Altiplano at about 13,000 feet altitude, some 20 km southeast of La Paz (see map for further details). The area has about 60,000 inhabitants, the majority of whom have net incomes which place them among the poorest 20% of the population. Almost all farmers in the project area own their land (6 ha on average). About 70% of them have already obtained a title to the land, and the National Agrarian Reform Directorate is continuing its program of issuing titles in the remainder of the project area. Assurances were obtained that the Government would complete granting of land titles in the project area by December 31, 1977 (Section 3.12, Loan Agreement). Project Objectives and Content 27. The principal objective of the project is to raise the living standards of subsistence farmers' families in the eastern part of the Ingavi Province and the southern part of the Los Andes Province through higher income and improved health conditions. The main thrust of the project will be to increase production of 4,000 project farmers and to provide complementary infrastructure (85 km of roads; 20 irrigation wells) and social services (six health posts; potable water supply) for all of the 10,000 rural families presently living in the project area. With the use of improved seed, additional fertilizer, supplementary irrigation, and improved breeding stock, yields can be more than doubled and incomes increased accordingly. These increases can be achieved, however, only through a well coordinated package of activities involving credit for investments and working capital, technical  - 9 - assistance, supporting infrastructure, and some improvement of social facil-ties which would directly help to improve the quality of life oil the farmers. Because it is complex and the first comprehensive project of its kind undertaken in the Altiplano, only about 40S of the total population in the projecti area will benefit from the production component. If successful, similar but larger projects could be prepared in order to accelerate improvements in agricultural practices under the difficult ecological and sociolcgical conditions of the Altiplano. 28. The project would finance an integrated development package designed to deliver improved production inputs and technical assistance to motivate poor rural families to form farmers' groups, i.e., to participate in the prcject, farmers would be required to join existing cooperatives or to form new groups. The project would promote formation of a total of 80 farmers' groups, 20 of which would be organized mainly to develop agricultural production with irrigation and 60 groups to improve production under rainfed conditions. At present there are alread-r about 40 farmers' groups in the p'roject area. She formation of new groups and the reorgan_zation cf the present groups for the types of activities required by the project would be facilitated by long tradition of the Altiplano farmers to work collectively. Iroups are expected to have about 50 members each for the purpose of the proj'ect. 29. About 1,000 farmers (in 20 groups) who presently own individual tracts of land in the area where groundwater is available for irrigation would be expected tc contribute, cn average, 1.5 ha for the formation of blocks of 7f5 ha of which about $0 ha would be _rrigated. Land which is presently operated collectively by these farmers would also be consolidated intc blocks of 75 ha for project Purposes. Each of the 20 grcups would have its ctTr irrigation well, a pcwer operated pinmp and tractor services. A typical group of 50 farmrers wTould irrigate the 50 ha collectively and would grow traditional zrops mairl-y (potatcoes, vegetaoles, quinoa,l/ alfalfa/fescue and green barl-ey) improve li-estock (dairy cattle and sheep) and share in the services of tractors, livestock and storage facilities and technical assistance. A minir.4nx ofr 30 members would be set for irrigation grouTps to ensure a reasonably wide distribution of bernefits from the limited water supply available. ;onsequently, assurances were obtained that the Govermnent wculd require groups undertaking irrigated develcpment to have at least 30 members and 75 ha of irrigable land which would be operated as a unit. (Slection 1.02(e), and paragraph B? of Schedule 5 tc the Loan Agreement.) 3J. The remaining 3,0CC farmersr families would develop agriculture under rainfed conditions. Approximately, 1,000 of these farmers organized in 20 groups each with 50 members, on average, would collectively work single blocks of about 75 ha. These farmers would develop the same crops and livestock as menticned above although no vegetables would be grown and 1/ An Andean grain with high nutritional value.  - ic - tractor services would be linited to planting alfalfa/fescue. The next 20 groups of approximately 1,000 families would consist of farmers who, although working their scattered plots individually, would organize themselves to receive technical assistance collectively, assume joint obligation for credit, operate bull and ram breeding services and share common storage facilities. The last 20 groups of farmers would consist of those who may want to cooperate in sharing of storage facilities only. IWith better marketing assured, they would improve their livestock operation on the basis of forage crop develop- ment and bull and ram stud services purchased from the other farmers' groups in the project area. Organization and Implementation 31. A semi-autonomous Project Unit under the Ministry of Peasant Affairs and Agriculture was established on December 18, 1975. It would have a Board of Directors composed of a representative and alternate from each of the participating ministries and agencies. Tfhe Project Unit would have two main departments: The Services Department and the Engineering Department. The Services Department would provide technical assistance to farmer groups on crop and livestock development and on organization and management of groups. The Engineering Department would be responsible for the purchase of 20 tractors and their maintenance by farmer groups and it would supervise the construction and operations of the irrigation systems. The Project Unit is headed by a Bolivian Project M4anager who will he assisted by a team of internationally and locally recruited specialists in the organization and operation of the Unit. The appointment of these specialists is a condition of effectiveness (Section 6.01, Loan Agreement). In addition to financing the cost of the technical services, the Bank is also providing US.;500,000 to cover 58% of the total cost of the experts, beginning in 1976. However, should UNIDP funds become available for this purpose in later years, a corresponding amount of the Bank's contribution would be cancelled. The Project Manager and his staff would implement the project according to the policy established by the Project Unit's Board cf Directors, which would approve annual budgets and work plans and be responsible for overall coordination of project activities among the participat- ing agencies. Assurances were obtained that the Government would provide the funds to maintain the Unit for the duration of the project development period of about ten years (Sections 3.01 and 4.03 (a) (i), Loan Agreement) and that the aforementioned Decree and the Statutes would not be modified without the Bank's agreement (Sections 5.01 and 5.02, Loan Agreement). 32. The Project Unit's personnel would live in the project area in order to effectively carry out the daily coordination and implementation of the project. The involvement and close support of the beneficiaries is crucial for the success of the proposed development program. In order to gain the confidence cf the farmers, every effort would be made to give them maximum say in decision making by encouraging the fanmers to share the responsibility for the operation and maintenance of project works. The Unit's personnel would be directly involved in (i) assisting farmers in the preparation and implementation of on-farm investment programs and (ii) the purchase of inputs and marketing of crops and livestock; (iii) implementing a program of demonstration farm trials; (iv) training technicians and farmers; (v) purchasing  of 20 tractors and supervising their operation and maintenance; (vi) supervis- ing the construction, operation and maintenance of the irrigation systems; and (vii) supervising the construction, operation and maintenance of the livestock and storage facilities. In addition, the Unit will sign separate contracts with the Military Geographic Institute (I-24) for mapping of the irrigated areas, the Geological Survey of Bolivia (JEOBOL) for the installation of 20 deep wells for irrigation, the National Cormunity Development Services (SNDC) for construction of the irrigation and drainage works, the lNational Roads Services (SNC) for improvements of gravel roads and with the Ministry of Social Security and Public Health (MPSSP) for the construction of the health posts, waste facilities and wells for drinking water. Signing of a separate agreement between the Project Unit and each of the aforementioned entities for the work involved has been made a condition of disbursement of the amount of the loan allocated for the corresponding category. (Section 3.06 and Schedule 1, paragraph 3 (i)). 33. A monitoring unit would be established by February 1, 1977 within the Project Unit to measure for ten years the impact of the project, provid- ing project management with a decision-making tool and evaluating the sound- ness of technical, financial and economic assumptions in order to develop standards on the basis of which the project might be replicated in other parts of the Altiplano and Bolivia. (Sections 3.08 and 4.03 (a) (ii), Loan Agreement). Credit Arrangements and "ost Recovery 34. About $5 million of the proceeds of the loan would be relent by the Central Bank to BAB which wiould provide farmer groups with subloans to finance the cash cost of production inputs and of on-farm investments (including irrigation systems and tractors). Contributions of the farmer groups would be in the form of labor. Maturities of subloans would vary from a minimum of six months in the case of some production inputs to a maximum of 20 years for irrigation systems. Grace periods would vary from two to five years. Loanis for on-farm investment and for working capital would carry an interest rate of 12<, the rate being charged by BAB to small farmers under IDA's 3redits 261-Bo and 561-BO. 35. Farm plans and subloan applications would be prepared by the Project Unit and, after approval of the Project Manager, would be fornarded to the Bolivian Agricultural Bank (BAB) for disbursement of funds. Signing of a Subsidiary Loan Agreement between the Central Bank and BAB is a condition of disbursement of the amount of the loan allocated to credit for farmers (Section 3.09 (c) and Schedule 1 paragraph 3 (b), Loan Agreement). Supervision of farm plan implementation would be undertaken by the Project Unit and authorization by the Project Unit would be required for each disbursement against a farm plan. BAB would provide staff to collect repayments of subloans and the Project Unit would administer collection. In order to perfolm its project functions, BAB would establish an office in Viacha. BAB would repay the Central Bank project aco.ount--,'ith l1o interest--only as payments were received from sub-borrowers and therefore would not carry any finl ncial risk. As compensation for its participation, BA3 wcu'd thus receilve a margin  - 12 - of 2p% on outstanding subloan balances. The Central Bank would receive a commission of 1/4/'O on outstanding subloan amonmts for its services. Assurances ,Pere obtained that repayment of subloans be relent in the project area for similar purposes (Section 3.09 (e), Loan Agreement). 36. Except for direct productive investment (other than technical assistance), the cash cost of which will be recovered through the credit mechanisom, the cost of investments under the project will not be fully recovered. However, beneficiaries would contribute a substanti-l amount of m.rskilled labcr to-;a-,' project waorks, valued a-t about .p3.4 million at market orices. A cash contribu-tion towards the construction of drilled potable water wells of 5'0 of the cost of these wells would be required from beneficiaries since little unskilled abor could be employed in this pirticular case (Section 3.9) (c), Loa.-. greeme:it). I iarketing 37. The annual incremental crop production generated by the project would, in part, be ccnsumed on the farm and the surplus would be sold either at local market fairs or at the urban markets of La Paz which can be reached from the project area in about 30 minutes by road. The Project Unit would assist the farmers in marketing output frcm the project and would provide farmer groups with timely infcrmation about prices in La Paz and help them arrange for transportation to markets. Lil; prcduced by the project's farmers u(ld be s&ld so the :3overnment-o-nved Industrialized i4ilk Plant (PIL) which is located near La Paz. PIL's present, limied milJ collection operations oculd need to be exp)-nded to absorb the incremental production generated by she project. Assurances were obtained that the 3overnnent would cause PIL to collect milk from project beneficiaries at least once a day and would insure that PIL had sufficient facilities and staff to assure timely collection (Section 3.11 (a), Loan Agreement). In addition, assurances were obtained that the lovernment would prepare, -within one year of the date of effectiveness, a comprehensive plan for the development of milk production in the northern part, of the Altinlano (Section 3.11 (b), Loan Agreement). 38. Farmgate prices have been rising steadily since 1970, reflecting both world and domestic market trends. Producer prices provide sufficient incentives to farmers to make the proposed investments, and the storage facilities contemplated would enable them to take advantage of the normal seasonal price fluctuations. Project Cost and Financing 39. Total project cash costs are estimated at US.p12.9 million equivalent, of which 03.6 million would be for on-farm investments, ?l.5 million for incremental working capital, 32.1 million for technical services, 30.7 million for roads, P0.9 million for waater and waste facilities, .0.3 million for the power line, jO.l million for heal-th facilities and the rest for contingencies. Of the total project cash cost, the Government would contribute US`3.3 million or 25-'', the beneficiaries US0O.1 million or 4% and the Bank would finance the balance of US.39.5 million or 745. The proposed loan vwould finance the  - 13 - estimated foreign exchange cost of P5.1 million plus US&5.4 million of local costs. As noted in paragraph 12, some local cost financing is justified in Bolivia to enable the Bank to make an adequate contribution to meeting the country's external capital requirements. Procurement and Disbursement 40. Procurement of most farm inputs would be made by fanmer grroups throu-h normal conmercial channels because the size and timing of individual purchases would not be suitable for international competitive bidding (101B). The 20 tractors will be purchased through local competitive bidding rather than IJB. At least five foreign manufacturers have their representatives in Bolivia and this will ensure adequate local competition. However, at present only one fixm is permitted to sell tractors in the 40 to 110 horse power range and prices for that particular range are relatively high. Assurances were obtained that the Government will permit the importation of tractors in this horse power range on equal terms for all bidding firms (Section 3.16, Loan Agreement). The tractors would be purchased in two groups of ten each. The total amount involved would be US.i0.7 million. The pumps, motors, casings and screens for the irrigation wells also would be grouped in lots of ten and purchased (USi0.3 million) through LIB in accordance with Bank guidelines. The wells would be installed by GEOBOL. Construction and improvement of the roads wTould be undertaken by SIN on force account, using unskilled labor supplied by project beneficiaries. Construction of water distribution and drainage systems and improvements of natural drainage would be undertaken by the National Comnunity Service (SIDO). .onstruction of simple adobe buildings and other facilities would be carried out by project beneficiaries under the supervision of SNDC. The wells for drinking water ald the privies (US61 million) would be installed by force account, with the assistance of unskilled labor supplied by project beneficiaries. 41. Proceeds from the Bank loan and the Government's contribution would be channeled through the Central Bank to B-. and the other participating agencies. She Bank would disburse 72,' for on-farm investments, incremental working capital, roads, health, water and waste facilities and 8as4 for technical services. Disbursements would be spread over about five and one- half years. Special Risk 412. Launching the proposed project in the Altiplano implies taking special risks, particularly since the results obtained in this region by other institutions have been mixed and inconclusive. Therefore, during preparation a special effort was made to analyze past ex)perience with other projects. As a conclusion it was found that the main identifiable risk elements are the follow-: (i) insufficient interest on the part of fanners to participate effectively in the project;  - 14 - (ii) deficiencies in the institutions involved in project implementation; and (iii) shortfalls in reaching projected production targets because of technical factors. 43. In view of this, the project deliberately relies on traditional methods of farm organization and farm,ers cooperation currently practiced in varying degrees in the project area. The project is designed to insure maximum participation by farmer groups in decisions affecting not only their investments but also their life style. Field demonstrations and technical and organizationaL assistance by Bolivian staff would be provided in a manner to motivate farmers to accept the proposed production methods and to utilize effectively the various services offered under the project. b4. The Project IJnit was established since no existing agency was found entirely suitable to execute this complicated project. Particular attention will be paid to staffing the Unit with a group of well qualified and dedicated professionals. They would be expected to work closely with farmer groups to help them make investment decisions based on thorough evaluation o-f soil and climatic conditions in the project area. These conditions are comnaratively better in the project area than elsewhere in the Altiplano and, therefore, fairly good results might be expected. However, because of the inadequate crop production records in the provinces in question, the projected production increases are rough estimates only and there remains a substantial degree of uncertainty with respect to variation in yields that farmers may encounter. In view of the uncertainties involved, the project would have to be monitored exceedingly closely and modifications may have to be introduced quickly during the implementation of the project. Nevertheless, the Bolivian Government is willing to assume the risks involved in order to improve production and living standards of poor farmers in the Altiplano, and it considers the Bank's support for this experiment of crucial importance. Economic Benefits and Justification About 60,000 persons living in the project area would benefit from road improvement's; 485000 from health, potable water and waste facilities; and about 2L,000 from on-farm investments and working capital. Disguised rural unemployment would be reduced and additional demand for supporting jobs (machinery operators, mnechanics, traders) would be increased. As a result of the project, participating farmer groups would increase their net family income as follows (in US$): At Full Activity Present Development Irrigated Agriculture (Groups) 345 1,120 Rainfed (Groups) 345 820 Rainfed (Individual Farming) 345 680 Marketing (Individual Far-ming) 345 600  - 15 - 46. The project would also have a beneficial environmental impact in the Provinces of Ingavi and Los Andes. The implementation of the mixed farming system would improve the balance between the animal stocking rate and carrying capacity of the land. The introduction of improved land management practices is likely to reduce soil erosion, which is a serious problem throughout the Altiplano and the irrigation and drainage works would reduce the salinity problem in part of the project area. O7. The best estimate of the project economic rate of return is 15%. In calculating the rate, half of the costs of the health, water supply and the waste systems were included because access to these facilities would increase labor productivity and therefore, would be reflected in greater agricultural output. Sensitivity analysis shows that variations in yields by 10% from those projected would result in rates of return of 12% and 19%, respectively. approximately the same rates of return would result from 10% variations in prices received by farmers or cost paid by them. PART V - LEGAL INSTRUMENTS AND AUTHORITY 48. The draft Loan Agreement between the Republic of Bolivia and the Bank, the Report of the Committee provided for in Article III (Section h4 iii) of the Articles of Agreement, and a draft Resolution approving the proposed loan are being distributed to the Executive Directors separately. 49. Special condition of effectiveness would be that the experts in project administration, groundwater irrigation, marketing and credit and sanitary engineering have been employed. 50. Features of the Loan Agreement of special interest are referred to in paragraphs 26, 29, 31, 32, 33, 34, 36, 37, 40, 41 and 49 of this report. 51. I am satisfied that the proposed loan would comply with the Articles of Agreement of the Bank and with the established criteria for Third Window loans. PART VI - RECOMMENDATION 52. I recommend that the Executive Directors approve the proposed loan. Robert c. McNamara Presiden' Attachnents February 5, 1976  ARNE I COUNTRY DATA - BOLIVIA Pg - AREA POPULATION DnSITy 1,098,00 km0 5,0 .2 et11io. (.id-1972) Per kz2of e?able land SOCIAL DINICATORS Reference Countriea Bolivia Cameruno odrn Pr _ _7 =21 1222 fl GONJ PER CAPITA US5$ (ATIAS RASIS) /I 200 /a. 200 320 /a 520 DEMOGRAPHIC Crude birrth rate (per thousand) [5 .5 . h ~ 3!-C 9 c 42 Crude death rate (Pa, th-ouad) 23bC( infant eortallty r.te (per thsaran lire births) .158 .7 Lieexpectancy at birth (years) 4.[5 1. h(9 /b 58 Oross reproduction rat /..2.8 /b.c 2.7 3.3 /b 2.9 Popul.tion growth rate 2.1. 2.60 2.0L 3.2/ 2.8 j Population growth rate - urban 3.5 I 3.7 ~ 6L . h 5 5L~a Ago tutr pret Urbao populaiioo an perceot of total 27 /~ ~ 29 L20 09 2L8i 5. ~b Fmily Plaooiog, No. of acoeptors cumulative (thous.) [6.6 No. of ucers (% of married w omeo). D(PLOYMNNT Total la bor force (thousands) 2,000 / 2,300 2,200 800 [.,300 percentage esploynd io agriculture 67 66 ..65 [.5 Pe roeotage oneMployed 11lb 16 ..8 5A~ INCOME DISTRIBUTION Percent of noat-ooal iocoen rece.i-ed by highent 5% ..36 ..29 3b3[/7, Percent of oattooal iocose reoived by highest 20% ..59 ..60 7Z-.- 6. g/ u Parcent of netional. income received by lowest 20% . .. 3 /rs 2t. Percnt of natiiooal jncose received by lowsnt [40% ..13 a.8/9s 7 7t . MISTRIBUTION OF LAND OhNARSHIP B owned bytop 10% or ownre .. .. 93 I ownd by ea,allst 10% of owhers .. .. 0.1 HEALTH AND NUTRITION Population Per ph.siia 3,700 /c 2300( C5960 3,370 /. 1920 Populat ion per nursing p-rnon ..- 2,730 2,i;70 1,120 3,200 Populatio par ho.spital bed 580 [g90 /1 80 /x 580 60L Per ..pita -1-oie nopply an % ofrequiremeetn / 69 /Oh 77 96 96 98 Per capita protein supply, total (graes par day0J/1 L2 lob [.6 59 50 62 O which, animal end pulse .. 1a 23 2~ 5 71 / Deafth rate 1-I. years /7 .. EIDUCATION Adjonted /8 primary school enrollmenot ratio 67 96 /j1 108 /c 91 /i 115 Adjute neo r col noletrto 11 13 L 9 10 Li Tears of schooling provided, first and second level 02 13 13/oh -11, /a. 12 12 Voctional enco1leet an % of sac. nchool enrollment ii 13 22 18 17 ~ Adu t.ltracy rate % ..30 /od ..52 /,ad 72 HOUSING Avergag No. of parsnos par room (urban)... Percet of occpied units withouts piped water 89 f ~ . Access to eletricity (as % of total ppoplation) 22/va ... Percet of Bo-al population connected to electricity 0 . CONSUMPTION Radio raoat<o-r. Per 1000 pepaltio. 73 /00 208 37 /n 56 1. 130 .LE Pa....gar cars per 1000 populat1on 3 1. 6 5 17 Electric pesr consouaption (kwh p.c.) 1-i /0h 168 /a 200 11.5a 1322/ Noasprint conooption p.c. kg per year 1.0 0.06 Z. 0.02 1.07 31a Notr- Figures refrr either to the latest periodn or to account of anvir.noental temperaturv, body weightd, awd th. latent yearn Latent periods refer in Principle to dietribution by age and aem of national Populations. the yearn 1956-60 or 1986-70; the Itatet yearn in ps-in- /6 Prots.e standarde (reqjuirmeantsl for al1 coantries as eatb- cipie to 1960 and 1970. lished by USDA Ecnas-ic Research Service provide for a minims,e /I The Per Cepito GNP estimate is at me-kt prices for allowa,ce of 60 grama nf total protein per day, annd 20 grams af yearn ether tho. 1960,c.lculat.d by the .0c coo.....r.ion anissa andA pole. protein, of which 10 gremn should be wiale] techhnique an th. 1972 World Sank Atlas. Protein. These Stndards are sacehat lose then those of 75 I2 Averge u.nb-r of doughtern per -ooa of reproduction grse of total protein ad 23 grams of amimal protein a an age.. average for the arld, Proposed by FAO in the Third World Food Z,) Popultiatc growth rates are for the decodes endinig in Suzvey. 1960 and 1970. L7 Sone ntudies have euggented that crude death rates of chsildren /jRatio of population under 15 and 65 end over to popuo- egse 1 through 4 may be use d as a first appromi.ation indac of tion of ugn15-6i fur agv dopendency rtio end to Iotbr malnutrition. f-re of ug- 15-6?. fur ..c...oc depeod-ny reLic. /8 Perceatage enrolld of vorrespooding F.p.l.tion of sohool age /S FA Q rf_r-cc ooord reprevect phyoiologicol e- andefined for such country'. quareei fcr -or-I activity end health, taking Is 1972; /b 1965-70; /c Salivate; /d 1967; Ia 1960-72; IL Cities of IA P--, Orurm, Potoni, Cochabanhe, Sucre, Torioa, SLant Cruc, Trinidad and Cobija; 4& 1959-70; Ih Ur-has..c.ntern over 5,000 population; /i Localities of L,100 or cur lohahitente having ennentiay urban chssmcterlstics; /,j 1961-72; /k Capitals of diLrlcta and t.hose popuILaed cectern with ouch urban characteristics an streeto, placas, -ater supply syntems, se.,rage systems, electric lighto~, oto; /1 1969; /n Data occlude adjustment for underenuseraLien, and Indian jungle Population; /. irban urna; /8 -Inclding Inian jungle population; estim.ated at 100,830 in i961; LE~ 1971; /8q 1965; /r 1967-68; Pvr capita; /t 1970-71; /. iEunoically active population; /v 1963; Iw Numbher on the register, not all ,sorking in thn ountry /8 198; 7[.196L-66; /z Estiente wulch includes overge oLudento; LBa. Inciuding evening -h;oolu; ohb Rant leneroon; /a. Went Can.ernc; Zad Definition unknown; ~15 yare and ove; laf Inside or outside; 78g Percentagv of households; /.h 1961; /Z- ILivtrt; /7lC- sioe Peru hoa beer, Selectecd an uiecti-c conty becouse of s4iclar naturl coditions and -p-rahie hu-en and resourc R2 May 22, 1975  ANNEX I Page 7 of 4 BOLIVIA ECONOMIC DEVELOPMENT DATA (Amounts in 1973 01$ MIlions) Actual - ~~~Estimated Pr- lested _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ 1968 1971 1973 1975 1977 1980 1968-71 1971-73 1974-77 1978-80 1968 1971 1977 NATIONAL ACCOUNTS 3-Year ..c.a. at 1973 Peica 4 Exchange Rate AeaenulCrchRtsAs Percent of :[,0 6rc- Dometic Pred-ct 626.3 971.6 1,035.3 1,138.1 1,29A.7 1,617.9 3.7 6.0 7.8 11.7 98.7 90.0 'In.] Term of Trade Effect 10.1 19.0 50.7 25.8 49.5 78.6 . ... 1.3 7.0 3 7 Ocans Dometic Incom 836.4 940,6 1.086.tI 1,163.9 1,346.2 1,696.5 4.0 7 .4 7.4 12.3 100.0 100.0 1I0O Inpact (i-al. IPS) 301.4 303.8 347.7 502.7 549.8 676.4 0.3 7.0 16.5 10.9 36.0 32.7 '.11.0 Enp-rt " (import capacity) 265.7 276.2 351 .4 346.4 411 1793 .9 1.4 12.0 - 176.0 31. 7.4 32.0 Resourc RaBasne (-OS-plss) 36.2 77.6 -18.71 156.3 87.5 - - - -- 4.3 2.9 o coesnnpti-c Enpeedit--e 688.2 776.9 896.4 1,041.6 1,063.4 1,291.9 4.1 7 .4 I.e iO.2 87 3 Olt ~ 79.11 I (i-Il. stocks) 184.3 191.3 16 5.3 778.4 391.6 487.3 1.2 negadve 28.0 1i.6 72.0 20.7 79.1 R,octic Sa-sces 148.1 163.7 iR9." 266.6 287.0 404.9 3.4 7.cb 14.3 19.7 17.7 11.4 71.0 Narsonu Sa-icgs 128.1 146.5 177 .) 250.1 250.9 339.5 4.6 10.1 13.3 14.1 15.3 lt 19.2 MEIICIIANDISE TRADE Annual Rat., at Cocrent Prices As Percnt .I [.,.I Capical Goods 71.0 71. 1 119it 770.0 .14 .2 480.9 -egaice 29.0 12.0 28.0 47.0 42.1 50.0 Ra. M-ceials and Intermdiate Goodo 47.3 52.2 67.1 113.7 169.4 776.6 3.3 13.4 36.0 28.0 31.0 31.0 74.10 Fuels and Lohri-ats 1.A 1.7 2.2 10.3 17.7 17.9 negative 35.4 78.0 18.7 1.0 0.5 1.0 Cosepic nds 32.1 43.5 67.21 120.0 108.3 141.1 10.7 24.0 17.3 14.1 21.0 21.9 14.4 To,tal Merhandise Inpoecs CIF) 152.0 i68.0 255.5 514.0 704.6 1,116.5 3.7 2 3 .5 40.9 28.0 100.0 100.0 191.0 Primay Prodoocs 14 5. 8 191.4 26B..] 277.7 386.1 588.1 9.6 18.4 17.1 16.8 83.5 88. 7 05.4 Pools 24.3 73.9 67.o1 163.4 190.5 503.6 negativ,e 67.0 62.0 50.0 14.3 11.1 373. ' c/ta Cr-dc Pecrle- (74.37 (23.9) (48. 9) (114.6) (140.01 (367.0) negatIve 43.8 61.0 57.0 (14.3) (iii1) 123.71 MO,,nf-ctur-d Gnods 0. -4 0.4 3.0 3.9 5.4 8.3 23.0 - 22.0 24.0 .2 .2 1.0 alMm-O. sprs(fob) 170.5 715.9 330.:) 443.0 590. 1,100. 8.2 21.0 798 3. 100 Ot 130 Mc-h-~dine Trade Iedi-c [sport Price eden 46.7 76.4 100.0 118.6 194.0 749.0 4.6 14.4 24.8 13.3 21.6 22.7 32.4 [sport 'rice Inde- 66.0 75.9 100.11 138.0 173.0 714.9 4.8 14.8 20.0 11.5 21.3 721. 28.9 Term of Trade Icde- 191.i 100.0 100.3 114.9 113.0 119.3 negative negaine 4.2 2.8 3 2 .7 30.0 10.5 Enp-rto Vinne In,dex 75.4 83.5 100.0 83.0 119.7 166.9 3.1 9.4 6.0 i8.1 24.4 24.7 70.0 .0AL11 SIlIit0 SCIOK Accua,l Data at 1973 rite and Exchange eaten Anvrge A.c.a. Lo-th Rates As Perrec at [,tt l Agriculturc ~~~~~~~~~~~~~186.0 201.6 772.0, 248.2 273.3 320.0 2.5 5.1 7.1 8.3 2 2. 5 21.9 21.2 [atdic - an,d Min,ing 2 79. 7 303.4 338.6 351.8 412.4 534.4 2.7 5.46 6.8 13.8 33.6 33.0 37.0 Ot-ron 365. 1 414.0 4_77.7 538.1 604.7 7 57.*2 4.-3 7.4 8.a2 11.9 43.9 45.1 Ln. T-.t1 (-(;fDPt 531.6 919.71 1,038.9 1,i3 21 1,2903 1,611.6 3.4 4 .3 7.5 u1.S 100.0 100.0 100.0 I'03 1.CFINA.NCE (Centra Conem--t) Co--ct Ro-ipto 807.6 112.2 109.2: 109.5 140.3 158.0 4.3 -2.4 6.5 10.2 11.9 11.5 10.0 C--ron Enp-nditre 102.9 1 34.04 145.3! i68.I 190.1 73 9.9 _7.9 6.3 6.9 8.1 11.5 13.8 14.7 oodgetarp S-irngs 3.7 -772.72 -36.1 -59.0 -49.8 -51.9 C .0.4 -2.3 -3.9 Othor P"hlc Sector Savings 29.3 54.4 98.2: 90.0 134.1 719.2 . ... 3.2 5.c n.5 i',,Iit~ Sctor Cap Ital Epe-d itore 108.7 112.6 98.0 147.5 267. 7 301.4 9.5 -5.6 28.2 4.0 17.0 11.6 23. 7 CIIRRET EXPERDITURE DETAILS A,,toal 1/s 7 Tota Crr.e-t Enpe-d.) 1968-70 1971-72 RETAIL 08 PUBLIC SECTOR INVESTMENT PROGRAS' As Pec-e- of Fatal )1968-74 - 1975-80) Control Adnisistratios 7~~~~~~~~8.7 25.9 Agtoiclte and Irrigation 3.0 3.8 D,f-n, 13.5 12.8 Mining end RH'd-oc-e..s 39.8 61.1 Edttcottoo 7~~~~~~~~~~~~~~7.3 24.3 In,d-t-r and Power. 14.9 9.0 Other S-onl 4 C-eoity lero 9.3 13.5 Trans"port and C-ntaicacio- 24.0 17.4 Agri-olt-r 3 .1 3.0 t,hliic Sero. and Social e-ice 18.3 8.7 Other 17.7 18.5 Ot6cr lpnCal-uced fro 5-Yr AoeraodDa.t. 1968-70 1971-74 1975-77 1978-80 riNANCINt; 1968-73 1974 1975-80 Aserge ICOtR 6.41 3.00 3.127 4.06 'sblir Serr- Sacin,ga 39.8 11.0 44.4 Import Elasicity 0.91 1.06 1.13 1.03 'sentoOoroing (net) lc.i -44.0 (s.d Marginal Dometic Savings Rate 644.92,. 24 .2 7. 3.14 3 7.4 7. lorriEs no--eim et 4n.4 29.1 3.c Marginal Rationl Savings Rate 20. 57. 20.4 7. -ctl io- 722.0 ttthr -2. 22.1 LABRV FORCE AND OUTPUT PER WOREER Enplopetl Lahor Forc Val1c Addod W-kanhe (1973 P'cicco.. Cst-tc RaIn In Th--sads X. of Total 1970-1974 in 11U Dollars, Peret of Asera.ge Iitnoge pa., 1970 i974 1973 1974 Crouh Rate 1960 19702 1960 1970 . 1970-74 Airicoltr- 1,271.0 1.383.1 65.4, 64.4 2.1 15. 14 170.0 33.8 33.4 2.9 T.d-ctry 764.2 300.0 13.1, 14.0 3. 3 1,067.8 1,147.6 238.4 225.8 2.0 Service 407.1 442.0 21iL0 2.16 3.3 928.9 1L068.4 209.6 21024 3.3 Total 1,942.3 2,146.7 t00.11 100.0 2.5 0447. 9 508.2 100.0 100.0 3.2 I/ En-1tidi,,g tcsfro export e3cr7re N.lt applioahle - Nill or -egligible  ANNEX T Page 3 of 4 BOLIVIA SUMKARY: BALANCE OF PAYMENTS (Current U.S. $ millions) 1972 1973 1974 1975 1976 1977 1978 1979 1980 1985 1. Imports (Cif) 261 332 504 664 700 817 980 1,150 1,240 2,521 2. Exports (Cif) 225 310 614 490 550 650 780 960 1,160 2,880 3. Balance of Goods & NFS -36 -22 94 -195 -190 -215 -255 -245 -140 359 4. Factor Services -22 -25 -31 -35 -37 -44 -53 -102 -133 -197 Profits (-6) (-6) (-7) (-9) (-11) (-12) (-14) (-50) (-69) (-106) Other (Net) (-16) (-19) (-24) (-26) (-26) (-32) (-39) (-52) (-64) (-92) 5. Current Transfers 13 15 12 12 12 12 5 3 3 -- 6. Current Account Balance -44 -32 50 -218 -215 -247 -303 -344 -270 162 7. Direct Foreign Investment -13 5 10 18 35 58 75 89 90 30 8. Official Capital Grants 8 10 9 20 25 27 28 26 20 2 9. Public M & LT Loans (Net) 93 5 41 118 130 142 182 219 141 -23 Disbursements (125) (38) (95) (178) (192) (216) (266) (329) (280) (199) Repayments (32) (33) (54) (-48) (-62) (-74) (-84) (-110) (-139) (-222) 10. Other M & LT Loans (Net) 15 17 21 23 25 39 42 48 60 10 11. IMF Dravings 1 12 __ -- -- -- -- -- -- 12. Other Short f7rml Errors -42 -20 -15 -16 -10 -5 -- -- -- -- & Omissions - 13. Change in Net Reserves -17 15 -123 55 10 -14 -24 -38 -41 -181 t-Increase) 14. Total Net Reserves 47 31 154 99 89 103 127 165 206 720 (End of Period) 15. Debt Service Ratio 20.9 16,8 12.9 11.4 14.5 16.4 16.5 17.4 17.8 12.2 16. External Public Debt OS -/ 681 698 723 o/v IBRD (23) (23) (21) IDA (26) (30) (39) 17. IBRD-IDA Debt Service 3.1 4.8 4.0 as % of Public Debt Service 18. Debt Service as % of GDP 4.6 4.9 4.5 n I/ Includes SDR allocation equivalent to US$4.3 million in 1972.  ANNEX I Page 4 of 4 CONTRACTED PUBLIC AND PUBLICLY GUARANTEED EXTERNAL DEBT,"/ 1969-74 (US$ millions) 1969 1970 1971 1972 1973 1974 INTEKNATIONAL ORGANIZATIONS 30.7 1.4 26.8 11.2 7.2 54.4 CAF - - C.1 2.0 1.2 7.2 IBRD 23.3 - - - - IDA 7.4 1.4 6.8 8.0 6.0 6.2 IDB - - 19.9 1.2 - 41.0 GOVERNMENTS 30.1 17.2 34.7 65.7 29.9 112.2 Argentina 3.2 14.3 4.3 4.2 3.4 0.2 Czechoslovakia - - 3.3 - - _ Germany F.R. 1.8 1.4 - - - 30.2 United Kingdom 1.4 - - 7.1 - - U.S.A. 22.7 1.5 25.3 40.0 26.5 40.6 U.S.S.R. - - - 11.2 - 1.2 Others 1.0 - 1.7 3.2 - 40.0 SUPPLIERS' CREDITS 11.7 1.6 3.9 36.4 20.2 16.9 Argentina - - 1.6 5.1 5.7 11.0 Belgium - - - - 5.5 - Canada - - - - 3.7 Denmark 0.7 1.3 - 0.8 - Germany F.R. 4.2 0.3 - - - Italy 2.1 - - 16.6 -- Japan - 2.0 6.4 - 0.2 Poland - - - 0.3 4.2 - Spain 3.3 _- - U.S.A. - - - 1.1 0.9 - U.S.S.R. - - - 4.7 - - Others 1.4 - 0.3 1.4 0.1 5.7 PRIVATE BANI(S 1.3 23.3 23.1 9.7 93.4 Brazil - - 12.0 7.9 4.7 13.5 U.S.A. 1.3 - 10.0 12.8 1.5 27.0 Others - - 1.3 2.4 3.5 52.9 OTHER 14.2 4.1 - 22.8 0.1 - Nationalization (USA) - 78.6 - - 0.7 - TOTAI--' 88.0 102.9 88.7 159.2 67.8 276.9 1/ Repayable in fo-'ign currency only. 2/ Net of adjustments and cancellations.  ANNEX II page 1 of 3 THE STATUS OF BANK GROUP OPERATIONS IN BOLIVIA A. STATEMENT OF BANK LOANS AND IDA CREDITS (as of December 31, 1975) US$ million Amount (less cancellations) Loan or Credit No. Year Borrower Purpose Bank IDA TUndisbursed Fully disbursed loans and credits 23.2 30.6 - 261 1971 Bolivia livestock - 6.8 1.7 346 1972 Bolivia Railways - 8. 0 0.7 433 1973 Bolivia Power - 6. o 0.8 455 1974 Bolivia Mining - (6.2 4.6 561 1975 Bolivia Agriculture - 7.5 7.5 1121 1975 ENFE Railway 32.0 - 31.2 TOTAL 55.3 65.1 4"*5 -{Fwhich has been repaid 3.1 0.3 Total held by Bank and IDA 52.2 64. 8 Total undisbursed 46. B. STATIENTE OF IFC INVESTMEaITS (as of December 31, 1975) Amount in US$ million Year Obligor Type of Business Loan Equity Total 1973 Plasm.ar, S.A. Gables and Plastic Products o.31 0.1 0.o4 1/ Of which, USPO.1 million is a standby loar..  ANNEX 7I Page 2 of 3 C. PROJECTS IN EXECTJTION Credit 261-BO - TWAird Livestock Development Project, US$6.8 million, June 25, 1971: Effective Date: September 15, 1971; Closing Date June 30., 1977 After implewentation slowed down in 1974, the proj,ect is now proceeding as scheduled and the credit should be fully disbursed by the closing date of June 30, 1977. Credit 346 - Railway Project, US$8 million, December 1, 1972; Effective Date: February 212 1973; Closing Date: Juno 30, 1976 All of the funds under the project have been committed. Due to inflation, however, the funds available under the credit have been insufficient to procure all of the items included in the project. About 50% of the items planned for procurement for the first project, have been deferred for purchasing under the second railway project. Materials and equipment ordered under the project did not begin to arrive in Bolivia until the last quarter of 1974. Improvements have been made in the management, operations, financial condition and tariff structure of the railway. Credit 433 - Third ENDE Power Project, Us$6 million, October 17, 1973; Effective Date: October ib, 1969; Closing Date: December 31, 1976 The Santa Cruz gas turbine was put into service in December 1974. Because of delays in preparing bid documents and possible future delays in equipment delivery, completion of the various transmission line and substation equipment components is expected to be six months to two years behind the appraisal estimate. The project's foreign and total costs are expected to be 40-50o above appraisal estimates. Although the beneficiary's recent financial performance has been satisfactory, it needs additional tariff increases to maintain its agreed upon 9% rate of return in 1976 and future years. Credit 455 - Mining Credit Project, US$6.2 million, January 18, 1974; Effective Date: June 15, 19Th; Closing Date: June 30, 15 The project is proceeding as scheduled.  ANTEX II Page 3 of 3 Credit 561-BO - Agricultural Credit I, U7.5 mili_on, June 20,_197$- Effective Date: December Closin' Date: Junei302 1979 The project is proceeding as scheduled. Loan 1121-BC - Second Raiw Project, U5332 milion June 5 1975; Effective Date: AuutL 6, 1 L23!5Pate: December 31 197 The Borrower has arranged bilateral financing for locomotives in the project and has, in accordance with understanding reached with the Bank, requested the cancellation cf US'3.3 mil-lion of loan funds reserved for the purchase of locomotives. The prorect is proceeding as scheduled.  ANNEX III Page 1 of BOLIVT A, INGAVI RURAL DEVELOPMENT PRZOJECT LOAN AND PROJECT SUI4HARY Borrower and Guarantor: Republic of Bolivia Deneficiary: The Project Unit and the 1Ministry of Agriculture. Amount: US$9.5 million Terms: Standard Third Window terms of 25 years, including seven years of grace, with interest at 4-1/2%. Project Description: The project would finance agricultural development in order to increase the incor-me and improve the living standards of about 4,000 subsistence farmers' families in the eastern part of the Province of Ingavi and the southern part of the Los Andes Province in the Altiplano region. In addition, it will finance complementary infrastructure and social services for the benefit of all the 10,000 rural families living in the project area. The individual project components are summarized below: (a) Irrigated Agricultural Development (i) construction of 20 deep-well irrigation systems, storage tanks sheds and dis- tribution and drainage works needed to irrigate about 1,000 ha; (ii) extension of a power line to operate the irrigation pumps; (iii) construction of storage and abninistration facilities; (iv) purchase of 20 tractors, improved seed, fertilizers, chemicals for seed treatment, insecticides and fungicides;  ANNEX III Page 2 of