Honduras - Guayape Regional Development Project

Document of The World Bank FOR OFFICIAL USE ONLYf t X Report No. 1953-HO HONDURAS GUAYAPE REGIONAL DEVELOPMENT PROJECT STAFF APPRAISAL REPORT May 5, 1978 Projects Department Latin America and Caribbean Regional Office This document has a restrieted distribution and may be used by recipients only in the performance of their official duties. Its contents may not otherwise be diselosed without World Bank authorization.  CURRENCY EQUIVALENTS US$1.00 = L 2.00 (Lempiras) L 1.00 = US$0.50 L 1,000,000 = US$500,000 WEIGHT AND MEASURES Metric System and 1 manzana = 0.7 hectares (ha) GLOSSARY OF ABBREVIATIONS ANACH - National Association of Honduran Campesinos BANAFOM - National Development Bank BCH - Central Bank of Honduras CABEI - Central American Bank for Economic Integration CAR - Regional Agricultural Committee CIDA - Canadian International Development Agency COCO - Committee for Agricultural Development COHDEFOR - National Forestry Corporation CONADI - National Investment Corporation DARNO - Agricultural Directorate for the North East Region DGI - Department of Irrigation FACACH - Federation of Savings and Loan Associations FUNHDESA - Honduran Development Foundation IDB - Inter-American Development Bank INA - National Agrarian Institute MNR - Ministry of Natural Resources PROMF,CA - Agricultural Mechanization Program SECOPT - Ministry of Public Works and Communications UNC - National Union of Campesinos URH - Department of Hydrological Resources FISCAL YEAR January 1 - December 31  FOR OFFICIAL USE ONLY HONDURAS GUAYAPE REGIONAL DEVELOPMENT PROJECT STAFF APPRAISAL REPORT TABLE OF CONTENTS Chapter No. Title Page No. I. BACKGROUND ..................... o. ....... ....... 1 A. General .......................... . .............. . 1 B. Agricultural Credit .8...... .. ...... 8 C. The Small Farm Subsector ........................ 11 II. THE PROJECT AREA ........ ........... . .... . . 13 A. Location ................. .....13 B. Land Tenure and Use . 14 C. Institutional Support ............................ . 16 D. Infrastructure... ....... 17 III. THE PROJECT ..............o.........18 A. Introduction ....................18 B. Brief Description ....... ................ 18 C. Detailed Features ................................ 19 D. Project Costs ..... ........................... 20 E. Financing .......22 Fe Procurement ..... ... ...... * ........ *.* ...... *. . 23 G. Disbursement.. ... .. ... 23 IV. PROJECT IMPLEMENTATION ............................ 25 A. Organization and Management... 25 B. Participating Institutions ......27 C. Lending Policies and Procedures 29 D. Accounts and Audit ............ . 31 E. Project Monitoring and Evaluation. 31 V. SPECIFICATIONS OF FARM MODELS 31 VI. PROJECT PRODUCTION, DEMAND AND MARKETING. 34 VII. FINANCIAL ANALYSIS... .... 35 A. On-farm Operation ... *.. .............. 35 B. Fiscal Impact ....... . ................. . 37 This report is based on the findings of an appraisal mission which visited Honduras during October 1977. The mission comprised Messrs. N.P. Sharma, C. Barham, C. Plaza, J. Martinod, R. Paraud (Bank) and A. Santiesteban (Consultant). 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 disciosed without Worid Bank authorization.  TABLE OF CONTENTS (Continued) VIII. ECONOMIC ANALYSIS ............ ......................... . 37 A. Benefits and Justification .... ................... 37 B. Economic Rate of Return and Sensitivity Analysis . 38 C. Project Risk ............... ...................... 41 D. Environmental Impact ..... ........................ 42 IX. SUMMARY OF AGREEMENTS REACRED AND RECOMMENDATION ...... 42 SCHEDULE A - Lending Procedures, Terms and Conditions 45 Table 1 - Phasing of the Lending Program .......... 51 ANNEXES 1. National Development Bank ............................. 52 T.1 Consolidated Balances of the Banking System as of December 31, 1975 . ............................. 68 1.2 Loan Portfolio of the Banking System, by Type of Institution and Sector, end Year Position, 1971-75 69 T.3 Operating Results of Branches in 1976 70 T.4 Movement of Capital, 1972-76 .71 T.5 Particulars of Borrowings as of December 31, 1976 72 T.6 Investments in Enterprises as of December 31, 1976 73 T.7 Classification of Outstanding Loans According to Purpose, 1974-76 .................. 74 T.8 Classification of Approved Loans According to Size, 1974-76 .................................. 75 T.9 Classification of Loans Issued According to Purpose, 1971-75 ............................... 76 T.10 Position of Overdue, Extended and Refinanced Loans, 1974-76 ........................................ 77 T.11 Classification of Overdue Loans According to Loan Purpose, 1974-76 .......................... 78 T.12 Overdue, Extended and Refinanced Loans of Reform and Non-Reform Sectors at end-March 1976 and 1977 79 T.13 Consolidated Profit and Loss Statements, 1972-76 80 T.14 Consolidated Balance Sheets, 1972-76 .81 T.15 Financial Ratios, 1974-76 .82 T.16 Minimum Liquidity Requirements, 1974-76 83 Chart 1 - BANAFOM Organizational Chart 2. Consultants' Terms of Reference ....................... 85 3. Farm Development Models ............................... 89  TABLE OF CONTENTS (Continued) T.1 Proposed Yearly Cropping Pattern 92 T.2 Farm Model 1 - Rainfed Single Family Farm (10 ha) - Investment Costs .......... O.***.* ......... *o 93 T.3 Farm Model 1 - Rainfed Single Family Farm (10 ha) - Estimated Labor Budget (Man-days per Year) .. 94 T.4 Farm Model 1 - Rainfed Single Family Farm (10 ha) - Operating Costa ...................... 95 T.5 Farm Model 1 - Rainfed Single Family Farm (10 ha) - Cropping Pattern, Yields, Total Production, Production Value, Operating Costs 96 T.6 Farm Model 1 - Rainfed Single Family Farm (10 ha) - Cash Flow and Family Income Projections 97 T.7 Farm Model 1 - Rainfed Single Family Farm (10 ha) - Financial Rate of Return and Sensitivity Analysis 98 T.8 Farm Model 2 - 75-ha Rainfed Group Farm (22 families) - Investment Costa ...s... ..... ... ... 90 T.9 Farm Model 2 - 75-ha Rainfed Group Farm (22 families) - Estimated Labor Budget (Man-days per Year) . 100 T.10 Farm Model 2 - 75-ha Rainfed Group Farm (22 families) - Operating Costs 101 T.11 Farm Model 2 - 75-ha Rainfed Group Farm (22 families) - Cropping Pattern, Yields, Total Production, Production Value, Operating Costs 102 T.12 Farm Model 2 - 75-ha Rainfed Group Farm (22 families) - Cash Flow and Family Income Projections 103 T.13 Farm Model 2 - 75-ha Rainfed Group Farm (22 families) - Financial Rate of Return and Sensitivity Analysis 104 T.14 Farm Model 3 - 75-ha Irrigated Group Farm (22 families) - Investment Costs ............... 105 T.15 Farm Model 3 - 75-ha Irrigated Group Farm (22 families) - Estimated Labor Budget (Man-days per Year) . 106 T.16 Farm Model 3 - 75-ha Irrigated Group Farm (22 families) - Operating Costs .107 T.17 Farm Model 3 - 75-ha Irrigated Group Farm (22 families) - Cropping Pattern, Yields, Total Production, Production Value, Operating Costs ........ *. 108 T.18 Farm Model 3 - 75-ha Irrigated Group Farm (22 families) - Cash Flow and Family Income Projections 109 T.19 Farm Model 3 - 75-ha Irrigated Group Farm (22 families) - Financial Rate of Return and Sensitivity Analysis 110 4. Detailed Project Cost ...... .. *...... . 111 5. Related Documents and Data Available in Project File 112 Map IBRD No. 13243 - Guayape Regional Development Project   HONDURAS GUAYAPE REGIONAL DEVELOPMENT PROJECT 1. BACKGROUND A. General Agriculture in the Economy 1.01 Agriculture is the most important sector