Dominican Republic - Sugar Rehabilitation Project

Document of The World Bank VIL bu ; FOR OFFICIAL USE ONLY Report No. P-2602-DO REPORT AND RECOMMENDATION OF THE PRESIDENT OF THE INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT TO THE EXECUTIVE DIRECTORS ON A PROPOSED LOAN TO CONSEJO ESTATAL DEL AZIJCAR WITH THE GUARANTEE OF THE DOMINICAN REPUBLIC FOR A SUGAR REHABILITATION PROJECT August 29, 1979 This document has a resrcted distribution and may be umed by recipients only in the performance of their official duties. Its contents may not otherwise be disclised without World Bank authorization.  DOMINICAN REPUBLIC SUGAR REHABILITATION PROJECT CURRENCY EQUIVALENTS Currency Unit = Peso (RD$) US$1.00 = RD$1.00 US$1,000,000 = RD$1,000,000 WEIGHTS AND MEASURES 1 meter (m) = 3.28 feet (ft) 1 kilometer (km) = 0.62 mile (mi) 1 kilogram (kg) = 2.2 pounds (lb) 1 hectare (ha) = 2.47 acres ABBREVIATIONS CEA - Consejo Estatal del Azucar (State Sugar Council) CDE - Corporacion Dominicana de Electricidad (Dominican Electricity Corporation) IAD - Instituto Agrario Dominicano (Dominican Agrarian Institute) INAZUCAR - Instituto Nacional del Azucar (National Sugar Institute) INESPRE - Instituto de Estabilizacion de Precios (Price Stabilization Institute) ISA - International Sugar Agreement LIBOR - London Inter Bank Offer Rate SEA - Secretaria de Agricultura (Ministry of Agriculture) FISCAL YEAR OF CEA October 1 - September 30 FISCAL YEAR OF GOVERNMENT January 1 - December 31  FOR OFFICIAL USE ONLY DOMINICAN REPUILIC SUGAR REHABILITATION1 PROJECT Loan and Project iummary Borrower: Consejo Estatal del Azucar (CEA) Guarantor: The Dominican Republic Amount: US$35 million Terms: Seventeen years, including four years grace at 7.9 percent per annum interest rate. CEA would be charged a guarantee fee of 2.1 percent by the Government bringing the effective interest rate to CEA to 10 percent in U.S. dollars. The Government would assume the foreign exchange risk of non-dollar currencies against the US dollar. Proiect Description: The project would improve the operational effi- ciency and the financial situation of CEA, and would enable the Dominican Republic to sustain its present level of exports while meeting the projected increase of domestic sugar consumption. The project includes four components: (a) rehabilita- tion of the sugar mills at Ozama, Rio Haina, Boca Chica, Consuelo, Quisqueya and Barahona; (b) rehabilitaticn of a total of about 540 km of railway track at the above mills, except for Barahona and the purchase of 150 hauling cars, three locomotivec, telecommunications equipment, an initial stock of spare parts and a fully-equipped rail car repair shop; (c) carrying out of irriga- tion and drainags studies at Barahona estate, a cane area reduction program concurrent with the increase of yielcLs in the cane areas, two pilot research programEs, one for the mechanization of land preparation and harvesting and one for payment to outgrowers ba;ed on grading cane according to its sucrose content, and (d) provision of technical services to assist CEA in improving its management information system, operational and administrative planning, and per-sonnel administration and train- ing and its overall organization. The project's major risk is lower than expected sugar prices. A sensitivity analysis shows that if revenues were to be lower than forecast by 44 percent, the economic rate of return of the project would be equal to the estimated opportunity cost of capital in the Dominican Republic. 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.  - ii - Estimated Costs: Local Foreign Total ------(US$ Million)----- Sugar Manufacturing 5.1 19.5 24.6 Transportation 7.1 10.3 17.4 Agriculture 2.6 3.7 6.3 Management and Organization 0.4 2.3 2.7 Base Cost 15.2 35.8 51.0 Physical Contingencies 1.5 3.6 5.1 d Price Contingencies 5.5 7.6 13.1 Total Project Cost: 22.2 47.0 69.2 Financing Plan: US$ Million Percentage Equivalent Distribution IBRD 35.0 50.6 CEA/Government 15.0 21.7 Commercial Banks /1 19.2 27.7 Total: 69.2 100.0 /1 An additional US$800,000 have been obtained by CEA from private commercial banks for contingencies. Estimated Disbursements: US$ Million Equivalent Bank FY 1979 1980 1981 1982 1983 1984 Annual 0.2 10.7 16.6 5.6 1.3 0.6 Cumulative 0.2 10.9 27.5 33.1 34.4 35.0 Economic Rate of Return: 25% Staff Appraisal Report: Report No. 2468b-DO, dated August 29, 1979  INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT REPORT AND RECOMMENDATION OF THE PRESIDENT OF THE IBRD TO THE EXECUTIVE DIRECTORS ON A PROPOSED LOAN TO CONSEJO ES2ATAL DEL AZUCAR WITH THE GUARANTEIIE OF THE DOMINICAN REPUBLIC FOR A SUGAR REHABILITATION l'ROJECT 1. I submit the following report and recommendation on a proposed loan to Consejo Estatal del Azucar (CEA) with the guarantee of the Dominican Republic for the equivalent of US$35 million to help finance a Sugar Reha- bilitation Project. The loan would have a tera of 17 years, including 4 years of grace, with interest at 7.9 percent per annum. CEA would be charged a guarantee fee by the Government brinlying the effective cost of the loan to 10 percent in U.S. dollars. The Government would assume the foreign exchange risk of non-dollar currencies against the US dollar. CEA has substantially completed co-financing arrangements with foreign commercial banks for US$90 million to be repaid in 10 years, including a grace period of 4 years, at an interest rate of 1 1/8 percent per annum above LIBOR for the first 3 years, of 1 1/4 percent per annum above LIBOR for the next 5 years, and of 1 3/8 percent per annum above LIBOR for the remaining 2 years. PART I - THE ECONDMY 2. The last economic report on the Dominican Republic, Report No. 2492-DO entitled "Current Economic Memorandum on the Dominican Republic," was distributed to the Executive Directors on May 11, 1979. Relevant social and economic data are presented in Annex I. 3. During 1968-74, the Dominican economy experienced an unprecedented average annual increase in GDP of 10.5 percent. In 1974-1977, however, economic growth slowed to only 5.3 percent per year. In 1978, preliminary estimates indicate a further decline to 3.6 percent. 4. Economic growth during 1968-74 was led by exports of sugar and minerals, by tourism and by a high level of bcth private and public investment. During that period, the Dominican Republic was able to increase substantially the volume of sugar exports, start the exploitation of ferronickel deposits, undertake vigorous industrial expansion (mostly in import substitution indus- tries), and establish itself in the Caribbean tourism market. The main reasons for slower growth in recent years are poor agricultural performance, partly as a result of droughts in 1975 and 1977, the drcip in sugar prices after 1975, which had a strong impact on domestic aggregate demand, and--more recently-- the depressed world market for ferronickel and bauxite. Manufacturing, oriented mainly to the domestic market and heavily dependent on imported intermediate and capital goods, has been particularly affected by the slow growth of the economy and by shortages of electricity. Industrial expansion during 1975-78 averaged 4.7 percent per year, compared with the 1968-74 average rate of 13.7 percent.  -2- 5. The country's balance of payments, like that of most energy import- ing, primary products exporting countries, has deteriorated in the latter part of this decade. In 1974 the cost of petroleum imports increased by over US$100 million and was largely responsible for the deficit in the balance of payments in that year. Steep increases in the price of sugar created a surplus in 1975; but since then, sugar prices have fallen drastic- ally, the demand for minerals, ferronickel and bauxite has been weak, and the production of coffee and cocoa has stagnated, with the result that the deficit on current account has widened. The balance of payments has also become sensitive to flows of capital from private sources which in turn reflect the perception abroad of factors affecting risk and uncertainty in the Dominican economy. Because of a de facto dual exchange rate system and the openness of the economy, these private funds have proven hard to quantify. 6. An overall balance-of-payments deficit of US$95 million is estimated for 1978. The deterioration in the balance of payments is due partly to an estimated increase in the current account deficit from US$264 million in 1977 to US$377 million in 1978 resulting from a continued decline in sugar prices, a drop in coffee and cocoa prices, a substantial reduction of the volume of coffee and ferronickel exports; and a decline in net capital inflows. Because of the massive increase in petroleum prices the current account deficit in 1979 is expected to reach US$480 million. To prevent further loss in reserves, the Government will be undertaking a much larger recource to medium-term borrowing from commercial sources, even as official lending increases. The required commercial borrowing will not be sustainable over the longer term, and the Government is undertaking some measures and considering others (see para 10) to strengthen the balance of payments. 7. Inflation, which was minimal during the 1960s, accelerated in the 1970s. The average annual increase in the Santo Domingo consumer price index during 1971-77 amounted to 11.8 percent. This same index indicates a reduction in the rate of inflation during 1978 to 3.5 percent. This reflected a fall in food prices following the recovery of domestic food production from the effects of drought in preceding years and stable housing costs. These categories account for almost two thirds of the weight in the index, and had been the sources of upward pressure on prices during most of the decade. Recent increases in gasoline prices, electricity rates, and wages, will likely generate more upward pressure on prices during 1979. 8. Past fiscal policy had been cautious. In 1968-77, current budget surpluses averaged 6 percent of GDP (varying between 3 percent in 1968 and 10 in 1975) and financed, on average, 98.5 percent of the Central Government's capital expenditures. Although the Government's long-term savings performance was impressive, it was achieved at the expense of extremely low growth of current expenditures, especially wages and salaries. During 1968-77, average annual growth of recurrent expenditures was about 1.6 percent in real terms, and average real salaries of government employees dropped considerably. This austerity limited the Government's ability to operate and maintain the country's economic and social infrastructure as well as to attract and retain capable personnel in government service.  -3- 9. In 1978, the fiscal situation deteriorated, with an overall Central Government deficit estimated at RD$114.5 million, mainly as a result of a lower current surplus of RD$175 million, compared with RD$278.4 million in 1977. The reduction in the current surplus iE attributable to wage increases granted to public employees, to a reduction of' about RD$40 million in revenues due to lower value of sugar exports, the temporary suspension of export taxes on cocoa and coffee, and subsequetnt reduction by 50 percent of export taxes on coffee. 10. The Government which took office in August 1978 has announced its intention to adopt measures to strengthen the balance of payments and public sector finances, stimulate export growth and eliminate price distor- tions unfavorable to agriculture and employment creation. Although a compre- hensive package of economic measures has not yet reached the stage of imple- mentation, it is clear that the Government has recognized the need for appropriate adjustments in policy. It has resisted pressure to launch an ad hoc public works program to palliate the country's acute unemployment problem. It has proposed legislation that would legalize the parallel foreign exchange market which has long been supplied by receipts from tourism and by emigrant remittances and has financed EL growing volume of imports. The new legislation would allow those engaged in certain export activities to sell their foreign exchange earnings at the premium offered by the parallel market over the official exchange rate set by the Central Bank. It is preparing other legislation to provide incentives to exports and to the development of agro-industry. Most of these are expected to improve export performance in the long term. In addition, the Government is seeking to strengthen the fiscal situation by channelling the plethora of earmarked taxes and special funds, which formerly put a large part of public sector resources beyond the allocation decisions of the annual budget, into a single consolidated fund; and by improved administration of income taxes and customs duties. Also, measures are being taken to strengthen the autonomous agencies such as the electricity company, for which an increase in rates was recently approved, and the sugar corporation, which would be relieved of the burden of a cross subsidy to the electricity company. Insofar as certain components of the economic policy package require legislative action, the Government's ability to secure approval by Congress of the proposed measures will be critical to success in expanding and diversifying exports and relaxing the balance-of-payments constraint on economic growth. 11. Prior Bank reports had traced the weakness in administration to the extreme centralization of responsibility for investment program formulation and implementation within the office of the Presidency, and to the low salaries of government administrators compared to their counterparts in the private sector. The new Government has now moved to decentralize by giving to the Secretaries of State greater responsibility for the formulation and implementation of development programs within their sectors, and has sought to attract and retain capable staff by increasing salaries.  -4- 12. The external public debt in relation to GDP was 15.3 percent at the end of 1978 and debt service was 10.2 percent of exports of goods and non factor services in that year. Because of bunched repayment obligations, the debt-service ratio is expected to rise to about 18 percent in 1979 before declining to 15 percent in 1980. The new Government has indicated that it will attempt to ^ontinue prudent financial policies as well as the economic reforms outlined auuve and ameliorate the country's social problems. Because of low export prices, the recent petroleum price rise, and the constrained economic situation there will obviously be difficulties in harmonizing these three goals. The Bank is involved in a dialogue with the Government over .his issue and will be monitoring closely its response to the challenges it faces. Based on the Government's recent actions and statements of intentions, as well as its relatively low past external debt, we consider that the Dominican Republic continues to be creditworthy for Bank lending. PART II - BANK OPERATIONS IN THE DOMINICAN REPUBLIC 13. The Bank Group began operations in the Dominican Republic in 1969. Except for an enclave mining project, lending to the Dominican Republic was on IDA terms prior to FY1975. Since then lending has been on Bank terms, including two Third Window operations. Two loans, for a tourism infrastruc- ture project and a second education project, were approved in FY1975 and two loans, both on Third Window terms, for highway rehabilitation and maintenance and population and family health, were approved in FY1977. Two loans, for irrigation (Nizao Irrigation Project) and tourism (Second Puerto Plata Tourism Project), were approved in FY1979. Total Bank loans and IDA credits outstanding.amount to US$101.1 million, of which US$55.6 million are undis- bursed. Annex II contains a summary statement of the Bank Group loans and credits as of July 31, 1979 and notes on the progress of ongoing projects. 14. IFC has financed two operations in the Dominican Republic, an investment in a cement plant approved in 1974, and a line of credit for small and medium scale industry approved in 1978. Other projects are under consideration by IFC. 15. In the absence of adequate project preparation and of clear investment priorities, the Dominican Republic has, in the past, failed to make full use of official long-term external assistance. Total lending of this type amounted to US$335 million during 1970-77. The present Government is taking steps (see para 16) which should make it possible to increase the contribution of the external development agencies to the financing of the public investment program. IDB became the major source of long-term assistance to the Dominican Republic after U.S. budgetary support ended in the late 1960's. Assistance from IDB has included agriculture (credit programs and irrigation); power (two multipurpose hydroelectric projects and rural electrification); water supply and sewerage; and higher education. U.S. long-term assistance consisted mainly of food (PL480) and loans for agri- culture and health. Long term assistance from IDB for the next three years is expected to include agriculture (with a major emphasis on agrarian settle- ment programs and credit), potable water, irrigation and power. AID assistance would concentrate on agricultural credit, integrated rural development and rural road maintenance.  -5- 16. The Government has recently prepared a three-year public investment program, in which sector and project priorities are defined. The Bank has established a Sub-Group for the Dominican Republic as part of the Caribbean Group for Cooperation in Economic Development. The public investment program and the list of projects for which the Governmient expects to obtain external financing, were reviewed by the Sub-Group at a first meeting in June 1979. The Authorities expect that this mechanism wi]l assist them in their effort to mobilize external financing on terms compatib]e with the country's balance- of-payments constraints. 17. Bank Group lending to the Dominican Republic has aimed at strength- ening the balance of payments; improving social services available to the lower income groups, particularly in rural areas; improving agricultural production and land distribution; and strengthening institutions responsible for major economic sectors. The project now tnder consideration would, by improving the productivity of CEA, the country's principal producer of sugar, enable the Dominican Republic to sustain the rolume of its principal export and major source of employment. The project would also strengthen CEA as an institution. 18. Projects currently under consideration for Bank financing address the country's main economic and social development issues. A Second Highway Project would continue the road rehabilitation and maintenance program ini- tiated under the First Highway Project, and would include a pilot component for the use of labor intensive techniques in l:he construction of rural roads. Further Bank lending is envisaged for education, health and population, and agriculture. New areas for Bank lending are being discussed with the Govern- ment; they could comprise power, rural development and industrial finance. 19. The Bank Group's share in the Domin:Lcan Republic's external public debt outstanding and disbursed was estimated at 5.5 percent at the end of 1978. The Bank Group's share of external pub:Lic debt service in 1978 was 3 percent. Its share of outstanding public external debt would rise to about 12 by 1985, while its share of external public debt service would increase to about 6 percent. PART III -- THE AGRICULTURAL SECTOR AND THE SUGAR SUBSECTOR The Agricultural Sector 20. Agriculture has traditionally been, and continues to be, the most important sector in the Dominican Republic's economy. About 55 percent of the country's 5 million people live in rural areas and agriculture provides employment for over half the economically actLve population. However, rural poverty remains one of the major socio-econom:c problems of the Dominican Republic, and per capita rural income averages about one-third of urban income. In 1978, the sector contributed 17 percent of GDP and 70 percent to the total value of commodities exported. Agricultural production since 1960 has grown at an average 2.7 percent per year, with higher growth in food crops  -6- (4.6 percent) and in livestock (4.9 percent). The performance of the sector over the 1973/77 period stagnated, both in terms of output, due to reduced production of food crops (3 percent) resulting from unfavorable weather conditions in 1975 and 1977, and in terms of value, following the drop in international sugar prices. In 1978, the sector achieved a real growth rate of 7.2 percent with crops increasing by 6.6 percent and livestock by 8.4 percent. 21. The quality of soil and water resources in the Dominican Republic is generally adequate for agricultural purposes. The country has about 2.74 million ha in farm land. Approximately 1.5 million ha are in pasture; about 250,000 ha have been expropriated by the Government and await distribution, and another 190,000 ha are owned by the sugar industry. The remaining 800,000 ha of arable land, are divided into nearly 300,000 farms that produce most of the foodstuffs. Small size farms (less than 5 ha) account for 10 to 15 percent of farm land, while large size farms occupy about 60 percent. Organization of the Sector 22. The Ministry of Agriculture (SEA) is responsible for overall agri- cultural planning, as well as research and extension and other general respon- sibilities normal to an agricultural ministry; land reform is the responsibility of the Agrarian Reform Institute (IAD); irrigation is implemented and managed by the National Water Resources Institute (INDRHI); and agricultural credit is channeled mainly through the Agricultural Bank (BA). Sugarcane production is controlled by the State Sugar Council (CEA) and two private companies. Other institutions having a direct effect on the agricultural sector are the Dominican Price Stabilization Institute (INESPRE), which is responsible for regulating and stabilizing domestic prices for a dozen commodities including sugar, the National Sugar Institute (INAZUCAR) which undertakes sugar marketing surveys, assists in international sugar negotiations and supervises compliance with such agreements and the Dominican Center for the Promotion of Exports (CEDOPEX), which promotes non-traditional exports. Agricultural Policy 23. SEA has prepared a 1978-82 agricultural development plan which will emphasize production of food crops and development of agroindustry. To complement this policy, IAD would promote the establishment of agrarian cooperative enterprises, devoted mainly to food crops and industrial crops. CEA would initiate a program to increase productivity and at the same time reduce areas in cane, thus releasing lands for crop diversification programs, research and experimental activities, and for the settlement of landless farmers by IAD. 24. Expansion of agricultural areas is also part of the Government's strategy in the sector, as indicated by ongoing regional development studies being conducted by the National Planning Office and projects being considered for the development of the southwest, the Azua plain and the lower Yuna valley. In an effort to provide a basis for regional planning, SEA is trying to establish a system for evaluation of agricultural areas.  -7- Bank Role in Agriculture 25. The Bank Group has to date financed a livestock development project and two irrigation projc.ts in the agricultural sector of the Dominican P-rtbli" Completed in 1976, the livestock project as irdicated in the Project Performance Audit Report (Report No. 2052 of May 10, 1978) was a generally successful oper- ation which resulted in a significant increasE in milk and beef production, but livestock productivity may have fallen short cf appraisal expectations. The first of two irrigation projects, Yaque del Ncrte, was approved by IDA in 1973 with parallel financing from IDB, with the objective of increasing agri- cultural productivity and improving land distribution on approximately 23,000 ha. The project has suffered a two-and-a-hall-year delay and an estimated cost overrun of about 90 percent. Major execution problems have involved acquisition of rights of way and lack of agrarian reform legislation. These problems have affected the project's construction schedule and land acquisition and settlement programs. The Government has submitted a draft bill to Congress for its approval, which would permit the Executive Branch to establish by decree a maximum property size for each State irrigated system. It is expected that the bill would be approved by Congress not later than December 31, 1979. This would permit the establishment of a maximium property size in the Yaque del Norte area and the carrying out of land acquisition and settlement programs beginning in 1980. The second irrigation project, Nizao, aims at increasing agricultural productivity, increasing exports, and improving the standard of living of some 3,200 families. The Loan Agreemient was signed in February 1979 but is not yet effective. The Sugar Subsector 26. The Dominican Republic enjoys a comparative advantage in the produc- tion of sugar because of good quality soils and climatic conditions. Sugarcane occupied about 12 percent of total cultivated lands and sugar contributed 32 percent of total exports in 1978. Sugar p;:oduction during that year totaled 1.4 million m ton of which 0.9 million m ton were exported, about 0.2 million were for domestic consumtpion and the remainder was kept in stocks. Production capacity (per 190 day grinding period) is distributed among CEA (840,000 m ton), and two private groups, Gulf and Western (400,000 m ton), and Vicini (90,000 m ton). The subsector accounts for about 60 percent of the labor force in the manufacturing indus:ry (including seasonal workers), and provides additional employment indirectly through transport, trade and other services. Outgrowers (individual farmers) own about 33 percent of the cane area milled by the industry as a whole. Taxes on sugar, which in 1975 reached 24 percent of tax revenues, now accouat for less than 2 percent of tax revenues as a result of low sugar prices and a modification to the export tax law at the end of 1978. The modification to the export tax exempted all mills with an output lower than 90,000 m tons from taxation. 27. The Dominican sugar industry is characterized by widespread use of subcontractors and hired labor imported fr3m Haiti for field operations. Officially, about 15,000 workers are brought into the country annually for seasonal manual labor but the figure could be as high as 30,000. The high labor requirement is due to the low level of nechanization. Labor-intensive practices have provided a distinct advantage because of the low proportion of  -8- trash, leaves and tops that reaches the mill. On the other hand, there is some scope for mechanization of cane harvesting on terrains with suitable topography. The Private Sugar Industry 28. Gulf and Western Corporation, a United States-based company, owns and operates La Romana, a large (71,200-ha harvested area) estate with a 400,000-m- ton-per-annum-capacity sugar mill which accounted for 28 percent of all sugar production in 1974/78. It is located in the eastern part of the Dominican Republic, where lack of rain and relatively poor soils depress yields of cane per ha. Good management and organization, combined with regular investment programs and adequate maintenance of field and factory equipment, account for much of the company's successful operation. Gulf and Western, which has diversified its operations in the Dominican Republic (tourism, manufacturing and finance), does not at this time plan to expand its sugar operations. 29. The Vicini group, a Dominican enterprise, owns and operates three sugar estates in the southern and central part of the country, Cristobal Colon, Angelina and Caei. Their total production averages about 80,000 m ton per year, or about 7 percent of the country's sugar output. The group has recently completed the modernization of the Colon mill and of its railway system, and does not plan to undertake further investments for expansion in the next four years. The State Sugar Council (CEA) 30. Created by Law 7 of August 20, 1966, CEA administers the 12 state- owned sugar estates. It is chaired by the Secretary of Finance and includes representatives of Government, outgrowers, private industry and labor. Day-to-day operations are managed by the Executive Director of CEA, who is also a councilman. Until recently, 20 heads of departments in addition to the administrators of the estates, in effect, reported directly to the Executive Director. A new and capable Executive Director took office in August 1978. He has made several significant changes in CEA's management and is executing a revision of the organization based on a study completed by consultants in 1966. 31. The 12 CEA administered estates are Amistad, Esperanza and Monte Llano, located in the north; Barahona in the west; Catarey in the center; Rio Haina, Boca Chica and Ozama in the south and Consuelo, Porvenir, Quisqueya and Santa Fe in the east. Between 1971 and 1977, CEA sugar production increased from 0.70 million m ton to 0.81 million m ton, while total cane milled in- creased by 18 percent, reflecting a drop of overall factory yields. Cane acreage in 1978 was estimated at 212,000 ha of which about 49 percent is in the hands of outgrowers. Some 3,110 outgrowers raise cane on 77,608 ha in the area of influence of the CEA project estates, most of which are small farmers (i.e., under 40 ha).  -9- 32. The average cost of production of sugar for all CEA factories in 1978 was US$0.235 per kg. The cost of cane is the largest single factor determining the cost of sugar production and there iB scope for increasing cane Productivity in the best CEA lands through better cultural methods, improved cane varieties for all estates, better use of irrigation, and more attention to drainage practices at Barahona Estate. It is also essential to replace old factory equipment so as to avoid factory breakdowns, high mainte- nance costs and reductions in output. 33. The link between field and mill is vital to the industry. In the last two decades, tractors have complemented cx-carts in bringing cane from the field to railroad and truck sidings. The railroads are owned and operated by the sugar estates. A costly and difficult problem is cane storage. Estates that operate railroads in many countries have found that the ideal solution is having sufficient cars to hold care for night grinding, but smaller bulk yards which serve as surge bins wrhere cane is kept, are more common, and usually operate in conjunction with other storage on wheels. The deficiencies of the present system result in lost time in the mills and loss of sucrose content through delays in delivery. Also, repair facilities on the CEA estates are outdated, with limited equipmEnt and insufficient tools, and the personnel assigned to such work do not have the necessary training or proper supervision. PART IV - THE PROJECT 34. The feasibility study for the propoEed project was undertaken by Booker's Agricultural and Technical Services in 1975 and covered all CEA mills and corresponding agricultural and transportation facilities. The objective of the study was to determine a capital investment program for CEA that would rehabilitate and expand the capacity of the sugar mills and transportation system. Based on this study, but with a reduced scale of the project in view, two FAO/CP missions (November 1977 and March 1978) visited the Dominican Republic to assist CEA in identification and preparation work. The project was appraised in October-November 1978. A report entitled "Staff Appraisal Report - Dominican Republic - Sugar Rehabilitation Project" (Report No. 2468b-DO, dated August 29, 1979) is being distributed separately. Negotia- tions were held in Washington from July 16 to July 20, 1979. The Dominican delegation was headed by Mr. Ramon Martinez-Aponte, Undersecretary of Finance. Project Objectives and Description 35. The primary objective of the projeci: is to improve the operational efficiency and financial situation of CEA by reducing the average production cost per unit in agriculture, transportation, manufacturing, and management by avoiding major breakdowns in the manufacturing process and in the transporta- tion system and by strengthening management svstems. The investment would not lead to increased exports; it would increase the total output of CEA factories only to the extent required to keep up with domestic demand, expected to increase at about 5 percent per annum. The incremental production would be 74,000 m ton of sugar in the sixth year of the project.  - 10 - 36. To accomplish these objectives the project would: (a) Rehabilitate the sugar mills at Ozama, Rio Haina, Boca Chica, Consuelo, Quisqueya and Barahona; (b) Rehabilitate the railway system; (c) Carry out irrigation and drainage studies at Barahona estate, a cane area reduction program, and two pilot research programs; and (d) Provide technical services to assist CEA in reorganizing and improving its organization and management. Sugar Factories 37. The project would undertake major works in the Ozama, Boca Chica and Rio Haina sugar factories and minor works in Consuelo, Quisqueya and Barahona. The processing capacity of Ozama would be increased by 58 percent, to 230 m ton per hour, with minor processing capacity increases in Boca Chica and Consuelo. The equipment replacements at the six mills would reduce the grinding periods and thus decrease per unit average production costs. Engineering consultants would be hired by CEA to prepare equipment specifications for the factory items and would supervise the installation of the equipment and works at the Ozama factory. The hiring of the consultants in accordance with Bank guidelines, would be a condition of loan effectiveness (Section 7.01(a) of the draft Loan Agreement). Transportation 38. The transportation component would concentrate on the rehabilitation of about 540 km. of railway track in Rio Haina, Ozama, Boca Chica, Quisqueya and Consuelo. In addition, three locomotives would be replaced and 150 (20 m ton) cane hauling cars would be purchased. The project would also finance an initial stock of spare parts and a fully equipped car workshop. Tele- communication equipment would be required to increase the efficiency and safety of rail traffic. Cane hauling trucks and bulldozers for road mainte- nance would also be included in this component. Consultants would be hired by January 31, 1980 to supervise rail rehabilitation, maintenance of hauling rail cars and locomotives and organization of rail traffic (Section 3.02(b) of the draft Loan Agreement). Agriculture 39. Irrigation and drainage studies to determine the appropriate level of investments to retard or to stop the salinization of the cane fields, and a pilot internal drainage scheme on 100 ha. would be undertaken at the Barahona Estate. A program comprising two levels of activities would be introduced to reduce the amount of land used for cane production while increasing yields. The first would phase out outgrower's lands with unsuitable characteristics for cane production and/or at uneconomic hauling distances. Such outgrowers would receive technical assistance from SEA on production of alternative crops  - 11 - and the extension services required to diversi:fy their production (Section 3.03(a) of the draft Guarantee Agreement). The second would be carried out in the longer term and would concentrate on the estata-owned lands; land not suitable to cane would be used for experimental activitLes and research, and the carrying out of priority projects including land distribution programs (Section 3.03(b) of the draft Guarantee Agreement). CEA would reorganize by January 31, 1981 its Duquesa Experimental Station to improve cane productivity through more effective cane research and extension. Pilot programs, for the mechanization of land preparation and harvesting at Boca Chica, and for payment to outgrowers based on the grading of cane according to its sucrose content at the Monte Llano estate would be carried out. Organization and Management 40. Consultants would be hired to assist CEA in improving its overall organization and management dealing principally with (a) establishment of an efficient management information system through the gradual introduction of Electronic Data Processing (EDP) facilitiesi and for planning of agricultural and manufacturing production and transportation scheduling and (b) definition of suitable personnel policies with emphasis on staff quality, career develop- ment, salary incentives and improvements of the organization of CEA head- quarters and estates. Detailed terms of reference for the management consultants are in preparation by CEA and wouLd be reviewed by the Bank. 41. A qualified training officer would be appointed and assigned to the Personnel Department of CEA. In collaboration with the management consultants, the various departments at CEA headquarters and at the mills, he would draw up and help implement a program aimed at meeting CEA staff needs. A survey would be carried out to see how programs presently carried out in the Dominican Republic would fit CEA's training requirements. CEA assisted by consultants would prepare and submit a report to the Bank by December 31, 1980 describing the Training Program for mechanical and chemical engineers and providing a timetable for its execution. The Bank would have a reasonable opportunity to comment on the program and its timetable befcre it is put into effect (Section 3.05 of the draft Loan Agreement). Project Costs and Financing 42. Total project cost is estimated at US$69.2 million, of which about US$47.0 million, or about 68 percent, represents foreign exchange requirements. The baseline project cost amounts to US$51.0 million and has been estimated on the basis of mid-1978 prices in pesos and converted into US dollars at the official exchange rate. Physical and price :ontingencies total US$5.1 million and US$13.1 million, respectively. Physical contingencies of civil works, equipment and other components have been esttmated at about 10 percent and price contingencies at about 7 percent. CEA does not pay taxes or duties on imported equipment. Expatriate consultants would be retained for about 650 man-months. The average man-month baseline cost per expatriate consultants for all project components is estimated at US$8,200 (including consultant firm overhead, fees and other costs, where applicable).  - 12 - 43. The proposed Bank loan of US$35 million would be made to CEA with the guarantee of the Dominican Republic, and would finance about 51 percent of total project costs, representing 74 percent of the estimated foreign exchange component of the project. The Bank loan would be for 17 years, including four years of grace at 7.9 percent interest. A guarantee fee would be chargee "y the Government to CEA bringing the cost of the funds to 10 percent per annum in dollars. However, in view of CEA's weak financial situation (see paras. 58 - 60), payment of the guarantee fee would be capitalized at the rate of 10 percent per annum and would begin with the first repayment of orincipal under the Bank loan (Section 3.08 of the draft Loan Agreement). The Government would bear the foreign exchange risk of non-U.S. dollar currencies against the US dollar and would make a capital contribution equivalent to US$15 million. Not less than 80 percent of this contribution would be provided during the first three years following the signing of the Loan Agreement (Sections 2.03 and 2.02(b) of the draft Guarantee Agreement). CEA would secure US$90 million from foreign commercial banks under the co-financing operation described below. The co-financing package would consist of US$20 million needed for the project, and of US$70 million to finance CEA's current operations and capital expenditures which are urgently needed to begin the 1979/80 grinding season. The proposed co-financing package would also permit CEA to improve its debt structure from short to medium term and thus strengthen CEA's medium term cash flow position. Other financing may also be needed from time to time to finance operational costs and the Government would assist CEA to obtain these loans (Section 2.04 of the draft Guarantee Agreement). Co-financing with Foreign Commercial Banks 44. CEA has substantially concluded co-financing arrangements with foreign commercial banks for a loan of US$90 million. The loan would have a final maturity of 10 years, including a grace period of 4 years at an interest rate of 1 1/8 percent above LIBOR (for deposits at three/six months) for the first 3 years, of 1 1/4 above LIBOR for the next 5 years, and of 1 3/8 above LIBOR for the remaining 2 years. The commercial bank loan would be disbursed over a one year period. CEA would assume the foreign exchange risk and the Government would guarantee the loan. These terms would represent an improvement over those obtained recently by the Dominican Republic in the Eurodollar market. The execution of the contract with private banks on terms and conditions satisfactory to the Bank would be a condition of loan effective- ness (Section 7.01(b) of the draft Loan Agreement). 45. It is proposed that as soon as a final agreement is reached on the contract with private banks, the amortization schedule of the proposed Bank loan would be adjusted on the US$20 million portion of the co-financing package, so as to ensure that repayments on the external borrowings for the project would approximate those CEA would have obtained if the entire amount had been on Bank terms. Annex 3 of the draft Loan Agreement shows the normal amortization shedule; Annex 4 of this report shows how this schedule would be adjusted when the co-financing package is obtained. Project Execution 46. CEA, which has considerable experience in procurement, installation and commissioning of factory and transportation equipment and works, would execute the project. An internal committee, chaired by the Finance and  - 13 - Programming Chief Officer and consisting of a:Ll senior line staff would approve all project capital and operational budgets, and authorize expendi- tures for equipment, civil works and consultiiig services. In most cases, technical studies, equipment and works would be undertaken by local staff under the authority of the estate administrator at the estate level. Local staff would be assisted by the technical staff at headquarters with direct assistance by consultants. Responsibility for coordinating all the activities for the efficient execution of project components would be vested in the Projects and Special Studies Department and the Management Office of Finance and Programming. CEA has appointed a chief of the projects and special studies department satisfactory to the Bank. The Bark would have the opportunity to comment on the qualifications and experience of any candidate for this position before any subsequent appointment (Section 4.04 of the draft Loan Agreement). 47. The chief of the Projects Departmeut would be responsible for the monitoring of all project components and wouLd receive data on key indicators from sugar factory managers, consultants and technical superintendents at headquarters in order to have early warning of any problems that could inter- fere with project implementation. The Bank would receive from CEA (a) semi- annual progress reports, based on the monitoring information and covering progress on equipment procurement and instalLation and on civil works construc- tion as well as project expenditures; and (b) a completion report no later than six months after the closing date (Section 3.07(b) and (c) of the draft Loan Agreement). Auditing 48. Each of the six CEA estates financed under the project would keep separate accounts geared toward producing cc,st control and management infor- mation related to project implementation. These consolidated accounts, together with CEA's accounts, would be audited by independent auditors acceptable to the Bank. The audit reports would be submit:ted to the Bank no later than six months after the close of CEA's fiscal year (Section 5.02 of the draft Loan Agreement). Procurement 49. Equipment and Civil Works. Purchases of similar equipment items for sugar factories (US$30.6 million), transportation (US$19.2 million) and agriculture (US$1.5 million) would be bulked into single contracts, whenever feasible. For contracts above US$50,000, procurement of factory, transport and agricultural equipment and materials to be financed by the Bank would be by international competitive bidding. Equipment purchases of minor items would be in accordance with sound business practices and after receiving quotations from at least three suppliers, provided that such contracts would not exceed in the aggregate the equivalent of US$500,000. Civil works for sugar factories (US$0.6 million) and for rail track rehabilitation (US$4.9 million) would be procured through force account by the project mills, with assistance of sub-contractors. There would be no Bank financing of civil works, which would be entirely covered by local counterpart funds.  - 14 - 50. Consultants. Consulting services (US$10.3 million) and related equipment would be selected in accordance with procedures and retained on terms and conditions acceptable to the Bank. It is expected that inter- national consultants would be hired for: (a) engineering work in the sugar factories; (b) technical assistance for railways; (c) manage"ont of the Barahona irrigation and drainage studies; and (d) management of part of the cane area reduction program. An international consulting firm, in associa- tion with a local firm would undertake the design and implementation of the EDP and management assistance component. Computer facilities (US$2.1 million) would be procured on the local market after at least two quotations have been received. Disbursement 51. The proposed loan would be disbursed over a period of five years as follows: (a) 100 percent of foreign expenditures for purchases of factory equipment, including installation and engineering; (b) 13 percent of foreign expenditures for transportation equipment, materials, and technical assistance; (c) 100 percent of foreign expenditures for agricultural studies and programs; and (d) 100 percent of foreign expenditures for management and organization assistance including leasing of EDP hardware facilities. Retroactive Financing 52. Retroactive financing of up to US$150,000 is recommended to cover initial payments to consultants for preliminary engineering and management studies. Markets 53. Exports. The Dominican Republic is a provisional member of the International Sugar Agreement (ISA) which became effective on January 1, 1978 and covers the period 1978-82. As provisional member the Dominican Republic must fulfill the stocking obligations stipulated by ISA. The volume of sugar exported by the Dominican Republic in 1978 in accordance with ISA, was 935,000 m ton which was 15 percent below the level exported in 1977 and 8 percent below the average level exported in 1973-77. In 1978, the Dominican Republic held over 200,000 m ton in stock, which is equal to the maximum stocking obliga- tion during years 1978-80. The Dominican Republic has been assigned an export quota of 990,000 m ton for 1979. The country's quota will increase to 1.1 million m ton when world sugar prices are above US$0.30/kg (in current prices). Production capacity of 1.4 million m ton at project completion (including the increase of 74,000 m ton resulting from the project), would enable the Dominican Republic to maintain its exports and to cover domestic market requirements.  - 15 - 54. Between 70 and 80 percent of Dominican sugar exports go to the United States. In recent years Venezuela has become also a major importer of Dominican sugar, having purchased 108,000 m ton of sugar valued at US$24 million in 1978. Venezuela and the Dominican Republic have signed a new agreement under which Venezuela will purchase about 209,000 m tons of sugar in 1979 at a price of about US$0.24/kg. Secondary customers are Morocco, France and the United Kingdom and, more recently, the Soviet Union. In addition to sugar, CEA and the two private firms export molasses to the United States. In 1978, the industry exported about 167 million liters for about US$10 million. 55. World raw sugar prices on free markEts declined from US$0.30/kg (in 1978 constant dollars) in 1976 to a low of US$0.18/kg in December 1978. This decline continues to reflect the fast increase in world production and stocks which occurred in response to high world sugar prices in 1974 and 1975. According to Bank estimates, world sugar prices are expected to increase in 1978 prices from US$0.21/kg in 1980, to US',0.29/kg in 1982 to US$0.40/kg in 1984 to 1986, and then decrease to US$0.31/'kg,in 1987 to 1990. 56. Domestic Consumption. In 1978, domestic consumption was about 177,000 m ton of which about 97,000 m ton was of refined sugar and the rest, raw sugar. CEA forecasts the increase in sugar consumption at about 5 percent per annum over a 10-year period; between 1970 and 1978, it grew at 5.5 percent per annum. 57. INESPRE, the price stabilization in:stitute, is in charge of sugar distribution for domestic consumption. In accordance with existing legislation, INESPRE, in 1978, purchased raw sugar and refLned sugar from the sugar compa- nies at DR$0.13/kg and DR$0.17/kg, respectiveLy and sold to wholesalers at DR$0.26/kg and DR$0.31/kg, respectively. Eighty percent of the spread between INESPRE's selling price to wholesalers and sugar factory prices is used to subsidize the Dominican Electric Corporation (CDE), 15 percent is given back to CEA and 5 percent is retained to finance INESPRE's operating costs. This subsidy to CDE has contributed to CEA's difficult financial situation. The Government has submitted legislation to the Dominican Congress which would eliminate the subsidy. Elimination of the subsidy would be a condition of loan effectiveness (Section 7.01(c) of the draft Loan Agreement). Pricing of Cane 58. The price of cane received by outgrowers is based on the average weighted unit price of sugar sold on the world and domestic markets. Present pricing policies are satisfactory but given their impact on farmers and on the sugar industry as a whole, the Government would review prices paid to out- growers and retailers every two years, starting in October 31, 1981. The Bank would be given a reasonable opportunity to discuss the results of the review with the Government (Section 3.02 of the draft Guarantee Agreement). Financial Analysis 59. CEA's financial situation deteriorEated sharply after 1976 as world sugar prices dropped abruptly. Losses (after taxes) were $26 million in 1977 and $23 million in 1978. A loss of $40 million is estimated for 1979.  - 16 - Faced with inadequate internal cash generation, CEA has resorted increasingly to short-term indebtedness to finance urgent maintenance and working capital requirements. 60. This situation has been aggravated by high administrative and operating costs which, in turn, reflect the lack in the past of an adequate program of capital replacement and maintenance. CEA's failure to carry out such a program resulted from weak management and from the substantial trans- fers which CEA has had to make to the rest of the public sector. Thus, in 1976, at a time of high world sugar prices when CEA's net income (before taxes) reached a record level of $45 million, about $42 million was paid in export tax (the subsidy to CDE represented a $13 million reduction in receipts from domestic sales). In addition, in the past CEA's management has failed to allocate funds, remaining after taxes, to maintenance and capital replace- ment and such funds have been withdrawn by the government to finance other public sector needs. The situation has now changed fundamentally inasmuch as both the government and CEA's new management are determined to rehabilitate and modernize the company. A good indication of this is the package of measures summarized below (para. 61). 61. CEA's interest rate structure on its loans to outgrowers appears inadequate, even after taking into account delayed payments to them for the purchase of sugar cane. Assurances were obtained that CEA would undertake a study to determine the adequacy of the interest rate charged to outgrowers, taking into account delayed payments to outgrowers for purchases of cane, and the price of cane paid by CEA to outgrowers and, after receiving Bank comments thereon, CEA would carry out the study recommendations by September 30, 1980. In addition, CEA's financial condition has been further affected by accumulated arrears on loans due from outgrowers, which amounted to US$7 million at the end of 1978. Assurances were obtained that CEA would present a plan for the recovery of delinquent loans by December 31, 1979 and undertake measures to recover or write-off irrecuperable loans in arrears to outgrowers by January 31, 1982 (Sections 5.04 and 5.05 of the draft Loan Agreement). 62. The Government and CEA's new management are considering a package of investment, financial and organizational measures designed to turn CEA into an efficient sugar producer. Of particular importance are the modification to the sugar export law which took place in late 1978 (para. 26), the expected elimination of the subsidy to CDE, the Government's capital contribution of $15 million, a medium term cofinancing package and measures to recover arrears of CEA loans to outgrowers. In addition, CEA would maintain a ratio of current liabilities of not less than 1.3 to 1 at all times until fiscal year ending September 30, 1982 and not less than 1.5 to 1 thereafter. CEA would not incur any debt over one year, unless its revenues for the fiscal year preceding such debt, or for a later twelve month period, whichever is greater, are not less than 2 times the debt service requirements on all debt. CEA would prepare and submit until project completion to the Bank for comments annual three-year maintenance and capital investment plans. In order to utilize internally generated funds as required for purposes of the carrying out of investment and maintenance plans, and to meet its debt service requirements, CEA would allocate to reserves not less than 40 percent of its surplus in each fiscal year (Sections 5.06, 5.07 and 5.08 of the draft Loan Agreement).  17- 63. These measures, together with those designed to improve the operational efficiency of CEA and of its mills, would result in an improvement of CEA's financial situation over the medium term. The projected increase in sugar prices (para. 54) and the impact of the technical, financial and managerial improvements proposed under the project are expected to lead to a distinct trend of growing profitability after 1982 which should allow CEA to improve its debt structure and continue the investment program to be initiated under the project. Economic Benefits 64. The quantified direct benefits of the project would be (a) lower unit costs of production of sugar for all CEA operations from US$0.235/kg in 1978 to US$0.198/kg in 1989 and (b) increase in production of sugar by 74,000 m tons by the sixth project year. On this basis, the internal economic rate of return for the entire project, including the oitlays for agricultural and management studies, has been estimated at 25 percent. The project would help maintain many of the 40,000 jobs in CEA headquarters and sugar estates as well as an equal amount of secondary employment. It would also help maintain the present volume of the Dominican Republic's main export by avoiding major break- downs in sugar production and transportation due to deteriorated equipment. 65. The economic rate of return of the froject would be equal to the opportunity cost of capital in the Dominican Republic (estimated at 11 percent) if the benefits from increased sugar output wEre reduced by 44 percent, or if the costs of equipment and civil works for sugar factories and transportation increased by 80 percent, or if the project benefits suffered a delay of three years. Project Risks 66. The risk most likely to affect the 'roject's economic rate of return is a world price of sugar lower than projected. However, the proj- ected price for 1984-86 (US$0.40/kg in 1978 prices). appears to be conservative when compared to previous peaks in 1963/64 of US$0.46/kg and in 1974/75 of US$0.77/kg). Another risk would be the lack of a continuing long-term capital investment program, which would need to begin during the fifth year of imple- mentation of the project. It is expected that the projected improvement of CEA's financial situation will enable it to undertake such a program. These risks appear reasonable particularly in the light of the overall international competitiveness of the Dominican Republic as a sugar producer. Environmental Impact 67. The present methods of disposing oi waste materials associated with sugar production would continue to be used under the project since there are no apparent ill effects to the env:.ronment. However, to ensure that any increase in production as a result of the project would not change the present situation, Bank missions would continue to check on the matter, particularly in regard to water quality.  - 18 - PART V - LEGAL INSTRUMENTS AND AUTHORITY 68. The Guarantee Agreement between the Dominican Republic and the Bank, the Loan Agreement between the Bank and Consejo Estatal del Azucar (CEA), and the Report of the Committee provided for in Article III, Section 4(iii) of the Articles of Agreement are being distributed to the Executive Directors separately. Special conditions of the project are listed in Section III of Annex III. Conditions of Loan Effectiveness would be: (a) the elimination of the sugar subsidy to CDE; (b) the execution of a contract by the Borrower with foreign commercial banks for the US$90 million cofinancing operation on terms and conditions satisfactory to the Bank; and (c) the hiring of engineering consultants for the project sugar factories in accordance with Bank guidelines. 69. I am satisfied that the proposed loan would comply with the articles of Agreement of the Bank. PART VI - RECOMMENDATION 70. I recommend that the Executive Directors approve the proposed loan. Robert S. McNamara President by I .2P. D. Cargill Attachments August 29, 1979  -19- ANE I MA ~ ~TA ~ Page 1 of 5 DOKINICAN WLIC - SOCIAL TUICATb5S DATA SIT LAN Ank (TR0USUD SQ.O{. SINICUI UPISLIC _ funl CMO WT D)AP C TOTAL Ban86 SAKE mm NiCER AGRICULTURAL 24.7 NOT 33c8V CDOCAPHIC 180C iCUS 1940 lb 1970 1k UTIINIA /b ICION Le OUUP C G ROUP I. GNP PER CAPITA (USS) 240.0 390.0 340.0 1074.6 926.1 1748.5 ENERGY CONSUMPTION PER CAPITA (KILOGRAMS OF COAL lQUIVATNT) 157.0 321.0 653.0 94U.1 730.7 1646.7 POPULATION AND VITAL STATISTICS POPULATION, KID-YEAR (MILLIONS) 3.0 4.1 5.0 URBAN POPULATION (PERCENT OF TOTAL) 30.3 39.8 45.9 59.3 49.0 51.2 POPULATION PROJECTIONS POPULATION IN YEAR 2000 (MILLIONS) 9.0 STATIONARY POPULATION (MILLIONS) 15.0 YEAR STATIONARY POPULATION IS RlACHED 2075 POPULATION DENSITY PER SQ. KM. 63.0 83.0 103.0 23.5 44.6 28.2 PER SQ. KM. AGRICULTURAL LAND 166.0 174.0 204.0 80.5 140.7 100.5 POPULATION AGE STRUCTURE (PERCENT) 0-14 YRS. 46.8 48.2 47.0 40.9 4'.3 35.4 15-64 YRS. 50.3 49.1 50.0 54.4 55.3 56.3 65 YRS. AND ABOVE 2.9 2.7 3.0 3.9 3.5 5.1 POPULATION GROWTH RATE (PERCINT) TOTAL 3.6 2.9 2.9 2.4 2.4 1.7 URBAN 6.1 5.8 5.4 3.7 4.5 3.0 CRUDE BIRTH RATE (PER THOUSAND) 50.0 45.0 37.0 32.8 31.1 27.5 CRUDE DEATH RATE (PER THOUSAND) 16.0 12.0 9.0 8.5 9.2 9.1 GROSS REPRODUCTION RATE .. 3.5 3.4 2.4 2.2 1.8 FAMILY PLANNING ACCEPTORS, ANNUAL (THOUSANDS) .. 17.2 61.5 USERS (PERCENT OF MARRIED WOMEN) .. .. 30.3 17.7 34.7 FOOD AND NUTRITION INDEX OF FOOD PRODUCTION PER CAPITA (1969-71-100) 121.3 101.0 89.0 99.4 104.4 102.0 PER CAPITA SUPPLY OF CALORIES (PERCENT OF REQUIREMENTS) 92.0 88.0 98.0 107.0 105.0 120.8 PROTEINS (GRAMS PER DAY) 46.0 50.0 45.4 60.4 64.4 80.9 OF WHICH ANIMAL AND PULSE .. 29.0 23.3 28.3 23.5 31.3 CHILD (AGES 1-4) MORTALITY RATE 23.0 15.0 10.0 6.7 8.6 5.1 HEALTH LIFE EXPECTANCY AT BIRTH (YEARS) 51.0 57.0 60.0 63.6 60.2 65.6 INFANT MORTALITY RATE (PER THOUSAND) .. 96.0/f .. 76.1 46.7 45.5 ACCESS TO SAFE WATER (PERCENT OF POPULATION) TOTAL .. 37.0 55.0 63.4 60.8 69.4 URBAN .. 72.0 88.0 79.5 75.7 85.1 RURAL * 14.0 27.0 38.6 40.0 43.0 ACCESS TO EXCRETA DISPOSAL (PERCENT OF POPULATION) TOTAL .. 58.0 42.0 58.8 46.0 70.1 URBAN .. 63.0 74.0 77.8 46.0 88.3 RURAL *- 54.0 16.0 24.5 22.5 33.2 POPULATION PER PHYSICIAN .. 2100.0 1870. Oj 1841.9 2262.4 1343.2 POPULATION PER NURSING PERSON .. 3930.0 1330.07j 933.7 1195.4 765.0 POPULATION PER HOSPITAL BED TOTAL 400.0 350.0 350.0/h 563.4 453.4 197.6 URBAN .. 150.0 220.0 279.4 253.1 260.2 RURAL *- 2680.0/h 3580.0/h 1140.9 2732.4 1055.0 ADMISSIONS PER HOSPITAL BED .. .. 30.0/h 25.7 22.1 17.3 HOUSING AVERAGE SIZE OF HOUSEHOLD TOTAL 5.0 5.3 .. 5.0 5.3 4.7 URBAN 4.8 5.2 .. 4.8 5.2 4.4 RURAL 5.1 5.4 5.3 5.4 5.1 AVERAGE NUMBER OF PERSONS PER ROOM TOTAL 2.0 .. .. 1.3 1.9 1.1 URBAN 1.6 .. .. 1.3 1.6 1.2 RURAL 2.2 .. .. 1.5 2.5 1.2 ACCESS TO ELECTRICITY (PERCENr OF DWELLINGS) TOTAL 20.0 .. .. 54.3 50.0 66.0 URBAN 57,7 .. .. 90.1 71.7 85.1 RURAL 3.0 .. .. 14.2 17.3  -2 0 - ANNEX I TABLE 3A Page 2 of 5 DOMINICAN RZPUBLIC - SOCIAL INDICATORS DATA SHEET DOINCA EPBLC REFERENCE GROUPS (ADJUSTED AYERACES DO3MINICAN REPUBLIC - HOST RECENT ESTIMATE) - SAME SAME NEXT HIGHER MOST RECENT GEOGRAPHIC INCOME INCOME 1960 /b 1970 lb ESTIMATE /b REGION /C GROUP /d GROUP /e EDUC T_'!N ADJUSTED ENROLLMENT RATIOS PRIMARY: TOTAL 98.0 101.0 110.0 107.3 102.5 101.7 MALE 99.0 101.0 109.0 109.1 108.6 110.C FEMALE 98.0 102.0 111.0 107.4 97.1 92.8 SECONDARY: TOTAL 7.0 19.0 24.0 40.5 33.5 51.2 MALE 7.0 19.0 24.0 40.4 38.4 56.4 FEMALE 7.0 19.0 24.0 39.0 30.7 43.7 VOCATIONAL ENROL. (7 OF SECONDARY) .. 8.0 9.0 18.5 11.5 18.3 PUPIL-TEACHER RATIO PRIMARY 58.0 54.0 .. 37.1 35.8 27.1 SECONDARY 16.0 24.0 .. 17.9 22.9 25.3 ADULT LITERACY RATE (PERCENT) 64. 5 67.2 67.0 77.4 64.0 86.1 CONSUMPTION PASSENGER CARS PER THOUSAND POPULATION 4.0 10.0 16.0 29.1 13.5 53.4 RADIO RECEIVERS PER THOUSAND POPULATION 34.0 38.0 40.0 172.1 122.7 225.9 TV RECEIVERS PER THOUSAND POPULATION 6.0 23.0 34.0 67.9 38.3 102.6 NEWSPAPER ("DAILY GENERAL INTEREST") CIRCULATION PER THOUSAND POPULATION 27.0 36.0 42.0 76.1 40.0 78.5 CINEMA ANNUAL ATTENDANCE PER CAPITA 2.0 1.2 .. 4.2 3.7 3.6 LABOR FORCE TOTAL LABOR FORCE (THOUSANDS) 820.0 1100.0 1200.0 FEMALE (PERCENT) 10.5 11.2 11.9 21.5 25.0 24.5 AGRICULTURE (PERCENT) 66.4 61.2 58.0 30.2 43.5 28.9 INDUSTRY (PERCENT) 12.2 14.0 16.0 23.8 21.5 30.6 PARTICIPATION RATE (PERCENT) TOTAL 28.6 26.8 26.5 30.9 33.5 33.8 MALE 50.4 47.1 46.3 47.3 48.0 51.3 FEMALE 6.1 6.1 6.3 13.3 16.8 16.3 ECONOMIC DEPENDENCY RATIO 2.0 2.1 2.3 1.5 1.4 1.3 INCOME DISTRIBUTION PERCENT OF PRIVATE INCOME RECEIVED BY HIGHEST 5 PERCENT OF HOUSEHOLDS .. 26.3/i 25.1 23.7 20.8 HIGHEST 20 PERCENT OF HOUSEHOLDS .. 54.37? 52.9 58.7 52.1 57.6 LOWEST 20 PERCENT OF HOUSEHOLDS .. 4.37? 5.0 2.9 3.9 3.4 LOWEST 40 PERCENT OF HOUSEHOLDS .. 12.47? 14.0 9.9 12.6 11.0 POVERTY TARGET GROUPS ESTIMATED ABSOLUTE POVERTY INCOME LEVEL (USS PER CAPITA) URBAN .. .. .. 265.6 270.0 RURAL .. .. 239.0 185.1 183.3 ESTIMATED RELATIVE POVERTY INCOME LEVEL (US$ PER CAPITA) URBAN .. .. 270.0 396.3 282.5 550.0 RURAL .. .. 280.0 308.1 248.9 403.4 ESTIMATED POPULATION BELOW ABSOLUTE POVERTY INCOME LEVEL (PERCENT) URBAN .. .. 24.0 35.2 20.5 RURAL .. .. .. 46.6 35.3 Not available Not applicable. NOTES /a The adjusted group averages for each indicator are population-weighted geometric means, excluding the extreme values of the indicator and the most populated country in each group. Coverage of countries among the indicators depends on availability of data and is not uniform. /b Unless otherwise noted, data for 1960 refer to any year between 1959 and 1961; for 1970, between 1969 and 1971; and for Most Recent Estimate, between 1974 and 1977. /c Latin America 4 Caribbean; /d Intermediate Middle Income ($551-1135 per capita, 1976); /e Upper Middle Income ($1136-2500 per capita, 1976); /f 1965-70 average; /g 1973; /h Government estab- lishments only; /i Santo Domingo, urban. May, 1979  -21 - ANNEX I PCI IbIlliNi if 901Db INlItli;PR5 ~~~~~~~Page 3 of 5 Ncotes .Af t1001 che dab. ore diWow fron.rurm heesrel,in ''dged th, nest A,torbetateivu end ret tam,l it shol,,I - ,dol 1,, Ii 'hoe, napot Hs 1tonr- .:ttie gll orparable sos fthe lack of tanndordiced deililon And con cepts geaId badleentlnns t cIfvoof hoi daim, The dete sre, romethelesm, ueful Po deecribe ordersof magnitude, indicate trendsl, nd chernuterascrtain n)r oiitfsrecce etween, cocotl The adlueted aronp avesase for sick indicator rse popolAtien-weigbtesd geosmtirt mnicr, seclu~ding the ewtrenre unies of tbs Indicator and the most populated coutyisakgup Coverage of countries amontg rbo indicators depends on vprimtrhlitp oft dota ond in pan er,iton. los to lack of date. group averagosm for 1apital Surplva. oil heperners and indicator, of soness to onien and .ceton disposal. nosing. income distribu,tion, srd poverty are simple pop,,lotin-wsigh,tsd gsoerstic Means withou~t the aectiosien of extrea" values. LAND AREA (thousand sq. 'Kn) Peoulstion per hesitel bed - totel, anba.. sod renal - population (total, Total - Tntal surface area comprising land anse and inland waters, urban, sod rurst dividad by their respctvenubsr of bospitel beIds Agricultural - Neat intent estimate of agri.cultural area used temporarily vavslab.e in public and privte genaraI and specialioed hospital and re- or peran-acnlp for crops, pastures, market and kitchen gardens or to habilintiti- centers. Hdospita1s are establishments permanently staffed by lie fellow. an laast one physician. Establushments previding principally custodial tape are act Inuladod. cRal. hoytan h.wevor, includa health and nedi- GNP Pin CAP1TA fib)) - hNP Per capita. -timates at ourront mono:, prices, cal connoer noli perman.ently otoffed by a phynlici. (but by a medical as- cst>ru y ... ... Pvvoncur Method a W-id back Atlas (1971-77 basin); eslac.t, mouron, nidwife, ott.) uhuh offnt in-pationt accommodation and J4ric <'i o p'U .y-wide aIhefted range ofi nodicol fiaolctie.. Ode -OtM lruisla o Total .onhbn of odmliocs.. tl or diocharg.o ENEcGY CONpLpnTtION run C1, LT.- Anno,o zamy o. -co 00. etn,rl. .-t dividod by the .mabap of beds.. (uland "gunlte pent loan, tat',poile und.1 hool. and.' us go- thermal elcntrinutp) ;in i:lu.gru- of cal equinoent Per c pita..715' POPUJLATION_ ANI;_ ITA_LiTAuIISCO, A ' 1ocl COO lto of ann.poyfcitndividaaln h.l shorn ltvicg quarters Total conulatlon. midya JmlIn)- ' u y:iintailbaac- roa mo. CbadnCrlodger mop or nay met be includad in average of two oct -yorear iae;Di Isou 'tnd 177 . t Ct' s'- ' ~ ataica punpan Statistical definitions lif heuse- tcban Pauro Iponoc o~f Loot - Reac of ucham t- -1~a POP 1.-Ci t tior: dlifZrent dndLnlo,.- *- arbe. -rn.. map affect - p on1 I ty Avono uc,rcnon e om oa. ra.sm ua Average non- ofdata sinig ~couo_ie.. hen on Iamcoyr room in all. urban, and rural occupied convetional Peult on dniti- dwel3i,gs. reaCoc~tivel':. Dwellings exculude non-permanent structures and Per an ho. - Mid-yaac nonulanton Par aq-ar,. rlmarai 11.6 bl-al-an ...cu -bad canto. Pof total area. Access o' Ctlorrioto (ner-." ofdolcs)-tnl unbar. and rural Perso bin . .. ..ioltn and - Compured so above f,i I~ .ut.rl'nd Con ' -in tonal d-olinigs -xtb elcctricity in living quarters as percentage only.- od toti_ - ubar, end tonal. dweflting reopective17. Ppoulo~tice ace structuraeosnt - bildnen (C'-lu ye."o) ,wlo.-g (15-60 years), and retired ;67, so~rad ...iar) as Percent.gea of Mid- LPAT user Populstiom ~c 'usotro rol.oont , ti,5 PapuleI & groth rate (p coont) -tucal. and urban - Comopoun.d -ccal Primana ol., u-nol.odfale - Ttota Aned fema.le onroilment of all ages growth rates f total sod unbar mid-peat populations for 1950-60, at the pm-ar' -vel lii Poruac eg of ronpoutiunly primary enhool-age 1960-70, and 1970-75. populations; ncrmslly loclodes uhildr.e. aged h-Cl yearo bat adjusted for Crude 'rbh rate (pcr thousan)- A,noel 1.ye births par thousan d of differeot length. of primary edicatico; forQ iaro witb uciversal ado- moid-year population; ten yer a ' 'etic ever0. - ending in .1960 end natilin enrollment nay enceed 1lhh portent n~inco s.-n pupils ore below or 1970 and f -e year averageondoce-_ in. ' tflir c tn pe.ent -stimeto. abovo the official oohool aeg. Crude death, rate (p_~ thliaand -Annua deei nre thoosand of mid- Secondary schuol - _total and fosa- lap-ud 00 chaos; -o-ud-nyd - year Ppoplation; tan-ya, arithmetic averages eruing '0 1960 and 1970 tioc requires at least four yearn ct appro-d pn.-ry ic-trontiom; Pro- and fuvepearT averag emdnrg In 197) fornoon recent auoaevIdes generlil -cational, or teether trolinig u-tr..u::unsi for pupils Gross repro dietie rts -' Averesm -.nhe of daughters oroonco will bear usull.. 11Y f1 to 17 Yners of age; uc-ephcdecte -n-s- arli gecrarlty to hernoorosl ePcoductov- per lcd if she e.p- 'ioc-o pr-non ceo- coclodod. opecific fertilIty rates.; oclyp five-year ov-raego endiog in 1960, .'.utli-al erollmen..t iPercent of secondacy) - h'utotioccl cuetltuti... In- 1970, a-A 1975. uIede techeical, industria.1 or other programe whinb operate independently Pumiy Planning al-e2t-co I, anua (hcsodo Annual eucho of or as dapartmento of setondary isstitutiono. t-err fbrhroto ei-n ecdan aoye f -ocien- fomily ail ~-t-och.r raiT-eiar.od aoeoy- 1ua stadoota -1rilld Jn Ionn Ing progeam. primay and ..e.ondary lve-le divided by nune- of toockhr in tho norre- Puiyplecoec - Us ers (porten.tof_married we Pernortog o f spendine levels. marued women of chuld-bearing age (15-u4 yeo-) w...00 birth-control Adult lienan noe(enn)-Literate aodulne (oble to read end write) 00 devute. to all narooed wlien uli some aae oroor a par-tetge of total Audlt population gind 11 pnors andevr POOl AND NTpytITIph1 ~ClfiiiPTl;CN mAdcaof food produlitione pee at (1970100) - ed..no acer- cf Per Pa...en5e' cas.. (per thosoand popoluticn) - Poisongertor to-prlno motor cars napits. annuo prodoetien of all food -iln-oditios. iOti,f Io. ho- oiDht Ipon...; oculudes aeholancee h-ao- and military Per canineaspply of talories (percent of recuiron-tsi - Computed fr.. vehiclet. energy equiva lent ef cot food sopplies available in coutry Per uapita Redio no-elvn erthu dpupoltln) - All types of receivers for radio per day. uvaiIabIe sppIes. epiedomestic production, imports lone hroadusTC ttsn gecerol poblin Per the....nd ef pop.altioc; emliludouniema emports, -d cihanges in stock Not -upplie- ec1,ude animal lend, seeds, recoivoe in ooa.trios and in Years whom regianratini of radio sets wao in quantIiLes coed In fooad processing, and lI-... in distnlbotono Ro- cffOctn deto for rene years- coy oct ho to-par.n. ou nce most cun o q,iroet , were eutimated hy PAo bhasad on phynueleglnal oneda fcr nor- ohnlishsd licomoting. mal activity and health tuesoderiog environmental tempertutre, body OP recotos(o tluodeuaic - TV crenivero fer bruadno..t to geserd. weights,. age and sac dionribuinscof ci poplation, and all-wieg 10 per- public per thosoand pcpolaticc; eolueatit..eniod TV onuivero In toun-. tent for 000t0at he...ehold level, veins and in year whoc r-f-tr-tic. of 'TI ..m w-s do effoct. Per canito eupolv of urotein (cgrane per day) Protein. content of Per-- Newspape , irculatioin (pee th,euud pepulotice) - Sboes the average nirnule- tP,ita eon supply of food Per day. Net sapip e f fond in defined asi tioe of "doily general noter-ot newspaper", defined as a Periodical puhli- ahove. Omqa.iremects for all neo..nTrue established he 0iSDA previde for liot-e dovotod pr-naily tu recording general aIni. It ii co..sidared to o ..Michnin alovns ih from liP ,ten pretois par da,y 20 O Sracs ho "daily" 1 in oppsoc at leost fear utmi-oco.ek of aiel and pis roo t f hio1 gry ed ho aimal proteim. Cicm anua.ttn.e .cncaia.e.na - Biasod cm the ...her uf tickete The.e standards are lower thanmth... of 75 grams ef totol pretein and oold duing the yeen, -icldieg odninaoia. to doive-is cinen.s coad mobile 23 grans of animal prortcas act average for the world, propesed by unit,. PuO in tho Third idlrld rood Survey. Per caPita protein spply fren sanimal nd pulse - Protein eapply of folid EIPOPIMEttI derived from aninels and pubes in grams per day. Total lthbor force ithousandi; - fucnnoic.lly active persons, incluading armed Child (..e. 1-h ) nortalitfy rate_(per h Asa) - Anua doaths per nhoae- fore- cod uceploped hat .culudiog heusevlves. itodents, etc. Defini- end in. age group 1-h yocrs, to lihildpeo in this ego group. tine: inv.ri...sc... tlev lire not t-myroblo. pee e fomen) - Panalo lahor forle os porenceI o tetal abeor lorce. OEAITO Acrioul lire lyo~~~~~~~~~~~~~~~~~~~~(prcent) - labor f.ree in frcIng, footry. hutingaiflIn Lif mpnota- at io yus Average number of years of _ife an p-c.~ntagn cf total labor fotep. remaining at lie ..;.sualy five-yost avenages ending in 1960, 1970, icdotr', (prtet - Lahor force in mining, ucurr-utnie.c, .. factoetriog Arid end 1971. nine .riutty' water aind gi as Pereentage of tetol tohoc fliree. In fant mortality rote (pen thousad) - Annual doaths ef iefants under P-rtici,ali ao(een)-tn,ml,adfm - Tonal, male, amd em.e pear of age per theusond live birhte. fe-L.e oh rfcto us ynrcintofos of tholr ro.upeutve population. Acess no safe water tsreent vopuan ioc) - total, urban, cud zuro. -Theer are ILO.0 odi-sr portielpariur ront- refl-iocig 00-te Numbor nof Popi (total1, urban, md rural) cith rcasco.ahlo ee tc st-ot-ir of the PeP,,ienie, -rd tuac Itie tore. safe water supply (includes treated iA,fce eaters or untreated hot tEnclio deedcprtl eC fpylto ne bodh o vrt uecona-ieatad wanan suih as then frt- protected ho 0holei, syringe the leblir force in afe froiup of 15-6b pe,.. end.sanitary wei1si asperceotaget of thoin -'eapeutive pcpul.tanio. tin sn urban a C pbic -luumtai on stod;o- luctatd out nore INCOME tiSTRiBCTtCN then, 200 ocetsr from a houne .o OwC-id-o.. -o oniog within re.- jPenulinto u pivteinum (both in cash and kisd) ron-l-d by richest 5 senale access of thon hosu- In rurl aruneet'oi ateowoold periont,riehest 20 portent, puliret Of pereont, and peorost 40 pereent imply that the husewIf.o lr mebers of thr house.hold u, -0t00 tli oIfoshl upend a dispropnrtioniate porn of the cl- in lot-hing ru [olc' watrrneeds. PVRT',n TAyChRGT GRfUPS Acces tc ert ipsl(erete Oualm 'roatut