Peru - San Lorenzo Irrigation and Land Settlement (Stage Three) Project

FILE COPY Report No. 3933-PE Impact Evaluation Report Peru: San Lorenzo Irrigation and Land Settlement Project May 24, 1982 Operations Evaluation Department FOR OFFICIAL USE ONLY Document of the World Bank 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. THE WORLD BANK FOR OFFICIAL USE ONLY Washington, D.C. 20433 USA. Office of Directr-CenerA Opeations Evauation May 24, 1982 MORANDUM TO THE EXECUTIVE DIRECTORS AND THE PRESIDENT SUBJECT: Impact Evaluation Report - Peru: San Lorenzo Irrigation and Land Settlement Project (Loan 418-PE) Attached, fo:r information, is a copy of a report entitled "Impact Evaluation Report - Peru: San Lorenzo Irrigation and Land Settlement Project (Loan 418-PE)" prepared by the Operations Evaluation Department. Attachment 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. FOR OFFICIAL USE ONLY IMPACT EVALUATION REPORT PERU: SAN LORENZO IRRIGATION AND LAND SETTLEMENT PROJECT (LOAN 418-PE) TABLE OF CONTENTS Page No. Preface ....................................... i Summary and Conclusions ......................................... ii I. INTRODUCTION ..................................... 1 A. Historical Background .............................. 1 B. The San Lorenzo Irrigation and Land Settlement Project ............ ..................... 3 II. MAIN DEVELOPMENTS SINCE PROJECT COMPLETION ............. 7 III. SOCIAL IMPACT ................. 10 A. Settlement Performance ........ 0.... .............. 10 B. Farmers' Organizations ... .... .................... 14 C. Employment ............ .......................... 16 D. Social Infrastructure .............................. 16 IV. AGRICULTURAL WMPACT .......................... 17 A. Cropped Area . 17 B. Cropping Pattern and Yields ........ 18 C. Net Value of Agricultural Production 19 D. Project Impact at Farm Level ....................... 20 E. Development of Agro-Industries ................. 21 F. Constraints to Agricultural Development 21 V. ECONOMIC PERFORMANCE ................................... 22 VI. EVOLUTION OF PROJECT MANAGEMENT ....... . . . 23 VII. FUTURE PROSPECTS ............................. 24 VIII. CONCLUSIONS ......................................... 25 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. TABLE .OF CONTENTS (continued) Page No. APPENDIX: Borrower's Comments ...................................... 27 ANNEXES 1. Table 1 and 2: Development of the Chira Piura System 30 2. Main Events . ..... .................... 32 3. Table 1: Cost Estimate at Appraisal. 33 Table 2: Contribution of Loan 418-PE to Gross Medium- and Long-term Lending to the Project Area .... 34 Table 3: Disbursements by Years ....... 35 4. Table 1: Cumulative Area Sold.................. ... 36 Table 2: Water Availability,and Use . 37 Table 3: Size Distribution of Individual Holdings ....... 38 Table 4: Size Distribution of Cooperatives ........ . 39 Table 5: Size Distribution of Cooperatives (Subzone Valle de los Incas and Valle Hermoso).. 40 Table 6: Repayment of Land Costs ................... 41 Table 7: Cultivated Area between 1971 and 1980 ....... 42 Table.8: Cultivated Area by Crops, 1962-1980 ........ 43 Table 9: Cultivated Area-Subzone Valle de los Incas and Valle Hermoso . ........ .... 44 Table 10: Cultivated Area-Squatter Subzone .............. 45 Table 11: Total Cultivated Area 1976-1980 ................ 46 Table 12: Estimated Gross Family Income, 1980 ............ 47 Map- IBRD - 14158R Peru: Chira-Piura-San Lorenzo System IBRD - 16320 San Lorenzo Project - Peru IMPACT EVALUATION REPORT PERU: SAN LORENZO IRRIGATION AND LAND SETTLEMENT PROJECT .(LOAN 418-PE) PREFACE This is an Impact Evaluation of the San Lorenzo Irrigation and Land Settlement Project in Peru, for which Loan 418-PE was approved in April 1965 in the sum of US$11.0 million and closed 11 years later in June 1976. Only 60% of the loan proceeds were disbursed; the other 40% had been cancelled after renegotiations in March 1968. The Impact Evaluation Report is based on a review of the Appraisal Report (No. TO-466a) dated March 26,. 1965, the President's Report (No. P-425) of April 12, 1965, the Loan Agreement dated June 18, 1965, and the Project Performance Audit Report (PPAR, OED Report No. 1858) of January 1978; relevant Bank files have also been consulted and Bank staff associated with the project have been interviewed. OED missions visited Peru in April 1981 and October 1981. Extensive farm survey and data gathering were carried out in August-September 1981 with the assistance of the Flundacion Nacional para el Desarollo (Peru). The sur- vey, which was conducted by an agro-economist, yielded many valuable insights regarding the social and economic impact of the project. OED missions held discussions with officials of the Ministry of Agriculture and the Regional Office for Development of Northern Peru. A field trip to interview a number of participating farmers was undertaken. The information obtained during these missions was used to test the validity of some conclusions of the 1978 audit report and permitted discussions of the project's impact on the lives of the settlers, on farmer organizations, on employment and agricultural produc- tion as well as on future developments in the project area. This project was selected by OED for impact evaluation for the following reasons: (i) it was the first Bank financed land settlement project in Peru; (ii) its implementation time overrun has been about 700%; (iii) it has been classified as a "problem project" in five of the implementation years; (iv) it formed part of a complex developmental effort in an entire area of the country; and (v) its economic and social impact was still uncertain at audit. A copy of the draft report was sent to the Borrower for comments on January 11, 1982. Comnents on water users' association and water charges received from the Government are attached as an appendix to the report and have been incorporated in the text where appropriate. The valuable assistance provided by the Ministry of Agriculture and the Regional Office for Development of Northern Peru and their staff, as well as the farmers interviewed during the preparation of this report, are grate- fully acknowledged. - ii - IMPACT EVALUATION REPORT PERU: SAN LORENZO IRRIGATION AND LAND SETTLEMENT PROJECT (LOAN 418-PE) SUMMARY AND CONCLUSIONS The Project 1. In April 196.5, the Bank lent US$11.0 million (Loan 418-PE) to the Government of Peru to assist in bringing about 32,000 ha of new land into production through irrigation and settlement of about 1,570 family units in the San Lorenzo area. The project was the second Bank involvement in.agricul- tural development of the Chira-Piura Region (Northern Peru). The first Bank loan (Loan 114-PE) approved in 1955, which financed the San Lorenzo dam and irrigation infrastructure, was completed in 1959 without firm plans to develop the lands served by the works. The delay in formulating the agricultural development phase meant that water supplies from the San Lorenzo dam were partly utilized in other parts of the Piura Valley resulting later in strong competition for water between San Lorenzo and other areas of the Region. 2. As approved by the Bank, the project was not self-contained and was only intended to be a small contribution to the overall development of San Lorenzo by providing partial financing for capital and recurrent cost of an already ongoing project which since 1962 had been financed by Government and other sources, mainly USAID. The project consisted of (i) provision of services and facilities for project management, (ii) funds to supplement an ongoing medium- and long-term credit program to cover on-farm investments, (iii) technical assistance, (iv) drainage studies and equipment to implement anticipated drainage works and (v) a study of the Chira-Piura river basins. The project cost was estimated at US$30.4 million equivalent. The Bank loan of US$11.0 million was expected to be closed on December 31, 1967. 3. Implementation was scheduled to take about 30 months but actually took 11 years. The loan was closed only in June 1976. The project was clas- sified as a "problem project" in five of the implementation years. Unforeseen technical problems related to low water availability and soils, together with management problems and political difficulties which surrounded the implemen- tation of an innovative settlement program, meant that appraisal objectives were over-optimistic. In 1968, the loan was renegotiated without having been appraised, and the settlement objective was reduced from 32,000 to 18,000 ha; US$4.5 million of the US$11 million were cancelled. In 1969, however, a new government carried out a massive land reform program which resulted from 1971 to 1975 in the unexpected settlement of about 3,000 squatters in and around the original projlect area. At completion, 36,600 ha had finally been developed, of which 9,700 ha originally settled had been abandoned for tech- nical reasons, giving a net developed area of 27,590 ha. The study of the - iii - Chira-Piura basins, which was completed in December 1968, recommended the construction of the Poechos dam, which was implemented later with Yugoslav financing and is now used for irrigation of the Lower-Piura Region. Construc- tion of drainage works only started by mid-1973, six years behind schedule, and ended in 1976. 4. The proceeds of the loan were disbursed as follows: 41% for agri- cultural credit, 25% for operation and maintenance of equipment, 17% for the study of Chira-Piura basins, 13% for technical assistance, drainage study and project facilities and 4% for drainage works. At completion, settlement included 1,292 families individually settled and 1,888 families grouped into 56 Agrarian Reform Cooperatives. In addition, 1,390 families had been settled outside the project boundaries and grouped into 32 cooperatives. Water availability was still restricted by the need to provide a substantial amount of water to Lower-Piura and, as a result, the cultivated.area in San Lorenzo had never reached the total irrigable area in any year. The project's eco- nomic rate of return (ERR) was estimated at 17.5%, a relatively high value, mostly due to the fact that the settlement phase used previously constructed works. The ERR for development since 1955 (Loan 114-PE and Loan 418-PE) was estimated at about 8.7%. 5. The PPAR, issued in January 1978 (Report No. 1858) concluded that the project has generally achieved its basic objectives but has been hampered by a serious over-estimation of water availability, inadequate soil surveys and socio-political changes in the country. Project Impact 6. Since completion, the project has continuously remained subject to external pressures and unpredictable events: new inflows of population, progressive disintegration of Agrarian Reform Cooperatives, increasing compe- tition for land and water and decreasing government support. However, the project's overall social impact went far beyond appraisal expectations and proved better than at project completion for the following reasons: (a) Since 1976, farming population and project area increased by about 25% and 11% respectively due to fragmentation of land and new settlement of squatters; (b) Agrarian Reform Cooperatives progressively and substantially de- parted from their initial collectivized production concept and became successful service cooperatives; (c) settlers developed strong organizations with a remarkable sense of discipline, efficiency and self-help: service cooperatives, settlers' and water users' associations progressively relieved government institutions of their support role to farmers; (d) employment performance exceeds expectations and has largely bene- fited low income target groups; and - iv - (e) social infrastructure provided during the settlement period has had a long-term socio-economic impact throughout the project area and region. 7. The agricultural and economic impact of the project remains satis- factory but is not better today than it was five years ago. As a result of the completion of the Poechos dam in 1976, water supply to San Lorenzo was expected to increase significantly. However, the benefit derived from the completion of the Poechos dam has been partly offset by (i) a growing competi- tion for water within the San Lorenzo system itself due to increases in project population and airea, (ii) increasing water losses during the recent years due to poor maintenance of the distribution system, (iii) technical and marketing problems for cotton, and (iv) increasing - drainage and salinity problems. In the whole San Lorenzo system, the cultivated area decreased by 18% from 1976 to 1980 and the cropping intensity from 75% to about 62%. However, this reduction has been almost fully compensated for by a shift to higher value crops, mostly rice, and fruit trees. The development of agro- industries and fruit-processing facilities by private enterprise and by settlers themselves was an important indirect benefit of the project and contributed to resolve part of the marketing problems. In 1981, the overall net value of agricultural production in the extended San Lorenzo area as well as the pProject's ERR remained slightly below that of the 1971-75 period, reflecting water losses due to poor maintenance of the irrigation system and misuse of water by squatters. Progress in agricultural production is also hampered by poor agricultural research and extension. Nevertheless, estimates of gross farmer incomes show that (i) incomes of medium-size settlers have increased up to twelve :imes compared with the pre-project income estimates and (ii) income for all farmers, including squatters, is substantially above alternative income opportunities in agriculture. 8. In conclusion, it can be said that despite the limited Bank contri- bution to development of San Lorenzo and the project's poor record during implementation, it has achieved its basic goals, albeit in unforeseen ways and almost eight years .late. Five years after completion, it appears that the most notable accomplishment of the project was the successful establishment of strong fatmer organizations. The project today is a remarkable example of the way farmers can progressively and successfully take over project responsibili- ties and substitute for government institutions; it also demonstrates the need to anticipate and prepare during project implementation for such a transition of project authority. 9. The high potential of the project area and the dynamism of its farmers deserve that additional investment be considered to remedy scarce and unreliable water supplies, as well as insufficient agricultural research and extension. The project is now at the stage where farmers themselves must assume responsibility for operating and maintaining the irrigation system and for managing most of the support services. A pilot O&M project, which if successful could be replicated in other irrigation schemes, would be worth- while considering in the San Lorenzo area. - v - 10. In addition to the main findings of the PPAR, the following points which were not apparent at the time of audit may be of particular interest: - the credit for successful settlement of squatters should be attrib- uted to the project authorities, who were able to manage such a difficult operation, and to some extent also to the Bank, which adapted to a changing situation (paras. 3.03-3.05); - prevention of encroachment and illegal population inflow in irriga- tion and settlements projects is difficult if no adequate measures are provided for during project preparation and appraisal and if no legal action is taken as soon as encroachment occurs (paras. 3.06- 3.07); - the settlement objectives of the project, which were considered radical and conceptually advanced at appraisal, now appear generous and somewhat outdated if compared with recent agrarian reform in Peru (para. 3.08); - the success of the efficient farmer organizations can be attrib- uted to (i) remoteness of the project area necessitating close cooperation between farmers, (ii) strong pioneer spirit of the settlers and government officials, (iii) well-defined criteria for selecting settlers and agricultural development based on a self-help concept and (iv) Government's new policy to progressively restrict assistance and promote responsibility among project beneficiaries (paras. 3.10-3,15); and - some contradiction may exist in settlement projects between income distribution objectives, intended to settle the largest number of small farmers, and development objectives which are often based on the entrepreneurial ability of a small group of more educated and more wealthy people (para. 3.16). - 1 - IMPACT EVALUATION REPORT PERU: SAN LORENZO IRRIGATION AND LAND SETTLEMENT PROJECT (LOAN 418-PE) I. INTRODUCTION1' A. Historical Backgrouad 1.01 Of the 2.9 million ha of cultivated land in Peru, about 1.0 million are irrigated, 440,000 of which are located along the coastal region of Peru. The Coastal Zone consists mainly of flat desert plains, sand dunes and the dry, heavily eroded Andean foothills. Agriculture is limited to the river valleys where irrigation is possible; the valleys produce over 40% of the country's gross value of crop production including sugar, rice, cotton, maize, citrus and grapes. About 142,000 ha or 20% of the irrigated area lies in the Northern part of the Coastal Zone in the Chira-Piura river basins, of which San Lorenzo forms a part. The area has special economic significance as a major producer of high quality export cotton and a substantial proportion of the national tree crop production. The Development of the Chira-Piura System 1.02 Two neighboring rivers cross the northwestern Department of Piura. The Chira River, which lies to the north, carries more water, but irrigable soils are scarce in ita hydrological basin. The Piura River carries less water, and no water at all in some periods, but there are sizeable tracts of irrigable soils along its banks. Water can be - and has been - transferred between the two rivers, and there is no break in continuity between the lowlands of the two basins. 1.03 Three water sources and three areas are linked in the Chira-Piura system (map). The water sources are: the.Chira River, the Quiroz River (a tributary of the Chira River) and the Piura River. The areas are: San Lorenzo (in the highlands between the three rivers), Upper Piura (along the Piura River, upstream from San Lorenzo), and Lower Piura (along the Piura River, downstream from San Lorenzo).!/ 1/ Adapted from the Project Performance Audit Report (PPAR) No. 1858. 2/ A fourth area (Middle Piura, downstream from San Lorenzo and upstream from Lower Piura) and a fourth water source (Chipillico River) exist, but they are very small and did not play any role in the development of the system. - 2 - 1.04 Up to 1949, Upper and Lower Piura shared the Piura River waters, then the only source of irrigation water (Annex I - Diagram 1). Lower Piura had the bigger share (15,000 ha, as compared with less than 4,000 ha in Upper Piura) for historical and political reasons since it was colonized long before and its big landlords constituted a very powerful group. Water flow in the Piura River was erratic, and therefore irrigated agriculture - the only possible kind - was uncertain. 1.05 The development of the Chira-Piura System, which turned out to be one of the most important agricultural development schemes in Peru, was carried out in three stages: (a) Stage I (1948-1953) was financed by the Government itself and consisted of diversion works to transfer water from the Quiroz to the Piura River (below Upper Piura) to increase both the area irrigated in Lower Piura (up to 31,000 ha) and the reliability of water supply (Annex I, diagram 2). (b) Stage II (1955-1959), partly financed by the Bank (Loan 114-PE), provided construction of a dam in San Lorenzo to store the water being transferred from the Quiroz River in order to enhance water reliability in Lower Piura and to irrigate 45,000 ha in San Lorenzo. The dam was completed in 1959, but land settlement in the San Lorenzo area, not included in Stage II, was not carried out immedi- ately. The powerful landowners of Lower Piura lobbied - and did obtain - as much as possible of the additional unused supply of water provided by the dam; the area irrigated in Lower Piura was hence further expanded to about 50,000 ha. Upper Piura also ex- panded explosively to some 18,000 ha from 1960 to 1964. As a result, the water diverted from the Quiroz River and stored in San Lorenzo allowed an increase in the area irrigated upstream and downstream of the San Lorenzo area, i.e., Upper and Lower Piura, while San Lorenzo itself was left with sufficient water for only 32,000 ha. (c) Stage III (1961-1976), which was also partly financed by the Bank (Loan 418-PE) aimed at: (i) the agricultural development of the San Lorenzo area (Annex I, diagram 3) through land distribution to settlers ("colonos") and (ii) the construction of a second dam (Poechos) on the Chira River and of a diversion canal to transfer water to Lower Piura (Annex I, diagram 4). Completion in 1976 of the diversion scheme supplied Lower Piura farmers with as much water as they could use; Upper Piura could now take all the water from the Piura River and further expand irrigation to some 30,000 ha; and San Lorenzo could now count on a reliable source of water from the San Lorenzo dam since water was no longer released for Lower Piura. - 3 - The Bank's Contribution to the Chira-Piura Scheme 1.06 Bank involvement in the Chira-Piura scheme began in 1955 (Annex 2) with Loan 114-PE which financed the San Lorenzo dam and infrastructure (Stage II) and was completed in 1959 without firm plans to develop the lands served by the works. The project consisted of an earth-filled dam with live storage of about 258 MCM and irrigation infrastructure to serve about 45,000 ha of desert land which then comprised the San Lorenzo Project area. The project cost was about US$107 mLllion (1981 terms); approximately US$68 million was provided through Loan 114-PE and the remaining funds through a loan from the United States and Government resources. A fundamental shortcoming during both the appraisal and Implementation of Stage II was that no definite deci- sions were made with respect to settlement and consequently storage water could.not be used immediately on the 45,000 ha for which the physical infra- structure had been constructed. The delay in formulating and implementing the colonization phase meant that from 1959 to 1962, water supplies for San Lorenzo were utilized in other parts of the Piura Valley [para. 1.05(b)]. 1.07 By 1961, the Bank expressed its readiness to help finance the settlement stage (Stage III), but actual support was delayed until 1965 mainly because of the Bank's insistence on organizational and legal pre-conditions. When the project was appraised in late 1964, some 14,000 ha were already settled averaging about 1.6 ha per holding. Therefore, the San Lorenzo Irriga- tion and Settlement Project (Loan 418-PE), which is the subject of this Impact Evaluation Study, contributed to the on-going land development and settlement phase of the entire San Lorenzo area and cannot be equated with a self- contained project (para. 1.09).1/ The project also financed a feasibility study of the Chira Piura Valleys, the outcome of which was a plan including the construction of (i) the Poechos dam and of the Chira-Piura diversion canal [para. 1.05(c)] partly financed by Yugoslavia and (ii) the main and secondary drainage networks of Lower Piura. 1.08 In 1979, the Bank approved the Lower Piura Irrigation Rehabilitation Project (Loan 1771-PE) aiming at the rehabilitation of irrigation works and reclamation of saline lands in the Lower Piura Valley. The project is expected to be completed by mid-1985. B. The San Lorenzo Irrigation and Land Settlement Project (Loan 418-PE) 1.09 As appraised in 1964 and approved in June 1965, project objectives were to help develop about 14,300 ha already settled and to accelerate devel- opment of about 17,000 ha of new land thereby bringing about 32,000 ha into 1/ The report also covers most of Stage II. An overview of Stages I, II and III is not feasible since Stage I was not financed by the Bank and no data are available on costs and benefits of the Quiroz Diversion scheme constructed under Stage I. -4- production by 1968. The package consisted of (i) provision of services and facilities for project management, (ii) funds to supplement an on-going medium and long-term credit program to cover on-farm investment, (iii) technical assistance, (iv) drainage studies and equipment to implement anticipated drainage works and (v) a study of the Chira-Piura river basins. Project cost (Annex 3, Table 1) was estimated at US$30.4 million equivalent (about US$128.0 million in 1981 terms). The Bank loan (US$11.0 million equivalent or about US$46 million in 1981 terms) was expected to be closed on December 30, 1967. Project Implementation 1.10 Implementation was scheduled to take about 30 months but actually took 11 years. The closing date was revised four times and the loan was finally closed in June 1976. The project was classified as a "problem proj- ect" in five of 'the implementation years. During this greatly extended period, one can distinguish five distinct phases (see Annex 2). (a) 1965-1967: Unforeseen technical problems related to low water availability and soils together with management problems and politi- cal difficulties which surrounded the implementation of an innova- tive colonization program, meant that appraisal objectives were over-optimistic. Moreover; most of the sandy soils in the Tablazo areall (Annex I, diagram 3) developed under the project had to be abandoned because of high percolation losses in the coarse textured soils, and the settlers had to be relocated to other districts. (b) March 1968: The loan was renegotiated without reappraisal. Because of water shortages and increased competition for water from Lower Piura, the settlement objective was reduced from 32,000 to 18,000 ha; US$4.5 million of the US$11 million were cancelled and the closing date extended from December 30, 1967 to June 30, 1969, The study of .the Chira-Piura basins was completed in December 1968. The study recommended the construction of the Poechos dam and the diversion canal undertakings which were implemented later with Yugoslav financing. (c) March 1969: A new government took over in 1969 and carried out a massive land reform program. The Bank suspended lending opera- tions for 12 months over the issue of compensation of expropriated foreign interests. (d) June 1969 - January 1971: Water shortage problems were aggravated by unexpected settlement of some 1,700 squatters on about 5,000 ha. However, reimbursements were resumed in 1970 and the closing date 1/ Algarrobo, Parkinsonia and Somate Districts. - 5 - was extended to December 30, 1973. Bank involvement in settlement ended in December 1969 when the amount allocated to agricultural credit was fully disbursed. (e) March 1971 to June 1976: The only remaining objective of the loan was completion of the drainage works and purchase of O&M equipment. The drainage study concluded that only about 3,000 ha had drainage problems compared with 8,200 ha originally identified. Construction of drainage works started by mid-1973 and ended in 1976. Undis- bursed funds were finally used for the replacement of the control valve in the San Lorenzo dam. The loan was closed on June 30, 1976. Meanwhile, an extra 5,900 ha had been settled and developed by the government without Bank assistance by grouping 1,390 squatters into Agrarian Reform Cooperative units, located outside the original boundary of San Lorenzo in Valle de los Incas and Valle Hermoso (Annex I, Diagram 4). Project Achievements 1.11 As stated above (para. 1.07), Loan 418-PE cannot be considered a self-contained project, for it provided partial financing for capital and recurrent costs during the final 11 years of an on-going project which covered a period of 15 years and was also financed from other sources, mainly USAID (Annex 3, Table 2). Loan proceeds covered about 17% of the total development cost which was about US$93.0 million in 1981 terms (and 27% if only the 1965-1975 period is taken into account). The most important project component was agricultural credit: the loan financed 62% of the medium- and long-term credit on-lent between 1.966 and 1969, but only 19% of those of the whole project period. The proceeds of the loan (US$6.5 million or US$27.0 million in 1981 terms) were disbursed as follows: 41% for agricultural credit, 25% for 0&M equipment, 17% for the study of Chira-Piura basins, 13% for technical assistance, drainage study and project facilities and 4% for drainage works (Annex 3, Table 3). 1.12 The primary objective at appraisal was to bring 32,000 ha into production by 1968 through a settlement scheme. A revised estimate of water availability reduced this to 18,000 ha. at loan renegotiation, but since the 1969 agrarian reform legislation, squatters in the project area also had to be settled. At completion, 36,660 ha had been developed of which 9,070 ha originally settled had been abandoned for technical reasons giving a net developed area of 27,590 ha. Settlement included 1,292 families individually settled on 19,935 ha (an average of 15.40 ha per settler) and 1,888 landless families grouped in 56 Agrarian Reform Cooperatives on 7,655 ha (an average of 4 ha per family). The total of 3,180 families compares with the appraisal objective of settling 1,570 family units, subsequently reduced to 950 at loan-renegotiation. In addition, 5,900 ha were settled outside the project boundaries [para. 1.10(e)] and allocated to 1,390 families grouped in 32 cooperatives. At the time of project completion, the settlement of Agrarian Reform Cooperatives, though not financed by the Bank Loan, was considered - 6 - successful except for minor technical problems in some areas. Cooperatives had not matched the agricultural performance of individual settlers; nonethe- less, they have had an important social impact in directing project benefits to the poor. 1.13 The cultivated area increased at a rate similar to the-net increase in developed lands; there has been no lag between development and full land use. Water availability of the San Lorenzo reservoir was still restricted by the need to provide a substantial amount of water to Lower Piura (37% of average annual water distribution for the 1973-1975 period). As a result, the cultivated area culminated at a maximum of about 25,500 ha in 1973 but never reached the total irrigable area in any year. In 1976, the area was to about 72% under-annual crops, predominantly cotton followed by rice and maize, 26% tree crops, mostly mango and citrus, and only 2% under pastures. 1.14 At completion, the project's rate of return was estimated at 17.5%. The relatively high ERR was mostly due to the fact that the colonization phase could make use of previously constructed works (sunk costs) and that there was little time elapsed between investments and obtaining benefits. The ERR for the development activities since 1955 (Stage II financed by Loan 114-PE and Stage III financed by Loan 418-PE) was recalculated at about 8.7% compared with 14% projected at appraisal. At completion, it was estimated that net incomes of the first settlers had increased up to twelve times as a result of the project and that income for all beneficiaries was substantially above alternative income opportunities in agriculture. Main Findings of the PPAR 1.15 The PPAR, issued in January 1978 (Report No. 1858), concluded that the project had generally achieved its basic objectives but had been hampered by a serious over-estimation of water availability, inadequate soil surveys and socio-political changes in the country. The PPAR also pointed out that (i) insufficient attention had been given at appraisal to basin hydrology and competition for water generated by development outside the San Lorenzo; (ii) agricultural development had been neglected at the preparation and appraisal stages; (iii) the project preparation should have been done concur- rently with Stage II construction so that development could have been a continuous process and (iv) the drainage works were ill-defined, for they anticipated the results of a major drainage study also financed under the loan. However, the project served as a development catalyst for the whole northwest region and was a training ground for many government officials. The PPAR also drew lessons from the uncommon time overrun of the project and recommended that (i) a definite provision be made in a loan agreement for updating project feasibility after a certain time overrun and (ii) supervision reports indicate whether problems are project, sector or country specific so that management can decide the appropriate strategy to obtain corrective action. - 7 - II. MAIN DEVELOPMENTS SINCE PROJECT COMPLETION 2.01 The Impact Evaluation of the San Lorenzo irrigation and settlement project has to take into con.ideration four major events- which affected the San Lorenzo system after project completion: (i) an unexpected increase in the total farming population (+ 25%) and project area (+ 11%); (ii) a drastic change in cropping patterns; (iii) different water availability and distribution patterns due to the completion of the Poechos dam and associated diversion work to Lowe:r Piura (para. 1.05); and (iv) increasing drainage problems. Increase in Farming Population and Project Area 2.02 Since project completion, the number of individual settlers in the project area increased by about 8.5%, from 1,292 to 1,388 (Annex 4, Table 1). This increase was due to (i) fragmentation and reallocation of land abandoned by previous owners and (Li) allocation of land formerly owned by four coopera: tives to individual settlers in 1976. The area owned by individual settlers remained about the same (20,000 ha) as in 1976. The number of production cooperative units decreased from 56 to 53 in the San Lorenzo area while membership declined by about 30% from 1,868 to about 1,350 families, mostly due to resignations. The area owned by cooperatives has not changed (7,577 ha) since 1976 (Annex 4, Table 1). 2.03 Outside the project boundaries, the situation remained unchanged in the Valle de los Incas and Valle Hermoso districts, with a total of 32 cooperatives and 1,390 members. More important is the illegal settlement of squatters upstream from the San Lorenzo dam on both sides of the Rio Quiroz- Quebrada Totoral-San Lorenzo reservoir diversion canal, and downstream from the San Lorenzo dam, along the Malingas Canal and the Quebrada San Francisco (see map). Encroachment which started in 1970 and remained unnoticed at project completion, increased significantly during the past few years and resulted in both the progressive colonization of about 2,000 ha by 1,171 families, mostly subsistence farmers, and in severe water shortage problems for the farming population settled in the San Lorenzo area (para. 2.09). This clandestine colonization was generated by the Agrarian Reform policy of the past ten years and was tacitly accepted both by Government authorities and the San Lorenzo settlers. In addition, 1,505 ha and four cooperatives which previously depended on the Upper Piura scheme were also given water rights under the San Lorenzo system. Although the exact number of families of these four cooperatives is unknown, it can be estimated at 300 to 400. 2.04 The evolution of the farming population and cropped area benefitting from the San Lorenzo system is analyzed in Chapters III and IV, and can be summarized as follows: -8- No. of Families Area (ha) Subzones 1975 1981 1975 1981 San Lorenzo Project Area/a Individual settlers 1,292 1,388 19,935 20,032 Cooperatives 1,888 1,350* 7,577 7,577 Sub-total 3,180 2,738 27,512 27,609 Outside Project Boundaries Valle de los Incas and Valle Hermoso 1,390 1,390 5,907 5,907 New squatter area n.a. 1,171 n.a. 1,966 Upper Piura - 400* - 1,505 Sub-total 1,390 2,961 5,907 9,378 Total 4,570 5,699 33,419 36,987 (Difference: %) (+ 25%) (+ 11%) /a Districts of San Isidro, Partidor, Malingas, Hualtaco, Somate and Algarrobo. * Estimate. Change in Cropping Pattern 2.05 The cropping pattern in the San Lorenzo project area did not change significantly during project implementation, with the exception of a continu- ous expansion of fruit tree plantations. In 1975, annual crops represented 72% of the cultivated area while fruit trees and pastures accounted for 26% and 2% respectively. Cotton was the dominant crop (57% of the annual crops) followed by rice (18%). 2.06 The cropping pattern changed drastically after 1976 because of: (i) increasing technical and marketing problems for cotton (see para. 4.02); (ii) better yields and producer prices for rice (see para. 4.03); and (iii) the development of agro-industries for fruits (see para. 4.13). The evolution of the cropping pattern (details in paras. 4.02-4.06 and in Annex 4, Table 8) can be summarized as follows: fruit tree acreage increased from 26% to 42% of total cropped area, while annual crops decreased from 72% to 55%; rice became the dominant annual crop, representing now 45% of total annual crop area. 2.07 The change in cropping pattern has significant consequences on water use since rice and fruit trees, which, together cover now about 67% of the - 9 - cultivated area, are both high water-consuming crops (18,000 and 12,000 m3/ha respectively compared with 10,000 and 7,000 m3/ha for cotton and beans). Change in Water Availability and Distribution Pattern 2.08 With the completion, in 1976, of the Poechos dam and its diversion canal, Lower Piura became progressively independent from the San Lorenzo system which reduced it:i water allocation to Lower Piura from an average 270 MCM per year during the 1957-75 period to 104 MCM in 1977 and almost zero in 1981 (Annex 4, Table 2). It was expected that completion of the Poechos dam would permit increased water supplies to San Lorenzo from an average 280 MCM per year in the 1965-75 period to about 550 MCM in 1981 and thereafter. If the San Lorenzo area had remained the same as at project completion, (about 33,400 ha including the original San Lorenzo project area and Valle de los Incas/Valle Hermoso), water availability per ha today would be about 16,000 m3/ha i.e. quite sufficient for the cropping patterns which prevailed at completion. 2.09 However, the combined effects of increased project population and area, changed cropping patterns and poor maintenance of main irrigation works now result in water shortages. The insufficient water availability can be attributed particularly to: (a) squatters obtaining water from the Quiroz-San Lorenzo canal through siphons or primitive irrigation mechanisms resulting in high water losses; it is estimated that about 3 m3/sec- (about 90 MCM per year or 16% of the potential water availability of the system) is diverted by squatters, although part of this loss is recovered through the return flow; (b) the transfer of part of Upper Piura to the San Lorenzo system (para. 2.03) created an additional water demand of about 5%; (c) changes in cropping patterns, with the current emphasis on rice and fruit trees, result in an average additional increase of 12% in water demand per ha compared with that prevailing at project completion; (d) the poor maintenance of the distribution system during the project period as well as during the past years has resulted in increasing water losses from an estimated 16% at completion to about 35% today. In addition, during 1980 and 1981 the flow of water was not as abundant as that in the 1970-75 period because of low rainfall. In conclusion, benefits of increased water supplies due to the progressive independence of, and decreasing competition from, Lower Piura was partly offset by a series of events which led to increased competition for limited water resources within the San Lorenzo system itself. - 10 - Drainage 2.10 Studies carried out under the Project in 1971 concluded that only about 3,000 ha actually have salinity and drainage problems compared with about 5,000 ha estimated at appraisal (1964) and with about 8,200 ha identi- fied by a consultant firm in 1969. During project implementation, drainage works on about 3,000 ha were the main reason for extending the closing date to 1976. The PPAR concluded that an unrealistic planning schedule and lack of adequate data were the main reasons for the flawed drainage component. In 1981, it became apparent that: (i) drainage works carried out under the project were not efficient and were poorly maintained; and (ii) drainage problems adversely affected about 6,000 ha (about 20%) of the project area. New drainage works have been undertaken by the Government; about 40% of the program was completed during the 1977 to 1981 period, but construction of the remaining 60% is expected to take several years because of limited public funds. III. SOCIAL IMPACT A. Settlement Performance 3.01 Settlement was the primary objective of the project. At appraisal, it was estimated that about 1,570 families would be settled on the 32,000 ha project area with an average farm size of 20 ha/farm. Settlers were to include about 750 families, mostly former goat herders and laborers already living in the project area and about 820 additional families who would come from all over Peru and would qualify according to such criteria as "need, experience, industry, education and credit-worthiness".L/ The demand for land was assumed to be great, and the settlement was expected to be completed within 30 months. Settlement development, which turned out to, be quite different from that anticipated at appraisal, can be divided into three different phases: Phase I - Settlement of Individual Farmers 3.02 It took six years, from 1961 to 1966, to settle 1,300 families on about 20,000 ha. Contrary to expectations many potential farmers were reluc- tant to settle in the project area, principally because of difficult living conditions which prevailed in the region at the time and the fear of getting into debt for the purchase of land and for working capital. Completion of settlement was also delayed by the need to abandon about 7,000 ha of devel- oped land in the Algarrobo and Parkinsonia districts, because of high water requirements due to percolative losses in the coarse textured soils, and due to the need to relocate farmers on new land in the upper sectors of the 1/ Appraisal Report, para. 13. - 11 - project area. Nevertheless, the settlement objective and its social impact have been achieved; the distribution of land (Annex 4, Table 3) among the 1,388 families settled in 1981 shows that farms of less than 20 ha represent 60% of the land and belong to 85% of the settlers. Average holding size is about 14.5 ha. Fragmentation of farms, through inheritance and sales (one hectare is now estimated to cost US$2,500 or more), is gradually increasing and the average farm size tends to decrease over time. Moreover, the indi- vidual settlers have been and continue to be the most qualified farmers in the project area, as well as the pillars of the strong farmer organizations which developed later in the project area (paras. 3.09-3.16). About 50% of the project settlers came from the Piura Province and 50% from other regions of the country; most were, and remain, highly motivated; they constitute an homogeneous and entrepreneurial group. Phase II - First Encroachment and Settlement of Agrarian Production Cooperatives 3.03 In 1969, a change in government and a new agrarian reform policyi/ triggered the first squatter movement and the need, not anticipated at ap- praisal, to relocate about 1,868 farm families to the project area with a further 1,390 families outside the project boundaries to Valle de los Incas and Valle Hermoso. Thus a total of 13,484 ha was allocated to 85 Agrarian Reform Cooperatives (CAP) with 3,258 families, an average of 4 ha per family (Annex 4, Tables 4 and 5). This new settlement was neither approved nor financed by the Bank, but tacitly accepted because of its important social impact. The salient characteristics of the CAPs were the follow- ing: (i) the ownership and usufruct of all productive assets is collective; (ii) members receive a salary and a share in the profits proportionate to the number of hours worked; (iii) management is by elected representatives; and (iv) labor is provided by the members and by seasonal hiring of non-members. 3.04 The development of CAPs since the introduction of the agrarian reform policy has been hampered by farmers' reluctance to accept collectivized production, central management and to relinquish their rights to farm individ- ual plots. First, an estimated 30.Z/ of the CAP members resigned and four 1/ In June 1969, the Government approved a new land reform law that has rapidly and dramatically changed Peru's landownership patterns. Latifundist agriculture was to be liquidated and the property rights transferred to agricultural workers, small farmers and peasant communi- ties. The target was to expropriate 14,500 estates covering 43% of the country's gross farm area (10.3 million ha) by the end of 1977. The new agrarian structure was to be based on cooperative production units which would stimulate the growth of agricultural output, raise rural income and promote socio-economic development. 2/ No census or statistics are available on cooperative membership; esti- mates are based on interviews undertaken among about 10 cooperatives during the August-October 1981 evaluation mission and on some data prepared by government officials. - 12 - CAPs"were liquidated for various reasons, mostly inability to work under CAP rules or lack of basic knowledge of agriculture (a number of squatters were not farmers). CAPs resisted the admission of new members and as a result the average area per family grew from 4 ha in 1969 to about 5 ha in 1981. Second, with a few exceptions, most of the cooperatives progressively and substan- tially departed from the CAP principles by: (i) dividing the communal holding between their members who are now permitted to work their 5 ha plots individ- ually, and (ii) evolving into service cooperatives in which small individual farmers pool together to provide inputs, credit, marketing services and agri- cultural equipment. Water allocation to members is also strictly reglemented by the cooperative leaders. This development, which was accelerated when the military government was replaced in 1980 by a new constitutional government, is highly appreciated by cooperative members and in their view contributes to improving both agricultural production and their well-being. 3.05 In conclusion, the first squatter encroachment, with the subsequent settlement of CAPs, turned out to be a major additional social benefit of the project although such a benefit was not anticipated at appraisal and not supported by the Loan. In retrospect, there was considerable risk that such encroachment would deal a fatal blow to the project by increasing competition for land and water. The credit for the successful settlement of squatters should be given to the project authorities, who were able to manage this difficult operation, and to some extent to the Bank, which adapted to changing situations. A remaining risk could be a further relaxation of discipline within cooperatives, particularly on the water allocation rules set up by the Water Users Association (para. 3.14). Phase III - Second Encroachment Upstream from the San Lorenzo Reservoir 3.06 Contrary to the first encroachment, the second developed slowly, remained unnoticed for years and was never legalized. The main features of the second encroachment are: (i) individual settlement on very small plots (about 1.70 ha per family); (ii) predominance of food crops and (iii) primi- tive irrigation systems (para. 2.09) leading to high water loss. The land colonized by squatters is desert hills and steep slopes with high risks of soil erosion. Nevertheless, squatters managed to level the land (however insufficiently) and to build their own irrigation system without benefiting from any technical support from government. As they are considered illegal they are not required to pay water charges or to follow any water allocation rules prevailing in the downstream area, although their location along the diversion canal and upstream from the San Lorenzo reservoir makes them favored water users. Because of competition for water, conflicts have arisen with the legal occupants downstream and the dominant question in 1981 is whether and how this new generation of squatters can be integrated in the San Lorenzo system. San Lorenzo settlers and government officials in Piura are willing to resolve this problem as soon as possible and a new and organized settlement and irrigation scheme is now under consideration (para. 7.03). - 13 - 3.07 As already pointed out in a recent PPAR (OED Report No. 3730) encroachment, illegal population inflow, and the difficulty involved in enforcing land occupancy laws have been hihl ighted -in a number of Bank- assisted settlement and irrigation projects;./ prevention and/or corrective action is difficult if adequate measures are not provided for during project preparation and appraisal and if no legal action is taken as soon as encroach- ment occurs. The Social Impact of Settlement 3.08 In conclusion, the project's overall achievements in respect of settlement went far beyond appraisal assumptions, mostly for unexpected socio-political reasons.. When the Agrarian Law No. 13240 was issued in 1959, settlement objectives were to distribute land to qualified farmers and it was thought that holdings would vary from 15 to 150 ha according to soil types and potential productivity, with an average farm size of about 24 ha. In fact, the first settlement phase resulted in an average 14.5 ha holding, the second phase in a 5 ha plot per family and the last in an average 1.70 ha plot per squatter family. Soil quality and potential productivity have not been predominant factors in determining farm size since both are lower in Phase III than in Phases I and II. When the 1959 Agrarian Law was issued, it was considered radical and. conceptually advanced and generated intense political opposition to the project. However, the actual progress of the settlement scheme has turned out to be even more radical than expected. In retrospect and by current standards, the settlement objectives of the project appear generous and somewhat outdated if compared with recent agrarian reform objec- tives in Peru where pressure on land and water leads to even stricter criteria on holding sizes. Repayment of Land 3.09 For settlement purposes, land was sub-divided into lots, the sale price of which was calculated by a complex formula which considered plot size, land classification and an estimate of development costs. Down payments ranged from 2% to 8% of sale prices, a grace period of 3 years was allowed, and the terms of the loans were 20 years' repayment (25 years for plots smaller than 8 ha) and interest on the reducing balance varying from 2% to 6%. The 1981 repayment records (Annex 4, Table 6) show that farmers faced up to their responsibilities remarkably well: repayments are only 17% in arrears for individual settlers, compared with 33% in arrears for cooperatives and 21% overall. Since the amount of the original debt has not changed despite high 1/ Madagascar: Beef Cattle Development Project (OED Report No. 1559); Ethiopia: Humera Agricultural Development Project (0ED Report No. 1858); Rwanda: Mutara Ag:ricultural Development Project (OED Report No. 3520; Sri Lanka: Mahaweli Ganga Development Project Stage I (OED Report No. 3730). -14 - inflation, repayment has gradually become an easier task. Because the sale of land is forbidden unless repayment is complete, some farmers have repaid in advance in order to be able to sell all or part of their land. B. Farmer Organizations 3.10 The most important development of the project in recent years has been the establishment of strong farmer organizations with a remarkable sense of discipline, efficiency and self-help. Service cooperatives, a settlers' association and a water users' association were created during project implementation and progressively relieved Government institutions of their support role to farmers. Service Cooperatives 3.11 At the time of project completion, it was found that project manage- ment, with the assistance of Danish specialists, had initiated the concept of self-governing and self-financing service cooperatives controlled by farmers to enable bulk purchase of inputs and collective marketing. The PPAR con- cluded that the success of cooperatives stemmed from allowing the movement to grow naturally rather than forcing the pace after the initiation period. By 1981, in addition to production cooperatives which have evolved into service cooperatives (para. 3.05), settlers have established eight service coopera- tives which are grouped in one central cooperative (Central de Cooperativas Agrarias de San Lorenzo). About 45% of all settlers (627 individuals) are cooperative members. In addition, two production cooperatives, which cover 149 families are members of the Central Cooperative. The main services provided to members are: (i) marketing of rice and cotton, (ii) purchase of inputs and agricultural equipment and (iii) agricultural equipment ser- vices. The Central Cooperative developed processing facilities for rice and fruits, an animal feed factory and training activities for settlers and their families. Settlers' Association and Water Users' Association 3.12 The Settlers' Association (Associacion de Colonos) and its board have taken a prominent part in dealing with the project authorities, in carry- ing responsibility for establishing policies and self-discipline for land and water uses and in organizing the Water Users' Association, which has now taken over part of the operation and maintenance responsibilities for the irrigation component. The San Lorenzo Water Users' Association (Junta de Usuarios) and its district committees (Comision de -Regantes) are now governed by a new (1979) law which transferred to beneficiaries of irrigation schemes the responsibility for programming water allocation and scheduling and taking appropriate measures for maintaining the irrigation system. Consequently, the law provides for a complete change in the cost recovery and water charge procedures which were in effect in 1976 at the time of project completion. - 15 - 3.13 Prior to the 1979 legislation, all recovered funds were treated as government revenue while 0&M costs were covered by budgetary allocations to the project authority. Under the new system which took effect in 1981, most of the funds recovered through water charges are expected to be returned to the Water Users' Association to cover 0&M costs while a small percentage of these funds would be retained by government for recovery of investment costs and tax on water use. Under the new law, about US$175,000 is expected to be allocated in 1981 to the Water Users' Association to cover part of 0&M expenses..!/ In 1981, the Association was also able 'to raise among its members additional emergency funds equivalent to about US$50,000 to help finance urgent repairs to the irrigation distribution system; in addition, the Association obtained a loan from Banco Agrario to finance a study on a reha- bilitation program for the whole San Lorenzo system. Funds allocated to Water Users' Association, and collected among the members of these associations remain, however, insufficient to cover full O&M expenditures and rehabilita- tion costs which, together, are estimated at about US$ 1 million, in 1982. But since water users are now involved in decision-making in respect of determining both the level of water charges and the use of collected funds, water rates, which increased from US$6.0 per ha in 1978 to about US$10.0 in 1980, are expected to increase further in the near future and to cover even- tually the full O&M cost. The objective of the Water Users' Association is to take over full O&M responsibility under a self-governing and self-financing system after a rehabilitation program, now under consideration (para. 7.01- 7.05) has been implemented. 3.14 The Settlers' Association and the Water Users' Association have also developed a strict water allocation system between the different districts and between water users in case of scarce water availability. In 1981, because of low water availability, the decision was taken that only four hectares per family would benefit from a full 18,000 m3/ha allocation for rice produc- tion, while the next four hectares would be allocated only 10,000 m3/ha. The remaining land would not be irrigated unless water availability in the reservoir increases significantly during the following months. This water distribution pattern, which intends to apportion proportionately more water to small farmers than to the largest, permits a satisfactory living standard and security for all settlers. 3.15 In retrospect, the most notable accomplishment of the project lies in the creation of successful and efficient farmer organizations. There appear to be four elements that contributed to the success: (a) remoteness of the project area (about 100 km from Piura) leading to a need for close cooperation between farmers in processing inputs and marketing products; 1/ At the time of the Impact Evaluation mission, the new system was partly in effect and limited to O&M of the water distribution infrastructure. 0&M of major infrastructure as well as rehabilitation works were still under the responsibility of the Regional Office for Development of Northern Peru (CORPIURA) and financed by budgetary allocation. - 16 - (b) strong pioneer spirit of the settlers, as well as of the government officials who were responsible for the settlement scheme;. (c) well-defined criteria for selecting settlers and agricultural development based on a self-help concept; (d) government's policy to restrict aid when the project reached full development and to promote responsibility among project benefi- ciaries. 3.16 A major lesson can be drawn from this experience: the leaders of farmer organizations have been and still are a small group of entrepreneurial settlers whose farm size is generally above average. This group belongs to the first wave of settlement, while settlers under the second scheme are smaller farmers, mostly drawn from unemployed people and less active in farmer organizations. This feature suggests that some contradiction may exist in settlement projects between income distribution objectives intended to settle the largest number of small farmers and development objectives which are often based on the entrepreneurial ability of a small group of more educated and more wealthy people. C. Employment 3.17 At appraisal in 1964, it was estimated that at full production "more than 50,000 people of the project market area would derive their livelihood from it (the project) either directly or indirectly".11 In 1981, employment performance exceeds expectations and has largely benefited low income target groups. In addition to the 5,700 farming families now living in the San Lorenzo system area, it is estimated that about 3,500 permanent agricultural laborers work in the project area; in addition occasional labor, estimated at 1,076,000 mandays/year equivalent to about 3,100 permanent jobs is also provided. Overall, direct project beneficiaries can be estimated at about 12,300 families, or about 73,800 people. No data are available on indirect beneficiaries, like laborers in agro-industries, transportation, input sup- pliers and supporting services. A rough estimate by the evaluation mission puts them to about 5,000 to 6,000. D. Social Infrastructure 3.18 Although the Bank project did not contribute towards financing social infrastructure, the Government has provided important community ser- vices during the settlement period, mainly in education and health. These services, which were encouraged by the Bank and which were placed under the responsibility of the then autonomous Project Authority, have had a socio- economic impact with long-term benefits throughout the project area and region. 1/ Appraisal Report, para. 13. - 17 - 3.19 School attendance in the San Lorenzo area reached 94% in 1981 (16,202 children) compared to only 43% for the whole Plura Region. Because of low government investments in school facilities and equipment during past years, farmers contribute towards building and equipping of schools as well as teachers' salaries. Three health centers were established in the San Lorenzo area during the project period and three new centers were built since 1979. Although health attendance is lower than the norms established by the Ministry of Health, it is similar to that prevailing in the Piura Province. IV. AGRICULTURAL IMPACT A. Cropped Area 4.01 In 1976, at the time of project completion, it was found that average cropping intensity had not increased beyond 80% for the previous three years and that restricted. and unreliable water supply was the dominant reason for poor agricultural performance. In 1981, as stated above (para. 2.10), the benefit derived from the construction of the Poechos dam for the San Lorenzo area has been partly offset by growing competition for water within the San Lorenzo system itself, due to increases in project population and area, changes in cropping patterns and increasing water losses during the past five years. Evolution of cropped area in the different subzonesl/ is detailed in Annex 4, Tables 7-11 and summarized below: (a) In the original. San Lorenzo area, totalling 27,900 ha,. the cul- tivated area which reached a maximum of about 25,500 ha in 1973 decreased to about 19,800 ha in 1976 and 18,000 ha in 1980, i.e., a 65% cropping intensity compared with 90% in 1973 and 80% in 1975. (b) In the Valle de Los Incas and Valle Hermoso districts, (5,907 ha), the cultivated area dropped from 5,550 ha in 1976 to 2,650 ha in 1980, and the cropping intensity fell from about 94% to about 45% for the same period. (c) In the newly settled area, which benefits from the largest water resources, a census carried out in 1981 for the Canal Quiroz and Quebrada Totoral areas (1,625 ha) shows a cultivated area of 1,352 ha, or an 83% cropping intensity. (d) In the whole San Lorenzo system area, out of a total of about 35,400 ha of cultivable land for which data are available, only about 22,000 ha (62%) were cultivated in 1981, compared with 26,738 ha (75%) in 1975. 1/ No data are available for Upper Piura subzone (1,505 ha). 2/ Including about 300 ha occupied by squatters along Quebrada San Francisco and Canal Malingas. - 18 - B. Cropping Pattern and Yields 4.02 For the districts located within the original San Lorenzo project boundaries, the changes in cropping patterns, as stated in para. 2.06, can be explained both on technical and marketing grounds. Cotton was initially the main crop in the project area but yields have not reached the appraisal estimates of 2.5 tons/ha and have declined over the years as follows: Years Average Seed Cotton Yield (tons/ha) 1954-1958 1.8 1960-1969 1.6 1970-1980 1.5 Increasing disease and soil quality problems have been the main cause of declining yields while the producer price of cotton has not increased for years and has been adversely affected by a government tax of 17.5% on the EOB export price. 4.03 The growing importance of rice in the cropping pattern can be explained by the introduction of high yield varieties and increasing yields over time (from 4.65 tons/ha in the 1971-1975 period to 5.56 tons/ha in the 1976-80 period) and more particularly for the past two years, with all-time records of 5.93 tons/ha in 1979 and 6.25 tons/ha in 1980. In addition, farm gate prices for rice have continuously increased in real terms during the past five years. Areas under maize and beans remained about the same as in 1975 and yields did not increase significantly. 4.04 Fruit tree plantations, mostly lemon, boomed because of an attrac- tive export market for lemon essence and processed fruits. Average yields are higher than in 1975, mostly because some plantations have reached full produc- tion, but they are still lower than anticipated since 60% of the orchards are less than six years old. Fruit production is considered the second most profitable crop after rice, with the exception of mango which is no longer profitable. 4.05 The evolution of the cropping pattern in the San Lorenzo project area is detailed in Annex 4, Table 8 and is summarized below: - 19 - As Z of the Total Cropped Area 1975 1981 Annual Crops 72% 55% (Cotton) (41%) (11%) (Rice) (13%) (25%) (Maize) (16%) (17%) (Others) (2%) (2%) Fruit Trees 26% 42% (Lemon) ( 4%) (17%) (Mango) (16%) (16%) (Others) (6%) (9%) Pastures 2% 3% 4.06 For the subzones located outside the San Lorenzo project boundaries, the change in cropping patterns has been less pronounced; in the Valle de los Incas and Valle Hermoso districts (Annex 4, Table 9), fruit trees represent 23% of the cultivable area and the orchard area has remained constant since 1975. Annual crops decreased by 70% from 1975 to 1981. The area under cot- ton, which remains the predominant annual crop since rice cannot be cultivated in these areas, decreaaed by about 55%. In the new squatter settlement subzone, fruit trees have not exceeded 10% of the cultivable area, but the share of rice among annual crops has increased continuously in the past five years (Annex 4, Table 10). No data are available for Upper Piura but the evolution of the cropping pattern of this area is likely to be similar to that of other districts. C. Net Value of Agricultural Production 4.07 At project completion, the net value of agricultural production for the original San Lorenzo project area was estimated at about US$7.1 million (in 1981 terms) per year for the period 1971-1975 and was expected to increase to US$8.9 million for the period 1980-2000, when Lower Piura becomes indepen- dent from the San Lorenzo system. At the time of the project impact evalua- tion in 1981, it was found that the net value of agricultural production in 1980 was about US$6.42 million, or 90% of the net value estimated at the time of completion and 72% of the estimates for the 1980-2000 period. Since the area under fruit trees increased by about 60% after project completion and a large number of orchards are not yet bearing fruit, it can be concluded that: (i) the reduction from 80% to 60% cropping intensity has been almost offset by shifting to higher value crops, (ii) prospects for 1985-2000, once fruit trees have reached full production, can be considered equal to or above the produc- tion estimates made at completion for the 1980-2000 period and (iii) the net value of agriculture production could have been much higher within the orig- inal San Lorenzo project boundary had the irrigation infrastructure been properly maintained and the original project area not been extended by about 10,000 ha. - 20 - 4.08 At project completion, part of the water stored in the San Lorenzo reservoir was used to provide additional irrigation water to Lower Piura. Incremental benefits generated by such water supply were estimated to average US$2.9 million per year in 1981 terms for the 1970-75 period. Water release to Lower Piura ceased in 1976 while the original San Lorenzo area was extended from 27,600 ha to about 37,000 ha now irrigated by the San Lorenzo system. It is estimated that this extension resulted in an additional net benefit of about US$2.96 million per year in the 1976-1980 period, i.e., approximately the equivalent of the benefits previously generated in Lower Piura from the San Lorenzo system. 4.09 In 1981, the overall net value of agricultural production in the extended San Lorenzo area is about US$9.32 million compared with US$10.0 million for the 1971-1975 period. This slight decrease in net value of agricultural production reflects water losses due to poor maintenance of the irrigation system and misuse of water by squatters with adverse effects on downstream areas. D. Project Impact at Farm Level 4.10 At project completion, estimates of gross farmers' income were made for representative farms including cooperative members (4 ha), small settlers (6.6 ha), medium-size settlers (16 ha) and large settlers (56 ha). An esti- mate of farmer incomes was made in 1981 for the same representative farms, with the exception of the cooperative farms now extended to 5 ha instead of 4 ha (para. 3.04) per member. In addition, a typical squatter farm (1.70 ha) was added to the list. 4.11 Although only indicative, these estimates (details in Annex 4, Table 12) confirm the 1976 findings and can be summarized as follows: Average Gross Family Income (in 1981 terms) '000 S./ US$ Equivalent Cooperative member (5 ha) 753 1,882 Small settler (6.6 ha) 980 2,450 Medium-size settler (16.0 ha) 1,650 4,125 Large settler (56.0 ha) 4,497 11,242 Squatter (1.7 ha) 256 640 Alternative income opportunity in agriculturai 191 478 /a Assuming 225 work days per year at official minimum wage rate (S./ 850 per day). - 21 - These estimates show that i). incomes of the original medium-size settlers have increased up to twelve 'times compared with their pre-project incomes (US$350 in 1981 terms), and (ii) income for all farmers, including squatters, is substantially above alternative income opportunities in-agriculture. It is not surprising that government now considers original settlers in San Lorenzo to be privileged compared both to newcomers and farmers in other areas of Peru; their high income is due to relatively larger farm units which reflect the social objectives that prevailed in 1961 and which are now superceded by stricter agrarian reform standards. E. Development of Agro-Industries 4.12 Marketing of fruits was foreseen as a problem at appraisal, and technical assistance to investigate was financed through the Loan. Little was done until 1973, when the Bank pressed for action because part of the 5,000 ha planted with fruit trees was coming into production. A feasibility study for a fruit development and marketing project was proposed but not implemented. At completion, it had become evident that the limited market that existed for fresh produce could not guarantee benefits from the substantial investment in tree crops unless processing facilities were constructed. 4.13 The development of new fruit processing facilities was undertaken during 1975-80 by private enterprise and by the settlers themselves. Four processing plants have been constructed for extraction of lemon essence which is exported to the US and Mexico. Fruit processing facilities offer an alternative to fresh fruit marketing and thus play an important role in price regulation. In addition, a processing plant for mango and papaya is now under construction; this new industry is expected to relieve in part the current mango marketing problem and to boost cultivation of papaya in the project area. Development of agro-industries should be considered an important indirect benefit of the project. F. Constraints to Progress in Agricultural Development 4.14 The poor maintenance of the irrigation system during the past five years led to an increasing deterioration of canals and gates, resulting in poor water efficiency and increasing water losses. No annual maintenance program has been established and no regular budget has been allocated for repairs. Only in 1980 was an amount of US$231,000 apportioned for the repair of canals and roads. In addition, the agency responsible for system opera- tions has been hampered by budgetary constraints resulting in serious staffing and operating problems. In this respect, the situation in the San Lorenzo area is similar to the one prevailing in most irrigated areas in Peru, where budgetary constraints make system operations difficult or inefficient. At farm level, water discipline has been lax for years, but the need to enforce discipline is now fully acknowledged by farmers; at the same time, however, farmers who now have more operational responsibilities also recognize that they are not sufficiently trained to fully take over these responsibilities. - 22 - 4.15 Agricultural credit and provision of inputs is properly organized in the San Lorenzo area through Banco Agrario. Repayment of credit is remarkably good and collective liability for repayment is effective within the coopera- tive organization. Today agricultural research and extension constitute the weakest link in the supporting services line. Farmers acknowledge that expanding rice cropping is not a solution in a region where irrigation water is scarce and unreliable. However, because of the lack of applied research in the project area, farmers confess that they do not know what other profitable crops could be substituted for rice, how their low maize yields could be increased or how pest control for fruit trees could be improved. Extension service consists of 23 professionals and 78 assistants, a fairly large team, but because of budgetary constraints extension agents devote most of their time to administration and statistics. Little time is devoted to relaying extension messages or demonstrating sound agricultural techniques and the use of farm equipment. No extension program has been worked out and budgetary constraints are such that such a program could not be implemented anyway. To overcome these deficiencies, the Settlers' Association plans to establish a small adaptive research station and to develop a technical assistance program using its own resources. 4.16 Marketing remains an issue despite progress during the past months. The parastatal and monopolistic organization, ENCI, is involved in marketing cotton while ECASA is responsible for marketing rice. Although producer prices for rice are about 10% of the import price, they are considered to be quite attractive to producers, while prices for cotton are insufficient given the yields prevailing in San Lorenzo. The main difficulty confronting farmers does not relate to prices but more to the marketing system in general because as a result of the monopolization of marketing by ENCI and ECASA, farmers are not being paid until long after delivery of the crop. V. ECONOMIC PERFORMANCE 5.01 The ex-post economic rate of return was calculated in the PPAR from the beginning of Stage II development in 1955 and for Stage III from 1961 until the closure date of Loan 418-PE in June 30, 1976. The ERR was estimated at .8.7% for Stage II (compared with 14% projected at appraisal) and at 17.5% for Stage III (not calculated at appraisal). Both estimates were based on the assumption that the project area would remain about 27,600 ha and would bene- fit from all San Lorenzo water resources after 1976 when water distribution to Lower Piura was to be discontinued. However, incremental benefits in Lower Piura up to 1975 were taken into account for calculating the ERR of Stage II. 5.02 While water release to Lower Piura was actually discontinued in 1976, the project area was extended by about 10,000 ha resulting in (i) lower benefits than anticipated for the 1976-85 period within the original San Lorenzo project area (para. 4.07), and (ii) additional benefits outside the project boundaries. Since these changes in the benefit stream are only - 23 - related to benefits gene-rated after the 16th year of the project life, their impact on the ERR is small. However, on the basis of these new assumptions, the ERR of Stage II development is now (1981) estimated at between 9 and 10% indicating that the decrease in benefits in the original San Lorenzo project area, and in Lower Piura, have been more than offset by additional benefits accruing outside the original project boundaries. For Stage III (Loan 814-PE) which financed investments made only within the geographical boundaries of the settlement project, the revised ERR is about 14.5Z reflecting the current water shortage and water competition with other users outside the project area. 5.03 From these figures, it can be concluded that the two Bank-financed projects have had a positive economic impact for the country. However, re- turns on investments couLld have been better if (i) the delay between commis- sioning Stage II works and implementing the Stage III settlement phase had been shorter and (ii) operation and maintenance of the irrigation and drainage systems had been more eflective since project completion. VI. EVOLUTION OF PROJECT MANAGEMENT 6.01 At appraisal, the Bank reasoned that Stage III development would be implemented against strong political opposition and that to succeed the proj- ect needed to be administratively independent. Establishment of Irrigacion y Colonizacion de San Lorenzo (ICSL), an independent agency placed under direct control of the office of the President, was made a condition of Bank involvement in Stage III,. Undoubtedly, the privileged administrative position of the San Lorenzo management, strongly supported by the Bank, enabled devel- opment to take place relatively protected and isolated from changing socio- political events in Peru. It contributed to a dynamic development and a highly motivated team. The Bank intended that San Lorenzo remain, in terms of its organization and management, independent from existing governmental institutions. 6.02 During 1969-1971, when the new government undertook agrarian reform throughout the whole country, political opposition to the project was elimi- nated. Expropriation of all estates larger than 150 ha and distribution of land to production cooperatives meant that the individual settler concept in San Lorenzo had now become a socio-political anachronism. In 1971, and without consultation with the Bank, San Lorenzo management came under the Director General for Agrarian Reform and Rural Settlement, one of six main branches of the newly structured Ministry of Agriculture. This marked the decline from independence to a normal operational role similar to any other irrigation district. 6.03 In 1981, the organizational arrangement of 1971 still remains. Zona Agraria I in Piura is responsible for the San Lorenzo area and provides support services to settlers and cooperatives through its San Lorenzo and Chipillico Irrigation District. Like most completed work programs in Peru, - 24 - San Lorenzo suffers from the relatively low priority assigned to operation and maintenance of irrigation infrastructure, and insufficient budgetary funds. However, a new development likely to change this situation is the strengthening of farmer associations and their willingness to take over most project management responsibilities. This development was triggered by government budgetary problems over previous years, and a deliberate government decision to transfer more responsibilities to the farmers. Helping farmer associations to organize an efficient water operation system and an adequate agricultural research and extension scheme remains to be done and should become the primary objective of the project authority. The San Lorenzo case .illustrates the possible role of farmers once a project is completed and the need to anticipate the gradual assumption of management responsibility by farmer organizations thereby releasing scarce government resources for invest- ment elsewhere. VII. FUTURE PROSPECTS 7.01 The combined effect of poor operation and maintenance, expansion of the settlement area and changes in cropping patterns has now resulted in scarce and unreliable water availability and the need to undertake rehabilita- tion and complementary works in the San Lorenzo area. The high potential of the project area and the dynamism of its farmers deserve that additional works be considered; it is clear, however, that any additional investment should be conditional upon the introduction of an efficient operation and maintenance system. If this is not achieved, it is unlikely that the cycle of poor O&M followed by need for additional rehabilitation will be broken. 7.02 The project is now at the stage where the farmers must assume responsibility for operating and maintaining the irrigation system and not merely for emergency repairs or for deciding on water allocation between users. Under current legislation, a water users' association can dispose of funds recovered under water charges, establish an O&M program and borrow for rehabilitation works. Therefore, the first remedial action to be taken would be to assist the associations in planning and financing rehabilitation works both for irrigation and drainage as well as for organizing an efficient and self-financing O&M system. A pilot O&M project, which if successful could be repeated in other irrigation schemes, would be worthwhile considering and could be included in Government plans for agricultural development. 7.03 The second step would be to incorporate squatters in the San Lorenzo system, by (i) constructing a proper primary irrigation infrastructure and thus limiting current water losses, (ii) involving squatters in the farmers' and water users' associations, (iii) legalizing their land occupancy and (iv) obtaining their agreement to pay water charges and accept water alloca- tion rules. Adequate measures to prevent any further encroachment on the area should also be worked out in cooperation with the farmer associations. - 25 - 7.04 Since the capacity of the Quiroz-San Lorenzo canal is currently insufficient to carry all waters of the Quiroz River during the rainy season, the third action would be to increase water availability to the San Lorenzo systems by constructing micro-storage reservoirs on the upper reaches of the Quiroz River. If water supply from the Quiroz could be stepped up, the crest of the San Lorenzo dam could be raised by two meters providing about 30 MCM additional live storage. 7.05 A feasibility study would be needed for these three actions proposed which could contribute to (i) increasing the irrigated area from the current 22,000 ha to a maximum of 35,400 ha and (ii) raising the cropping intensity to 100% or more. VIII. CONCLUSIONS 8.01 Although the Bank's involvement in the overall development of the Chira-Piura system was limited, it was of significant importance to the San Lorenzo development, with the first loan (114-PE) supporting the construc- tion of the-San Lorenzo dam and the second (418-PE) for the settlement phase. 8.02 The Irrigation and Land Settlement project was implemented during a difficult and changing period in Peruvian history. At the beginning, the project was considered radical and socially innovative; at project completion, its objectives appeared somewhat outdated. Slow project execution and numer- ous problems which led to the project being classified as a "problem project" in five of the eleven implementation years were more a reflection of national and sectoral issues than project-specific issues. The project was not self- contained; it provided partial financing for an on-going-government program which changed considerably during implementation and over which the Bank had little influence. When the project was closed in 1976, the project differed so greatly from appraisal that Loan 418-PE had virtually financed a project which had never been appraised. In spite of the project's poor reputation during implementation, the project has generally achieved its basic goals, but in unforeseen ways and much later than anticipated. The PPAR issued in January 1978 recognized that the economic and social impact of the project was not negligible and the project had especially benefited the very poor even though this was not intended at appraisal. 8.03 Since completion, the project has remained subject to external pressures and unpredictable events: new inflows of population, squatter encroachment, progressive disintegration of production cooperatives, increas- ing competition for land and water and decreasing government support all constituted potential threats for the future of the project. The most strik- ing feature of the project during the past five years was the establishment - 26 - of strong and efficient farmer organizations. These farmer organizations were able to organize themselves, to cope with the increasing difficulties and to maintain satisfactory living standards and security for all settlers. Such a success might well be the most notable accomplishment of the project; although it was not predicted, nor predictable, at appraisal it shows that the settle- ment objective of the project has been properly achieved. The project today is a remarkable example of the way farmers can progressively and successfully take over project responsibilities and substitute for government institutions once a project is completed; it also demonstrates the need to anticipate and prepare during project implementation for such a transition of project authority. 8.04 The social impact of the two Bank projects can be considered higher today than it was five years ago, since the number of beneficiaries of the San Lorenzo system area increased by about 25% and now stands at about 74,000 people. The economic impact of the project remains satisfactory but agricul- tural production is curtailed by water shortages due to the expansion of the project area and poor maintenance of the irrigation infrastructure. Neverthe- less, incomes of all farmers are substantially above alternative income opportunities in agriculture. Development of fruit-processing industries can also be considered an important indirect benefit of the project since the Bank contributed to the financing of fruit-tree plantations through agricultural credit to settlers. 8.05 Scarce and unreliable water availability, as well as insufficient agricultural research and extension remain the major problems of the project. This is a shortcoming going back to the appraisal which was also insufficient in its analysis of water availability and drainage requirements, and suffered from lack of attention given to agricultural development. The high agricul- tural potential of the project area and the dynamism of its farmers indicate that additional investments and technical assistance should be considered, in support of the self-governing and self-financing farmer associations. Appendix 1 Page 1 BORROWER' S C024ENTS REPUBLIC OF PERU 0ORPORACION DEPARTME2TAL DE DESARROLLO DE PIURA (CORPIURA) Piura March 25, 1982 Our Ref: No. O445-82/ORN-PC Mr. Shiv S. Kapur Director Operations Evaluation Department World Bank Washington,D.C. Dear Mr. Kapur: Subject: Your letter of February 17, 1982 Thank you for the abovementioned letter, which accompanied the Bank's PPAR on the San Lorenzo Irrigation and Land Settlement Project. With regard to that document, I am forwarding herewith a memorandum which your Department might take into consideration. Yours, etc. /s/ Luis Zegarra Camminati President, CORPIURA Chief, ORDENORTE - 28 - Appendix 1 Page 2 MEMORANDUM CONCERNING TE PROJECT PERFORMANCE AUDIT REPORT ON THE SAN LORENZO IRRIGATION AND LAND SETTLEMENT PROJECT (LOAN AGREEMENT NO. 418-PE) The San Lorenzo Irrigation and Land Settlement Project (Loan 18-PE), financed by the World Bank, has brought undoubted economic and social benefits to Piura Department as a whole. Nevertheless, there are reasons to expand the evaluation the Project Performance Audit Report from the Bank's Operations Evaluation Department gives of the settlers' organization established to deal with the problems that arise in maintaining irrigation infrastructure in the Valley. Although it is clear that one of the successes of the Project was the creation of a sound user organization which displays "a noteworthy sense of discipline, efficiency and self-help," there is no escaping the problems that do in fact jeopardize the continuing soundness of that assocation. In Peru, the administrative system for collecting water charges is centralized. In other words, payments made by users are transmitted by Banco de la Nacion to the Treasury. Through the annual budget, the Treasury in turn channels the funds required for maintenance of.irrigation infrastructure via the Ministry of Agriculture's Directorate-General of Water Resources.. The user associations do not administer the funds they collect, and as a general rule the Treasury fails to allocate what they regard as necessary for proper maintenance of the infrastructure which concerns them. The Government's recurrent budgetary difficulties invariably lead to paring of those budget categories in the public investment program which lack political significance. Funds for the maintenance of irrigation infrastructure are the most vulnerable to cutbacks of this type. For their part, the settlers -- and, indeed, farmers in general - regard water charges as a tax from which they derive no direct benefit. They are therefore opposed to any increase in the size of the tax, so that the value of the revenue collected declines increasingly. Furthermore, the interruptions to irrigation infrastructure maintenance - 29 - Appendix 1 Page 3 continually exacerbate the p-oblem - to the point vhere the efforts of users alone are insignificant by comparison with the total cost of the-works that have become-necessary. For 1982, ORDENORTE had to obtain almost S/. 600 million from the Treasury before it could embark on irrigation system maintenance in San Lorenzo, despite the fact this allocation represents a glaring imbalance in favor of Piura Department in the assignment of development resources among the provinces. It is therefore desirable that the World Bank consider the importance of developing decentralized modes of administering irrigation infrastructure works, as vell as the possibility of entering into agreements for loans with the decentralized development agencies now operating in Peru. We also regard as highly important an examination of the possibilities of providing new credit funds to finance effective technical assistance for farmers in the Valley. -30 - Annex Table 1 DEVELOPMENT OF THE CHIRA PIURA SYSTEM e9¥a e, Ot¢er .. tei t . - 31 - Annex Table2 DEVELOPMENT OF THE CHIRA PIURA SYSTEM O,M449"t 3. ~1ftt41"i a4*. ·P<rgiorr Srn*rnou (9. J9, les.face <.sesa IMPACT EVALUATION REPORT PERU: SAN LORENZO IRRIGATION AND LAND SETTLEMENT PROJECT (LOAN 418-PE) MAIN EVENTS Development Stage Year Event Comment ( 1937 Study of the Quiroz Diversion Project; Diversion to transfer water from Chi&r to Piura river basins. Stage I ( 1948-1956 Construction of Quiroz Diversion Project; Stage II 1955-1958 Construction of San Lorenzo Dam and Partly financed by Loan 114-PE. infrastructure; ( 1961 Start of the Colonization Phase; ( 1963 'General Preparation Plan' produced by ( San Lorenzo management; ( 1965 Appraisal of Loan 418-PE; Serious loss of cotton crop due to storm damage. ( Nov. 1966 Date of Effectiveness of Loan; 1965-66 very low water years. ( Jan. 1967 Memorandum of Understanding; Reassessment of water availability and project objectives. W ( Dec. 1967 Original Closing Date (extended); N ( Mar. 1968 Renegotiation of Loan 418-PE; Agrarian Reform Law; Loan reduced to US$6.5 million. ( Project became operational (under Zona Agraria 1); Basic changes to socio/political objectives. Mar. 1969 Completion of Drainage Report; Bank involvement ended in components which directly Stage III ( June 1969 Suspension of Disbursements; contributed to settlement or development. ( Nov. 1970 Decision to treat Drainage component as a 'special technical project'; ( Mar. 1971 Comprehensive plan agreed for Drainage ( Project; June 1972 Start of construction of Poechos dam on river Chira; Chira-Piura Diversion Project; First Stage; ( May 1973 Start of construction of drainage; ( June 1973 Revised Closing Date (extended); ( June 1976 Loan 418-PE Closed; Dec. 1976 Estimated completion of Phase I of Drainage; ( Dec. 1976 Completion of main works, Chira Piura Diversion Project, First Stage; Feb. 1977 FAO/CP preparation mission; Lower Piura Rehabilitation ( and Drainage Project (Irrigation Rehabilitation II). - 33 - ANNEX 3 .Table 1 IMPACT EVALUATION REPORT PERU: SAN LORENTO IRRIGATION AND LAND SETTLEMENT PROJECT (LOAN 418-PE) COST ESTIMATE AT APPRAISAL (US$ million) Allocation of Re-allocation of Cost Funds (Appraisal Funds Before Date Category Item Estimate Report) of Effectiveness/b A. O&M Land Development and Road Equipment 7.85 1.25 1.20 B. Drainage and Ancillary Works 1.25 1.25 0.90 C. Technical Services, Facilities and Equipment 3.70 1.07 1.00 D. Basin Study/a 0.60 0.60 0.60 E. On-farm Investments (Medium- Long-term Agricultural Credit 12.60 6.78 6.80 F. Unallocated - - 0.50 Sub-total 26.00 lo.95L 11.00 G. Administration 4.40 Total 30.40Ld /a The costs of the Basin Study are not considered part of San Lorenzo project although financed through Loan 418-PE. /b The change took place between April and November 1965. /c Taken from the Appraisal Report (Annex 4); the US$0.05 million difference from the US$11.0 million loan amount occurred after appraisal. /d No contingency items were included in the cost estimate. an Lorenso: Contribution of Loen 418-PE to Gross Medium- and l"n--Term Lending in the Project Area -mn solen _Jag of 1975eg min sole& ..... of 1975- ------ - £i44w - 5 ne5 _n t - - - - - _ - - -- - _4 - - - -1" L ° _ - -.. c - Iae een- -ero UO.sa- -- 114fl ___ -I--- ihT. V ANNEX 3 IMPACT EVALUATION REPORT PERU; SAN LOR.NZb IRRICATION AND LAND SETTLEMENT PROJECT (LOAN 418-PE) DISBURSEMENTS BY YEARS (US$ '000) Category A B C D. E COPeration 6 !aintenance n_j .... /a T-nsn i-)A.i...r./b Rnin Aerriulural Description Equipment Works and Facilities Program Credit UnallocatedL. Totale Original amount allocated 1,200 900 1,000 600 6,800 500 11,000 Amount allocated at renegotiation (1968) 956 377 1,018 948 2,900 301 6,500 Amount diupersed by years 1965 - - - 1 - - 1 1966 83 - 430 8 399 - 920 1967 45 - 193 219 1,002 - 1,450 1968 1 - 245 633 428 - 1,397 1969 - -8 226 836 - 1,070 1970 - - - - r971 - - 1972 45L . - - - 45 1973 541 271 - - - 812 1974 344 15 - - - 359 1975 386 - - - 386 1976 63 - - - - 78 41 Total Actual Disbursements 1,508 286 876 1,087 2,665 7 6,500 /a After 1974, categories A and b were dispersed isnder category A only. lb The Drainage Study accounted for US$0.34 million. c Unallocated funds were used for Category A and 0. /d Disburbed December 12, 1972. /e Undisbursed at closure, June 30, 1976. - 36 - ANNEX 4 Table 1 IMPACT EVALUATION REPORT PERU: SAN LORENZO IRRIGATION AND LAND SETTLEMENT PROJECT (LOAN 418-PE) CUMULATIVE AREA SOLD (ha) Individual Collective Total No. Farms/ Year Number Area No. Families Area Number Area 1961 103 706 - - 103 706 1962 450 7,385 - - 450 7,385 1963 754 13,840 - - 754 13,840 1964 951 16,688 - - 951 16,688 1965 1,130 19,862 - - 1,130 19,862 19661a 1,302 23,248 - - 1,302 23,248 1967 1,287 22,321 - - 1,287 22,321 1968-1 1,284 21,763 - - 1,284 21,763 1969L-. 1,273 20,716 10 / 1,096 4,402 2,369 25,118 1970 1,288 21,632 30 / 1,687 6,785 2,975 28,417 1971 1,294 21,635 42 / 1,795 7,238 3,089 28,873 1972 1,293 21,599 42 / 1,795 7,238 3,088 28,837 1973 1,291 21,087 42 / 1,795 7,238 3,086 28,325 1974 1,279 20,165 42 / 1,795 7,4-36 3,126 27,601 1975 1,292 19,935 47 / 1,847 7,654 3,180 27,589 1976 1,280 19,014 56 / 1,888 7,577 3,148 26,591 1977 1,291 19,123 53 / 1,8681c 7,577 3,159 26,700 1978 1,314 19,313 53 / 1,86&/c 7,577 8,182 26,890 1979 1,336 19,485 53 / 1,868/c- 7,577 3,204 27,062 1980 1,357 19,796 53 / 1,86/c 7,577 3,225 27,373 1981 1,388 20,032 53 / 1,868/c 7,577 3,256 27,609 /a Up to November of each year. /b Up to March 1970. /c No statistics are available but the mission estimates 30% less. IMPACT EVALUATION REPORT PERU: SAN LORENZO IRRIGATION AND LAND SETTLEMENT PROJECT (LOAN 418-PE) WATER AVAILABILITY AND USE (in Million m3 rounded) INFLOW DISTRIBUTION Including Reservoir Operation Total Available Calendar Diverted from Inflow Chipillico San Lorenzo Lower Piura Chipillico TOTAL through Lower Year quiroz River River TOTAL Project Valley Valley Distribution Rio Plura Plura Valley 1 2 3(1+2) 4 % 5 % 6 % 7 8 9 (5+8) 195 212 154 366 NA - 212 - HK - - 530 742 1958 424 111 535 NA - 423 - NK - - 457 880 1959 460 59 519 NA - 178 - NK - - 408 586 1960 501 57 558 64 12 427 70 101 18 558 65 493 1961 507 40 547 46 10 278 72 65 14 476 87 365 1962 666 50 716 124 18 441 75 49 7 689 75 516 1963 474 27 501 151 29 331 64 38 9 524 4 335 1964 476 20 496 251 45 279 50 23 4 553 - 279 1965 484 93 577 234 45 250 49 31 6 515 411 661 1966 421 38 459 332 47 343 49 30 4 705L 25 368 1967 491 33 524 290 58 186 37 23 5 499 81 267 1968 338 4 342 187 51 167 45 13 4 367 - 167 1969 371 21 392 241 59 155 38 12 3 408 94 249 1970 688 16 704 292 50 275 47 20 3 587 - 275 1971/a 619 36 455 335 58 244 42 NA - 579 70 314 1972 346 7 353 283 47 316 53 NA - 599 207 523 1973 273 115 388 315 47 349 53 NA - 664 279 628 1974 593 28 621 331 52 304 48 NA - 635 32 332 1975 619 84 703 333 38 549 62 NA - 881 214 763 1976 430 113 543 478 81 112 19 NA - 590 325 437 1977 578 79 657 538 84 104 16 NA - 642 54 158 1978 403 22 425 393 88 55 12 NA - 448 45 100 1979 405 31 436 442 93 33 7 NA - 475 35 68 1980 380 11 391 358 93 26 7 NA - 384 28 54 198t/b 443 29 472 266 94 19 6 NA - 305 32 51 ) /a From August 1971, the distribution of the valles of Chipillico and San Lorenzo were treated as a single unit. te 5 /b The 1981 figure is until July 1981. - 38 - ANNEX 4 Table 3 IMPACT EVALUATION REPORT PERU: SAN LORENZO IRRIGATION AND LAND SETTLEMENT PROJECT (LOAN 418-PE) SIZE DISTRIBUTION OF INDIVIDUAL HOLDINGS (AUGUST 15, 1981) Districts: San Isidro, Partidor, Malingas, Hualtaco, Somate and Algarrobo No. of Accumulative Net Area Accumulative Size Settlers % % % % % Up to 8.0 529 38 38 3,495 17 17 8.1 - 13.0 338 24 62 3,557 18 35 13.1 - 20.0 315 23 85 5,059 25 60 20.1 - 40.0 126 9 94 3,437 17 77 40.1 - 60.0 56 4 98 2,801 14 91 60.1 - 80.0 24 2 100 1,683 9 100 Total 12388 100 20,032 NOTE: Holdings owned by schools and former proprietors are not included. IMPACT EVALUATION REPORT PERU: SAN LORENZO IRRIGATION AND LAND SETTLEMENT PROJECT (LOAN 418-PE) SIZE DISTRIBUTION OF COOPERATIVES (AUGUST 15, 1981) Subzones: San Isidro, Partidor, Malingas, Hualtaco, Somate and Algarrobo Number of Number of Accumulative Net Area Accumulative I- Size (ha) Cooperatives MembersL x X (ha) z % Up to 13.0 - - - - - - 13.1 - 20.0 3 11 1 1 49 1 1 20.1 - 40.0 17 106 6 7 463 6 7 40.1 - 60.0 10 113 6 13 480 6 13 60.1 - 80.0 7 117 6 19 479 6 19 80.1 - 100.0 - - - - - - - 100.1 - 200.0 4 157 8 27 633 8 27 200.1 - 300.0 3 171 9 36 687 9 36 300.1 - 400.0 1 95 5 41 380 5 41 400.1 - 500.0 3 334 18 59 1,344 18 59 500.1 - 600.0 2 291 16 75 1,167 16 75 600.1 - 700.0 3 473 25 100 1,895 25 100 Total 53 1,868 100 7,577 100 /a Official cooperative membership. (Actual membership is estimated to be 30% lower). SIZE DISTRIBUTION OF COOPERATIVES (August 15, 1981) SUB-ZONES: VALLE DE LOS INCAS AND VALLE HERMOSO Number of Number of % Net Size Cooperatives Members Accumulative Area Accumulative Up to 60.0 - - - 60.1 - 80.0 3 47 3 3 180 3 3 80.1 -100.0 - - a 100.1 -120.0 2 60 4 7 230 4 7 120.1 -140.0 1 34 2 9 127 2 10.1 -160.0 2 91 7 16 291 5 11 160.1 -180.0 -- 180.1 -200.0 7 323 23 39 1,385 23 37 200.1 -220.0 11 553 40 79 2,297 39 76 220.1 -240.0 5 243 18 97 1,156 20 96 240.1 -260.0 1 39 3 100 241 4 300 T 0 TAL 32 1,390 100 5,907 100 - - 41 - ANNEX 4 Table 6 IMPACT EVALUATION REPORT PERU: SAN LORENZO IRRIGATION AND LAND SETTLEMENT PROJECT (LOAN 418-PE) REPAYMENT OF LAND COSTS (Soles million) Individual Cooperative Total at Settlers Association 12/31/80 Down payment 18.4 - 18.4 Installments 153.0 39.3/a 192.3 Total paid 171.4 39.3 210.7 Arrears 30.3 19.5/b 49.8 Payment not yet due 236.1 175.5 411.6 Total outstanding 266.4 195.0 461.4 Total original debt 437.8 234.31C 672.1 /a Of which SI. 6.5 million for Valle de los Incas and Valle Hermoso. /b Of which S/. 2.8 million for Valle de los Incas and Valle Hermoso. /c Of which SI. 94.3 million for Valle de los Incas and Valle Hermoso. - 4Z - ANNEX 4 Table 7 IMPACT EVALUATION REPORT PERU: SAN LORENZO IRRIGATION AND LAND SETTLEMENT PROJECT (LOAN 418-PE) CULTIVATED AREA BETWEEN 1971 AND 1980 CULTIVATED AREA (Thousands of HAs) Valle de los San Lorenzo Incas and Valle Year Original /a Hermoso Total 1971 22.9 22.9 1972 20.8 20.8 1973 25.5 25.5 1974 23.4 n.a. 23.4 1975 21.8 n.a. 21.8 1976 19.7 5.6 25.3 1977 19.6 5.0 24.6 1978 16.1 3.4 19.5 1979 17.5 3.7 21.2 1980 18.0 2.7 20.6 Average: 1971-75 22.8 22.8 1976-80 18.2 22.2 /a Sub-zones of San Isidro, Partidor, Malingas, Hualtaco, Somate and Algarrobo. гиrЛст еvЛ�илттои енеоат PB6Us SЛN 1ARENZO IHaICAT10N AND LAND SBTTLENENi PBOJBCT (LOAN 418-РВ) CULTIVATED ААЕА 8У CHOPS, 1962-80 (НЛ) ANNUAL СНОР3 PsUIiS Уеаг ТоСя1 1bca1 TotQ Си1- Со[[on R1ce Иа1zе Sorдhum Веепв Уиса Onionв nr,hnro (`тnпа �g..e_. в-_.... м_�.._ .....__,_ л..___ -_ _ - - - - - ..- - - л.• .w.в saiiвii �ввьiiУвв ci�dL00 ArOi 1962 1,000 - 500 - 100 - - - 1.600 - З З 6 10 22 20 1,642 196Э 2.500 ЭОО 1,000 - 200 150 30 ' S0 4,230 14 14 8 14 20 70 20 4,ц0 1 1964 6,782 465 987 - 351 402 161 888 1U,036 112 80 80 122 1Э0 467 2Эб 10,7Э9 �. 1965 11.641 - 1.240 - 411 872 254 259 14,672 152 249 249 218 123 8Э7 287 15.796 w 1966 9,744 620 3.355 - 359 600 �424 61Э 15,715 277 272 272 265 286 1,272 Э01 17,288 � 1967 10.605 686 2,161 - 1,724 431 431 211 16,255 669 381 381 Эб1 Э01 1,946 446 18,647 1968 6,ЭЬ2 1,112 1,727 - 451 211 280 186 10,ЭЭ1 1,019 399 Э99 462 251 2.Э97 262 12,990 1969 10,195 1,470 1,Э8Э - 840 120 2Э4 715 14,957 1,649 488 488 575 '2Э9 Э.482 Э71 18,810 1970 9,530 2,625 2,Э98 1,110 419 84 l65 810 i7,141 1,754 574 502 601 24S З,б76 50S 21,Э22 1911 9,868 4,6Э4 1,8Э7 470 458 194 218 840 18,519 1,913 68В 527 646 2ЭЭ 4,007 Э29 22,8SS 1972 7,910 2,441 Э,236 7Э8 296 154 246 944 1:,955 2,228 831 589 699 201 4,548 Э41 20,844 197Э 10,076 4,196 4,227 106 622 292 236 76 19,196 2,886 ВЭ4 65У 612 180 3,171 S00 25,461 1974 14,969 1,497 1,105 35 121 100 117 95 18,039 3,069 827 576 566 l54 5,192 188 2Э,419 1975 8,9Э9 2,859 3.489 - 228 96 114 67 15,792 Э,Э48 972 632 612 155 5,719 289 21,800 1976 3,656 4,454 3,968 - 135 42 27 256 12,538 3,161 2,082 466 S39 253 7,032 171 19.741 1977 3,404 4,591 4,Э43 - 79 8 29 76 12,530 Э.052 2,082 466 5З4 251 6,916 144 19.590 1978 2.004 4,840 2,092 214 70 91 1 94 9,406 2,792 1,954 466 S28 2Э4 6,504 238 16,148 1979 2,021 4,592 З,896 - 69 14 9 99 10,700 2,79Э 1,968 41В 529 219 � 6.480 Збб 17.526 1980 1,957 4,482 Э,158 - 14В 49 17 59 9,870 2,914 3.029 414 528 21Э 7,615 484 17,969 Ф е о' р h+ Ф N Р1 оо � IMPACT EVALUATION REPORT PERU: SAN LORENZO IRRIGATION AND LAND SETTLEMENT PROJECT N 418-PE) CULTIVATED AREA, 1976-80 'SUB-ZONES. VALIZ DE WS INCAS AND VALLS HERMOSO (HA) ANNUAL CROPS FRUITS Sub- Year Cotton RIce !! It z e Sorghum Beans Yuca Onions Others Total Ntn&o Lemon Orange Avocado Banana Others Total Pastures TOTAL 1976 2.619 1,523 4 4 10 31 20 4,211 830 520 - - - - 1,340 - 5,551 1 1977 2,376 1,210 4 7 - 26 10 3.633 824 510 - - - - 1,334 - 4,967 lp 1978 1,520 425 80 16 - - 7 2,048 814 510 - - - - 1,324 - 3,372 .0- 1979 1,680 618 3 3 - 4 12 2,320 814 520 - - - - 1,334 - 3,654 1980 1.180 148 - 10 1 8 - 1.273 799 578 - - - - 1,377 - 2,652 "Owl IMPACT EVALUATION REPORT PERU: SAN LORENZO IRRIGATION AND LAND SETTLBMENT PROJECT (LOAN 418-PE) CULTIVATED AREA, 1976-80' SQUATTER SUB-ZONES: CANAL QUIROZ AND QUEBRADA TOTORAL (HA) ANNUAL CROPS FRUITS Sub- Year Cotton Rice Maize Sorghum Beane Tuca Onions Others Total Mango -Lemon Orange Avocado Banana Others Total Pastures TOTAL 1976 - 597 282 - 1 233 - 81 1,194 60 18 - - 56 68 202 50 1,446 1977 - 615 150 - - 85 - 28 878 60 18 - - 56 68 202 50 1,130 1978 - 636 217 180 - 138 - 19 1,190 60 18 - - 56 58 192 50 1,432 1979 - 674 235 - - - - 25 934 60 18 - - 56 56 190 50 1,174 1980 - 780 140 72 - 85 - 39 1,116 60 18 - - 56 52 186 50 1,352w * M 0* & IMPACT YVAIAIATION REPORT PERUs SAN LORENZO IRRIGATION AND LAND SETTLEMENT PROJECT (LOAN 418-PE) TOTAL CULTIVATED AREA, 1976-80 (SUMMARY OF TABLES 8, 9 AND 10) (11A) ANNUAL CROPS FRUITS Sub- Sub- Year Cotton Rice MaIze Sorghum Beans Yuca Onions Others Total Mango Lemon Orange Avocado Banana Others Total Patures TOTAL 1976 6,275 5,051 5,773 4 140 285 58 357 17,943 4,051 2,610 466 539 587 321 8,574 221 26,738 1977 5,780 3,206 5,703 4 86 93 55 114 17,041 3,936 2,610 466 534 587 319 8,452 194 25,687 1978 3,524 5,476 2,734 474 86 229 1 120 12,644 3.666 2,482 464 528 588 292 8,020 288 20,952 1979 3,701 5,266 4,749 3 72 14 13 136 13,954 3,667 2,506 418 529 609 275 8,004 396 22,354 an 1980 3,065 5,262 3,446 72 158 135 25 98 12,261 3,773 3,625 414 528 573 265 9,178 534 21,973 a 1- 5J - 47 - ANNEX 4 Table 12 IMPACT EVALUATION REPORT PERU: SAN LORENZO IRRIGATION AND LAND SETTLEMENT PROJECT (LOAN 418-PE) Estimated Gross Family Income, 1980 ('000 Soles, 1980 Terms) Type of Coop,rative Smallholder Medium-Size Farmer Farmer: Member (0-8 ha) (8-40 ha) (40-80 ha) Squatter No. of Farmers 2,740 529 779 80 1,171 in Group: Average Size: 5 ha 6.6 ha 16 ha 56 ha 1.7 ha G.V.P.A 1,521.0 2,007.7 4.867.2 17,035.2 517.1 Inputs/b 768.0 1,013.8 2,457.6 8,601.6- 261.1 Hired Labor/C - 14.0 760.4 3,936.4 - Total Production Cost 768.0 1,027.8 3,218.0 12,538.0 261.1 Gross Income 753.0 979.9 1,649.2 4,497.2 256.0 Estimated Alternative 191.3 191.3 191.3 Income/d Difference 561.7 788.6 64.9 /a Estimated at S/.304,200 per ha for all farms. /b Estimated at S/.153,600 per ha for all farms. /c Assuming the farmer's family can provide up to 50 work days per month. /d Assuming 225 work days.per year at official wage rate (S/.850 per day). 【’&i [:；∥’^．여vf긔 ［기 SAN IORENZO PR0IECT �' � � � iако-iвэzо _ • _ ''�-� ECUADOR ►Еваиадr юе2 \ Р`, �� -_`�� � . 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