Peru - Chanchamayo - Satipo Rural Development Project

Document of The World Bank FOR OFFICLAL USE ONLY Report No. 10809 PROJECT COMPLETION REPORT PERU CHANCHAMAYO-SATIPO RURAL DEVELOPMENT PROJECT (LOAN 2396-PE) JUNE 30, 1992 Agriculture Operations Division Country Department I Latin America and the Caribbean Regional Office 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.  CURRENCY EOUIVALENTS Currency Units Up to 12/1985: Peruvian Soles (S/.) From 01/86 to 12/90: Intis (I/. 1.00 SI. 1,000.00) From 01/1991: Nuevos Soles (NS/. 1.00 = I/. 1.0 million) Exchange rate at appraisal USS 1.00 = S/. 2,070 S/. 1,000 = US$ 0.48 Exchange Rates during Implementation (yearly averages): Year Intis/ USS (*) 1983 2,070 1984 3.467 1985 10.980 1986 13.950 1987 16.840 1988 128.830 1989 2,666.190 1990 187,885.630 (*) Inti equivalents per US dollar (official market). GLOSSARY OF ACRONYMS BAP Agrarian Bank of Peru ED Executive Directorate ERR Economic Rate of Return GDP Gross Domesttc Product GOP Government of Peru IDB Inter-American Development Bank INADE National Development Institute INFOR National Forestry Institute INIPA National Institute for Agricultural Research and Extension MTC Ministry of Transport and Conmunication PCR Project Completion Report PDRCS Chanchamayo-Satipo Rural Development Project PEPP Pinchis-Palcazu Special Project PROCOMPRA Semiautonomous Agricultural Marketing Agency SAR Staff Appraisal Report USAID United States Agency for International Development  F)R OFFICUIL USE ONLY THE WOR'D BANK Washington, D.C. 20433 U.S.A. Office of Director-Generai Operations Evaluation June 30, 1992 MEMORANDUM TO THE EXECUTIVE DIRECTORS AND THE PRESIDENT SUBJECT: Project Completion Report on PERU Chanchamavo-Satipo Rural Development Prolect (Ln. 2396-PE) Attached, for information, is a copy of a report entitled "Project Completion Report on PERU - Chanchamayo-Satipo Rural Development Project (Loan 2396-PE)" prepared by the Latin America and the Caribbean Regional Office. 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 PROJECT COMPLETION RFPORT PERU CHNCMMYO-SATIPO RVRAL DAVELOPMEN. PROJECT (Lo&an2396-PEI TABLE MOFCONTENTS PREFACE ...........................j... . . . . . . . . . . . . . . . EVALUATIONSUIERRY .......................... iii PARTI: PROJZCTRVIEW FROMBANK'S PERSPECTIVE .... . . . . . . 1 Project Identity. . ..1. . Background .....1.......... l Project Objectives and Deucription .. .. . 2 Project Design and Organization ........ . . . . ..... 3 Project Implementation ........... . . . . .... . 3 Project Results .i .............. . . . . .... . 5 Project Sustainability. . . ...... . 6 BankPerformance .............. . . . . ..... 6 BorrowerPerformance ............ . . . . .... . 6 Project Relationship ... . . . . . . . . . .... . 7 Consulting Services ............. . . . . .... . 7 Project Documentation and Data ........ . . . . ..... 7 PART II: PROJECT REVIEW FROM THE BORROWER'S PIRSPECTIVE ... . . . . . . 9 PART I1l1 STATISTICAL INFORMATION .. . .1.1............... . ll Table 1 - Related Bank Loans ..1.1.............. . ll Table2-ProjectTimetable . . . .1.2............. . 12 Table 3 - Loan Disbursements ..1.2.............. . 12 Table 4 - Key Project Implementation Indicators . .1.3..... . 13 Table 5 - Project Cost and Financing ..1.5.......... . l5 Table 6 - Project Results ..1.7................ . 17 Table 7 - Compliance with Loan Covenants . . ..... . 18 Table8-Useof BankResources .1.9.............. . 19 This document has a restricted distribution and may be used by recipients only inthe performance of their official du,ies Its contents maynot otherwise be disclosed without World Bankauthorization.  - i - PROJECT COMPLETION REPORT PERU CHANCHAMAYO-SATIPO RURAL DEVELOPMENT PROJECT (Loan 2396-PE) PREFACE This is the Project Completion Report (PCR) for the Chanchamayo-Satipo Rural Development Project (PDRCS) in Peru, for which Loan 2396-PE of US$40.0 million was approved on March 27, 1984, and became effective on August 9, 1984. The Bank Loan was suspended on May 12, 1987, and closed on June 30, 1990. The final disbursement was on July 15, 1987. Some US$7.2 million was disbursed and US$32.8 million was cancelled. The PCR (ES, Parts I and III) was prepared by the FAO/IBRD Cooperative Program on behalf of the Agricultural OperaLions Division, Latin America Country Depa:rtment I. Part II, although requested, has not been received from the Borrower. Parts I and III are based on the Staff Appraisal Report, the Loan Agreement, the President's Report, Supervision Reports, correspondejnce between the Bank and the Borrower, internal Bank Memoranda, the Project's Financial Statements and Audit Reports and Progress Reports prepared by the Borrower. For security reasons, the PCR mission was not able to visit the project area, and therefore could not confirm the validity of the information recorded on implementation achievements.  - iii - PROJECT COMPLETION REPORT PERU CHAICHAMAYO-SATIrO RURAL DEVELOPMENT PROJECT (Loan 2396-PE) EVALUATION SUMMARY Obiectives 1. The principal objective of the project was to increase agricultural and forestry production in the Chanchamayo-Satipo area of the central Peruvian jung:e highlands east of Lima. The project aimed at improving productivity, income and living conditions for about 20,000 families, including 2,000 native Akerindian families, in the area. Principal compo.._nts of the project were: (a) provision of extension, credit and other agricultural support services - including marketing; (b) improvement of about 427 km of rural roads and provision of associated maintenance equipment; (c) provision of land titles; (d) improvement of forestry management; (e) assistance for native communities; and (f) support for project management, studies and technical assistance in various fields. Implementation Experience 2. The project became effective in August 1984. Initial implementation progress was very slow due mainly to local funding constraints. Project progress improved in late 1986 but slowed after May 1987 when the Bank suspended all loan disbursements to Peru due to non-payment of the debt service. As a result only US$7.2 million out of a total loan of US$40 million were disbursed. The Government, however, continued tc support the project by providing US$7.8 million which were mostly used to continue payment of staff salaries. Investments remained very limited. 3. The main problem in project implementation was the failure of the Banco Agrario (BAP) to disburse credit to participating farmers. Although the required agreement between the BAP and the Executive Directorate (ED) of the project became effective in 1984, only one percent of the targeted loan amount of US$20.6 million w1s disbursed. This was due mainly to financial constraints, as BAP had d .fficulties in obtaining the required funds from Treasury, but possibly also due to farmers' eligibility problems. As provision of credit was an important element of the development strategy to rehabilitate, expand and intensify perennial and annual crop plantings, the failure to implement this component heavily constrained all other production or.ented efforts, in particular those of extension and research. 4. Besides these key constraints, implementation was further hampered by guerilla incursions after 1988 and illegal forest clearing by coca planters. The  - iv - deteriorating security situation not only affected farming activities but also hampered project monitoring and supervision. Pro-ect Reou .s 5. Due to inadequate project monitoring no reliable agriculture and forestry production data aro available. Indications, however, are that only fractions of the SAR targets were achieved, as was to be expected giveon the fact that the project was not completed. The project's main objective, namely to increase crop production, was met only to a l4mited extent. As a result of this and because of guerilla activities and intensified forest clearing by coca planters, the project did little to improve the nutritional situation of the native communities in the project area and to control deforestation. Isolated achievements such as limited improvement to infrastructure, land titling, the organization of farmers, market committees and the promotion of "chacras integrales" (integrated farming systems) are noteworthy but of little significance in face of the overall lack of results. At appraisal the economic rate of return (ERR) was estimated at over 18%, based only on quantifiable benefits from incremental crop and forest production. As only less than 20% of the loan was disbursed and benefits could not be quantified, no attempt was made to re-estimate the ERR. SustainL"ilitv 6. The implementation experience has demonstrated that under the prevailing socio-economic anC political situation, even basic agricultural services such as extension and research cannot be sustained. Unless a specific effort is made by Government, even the limited development achievements of the project will be lost. This applies especially to roads, bridges, buildings and water supply systems which are already affected by lack of maintenance and repairs. Findinos and Lessons Learned 7. Owing to the drastically reduced disbursement and weak mon.itoring, findings and lessons are rather limited. The need for a project of this kind was unquestionable and in general the project appears to have been well designed, responding to the development needs of the area. It could not have been foreseen at appraisal that the socio-economic and political circumstances would deteriorate to a level which effectively prevented project implementation. It emerges very clearly, however, that the institutional and operational arrangements for the channelling of credit to farmers were not sufficiently well defined to allow an appropriate flow of funds. As the successful achievement of the main objectives of the project hinged on the availability of farm credit, its provision should have been more forcefully pursued by the Bank at an early stage. The main lesson learned from project implementation is that whenever a project depends exclusively on non- loan sources for the financing of essential components, firm agreements on the provision of such funds have to be in place at start-up, with advance funding already earmarked.  PROJECT COMPLETION REPORT PERU CHANCHAMAYO-SATIPO RURAL DEVELOPMENT PROJECT (Loan 2396-PE) PART I. PROJECT REVIEW FROM BANK'S PERSPECTIVE 1. Pro-ect Identity - Project Name: Chanchamayo-Satipo Rural Development Project - Loan No.: 2396-PE - RVP Unit: Latin America and the Caribbean Agriculture Division - Country: Peru - Sector: Agriculture 2. Background 2.1. The agricultural sector in Peru suffered a major decline during the 1970s. While the population grew by 2.8% p.a. (4.1% in the urban areas), agricultural production decreased by 0.6% p.a. in real terms, food imports increased by 20% over the decade, while agricultural exports plunged by 78% and agricultural GDP fell from 15% of the total in 1970 to 11% in 1982. This was due partly to severe droughts between 1970 and 1980, but mainly because of adverse Government policies which included a sweeping land reform, inadequate agricultural input and output pricing policies, imposition of an inefficient state-run marketing system, insufficient credit, deficient extension and research support, and the concentration of public investment in large-scale coastal irrigation projects with very long gestation periods. 2.2. By the late 1970s, the military Government had recognized the gravity of the problems and began introducing measures to reverse this trend. This effort was accelerated by the Belaunde Government from 1980 on, and included, among others, the elimination of consumer subsidies; increased farmgate prices; the strengthening of credit and support services; provision of investment incentives; and the privatization of import, export and marketing of most agricultural inputs and products. While the impact of these measures resulted in a 14% growth of ayricultural output between 1980 and 1982, it was clear that further growth would be constrained Dy the limited resource base in Peru's traditional production areas, namely the Costa and the Sierra, and that further expansion would only be possible by developing the Ceja de Selva with its 4.5 million km2 of fertile lands, of which only 0.6 million km2 are being exploited. The development of this area was declared first priority and four projects, two in the Mayo Valley in Northern Peru and two in the Selva Central, east of Lima, were launched under the responsibility of the National Development Institute (INADE), a cabinet-level agency. The Chanchamayo- Satipo project is located in the Selva Central where INADE'e Pichis-Palcazu office (PEPP) was implementing two other development projects with USAID and IDB assistance.  - 2- 3. Project Obiectives and Description 3.1. The Chanchamayo-Satipo Rural Development Project (PDRCS) was the second Bank assisted rural development project in the Ceja de Selva, after the Alto Mayo project which had been approved in March 1983. The project area included 730,000 ha of valleys ranging from 500-3,000 m above sea level, of which about 400,000 ha were settled land and 330,000 ha were thinly populated steep slopes. Total population was 160,000, of which 80% rural. The project's objectives were to: (i) improve incomes and living conditions for about 20,000 rural families by expanding local agricultural (mainly fruit crops) and forestry production; and (ii) improve the region's infrastructure base. Some 5,500 farming families -- including over 500 Amerindian families -- were to participate direct:y in the agricultural development components, whereas all 20,000 families were expected to benefit from the infrastructure improvements in the area. The project was to coordinate area development so that the physical environment would be protected and local native communities would be incorporated into the development. 3.2. The project included the following main components: (a) an agricultural credit program for the 'irmers in the area; (b) ccnstruction and improvement of access roads and support for the establishment of a road maintenance program; (c) provision of complementary production support activities, including agricultural research and extension services and marketing facilities; (d) strengthening forestry manage,nent and conservation; (e) land titling; (f) improvement of living conditions of the native communities; and (h) support for project management as well as studies and technical assistance. 3.3. Total project cost was estimated at appraisal at US$67.5 million, of wh_ch the Bank loan was to finance US$40.0 million (59%), including US$15.6 million in foreign exchange, front-fee, and US$24.3 million in local costs. The remaining US$27.5 million were to be provided by the Government, the Banco Agrario (BAP) and beneficiaries. Agricultural credit accounted for 31% of project costs; access roads for another 31%; production support services for 16% (research/extension 12% and marketing 4%); forestry 7%; land titling 7%; and project management 6%. Direct support to the native communities accounted for the remaining 2%, but was also included in all the above components. 3.4. INADE was to be responsible for general coordination and direction of the project. PEPP was to be directly responsible for executing all components except for credit, research/extension and forestry, which were to be carried out respectively by BAP, INIPA and INFOR, through formal agreements. A project  management unit in La Merced was to be in charge of day-to-day implementation, while a liaison office in Lima would ensure inter-ministerial coordination. The Ministry of Transport and Communication (MTC) was to assist the project in technical issues concerning road activities. 4. Project Design and Organization 4.1. The project wan qenerally well prepared, its rationale responded to the Government's policy to expand agriculture by developing the Ceja de Selva, and its design translated a concern for development in harmony with a balanced environmental base and with the needs of the numerous tribal communities established in the area. 4.2. The organization and management arrangements were adequately inserted in the existing institutional framewor'. Most project problems are attributable rather to the generally adverse socic-economic condition than to design or management deficiercies. Un cecedented economic recession and inflation, together with serious funding problems, aggravated by the early interruption of Bank financing, hindered normal implementation and achievement of project objectives. These could not have been foreseen at the time of project preparation and appraisal. S. Project Implementation 5.1. The project became effective in August 1984 and its implementation was characterized by a very slow start, due to serious counterpart budget cuts which had also delayed Bank disbursements. An apparent improvement in late 1986 was soon frustrated by the suspension of all Bank loan disbursements to Peru in May 1987 due to non-payment of the debt service. Total loan disbursements amounted to US$7.2 million (18% of the loan) and US$32.8 million was canceled. The Bank loan closed on June 30, 1990, as foreseen. In spite of the suspension of the loan, the Government continued to support the project activities by providing US$7.8 million out of its own budget, which was proportionally far in excess ot the SAR financing plan (see Part III, Table 5B). This allowed the project to continue payment of staff salaries, but investments remained very limited. Besides the curtailing of loan funds, the failure of BAP to provide credit to project farmers seriously reduced their ability to adopt improved production technology (see paras. 5.2 and 5.4). Total actual project costs were about US$15.0 million, equivalent to 22% of SAR estimates. However, in spite of th *e difficulties, the project managed to achieve some results mainly in terms of infrastructure construction and services. Its economic impact is impossible to measure due to lack of reliable data. 5.2. Agricultural credit, although vital for the attainment of SAR production tazgets, was not financed by the loan. It was to be provided by eAP (using Bank Loan 2302-PE and other funds), through a subsidiary agreement which became effective in late 1984. The targets established by the agreement included 4,370 long-term and 770 short-term loans, amounting to US$17.8 and US$2.8 million, respectively. However, while about 3,300 loan requests had been prepared by the project, BAP provided only about US$240,000 (1% of estimates) to project farmers. This was due mainly to funding constraints, as BAP had difficulties in obtaining the expected  -4- amounus from the Treasury. Farmers' lack of eligibtlity and/or creditworthiness may have been another reason. Detailed statistics are not available, but the financing of only 138 ha of coffee rehabilitation and 37 ha of new citrus crops, againnt the expected 14,000 ha and 1,150 h3 respectively, illustrate the poor performance of the PEPP-BAP agreemeat on the provision of credit, which ceased to operate in 1988. 5.3. The marketina component consisted of the const-uction of two fruit packing centers with an annual capacity of 14,000 tons each, and technical assistance to operate them. The centers were not established, due mainly to the weakness of the Semiautonomous Agricultural Marketing Agency (PROCOMPr',A) under the Ministry of Agriculture to which the project had delegated their implementation. However, the project trained farmers in marksting techniques and helped them, as well as the Amerindian communities, to organize marka:ing cor. '.ttees end to establish retail marketing points in free fairs in the project urban centers and in Lima. 5.4. Rural extension was initially very weak due to the institutional problems of the National Institute for Agricultural Research and Extension (INIPA), but improved after having been taken over by the project in 1986. However, owing to lac'. of credit (see para. 5.2), technical advice to farmers had little impact ana the transfer of improved technology was limiteu. The extension servics, however, successfully promoted the development of "chacras integrales", an approach that sought to blend crop and livestock activities on the farms, with the objective o_7 ensuring farmers' subsistence while generating some surpluses for the market. It appears that, under the given economic environment, this proved to be an appropriate solution and was widely accepted. Extension also promoted the organization of 36 farmers' committees which were effective in improving produce marketing. It also helped to improve food production among the native communitias, although this effort was soon neutralized Ly guerrilla incursions (see para. 5.9). However, for lack of adequate funding and the consequent desertion of staff, the extension service deteriorated and practically ceased to operate after 1988. 5.5. Research was carried out, through an agreement with the University of La Molina, in two experimental stations in the project area. It was effective up to 1987, after which it was phased out due to funding constraints. Main achievements were the introduction, although on a very limited scale, of improved varieties of citrus, avocados and macadamia; the introdur ion of the achiote crop; the identification of crop diseases and their control; a c the improved management of old coffee stands. 5.6. Forestry. About 1,400 "a, benefitting 668 farmers, were reforested, some minor surveys and experiments jre carried out, and four forest police posts (versus the appraisal target of 6) and two nurseries (100% of target) were constructed under this component. However, the agreements between the project and the National Forestry Institute (INFCR) and the Forest Police were of limited effectiveness as a resnilt of lack of funds. Therefore little was accomplished to control accelerated deforestation connected with the expansion of the agricultural frontier. 5.7. Roads. The project constructed a loom-long bridge over the Perene river, and constructed or improved about 186 km of access roads (44% of SAR  estimates), while road m3intenance was neglected due to l,ck of funds. As a consequence, project roads deteriorated very rapidly, increasing the cost of transport of prod _ts to the markets and causing a reduction in the farmersI income. 5.8. wand titlina was one of the nroject's most successful components. Through agreemento with Regi6n Agraria XVI-Junin, INFOR, and the Directorate of Cadastre, the project issued 7,384 individual land titles (49% of estimates) and 84 titles to tribal comnunities (99% of the appraisal estimate of 85). In addition, 95 (against an SAR target of 85) Amerindian reserves were demarcated. 5.9. Native Communities. This component aimed essentially to assist the 85 communities (about 2,000 families) established in the project area by improving their living conditions and raising their nutritional level which had been seriously affected over the last several years by increased deforestation. To achieve this objective, the project set up a separate bilingual extension service through which 292 "promoters of development" were trained, and started a technical assistance program to diversify and increase agricultural production, introduce livestock activities, promote craftsmanship, organize marketing channels, and improve the sanitary and nutritional conditions of these communities. Some 800 families out of the estimated 2,000 were assisted, with promising results. However, increased funding constraints after 1987, exacerbated guerrilla incursions and a continuing deforestation brought about a decline in the nutritional level of about half of the native population. 5.10. Proiect Management. The effectiveness of project management, which included qualified and motivated staff, was seriously constrained by constant funding difficulties. Foreseen investments, already limited during the first three years of the project, were discontinued altogether after loan suspension, when funding became so critical that staff had to be progressively reduced from 430 in 1987 to 260 in 1988, to 90 in 1989 and to 60 in 1990. 6. Results 6.1. The failure of BAP to provide long-term credit for rehabilitation and expansion of perennial crops and short-term credit for the intensification of annual crops rendered extension efforts practically ineffective. Unfortunately, no reliable cLop production data are available, but, from the failure of the credit component and the limited effectiveness of the extension component, it may be concluded that the main project objectives were not achieved (see also paras. 5.2 and 5.4). The situation was further aggravated by constant counterpart funding constraints from the beginning of the project, compounded by the suspension of Bank loan disbursements. Isolated achievements, such as improvements to jnfrastructure, land titling, the organization of farmers' marketing committees and the promotion of "chacras integrales", are of little significance in light of the overall results. 6.2. Crucial social and environmental issues which the project intended to resolve actually became worse during the implementation period. Owing to funding constraints and the intrusion of guerrillas who sequestered crops and animals, the living conditions, including the nutritional situation of the many native communities in the area, are now actually poorer than prior to the project. For  similar reasonz, and due to intensified forest clearing by coca planters, the attempts to control deforestation wers not successful, thus contributing to a deterioratioi of the environment. 6.3. At appraisal, the Economic Rate of Return (ERR) estimated at about 18.6%, was based only on quantifiable benefits from crop and forest production. However, as less than 20% of tha loan was disbursed and only negligible credit was provided to farmers, ve.^y few benefits could be claimed by the project. Data available on incremental crop and forest production are insufficient to allow a meaningful assessment of p_:oject benefits, ;isrefore no attempt was made to carry out a re-estimation of the ERR. 7. Proiect Sustainabilitv 7.1. Due to the above adverse implementation conditions, the project failed to build a basis for sustainable development. In facz, the environmental situation and the nutritional and living conditions of some of the Amerindian communities, which the project intended to improve, visibly deteriorated during implementation. Furthermore, expanding narcotrafficking contributed to diverting farmers from project-proposed development objectives to apparently more profitable coca cropping. Therefore, unless adequate financial, technical and security services are provided to the project area, it is likely that even the limited achievements of the project will be lost. 8. Bank Performance 8.1. The SAR could not foresee the rapid deterioration of Peru's economy which seriously affected project implementation. Technical, ecological and other risks, such as those deriving from conflicts between settlers and Amerindians, were adequately considered. Financial disruptions caused by disbursement suspension, as well as drug activities and terrorism, could not have been predicted. Bank supervision missions detected early the main political, technical and financial issues and problems, and rated the project accordingly. The Bank, however, failed to resolve the issue of farm development credit by enforcing the adherence and implementation of the creCit agreement between INADE and BAP, which was ratified by GOP. 9. Borrower Performance 9.1. The Borrower's unilateral decision to interrupt debt service payments, which led the Bank to suspend loan disbureements, seriously compromised project implementation. Because of the Borrower's failure to substitute fully for the suspended loan financing and the mounting social unrest in the country, project activities declined sharply. The Borrower's inability/unwillingness to provide funds for farm credit hinde:ed the expansion of agricultural production, and prevented the project from attaining its main objective. Changes in national strateg'ies and priorities which reaulted in reduced counterpart funding as well as deteriorated transport conditions, were equally detrimental to project performance.  Due to the exceptionally adverse socio-economic circumstances and the fact that less than a quarter of the loan was disbursed, no useful lessons could be learned from the implementation experience, except that the combined effect of unstable macroeconomic conditions, social unrest and narcotraffic on a project prevents its efficient and effective implementation. 10. Pro-ect '~elationship 10.1. Except for the suspension of loan disbursements by the Bank, all decisions affecting the project were made under a common understanding of problems and constraints between the Bank and the Borrower, with the shared objective of ensuring successful project implementation. However, the relationship between local institutions was frequently unsatisfactory, particularly between the project and BAP, and was detrimental to the implementation of the project's credit component, and, consequently the attainment of production targets. 11. Consulting Services 11.1. Funding for consulting services was available for training, engineering, road maintenance, forestry, and project evaluation. However, due to budgetary constraints, external technical assistance was hired only for engineering activities related to project infrastructure, particularly roads. 12. Prolect Documentation and Data 12.1. Project covenants as well as project organization and management were clearly stipulated. The project and its SAR were based on satisfactory baseline data. However, due to the severe funding constraints and limited access to the project area, monitoring of project performance was insufficient to allow a realistic assessment of project achievements and impact.  - 9 - PART II. PROJECT REVIEW FROM THE BORROWER'S PERSPECTIVE Note: This Section has been requested from the Borrower, but has not been received.  - 11 - PART III: STATISTICAL INFORMATION Table 1: RELATED BANK LOANS Loan/ Title Purpose Year Status Commnents Approv Ln. 2150-PE Rebuild nat. 1982 Closed March Bank support suspended Agric.Research and research and 1988. PCR in 1987. Project Extension Project extension issued in performance hindered services February 1992. by funding and institutional cons.raints. Objectives partially achieved. Ln.2302-PE Sixth Long-term loans 1983 Closed in June Bank suspended Agric. Credit at national 1988. PCR disbursement in Project. level. issued June February 1987 because 1989. of disagreements over terms and conditions of onlending. Ln.1812-PE Puno Increase income 1980 Closed in June Project was successfully Rurai Dev.Project. of 17,000 rural 1987 (2 years completed and met most families. behind of its physical targets. schedule). PCR Project impact positive issued in June but constrained by 1990. problems of macro- economic and social stability. Ln. 177 1-PE Lower Develop/ 1979 Closed in June Project was considered Piura Irrigation rehabilitate 1987 (3 years a qualified success, Rehabilitation Project coastal irrig. behind although physical II areas schedule). PCR targets were met later issued March than planned. 1989. Ln.2219-PE Alto Improve 1983 Closed 1990. Bank support suspended Mayo Rural incomes and PCR issued in in 1987. Project Development Project. living conditions March 1992. performance hindered of local settlers by fund.ng and and tribal institutional constraints. communities. Objectives partially achieved.  - 12 _ Table 2: PROJECT TIMETABLE Item Date Actual Planned Date Identification - 09-10/81 Preparation - 10-1 1/82 Appraisal Mission 04/83 05-06/83 Loan Negotiations - 11/83 Board Approval 12/83 03/84 Loan Signature - 05/84 Loan Effectiveness 06/84 08/84 Loan Closing 06/90 05/91 Loan Completion 12/89 not completed Table 3: LOAN DISBURSEMENTS (US$ million) FY 1985 FY 1986 FY 1987 FY 1988 FY 1989 FY 1990 Appraisal Estimate 3.0 8.0 15.0 23.0 31.0 40.0 Actual 1.6 1/ 3.0 6.3 7.1 7.2 7.2 Actual as % of Estimate 53 38 42 31 23 18 Date of final disbursement: 24 June, 1987. 2/ 1/ Including US$0.1 million front fee. 2/ Effective July 8, 1987, disbursements for all World Bank financed projects in Peru were suspended due to nor payment of debt service.  - 13 - Table 4: KEY PROJECT IMPLEMENTATION INDICATORS Indicators Unit Appraisal PCR PCR Estimate Estimate % of Ap- praisal A. Credit Short- and long-term loans US$ 20.6 0.2 1 million B. Extension 1. Technical Assistance (a) farmer 8,000 3,578 45 2. Rehabilitation/expansion of ha 25,000 13,898 56 industrial crops (b) 3. Supervision of rural credit number 5,500 225 5 implementation (c) 4. Assistance/establishment number 200 220 110 livestock units 5. Construction of extension number 5 5 100 offices 6. Construction of dwellings number 25 6 24 for extensionists C. Research 1. Field Experiments number 150 77 51 2. Construction/rehabilitation units 20 4 20 of offices D. Forestry 1. Field office (INFOR) unit 2 0 0 2. Construction of seed unit 1 1 100 processing unit 3. Construction of forest police unit 6 4 67 posts 4. Construction District Office unit 1 0 0 5. Construction nurseries unit 2 2 100 6. Training courses number 35 n.a. n.a. 7. Seedlings-production/distribution number 8,000,000 855,000 11 8. Surveys of protection areas ha 200,000 98,600 49 9. Forest Cadastre ha 730,000 n.a. n.a. 10. Establishment of seed stands stand 5 3 60 E. Roads 1. Improvement of access roads km 427 186 44 2. Construction of work shops unit 2 2 100 3. Construction of bridges 3 1 33 4. Purchase of road maintenance pool 2 1 50 machines  - 14 - Indicators Unit Appraisal PCR PCR Estimate Estimate % of Ap- praisal F. Land Titling 1. Distribution of titles holdings 15,000 7,384 49 2. Demarcation of indian reserves number 85 95 112 3. Titling of indian communities number 85 84 99 G. Native Communit.es 1. Social development families 2,000 822 41 2. Training of development number 280 292 104 promoters 3. Establishment of communal, unit 40 18 45 stores 4. Establishment of carpentries unit 30 17 57 5. Establishment of dressmaking unit 40 36 90 workshops 6. Construction of potable water unit 300 41 14 systems 7. Agricultural extension producers 2,000 530 27 8. Supervision rural credit loans 1,700 530 31 9. Rehabilitation/expansion of ha 5,000 1,930 38 industrial crops 10. Construction of health unit 20/20 13/25 65/125 posts/schools H. Marketing 1. Organization and registration of producers' committees/ number 100 36 36 cooperatives number 2 0 0 2. Training courses on marketing number 200 127 64 subjects 3. Marketing surveys nurnber 300 63 21 4. Radio/television programs number 380 239 63 5. Construction and implementation units 2 0 0 of marketing centers I. Project Management 1. Construction/rehabilitation of m2 1,600 0 0 offices and dwellings Comrnents: The statistics of Table 4 must be regarded with caution, as discontinuation of project activities neutralized most achievements, particularly: 1. Extension. Assistance to farmers (a) and crop areas (b) was eventually te nated because of lack of funds, and results were not adequately monitored. As for rural credit supervision (c), extension j.,epared 3,228 individual proposals for bank financing, but only about 7 percent of the requests were effectively financed by BAP. 2. Native communities. The achievements of this component were to a large extent neutralized by guerrilla activities, assistance was discontinued for lack of funds and results were limited.  - 15 - Table 5: PROJECT COSTS AND FINANCING A. Project Cost by Component Component Appraisal Estimate Actual" Local Foreign Total Local Foreign Total ............................. .(US$million). Credit 10.6 5.7 16.2 - - - Agric. Extension 3.5 0.8 4.2 2.3 0.5 2.8 Research 1.2 0.7 1.9 0.6 0.4 1.0 Forestry 3.1 0.6 3.7 1.1 0.2 1.3 Roads 9.6 6.9 16.5 2.7 1.9 4.6 Land Titling 3.2 0.4 3.5 2.4 0.2 2.6 Native Communities 0.6 0.3 0.9 0.8 0.4 1.2 Project Unit 2.6 0.3 3.0 1.0 0.1 1.1 Marketing 1.6 0.9 2.6 0.2 0.1 0.3 Base Cost 36.0 16.5 31.5 11.1 3.8 14.9 Physical 2.0 1.4 3.4 - - - Contingencies Price Contingencies 8.1 3.4 11.5 - - - Total Project Cost 46.1 21.3 67.4 11.1 3.8 14.9 Front End Fee - 0.1 0.1 - 0.1 0.1 Total Financing 46.1 21.4 67.5 11.1 3.9 15.0 Required l/ Total project costs were substantially below SAR estimates due to slow project start-up and loan suspension after July 1987. The failure of the BAP to provide credit to participating farmers has further decreased project costs. No reliable data is available to re-evaluate the foreign exchange component, therefore SAR percentages were applied.  - 16 - B. Project Financing (US$ million) Planned Final US$ % US$ % million million IBRD/IDA (Total) 40.0 59 7.2 48 - Civil works 18.0 26 2.0 14 - Vehicles and 8.0 12 1.5 10 equipment - Consultants, 2.2 3 0.2 1 training, studies - Operating cost 8.0 12 3.3 22 - Special account 1.0 2 - - Fee 0.1 - 0.1 - Unallocated 2.7 4 - BAP 17.4 26 Producer Associations 1.4 2 Farmers 3.2 5 - Government 5.5 8 7.8 52 Total 67.5 100 15.0 100 Comments: Any differences due to rounding. Loan disbursements were suspended in May July 1987. The failure of the BAP to provide credit to project farmers resulted in a corresponding lack of contribution by producer associations and farmers. The Govemment, however, increased its percentage contribution to allow at least completion of essential infrastructure and recruitment of staff, as well as operating costs.  - 17 - Table 6: PROJECT RESULTS Not applicable. Due to severe funding constraints project investments were only partially accomplished, activities were curtailed and objectives were jeopardized. Moreover, because of lack of reliable production data due to deficient monitoring and limited access to the project area because of civil unrest, results could not be realistically assessed.  - 18 - Table 7: COMPLIANCE WITH LOAN COVENANTS Covenants Suject Detdline for Status Coenta C pliance 3.02(a) INADE to establish credit Not specified Completed. Unsatis- agreement with SAP, to make factory (1) credit available to beneficiaries. 3.02(b) Borrower to furnish the Not specified Completed. Unsatis- Bank ratification statement factory (1) of above agreement. 3.03(a) INADE to establish Not specified Completed. Satisfactory agreements: (a) with UNA and INIPA for research and extension; and (b) with INFOR for research, extension, reforestation and training. 4.05 Establish Revolving Fund in Not specified ConpLeted. Satisfactory Banco de La Naci6n and deposit US$100,000 equivalents. 3.04 Hire consultants to assist mot specified Incomplete. Due to Unsatisfactory implementation of training, budgetary ancl suspension engineering, road of disbursements only maintenance, forestry and engineers were hired. project evaluation. 3.06(b) Establish and maintain a Nov. 7, 1984 Unit was timely Unsatisfactory Monitoring and Evaluation established, but for Unit. budget cuts staff was only recruited in late 1986. 3.09 (a) Identify, through MAG, Not specified (a) Production and Unsatisfactory forestry production and protection areas were protection areas; (b) identified; (b) no prevent grant of permits were granted but exploitation concessions Not specified illegal felLing were until forest management difficult to prevent; plan has been approved by (c) Management plan was MAG; (c) prepare resource not prepared due to management plan. Dec.31, 1985 staffing constraints 4.02 Maintain records and Not specified Separate accounts were Unsatisfactory separate accounts and hire kept. Audit reports were auditors. Submit audit submitted on time until report within six months 1986, and with after end of each fiscal significant delays year. thereafter. 4.04 Furnish annual work July 31 of Road construction was Unsatistactory programs, cost and budgets each year, delayed first for for project constructed/ beginning in problems with improved roads maintenance. 1985. contractors and further due to suspension of Bank disbursements. 4.06 Upon comipletion of Not specified Construction delayed. Unsatisfactory packaging centers, submit Bank plan of action for transferring centers to producers and providing technical assistance. (1) Although the credit agreement was established and ratified only about 1X of farm development Loans were disbursed apparently due mainly to a failure of Goverrnment to provide funds to SAP.  - 19 - Tabe 8: Use of Bank Resources A. Staff inputs (Staff Weeks) FY FY FT FY FY FY FY FY S