Colombia - Agricultural Diversification Project

Docum_t of The World Bank FOR OMCLAL USE ONLY Rqt N. 12249 PROJECT COMPLETION iEPORT COLOMBIA AGRICULTURAL DIVERSIFICATION PROJECT (LOAN 2453-CO) AUGUST 13, 1993 MICROGRAPHICS Report No: 12249 Type: PCR Agriculture Operations Division Country Department III 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 Appraisal Average 1983 - Col$ 79.53 - US$1.00 Average 1984 - Col$101.33 - US$1.00 1985 - Col$143.05 - US$1.00 1986 - Col$195.60 a US$1.00 1987 - Col$241.35 - US$1.00 1988 - Col$299.78 - US$1.00 1989 - Col$384.89 - US$1.00 1990 - Col$502.21 - US$1.00 1991 - Col$630.00 US$1.00 WEIGHTS AND MEASURES Metric System GLOSSARY OF ABBREVIATIONS Bank - The World Bank FAO/CP - Food and Agriculture Organization FFAP - Pondo Financiero Agropecuario (Agricultural Finaneing Fund) FFL - Pondo Financiero Industrial (Industrial Financing Fund) FINAGRO - Fondo para el Financiamiento del Sector Agropecuario (Fund for Financing of the Agricultural Sector) FEDERACAFE - National Federation of Coffe2 Growers of Colombia PRODESARROLLO - Coffee Zones Development and Diversification Program, a Department within FEDERACAPE FNC - Fondo Nacional del Cafe (National Coffee Fund) SAR - Staff Appraisal Report GOVERNMENT OF COLOMBIA FISCAL YEAR January 1 to December 31  FOR OFFICIAL USE ONLY THE WORLD BANK Washington, D.C. 20433 U.S.A. Olfeu of D _eaeto4~111l Optatio., Uvaluatlen August 13, 1993 MEMORANDIJM TO THE EXECITIVE DIRECTORS AND THE PRESIDENT Subject: Project Completion Report on Colombia Agricultural Diversification Project (Ln. 2453-CO! Attached is the Project Completion Report on Colombia - Agricultural Diversification Project (Loan 2453-CO) prepared by the Latin America and the Caribbean Regional Office. Part nI was prepared by the Borrower. The project aimed at reducing areas planted with coffee and diversifying towards production of annual crops and livestock raising. Thbis project is tne first collaborative effort in agriculture between the Bank and the private sector in Colombia (National Federation of Coffee Growers). The project results exceeded expected estimates because of good preparation and appraisal, a high degree of commitment by all parties concerned and an effective implementing institution. Small-scale coffee growers unexpectedly benefitted from the project because the Federation made an effort to reach them through supervised credit. Some positive environmental effects exist due to the switch of coffee growing in marginal, high slope areas, to grass cover for beef production. The economic rates of return have been reestimated at 25 to 40 percent compared to appraisal estimates of 19 to 42 percent. Overall, the outcome of the project is rated as satisfactory, its sustainability as uncertain and its institutional development as partial. No audit is planned. Robert Picciotto by H. Eberhard K8pp 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 OMCIAL USE ONLY PROJECT COMPLETION REPORT COLOMBIA AGRICULTURAL DIVERSIFICATION PROJECT (LOAN 2453-CO) Table of Contents Paae No. PREFPACE ................................ EVALUATION SUMMARY . . . a . . i Part I - PROJECT REVIEW FROM BANK'S PERSPECTIVE Project Identity . .d.en.t y..... ................ 1 Project Background . . . . . . . ....................... 1 Project Objective and Description . . . . . . . . . . . . 2 Project Design and Organization ........ .....# ......... 3 Project Implementation ... .......... . ... . 3 Project Results ... . . . . . . .. . . . .. .. .. . . . . 6 Project Sustainability .. . ..*.. ........9............. . 9 Bank and Borrower Performance .............. 9 Project Relationships ...................*.... .......... 11 Project Documentation and Data .o. .. . . . . . .#. . . . 11 Part II - PROJECT REVIEW FROM BORROWER'S PERSPECTIVE Borrower's Perspective of the Design and Implementation and its Development Impact on the Project1l . . . . . . . 12 Part III - STATISTICAL INFORMATION 1. Related Bank Loans and Credits . . . . . . . . . . .. 18 2. Project Timetaeble o o ... ..................... 21 3. Cumulative Estimated and Actual Loan Disbursement . . . 26 4. Key Indicators . . . . . . ... - . . . .. .. .. . . . . 27 5. Project Costs . .. .. a. .. . . . . . . . . . . . . . . 29 6. Project Financing o . . . . . . . . . . . . . . . . . . 30 7. Economic Rates of Return on Selected Agricultural Production . . . . . o . o . o .. .. . . . . . . .# . . 31 8. Compliance with Loan Conditions . . . . . . . . . . . . 32 9. Use of Bank Resources . . . . . . . . . . . . . . . .o . 35 l/ Tho Borrcwr IL" eaatted a full PCM wern8 the UDERAGhf's fifth Five Yow Divardfteatica PI1 1984-1989 which is vilable In LAC Files. This document ha3 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.  PEQJCT CMLTO RORT COLOMI AGRICULTURAL DIVERSICATIOn n C (LOA 2453-CO) PRIEPACS 1. This is the Project Completion Report (PCR) for the Agricultural Diversification Project in Colombia, for which Loan 2453-CO in the amount of US$50 million was approved by the Bank on June 27, 1984. The loan closing date was September 30, 1992, two years behind schedule. Final disbursement was on January 31, 1993 and the loan account was closed at that time. The loan of US$50 million was fully disbursed. 2. This I.R was prepared by the Bank'. Agriculture Operations Division of the Latin Avarica and the Caribbean Regional Office (Preface, Evaluation Summary, Parts I and III) and the Borrower (Part II). 3. Pre aration of this PCR was started during the Bank's final supervision mis4sion and is based, intr aliag, on the Staff Appraisal Report; the Loan Agree&ent; supervision report.; correspondence between the Bank and the Borrower; F&I Evaluation of the Fifth Five-Year Diversification Plan; and interviews with scaff involved in project preparation and implementation.  - iii - PROJECT COMPLETION REPORT COLOMBA AGRICULTURAL DIVERSIPICATION PROJECT (LOAN 2453-CO) EVALUATION SUMMARY Objective 1. The central objective of the project was to assist in, and accelerate, the Government's and PEDERACAPE's efforts to diversify agricultural production, sources of employment and income in coffee areas. To this end, the project was designed to develop the associated institutional, organizational and physical basis needed to significantly increase the on- going diversification efforts, and make it a more self-sustaining process, thereby lessening the country's dependence on coffee production. In providing alternatives to coffee production, the project was to assist the authorities in gradually shifting the policy incentives to the production of other agricultural commoditi.es, thus indirectly helping in reducing the overproduction and stock build-up of coffee and the country's vulnerability to market constraints of coffee and associated price changes. The project was also to help small-scale coffee growers not participating under the project to maintain their share in the limited coffee market to the extent that coffee production of participating farmers would not increase. More particularly, the project was to help to: (a) increase the production of non-coffee crops and the availability of food commodities; and (b) strengthen the marketing system and the agroindustrial subsector (para. 3.01). Imolementation Experience 2. The loan agreement became effective on March 20, 1985, with one extension of three months to allow for delays in the Government's internal legalization of the Bank loan to PEDERACAPE, a private organization (para. 5.01). It was estimated at the time of appraisal that the closing date would be September 30, 1990. In fact, the project was closed on September 30, 19929 two years later after two extensions (para. 5.07). Project implementation went smoothly since PRODESARROLLO, the implementing group within PEDE$ACAPE, was well experienced with the program. The annual achievement of new diversification, measured in hectares of new crops and  - iv - number of livestock, increased over previous years. This was due to the strong demand for diversification, available fundos and the ability of PRODESARROLLO to handle the increasing workload, especially in the areas of technical assistance, and the evaluation and approval of subprojects (para. 5.02). The higher than planned level of counterpart funds from the coffee growers who participated in the project (481 of total investment, more than double the expected financing plan of 232) facilitated implementation of the project and the expansion of its targets, leading to positive achievements at project closing. The increased contributions from the coffee growers was partially due to the PFAP's provision of a lower level of credit to that envisaged at appraisal. Another factor which positively affected implementation of the project was the fall in the world price of coffee (from US$1.56/lb in 1985 to US$0.70/lb as of February 1992) which actually strengthened FEDERACAFE's commitment to the diversification objective (p&ra. 5.09). 3. Little technical or managerial risks were expectad for the project since EMDERACAPE, a private agricultural producer organization, was efficient and commanded a well developed physical and organizational infrastructure in the proposed project area. Also, the principal banking windows under the project, Banco Cafetero and Caja Agraria, had consistently performed well in granting credit and were expected to have no difficulty in providing the banking services required ur-er the project. However, one element could critically affect the pace of project execution: the efficient marketing and processing of project cutput. In fact, the project's pace of execution was not hampered because: (a) a large part of the increasing agricultural production was readily absorbed in local markets; and (b) the development of many agroindustries, financed under the project, provided an outlet for the balance of farm output (para. 5.08). Results 4. Overall, project objectives have been met, i.e., there has been an increase in production of non-coffee crops and the availability of food commodities (such as citrus, lulos marecuya, papaya, plantain, pineapple, pitaya, onions, tomatoes, cocoa, platano, sugarcane, beans, corn, and dairy and meat products). Both the marketing system and the agro-industrial subsector have been strengthened through some 239 marketing and 234 agro- industrial projects (para. 6.01). Physical achievements of the project were well over the planned targets, particularly so for the agricultural crops component where the area planted exceeded the 5-year project targets by 302 (78,665 ha vs. SAR estimate of 60,400 ha), and for the number of livestock which exceeded the plan by 1102 (132,277 heads vs. SAR estimate of 63,000 heads). Over the 7-year period actually financed by the Bank loan, the area planted re,-hed 175,126 ha (an increase of 1902 over SAR targets), and livestock increased to 192,230 heads (2052 over SAR targets). These excellent results were due to the fact thats (a) demand for diversification activities under the project was always very strong and, in fact, grew each year; (b) the costs of on-farm investments were lower than expected, allowing for increased diversification without a commensurate increase in furding; and (c) higher thau planned level of participation by farmers allowed for greater  - v - leverage from the loan resources (paras. 5.09 and 6.02). Through the support services component, training was provided for MEDERACAPE technicians, specialists from other institutions and beneficiaries; and the marketing information system was improved, issuing to farmers monthly bulletins on prices and market situation for a variety of crops (pare. 6.06). 5. Total project cost was US$260.2 million, 1032 of appraisal estimate of US$253.4 million (para. 6.07). At appraisal, rates of return for the illustrative investment models for farm development, marketing and agro- processing subprojects ranged from 23 - 25X. During project implementation, these models were tested at least every six months to check on viability of crops via a vis current market conditions and y4.elds. Results indicated that the returns were consistently better than expected. Rates of return on selected agricultural production ranged from 252 to >402. For selected agro- industrial/marketing projects, rates of return were in the range of 19S to >402. Such positive rates of return can generally be attributed to lower than expected investment costs combined with higher market prices (para. 6.08 and Part III, Table 7). 6, PEDERACAPE estimates that sbout 33,000 staffyears of agricultural employment, 2,800 staffyears of agroindustry employment, and some 3,500 staffyears of marketing employment have been provided through the project. The diversification program has contributed to a higher and more stable rural employment through increased agricultural production and less seasonal impact of a coffee-only environment. It has also attracted resources in the sector ands by intensifying production and the development of higher revenue crops, has resulted in higher rural income (para. 6.09). Prolect Sustainabilitv 7. Diversification continues to be an important activity for coffee growers in Colombia. As the international price for coffee continues to fall and the domestic prices are adapting to the new reality of the coffee market, and returns on diversified activities remain attractive, diversification should continue. However, the level of sustainability would depend on both technical assistance and credit being available to participating farmers and entrepreneurs. The projected sixth Five Year Diversification Plan indicates that, at the end of Year 5 (1994), approximately 89,300 ha for agricultural activities will be diversified and approximately 403,840 units of fisheries, livestock, and poultry would be developed. As production from the program expands beyond local demand levels, agro-industry investments should be linked more closely to crop production surpluses (para. 7.01). Lessons of the Project 8. This project generally confirmed the appraisal design of the key ingredients for reaching and sustaining project objectives: (i) project objectives were realistic in tne context of the expected macro-economic and policy environment;  -vi- (1i) the project was thoroughly prepared cnd appraised, facilitated by the ongoing program of diversification and advance planning by the Borrower; (111) flexible Implementation of the project; (iv) strong comitment to the project by the Borrower, hence adequate local funding available; (v) strong support from the beneficiaries to the project, facilitated by effective extension provision and adequate supply of credit (although at subsidized rates); and (vi) competent project management (implementation by a private institution with a record of solid performance, strong leadership, and highly qualified technical staff). 9. At the same time, a key lesson from the project is that borrowing in foreign currency to lend in local currency requires continuous supervision to ensure that lending rates to beneficiaries are adequate to cover the cost of funds, in view of the fluc-tuations in exchange rates. Under the reviewed project, failure to react quickly to changes in the relationship between these two variables, particularly with a policy of keeping lending interest rates low, resulted In a high subsidy and a substantial cost to the Coffee Fund, a coffee stabilixation fund administered by IEDBR&CAIE. The extent to which this subsidized interest rate may have contributed to the large supply response alicited under the project, which went well beyond the original output targets, is of course difficult to establish (para. 8.03).  PROJECT CGOPLETION REPORT COLOMBIA AGRICULTURAL DIVERSIFIATION PROJECT (LOAN 2453-COJ Part 1 - Prosect Review from the Bank's Perseective 1. Proiect Identitr Project Name: Agricultural Diversification Project Loan Numbers 2453-CO RVP Units Latin America and the Caribbean Country: Colombia Sector: Agriculture Subsectors Diversification 2. Pro ect Background 2.01 Growth in the agricultural sector in Colombia in the 1970s was driven by external factors such as favorable markets and price. for export crops, especially coffee. In the 1980., international prices for food commodities, including coffee, fell and at the same time the cost of agricultural inputs, including labor, remained high. The country's heavy dependence on coffee needed to be reduced and the unrealized potential for agricultural diversification in the coffee areas tapped. Both the Government and PEDERACAPE recognized the need for agricultural diversification as the International Coffee Agreement with its quota system was likely to continue and Colombia's quota could not be expected to increase more than 1.52 per year. Purthermore, the international price for coffee in real terms was expected to decline while the levels of stock build-up could not be financed indefinitely. Therefore, coffee production needed to be brought In line with the market, and underutilized resources existing in the coffee areas needed to be diverted to alternative uses. This strategy would respond to increasing demand for food crops, while at the same tiine maintain the Income levels of the coffee growere. 2.02 The Government's agricultural diversification efforts to reduce the negative effects of coffee monoculture go back to the 1940's. In 1946, the first contract was signed between the Government and FEDERACAPE to promote the production of non-coffee crops in the coffee zones and over two decades about US$150,000 were spent annually. In 1963, FEDERACAPE formed a unit, PRODESAJROLLO, to promote agricultural diversification activities throughout *:he coffee areas by providing technical advice and credit. From 1963 to 1982, credit totalling about US$146 million was provided for about 99,000 ha, 46 marketing projects and 41 agroindustrial enterprises.  2 2.03 At the time of project appraisal, Bank projects had focussed on increasing productivity, income and welfare of small farmers, with all projects executed by public sector institutions. The results, in general, indicated that many of the problems with project implementation reflected the shortcomings of the public sector, i.e., institutional instability, frequent changes in policies and key personnel, poor accounting and monitoring capabilities, and underfunding. In this project, the executing agency, FEDERACAPE, was selected because it was, and remains, a well-managed private institution with a record of solid performance. Bank assistance was sought in order to expand PRODESAROLLO's then on-going program, i.e., the fifth Five Year Diversification Plan (1984-1989), within rEDERACAFE. 3. Prosect Obiective and Descriotion 3.01 Proiect Obiective. The central objective of the project was to assist in, and accelerate, the Gcvernment's and FEDERACAPE's efforts to diversify agricultural production, sources of employment and income in coffee areas. To this end, the project was dasigned to develop the associ.:ted institutional, organizational and physical basis needed to significantly increase the on-going diversification efforts, and make it a more self- sustaining process, thereby lessening the country's dependence on coffee production. In providing alternatives to coffee production, the project was to assist the authorities in gradually shifting the policy incentives to the production of other agricultural commodities, thus indirectly helping in reducing the overproduction and stock build-up of coffee and the country's vulnerability to market constraints of coffee and associated price changes. The project was also to help small-scale coffee growers not participating under the project to maintain their share in the limited coffee market to the extent that coffee production of participating farmers would not increase. More particularly, the project was to help to: (a) increase the production of non-coffee crops and the availability of food commodities; and (b) strengthen the marketing system and the agroindustrial subsector to handle the increased output. Project Descrivtion. Over the five year project period, the project was targeted tos (a) provide agricultural credit for short, medium and long- term subloans and incremantal capital to finance development of some 60,000 ha of non-coffee crops and livestock production with some 13,600 producers in the coffee growing area; (b) strengthen the marketing infrastructure by providing technical as3istance and credit for agricultural processing and increase the volume of agricultural production marketed through project financed organizations; (c) promote, help organize and provide technical assistance and credit for agricultural processing activities throughout the project area; and (d) provide support services to effectively implement the credit components. 3.02 Bank involvement in the project was to help institutionalize the diversification efforts within nEDERACAFE, and to expand its on-going lending program and generate enough momentum to make the diversification effort a self-sustaining process.  3 4. Pro1ect Design and Oryanization 4.01 Promotion of agricultural diversification in the coffee growing areas was included in the development policies of both the Government and PEDERACAPE. The project, as prepared, was essentially a large part of the fifth Five Year Diversification Plan for PEDERACAPE, covering the period October 1984 through to September 1989 (the plan follows the crop year, October to September). The increased targets for diversification in the plan were in support of Government objectives to increase overall agricultural productivity and production and FEDERACAPE's efforts to diversify production, labor and income in the coffee growing areas. The Bank supported this activity for both the development objectives stated for agriculture, as well as to strengthen divereification operations under REDERACAPE, a private sector organization and one of the key agricultural organizations in Colombia. 4.02 The project's design and organization contributed to the high level of achievements under the project since the project scope expanded an ci-going diversification program, well supported by the targeted farmers. The implementing group, PRODESARROLLO, within PEDERACAPE, had a good deal of experience with diversification, together with well qualified and competent staff to carry out the w,rk. Under the project, these facilities were to be expanded and eventually become an independent unit in FEDERACAPE, the Sub- Gerencia de Diversificacion. At the time of project appraisal the staff in this unit totalled 105 and at the end of the five years plan the staff was increased to 251, a large part of the increase being in extension staff. 4.03 The project was prepared by FEDERACAFE/PRODESAROLLO based on its fifth Five Year Diversification Plan. The Initiating Project Brief of May 12, 1983 was prepared by FAO/CP and provided the basis for the Bank's final Project Brief of August 23, 1983. Project appraisal took place in October 1983. Board approval was on June 27, 1984 and loan signing on September 21, 1984 (Table 2). 5. Proiect Implementation 5.01 Effectiveness. The loan agreement became effective on March 20, 1985, with one extension of three months to allow for delays in the Government's intornal legalization of the Bank loan to FEDERACAPE, a private organization. 5.02 Implementation Period. Project implementation went smoothly since PRODESARROLLO was well experienced with the program. The annual achievement of new diversification, measured in hectares of new crops and number of livestock, increased over previous years. This was due to -he strong demand for diversification, available funds, and the ability of PRODESARROLLO to handle the increasing workload, especially in the areas of technical assistance, and the evaluation and approval of subprojects. 5.03 On December 31, 1986, at the request of the Borrower, the Bank raised the disbursement percentage on Category l(a) - Agricultural Development, from 182 to 322. This was agreed to because, since the signing of the loan agreement in September 1984, the peso had devalued about 50Z  4 against the dollar (from Col$ 107 to 211/US$1.(O). The projected weighted average ezhange rate over the project period was, in 1986, Col$ 2781US$1.00 versus the SAR expected average of Col$ 167. As a result of this devaluation, the estimated foreign exchange component, in peso terms, had risen from Col$ 8,263 million to Col$ 13,871 million, up from 20S to 292 of project costs. In order to maintain the input of counterpart funds at the levels expected at appraisal and avoid a funding gap of an estimated Col$ 5,608 million, the Bank chose to increase the percentage of disbursements under Category 1(a) to 322. This was expected to cover the full foreign costs in equivalent local currency. 5.04 On January 5, 1988, the above disbursement percentage for Category 1(a) was further increased to 452 as the devaluation of the peso continued to accelerate and the exchange rate remained well over the projections in the SAR, i.e., on January 5, 1988 the exchange rate was Col$ 260/US$1.O0, and was expected to average Col$ 320/US$1.00 over the life of the project, versus the expected average in the SAR of Col$ 1671US$1.00. The weighted average disbursement percentage for this category was expected to be 352 over the life of the project. Other amendments to the project included the requirement for an audit of the accounts of the National Coffee Fund (July 1986) and the raising of the ceiling of the Special Account to US$5.0 million from US$3.0 million (February 1988). 5.05 Under the project, it was agreed that PEDERACAPE would lend at the prevailing FlAP average interoest rate, and would adjust its rates together with PPAP. At the time of appraisal, and with the projections for interest rate increases by PFAP and for devaluation, it was expected that the rate to final beneficiaries would be adequate to cover at least the cost of Bank funds, the cost of intermediation and the impact of the peso devaluation. 5.06 In the event, FEDERACA.? rates did not keep up with PPAP's until a large share of the loan funds had been disbursed. Devaluation too increased much faster than projected at appraisal (over 222 in 1984/1986, as compared to the projected 15S for 1985, and 10 for each succeeding year). Throughout that period, PEDERACAPE continued applying the average rate of 21.72, although by that time PFAP started raising its rates. PPAP did even better, starting In 1989 it pegged its interest rate structure to the prevailing rate for savings, DTF, thus maintaining a relationship with the inflation/devaluation (although continuing subsidies to the sector, and to the small farmers in particular). FEDERACAPE did not follow suit. The cost of Bank funds in Col$ peso terms went up to about 382 (25/262 devaluation, 10.52 bank interest rate and commitment charge, and 2 points for intermediation costs), while diversification loans went at the same 21.7% rate. This forced the National Coffee Fund (a Fund belonging to the Government but operated by FEDERACAPE, which manages the surpluses from the exports of coffee) to cover the difference between the prevailing lending rates and the actual cost of Bank funds; this subsidy reached over US$12 million by September 30, 1989, while the fall in international coffee prices, which started in 1988/1989, reduced substantially the Fund's resources. While all along PEDERACAFE had indicated that it was willing to apply lower rates as an incentive for diversification, it became clear that they were not aware of the high cost. Several supervision missions discussed the implication of the low FEDERACAFE lending  5 linked to DT@. By the end of 1989, the Bank put MEDERACAPE on notice that failure to do so would result in the suspension of disbutsement from the Bank loanzl. Adjusting the interest level was a complicated procedure, and finally, in October 1990, FEDERACAPE raised its rates to the FFAP levels, for all loans financed by the remaining Bank funds, and with the collections from past loans. As of February 1992, interest rates are as followst for Production: DTF+6 for medium and large farmeros DTF-4 for small farmers. 5.07 The Bank agreed to the Borrower's request for extension of the loan closing date to September 30, 1991 (original loan closing date September 30, 1990) to allow for disbursement of the backlog of eligible expenditures as a result of the suspension of disbursements. A second request from the Borrower for a one-year extension of the closing date to September 30, 1992 was also agreed to by the Bank to provide continuity to the diversification program during the transition period of 1990/91 when both a reorganization of PEDERACAPE (para. 5.09) and a new agricultural fund, FINAGRO, was announced1l. 5.08 Proiect Risks. Little technical or managerial risks were expected for the project since PEDERACABE, a private agricultural producer organization, was efficient and commanded a well developed physical and organizational infrastructure i1 the proposed project area. Also, the principal banking 'indows under the project, Banco Cafetero and Caja Agraria, had consistently performed well in granting credit and were expected to have no difficulty in providing the banking services required under the project. However, one element could critically affect the pace of project execution, the efficient marketing and processing of project output. In fact, the project's pace of execution was not hampered becauses (a) a large part of the increasing agricultural production was readily absorbed in local markets; and (b) the development of many agroindustries, financed u=der the project, provided an outlet for the balance of farm output. 5.09 Unforeseen Factors Affecting Implementation. The higher than planned level of counterpart funds from the coffee growers who participated in the project (482 of total investment, more than double the expected financing plan of 232) facilitated implementation of the project and the expansion of its targets, enhancing the opportunity for positive achievements. Such funding provided increased leverage with project loan funds and thus complemented the increase in diversification activities over the levels planned. The higher than planned level of contributions from coffee growers was partially due to the RFAP's provision of a lower level of credit to that [/ In fact, disbursements were suspended from the Bank loan for two months from end July to end September, 1990. 2/ FINAGRO was created to replace PFAP and it was expected that FINAGRO would provide the credit requirements for diversification at MEDERACAPE. The transition from PFAP to FINAGRO was slow and was not completed until August 1991 and during the transition period the flow of funds to agriculture was greatly reduced.  6 envisaged at appraisal. Another factor which positively affected implementation of the project was the fall in the world price of coffee (from US$1.56/lb. in 1985 to US$0.70/1b. as of February 1992) which strengthened FEDERACAFE's commitment to the diversification objective. However, in 1991 FEDERACAPE operations were reorganized and the Sub-Gerencia for Diversificacion was merged with the main coffee technical and financial groups. This slowed down diversification activities so that by the year ending September 30, 1991 only an additional 12,434 ha (vs. 19,716 ha for 1990, 36,892 ha for 1989) were divereified. A follow-up credit project was in the pipeline for FEDERACAPE but was dropped in 1991 when Government assured the Bank that loans for agricultural credit for diversification, granted by the banking system, would be eligible for rediscounting by FINAGRO. 6. Proiect Results 6.01 For purposes of this report, project achievements and project costs cover a 7-year period from October 1984 to September 1991. Disbursement information is up to January 31, 1993 (the final disbursement date for withdrawal applications approved before the loan closing date of September 30, 1992). Overall, project objectives have been met, i.e., there has been an increase in production of non-coffee crops and tLe availability of food commodities (such as citrus, lulo, maracuYa, papaya, plantain, pineapple, pitaya, onions, tomatoes, cocoa, platano, sugarcane, beans, corn, and dairy and meat products). Both the marketing system and the agro-industrial subsector have been strengthened through some 239 marketing projects and 234 agro-industrial projects. 6.02 Physical achievements of the project were well over the planned targets, particularly so for agricultural crops, where the area planted exceeded the 5-year project targets by 301 (78,665 has vs. SAR estimate of 60,400 has), and for the number of livestock which exceeded the plan by 1102 (132,277 heads vs. SAR estimate of 63,000 heads). Over the 7-year period actually financed by the Bank loan, area planted reached 175,126 ha (an increase of 1901 over SAR targets), and livestock increased to 192,230 heads (205X over SAR targets). These excellent results were due to the fact that: (a) demand for diversification activities under the project waa always very strong and, in fact, grew each yearl (b) the costs of on-farm investments were lower than expected, allowing for increased diversification without a commensurate increase in funding; and (c) higher than planned level of participation by farmers allowed for greater leverage from the loan resources (Part III, Tables 4 and 5). 6.03 Atricultural Production Component. The project was to finance investments for on-farm development mainly in land preparation, livestock, planting materials, fertilizers, and other current inputs to participating producers for the production of non-coffee crops. As of September 1991, the area under coffee has remained stable, the coffee areas in the marginal zones (under 1,300 meters above sea level) have diminished, and most switches to disease-resistant coffee-replanting have occurred only in the optimum zones. In the marginal zones the decrease in coffee areas has been compensated by plantings in cocoa and other crops, while in the optimum zone cold-weather fruit crop areas have exceeded the targets as a result of more efficient land  7 use. There were also increases in plantain and sugarcane plantings and forage. For food crops, as mentioned above, the larger increases were in cocoa, beans, corn, plantain and sugarcane, basic consumption crops in coffee zones, and milk and meat, which reduced the deficit of these items. Fruits and vegetables grown have mostly been absorbed by expanding local markets. A total of 31,628 subloans for agricultural production and 10,803 subloans for livestock were provided and credit amounted to Col$ 7,774 million for agricultural production and Col$ 6,402 million for livestock, financing an investment of Col$ 16,540 million for agricultural production and Col$ 10,162 million for livestock (Part III, Table 4). 6.04 Marketinft Component. In an effort to strengthen the marketing infrastructure and increase the volume of agricultural production marketed through project-financed sub-projects, the project was to provide long- and short-term credit for storage constructiont loading, weighing and packing equipment; and working capital associated with marketing investments. Overall an increased efficiency in transport and processing of products has been achieved through the project. Also, the volume of exports of non-traditional tropical fruits (such as pineapple, passionfruit, pitaya and others) has increased from 24 tons and US$46,000 in 1984 to 2,500 tons and US$3,500,000 in 1988. Overall an increased efficiency in transport and processing of products has been achieved. A total of 239 subloans were provided and credit amounted to Col$ 1,786 million for this component, financing an investment of Col$ 2,928 million (Part III, Table 4). 6.05 Agroindustries Comoonent. The project was to finance fixed investment needs, such as the purchase of machinery, equipment, spare parts, and complementary services; construction of industrial facilities; civil works; and related permanent working capital for about 31 privately owned agroindustrial subprojects during the life of the project. Through the project, increased production has been integrated in agroindustries, mainly milk and byproducts, tomatoes and citrus products. A total of 234 agroindustry subloans were provided and credit amounted to Col$ 4,953 million under this component, financing an investment of Col$ 20,638 million (Part III, Table 4). 6.06 SuPport Service ComPonent. Financing under the project was provided for: (a) training of FEDERACAPEIPRODESARROLLO's technical assistance agents and staff and beneficiaries; (b) applied project-specific agricultural research; (c) expansion and improvement of an agricultural marketing information system; and (d) incremental staff costs required by FEDERACAFE/PRODESARROLLO. 160 training events were organized with participation of 3,560 attendees of which 352 were PEDERACAFE technicians, 19X were technicians and 122 specialists from other institutions, and 341 beneficiaries. Through the training program the Departmental Coffee Committees were able to identify the priority needs of their tecenical personnel. For applied agricultural research, 404 projects were undertaken. The marketing information system was improved, issuing to farmers monthly bulletins on prices and market situation for a variety of crops. Incremental staff reached 145 with a total cost of US$8.8 million. The support services component activities led to inter-institutional agreements, especially with  state entities, coffee producer association, Agricultural Secretariats and the Federation of Cooperatives ( IDECOP). 6.07 Project Administration. Total grgo1