Argentina - Small Farmer Development

Report No. PIC4629 Project Name Argentina-Small Farmer Development Region Latin America and the Caribbean Sector Rural Development Project ID ARPA6041 Borrower Argentine Republic Implementing Agency Secretaria de Agricultura, Pesca y Alimentacion Direccion de Planeamiento y Desarollo Agropecuario Paseo Colon 982 1305 Buenos Aires, Argentina Telephone: (56-1) 349-2670 Fax: (56-1) 349-2677 Date PID Prepared November 1996 Projected Appraisal Date March 1997 Projected Board Date June 1997 1. Country and Sector Background. The rural population (very narrowly defined as those living in communities of less than 2000 inhabitants) represents only about 13t of the total population but includes 28t of Argentina's poor. According to the 1991 population census, the incidence of poverty among rural households, according to the unsatisfied basic needs (NBI) approach , is about 36t (1.5 million people), 2.5 times the urban poverty rate. Although no income or consumption-based measures of poverty are available, other indicators such as the percentage of farms classified as 'minifundios' or poor indicate a similar poverty rate within the subcategory of farm families. About 60t of the rural poor are classified as economically active and 40t as inactive (children, aged, handicapped) . The economically active rural poor employ a diverse set of survival strategies combining on-farm and off-farm activities, reflecting Argentina's varied agro-ecological zones and social structures. Although NBI indicators show that rural poverty, like urban poverty, declined from 1980 to 1991, reductions were less evident in rural areas, increasing the proportion of the country's poor located in rural areas. 2. Sectoral Environment: Argentina's rural sector is undergoing an important restructuring process which should leave it well-positioned to exploit its comparative advantage and maintain strong growth in output and exports. However, the participation of small-scale rural producers in this positive growth scenario has been constrained by their limited access to the resources necessary to adjust their production systems to the new incentive structure. Government's Rural Development Strategy acknowledges the potential productivity advantage of small-scale producers and identifies several opportunities to improve the business climate in poor, rural communities consistent with Government's reduced role in the sector:  (i) Rehabilitation of deteriorated community physical infrastructure - roads, warehouses, town markets, small-scale flood control and irrigation works - to improve resource management and access to input and output markets; (ii) Development of community organizations - user groups, farmer associations, cooperatives - to allow producers to benefit from economies of scale in input supply (including TA and information) and output marketing; (iii) Provision of appropriate technical assistance and training services to transfer productivity-enhancing technology, improve natural resource management, diversify production and improve business management; (iv) Provision of targeted financial assistance for physical investments required to implement improved technology; (v) Regularization of land tenure - particularly amongst indigenous groups - to improve incentives to undertake on-farm investments to maintain the productivity of land and water resources. 3. Government's Poverty Reduction Strategy. The objectives of Government's social policy are to satisfy the basic needs of the population and guarantee equality of opportunity by providing opportunities for the population to participate in the process of economic development and to overcome the causes and manifestations of poverty. Since 1993, Government has piloted a decentralized, beneficiary demand-driven approach to channel technical and financial assistance directly to poor, rural communities (Programa Social Agropecuario, Programa Pro-Huerta, and Programa de Minifundio). NGOs are commonly contracted as intermediary institutions in addition to the national and provincial extension services and local governments. Government has requested Bank assistance to build on this pilot experience to provide a more comprehensive program of support to poor, rural communities consistent with sectoral policy objectives. 4. Project Objectives. The main project objective is to increase incomes of the economically active rural poor by increasing the sustainable productivity of on-farm and off-farm activities through technology transfer and improvements in production-related infrastructure, management and social organization. The related subsidiary objective is to increase the capacity of local institutions - provincial governments, municipalities, beneficiary organizations, and NGOs - to provide appropriate production-support services to the economically active rural poor. 5. Project Description. The proposed project would expand the scope of the pilot programs to assist communities with the identification, preparation, financing and implementation of investments in improved social organization, community infrastructure and production technology and business management. The proposed project would continue to draw upon the experience of NGOs and other existing intermediaries but also expand service coverage by providing training to other potential intermediaries, such as municipalities and beneficiary associations. The -2 -  project would have the following components: (a) the Rural Investment Fund component (up to 75% of base costs) would provide financial and technical assistance to targeted beneficiary groups for production- oriented subprojects (agro and agro-industrial production and marketing, rural road and irrigation and drainage rehabilitation, reforestation, village markets, training programs). The menu of eligible activities would be based on comprehensive beneficiary assessments carried out as part of project preparation and implementation; (b) the Institutional Strengthening component (up to 15% of base costs) would finance training, technical assistance and studies for local governments (provincial and municipal), NGOs, beneficiary associations and other private sector entities to increase their capacity to assist beneficiaries with organization, identification and formulation of subprojects to address community needs, and supervision of subproject implementation; (c) the Project Administration component (up to 10% of base costs) would finance project management expenses. 6. Project Financing. Total project cost has been estimated at US$100 million. A 88 million Japanese PHRD Grant is supporting project preparation. The proposed loan would finance approximately 50% of project costs, with cofinancing of % expected from other cofinanciers and % from Government counterpart funds. Beneficiary community and local government contributions are not included in the current project financing plan as estimates of the amounts and mechanisms to document these expenditures have not yet been determined. 7. Project Implementation. The Secretariat of Agriculture, Fisheries and Food (SAPyA), through a project coordination unit (UC) located in Buenos Aires, would have responsibility for administration and coordination of project implementation including monitoring procurement procedures, reporting, auditing and program evaluation. Implementation of the Rural Investment Fund would be the responsibility of the Social Agricultural Program (PSA). The PSA National Coordination Unit (UTCN) would allocate funds according to the proportion of the target population in each province. The Provincial Coordination Units (UTCP) would determine local targeting strategies (subject to UTCN approval), adopt project guidelines to local conditions, develop promotion and training strategies, and review, approve and supervise individual subprojects. 8. The identification, design and implementation of subprojects including the contracting of appropriate works, goods and technical assistance would be carried out by the beneficiaries in conjunction with the UTCP. NGOs, national and local government agencies and private sector agencies would be contracted by the UTCP for project promotion, training, applied research, field evaluations and to provide technical assistance to communities for organization and needs assessment. Beneficiary communities could contract these entities for assistance with subproject design, implementation and supervision. The project would also pilot the establishment of community-level coordination units (UTCL), which would decentralize UTCP promotional and subproject evaluation and supervision responsibilities to the municipal or departmental level. 9. Institutional strengthening activities would be contracted to - 3-  qualified intermediaries (local governments, NGOs, universities). Coordination with other Government social programs would be facilitated by the participation of the SAPyA project coordinator and/or the PSA coordinator on the Social Cabinet. Monitoring and evaluation activities would be coordinated with the System of Information, Evaluation and Monitoring of Social Programs (SIEMPRO) in the Secretariat of Social Development. 10. Project Sustainability. The project would build upon an existing organizational structure which was created without external funding and which enjoys broad political support at both the national and provincial levels as well as among NGOs and beneficiaries. On-going beneficiary assessment and the inherent flexibility of a demand-driven fund-type project would build flexibility into project interventions which would permit the project to maintain its consistency with community needs as it expands its target population and geographic coverage. Subproject design, evaluation and technical assistance would emphasize provision for operation and maintenance where appropriate. 11. Lessons from Bank Experience. Experience with demand-driven rural development programs supported by the Bank (Columbia DRI, Mexico Solidaridad, Brazil PAPP) has yielded several important lessons which would be reflected in the design of the proposed project: (i) incorporation of transparent and objective targeting and participation criteria, distribution formulas and operating procedures combined with social control mechanisms to avoid politicization and misuse of funds; (ii) decentralization and streamlining of subproject processing to permit rapid response to requests for funds; (iii) targeting of promotional activities and technical assistance to poorest communities which often lack capacity to identify, prepare and submit appropriate sub-project proposals; (iv) provision of training to ensure availability of technically proficient intermediaries familiar with group-based, participatory activities; (v) development of standard designs and technical specifications for most commonly demanded subprojects; (vi) provision of on-going TA and establishment of operation and maintenance arrangements as part of sub-project preparation to improve the sustainability of investments in social and physical community infrastructure. 12. Poverty and Program Objective Categories. The project meets the guidelines for the Bank's Program of Targeted Interventions. A specific mechanism has been designed, taking into account poverty levels and other key parameters, to target project investments to the poor, through both geographical allocation of funds and beneficiary screening criteria. 13. Environmental Aspects. Since the project consists mainly of small sub-projects with limited potential negative environmental impact, a classification of Type B is sought. The project would, however, ensure proper environmental screening and enforcement measures to prevent any negative environmental effects that certain types of productive or infrastructure investments could produce. The Operational Manual would specify environmental criteria, screening procedures and enforcement mechanisms to be followed. -4-  Contact Point: Public Information Center The World Bank 1818 H Street N.W. Washington D.C. 20433 Telephone No.: (202)458-5454 Fax No.: (202)522-1500 Note: This is information on an evolving project. Certain components may not necessarily be included in the final project. Processed by The Public Information Center week ending January 17, 1997. - 5 -