Mexico - Second Tropical Agricultural Development Project

 Second tropical agricultural development project Report No: ; Type: Report/Evaluation Memorandum ; Country: Mexico; Region: Latin America And Caribbean; Sector: Research; Major Sector: Agriculture; ProjectID: P007633 Mexico_Second Tropical Agricultural Development Project (Ln. 2658-ME) The Mexico Second Tropical Agricultural Development project, supported by Loan 2658-ME for US$109 million equivalent, was approved in FY86. The loan closed on December 31, 1995, after two one-year extensions. Because the project was reduced in scope, US$20.7 million equivalent was canceled in FY89. The Implementation Completion Report (ICR) was prepared by the Latin America and the Caribbean Regional Office. The borrower's assessment of the project is appended to the ICR. The project aimed to increase the incomes of about 40,000 farmers in the humid tropics of Mexico's southern-most states (Yucatan, Tabasco, Chiapas, and Vera Cruz). The eight zones covered by the project were chosen for their agricultural potential and large numbers of poor farmers. The zones had few roads, poor drainage, and traditional low-input subsistence cultivation. Most project funds were allocated to construction of irrigation drainage and all-weather gravel roads, complemented by agricultural extension to encourage better husbandry, higher crop production and soil conservation. The project also included a component to improve farmer-cooperation for carrying out tasks in common, notably operation and maintenance of the new drainage systems. The choice and location of investments were heavily influenced by the lessons from a preceding area development project in the same region. The project achieved most of its objectives. The drainage and road targets were largely realized. Research and extension also made a significant contribution to better cultivation and soil-conservation. The results are impressive. Total cropped area in the eight subprojects increased by 55,000 hectares, a 35 percent increase over pre-project cropping. The total value of production increased by about 94 percent in part due to a shift to higher value crops (fruits, vegetables, sugar cane, cotton). Average annual farm incomes in the areas increased by 37 percent from 1986 to 1995. About 52,100 poor families benefited from the project, 30 percent more than foreseen at appraisal. The project supported women in starting more than 300 cottage industry undertakings: small stores, vegetable gardens, dairy cattle, small livestock and other activities. Over the life of the project, private on-farm investment in the project zones is estimated to have been more than $200 million, mostly in new orchards for tropical fruits (citrus, bananas, pineapples), sugar plantations, additional livestock and aquaculture. But farmers also invested in improved pastures and better land conservation practices. The value of private off-farm investment was not calculated, but is substantial, particularly in packing, processing and marketing of fruits and vegetables. This outcome occurred under trying conditions. Agricultural prices in Mexico deteriorated somewhat during the period of disbursement, as did Mexico's public agricultural services. Throughout the project's life, government had difficulty in providing funds to cover the costs for operation of the extension and drainage systems. Project management was highly unstable, changing five times over the nine years of implementation. As a result disbursement took two years longer than foreseen at appraisal. The combined impact of these factors explains much of the drop in the economic rate of return from an estimate of 23 percent at appraisal to 14 percent at project completion. The Operations Evaluation Department (OED) agrees with the ratings in the ICR, namely that project outcome was satisfactory; sustainability likely; and institutional development substantial. OED rates Bank performance as satisfactory, rather than highly satisfactory as in the ICR: the largest subproject, Pujal Coy-II, initially accounting for 40 percent of total project cost, had to be redesigned after the project became effective to change the focus from agricultural to livestock development due to factors that presumably should have become apparent during preparation. The project suggests two lessons. First, it confirms once again the value of a pilot-project approach. Notwithstanding the experience with Pujal Coy-II, project design, organization and implementation benefited greatly from the experience with the preceding pioneering tropical agriculture project in the area. Second, complementary private sector investment is necessary in the case of production of fruits and other perishables for market. The requirements for timely and skillful processing and marketing are best met through private undertakings. The project would have been more successful if this had been recognized and encouraged at the outset rather than at the conclusion. The ICR is satisfactory. No audit is planned.