Ecuador - Livestock Development Project

RESTRICTED Report No. TO-58Za This report was prepared for use within the Bank and its affiliated organizations. They do not accept responsibility for its accuracy or completeness. The report may not be published nor may it be quoted as representing their views. INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT INTERNATIONAL DEVELOPMENT ASSOCIATION LIVESTOCK DEVELOPMENT PROJECT ECUADOR RETURnN Is April 24, 1967 Projects Department  CURRENCY EQUIVALENTS U. S. $1 = 18.00 Sucres 1 Sucre = U. S. $0. 06 1, 000, 000 Sucres .= U.S. $55,600 WEIGHTS AND MEASURES Metric System  Soime of the mat,erials in this report have been arljusted to serve the purposes of the instructional needs of the Economic Development Insti- tute and thus differ from the contents of the original report as distributed on April 2LI, 1967. July 1, 196S'   E C U A D O R LIVESTOCK DEVELOPMENT PROJECT TABLE OF CONTENTS Page No. SUIOIRY .. i-ii I. INTRODUCTION. . . . . . . . . . . . . . . . . . . . 1 II. BACKGROUND . . . . . . . . . . . . . . . . . . . . . . 1 III. THE PROJECT . . . . . . . . . . . . . . . . . .. .. . a A. General Description . . . . . . . . . . . . a. . a B. Detailed Features . . a . . a . . . . . . . . . .. . 5 C. Cost Estimates. . . . . . . . . . . . . . . . . 6 D. Proposed Financing. . . . . . . . . . . . . 7 E. Disbursements . . . . . . . . . .. . .. . 8 F. Operating Results *. . . *a. . . . .. .. . . IV. ORGANIZATION AND MANAGEMENT . . ............. 9 V. BNIEFITS AND JUSTIFICATION. . .........:. -2 VI. CONCLUSIONS AND RECONMENDATIONS . . . . . . . . . . . 13 This report is based on the findings of an appraisal mission to Ecuador in September 1966, composed of Messrs. W. Schaefer- Kehnert, F. Knobel, and E. Lamers, fir. F. Thomas (FAO), and Mr. H. Hughes (Consultant).  -2- ANNEXES 1. The Banking System 2. Total Investment Program 3. Administration Budget 4. Development of a Typical Farm 5. Projected Cash Flow of Central Bank 6. Projected Cash Flow of Participating Banks 7. Organization Chart 8. Duties, Responsibilities and Authorities of the Project Director 9. Flow of Incremental Costs and Benefits liAP  E C U A D O R LIVESTOCK DEVELOPMENT PROJECT SUMMARY (i) The Government of Ecuador has requested a Bank loan to help finance the first stage of its livestock development program which aims initially at the improvement of its beef cattle industry. The country has great potential both for increased productivity and for the expansion of the total area devoted to beef cattle production. There is also a pressing need to increase beef production to cover growing domestic and export demands. (ii) Because there is little experience in Ecuador of financing long- term cattle development, a phased approach would be used at this stage, confining the Project to specific areas. These areas have been selected for the highest land potential, adequate infrastructure, proximity to markets, and also have been limited to ensure adequate technical supervision. (iii) The Project is directed mainly at on-farm improvements such as land clearance, pasture renovation, fencing, water supplies, yards and dips, machinery and improved breeding stock. These improvements would result in an increase in total cattle numbers and herd productivity, tlhus leading to greater output. (iv) It is expected that about 240 beef cattle farms would participate in the Project. Long-term developmental credit to farmers of 8 to 12 years is envisaged. Investment on each ranch would be spread over three years. (v) The coordination and supervision of the Project would be carried out by a7Project Commission composed of representatives from the National Planning Board, the Ministry of Agriculture, Central Bank, participating banks and the Coastal Cattlemen's Association. A Project Director, satisfactory to the Bank, who would be appointed by and responsible to the Project Commission, would have the technical responsibility for implementation of the Project. Technical assistance to farmers would be provided by qualified livestock technicians under the supervision of the Project'Director. This group would also be responsible for assisting farmers to prepare development plans, for recommending these to the banks for lending and for supervising the execution of farm-development plans for which loans are made. The Participating Banks would process these loans according to their normal procedures.  - ii - (vi) The Project is estimated to cost a total of about US$6.8 million of which US$6.4 million or 94 per cent would be for farm development, and the balance of US$0.4 million or 6 per cent for technical services including seed multiplication. The foreign exchange component amounts to US$1.5 million or 22 per cent of total project cost. The Bank loan would cover 59 per cent of the total project cost. The balance would be provided by participating banks (about 22 per cent) and farmer loan recipients (about 19 per cent). (vii) The Project is technically sound and economically justifiable. The administrative arrangements would be satisfactory. Expected benefits to the participating farmers and to the national economy are substantial in the long-term and the Project would be the first step in a greater overall program. The Project is suitable for a Bank loan of Us$4.o million, repayable over an 18-year term, including a 6 year grace period. The borrower would be the Government of Ecuador and the loan would be channeled through the Central Bank to the National Development Bank (NDB) and other participating banks.  E C U A D O R LIVESTOCK DEVELOPMENT PROJECT I. INTRODUCTION 1. The Government of Ecuador has requested a Bank loan to help finance the first stage of its livestock development program which aims initially at the improvement of the beef cattle industry. Several Bank missions visited Ecuador between October 1965 and June 1966 to assist the National Planning Board in preparing a development project. This appraisal report is based on the findings of a mission which visited Ecuador in September/Octqber 1966 composed of Messrs. W. Schaefer-Kehnert, F. Knobel and E. Lamers (of the Bank), Mr. F. Thomas (of FAO), and Mr. M. Hughes (Consultant to the Bank). II. BACKGROUND 2. Ecuador is one of the smallest countries in South America. It is also one of the poorest in terms of income per capita, but it possesses rich natural resources for agricultural production and is wqll favored in terms of soil and rainfall. Ecuador is predominantly an agricultural country and approximately 65 percent of the present population of 5.2 million is rural. Agriculture, including forestry and fishing, now contributes 34 percent of the Gross Domestic Product and livestock accounts for about one-fourth of total agricultural production. 3. There are three geographic divisions in the country: the Pacific Coastal Plain (Costa), the Central Mountains with associated elevated valleys (Sierra), and the lower-lying area east of the Andes (Oriente). (See Map). 4. ?he Coastal Area in which the proposed project is located represents about one-fourth of the total land area of Ecuador. It has about 3.3 million ha suitable for agricultural purposes, 65 percent of which are in production, with about one million ha in improved and natural past