Guyana - Livestock Project

RETURN TO RESTRICTED REPIORTS DESK FL l~~ Report No. PA-61a WITHIN FILE COPY, ONE WEEK 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 The report may not be published nor may it be quoted as representing their views.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 BEEF CATTLE PROJECT GUYANA November 9, 1970 Agriculture Projects Department  CURRENCY Guyanese dollars (G$) US$1 = G$2.0 G$l - US$0.50 G$1,000,000 = US$500,000 WEIGHTS AND MASURES (British System) 1 pound. (lb) = 0.453 kilogram (2,2h0 pounds 1= long ton (ton) 5 (1.016 metric ton 1 short ton (sh ton) - (2,000 pounds (0.907 metric ton 1 mile (mi) 1.609 kilometers 1 acre (ac) = 0.h05 hectare (640 acres 1 square mile (sq mi) = (2.590 square kilometers (258.99 hectares 1 Imperial gallon (4Mg)= h.7 liters ABBREVIATIONS FM1D - Foot and Mouth DiseasA GDP - Gross DDmestic Prodact IDA - International Development Association LAC - Livestock Advisory Committee LDCo - Livestock Development Company LDF - Livestock Development Fund LPD - Livestock Projects Division UK - United Kingdom  GUYANA BEEF CATTLE PROJECT TABLE OF CONTENTS Page No. SUMMARY AND CONCLUSIONS ......................... i I. INTRODUCTION ........ ............................ 1 II. BACKGROUND .......... ............................ 2 A. General ....... .......................... 1 B. The Agricultural Sector .... ............. 3 C. The Beef Cattle Sub-Sector .... .......... 4 III. THE PROJECT ............................ 6 A. General Description ..... ................ 6 B. Project Areas and Land Tenure .... ....... 7 C. Detailed Features ...... ................. 8 D. Organization and Management .... ......... 11 E. Cost Estimates .......................... 12 F. Financing ....... ........................ 14 G. Procurement ...... ....................... 14 H. Disbursement ...... ...................... 15 I. Accounts and Audit ..... ................. 15 J. Lending Operations ..... ................. 16 IV. MARKETS, PRICES AND PRODUCER BENEFITS .... ....... 17 V. ECONOMIC BENEFITS AND JUSTIFICATION .... ......... 19 VI. RECOMMENDATIONS ....... .......................... 19 This report ts based on the findings of an IDA appraisal mission to Guyana In February/March 1970, composed of Messrs P.G. Nelson, R. Milford (IDA), C. Amorin (Consultant Economist) and H. Kelly (Cooperative and Marketing Consultant).   ANNEXES 1. Banking and Credit 2. The Guyana Beef Cattle Industry 3. Beef Cattle Marketing 4. Types of Enterprise and Cooperative Group Ranches 5. Coastal and LDCo Coastal Ranches - On-Ranch Investment 6. Coastal Ranches (7,500 ac) - Herd Projection 7. - Sales, Purchases, Expenses and Net Revenue 8. - Financial Projection 9. Rupununi Commercial, Amerindian and LDCo Ranches - On-Ranch InvestTment 10. Rupununi Commercial and Amerindian Ranches (64,000 4c) - Herd Projection 11. - Sales, Purchases, Expenses and Net Revenue 12. - Financial Projection 13. LDCo Coastal Ranch (20,000 ac) - Herd PrqJections 14. LDCo Rupununi Ranch (200,000 ac) - Herd Projection 15. LDCo - Sales, Purchases, Expenses and Net Revenue 16. LDCo - Financial Projection 17. Cost of Technical Services 18. Draft Terms of Reference for Project Director and Deputy Project Directors 19. Project Cost 20. Livestock Development Fund - Cash Flow 21. Estimated Quarterly Disbursement of IDA Credit 22. Rate of Return to the Economy CHART - Project Organization MAP   GUYANA BEEF CATTLE PROJECT SUMMARY AND CONCLUSIONS i. This report is on the appraisal of a Project for a first stage in the planned development of Guyana's beef cattle industry. Guyana had a small beef export trade, but the industry has been declining, largely because of poor management and the slaughter of young stock, and Guyana now imports beef. It has been hampered also by absence of long term land title, shortage of long term credit, and lack of experience in modern ranching methods. Local cattle are available for ranch development, if they can be mobilized; and large areas are suitable for ranching. Some of these areas could be used for sugar or rice, the two principal agricultural products; but market prospects for these products are doubtful and large sums would need to be spent on drainage and irrigation to prepare the land for them. Ranch development is the more attractive immediate use. ii. About 70% of Guyana's 260,000 cattle are in the Coastal Savanna. A special and important feature of the Project is the mobilizing of coastal cattle owners and their stock into commercial ranching enterprises on new land under skilled management. At least 10 coastal groups, each comprising 10-50 cattle owners, say they would definitely participate and many others are interested. Without the Project, it is very unlikely that they would come together, and the cattle industry would not progress. A cautious approach is proposed, however, and only an estimated 25 private ranches, 15 coastal and 10 elsewhere, would be included in this first phase. They would be owned by individuals, partnerships, companies or cooperatives. In addition, two ranches owned by the newly formed Livestock Development Co Ltd (LDCo - Government and commercial partners) would be included. iii. The proposed IDA credit of US$2.2 million would be about 50% of the estimated US$4.4 million equivalent project cost. US$1.8 million, or about 82% of the credit, would finance the foreign exchange component (40% of total cost). The balance of US$0.4 million, 18% of the credit, would finance local currency expenditures. Government would contribute about 14%; ranches (and land clearing contractors) and commercial banks about 18% each. This would be the Bank Group's first direct lending for Guyana agriculture though a Bank loan was made to the Credit Corporation (which does some agricultural lending) in 1961 and repaid in 1969, and a US$5 million loan was approved in 1968 for Sea Defense, which essentially protects agricultural production.  ii iv. The credit would be made to the Government of Guyana, which would bear the foreign exchange risk. Government would set up a Livestock Development Fund (LDF), Lo be administered by the Bank of Guyana as Trustee, and transfer to it the funds needed to rediscount commercial bank loans and run the project. v. Commercial banks would lend to project ranches for 12 years, including 4 years' grace, at 9 1/2% per year, of which 1/2% would he passed on as service fee to the Bonk of Guyana by way of contribution to the costs of its Livestock Projects Division (LPD). They woulld also lend to clearing contractors (for purchase of imported machinery) for 5 years, including 1 year's grace, at 9%. These rates compare with the 1969 average for all lending in Guyana, mostly short term, of 8 1/2%. Commercial banks would rediscount 75% of their project loans with LDF at 6%; and IDA would reimburse to LDF the amounts so rediscounted (82% of the proposed credit). IDA would also finance the foreign exchange cost of LPD (13% of the credit) and of studies for further development of the livestock industry (5%). vi. Loans to project ranches would be used to finance fencing, water, pasture establishment-, agricultural. machinery, ranch buildings and other investment items, wheld would nost 1-7 'e bought through existing commercial channels. Internatiornal competltive bidding would not be appropriate because the scale cf-i individual investmenit is too small, and the variety too great, for bhilk procurement. vii. The Project would lead to improvenment and upgrading of Guyana's beef cattle industry and ;give it important stimulus, both by example and through the supply of surplus breeding and fattening stock. It would involve the commercial banks for the first time in long term lending for agriculture. It would increase net beef production after about three years, saving imports and possibly leading to exports. viii. Returns on incremental investment would be satisfactory, both to ranching enterprises (13% to 21% depending on location and type) and to the economy of Guyana (21%). Subject to assurances, the Project is suitable for an IDA Credit of US$2.2 million.  GUYANA BEEF CATILE PROJECT 1. INTRODUCTION 1.01 The Governmenxt of Guyana seeks IDA finance for a beef cattle project, a first stage in the planned development of the industry. Prospects for beef cattle development were recognized by a Bank economic mission in October/Navew)er 1966. 1/ An FAO livestock reconnaissance mission visited Guyana in June/July 1968. The Project was prepared in July/December 1969 by a Government Livestock Prepaiation Coamission headed by Mr. C. Chisholm, an international consultant, assisted from time to time by Bank staff. This report is based 6tt the findings of an IDA appraisal mission to Guyana in February/Marcb 1970, composed of Messrs P.G. Nelson, R. Milford (IDA), C. Arnorin (Consultant Economist) and H. Kelly (Cooperative and Marketing Consultant). 1.02 Government sought an IDA credit of US$4 million to finance a project estimated to cost US$7 iil1ion. The nroject ut.bmitted included investment in 24 coastal ranches averaging 10,000 ac, 3 Ititermedliate Savanna ranches, and a coastal ranch of 20,('100 ac to bp owned by a newly formed Livestock Development %oQmpany (LDCo), together with initial herds. It was agreed with Government that the equilent of about 15 coastal ranches of 10,000 ac, of which 7,500 ac (average) would be developed initially, would be a more realistic first phase target and that, in general, the Intermediate Savanna is not yet ready for development. It was also igreed that 10 private ranches (average 64,000 ac) and one LDCo ranch of 200,000 ac in the Rupununi Savanna (see Map) be included. The revised project is astimated to cost US$4.4 million. 11. BACr5GROUND A. General Geogaphy 2.01 Guyana is on the northeastern Atlantic cost of South America. Independent since 1966, it became a "Cooperative Repu' .e" withln the 1/ "An Appraisal of the Development Program of Guyana", WH-169, q:-il 21, 1967; PPt 6 and 14.  - 2 - British Commonwealth In February 1970. Bounded by Veaezuela, Brazil and Surinam, its 83,000 sq mi. (about the same as UVi) divides Into foiur natural regions: (a) Coastal Savanna: 270 mi of narrow fertile coastal plain, mostly below sea level and seasonally flooded. Soils range from heavy black clay in lower areas to sandy loam in Islands of forest. About 95% of the population lives in this 2,500 sq mi (3% of the land area) producing 80% of Gross Domestic Produtct (GDP). The region has about 70% of the country's cattle; (b) Intermediate Savanna: a sandy clay belt, southwest of the coastal plain; of low fertility and sparsely populated; (c) The Guyana Mountains: a high range that runs NW/SE and extends into Surinam and French Guiana; and (d) Rupununi Savanna: in the southwest interior, with soils of generally low fertility and poor moisture retention. Ranch- ing is the main industry in this region and it has about 25% of the country's cattle. Climate 2.02 Coastal rainfall averages 80 in per year, is heavy from May to mid-August and light from November to February; temperature ranges from 750 to 80 F. Rupuntiunl Savanna rainfa.l averages from 50 to 60 in, almost all between May and Augulst; temperature ranges from 70