for official use only - world...

Document of

The World Bank

FOR OFFICIAL USE ONLY

Report No. 13824

PROJECT COMPLETION REPORT

MEXICO

CHIAPAS AGRICULTURAL DEVELOPMENT PROJECT(LOAN 2526-ME)

DECEMBER 28, 1994

Natural Resources Management and Rural Poverty Operations DivisionCountry Department IILatin America and Caribbean Regional Office

This document has a restricted distribution and may be used by recipients only in the performance oftheir official duties. Its contents may not otherwise be disclosed without World Bank; authorization.

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CtURRENCY EQUIVALENTS

Currency tJnitMexican Peso (Mex$)

Currency exchange ratts during Implementation

Year MexS/IJSS

1986 575.41987 1353.71988 2282.01989 2464.01990 2821.01991 2950.01992 3050.01993 3.1

FISCAL YEAR

January I - December 31

WEIGHTS ANI) MEASURFS

I meter (m) = 3.28 feet (ft)I kilometer (km) = 0.62 mile (mi)I hectare (ha) = 10,000 m2 = 2.47 acresI square kilometer (km2) = 0.38 square miles (mi2) = 100 haI metric ton (m ton) = 2,205 pounds

ABBREVIATIONS AND ACRONYMS

AGSAL Agricultural Sector Adjustment LoanATICOCI I Chiapas Coast Integrated 'I'echnical Assistance

(Asesorfa Tecnica Integral de la Costa de Chiapas)ATP Agricultural Technology Project (Loan 3465-ME)CNA National Water Commis.sion

(Comisi6n Nacional de Agua)CADRI Support Centers for Integrated Rural D)evelopment

(Centros de Apoyo al Desarrollo Rural Integral)CIE'S Center for Ecological Research of the Southeast

(Centro de Investigaciones Ecol6gicas del Sureste)CONAFRUT' National Fruit Growing Commission

(Comisi6n Nacional de Productores de Frutas)COPLADE State Development Planning Committee

(Comite Eslalal de Planificaci6n para el Desarrollo)CI'NI I Commission for the National I lydrau!ic Plan

(Comisi6n del Plan Nacional Ilidraulico)I)l)R Rural Development D)istrict

(Distrito de Desarrollo Rural)D)RD DecentralizXation and Regional Development Project

(Proyecto de Descentrali7aci6n y Desarrollo Regional)GOM Government of MexicoIMTA Mexican Institute of Water T'echnology

(Instituto Mexicano de 'recnologla de Aguas)INIFAP National Institute for Forestry, Agriculture and Livestock Research

(Instituto Nacional de Investigaciones Forestales, y Agropecuarias)PACI'0 Economic Solidarity PactPECF Economic Growth and Stabilization Pact

(Programa Econ6mico de Crecimiento y Estabili7aci6n)PRO(''CATI Agriculture Training, Extension and Research Program

(Programa de Capacitaci6n, Asistencia 'Itecnica e Investigaci6n)PROD)ERI'T'I I Program for Integral Development of the I lumid Tropics

(Programa de Desarrollo Rural Integral para el Tr6pico I lumedo)SAR Staff Appraisal ReportSARI-I Secretariat of Agriculture and I lydraulic Resources

(Secretarfa de Agricultura y Recursos I lidraulicos)SEDESOI. Secretariat of Social Development

(Secretarfa de I)esarrollo Social)SE'DUEl Secretariat of Urban l)evelopment and Elcology

(Secretarfa de Desarrollo UJrbano y EcologIa)

FOR O()FFICIAL USE ONLYTHE WORLD BANK

Washington, D.C. 20433U.S.A.

Office of Director-GeneralOperations Evaluation

December 28, 1994

MEMORANDUM TO THE EXECUTIVE DIRECTORS AND THE PRESIDENT

Subject: Project Completion Report on MexicoChiapas Agricultural Development Project (Loan 2526-ME)

Attached is a copy of the report entitled Project Completion Report onMexico - Chiapas Agricultural Development Project (Loan 2526-ME) prepared by Latin America andthe Caribbean Regional Office. Part II was prepared by the Borrower.

The project packaged investments in flood control, drainage and access roads withimprovements in extension and research services. The objective was to expand the cultivated areaand productivity of crops on small farms on the coast and in the central valley in Chiapas State.Production increased in both areas, mostly mangos and bananas on the coast and maize and beansin the central valley. The gains were attributed to better water control. The technical agriculturecomponent was less successful: the extension service was dismantled during the project period, in anattempt, until now of limited success, to decentralize and privatize these activities. The PCR doesnot clarify whether the production increases occurred mostly on the small farms and ejidos targetedat appraisal, or on larger commercial farms.

The project outcome is considered satisfactory. However, maintenance of the watercontrol and road works has been inadequate, and their sustainability is uncertain. The desired levelof coordination between the central and state governments was not achieved, and other institutionalprogress was disappointing. The PCR is adequate, though it should have identified the actualbeneficiaries.

An audit is planned.

Attachment

This document has a restricted distribution and may be used by recipients only in the performance of their official duties. Itscontents may not otherwise be disclosed without World Bank authorization.

MEXICO FOR OFFICIAL USE ONLY

CHIAPAS AGRICULTURAL DEVELOPMENT PROJECT

(Loan 2526-ME)

PROJECT COMPLEI1ON REPORT

Table of Contents

Page No.

Preface . ......................................................... iEvaluation Summary. ii

PART I: PROJECT REVIEW FROM BANK'S PERSPECTIVE

1. Project Identity. 12. Background. 13. Project Objectives and Description. 44. Project Design and Organization. 55. Project Implementation. 86. Project Results .107. Project Sustainability .128. Bank Performance .139. Borrower Performance .1310. Project Relationship .1411. Project Documentation and Data .1412. Lessons Learned .15

PART II: PROJECT REVIEW FROM BORROWER'S PERSPECTIVE .17

PART m1: SUMMNARY OF STATISTICAL INFORMATION .25

Table 1. Related Bank Loans .26Table 2. Loan Data .27Table 3. Cumulative Estimated and Actual Loan Disbursements .29Table 4. Project Costs and Financing .30Table 5. Project Implementation Targets .31Table 6. Project Benefits .33Table 7. Status of Legal Covenants .40Table 8. Use of Staff Resources .43

EBRD MAP: 18236

This document has a restricted distribution and may be used by recipients only in the performance of theirofficial duties. Its contents may not otherwise be disclosed without World Bank authorization.

MEXICO

CHIAPAS AGRICULTURAL DEVELOPMENT PROJECT,(LOAN 2526-MIE)


PREFACE

This is the Project Completion Report (PCR) for the Chiapas AgriculturalDevelopment Project (Loan 2526-ME) in the amount of US$90.0 million equivalent, whichwas approved on April 30, 1985. The Guarantee and Loan Agreements were signed on July16, 1985. A total of $32.0 million were canceled from the loan amount in June 1988(US$22.0 million) and August 1988 (US$10.0 million). The loan was closed, fullydisbursed, on December 31, 1993, nine months behind schedule.

The PCR was jointly prepared by the Natural Resources Management and RuralPoverty Operations Division (LA2NR) of the Latin America and Caribbean Regional Office(Preface, Evaluation Summary, Parts I and III) and the Borrower (Part II).

Preparation of this PCR has been based on the findings of a October 1993 mission toMexico by Bank Staff, interviews with government officials and other Bank staff, and thereview, inter alia, of the project Staff Appraisal Report (SAR), the President's Report, theLoan and Guarantee Agreements, supervision reports, correspondence between the Bank andthe Borrower, internal Bank memoranda, and Borrower reports.

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MEXICO


EVALUATION SUMMARY

Project Objectives and Description

1. The Mexican Chiapas Agricultural Development Project (together with the parallelChiapas Rural Roads Project-Loan 2525-ME) constituted the first phase of the Bank's supportfor the Chiapas Development Plan. The Chiapas Development Plan was designed to addressthe constraints to the development of the state--a depressed social environment, underutilizedagricultural resources and lack of adequate communications --through the integration of aseries of simultaneous economic and social development programs. Both projects wereapproved in April 30, 1985. The Bank's agricultural sector goals were to help increaseagricultural productivity in land under crops, particularly of small farmers, complementinfrastructure investment for support services, and promote employment-generatinginvestments in the rural area (see para 3. 1). The need to further these goals was acute inChiapas, one of the least developed states in the country. The inflow of Guatemalanrefugees to the region in the early 1980s had heightened social unrest, mainly in theindigenous areas on the central plateau (see para 2.2). Signed on July 16, 1985, the Loanbecame effective on April 4, 1986.

2. The Agricultural Development Project was designed to assist the Government ofMexico (GOM) achieve its objectives of increasing: (a) the area available for rainfed cropproduction and intensification of crop and livestock production; (b) agricultural productionand productivity; and (c) rural employment and family income. Project activities were:

(a) Improve infrastructure by constructing river control dikes, drains and relatedservice roads.

(b) Strengthen administration of the rainfed districts operations by providing fieldoffices, housing, workshops, equipment and vehicles for operation andmaintenance.

(c) Provide financial assistance for on-farm works, including drains, land clearing,and land smoothing.

(d) Provide for construction of soil conservation structures.

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(e) Strengthen production support services, extension, research, training,fellowships, and technical services (including national and internationalconsultants).

(f) Conduct studies (basic, feasibility, marketing, environmental andsocioeconomic) to provide data for this project and future development in thestate (see para 3.2).

Implementation Experience

3. Project implementation was satisfactory after delays in finalizing the project'sinterinstitutional coordination agreement to organize implementation. The mainimplementation weaknesses were weak organization and a lack of counterpart funds duringthe first half of the project's life. In early years counterpart funds ranged between only 20%and 30% of funds required for full implementation. It was only in 1990, when the NationalWater Commission (CNA) took over as the lead implementing agency over SARH, thatcounterpart funds became adequate, and the pace of implementation picked up. Despite theinitial delays, the project was completed in over seven and a half years, only nine monthsbeyond the original loan closing date (see para 5.7). The loan amount was fully disbursed,less a cancellation of $32 million made in 1988.

4. A major implementation issue was a weak implementation organization. Theanticipated coordination agreement to allow decisions to be taken at the State level neverbecame operational, because no state funds were required and therefore the StateDevelopment Planning Committee (COPLADE) had neither the authority nor the interest toplay a coordinating role (see para 4.8). The weakness of the implementation organizationwas further aggravated by the unforeseen four reorganizations of the Secretariat ofAgriculture and Hydraulic Resources (SARH), the implementing agency, during the projectlife. Although this could not be predicted at the time of project design, it affected theintegrity of both the project concept, resulting in overemphasis on works by CNA, and of theexecution of environmental studies (see paras 5.4 to 5.7).

Results

5. Project objectives regarding infrastructure-supported production and productivity gainswere generally achieved (see para 6.1)'. The infrastructure component's objectives wereachieved at rates of 127% for dikes, 179% for roads, and 100% for drains and auxiliarystructures. Project impact on land use and yields was good (see para 6.2). Due to the 1988cancellation of 36% of the loan amount, only 64% of the target area was developed. Thisreduction notwithstanding, the project-financed infrastructure allowed a net increase of 10%of the project area under agriculture. The main changes were in area under beans (4,000ha), bananas (6,000 ha), mango (9,000 ha) and livestock (8,000 ha). Crops with decliningarea included soybeans (-14,000 ha) and cocoa (-2,000 ha) (see para 6.3).

1 The Chiapas Development Plan objective to reduce inter-regional income disparities was implicitly abandoned withthe cancellation of the Chiapas Rural Roads Project in 1988 (see para 3.1).

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6. Productivity. Productivity and production intensity gains were impressive. In thecoast there were large yield gains in basic grains, perennials and livestock. Banana yieldson the coast at 34 tons/ha are among the highest in the world and revenues from this cropaccount for about half of primary production values in the area. In the Central Depression,the largest yield gains were in basic grains, fruits and vegetables and livestock. A totalproduction increase of 50% was achieved with a 10% net addition in area. Much of theintensification occurred in maize, papaya, mango and livestock (see para 6.4). Average netpresent values calculated for SAR farm models and assuming actual productivity changeswhile other variables remain the same were all highly positive except for the smallest maizeand bean production unit (see paras 6.5 and 6.6).

7. Employment. Although there are no specific data on the impact of the project onemployment, the 10% net increase of area under agricultural production and intensificationwould indicate that employment impact was positive (see para. 6.7).

Project Sustainability2

8. Project sustainability depends upon: (a) Balancing new infrastructure construction vs.maintenance. A strong emphasis on new construction must be tempered by maintenancerequirements of the infrastructure network. (b) Cost recovery and service provision policies.Transfer of infrastructure maintenance to users groups and switch to private extension mustbe gradual and include training for service providers. Small rainfed farmers should continueto receive extension support. (c) Effective environmental monitoring to identifyenvironmental impacts and implement mitigation measures when needed (see paras 7.1 to7.4).

Findings and Lessons Learned

9. The project imparted two important lessons. The main one is that an adequateimplementation organization with continuity and proper interinstitutional coordination isnecessary. The implementing agency must be responsible for overall implementation andhave the authority and means to establish priorities for other line agencies. This lesson hasbeen applied in the Decentralization and Regional Development (DRD I, Loan 3310-ME)(see para 12. 1).

10. A second lesson is that an adequate project budget is necessary for successfulimplementation. While the project appeared to have had a strong initial commitment fromthe government at negotiations, that commitment was not respected until 1990. The sameproblem has occurred with other Bank projects (e.g. the Agricultural Technology Project --ATP, Loan 3465-ME) and is being addressed at the institutional level, i.e., between the Bankand the Borrower in a dialogue that covers all projects and sectors (see para 12.2).

2. The project, as implemented, did not include the areas where civil unrest occurred in 1994. Therefore,sustainablity of project investment is not expected to be affected by those events.

MEXICO



PART I: PROJECT REVIEW FROM THE BANK'S PERSPECTIVE

1. Project Identity

Project Name: Chiapas Agricultural Development ProjectLoan No.: 2526-MERVP Unit: Latin America and the CaribbeanCountry: MexicoSector: Agriculture

2. Background

2.1 Annual GDP growth averaged 6.5% from 1965 to 1980 in Mexico, but some areas ofthe country remained economically depressed. An import substitution strategy was followedduring this period, but as the easier possibilities of the strategy became exhausted, theGovernment of Mexico (GOM) attempted to stimulate the economy by expanding publicsector, investment and expenditures and increasing market interventions. The strategy ofdomestic stimulus failed, and in 1976 Mexico experienced a serious financial and economiccrisis. The major oil discoveries in 1977 and an expansion of foreign borrowing temporarilyrelieved the serious financial and economic problems of the mid-1970s and led to anoverheating of the economy. Rising world interest rates and the simultaneous decline of oilprices forced the government to declare a moratorium on its external debt service in 1982.Associated with the government's growing indebtedness, inflation escalated from 29% in1981 to 159% in 1987, real wages fell, and GDP growth averaged only 1% in the 1980s.

2.2 Rapid economic expansion between 1977 and 1982 exacerbated regional imbalances.As industrialized oil-producing states reached higher standards of living, the most depressedareas in the south (among them Chiapas) remained largely rural and poor. At least 65 % ofthe population in these states is rural, largely dependent on agriculture for subsistence.Nevertheless, Chiapas is rich in unexploited agricultural potential. In the 1980s, civil unrestin neighboring Guatemala pushed some of its indigenous Mayan people to seek refuge in theareas of like ethnic groups in the Chiapas central plateau, which heightened for GOM thepriority of development in Chiapas.

2.3 The government that came to power at the end of 1982 began measures to redress thecountry's financial and economic deterioration, including through special efforts to promotedevelopment in depressed regions. These measures included major stabilization programs,

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major trade reforms--notably joining the General Agreement on Tariffs and Trade (GATT) in1986--and an Economic Solidarity Pact (PACTO) in 1987, renewed in 1988 and 1993 as theEconomic Stabilization and Growth Pact (PECE), and which is still in force. Thesemeasures have helped reduce inflation from 159% in 1987 to 25% in 1990, and less than10% in 1993. Among the special efforts to correct regional imbalances was the ChiapasDevelopment Plan. The Chiapas Agricultural Development Project and parallel ChiapasRural Roads Project, (Loan 2525-ME), were the Bank's contribution to the implementationof the first phase of this Plan.

The Agricultural Sector

2.4 Mexican agriculture expanded at over 4% annually after World War II until the mid-1960s, in excess of the population growth rate of about 3%. Output growth resulted largelyfrom the expansion of cultivated area: irrigated area increased by 4.5% annually from 1947to 1965, and total harvested area grew at more than 6.3%. However, between 1965 and1980 agricultural GDP averaged around 3%, and was less than 1 % during the 1980s. Theslippage in the agriculture growth rate was due to limits on suitable land for expansion, therising cost of irrigation development, the contraction in agricultural credit availability, andthe cumulative effects of the inefficient agricultural policies of the past three decades.

2.5 The main agricultural policy objective in the 1950s and 1960s had been to maintainlow prices for consumers and high prices for producers. To reach that objective, Mexicohad a tightly state-controlled agricultural policy with major interventions in production,credit, technology, inputs, storage, and processing. Principal policies included:(a) guaranteed prices of all major crops (maize, beans, wheat, barley, rice, sorghum,soybeans, safflower, cottonseed, copra, sunflower and sesame), thus distorting resourceallocation; (b) support to inefficient parastatals in the production, processing, and marketingof cotton, tobacco, coffee, feeds, tropical fruits, seeds, cocoa, and basic grains (maize,beans, wheat, sorghum, and soybean), which also distorted resource allocation; (c) publicinvestments in land clearing, that may have pushed agriculture onto economically andenvironmentally marginal lands; (d) heavy subsidies for credit, fertilizer and pesticides,irrigation, machinery, and livestock development, which induced allocative efficiency costs;and (e) fixed prices of basic foods, implying subsidies to consumers, and which covered asubstantial portion of agricultural production (over 50% in 1987).

2.6 Other Government policies had indirect negative effects on agriculture. Anovervalued exchange rate discriminated against the production of agricultural tradeables.Quantitative restrictions affected 100% of agricultural and industrial production, thusdamaging the domestic terms of trade for agriculture. Input subsidies and the cost ofmaintaining subsidized agricultural parastatals added to the fiscal deficit. The net effect ofindirect Government intervention was to suppress private initiative in agriculture and toretard growth.

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2.7 The economic crisis of 1982 eliminated or at least reduced some of the dual subsidiesto producers and consumers, and GOM began major agricultural policy reforms in the mid-1980s. Its chief goals were to:

(a) improve resource allocation efficiency by strengthening market mechanismsand cutting government intervention in markets;

(b) increase productivity by raising public and private investment; and(c) reach the poorest consumers by increasing income transfers through targeted

food subsidies; and(d) put the rural financial system on more of a commercial basis.

2.8 While further reform is required in rural finance and public expenditure allocations, aculmination of these reform and adjustment efforts was the initiation in early 1994 of thePROCAMPO program, a de-linked income support program targeted to producers of cotton,rice, cardamon, barley, beans, maize, sorghum, soybeans, and wheat.

The Role of the Bank

2.9 The Chiapas project was approved at a time when, because of the difficult structuralproblems in the sector and the sector's crucial importance for the one-third of the nation'spopulation living in the rural areas, agriculture was a principal area of Bank involvement inMexico. Over the ten years before the Chiapas Agricultural Development Plan was approvedin April 1985, the Bank had played an important role in Mexican agriculture, lendingUS$2,374 million for 16 projects. To deal with the financial and economic crisis beginningin 1982, there was a strong need for structural adjustment measures. For policy reasons,however, the GOM did not opt for such support, preferring that medium-and long-termissues be addressed through a series of sector adjustment loans.' Such sector adjustmentoperations formed a policy package to build a supportive framework to increase the privateinvestment necessary to spur growth. The first such loan for agriculture was the AgriculturalSector Adjustment Loan (AGSAL I - Loan 2918-ME) approved in March 1988 for US$500million, followed in June 1991 by AGSAL II (Loan 3357-ME) for US$400 million. Theseloans were associated with a broad policy dialogue on agricultural prices, trade, foodconsumption and input supply policies.

2.10 Prior to and after to the Chiapas Agricultural Development Project, the Bank madeseveral investment loans to help restore agricultural growth. Two of these helped to improvehumid tropical agriculture. The Integrated Development Project for the Humid Tropics(PRODERITH I, Loan 1553-ME, approved for US$56 million in April 1978) sought toexploit the potential of the wetter areas by investing in drainage, roads, and agriculturalextension. This project showed that farmers could significantly increase their average yieldsof basic annual crops though better access to extension and through proper linkages betweenresearch and extension. A second phase of the project (PRODERITH II, Loan 2658-ME)was approved for US$109 million in March 1986. This project sought to extend the methods

1. See the Project Completion Report of the Agricultural Sector Adjustment Loan (Loan 2918-ME) (June 15, 1993)for a complete list of sector adjustment loans (including hybrid operations) to Mexico.

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and results of PRODERITH I to a wider area of tropical Mexico. The Chiapas AgriculturalDevelopment Project sought to apply PRODERITH principles more intensively in Chiapas.

2.11 The Bank supported several other agricultural operations designed to focusgovernment policy on public investments and to raise sectoral efficiency. The AgriculturalExtension Project (PROCATI, Loan 2859-ME) approved for US$ 20 million in June 1987,was designed as a pilot to strengthen agricultural extension and adaptive research. TheIrrigation and Drainage Sector Loan (Loan 3419-ME, approved for US$400 million inDecember 1991) is designed to make irrigated agriculture more efficient throughrehabilitation of works, new investment, and sectoral policy changes. An AgriculturalTechnology Project (ATP, Loan 3465-ME, approved for US$150 million in May 1992) seeksto strengthen agriculture technology generation and transfer, following the 1987 PROCATIloan. A Decentralization and Regional Development Project (DRD I, Loan 3310-ME,approved for US$350 million in March 1991) is assisting the government's largest povertyprogram in the four poorest states (Chiapas, Guerrero, Hidalgo and Oaxaca). An On-Farmand Minor Irrigation Networks Improvement Project (Loan 3704-ME, approved for US$200million in February 1994) has been designed to improve the efficiency and self-reliance ofthe irrigation subsector through shared investments by beneficiaries and the Government. Aproposed Rainfed Areas Development Project (RAD) has completed negotiations for a US$85million loan to improve agricultural productivity in rainfed areas through rural investment tosupport farm diversification and technology transfer.

3. Project Objectives and Description

3.1 The Chiapas Agricultural Development Project was designed as part of the Bank'scontribution to the execution of a multi-sectoral plan to develop Chiapas. Chiapas is one ofMexico's poorest and least developed states, with a per capita income of US$350, or 16% ofthe national average of US$2.250 in 1984. The Chiapas Development Plan, which wasprepared by the GOM and adopted in May 1983, aimed at addressing the constraints to thedevelopment of the state -- a depressed social environment and lack of communicationsinfrastructure and agricultural technology -- and was expected to be carried out in severalphases over a 15-year period. At the outset, the GOM planned to focus on acceleratingagricultural growth and improving the physical infrastructure, mainly roads, drains andauxiliary structures. A parallel Chiapas Rural Roads Project was presented simultaneously tothe Board.2 The linkage between these projects was aimed at reducing the regional incomedisparities in the state. The Chiapas Agricultural Development Project was in a differentarea of influence and did not include rural roads other than those to be built in directphysical connection with drainage infrastructure.

3.2 Project objectives were to increase: (a) the area available for rainfed crop productionand intensification of crop and livestock production; (b) agricultural production and

2. The USS22.0 milLion loan (Loan 2525-ME) was to provide the infrastructure required to assist in the execution ofa program to construct, rehabilitate, improve and maintain rural roads to support the planned agriculturaldevelopment activities under the Chiapas Plan. AD but 95% of the loan amount was canceled in 1988 becauseGOM did not follow subproject selection or processing priorities as agreed with Bank, and because GOM prioritieschanged from the rural roads priorities as identified during preparation.

productivity in land under crops, particularly for small farmers; and (c) rural employmentand family income. Project activities were designed to:

(a) improve infrastructure by constructing river control dikes, drains and relatedfarm service roads;

(b) strengthen administration of SARH's rainfed district operations by providingfield offices, housing, workshops, equipment and vehicles for operation andmaintenance;5

(c) provide financial assistance for on-farm works, including drains, land clearing,and land levelling;

(d) construct soil conservation structures;(e) strengthen production support services, such as extension and research, and

technical services (including national and international consultants); and(f) conduct studies (basic, feasibility, marketing, environmental and

socioeconomic) to provide data for this project and future development in thestate.

3.3 The project area originally included areas in the Coast, the Central Depression andthe Central Plateau. The coastal project areas were not defined other than that they be boundby the 300m and 5m above sea level (asl) contourlines: of these 255,000 ha, 90,000 ha wereto be selected for full development (on-farm works in addition to drainage infrastructure) onthe basis of agreed criteria. These criteria were that lands be occupied mainly by ejidos andsmall farmers, and be economically and environmentally suitable for agricultural production,and that the support services (credit, extension) be provided on a timely and adequatemanner. The areas in the Central Depression were well defined, and included Comitan,Suchiapa, San Miguel II and Margenes de Grijalva. The area in the Central Plateau was LosAltos (7,500 ha). The last two areas were dropped in 19886.

4. Project Design and Organization

4.1 The project's total estimated cost was US$181.6 million, of which US$90 millionwere to be financed by the loan. The project was designed to respond to specific problemsidentified in the Chiapas Development Plan, support the government policy of developing thepoorest areas, and meet project objectives (see para 3.2). Project objectives were shared byGovernment and implementing agencies. It had a clear conceptual foundation based on thePRODERITH I experience, particularly as already established in Acapetahua, which was alsoa Chiapas Agricultural Development sub-project area. The implementing agency was SARH,as in PRODERITH I. The project was appraised on the basis of extensive feasibilitiesstudies of most of the project area. Further feasibility studies were to be undertaken underthe project for a possible second phase project. Project components were: (a) Infrastructure;

5. SARH Districts provided technology generation and transfer services and were organized into irrigation andrainfed. Districts were later consolidated into Rural Development Districts (DDRs).

6. Thus, as implemented, the project did not include Central Plateau areas which in 1994 became the locus of civilunrest.

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(b) On-farm Development; (c) Agricultural Support Services; and (d) Other Related Servicesas described below.

4.2 Infrastructure (US$76 million or 42% of the total project cost). The projectincluded substantial work to control floods in the coastal areas from 5-300 meters asl and infive areas in the Central Depression and Plateau. These works included about 350 km ofdikes, with associated roads, to protect farmland and rural communities, 475 km of serviceroad construction and rehabilitation (complementing the Chiapas Rural Roads Project), 600km of drains to remove excess surface water and control the water table, and 300 km offarms service roads with drains and 300 auxiliary structures (fords, bridges, culverts,sediment traps and crossings).

4.3 On-farm development (US$21.4 million or 12% of total project cost). The projecthad envisaged GOM would provide medium- and long-term credit in the project areas,mostly in Los Altos, for the construction of field drains, terraces, land clearing andsmoothing, and soil conservation structures. It was estimated that about 100,000 ha wouldrequire some investment, 50,000 ha land clearing and that about one-third of the worksassociated with on-farm investment would consist of soil conservation works, which wouldbenefit the community and be financed by public funds. Most of the soil conservation workswould be in Los Altos, one of the poorest areas of the State, where holdings are small andfragmented (1 to 3 ha) on steep fragile soils unsuitable for cultivation without soilconservation structures.

4.4 Agricultural Support Services (US$31.5 or 17% of total project cost). Theseincluded research and extension. Research under the project was to foster closercollaboration with extension and more adaptive research to fit farmers' needs. Thecomponent was to be implemented by the National Institute for Research on Crops,Livestock, and Forestry (INIFAP), in collaboration with extension agents in SARH's rainfeddistricts and later, Rural Development District (DDRs). It was to be geared toward:improving yields of existing and non-traditional suitable crops to benefit from drainageinvestments; developing new varieties; improving farming systems and managementpractices; working more on forestry and livestock in marginal areas; and developingprofitable technical packages. A problem identified during preparation affecting the researchsystem was a lack of resources to cover operating costs. Under the project, that problemwas to have been resolved by having all of INIFAP's incremental costs related to the projectreimbursable under the loan. The public extension service operating in the project area wasto be expanded under the project to avail farmers of improved technology. The project wasto implement the intensive extension methodologies developed under PRODERITH I. Thenumber of extension agents in the project area was to increase from 169 to 571, which wouldbe appropriate to the expected increase in farm area and output resulting from the project.

4.5 Other Related Services (US$53.1 million or 29% of total project cost). Theseincluded:

(a) consultant services (180 man-months) to help SARH strengthen its operationson the areas of soil conservation and support services, environmental andsocioeconomic impact analysis and research, extension communications, andthe conduct of pre-investment studies;

(b) studies, including pre-investment, detailed farm soil surveys, bathymetric andhydrological surveys of the lagoons and permanent wetlands of the Coast,marketing requirements in the project area at full development, and periodicsocioeconomic and environmental reviews;

(c) monitoring and evaluation to analyze project execution, beneficiary acceptanceand response to the development investment, changes in the production system(cropping patterns, intensity and yields), and environmental and sociologicalchanges; and

(d) project implementation and administration, including the construction of officespace, storage and staff housing facilities, workshops, equipment forinfrastructure maintenance and vehicles for construction and productionoperations.

4.6 The project's total cost was to be financed by the Federal Government (49%),beneficiaries (1 %) and the Bank (50%). No financing was required from the Chiapas StateGovernment. Some 59% of the loan amount was assigned to infrastructure, 4% to on-farmdevelopment, 10% to agricultural development and 27% to other related services as opposedto 42%, 12%, 17% and 29% of total project cost.

4.7 Project Organization. The GOM stated during preparation (and later ratified in aSingle Development Agreement (Convenio Unico de Desarrollo for Chiapas) their intentionto use this project as a mechanism to decentralize development planning and implementationto the state level. SARH would be the implementing agency and would keep the StateDevelopment Planning Committee (COPLADE) informed of project activities forcoordination of planning and programming of future operations. Representatives ofproducers and federal, state and local government would constitute a sub-committee, underCOPLADE to coordinate and integrate the annual work program of each district, as well asmonitor and evaluate project progress. SARH would follow traditional organization,management, and execution lines used in its projects in oth- rainfed areas. Allinfrastructure design, tendering, construction and supervision would be carried out underSARH's Undersecretariat for Large-Scale Irrigation (which became the National WaterCommission --CNA-- in 1988) through the District Offices of the Resident Engineers. TheUndersecretariat for Agricultural Operations would carry out operations, maintenance andtechnical services for agricultural production through the rainfed districts where eachsubproject was located (Tapachula, Villaflores, Tuxtla Gutierrez, Comitan and SanCristobal). SARH's State Representative would be responsible for the supervision,monitoring and evaluation of each rainfed district subproject.

4.8 In retrospect, the project design and organization were based on a sound concept andan unrealistic --although desirable -- organization set-up. The project concept --of integratinginfrastructure and agricultural technology generation and transfer to increase farm incomeand employment -- was well internalized and understood by SARH, as it had been theimplementing agency of PRODERITH I. The timing was appropriate in that it wasconsistent to the demands from Chiapas (see para 3.1). But it was unrealistic to expectCOPLADE to have an active role for coordination and integrating work programs without

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having any in role in assigning project funds. This was not a determinant success factor inthis case.

5. Project Implementation

5.1 The loan became effective in April 1986, one year after Board presentation.Effectiveness was affected by the delay in finalizing an agreement to set up a specialsubcommittee in COPLADE to coordinate activities of the Chiapas Rural Roads and theAgricultural Development Projects. In fact, this difficulty foreshadowed futureimplementation organization problems because even when the agreement was signed by boththe Chiapas Rural Roads and Agricultural Development Projects implementing agencies, itnever became operational. COPLADE never played its foreseen role of coordinating agency(see para 4.7), principally because no state funds were involved in project financing.

5.2 Although project targets were met for the most part, implementation was marred by aweak organization unable to manage the overall program, and insufficient counterpart funds.After a slow start and as the new administration took office (1988), priorities had movedtoward macroeconomic adjustment and away from regional development programs. Thischange in priorities resulted in significant loan cancellations of US$32 million (36% oforiginal loan amount) in 1988, as well as the effective cancellation of the Chiapas RuralRoads Project. No official reprogramming of project targets followed the cancellations. In1990, CNA became the de facto project implementing agency. Together, these changes arereflected in variances between planned and actual project implementation of each component,as follows:

(a) changes in the project areas and in the quantity of works, mainly roads.Feasibility studies indicated that the minor work contemplated in the Margenesde Grijalva and Los Altos project areas (7,000 and 7,500 ha, respectively),would not yield the expected results in cropping patterns and production value,so these areas were dropped by the Government. A 1988 Bank supervisionvisit to Los Altos arrived to a similar conclusion. Road construction reached179% of target;

(b) non-implementation of the on-farm development component. Much of the on-farm works were to be carried out by SARH in Los Altos sub-project area,which was dropped (see para above). The remaining works were to befinanced by credit which, because of the restructuring of the public ruralfinancial system, did not become available (see para 2.7 (d));

(c) because of a reduction in the research and extension recurrent budget, and adrop in the number of extension agents (from 169 to 99) technology transferfrom INIFAP to farmers was not disseminated in a timely fashion (anexception was an INIFAP's Rosario Izapa's research staff's initiative toestablish demonstration plots in one project area). During implementationGOM changed its extension policy to promote private extension. To facilitatethe policy transition from public to private extension (see para 5.5) CNAprovided extension in Acapetahua through the Mexican Institute of Water

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Technology (under CNA), and later hired a private extension group, theIntegrated Technical Assistance for the Chiapas Coast (ATIOCOCH), toprovide organization and technology services to farmers on the Coast (see para7.3); and

(d) partial completion of studies. Only feasibility, prefeasibility studies andmonitoring of water quality studies and an environmental diagnosis for theAcapetahua Hydrological Region, one of the coastal project ares, werecompleted. The marketing study focusing on additional storage requirementwas dropped with Bank agreement. All other studies (baseline, environmentaland socioeconomic impact assessments and monitoring and evaluation) werenot completed because the implementation agency lacked necessary technicalskills. A Bank-requested environmental audit to assess project's environmentalimpacts and propose mitigation measures for all project areas is ongoing (seepara 5.6) and is being followed up in PRODERITH II.

5.3 The following sections discuss the principal implementation difficulties with theoperation and the lessons learned from them.

5.4 Implementation Organization. The implementation organization envisaged atpreparation, which relied on coordination between SARH and COPLADE, was unable toaccomplish the desired decentralization objective and handicapped overall projectimplementation. COPLADE could not help decentralize decisions to the State level becauseit did not have a role in either design, implementation or coordination as it provided no fundsand had no authority over SARH. As it did not participate in the project, a joint monitoringand evaluation unit with SARH never materialized, so that the monitoring and evaluationsubcomponent was not carried out.

5.5 Project implementation was adversely affected by SARH's four reorganizations.These changes were unforeseen at the time of project design. As a result, SARH did notprovide leadership in on-farm development, research and extension and other relatedservices. SARH was mainly affected by: (a) the 1988 reorganization, when theUndersecretariat of Large-Scale Irrigation was split to become CNA (officially created in1989), an autonomous agency under SARH; and (b) the change in its extension policy frompublic provision to targeted public provision to small rainfed farmers and private provision tolarger farmers with a cost recovery phase-in. This policy change resulted in a rapidreduction of SARH's extension staff. As a result of the reorganizations, and although SARHcontinued to be the official implementing agency of the Chiapas Agricultural DevelopmentProject, CNA became the de-facto implementing agency in 1990. Therefore the projectbecame more and more an infrastructure project and the integrity of the project concept wasweakened.

5.6 One of the main areas adversely affected by the weak implementation organizationwas the environmental monitoring and completion of baseline and impact studies. Becausethe coastal area projects were bound between 300 and 5 asl, CNA was not responsible forthe environmental impact of the drainage infrastructure on land below the 5m asl contourline,where the impact was most important. This also meant that CNA could not be held

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responsible for correcting the negative impact of the drainage works on land below the 5masl level (CNA did introduce some preventive sandtraps in some of the major drains, butthese were ineffective under the area's heavy seasonal rainfall and the sharp reduction inflood flow on the flat coastal plains). And finally, the studies to monitor the impact were notdone because of lack of technical skills in both CNA and in the Secretariat of UrbanDevelopment and Ecology (SEDUE). The project foresaw that the environmental impactmonitoring would be carried out by SEDUE. But neither SEDUE nor the Secretariat ofSocial Development (SEDESOL), which assumed SEDUE's responsibilities in 1991, everassumed the project's environmental monitoring responsibilities. One reason was thatSEDUE's monitoring was not financed by the project because it was believed that it wouldbe part of SEDUE's regular functions.

5.7 Counterpart Funds. Project budget availability had been noted in the SAR as aproject risk. GOM gave assurances during negotiations that sufficient counterpart fundswould be made available in 1985, but the project became effective in 1986. Funds providedranged from 20% to 30% of requirements during 1986-89. After two years of slowimplementation, GOM requested cancellation of US$ 32 million in 1988. The level of fundsbecame acceptable in relation to the reduced project size, in 1990, when CNA took overproject implementation. After 1990, the pace of implementation picked up and the reducedproject was completed in seven and a half years (nine months beyond the original ClosingDate). Subsequent Bank agricultural operations in Mexico have established more explicitbudget commitments, but frequently budget support continues not to be in line with what isagreed in project design and negotiations.

6. Project Results

6.1 Overall Objectives. The broad objectives of the operation were achieved: to increaseproduction, productivity and employment by the construction of infrastructure to increaseproductive area, and by the generation and transfer of appropriate technology for the areadeveloped. Farmer communities have better access to social services in the area (a directimpact of the project's rural road construction program), agricultural resources are beingbetter used--in particular through the diversification out of extensive cattle ranching onperiodically flooded lands and other low input farming systems to more intensive perennialcrop growing on the now better drained lands (a direct beneficial impact of the project'sdrainage and flood protection program); dairy farming intensification became possiblethrough the regular milk collection at the farm by the regional milk processing industry.There are no data on project effect on farm employment. The project's expectedcontribution to the Chiapas' Plan objectives of reducing the intra-state disparities wasimplicitly abandoned with the cancellation of the Chiapas Rural Roads Project.

6.2 Infrastructure. The project's objective of providing road and drainage infrastructurewas achieved. The component achieved 127% of target for dikes, 179% for roads and 100%for drains and auxiliary structures. The roads network provided better access to markets andsocial services, and drainage infrastructure allowed higher intensification of agriculturalproduction.

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6.3 Area Development. The project's objective to increase agricultural land wasachieved. Due to the 1988 official cancellation of 36% of the loan amount, only 64% of thetarget area to be developed was achieved. This reduction notwithstanding, project area underagricultural production increased a net 10%, mainly to beans (4,000 ha), bananas (6,000 ha),mangos (9,000 ha) and livestock (8,000 ha). Crops with declining area include soybeans (-

14,000 ha) and cocoa (-2,000 ha) (see Table 6.B.)

6.4 Productivity Results. The objective to increase productivity was achieved, howeverthe project's contribution to this objective cannot be quantified. Productivity gains weregood as a result of better land and successful research results, despite the fact that the closerlinkage to extension did not materialize. Research on the Coast undertaken by INIFAP onannual crops, pasture improvement and tropical fruits, resulted in improved maize varieties,in better pasture management practices, in an early-ripening mango cultivar and in onemosaic-resistant black bean cultivar. Unfortunately, there was very little researchcoordination at the Federal and State levels (i.e. between INIFAP's Rosario Izapa researchand the State's Secretaria de Desarrollo Rural y Ecologia research on perennial cropsalthough the stations are only a few miles away). Improved technology was not accessible tofarmers because: they were not organized to receive technology and had no access toalternative private extension services; INIFAP's lack or resources did not allow them to setup many demonstration plots to show research results (Rosario Izapa being an exception);and public extension services were scaled down. There were impressive yield gains in boththe coastal area (basic grains +33%, perennials +18%, livestock +73%) and in the CentralDepression (basic grains +46%, fruits and vegetables +77% and livestock +105%).Current banana yields on the Coast at 34 tons/ha are among the highest in the world andrevenues from this crop account for about half of primary production values in the area, withmaize and mango at distant second places. In banana plantations, project drainageinfrastructure allows ejidatarios (Agrarian Reform beneficiaries) to benefit from the 1992Article 27 of the Constitution which allows joint-ventures with foreign investors, the farmerscontributing land and labor and the investors capital, technology and management (see Table6.B).

6.5 Production Patterns. The project contributed to increase the intensity of agriculturalproduction and change the production patterns. Drainage infrastructure has permitted atransition from low-input subsistence farming systems or extensive cattle growing to moreintensified production systems, including the introduction of cash crops (mostly fruit trees) infarmers' cropping systems, which are better adapted to prevailing ecological conditions. Aproduction increase of 50% was achieved with a net 10% addition in area (see Table 6.B).

6.6 Average net present values were calculated for SAR farm models assuming actualproductivity changes and no changes in original prices. The calculated NPVs using a 12%discount rate were all highly positive except for the smallest maize and bean production unit(Table 6C) and are due to production intensification and changes to perennial crops madepossible by drainage infrastructure. These results are consistent with recent analysis of farmmodels in rainfed areas of 20 states, over approximately 6,000 ha and involving more than1300 beneficiaries.

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6.7 Employment. Although there are no specific data on the impact of the project onfarm employment, the 10% net increase of area under agricultural production andintensification would indicate that employment impact was positive.

7. Project Sustainability7

7.1 Project sustainability will depend on the GOM careful balancing of new constructionand maintenance, cost recovery and service provision policies, and strengthening theenvironmental monitoring of project area activities.

7.2 New Construction and Maintenance. The project's new construction targets weregiven priority over establishing a sustainable maintenance system, jeopardizing the long termsustainability of the infrastructure network. The infrastructure component's objectives wereachieved, but the maintenance record is poor. Until 1992, the project's main activity was toconstruct rural roads, with road densities approaching lkm/2 km2. Construction was ofsatisfactory quality, but inappropriate specifications may have needlessly increased the cost ofmaintenance because 2-lane, 6-meter wide feeder roads were constructed in spite of the low-traffic (about 30 vehicles per day), and the large-diameter surface gravel used difficultmaintenance because motograders have a destructive effect when reshaping surface and morematerial is demanded for resurfacing than with smaller-diameter gravel. This is particularlyworrisome since the Government has started to transfer road maintenance to local usersgroups, irrespective of the facts that: (a) the roads' legal ownership is not clear; and (b) thatthe farmers' access to the infrastructure is not exclusive. SARH (and later CNA) haveperformned little infrastructure maintenance. Bank estimates of CNA's roads maintenanceexpenditure are about 1 % of investment (rule of thumb is 5%), and GOM has adopted apolicy to transfer maintenance to users groups. As a result, about US$1.0 million inmaintenance equipment was purchased and transferred to the Acapetahua Civil Society, alarge users association. The Bank has expressed concern that the farmers group may lack thefinancial and technical wherewithal to carry out appropriate maintenance. As a matter offact, the project was still financing a contract for a qualified firm to perform maintenanceafter the equipment was transferred. The Bank has requested the GOM to submit a road anddrainage maintenance policy outline, which is being followed up in PRODERITH II.

7.3 Cost Recovery and Service Provision Policies. Although the project design includedfeatures to increase sustainability through regulation of infrastructure maintenance costrecovery, it did not do so for extension services. During project preparation, the GOMissued a decree to allow production units to recover costs from infrastructure constructionand operations and maintenance, in accordance with the Agricultural Development Law of1981 and the Water Law of 1972. This policy was applied in the design of cost recovery forroad maintenance and is expected to be phased-in in the private provision of extensionservices for larger farmers, with a cost-recovery phase-in. The GOM intends to assess ausers fee of about US$9.0 per ha to finance road maintenance, but it still not clear how thatwill be done without clear road ownership. The success of these policies will depend on: (a)

7. The project, as implemented, did not include areas which in 1994 became the locus of civil unrest. Thus,sustainability of project investment and benefits are not expected to be affected by those events.

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continued funding for road maintenance during the transition; (b) continued funding fortraining to upgrade the technical skills of service providers; and (c) continued extensionsupport for small farmers.

7.4 Environmental Monitoring. Except for water quality monitoring, no environmentalmonitoring activities were carried out (see paras 5.2(d) and 5.6). The environmental audit isexpected to assess project's impact in all project areas and include mitigation measures whichshould be implemented by GOM. The environmental diagnosis of the AcapetahuaHydrological Region raised issues related to the multiple use of surface water by agriculturaland aquacultural producers; the mis-use of agrochemicals; interinstitutional coordination; andwater quality monitoring systems. One conclusion of this study is that linkages between thecentral plateau and Depression and the coastal areas should not be considered in isolation.The proposed Aquaculture project preparation would address the environmental monitoringissues raised in the environmental audit (see para. 5.2(d))

8. Bank Performance

8.1 Bank performance in project preparation and design was good. The Bank actedinnovatively by helping to develop the Plan Chiapas and supporting it through twoindependent but complementary operations that were processed in parallel. The ChiapasAgricultural Development Project was based on appropriate prior lending experience in thatit intended to replicate the successful PRODERITH I experience in Chiapas.

8.2 The project had good staff continuity and discipline. Regular supervision missionsduring the implementation period, notably by staff in the Mexico field office in the lateryears of the project were particularly good for civil works. Supervision missions duringmost of the implementation period were timed between 6 to 12 months during the project andhad good contact with the various project components and agencies. Bank staff were inregular contact with project management during missions for other operations, and for sectorwork. Extensive field visits were made during supervision missions to check progress in thedistricts, at associated INIFAP research sites, and in project headquarters.

8.3 The most important shortcoming in the Bank performance during implementation wasthe failure to insist that GOM support the parallel development of the project's infrastructureand agriculture activities, including the completion of studies. This led to an overemphasison infrastructure construction to the relative neglect of both accelerating technological changefor smaller farmers, and of monitoring the possible environmental impact of improveddrainage on the lands below 5m asl.

9. Borrower Performance

9.1 Borrower performance in project preparation, notably in absorbing results of theinitial sector work, identifying candidate project districts, and carrying out feasibility studieswas timely and of adequate quality to meet project objectives. There were severalweaknesses in the Borrower's performance during implementation, however. Theseweaknesses were due to a weak implementation organization (see paras 5.4 to 5.6) and lackof funding (see para 5.7). The lack of monitoring and evaluation contributed to a failure to

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measure if project objectives were achieved. Of special concern was the intended reliance onCOPLADE, which lacked authority to effectively coordinate the project activities of theagencies involved. Another major weakness was the lack of contact between the lead projectagency (SARH and later CNA) and the agencies responsible for carrying out the agriculturalcomponents.

9.2 Project disbursements. Procedures for project disbursements for works are wellestablished and understood, but not adhered by for research and extension activities. Becauselocal branches of SARH and INIFAP were not reimbursed for additional project activities,they lack incentives to follow Bank guidelines, gather and submit documentation for projectdisbursement. In the absence of inter-agency coordination, as it was the case in this project,the reporting relationship was lost and many activities which could have been carried outunder the project were not. This happened despite the fact that, under PRODERITH I,specific mechanisms were put in place for resource transfers for project activities.

10. Project Relationship

10.1 The Bank-Borrower relationship throughout this project was good. The sharedemphasis on targeting the poorest states continues in other projects, for instance the DRD Itargets the four southern states (see para 2.11). The working relationship have been close, asdemonstrated by the Borrower's request of Bank participation in the early stages of outlininga road and drainage maintenance policy and system, which is being followed up inPRODERITH II.

11. Project Documentation and Data

11.1 The legal agreements and appraisal report were generally satisfactory except for thelack of any legal requirements related to the environment. The Loan and GuaranteeAgreements were amended in 1989, to strengthen SEDUE's function to assess and monitorthe environmental impact of the project.

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12. Lessons Learned

12.1 The project imparted two important lessons. The main one is that an adequateimplementation organization, continuity and proper coordination are necessary to achievingoriginal project objectives. The implementing agency must be responsible for overallimplementation and have the authority and means to establish priorities to other lineagencies. As the Chiapas Agricultural Development Project demonstrates, an agency withouta resource allocation role (COPLADE) will be unable to coordinate other agencies' activities.Also, the project demonstrates that an agency dedicated to infrastructure construction is notlikely to subordinate its priorities to agricultural technology generation and transfer withoutthe watchful eye of a strong coordinating agency aware of the importance of the othercomponents to achieve overall project goals. For instance, the DRD I project activities arefinanced by matching grants between SEDESOL and COPLADE so priority and coordinationare ensured. The State proposes the investment program in specific areas and SEDESOLagrees to match funds, targeting investments to poor areas (rural municipalities/communitiesnot over 5,000 inhabitants) using agreed index and formula across rural areas to avoidconcentration. Alternatively, projects should focus on activities that can be implemented bya single agency.

12.2 A second lesson is that a sufficient project budget is necessary for successfulimplementation. While the project had a strong initial commitment from the government atnegotiations, that commitment was not respected until 1990, which was the first year of fullimplementation. The same problem has occurred with other Bank projects (i.e. theAgricultural Technology project) with even stricter budget commitments. The budget issue isbeing addressed at the institutional level, i.e., between the Bank and the Borrower in adialogue that covers all projects and sectors.

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MEXICO



PART II: PROJECT REVIEW FROM BORROWER'S PERSPECTIVE

1. Introduction

1.1 The State of Chiapas is located in Southeast Mexico. It is divided into the Coast,Central Depression, Los Altos and Northern physiographic regions. The physical,productive and socioeconomic characteristics vary considerably among them.

1.2 In order to formulate the Chiapas Agricultural Development Project and to determineworks, productivity and economic and technical feasibility, various studies were undertaken;among them, topography, hydrology, agrology, soil uses, land tenure and commercializationstudies.

1.3 Project area was 317,000 ha, which was later adjusted to 288,000 ha. In the Coastregion, where the Tapachula, Huixtla, Acapetahua and Margaritas Pijijiapan subprojects werelocated, the area was 240,000 ha; in the Central Depression, where the Margaritas Comitan,Suchiapa-Santo Domingo and San Miguel II were located, the area was 48,000 ha.

1.4 Subproject sites were selected because they offered the highest possibility of attainingproject goals; their selection was based on criteria that recognized and differentiatedsubwatersheds, trends in productive capacity, variations in resource potential and the basicorganization of technical services in the rainfed districts.

1.5 The area where the subproject sites were located has significant physical differences.Annual precipitation ranges from 1000 mm and 3000 mm during a six-month period and theannual mean temperature varies from 18C in the Comiteca Meseta to 28C in the coast. Ingeneral, the climate conditions permit growing rainfed crops such as cereals, cotton, soya,rice, sugarcane, tropical fruits and pastures.

1.6 The principal constraints for rural development were physical, technical andsocioeconomic-inundations, excess humidity, lack of communication and use of traditionaltechnologies that were not viable in the context of excess humidity and the differentsocioeconomic levels.

1.7 Project's principal objectives were to increase: (a) productive rainfed area;(b) agricultural production and productivity with a view to improving food self sufficiencyand increasing exports; and (c) rural employment and family income.

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Project Strategy:

1.8 Project strategy emphasized that emphasized the producers' participation within apolicy framework of decentralization and transferring the resources and functions to users'organizations and institutional coordination.

Components:

(a) constructing basic infrastructure: 475 km of farm service roads; 600 km ofdrains to remove excess water; 350 km of flood control dikes; 300 km offarm service roads with drains and auxiliary structures;

(b) constructing works and developing soil and water conservation;

(c) improving technical assistance for on-farm development, leveling andtechnology transfer;

(d) strengthening production support services, such as extension, research andtechnical services, including local and international consulting; and

(e) undertaking basic feasibility, marketing, environmental impact andsocioeconomic studies.

1.9 The strategies, methodologies and instruments used in the Project arose from theexperiences from the first phase of the Tropical Agriculture Development Project(PRODERITH I), in particular, the experiences from the Acapetahua Subproject in the Stateof Chiapas.

2. Bank's Performance

The Loan:

2.1 The Project was identified during visits by the Bank during 1982 and 1983. Itspreparation was completed in February 1984. The Bank and the Government of Mexico,through Nacional Financiera (NAFIN), signed the loan agreement on July 16, 1985 (ChiapasAgricultural Development Project, Loan 2526-ME) for the original amount of US$90million. The Loan intended to finance 59% of infrastructure; 10% of technical services andstudies costs; 16% of the project administration costs; 12% of the on-farm development,extension and training; and 3% of research, monitoring and evaluation. (Staff AppraisalReport, Chiapas Development Project, Report No. 5167b-ME, 25 March 1985).

Project Development:

2.2 Beginning in December 1985, the Bank undertook preparation missions for theChiapas Agricultural Development Project. It was considered convenient to apply theexperiences, methods and instruments generated in the first phase of PRODERITH, amongthem the Drainage Manual, Production and Conservation Plans, Local Development Plans,

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and the Rural Communications System. These instruments allowed promoting producerparticipation and giving integrity to the various rural development components throughtechnical and economic support.

2.3 The Loan became effective in 1986. In December 1986, the supervision missions forproject execution began. Members of Bank, the Secretaria de Agricultura y RecursosHidraulicos (SARH) and the Comisi6n Nacional del Agua (CNA) participated. Theyreviewed the advances made in the different project components. These missions formulatedcorresponding aide memoires and reported the necessary adjustments required for fulfillingthe works. Bank technical staff supervised and reviewed project financial statements with theview to make recommendations and the necessary adjustments for timely disbursements. TheBank approved the previously established and agreed to disbursement mechanisms and thedocumentary proof.

2.4 Until 1988, the Bank noted that Project implementation had been slow due to lowerbudget allocation and lack of institutional coordination and indicated administrativedifficulties in disbursements. Consequently, the Bank recommended in its reports toprorogate disbursement costs and to improve government agencies' intervention. Similarly,the Bank demonstrated its concern for the project's environmental impact. In September1998, the Project management was reorganized and US$32 million of the loan canceled,leaving an adjusted loan amount of US$58 million.

2.5 CNA was created in 1989. It became the project implementing agency. At that time,the Bank noted an advance in project implementation and highlighted measures to implementactions addressing environmental concerns, especially in the high regions of coastal riverbasins and for maintaining the El Triunfo ecological reserve.

2.6 In 1991, 158,000 had benefitted from infrastructure development, which representeda 56% physical targets. Infrastructure for the subprojects in the Central Depression wascompleted except for the canalization of the Rio Grande de Comitan and in the Acapetahuaand Huixtla de la Costa projects, it was estimated to reach 100%, by which the Bankemphasized its recommendations towards operation and maintenance of infrastructure andpurchasing equipment for these ends. The efforts of producers who contributed resourcesand labor are recognized. Similarly, it is valued satisfactory the technology generationresults and their application to maize, mango and cacao and pasture, although it must beindicated that there were limitations in technology transfer due to personnel reductions in theextension services.

2.7 By the November 23, 1992 Supervision Mission, 75% of physical targets had beenachieved, supporting the GOM's request to extend the closing date to December 31, 1993.

2.8 In November 1993, the last evaluation mission was carried out and Bank'sconsultants expressed their satisfaction for the opportune attention to its recommendations aswell as to the auditors' observations.

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Conclusions

2.9 The Bank carried out supervision and inspection missions systematically. The Bankmonitored the advances made and followed up the other actions of the various projectcomponents. These factors contributed to applying solutions with the principal aim ofattaining the stated objectives.

3. Government Performance.

Institutional Aspects

3.1 The Project was prepared in 1983 in order to meet the development needs of theState of Chiapas within the framework of the National Hydraulic Plan (1975 and 1982). Thisplan identified the Gulf and Southeast Zones of our country as regions of high and mediumpotential for commercial agriculture. The Project took into consideration the experiences,methods, instruments and the human resources developed during the first phase ofPRODERITH, in particular in the Acapatahua Project in Chiapas.

3.2 The National Hydraulic Plan Commission (CPNH), under SARH, prepared studiesand plans. It received support from SARH's Studies Directorate, SARH's state office inChiapas, the Government of the State of Chiapas, as well as from the State DevelopmentPlanning Development Committee (COPLADE).

Project Development

3.3 In the National Development Plan (1983-1988), the Government indicated the need tomake special efforts to promote development in those regions with relatively lessdevelopment. It gave the State of Chiapas a high priority. In 1983, the Governmentannounced a multisectoral development plan for the State of Chiapas as part of its strategyfor regional development. It emphasized the activities required for agricultural growth,infrastructure development and roads. It was a high priority project; its regionaldevelopment strategy sought to increase agricultural production, accelerate economic growth,alleviate poverty, and correct socioeconomic imbalances.

3.4 The Bank and the Government of Mexico signed the Loan Agreement, which wouldbe administered by NAFIN, and a Loan Guarantee Agreement on July 16, 1985.

3.5 The SARH state office in the State of Chiapas was responsible for coordinating,supervising, monitoring and evaluating each of the subprojects of the rainfed districts. TheSARH state office was responsible also of informing COPLADE of advances and obstaclesduring project instrumentation so that the latter agency would be able to take the necessarysteps to overcome them. Operations would be carried out through SARH's Directive andTechnical Committees of the Rainfed Districts.

3.6 SARH relied upon various dependencies to carry out specific tasks related to ruraldevelopment: (a) General Directorate for Large-Scale Irrigation; (b) General Directorate forProduction and Agricultural Extension; (c) the national institutes for agricultural, livestock

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and forestry research (INIA, INIP, and INIF); (d) the General Directorate for Soil and WaterConservation (DGCSA); and (e) the National Fruit Growing Commission (CONAFRUT).The Credit would be channeled primarily through the Agricultural Trust Fund (FIRA) andthe National Rural Credit Bank (BANRURAL).

3.7 The National Development Plan (1983-1988) defined a decentralization policy whichrequired structural reforms such as streamlining government apparatus, in order to improveefficiency and promote a reorganization of institutional services. The greater part of theProject's life was conducted under the application of the Agrarian Reform and the WaterNational Laws, which were modified in the last phases of the Project since theirpredecessors had failed to respond to the new conditions related to soil and water use that thecountry required.

3.8 By virtue of the fact that COPLADE undertook general coordination tasks in the Stateand the Project required particular attention for its instrumentation, COPLADE'scontribution to decision making decentralization was slight since it did not contribute projectinvestment funds. As a result, it did not have relevant input for project design,instrumentation and coordination.

3.9 Through the rainfed districts, SARH accomplished technical assistance and conductedproject execution. Later on, Rural Development Districts (and within them, Support Centersfor Integral Rural Development (CADRI)) were developed within each subproject under theNational Program for Integrated Rural Development (PRONADRI). Its action had a focusbased on the model created by PRODERITH, although there was a significant decrease in itspersonnel.

3.10 Research tasks were reorganized also: three national research institutes (agricultural,livestock, and forestry) were combined to form a single National Institute for Forestry,Livestock and Agricultural Research (INIFAP), which maintained continuity in its tasks ofgenerating technology within a larger, integrated framework. The Mexican Institute forWater Technology (IMTA) was created for research, technology development and transferand training for technical and professional personnel in water related matters; it had asignificant role in systematizing the methodologies generated in PRODERITH's first phase,in training and creating methodologies, as well as in technology transfer for water and soilconservation.

3.11 SARH'S General Directorate for Large-Scale Irrigation, through its Residencias deConstrucci6n (Construction Offices), undertook infrastructure design, construction andsupervision. In accordance with the procedures of the Public Works Law and itsRegulations, these were undertaken by competitive public bidding.

3.12 Until 1988, the Project development was below what had been programmed, resultingin partial loan cancellation. Carrying out and coordinating the Project improved, as theeconomic crisis abated, after creating CNA and sensibly increasing budget allocations.These made it possible to advance rapidly in constructing infrastructure, acquiring machineryand equipment for conservation and linking the infrastructure program with technicalassistance and research.

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3.13 Beginning in 1989, investments were concentrated in the Acapetahua and HuixtlaSubprojects with the aim of avoiding dispersion, consolidating close areas and achievingsignificant short term results.

3.14 CNA undertook to propose the country's water policy. It formulated the NationalProgram for Irrigation and Drainage (1990-1994) within which were established the strategyand procedure for construction, operation and maintenance of water works and requiredactions for their integrated use. Under the framework of CNA, the Drainage DistrictsManagement Office was created. It would serve regions with hydroagriculturalinfrastructure. It would also promote full and efficient uses in the tropical and subtropicalcoastal plains, so as to better production and living conditions and coordinate actions amongthe Chiapas Agricultural Development, the San Fernando (Tamps.) and PRODERITH IIProjects.

3.15 The Drainage Districts Management Office prompted the users towards greaterparticipation in hydroagricultural management, as it sought to transfer to their organizationstasks related to operations and maintenance.

3.16 With CNA's creation, the infrastructure construction tasks were executed by theConstruction Management Office of the General Subdirectorate of HydroagriculturalInfrastructure. These consisted of various contracts for supervision, goods and serviceswhich were assigned to various firms and whose performance can be considered satisfactory.When it was necessary, the recommendations and auditing remedial actions were undertaken,reaching satisfactorily the fulfillment of physical objectives.

3.17 Upon the opening of new possibilities for agricultural development, technicalassistance was carried out through various means. While some commercial houses cultivatedvegetables, other private firms managed the technical aspects of high value crops such asbanana and tobacco. The actions of official institutions became limited to dealing with basiccrops and the African palm.

3.18 Faced with the lack of technical personnel capable of dealing with the various aspectsof the Project's development related to the improvement of infrastructure works, CNAfostered creating and operating a Technical Cooperation Unit (TCU). It undertook directsales in accordance with the existing govemment procedures. Over time, the TCU became aprivate enterprise dedicated to technical services for rural development.

3.19 In order to deal with environmental problems, IMTA and the Soil ConservationService undertook an Agroecological Study of Acapetahua, which related the problems oferosion and the obstacles it places on infrastructure. Together with the TCU, anenvironmental impact evaluation was undertaken of the central region of the Chiapas coasts.The ample participation of various institutions and social groups led to identifying andgenerating consensus about the principal environmental effects of the actual technologicalpractices in the different physiographic zones. At the request of IMTA, the SoutheastEcological Research Center (CIES) undertook the Ecogeographic Study of the AcapetahuaWatershed, from which emerged a long term proposal for integrated watershed development.

- 23 -

Neither SEDUE nor subsequently SEDESOL had the expected environmental aspectsintervention since neither was able to receive the additional resources to carry out their tasks.

3.20 The new Agrarian and National Water Laws were promulgated during the final phaseof the Project, which fostered conditions for greater economic, financial and socialparticipation for the beneficiaries for administering the Project and its benefits.

3.21 In respect to the specialized technical consultant services, its activities had the basicobject of consolidating the process of transferring the resources and functions in order toachieve a greater efficiency in using available resources and a greater beneficiaryparticipation. In addition, work has been done in improving production organization, usingsector programs and developing and advising producers primarily in soil and waterconservation practices.

3.22 All the activities were directed at increasing production. Its impact is reflectedfavorably in yields increase. This is due to the technology transfers that were tied toinfrastructure works and the agricultural research that developed varieties designed to attainan optimal production under the region's climate conditions; and which formulatedrecommendations as to densities for sowing, fertilizer use, soil preparation practices and theuse of modem agricultural inputs.

3.23 Modifications in soil use were established based on the comparative advantagesterritorial improvement offered; as a result, there were no substantial changes in annualcrops; areas with perennial crops, however, were expanded significantly.

4. Results

4.1 The Project's general goals were met. In infrastructure, mainly, 27% more roadsideborders and 79% more roads were built. The Project's impact in relation to the soil use,production, productivity and employment was improved substantially, influencing decisivelyinfrastructure construction and the use of methods and work instruments generated inPRODERITH I to promote producer participation and technology transfer. During theperiod analyzed, the area dedicated to agricultural activities increased 10% for 133,000 ha to146,000 ha. The principal changes were in the surface areas dedicated to beans whichincreased 176%, for banana (83%), for mango (335%) and livestock (41%). Crops whichdecreased included rice, which decreased by 88%, soya (62%), sorghum (47%) and cacao(about 19%).

4.2 The territorial improvements that promoted substantial modifications in soil use alsoallowed for increases in agricultural area, production and productivity.

4.3 Even when there are no specific data as to Project impact on creating jobs, it may beinferred that if the agricultural limits increased by 10% and that soil use intensified, thenthere was a favorable impact.

Infrastructure construction and the means to promote producers' participation also influencedinstalling public services for producers' social welfare in the Project area.

- 24 -

5. Conclusions and Recommendations

5.1 In light of the results obtained, Project execution constitutes a success both in itscontribution to national production as well as in its favorable effects on beneficiaries' incomeand in employment generation. It is very important to continue complementary activities thatwould permit Project consolidation.

5.2 The actions designed to commit user participation towards correspondinginfrastructure maintenance must be reinforced. The annual program for operations andmaintenance should be applied, avoiding postponing conservation and instead, seeking normalconservation.

5.3 Specialized technical consulting services must be continued, in all their productiveaspects, with the aim of obtaining more profitable agricultural activities which would providegreater benefits to the producers (who would administer and cover the costs of technicalconsulting).

5.4 Environmental impact monitoring should be continued and strengthened andpreventive and corrective measures should be implemented that would allow for a sustainableagricultural development.

5.5 Project experience should be applied to new development zones in the State ofChiapas, throughout the nation and in other countries.

- 25 -

PART mII: SUMMAY OF STATISTICAL 1 IFORMATION

- 26 -

MEXICOCHIAPAS AGRICULTURAL DEVELOPMENT PROJECT

(Loan 2526-ME)


TABLE 1. RELATED BANK LOANS

Year of lApproval and

Loan Title Purpose Amount Status Comrnents

PRODERITH I Tropical agricultural 1978, for US$56 Completed Successful project with follow updevelopment mrillion (PRODERITH II) under implementation.

PCR No. 5997 was issued in December,1985

Chiapas Rural Roads 1985, for Completed 95 % of loan amount canceled in 1988Rural Roads USS22.0 million GOM did not follow sub-project

selection or processing priorities asagreed with the Bank, and because GOMpriorities changed from the rural roadspriorities as identified in preparation.PCR No. 9406 was issued in March 1,1991

PROCATI Agriculture 1986, for US$20 Completed PCR No. 13157 was issued on June 15,development and million 1994.extension

PRODERITH II Second tropical 1986, for Under Budget problems; loan amount is nowagricultural US$109 million implementation US$88.3 million after cancellation.development Expected Closing Date is December 31,

1995.

First Support reform of 1988, for Closed in 1990 Operation completed successfully; PCRAgricultural agricultural policies US$300 million issued June 15, 1993Sector Adjust.

Regional Assist the GOM's 1991, for Under No major problems; follow up projectDecentralization poverty program in US$350 million implementation being prepared.and the four poorestDevelopment agricultural states

Second Support continuing 1991, for Completed Successfully completed. PCR sent toAgricultural reform of agricultural US$400 million OED on June 29, 1994.Sector Adjust. policies

Irrigation and Support irrigation and 1991, for Under Budgetary difficulties but no other majorDrainage Sector drainage investment US$400 million implementation problem.

Agricultural Agricultural research 1992, for Under Significant budgetary problems.Technology and extension US$150 million implementation

On Farm and Irrigation 1994, for Approved by Awaiting effectiveness.Minor Irrigation infrastructure US$200 million the Board onNetworks improvements FebruaryImprovement 17,1994

Rainfed Areas Improve agriculture Proposed USS 85 Approved by Awaiting signing.Development productivity million loan the Board on

amount July 12, 1994

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MEXICO

CHIAPAS AGRICULTURAL DEVELOPMENT PROJECT(Loan 2526-ME)


TABLE 2. LOAN DATA(US$ millions)

Original Canceled Disbursed Repaid Outstanding90 32 58 31.4 28.8

(as of July 1994)

PROJECT TIMETABLE

Original Dates Actual or Re-estimated Dates

Regional Study December 1981 16 August 1982Identification September 1982 20 September 1982Preparation July 1983 20 July 1983Appraisal Feb/March 1984 March 1984Loan Negotiations February 1985 25 February 1985Board Approval April 1985 30 April 1985Loan Signature July 1985 16 July 1985Loan Effectiveness 15 October 1985 4 April 1986Project Completion 31 March 93 31 Dec 93Loan Closing 31 March 93 31 Dec 93

Source: Staff Appraisal Report and Division Black Books

Comments at each stage of project cycle

Identification: No special commentsPreparation: No important delaysAppraisal: No important delaysEffectiveness: Delays due to participating agencies' difficulties in signing a

coordination agreement and as a result of lost documents duringearthquake

Closing date: The closing date was extended once, from March 31, 1993 toDecember 31, 1993 because of disbursement delays

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MEXICO



TABLE 2. LOAN DATA (continued)

Project Schedule

Quarter 2 3 4 E

Year 1982 1983 1984 1985 1986 1987/92 1993

Identification

Preparation 3Appraisal Mission

Negotiations

Board Approval 3

Signature Date 3

Date of Effectiveness >>I

Completion Date T>>>>>

Closing Date >>>I

Year 1982 1983 1984 1985 1986 1987/92 1993

Quarter i2 3 ff41f11i131411121314

Scheduled: Slippage: > > > > Actual: X

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MEXICO



TABLE 3. CUMULATIVE ESTIMATED AND ACTUAL LOAN DISBURSEMENTS(US$ million)

Bank FY 1986 1987 1988, 1989 1990 1991 1992 1993 1994

(i) Appraisal estimate 7.5 18.0 32.0 46.0 61.0 77.0 85.5 90.0 90.0

(ii) Estimate minusprevious FYs cancellations 7.5 18.0 32.0 24.0 29.0 45.0 53.5 58.0 58.0

(iii) Actual 6.2 ' 9.0 14.0 16.7 18.2 27.0 34.6 49.8 58.0

(iv) Actual as % of (i) 83 50 44 36 30 35 40 55 64

(v) Actual as % of (ii) 83 50 44 70 63 60 65 86 100

1/ US$22.0 million were canceled from the Loan on June 20, 1988.2/ US$10.0 million were canceled from the Loan on August 10, 1988.3/ Including US$ for retroactive financing of expenditures incurred after July 1, 1984 for civil works andafter January 1, 1985 for incremental salaries for research and extension staff.

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MEEaCO

CHIAPAS AGRICULTURAL DEVELOPMENT PROJECT(Loean 2526-ME)


TABLE 4. PROJECT COSTS AND FINANCING(USS Millions)

Total Project Cost Loan Amount __________

Planned Actual Revised at Percent of Total Actual LoanCategory Amount as a % of Planned cancellation Project Cost to be Amount as a 1

(estinate) Actual Planned Amount in 1988 Actual Financed by Loan Actuial Coas |(1) (2) (3) (4) (5) (6) (7) (a)

I. Civil Works for Dikes, 82.9 62.06 75% 58.0 44.3 44.0 70% 71%Drains, Roads, Buildingsand Soil Conservation,including EngineeringDesigns _ _

2. Goods including 20.0 3.22 16% 11.0 5.1 2.4 90% of local and 75%Equipment, Materials, 100% of FESpare Parts and Vehicles

3. Consultant Services, 5.0 7.2 144% 5.0 5.5 6.6 100% 92%Studies and Trasining _ _

4. Incremental Salaries for 18.3 9.92 54.2% 7.0 3.1 5.0 10O% until 50%Research and Extension 6/30/87;Staff 50% until

6/30/89;and 25%thereafter

(changed to100%

_________ _________________________ ________ on 11/15/89) _ _ _ _ _ _ _

5. UnaBocated 55.4!' 9.0

6. CanceBation 32.0 32.0Y

7. Special Account

TOTAL 181.6 82.40 45.4% 90.00 90.0 90.0

So.e: SAR CNA, Bsk Eaxtst-

Y Drcrp.cy botween SAR txt Rad smounLr per finocing of disbusemebnt cstegonm.

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MEICO



TABLE S. PROJECT IMPLEMENTATION TARGETS

Component II Indicator | Appraisal Revised Ftl Percent Percent ofCo nr usco IdctrEtmt I I toof revised Iappraisal

Dikes Flood control dikes 350 km 571 km 445 7S 127

Roads Service roads construction and rehabilitation 775 km 1671 km 1390 83 179

INFRASTRUCTURE Drains Prirnary and secondary drains 600 km 1101 km 614 56 102

Structures Auxiliary structures (fords, bridges, culverts, 300 300 100 100s sediment traps and crossings) _ _ _

Field Offices Field offices to provide office space. storage 6 7 3 43 50and staff housing: 2 in the coastal subprojectareas and I in each of the 4 centraldepression subprojecl areas _ _

Workshops Buildings for workshops, staff housing, and 6 3 50equipment and spare parts storage l

ADMINISTRATION l[AND OPERATION Equipment Equipment to operate and maintain the road 52 mnachines 13 25

for network, drainage and dike systems andinfrastructure structuresmaintenance

Vehicles Vehicles for construction (37 pick-ups) and 112 112 100production operations (75 pick-ups and 240 4-wheel 4-wheelmotorcycles) vehicles vehicles

ON-FARM Medium and Investment for on-farm development 100,000 ha 100,000 100

DEVELOPMENT Long-term Land learing 50,000 ha 0 0Credit Ladcern5000h _____ =Extension Increase number of extension staff 571 99 17

Research Improve research stations (Rosario Izapa, 3 stations 3 100Centro y Costa de Chiapas) l l l_l_l

AGRICULTURE Training Extension staff 1200 1200 100SUPPORT Courses in farmer organization, improved 3000 farmerl NA NASERVICES production techniques, and maintenance of

drainage infrastructure

Fellowships for intensive local or overseas 12 mnan-years 12 100training l l l _l_l_l

______ _- =

- 32 -

MEXICO

CIIIAPAS AGRICULTURAL DEVELOPMENT PROJECT(Loan 2526-ME)


TABLE 5. PROJECT IMPLEMENTAITON TARGETS (Cont.)

Componsent ][Subs:tr Indicator Status at SAR Status at Project CompIeton

Basic anBa si c and Feasibility studies on 205,000 ha of Completedfeasibility the 255,000 in the coastal area

STUDIES studies in th[ Studies for 50,000 remaining ha in Tapachula CompletedProject Area

Studies for 55,000 ha in central depression Completedand 7,500 in Los Altos

Monitoring Monitoring of water table Not carried outof the WaterTable and l

Ground Ground water study in project area as well as Monitoring of water quality completed in 1992Water in areas of future development to determineSurveying the availability of and quality of water for

domestic consumption and supplementaryirrigation

Survey of the Hydrological and topographical surveys of Will not be carried outCoastal the coastal lagoons and adjacent permanentLagoons wetland areas

Monitoring Monitor and evaluate the effect on the water Will not be carried outand table of drainage and river control on theEvaluation of Coast with respect to design of infrastructurethe Drainage and effect on crop production, particularlySystem the second cycle crop

Soil surveys Soil surveys to determine overall Will not be carried outreclassification of soils for future optimumland use planning _ _

Chiapas Pre- Pre-investment studies on the more of Completed for 612,000 ha (260,000 ha under theInvestment 600,000 ha under the project and 300,000 project)Studies for additional haFutureDevelopment

Environment Environmental impact studies of Environmental Audit by Center for Ecologicalal and infrastructure program and changes in Research of the Southeast (CIES) ongoing.Socioeconom cropping systemic Impact Socioeconomic studies to deternmine project Will not be carried out

Review impact on employment, income, migration oflabor and the changes in production systems

Marketing Study to improve marketing system, focusing Not carried out, with Bank's agreementStudy on storage.

Source: SAR, CNA and SARH 1993

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MEXICO



TABLE 6. PROJECT BENEFITS

A. PROJECT IMPACT ON RAINFED CROP YIELDS

(Tons/Ha)

COASTAL AREAS DEPRESSION

SAR TARGET ACTUAL SAR TARGET ACTUALestimate estimate

OUTPUT (W/O

Project)

Maize 1.5-2.0 3.0 3.0 2.1 4.0 4.0

Beans 0.6 1.2 1.2 0.8 1 2 0.8

Sorghum NA NA 4.7 NA NA 3.5

Rice NA 3.5 4.5 NA NA NA

Cotton NA NA NA NA NA 2.3

Soybean NA 2.5 1.8 NA NA NA

Sesame NA 1.2 0.7 NA NA 0.8

Groundnut NA 2.0 NA NA NA 1.7

Tobacco 1.0 1.8 1.6 NA NA NA

Sugarcane NA NA 72.0 NA NA NA

Bananas NA NA 34.7 NA NA NA

Cocoa NA NA 0.7 NA NA NA

Papaya NA NA 29.5 NA NA NA

Mango NA NA 10.1 NA NA 8

Melons NA NA 7.2 NA NA 9.6

Watermelon NA 1.5 11.0 NA NA 13.4

Oranges NA NA 5 30 NA NA

Tomatoes NA NA 9.52 NA NA 14.8

SOURCE: SAR, CNA 1993 and Table 6 B.

MEXICo

CHIAPAS AGRICULTURAL DEVELOPMENT

(Loan 2526-HX)


TABLE 6: PROJECT BENEFITS

B: LAND USE AND PRODUCTION RESULTS

(a) Total Project Area

CROP AREA ( '000 HAS)I I Yield PRODUCTIONS (TONS) I Price PRODUCTION VALUES (Mex$000)changes chanes _

1985 1993 I change over 1985 1985 1993 I chiange over 1985 1985 1993 I change'1AIZE 53,905 54,845 2 40 111,553 159,319 43 -22 119,544 133,853 12BEANS 2,303 6,377 177 -8 1,914 4,897 156 -5 4,526 10,959 142SORGHUM 745 398 -47 33 2,161 1,534 -29 -58 2,481 736 -70RICE 472 56 -88 101 1,058 252 -76 17 975 272 -72COTTON 30 20 -33 23 56 46 -18 104 80 134 68SOYBEANS 21,917 8,264 -62 -6 41,892 14,878 -64 -21 52,874 14,752 -72SESAME 2,400 3,120 30 12 1,513 2,206 46 19 2,708 4,714 74GROUNDNUTS 231 823 256 37 293 1,433 389 -15 701 2,915 316TABACCO 1,654 1,962 19 3 2,647 3,236 22 143 8,993 26,699 197 WSUGARCANE 6,957 7,338 5 13 445,248 528,336 19 -59 86,456 41,558 -52 _BANANAS 7,464 13,669 83 0.5 257,808 474,431 84 -14 200,239 315,764 58COCOA 9,574 7,763 -19 -4 7,781 6,032 -22 -62 75,543 21,980 -71PAPAYA 250 674 170 64 4,500 19,890 342 52 1,966 13,238 573MANGO 2,645 11,511 335 34 20,021 116,347 481 -51 24,866 70,804 185MELONS 1,288 842 -35 9 8,520 6,077 -29 41 5,916 5,960 1WATERMELONS 2,573 1,406 -45 -13 32,807 15,651 -52 143 17,464 20,268 16ORANGES 0 250 n.a. n.a. 0 1,250 n.a. n.a. 0 756 n.a.TOMATOES 0 740 n.a. n.a. 0 10,847 n.a. n.a. 0 5,637 n.a.

TOTAL CROPS 114,408 120,058 5 39 939,772 1,366,722 45 -22 605,332 690,999 14LIVESTOCK 18,455 26,116 42 88 21,197 56,366 166 -24 22,872 46,519 103

TOTAL 132,863 146,174 10 35 960,969 1,423,088 48 -21 628,204 737,518 17

Basic Grains 57,425 61,676 7 33 116,686 166,062 42 -20 127,526 145,820 14Oil+Tobacco 26,232 14,189 -46 -13 46,401 21,799 -53 60 65,356 49,214 -25Trad. Perenn. 23,995 28,770 20 18 710,837 1,008,799 42 -26 362,238 379,302 5rruits/Veget. 6,756 15,423 128 13 65,848 170,062 158 -10 50,212 116,663 132

Sources: SAR, CNA, and SARH

MEXICOCHIAPAS AGRICULTURAL DEVELOPMENT

(Loan 2526-MX)




(b) Coastal Project Area

CROP AREA ('000 HAS) W Yield PRODUCTIONS (TONS) I Price PRODUCTION VALUES (MexS000)changes changes

1985 1993 I change over 1985 1985 1993 * change over 1985 1985 1993 i changeMAIZE 31,720 25,348 (20) 31 74,143 77,707 5 (5) 69,095 69,148 0BEANS 341 23 (93) 62 256 28 (89) (34) 497 36 (93)SORGHUM 0 113 +100 0 0 536 +100 0 0 242 +100RICE 472 56 (88) 101 1,058 252 (76) 17 975 272 (72)COTTON 0 0 - 0 0 0 - 0 0 0 -SOYBEANS 21,917 8,264 (62) (6) 41,892 14,818 (64) (21) 52,874 14,752 (72)SESAME 2,383 3,110 31 12 1,502 2,198 46 20 2,676 4,695 75GROUNDNUTS 0 0 - 0 0 0 - 0 0 0 -TABACCO 1,654 1,962 19 3 2,647 3,236 22 143 8,993 26,699 197 WSUGARCANE 6,957 7,338 5 13 445,248 528,336 19 (59) 86,456 41,558 (52)BANANAS 7,464 13,669 83 0 257,808 474,431 84 (14) 200,239 315,764 58COCOA 9,574 7,763 (19) (4) 7,781 6,032 (22) (62) 75,543 21,980 (71)PAPAYA 250 674 170 64 4,500 19,890 342 52 1,966 13,238 573MANGO 2,599 11,326 336 33 19,837 114,867 479 (50) 24,074 69,501 189MELONS 1,161 822 (29) 9 7,646 5,885 (23) 66 4,452 5,695 28WATERMELONS 2,410 1,351 (44) (15) 31,330 14,916 (52) 167 15,204 19,298 27ORANGES 0 250 n.a. n.a. 0 1,250 n.a. n.a. 0 756 n.a.TOMATOES 0 25 n.a. n.a. 0 238 n.a. n.a. 0 237 n.a.

TOTAL CROPS 88,902 82,094 (8) 53 895,648 1,264,680 41 (21) 543,044 603,871 11LIVESTOCK 2,276 1,862 (18) 77 5,326 7,704 45 (21) 4,963 5,673 14

TOTAL 91,178 83,956 (8) 53 900,974 1,272,384 41 (21) 548,007 609,544 11

Basic Grains 32,533 25,540 (21) 33 75,457 78,523 4 (5) 70,567 69,698 (1)Oil+Tobacco 25,954 13,336 (49) (14) 46,041 20,312 (56) 62 64,543 46,146 (29)Trad. Perenn. 23,995 28,770 20 18 710,837 1,008,799 42 (26) 362,238 379,302 5Fruits/Veget. 6,420 14,448 125 10 63,313 157,046 148 (4) 45,696 108,725 138


HEXICOCHIAPAS AGRICULTURAL DEVELOPMENT

(Loan 2526-MX)




(c) Central Depresslon Project Ared

CROP AREA ('000 HAS) t Yield PRODUCTIONS (TONS) t Price PRODUCTION VALUES (Mex5OOO)changes changes

1985 1993 I change over 1985 1985 1993 t change over 1985 1985 1993 t changeMAIZE 22, 185 29,497 33 64 37,410 81,672 118 (41) 50,449 64,705 28BEANS 1,962 6,354 224 (9) 1,658 4,869 194 (8) 4,029 10,923 171SORGHUM 745 285 (62) 21 2,161 998 (54) (57) 2,481 494 (80)RICE 0 0 - 0 0 0 _ 0 0 0 -COTTON 30 20 (33) 23 56 46 (18) 104 80 134 68SOYBEANS 0 0 - 0 0 0 - 0 0 0 -SESAME 17 10 (41) 24 11 8 (27) (18) 32 19 (41)GROUNDNUTS 231 823 256 37 293 1,433 389 (15) 701 2,915 316TABACCO 0 0 - 0 0 0 - 0 0 0 -SUGARCANE 0 0 - 0 0 0 - 0 0 0 -BANANAS 0 0 - 0 0 0 - 0 0 0 -COCOA 0 0 - 0 0 0 - 0 0 0 -PAPAYA 0 0 - 0 0 0 - 0 0 0 -MANGO 46 185 302 100 184 1,480 704 (80) 792 1,303 65MELONS 127 20 (84) 39 874 192 (78) (18) 1,464 265 (82)WATERMELONS 163 55 (66) 47 1,477 735 (50) (14) 2,260 970 (57)ORANGES 0 0 - 0 0 0 - 0 0 0 -TOMATOES 0 715 n.a. n.a. 0 10,609 n.a. n.a. 0 5,400 +100

TOTAL CROPS 25,506 37,964 49 55 44,124 102,042 131 (40) 62,288 87,128 40LIVESTOCK 16,179 24,254 50 105 15,871 48,662 207 (26) 17,909 40,846 128

TOTAL 41,685 62,218 49 68 59,995 150,704 151 (36) 80,197 127,974 60

Basic Grains 24,892 36,136 45 46 41,229 87,539 112 (37) 56,959 76,122 34Oll+Tobacco 278 853 207 35 360 1,487 313 (9) 813 3,068 277Trad. Perenn. 0 0 0 0 0 0 0 0 0 0 0Fruits/Veget. 336 975 190 77 2,535 13,016 413 (66) 4,516 7,938 76


- 37 -

MEXICO




C. FINANCIAL AND ECONOMIC ANALYSISNPVs per hectare 1984 and 1993!'

FARM MODELS | SAR Estimates (1984) 1 PCR Estimates (1993W

Coastal Ejido Crop (8 ha) 295 1,346

Coastal Ejido Mixed 92 450Crop/Livestock (130 ha)

Private Coastal Crop (20 37 580ha)

Central Depression Ejido 70 -35Crop (7 ha)

SOURCE: SAR, CNA 1993

1 / At 12 % discount rate.2/ PCR Estimates are based on actual productivity changes, assurning all other variables

remain as in the original farm models

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MEXICO

CIIIAPAS AGRICULTURAL DEVELOPMENT PROJECT(Loan 2526-ME)



D. AREA DEVELOPMENT

SAR ESTIMATE (1984)l________ _________ GOM ACTUAL AS

lefo Araf l l REVISED ACTUAL % OFAREA Area for r Deve lopment (1991) (1992) REVISED

Tapachula 98,500 60,000 37,077 62

Huixtla 56,000 60,000 47,902 80

Acapetahua 63,000 60,000 57,161 95

Las Margaritas 37,500 60,000 10,725 18

Sub-Total 255,000 90,0002' 240,000 152,865 64Coastal Area

Comitan 32,000 32,000 32,000 19,000 59

Suchiapa 8,000 8,000 15,000 9,900 66

San Miguel 1I 8,000 8,000 13,000 10,120 78

Margenes de Canceled -

Grijalva 7,000 7,000 _ _ _

Sub-Total 62,500 62,500 60,000 3/ 39,020 65CentralDepression

Los Altos 7,500 7,500 Canceled | |

Sub-Total j 7,500 | 7,500 Canceled -

Central Plateau || I _ l l l

TOTAL 317,500 | 152,500 | 300,0004/ | 191,885 | 64

SOURCE: SAR and CNA 1993.

1/ Included only river control dikes, roads and improved extension.2/ 90,000 ha (out of the 255,000 ha) to be selected focusing on ejidos and smallholder farmers (not including Las Margaritas), to be

fully developed with drains and on-farm works for intensive crop and livestock production.3/ 48,000 ha in Part 11.4! 288,000 ha in Part 11.

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MEXICO




F. AREA DEVELOPMENT BY TYPE OF LAND USE(has)

LAND USE SAR ESTIMATE (1984) | ACTUAL ACTUAL(1985) (1993)

ACTUAL TARGET |

COASTALAREA

Crops 81,000 117,000 88,902 82,094

Livestock 159,000 123,000 114,408 120,058

Other 15,0000 15,000 n/a n/a

Sub-Total 255,0009 255,000 91,178 83,956

CENTRALDEPRESSIONAREA

Crops 33,000 45,000 25,506 37,964

Livestock 15,500 10,000 16,179 24,254

Other 6,500 nil n/a n/a

Sub-Total 55,000 55,500 41,685 62,218

Crops 3,750 7,500 2,276 1,862

Livestock nil 18,455 26,116

Others 3,750 nil na

TOTAL 317,500 317,500 132,863 146,174

SOURCE: SAR, SARH and CNA 1993.

8. Included only river control dikes, roads and improved extension

MEXICOCHIAPAS AGRICULTURAL DEVELOPMENT PROJECT

(Loan 2526-ME)PROJECT COMPLETION REPORT

TABLE 7. Status of Legal Covenants

Cove- Original Revisednant Fulfiltment Fulfillent

Agreement Section Type Status Date Date Description of Covenant Comments

Loan No. 2.02 (b) F OK The Borrower shall, for purposes of the Project, Done2526-ME open and thereafter maintain in dollars, a Special

Account on terms and conditions satisfactory tothe Bank. Deposits into and payments out of theSpecial Account shall be made in accordance withthe provisions of ScheduLe 3 to this Agreement.

4.01 F OK 6/30/93 08/30/93 The Borrower shall: (i) have the Special Account, Donefor each fiscal year audited in accordance withappropriate auditing principles consistentlyapplied by independent qualified auditors; (ii)furnish to the Bank as soon as available, but in oany case not later than six months after the endof each year, a certified copy of the report ofsuch audit by said auditors, of such scope and insuch detail as the Bank shaLl have reasonablyrequested; (iii) furnish to the Bank monthlycertified statements of the Special Account; and(iv) furnish to the Bank such other informationconcerning the Special Account and the auditthereof as the Bank shalt reasonably request.

Guarantee 3.01 M OK The Guarantor declares its commitment to the In complianceobjectives of the Project as set forth in ScheduLe1 to the Loan Agreement. ("Due diligencecovenant")

Guarantee 3.02 (a) M OK The Guarantor shaLl: (i) enter into the Donecontractual arrangements referred to in Section3.01 of the Loan Agreement with the Borrower; and(i) not later than September 30, 1985, furnish tothe Bank a certified copy of the coordinatingagreement between the Guarantor and the Statepursuant to articles 69 and 93 of the CUD.

PEXICOCHIAPAS AGRICULTURAL DEVELOFNT PROJECT

(Loan 2526-ME)PROJECT COWLET ION REPORT

TABLE 7. Status of Legal Coveats (Cant.)

Cove- Original Revisednant Fulfillment Fulfillment


3.04 (a) T OK Not Later than December 1, 1986 and every year Donethereafter, the Guarantor shall, through SARH (i)prepare and furnish to the Bank the executionprogram for the infrastructure works described inPart A of the Project to be carried out during thefollowing calendar year; and (ii) exchange viewswith the Bank on such program..

3.04 (b) T OK The Guarantor, through SARH, shall follow criteria No new areas areacceptable to the Bank in the programming of the programmed sinceareas within the State to be developed under the US$32 million wereProject, such criteria to include, inter alia, canceled from thethat (i) the area to be developed would benefit Loan.primarily small-scale farmers; and (ii) the areais technically and economically feasible fordevelopment of agricultural production.

3.04 (c) T RVS The Guarantor undertakes that production support Agricultureservices, when required, are or will be available extension notin a timely manner for the areas programmed for provideddevelopment in accordance with paragraph (b) of adequately due tothis section. SARH scaling down

its extensionservices.

3.05 T SOON The Guarantor shall: (i) by December 31, 1987, Done, late incarry out a review of the construction and 1992; road andmaintenance practices regarding rural roads in the drain maintenanceState under the jurisdiction of SCT and SARH, with policy outline duea view to further rationalizing rural roads by April 30, 1994.designs, specifications, construction methods and Follow up inmaintenance practices, and assessment of PRODERITH IImaintenance responsibilities between agencies, and(ii) exchange views with the Bank on theconclusions and recommendations of such review.

EXICOCHIAPAS AGRIaJLTURAL DEVELOPMENT PROJECT

(Loan 2526-ME)PROJECT COtPLETION REPORT

TABLE 7. Status of Legal Covernats (Cont.)

Cove- Original Revisednant Fulfillment Fulfillment


3.06 T SOON (ii) The Guarantor shall (i) furnish to the Bank by (i) Done05/31/94 July 31, 1988, the study included under Part E (d) (ii) An

of the Project (state storage requirement); and envirownmentalecno review, on a periodic basis, the socio- audit of projecteconomic and envirorunental impact of the Project, activities to be

carried outbefore. Follow upin PROMERITH 11.

3.07 T OK Unless the Guarantor and the Bank shall otherwise User associationsagree, the Guarantor shall recover upon completion for O&M are beingof all infrastructure works included in each formed, someparticular area within the Project, the costs of equipment has beenoperation and maintenance, as well as, to the procured andextent feasible, the investment cost of such transferred toworks, user association.

O&M experiment_ _ _ _ _ _ _ _ _ _ ___________________ _____________________________ u nderway .

4.01 (a) F OK The Guarantor shall maintain a cause to be Done(b) maintained adequate records and accounts of the(c) departments or agencies of the Guarantor

responsible for carrying out the Project or anypart thereof; and have the audit report submittedto the Bank not Later than six months at the endof the fiscaL year, inctluding a separate audit

opinion on statements of expenditures.

Key

Covenant type: Status:

E Economic ACT Needs use of formal remedies to bring about complianceF Financial NYD Not yet dueM Managerial OK Covenant complied withT Technical RVS Needs to be revised

SOON Compliance expected in reasonably short time

- 43 -

NXICOCHIAPAS AGRICULTURAL DEVELOPMIET PROJECT

(Loan 2526-IE)

PROJECT COMLETION REPORT

TABLE 8. USE OF STAFF RESOJRCES

TRS Managing Staff Staff Staff StaffFY Task Division Division Typo Number Last Namn Specialty TRS Month Weeks

BANKIIFC - REGULAR BUDGET (BB)

82 LENP LA2NR LA2NR H DCF 12 .1EGR 12 .0

* Subtotal LENP ,1Total 32 .1I

83 LENP LA2NR LA2NR H AGR 12 .4ECN ECONOMIST 12 .1EGR 12 12.1

* Subtotal LENP 12.6Total 83 12.6

84 LENA LA2NR LA2NR A ETA 12 2.0OPA 12 1.6

C EGR 12 4.9ENS 12 4.2

H AGR 12 8.2ECN ECONOMIST 12 9.1EGR 12 10.4

* Subtotal LENA 40.5

LENP LA2NR LA2NR C EGR 12 2.1ENS 12 2.7

AGR 12 3.7DCF 12 .7EGR 12 3.3LVS 12 .1

LEGLA H XXX 12 .1

* Subtotal LENP 17.6Total 84 58.0

85 LENA LA2NR LA2NR A ETA 12 2.3OPA 12 .2

H AGR 12 .3ECN ECONOMIST 12 .5EGR 12 3.3

* Subtotal LENA 6.5

LENN LA2NR LA2NR A ETA 12 .6H AGR 12 .0

S5 LENN LA2NR LA2NR H ECN ECONOMIST 12 .6EGR 12 4.2

- 44 -

TRS Managing Staff Staff Staff StaffFY Task Division Division Type Number Last Name Specialty TRS Month Weeks

* Subtotal LENN 3

SPN LA2NR LA2NR H EGR 12 .9

Total 85 12.8

86 SPN LA2NR LA2NR C AP5155 12 .6H 03627 Downing 12 7.6

* Subtotal SPN 8.2Total 86 8.2

87 SPN LA2NR LA2NR H 03627 Downing 12 .505883 WIson 12 .111057 Roel 12 2.912202 Bulletr 12 4.917094 Wittenberg 12 2.1

PRESV H 16427 Ochs 12 4.9

* Subtotal SPN 14Total 87 14

88 SPN LA2NR LATAG H 03627 Downing 12 2.6LATEN H 09421 Plaza 12 2.7LA2NR H 07672 Von Pogrell 12 6.8

12202 Buller 12 312440 Binswanger 12 .6

- Subtotal SPN 18.0Total 88 18.0

89 SPN LA2NR LATEN H 09421 Plaza 12 110370 Goodland 12 .117953 Davis 12 .0

LA2NR H 12 .007672 Von Pogrell 12 7.912202 BULLER 12 2.0

Subtotal SPN 11Total 89 11

90 SPN LA2NR LATEN H 09421 Plaza 12 .0LA2NR H 07672 Von Pogrell 12 5

* Subtotal SPN 5Total 90 5

91 SPN LA2NR FAOS3 F 12 .0LATEN H 09421 Plaza 12 .0LA2NR H 12 .0

07672 Von Pogrell 12 7.121820 Margulis 12 1.8


92 SPN LA2NR ENVLW H 02004 Villmran 12 1.2LA2NR C 12 .0

H 07672 Von Pogrell 12 11.310976 Sallier 12 4.0

LA2MX H 01323 McCarthy 12 .4

Subtotal SPN 16.9Total 92 16.9

- 45 -

TRS Managing Staff Staff Staff StaffFY Task Division Division Type Number Last Name Specialty TRS Month Weeks

93 SPN LA2NR LA2NR C 12 .0H 12 .0

10976 Sallier 12 6.812331 Cackler 12 .015348 Bronkhorst 12 7.220183 Mcintire 12 .0


94 PCR LA2NR LA2NR H 10976 Sallier 1 .22 .94 .412 .0

11839 Shaw 3 .04 1.45 .57 .68 1.49 1.8

12 .315348 Bronkhorst 4 .6

5 .67 .48 ,212 .0

- Subtotal PCR 9.5

SPN LA2NR AGRNR H 16427 Ochs 12 .0LATEN H 09421 Plaza 4 1.3

12 .0LA2NR H 10976 Sallier 12 .0

11839 Shaw 12 .0

94 SPN LA2NR LA2NR H 12331 Cackler 12 .015348 Bronkhorst 1 .2

2 .23 .36 .212 .0

* Subtotal SPN 2.2Total 94 11.7TOTAL BB 197.2

TOTAL 6MXCPA085 197.2

* Subtotal PCR 4.7

IDTRSOI FOCEXEC - Rundate 07/15/94; Actual data as of 07/15/94.

Type of Staff: H = Higher Level, C - Consultant, A - Assistant, L Local Staff,K = Local Cona., S = Special Pos., F = FAO.

iBRD 18236=.. A0, -' N .- 90 MAY 195A

MEXICO

CHIAPAS AGRICULTURALI , , ; DEVELOPMENT PROJECT

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