Document of

The World Bank

FOR OFFICIAL USE ONLY

Report No: 82305-PY

PROJECT PAPER

ON A

PROPOSED ADDITIONAL LOAN

IN THE AMOUNT OF US$ 100.00 MILLION

TO THE

REPUBLIC OF PARAGUAY

FOR A

SUSTAINABLE AGRICULTURE AND RURAL DEVELOPMENT PROJECT

November 7, 2013

Sustainable Development DepartmentArgentina, Paraguay, and Uruguay Country Management UnitLatin America and the Caribbean Region

This document is being made publicly available prior to Board consideration. This does notimply a presumed outcome. This document may be updated following Board consideration andthe updated document will be made publicly available in accordance with the Bank's policy onAccess to Information.

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CURRENCY EQUIVALENTS

(Exchange Rate Effective October 31, 2013)

Currency Unit = Guarani (PYG)PYG 1,000.00 = US$ 0.23

US$ 1.0 = PYG 4,436.95

FISCAL YEARJanuary 1 - December 31

ABBREVIATIONS AND ACRONYMS

AF Additional FinancingCPS Country Partnership StrategyDA Designated AccountEOP End of ProjectESMF Environmental and Social Management FrameworkFM Financial ManagementIBRD International Bank for Reconstruction and DevelopmentICDP Indigenous Community Development PlanIPPF Indigenous People Planning FrameworkIFR Interim Financial ReportINDERT Instituto Nacional Desarrollo Rural y Tierras (National Rural Development and Land

Institute)INDI Instituto Paraguayo del Indigena (National Indigenous Peoples Institute)ISR Implementation Status and Results ReportM&E Monitoring and EvaluationMAG Ministry of Agriculture and Livestock (Ministerio de Agricoltura y Ganaderia)MDP Municipal Development PlanMEF Ministry of Economy and Finance (Ministerio de Hacienda)PAD Project Appraisal DocumentPDO Project Development ObjectivePMU Project Management UnitPRODERS Proyecto de Desarrollo Rural Sostenible (Sustainable Agriculture and Rural

Development Project)SENACSA Servicio Nacional de Saludy Calidad Animal (Nat.1 Animal Health and Quality

Service)UAF Unidad Administrativa y Financiera (Administrative and Financial Unit)UOC Unidad Operativa Contable (Accounting Operational Unit)ZCU Zone Coordination Unit

Vice President: Hasan A. TuluyCountry Director: Penelope Brook

Sector Director: Ede Jorge Ijjasz-VasquezSector Manager: Laurent Msellati

Task Team Leader: Renato Nardello

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PARAGUAY

ADDITIONAL FINANCING TOSUSTAINABLE AGRICULTURE RURAL DEVELOPMENT PROJECT

CONTENTS

Project Paper Data Sheet page iv

Project Paper

I. Introduction Page 1

II. Background and Rationale for Additional Financing Page 1

III. Proposed Changes Page 3

IV. Appraisal Summary Page 5

Annexes

1. Revised Results Framework and Monitoring Indicators Page 8

2. Operational Risk Assessment Framework Page 14

3. Revised Estimate of Project Costs Page 18

Map Section Page 20

111

PARAGUAY

ADDITIONAL FINANCING TOSUSTAINABLE AGRICULTURE RURAL DEVELOPMENT PROJECT

ADDITIONAL FINANCING DATA SHEET

Basic Information - Additional Financing (AF)Country Director: Penelope Brook Sectors: General agriculture, fishing andSector Manager: Laurent Msellati forestry sector (600); Sub-nationalTeam Leader: Renato Nardello government administration (20%); GeneralProject ID: P148504 public administration sector (20%)Expected Effectiveness Date: February 17, Themes: Rural non-farm income generation2014 (60%); Administrative and civil serviceLending Instrument: IPF reform (10%); Decentralization (10%);Additional Financing Type: Scale-up, Rural markets (20%)Restructuring Environmental category: B-Partial

AssessmentExpected Closing Date: December 29, 2017Joint IFC:Joint Level:

Basic Information - Original ProjectProject ID: P088799 Environmental category: B-Partial

AssessmentProject Name: Sustainable Agriculture and Expected Closing Date: December 28, 2013Rural DevelopmentLending Instrument: SIL Joint IFC:

Joint Level:AF Project Financing Data

[X] Loan []Credit []Grant [ ] Guarantee [ ] Other:Proposed terms: Fix Spread Loan payable in 30 years including 8 years of grace period,repayment schedule linked to commitment, customized repayment schedule, and allconversion options

AF Financing Plan (US$ng)Source Total Amount (US$M)

Total Project Cost: 116.00Cofinancing:Borrower: 6.00

Beneficiaries: 10.00

Total Bank Financing: 100.00IBRDIDA

NewRecommitted

iv

Client InformationRecipient: Republic of ParaguayResponsible Agency: Ministry of Agriculture and Livestock (MAG)Contact Person: Jorge Gattini, Minister of Agriculture and LivestockTelephone No.: +595Email:

AF Estimated Disbursements (Bank FY/US$m)FY 14 15 16 17 18Annual 8 20 30 30 12Cumulative 8 28 58 88 100

Project Development Objective and DescriptionOriginal project development objective (PDO):To improve the quality of life of Small-Scale Farmers and Indigenous Communitiesin the Project Area in a sustainable manner, through the support of actions tostrengthen community organization and self-governance, improve natural resourcesmanagement and enhance the socio-economic condition of said farmers andcommunities.

Revised project development objective:To improve in a sustainable way the socio-economic condition of Small-ScaleFarmers and Indigenous Communities in the Project Area, through the support ofactions to strengthen their community organization, self-governance, and access tomarkets and value chains.

Project description:

The Project comprises five components:

Component 1. Community Organization Development and Capacity Building (US$ 3.5M)

(a) Design and implementation of a training program, which program consists of theprovision of training to Project extensionists (such as, microcatchment, IndigenousCommunities, social organization technicians and rural communities in Target Areas),MAG's personnel assigned to the Project, and other Project stakeholders on, inter alia:(i) conceptual and methodological aspects of the Project; (ii) Project administrativeprocedures; (iii) community development and strengthening of local organizations;(iv) principles and practices of participatory rural assessments, formation and operationof CDGs, lAs, MDCs and MSCs, participatory planning, and stakeholder monitoring;(v) sustainable natural resources management practices; (vi) on-farm production and off-farm income generation; (vii) gender sensitization; (viii) animal production and healthpractices; (ix) agricultural production techniques and good practices; and (x) any otherarea acceptable to the Bank, all for the benefit of Small-Scale Farmers and IndigenousCommunities.

(b) Design and implementation of an environmental education program to, inter alia, raiseawareness amongst Project stakeholders on the need to address environmental problemsthat would improve the livelihood of the rural population.

(c) (i) Provision of technical assistance: (A) to assist MAG in the selection ofmicrocatchment areas, areas in which Indigenous Communities are located and Target

V

Areas; (B) to improve the production capacity and the sustainable management ofnatural resources of Small-Scale Farmers, Indigenous Communities, and other Projectstakeholders acceptable to the Bank; and (C) to establish MDCs and CDGs (as legalentities) in the areas mentioned in (A) herein, as applicable; and (ii) strengthening ofexisting CDGs, lAs and MSCs, all in accordance with the criteria set forth in theOperational Manual, and in a manner acceptable to the Bank.

(d) Design and implementation of a financial education program aimed at, inter alia,increasing knowledge amongst Project stakeholders about financial and commercialmatters to improve their ability to optimize the monetary benefits from their agriculturalproduction and marketing.

Component 2. Rural Extension and Adaptive Research (US$ 27M)

(a) (i) Carrying out of: (A) information workshops and participatory rural assessments inthe selected areas referred to in Part 1 (c) (i) (A) of the Project; (B) an exchange ofexperiences program among Small-Scale Farmers, Indigenous Communities and otherProject stakeholders; and (C) complementary socioeconomic and environmentaldiagnostic surveys/censuses in the selected areas referred to in Part 1 (c) (i) (A) of theProject; (ii) design of resource mapping of the selected areas referred to in Part 1 (c) (i)(A) of the Project; and (iii) provision of technical assistance and/or training toBeneficiaries in: (A) the preparation of MDPs, MIPs and ICDPs; (B) the formulation ofCommunity Subprojects which shall be based on the corresponding MDP, MIP andICDP; and (C) the implementation of Community Subprojects, the adoption ofproductive and environmental practices, and the improvement of marketing in respect ofsaid subprojects.

(b) (i) Carrying out of on-farm technology validation trials for: (A) the improvement andvalidation of existing agricultural production technologies and practices aimed atdiversifying production and addressing farming issues raised by Small-Scale Farmers,Indigenous Communities, and other Project stakeholders acceptable to the Bank; and(B) the adaptation and validation of existing productive systems to local agro-ecologicalconditions and/or to Small-Scale Farmers' production systems; and (ii) carrying out ofthe following activities to address technical and social constraints: (A) studies to identifyand develop specialized markets (including access to the same) and inclusive valuechains; (B) assessments on land tenure; (C) studies to support mainstreaming of naturalresources management and rural development strategies into national policy;(D) feasibility studies to identify opportunities for new products in the areas referred toin Part 1 (c) (i) (A) of the Project; (E) assessments of alternative financial mechanismsso that the microcatchment development assistance to be provided under the Project issustainable; and (F) any other study acceptable to the Bank.

(c) Strengthening the operational capacity of the ZCUs.

Component 3. Sustainable Rural Development Fund (US$ 60M)

Provision of Community Grants to carry out demand-driven investments, whichinvestments consist of, inter alia: (i) home improvements and construction of sanitationinfrastructure; (ii) adoption of sustainable land use practices; (iii) increasing crop andlivestock production; (iv) post-harvest food processing and storage; (v) animal healthvaccination and identification of tagging activities, including the provision of training onanimal health and production issues; (vi) forest and water conservation practices at farm

Vi

levels; (vii) diversification and improvement of production systems to increase income;(viii) construction of minor water supply facilities; (ix) acquisition and utilization ofminimum tillage equipment; (x) establishment of micro-enterprises; (xi) rehabilitation ofroads (within the existing right of way); (xii) establishment of nurseries and/orgreenhouses; (xiii) construction of waste disposal facilities, and recycling of pesticidecontainers; and (xv) any other investment acceptable to the Bank.

Component 4. Animal Health Improvement (No AF funds allocated for this component)

Strengthening of the institutional and operational capacity of: (a) SENACSA, through,inter alia: (i) the improvement of its management information system (Sistema deInformaci6n de Gesti6n de Oficinas Regionales-SIGOR); (ii) the improvement oflaboratory facilities; (iii) the improvement of selected animal health control posts andunits located within the Borrower's territory; and (iv) the acquisition and utilization ofequipment, and the provision of technical assistance and training required therefor;(b) VMG, through, inter alia: (i) the construction of small infrastructure (as approved bythe Bank); (ii) the improvement of the Borrower's genetic program for small-holders;(iii) the improvement of training programs on animal husbandry, animal health, artificialinsemination and processing of agricultural products for small-holder livestock farmers;(iv) the improvement of pasture programs for small-holder livestock farmers; and (v) theacquisition and utilization of equipment, and the provision of technical assistance andtraining required therefor.

Component 5. Project Mana2ement, Monitorin2 and Evaluation (US$ 7.1M)

(a) (i) Strengthening of MAG's institutional, operational, administrative and financialmanagement capacity to enable MAG (including the operational and administrativecapacity of the PMU, the Sub-UAF and the UOC) to assist the Borrower in theimplementation, management, evaluation and monitoring of the Project; (ii) carrying outof semi-annual audits of Part 3 (a) of the Project in a manner acceptable to the Bank;and (iii) carrying out of annual performance assessments of the PMU, the Sub-UAF, theUOC and the ZCUs.

(b) Design and implementation of a training program for MAG's selected personnel onProject management, public sector accounting, organization and procurement, treasurymanagement, and financial management and control (including accounting).

(c) Establishment and implementation of: (i) a Project management information system;(ii) a geographic information system; and (iii) a Project monitoring and evaluationsystem.

(d) Design and implementation of a communication and dissemination strategy, whichstrategy consists of, inter alia: (i) the carrying out of Project launch workshops,informational workshops, educational programs, and promotional and animal healthcampaigns at the national, departmental and local levels; (ii) the establishment andoperation of a Project internet home page; (iii) the printing and distribution ofinformational material; and (iv) any other activity of similar nature acceptable to theBank.

Vii

Safeguard and Exception to PoliciesSafeguard policies triggered:Environmental Assessment (OP/BP 4.01) [ X ]Yes [ ] NoNatural Habitats (OP/BP 4.04) [ X ]Yes [ ]NoForests (OP/BP 4.36) [ X ]Yes [ ]NoPest Management (OP 4.09) [ X ]Yes [ ]NoPhysical Cultural Resources (OP/BP 4.11) [ ]Yes [X] NoIndigenous Peoples (OP/BP 4.10) [X ]Yes [ ]NoInvoluntary Resettlement (OP/BP 4.12) [ ]Yes [X ] NoSafety of Dams (OP/BP 4.37) [ ]Yes [X]NoProjects on International Waterways (OP/BP 7.50) [ ]Yes [ X ] NoProjects in Disputed Areas (OP/BP 7.60) [ ]Yes [ X ] No

Does the project require any waivers of Bank policies? [ ]Yes [ X] NoHave these been endorsed or approved by Bank management? [ ]Yes [ ] No

Conditions and Legal Covenants:Financing Agreement Description of Condition/Covenant Date Due

Reference5.01(a) INDI Participation Agreement has been amended Effectiveness

by the parties thereto, in a manner acceptable tothe Bank.

5.01(b) The Operational Manual has been updated by the EffectivenessBorrower, in a manner acceptable to the Bank.

Schedule 2, SENACSA Participation Agreement has been One month after

Section I.B(a)(ii) amended in a manner acceptable to the Bank effectiveness

Schedule 2, The auditor to carry out the audits of Part 3 has

Section II B.4 been hired

Schedule 2, Hire a human resources firm to assist MAG in the

Section I.K selection of the Borrower's civil servants andindividual consultants for the Project

Viii

I. Introduction

1. This Project Paper seeks the approval of the Executive Directors to provide an AdditionalFinancing (AF) Loan in the amount of US$100.00 million to the Paraguay SustainableAgriculture and Rural Development Project (P088799, Loan 7503-PY, "PRODERS"). ThisProject Paper also seeks the approval of minor changes to the Project Development Objective(PDO).

2. The proposed AF will help finance the costs associated with scaling up the activities of aProject that has proven an effective tool for fighting rural poverty in Paraguay. The AF wouldexpand the Project Area to three additional departmentsI of Eastern Paraguay (Regi6n Oriental),where 97 percent of the country's population and an even greater share of smallholders and ruralpoor live. With the AF, the Project is expected to reach 200,000 additional beneficiaries,bringing the total number of Project beneficiaries to 256,000. Based on Project results to date, itis estimated that US$100 million of financing to PRODERS would lift an additional 125,000beneficiaries out of poverty and reduce extreme poverty in Paraguay by more than twopercentage points.

3. The AF will maintain the same institutional arrangements and overall implementationmechanisms currently used by the parent project, with minor adjustments based on lessons fromexperience. These include the need to increase the market orientation and linkages with inclusivevalue chains of farm-level investment supported by the Project.

4. This Project Paper also reflects (i) the first extension of the closing date of the Project toDecember 29, 2017 in order to complete its activities; and (ii) a restructuring consisting in minorchanges to project components and activities, and related changes to the Results Framework. It isexpected that all additional activities would be completed within four years, i.e. within 10 yearsfrom the approval date of the original Project.

II. Background and Rationale for an AF in the Amount of $100.00 million

5. Country context. With about one third of the population living below the poverty lineand 18 per cent in extreme poverty, Paraguay is one of the countries in Latin America with thehighest levels of poverty. Poverty is even more pervasive in rural areas, where two thirds of theextreme poor of Paraguay live, even though only 40 percent of the total population is rural. Inrural Paraguay, almost 45 per cent of the population (1.2 million Paraguayans) lives in poverty,compared to less than 25 percent in urban areas.

6. The new Government recently included the fight against extreme poverty among its toppriorities. Considering that two thirds of the rural poor of Paraguay (or about 782,000 people) arealso extreme poor and mostly live off agriculture, the Government concluded that PRODERSincludes the appropriate mix of activities (community organization, rural investment financing,and extension services) to contribute to reduce poverty in rural areas. The AF is intended to scale

1 Caazapi, Canindeyu and Concepci6n, in addition to San Pedro and Caaguazu, already covered under the originalProject. The Project Area can be further expanded, with the Bank agreement, when covered by the Environmentaland Social Management Framework acceptable to the Bank.2 Source: Technical Planning Secretariat, Directorate-General of Statistics and Census, Permanent HouseholdSurvey 2011.

1

up the Project to some of the departments with the highest incidence of rural poverty in order toreduce the number of rural poor and extreme poor.

7. Consistency with Country Partnership Strategy (CPS). The Project is consistent withthe current World Bank Group's CPS for the Republic of Paraguay for the period FYO9-FY13(Report n. 48087-PY) discussed by the Board of Executive Directors on May 5, 2009 and theCPS Progress Report 2009-2013 (Report n. 66782-PY), discussed by the Board of ExecutiveDirectors on April 9, 2012. The original Project was included in the CPS lending program as aninstrument to reduce the vulnerability of the rural poor under the cross-cutting theme "Poverty".The proposed AF is expected to widen the impact of the Project in some of the poorest regions ofthe country and contribute to support the Government's program of "Opportunities for all".

8. The Original Loan. The original loan for an amount of US$37.5 million was approvedon January 29, 2008, became effective almost 18 months later on June 30, 2009, and has aclosing date of December 28, 2013. The balance of the proceeds is fully committed for 2014. Asof November 1, 2013 disbursements were at 55 percent and are expected to exceed 60 percent bythe end of 2013.

9. The original PDO was "to improve the quality of life of Small-Scale Farmers andIndigenous Communities in the Project Area in a sustainable manner, through the support ofactions to strengthen community organization and self-governance, improve natural resourcesmanagement and enhance the socio-economic condition of said farmers and communities".

10. Original Project activities included support to the Community organization developmentand Capacity building for producers groups and Indigenous Communities (Component 1); RuralExtension and adaptive research technical assistance to increase production and improve naturalresources management (Component 2); Support to demand-driven investments inmicrocatchment areas and Indigenous communities through the Sustainable Rural DevelopmentFund (Component 3). The Original Project also included a component to strengthen theinstitutional and operational capacity of (a) SENACSA and (b) Vice-Ministry of Livestock(Component 4), as well as a component supporting Project management, monitoring andevaluation (Component 5).

11. The original Project Area comprised 84 microcatchments areas (microcuencas) and 73Indigenous Communities (reduced at 61 and 40, respectively, under the restructuring of 2013) inthe departments of San Pedro and Caaguazfi, in the Eastern Region of Paraguay. Projectbeneficiaries include an estimated 56,000 rural poor, organized in 440 rural associations and 40indigenous communities, achieving close to 100 percent of the results expected in the May 31,2013 restructuring. Analysis of these results indicates that the incidence of extreme povertyamong the Project beneficiaries decreased from 75 percent to 25 percent between 2011 and 2013,which exceeds the expectations set out in the Project Appraisal Document (PAD)3

12. Performance to date. The most recent Implementation Status and Results Reports (ISR)for the Project shows that, after delayed effectiveness, the Project's results have been generallyconsistent with the expectations set out in the PAD and the Project Restructuring Paper 4 in 2013.

3 PAD dated December 11, 2007; Report n.41419-PY4 Project Paper dated May 31, 2013; Report n.78048-PY.

2

13. Project performance for Implementation Progress has been consistently rated ModeratelySatisfactory for more than two years (last five ISRs) and has recently been upgraded toSatisfactory. While progress towards achievement of the PDO had until recently been ratedModerately Unsatisfactory, this was mainly because of the effects of the initial effectivenessdelay on the likelihood of achieving the original results. Further to the May 2013 restructuring,the PDO rating was recently upgraded to Moderately Satisfactory.

14. The issues that affected implementation up to the end of 2012 (complex procedures, slowdisbursement, lack of processing of monitoring data) have been thoroughly addressed at the Mid-Term Review of February 2013 and the ensuing May 2013 restructuring, which introducedstreamlined administrative procedures and implementation mechanisms. These have resulted in amuch improved performance, as exemplified by CY13 disbursements being now already 50%higher than at the corresponding period in CY12.

15. Procurement and Financial Management have been rated Moderately Satisfactory for thepast three years (six ISRs) and Financial Management (FM) has recently been upgraded toSatisfactory for the first time since effectiveness, signaling a strong FM performance despite theincreased volume of transactions. Both the financial audit and the concurrent audit (whichreviews the results and eligibility of transfer at field level) are current and unqualified. Safeguardcompliance has been satisfactory and rated accordingly for the last two years and the Project is insubstantial compliance with its key loan covenants.

16. Rationale for Additional Financing. In view of the positive results of PRODERS, theGovernment intends to scale up the operation to some of the departments with the highestincidence of rural poverty, in order to reduce the number of rural poor and extreme poor. TheGovernment requested that this scale-up be processed as AF, rather than a new operation, for twomain reasons: (i) PRODERS activities are an excellent tool to address the proposed projectactivities and mechanisms would basically replicate what PRODERS is already doing and (ii) thequicker processing time of an AF could allow for an expedited loan ratification, thus allowingthe AF to contribute to the Government objective of reducing extreme poverty starting already in2014.

17. Alternatives considered. A larger, stand-alone operation to cover other regions ofParaguay was considered. However, the Government and the Bank later agreed that an additionalfinancing would be the best option to provide continuity to the current approach whileminimizing the effectiveness delays that have characterized the portfolio in recent years.

III. Proposed Changes

18. Project Development Objective. In order to match the Government own formulation ofthe PDO, the original PDO "To improve the quality of life of Small-Scale Farmers andIndigenous Communities in the Project Area in a sustainable manner, through the support ofactions to strengthen community organization and self-governance, improve natural resourcesmanagement and enhance the socio-economic condition of said farmers and communities." willbe modified to read as follows: "To improve in a sustainable way the socio-economic conditionof Small-Scale Farmers and Indigenous Communities in the Project Area, through the support ofactions to strengthen their community organization, self-governance, and access to markets andvalue chains." This change improves the measurability of the PDO, and intends to stress anincreased focus on access to markets.

3

19. Changes to components. The following changes will be introduced to components:(i) Component 1: a new Sub-component 1(d) will support the design and implementation of afinancial education program aiming to increase Project stakeholders' knowledge of financial andcommercial matters to improve their ability to optimize the monetary benefits from theiragricultural production and marketing, which is crucial for their economic growth.(ii) Component 3: activities of the component will focus completely on community subprojectwithout any INDERT subprojects5 ; (iii) Component 4: Animal Health activities financed underthe original loan will be oriented towards strengthening the Project's support for small producers,rather than in the national-level activities to control Foot and Mouth Disease

20. Other changes introduced. Based on lessons learned from the implementation of theoriginal Project, the AF will introduce the following changes to the approach and/or theoperational arrangements (more details under the Appraisal Summary section ahead):(i) selection of target areas will be based on poverty mapping rather than "microcatchment areas"as in the original Project; (ii) supported investment plans will have a stronger market orientationthan the original Project and will strengthen linkages with inclusive value chains; (iii) theMonitoring and Evaluation (M&E) system will be strengthened to handle the expected increasedamount of data of the larger Project; and (iv) minor adjustments are proposed to the resultsframework in order to: accommodate the revised PDO and scaled up activities and reduce thenumber of indicators for easier and more effective M&E (see Annex 1, Results Framework).

21. Implementation arrangements. No major changes from the original Project are beingproposed in terms of design, approach and implementation arrangements. No new safeguards aretriggered, fiduciary arrangements remain the same, and risks identified under the original Projectcontinue to remain relevant.

22. Institutional arrangements. Under the AF, the Project will maintain the sameinstitutional arrangements as the original Project. The Ministry of Agriculture and Livestock(MAG), through its National Directorate for the Coordination and Administration of Projects(DINCAP), will continue to implement the Project through a Project Management Unit (PMU),comprised of a small core team supervising several area offices (organized by departments), inturn responsible for local field staff. In order to improve efficiency and geographical coverage,some of the field level activities could be entrusted to third-party providers (MAG's Departmentof Agricultural Extension, Non-Governmental Organizations, Consulting Firms, etc.).

Table 1: Project outcome indicatorsOutcomes Original Current Changes Revised

Target Targets* with AF Project Targets

Individual beneficiaries 100,000 56,000 +200,000 256,000Beneficiary smallholders families 12,600 9,150 +29,850 39,000Beneficiary Indigenous families 6,000 2,500 +13,000 15,500Community Development S/P** 600 480 +2,020 2,500Indigenous Communities S/P** 60 45 +130 175* As restructured further to Mid-Term Review of February 2013** S/P = Subproject

INDERT subprojects did not materialize under the Original Project.

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23. AF expected outcomes. The nature of activities financed and outputs expected fromscaled-up project activities are summarized in Table 1 above (details are in Annex 1, resultsframework).

24. Project financing. Revised project financing is presented in Table 2 below. Revisedcosting is presented in table A3.1 in Annex 3.

Table 2: IBRD Financing s by component (000 USD)

Original Current Additional RevisedComponent Cost Cost* Financing IBRD Financing1: Community Organization 1,900 900 3,500 4,400 3.2%2: Rural Extension 8,700 9,000 27,000 36,000 26.2%3: Rural Development Fund 19,500 21,500 60,000 81,500 59.2%4: Animal Health Improvement 2,900 2,900 0 2,900 2.1%5: Project Management 3,200 3,200 7,100 10,300 7.5%6 Unallocated 1,300 0 2,150 2,150 1.6%7 Front-End Fee n.a. n.a. 250 250 0.2%

Total 37,500 37,500 100,000 137,500 100%* Based on actual and projected costs as of Nov 1, 2013, including reallocation of funds expected for 2014.

IV. Appraisal Summary

25. Technical. Technical aspects of the Project remain virtually unchanged under the AF,which will build on lessons from the implementation to date. The following are some newtechnical aspects that will be introduced under the proposed AF:

(a) Targeting based on poverty indicators rather than micro-catchment areas. Selectionof intervention areas and beneficiaries will be based on already existing poverty mapping(Census 2010) and on registries of social programs' beneficiaries. In each department, thetargeting method will be able to discriminate at the district (distrito) and sub-district(compalia) levels: areas with higher concentration of poor smallholder would constitutepriority Target Areas. This approach will improve the poverty focus of the program andlimit an excessive dispersion of the intervention.

(b) Stronger focus on Rural Business Plans rather than generic communitydevelopment plans. The AF will aim at strengthening the market orientation of farm-level investments, in line with the government strategy that considers market inclusion asthe main way out of poverty for poor rural producers. Productive investments will need tobe based on credible linkages with market agents (intermediaries, processing plants,supermarkets, public procurement system, etc.). The Project will support producers inidentifying, and becoming actors of, inclusive value chains.

(c) Simplified project procedures. The AF will continue the path of proceduralsimplification initiated with the restructuring of 2013, by piloting innovative tools such asthe electronic signature (at least for transaction between the Project, the banks, andHacienda) and the simplification of the paperwork at field level.

(d) Financial education program. The AF will support the design and implementation of anew financial education program as Sub-component 1(d), in order to increase knowledge

5

amongst Project stakeholders about financial and commercial matters that would improvetheir ability to produce and market their production, optimizing the monetary benefits oftheir efforts

(e) Animal health activities geared towards small producers. Activities of Component 4will be oriented towards strengthening the Project's capacity to cater for small livestockproducers, a service which is crucially missing in Paraguay according to the latestassessment of the World Animal Health Organization (OIE).

(f) Strengthened Monitoring and Evaluation system. Strong delays in the implementationof a solid M&E system have been a weakness of PRODERS for a long period of time.The AF will strengthen the M&E and will require that all financed subprojects shouldinclude quantifiable indicators, to be regularly monitored by the PMU.

26. Safeguards. The Project is classified as "B" and there is no revision to the classificationas the AF encompasses the same eligible activities. No additional safeguards are triggered andthe same five safeguard policies triggered by the original Project remain: EnvironmentalAssessment (OP/BP/GP 4.01), Natural Habitats (OP/BP 4.04), Pest Management (OP 4.09),Forests (OP/BP 4.36) and Indigenous Peoples (OP 4.10). Under the original Project,environmental and social safeguard compliance and performance have been consistently ratedsatisfactory since mid-2011. The Project safeguard documents, originally prepared and disclosedin 2007, have been updated to reflect the expanded Project Area. The revised Environmental andSocial Management Framework was publicly disclosed in Paraguay and in the Bank's externalwebsite on October 31, 2013. The revised Indigenous Peoples Planning Framework was publiclydisclosed in Paraguay and in the Bank's external website on November 1, 2013.

27. Financial Management. Financial Management (FM) arrangements for the AF areexpected to rely widely on the arrangements in place for the original Project, with the MAG'sNational Directorate for the Coordination and Administration of Projects (DINCAP) responsiblefor the financial management and disbursements functions of the project. FM performance forthe Project has been recently upgraded to Satisfactory based on the following: (i) progressachieved in the simplification of transactions recording procedures which contributed toimproved and updated record keeping; (ii) unqualified financial statements audit reportsconsistently received by the Bank on time; (iii) satisfactory outcomes of the concurrent auditreports over the Community Driven Development component along with follow up of internalcontrol recommendations and; (iv) timely and accurate project financial reporting throughinterim financial reports (IFRs). The Bank's FM supervision will continue through on-sitemissions; desk review of IFRs, quarterly concurrent audit reports over the Sustainable RuralDevelopment Fund, and annual financial statements audits; as well as ad hoc support as needed.The Disbursement Table is presented in Annex 3.

28. Procurement. Procurement will be carried out in accordance with: (i) the "Guidelines:Procurement under IBRD Loans and IDA Credits" dated January 2011; (ii) the "Guidelines:Selection and Employment of Consultants by World Bank Borrowers" dated January 2011, and(iii) the provisions of the Loan Agreement. Procurement arrangements will be the same in placefor the original Project.

6

29. Economic and financial analysis. The economic and financial analysis carried out atappraisal of the original Project remains valid.6 The overall economic internal rate of return ofthe project was estimated to be 17%. This estimate is conservative since it does not take intoaccount some benefits accrued from the Project that are extremely difficult to quantify such as:(i) biodiversity conservation and decreased soil erosion; (ii) increased well-being as a result ofmore food availability and improved housing; and (iii) the long-term effects of strengthenedcommunity organization and self-management.

a. Project's development impact. Farmers' net income with and without the projectwere estimated on the basis of illustrative farm models. Net incremental incomecould vary from 24% to over 100% depending on the farmers' initial conditions, thecropping pattern and the farmers' own dynamics to go beyond the rehabilitation stageand adopt practices of sustainable production. According to the analysis carried out,all farm models are expected to ensure incomes above the rural poverty line, inaddition to the benefits derived from improved natural resources management,increased food availability and better housing and sanitation conditions. Results fromimplementation of PRODERS show indeed that the project has contributed to lift outof extreme poverty 2/3 of its beneficiaries, reducing the incidence of extreme pooramong its beneficiaries from 75 percent to 25 percent in three years, compared tobaseline data.

b. Rationale for Public financing. The new Government has made the fight againstextreme poverty its national priority. Poor farmers generally face greater risks inadopting productivity enhancing technologies and in making the investmentsnecessary to improve their livelihoods and socio-economic inclusion. The use ofpublic funds, through one-time incentives (grants), to mitigate those risks and reducethe up-front transaction costs necessary for poor farmers to make those investments isexpected to induce positive externalities which would ultimately result in increasedgrowth and poverty reduction for the country. In addition, the inclusion of financialeducation and the availability of investment funds should help the development of afinancial market catering poor producers, currently at embryonic stage in Paraguay.

c. World Bank's value added. The Bank has been supporting rural development andpoverty reduction in Paraguay for many years. Its global knowledge and theknowledge of the Paraguayan context, allow the Bank to maximize the value formoney of the project. Particularly, the instrument of additional financing used on awell-established project with sound fiduciary rules and performance would allow theGovernment to quickly mobilize financial resources to poor rural households in atransparent and effective manner.

30. Closing date. The new closing date of the Project will be December 29, 2017. Theclosing date of the Original Loan is December 28, 2013 and this Project Paper will extend it toDecember 31, 2015.

31. Policy exceptions. There are no exceptions to Bank policies.

6 The full Economic Analysis is available in the project files.7 PRODERS; Monitoring and Evaluation Report at September 30, 2013.

7

Annex 1: Results Framework and Monitoring

PARAGUAYAdditional Financing to the Sustainable Agriculture and Rural Development Project

Revision of the Results Framework

Current (PAD8) Proposed Comment/Rationale for ChangePDO

To improve the quality of life of Small- REVISED The PDO was revised to be moreScale Farmers and Indigenous To improve in a sustainable way the socio- accurate and reflect the marketCommunities in the Project Area in a economic condition of Small-Scale Farmers view.sustainable manner, through: and Indigenous Communities in the Project

1. the support of actions to Area, through the support of actions tostrengthen community 1. strengthen their communityorganization and self-governance organization, self-goverance,

2. improve natural resources 2. and access to markets and accessmanagement to value chains.

3. enhance the socio-economiccondition of said farmers andcommunities.

PDO indicators [# s core indicator]

Current (PAD) Proposed change *CDGs, MDCs and MSCs or oAs DROPPED Already mentioned in component 1.established, strengthened and participating (Change of target areas)in the management of rural sustainable Management committee of producers anddevelopment in 800% of the selected micro- Indigenous communities established,catchments and indigenous communities in strengthened and participating in thethe project area with participation of management of rural sustainablewomen and rural youth in decision-making development in 80 of the poorest zones of(appropriate level of participation to be the project area, with participation ofagreed by the organizations). women and rural youth in decision-making

(appropriate level of participation to beagreed by the organizations).

At least 50( of the target farms increase CHANGE TARGET VALUES Redefined at a more ambitious leveltheir agricultural incomes by 300%. Of At least 70% of the target farms increase (under previous version, % liftedthese, at least 20% obtain an agricultural their agricultural incomes by 30. above poverty line would have beenincome above the poverty line, satisfactory)The incidence of poverty (measured in CHANGED RephrasedUBN) reduced by 500d in the assisted At least 50 incidence of poverty reducedsmall-scale farmers and indigenous in the assisted small-scale farmers andcommunities. indigenous communitiesProduction of crops for domestic DROPPED Included in other indicators alreadyconsumption increased by 20o in 5m0 ofthe poorest beneficiary families.Productivity of land (by hectare) increased CONTINUED Approach will include action towardsby an average of 25 in beneficiary f both: increasing un-utilized area perthrough the application of productive farm and yield per hectare. Indicatorpractices promoted by the project. for2 inPDO# Number of project beneficiaries, of NEW Basic core indicatorwhich: Women, Youth, Indigenous peoples(of which W/Y) p_o_oetcDOPE nlddi teridctr _led

Change is with respect to the PDO of the original Loan Agreement.

8

67% of beneficiary households with access DROPPED Already an indicator in component 3 ofto at least one additional basic service the project.aimed at home improvements.20% of indigenous communities without DROPPED This result is beyond the control of theformal land titles at project start acquire Project.titles and 50% of small-scale farmerswithout title receive assistance towardacquiring titles.Greater awareness among 50% of project DROPPED Irrelevantbeneficiaries of land degradation and thepotential contribution of sustainablenatural resources and land management toimproved livelihoods in the project area.

NEW It is crucial to measure the new activityAssociative management capacity of the AE, access to markets andincreased: 80% Community Development inclusive vale chains trough businessGroups and 50% of indigenous community plans and financial/marketinggroups with investment proposals oriented education.to business plans to access markets andinclusive value chains.

Intermediate Results indicators

Current (PAD) Proposed change*

Capacity Building and rural extension

295 technicians trained and operating in CHANGE OF TARGET VALUE Changed only to reflect scaled-upthe project area 345 technicians trained and operating in the activities. Up to now they have 130

project area (295 from original project and technicians trained.from 50 AF)

Environmental education program CHANGE OF TARGET VALUE Changed only to reflect scaled-upipeetdand reaching about 8.000 .. activities

implemented aEnvironmental education programimplemented and reaching about 24,000(8,000 from original project and 16,000from AF)

By PY10, Subcomponent has formalized:

61 Microcatchment Development DROPPED Micro-catchments discontinued underCommittees. AF. Limited to Original Project, not

AF.420 Community Development Groups DROPPED Measured in next component.

2,000 Community Development Groups(420 from original project and 1,580 fromAF)

45 Indigenous Community Groups DROPPED Measured in next component.

130 Indigenous Community Groups (45from original project and 85 from AF)

27 Municipal Steering Committees DROPPED Municipal activities were canceled atrestructuring

National Coordination Committee DROPPED Not established under the originalestablished project.

By PY10, the following types of plans asinstruments for extension and financingpurposes have been prepared andimplemented in the project area:

61 Microcatchment Development Plans. DROPPED Micro-catchments discontinued underAF. Limited to Original Project, notAF.

9

9,150 Farm Investment Proposals CHANGE OF TARGET VALUE Changed only to reflect scaled-up

30,000 Families /farms with Investment activities

Proposals (9,150 from original project and30,050 from AF)

480 Community Investment Proposals CHANGE TARGET VALUE Is measured in next component.

2,000 Community Investment Proposalsfinanced and implemented (480 fromoriginal project and 1,520 from AF) F

45 Indigenous Communities Development CHANGE TARGET VALUE Is measured in next component.

Plans 130 Indigenous Communities DevelopmentPlans financed and implemented (45 fromoriginal project and 85 from AF)

600 producers trained as promoters in CONTINUED/NEW Incorporated the new skills forsustainable production. 2,500 producers trained as promoters in improved commercial orientation of

sustainable production and producers.

financial/commercial matters.

80% of beneficiary trained have adopted CONTINUEDdiversification and new sustainabletechnologies to increase production andproductivity.

1.200 other producers trained in DROPPED Redundant/unclearsustainable production practices.1.800 indigenous beneficiaries trained by DROPPED Numbers can be disaggregated inextension agents indigenous, young and women

beneficiaries.

At least 80% of small-scale farmers and DROPPED Irrelevant for monitoring80% of the 73 indigenous communitiesassisted regularly by rural extension agentsby PYO5

87 rural extension agents working in the DROPPED Irrelevant for monitoringproject area.

Organizational Development and Investments in subprojectsBy PY10, investments financed in micro-catchment and indigenous communitieswill include:480 Community Investment Proposals CHANGE OF TARGET VALUE AND Changed to include results from

REPHRASED component 2 and 3.

2000 Community Investment Proposalsfinanced and implemented (480 fromoriginal project and 1,520 from AF) F

45 Indigenous Communities Development CHANGE OF TARGET VALUE AND Changed to include results fromPlans REPHRASED component 2 and 3.

130 Indigenous Communities DevelopmentPlans financed and implemented (45 fromoriginal project and 85 from AF)

65% of beneficiary households with DROPPED Already included under othersubprojects to improve rural homes indicators.12.000 hectares under sustainable DROOPED Already included under otherproductive practices. indicators.

5.000 ha under forestry practices CHANGE OF TARGET VALUE

6.000 ha under good forestry practices

NEW The Project needs to improve itsAt least 80% of subprojects complete disbursement execution in order todisbursements and investments targets achieve the AF outcomes in a timelyestablished in their management plan manner.

10

NEW Subproject need to have specificallyAt least 80% of subprojects achieve 80% of quantified SMART indicatorstheir intended results from the investmentplan (64% composite target)NEW Put in place to monitor sustainabilityAt least 4 of subprojects are functional twoyears after their closing date

Component 4. Animal Health ImprovementSubcomponent 4.1 Strengthening of SENACSA

o SIGOR local units connected CONTINUEDo SIGOR on line coverageo Biotery Labo Residues Lab

* Indicate if the indicator is Dropped, Continued, New, Revised, or if there is a change in the end of project target value

11

REVISED PROJECT RESULTS FRAMEWORKProject Development Objective (PDO):

Click here to enter the revised PDO of your operation

Baseline Cumulative Target Values 12

Original Progress CoPDO Level Results Indicators9 , UOM10 Project To Date 201x 201y 201w 201z Frequency Data Source/ Responsibility for mm

13Methodology Data CollectionStart (2013) ents

(2008)Pilot micro- Yearly M&E office withcatchments and socioeconomic data collected

At least 50% of the target farms indigenous surveys through independent.. 500% and communities: evaluation team

increase their agricultural incomes Numberby 30%. Of these, at least 20% of 11.000 20% of yearly reports Every two

obtain an agricultural income above families target years

the poverty line. farms Project area: mid environmental Direccion de Censoterm evaluation surveys y Estadisticaand final Agropecuaria delevaluation report MAGPilot micro- Yearly M&E office withcatchments and socioeconomic data collectedindigenous surveys through independent

At least 50% incidence of poverty Poverty communities: evaluation team(measured in UBN) reduced in the 11.000 reduced yearly reports Every twoassisted small-scale farmers and b50% yearsindigenous communities yo Project area: mid environmental Direccion de Censo

term evaluation surveys y Estadisticaand final Agropecuaria delevaluation report MAGPilot micro- Yearly M&E office with data

Productivity of land (by hectare) catchments and socioeconomic collected throughincreased by an average of250% in of 25%o of indigenous surveys independent evaluation

00communities: yaltealutonta

beneficiary f through the application hecare target reormts: erytaof productive practices promoted by farms

the project. Project area: mid Socioeconomic M&E office ihroughterm evaluation and and independent evaluation

Please indicate whether the indicator is a Core Sector Indicator (for additional guidance - please see http://cogreingdirators10 UOM = Unit of Measurement.

SFor new indicators introduced as part of the additional financing, the progress to date column is used to reflect the baseline value.STarget values should be entered for the years data will be available, not necessarily annually. Target values should normally be cumulative. If targets

refer to annual values, please indicate this in the indicator name and in the "Comments" column.

12

final evaluation environmental teamreport surveys

Pilot micro- Yearly M&E office with datacatchments and socioeconomic collected through

Associative management capacity indigenous surveys independent evaluationincreased: 80% Community Numb 80% of communities: yearly teamDevelopment Groups and 50% of of total reportsindigenous community groups with business 0 40% 40% sub-investment proposals oriented to plans sub- Project area: mid Socioeconomic M&E office throughbusiness plans to access markets and projects term evaluation and and independent evaluation

inclusive value chains. final evaluation environmental teamreport surveys

Number Registro NacionalBeneficiaries 1 of 0 56.000 256.000 de Agricultura

people Familiar (RENAF)

13 All projects are encouraged to identify and measure the number of project beneficiaries. The adoption and reporting on this indicator is required forinvestment projects which have an approval date of July 1, 2009 or later (for additional guidance - please see http://coreindicators).

13

Annex 2

Operational Risk Assessment Framework (ORAF)

Paraguay: Additional Financing to the Sustainable Agriculture and Rural Development (P088799)

Stage: Board

Stakeholder Risk Rating Low

Risk Description: Risk Management:

A. Lack of consultations, A. During both preparation and implementation of PRODERS, consultations with representative ofparticipation, and ownership of indigenous peoples and small farmers have led to broad support for the Project. PRODERS is aindigenous communities assisted demand-driven project that operates on the basis of regular consultations with local stakeholders.by the project could jeopardize theproject effectiveness B. The component Community Organization Development is specifically designed to foster the

participation of poor producers and indigenous people.

C. The project's IPPF has so far been, and it is expected to continue to be, a key factor of PRODERS'success with indigenous people ad it is expected to. The IPPF has been updated to cover the Projectexpanded area.

Resp: Both Status: Stage: Recurrent: Due FrequencyDate:

14

Capacity Rating Substantial

Risk Description: Risk Management:

A. MAG processes and capacities for A. MAG FM capacities have been strengthened under Component 5 through the establishment ofadministrative & financial the MAG sub-UAF at the National Directorate for Coordination and Administration of Projectsfunctions need strengthening. (DINCAP, for its Spanish acronym). Also, MAG has adopted competitive recruitment of staff

to re-activate the Sub-UAF, accompanied by a capacity building program to support such unit,and strengthening of DINCAP FM staffing to support Project implementation.

B. Funds Flow: High bureaucratic B. MAG is expected to present to Hacienda a proposal to concretely reduce paperwork for transferrequirements needed as a to producer groups and IP. The project will upgrade its FM system to allow for electronicprerequisite for transferring money management of financial and administrative transactions and to link them to the M&E system.to communities, which may bothhinder the timely implementationof the program and createinefficiencies in the work of fieldpersonnel. Also, lack ofcoordination between DINCAP,the PMU, and Hacienda may causedelays in funds transfers.

C. Historically low disbursement rate C. Simplification and changes to the payments mechanism and documentation of eligibleexpenditures to the Bank procedures under the Subprojects Grants component agreed with thePMU have allowed a significant increase in disbursements and flow of funds to beneficiaries in2013 (30 percent of the loan, despite restrictions imposed during the political transition).Adjustments to the project operational manual are already in effect to improve disbursementperformance. ). An adequate level of accountability and control over funds transferred underComponent 3 is maintained through concurrent audits of eligibility of beneficiaries,procurement processes, uses of funds and documentation of expenses at subprojects level.However, close coordination and effort is required to be developed by DINCAP, the PMU andthe Treasury Office, Direcci6n de Tesoro Publico at the Ministry of Finance to reduce more thetimeframe for transferring funds to subprojects beneficiaries. A streamlined flowchart ofactions, roles, and responsibilities will be included in the revised Operational Manual.

15

D. Most of the procurement would be D. Continue implementing: (i) an oversight mechanism over CDD subprojects through adone through CDD procurement concurrent audit and (ii) a Human Resources firm to select individual consultants.procedures or through the hiring ofhigh number of individualconsultants, which may causeaccountability and monitoringissues.

E. Inadequate knowledge in E. Establish in the Project Operational Manual a clear description of roles and responsibilities,UOC/DINCAP of WB related to procurement processes between UOC/DINCAP and UEP.procurement guidelines may createdelays and issues in theimplementation of procurementprocesses.

F. Lack of human resources on F. PRODERS procurement team will be strengthened in anticipation of the increased volume ofprocurement. activities.

Resp: Both Status: Not Stage: Both Recurrent: Due Frequency

Yet Date:

Due

Governance Rating Substantial

Risk Description: Risk Management:

A. The high number of transaction in A. The Project's framework for good governance includes institutional strengthening anddecentralized setting carries an inherent improvement of financial and other management systems which have proven very usefulhigh level of governance risk. during PRODERS: these include the recruitment of an HR firm to manage the selection and

evaluation of all key project personnel; undertaking a concurrent audit of all field-leveltransactions; strengthening the project administrative capacity

B. In Paraguay effectiveness delay have B. It is expected that the ratification of the additional financial loan would be granted shortlyranged from 12 to 18 months for the lastfour projects and a similar delay would

16

reduce the impact of the additionalfinancing in the first two years, riskingto create a gap with the ongoingPRODERS.

Resp: Both Status: Stage: Both Recurrent: Due FrequencyDate::

Design Rating Substantial

Risk Description: Risk Management:

A. Risk that the volume of transaction A. The Government has put in place, and will continue, adequate staffing and organization for theof the AF may overwhelm the PMU. The Administrative Operational Manual (AOM), to be updated as part of the updatedProj ect administration and finance Operational manual due by Effectiveness, includes internal control procedures, PMU staffingunit. & organization, job descriptions, FMRs & financial statement formats, specific FDRS

procedures, description of FDRS management specific staffing, project audit terms ofreference and concurrent audit of the communities subproject component.

Resp: Client Status: Stage: Recurrent: Due FrequencyDate:

Social and Environmental Rating Low

Risk Description: Risk Management:

A. Social: changes in the project A. The sound application of the Project's IPPF, will be continued under the AF, ensuring that IP viewsstrategy might lead Indigenous and concerns are taken into account when designing specific interventions. No changes are foreseenPeoples to retire their support for in the strategic orientation of the project concerning IPs. The Government program against extremethe project poverty is expected to strengthen the focus on IP.

Resp: Client Status: Stage: Recurrent: Due FrequencyDate:

Program and Donor Rating Moderate

Risk Description: Risk Management:

A. Risk if overlapping with several A. All these project and PRODERS are managed by MAG's Directorate for the Coordination andother projects, such as IDB's Administration of Projects (DINCAP) which coordinates all rural development and agriculture

17

Modernization of Agricultural projects co-financed with external funds and coordinate the flow of information between them.Public Management project; GTZ- Through DINCAP, PMUs of rural projects intervening in the same areas will liaise with eachexecuted Caazapa Rural other, in order to strengthen synergies, avoid contradictions and overlapping, and improveDevelopment Project; IFAD's coverage of areas and beneficiaries.Paraguay Rural Project; and KfW'sSustainable Management ofNatural Resources Project.

Resp: MAG Status: Stage: Recurrent: Due recurrent FrequencyDate:

Delivery Monitoring and Sustainability Rating Moderate

Risk Description: Risk Management:

A. A larger project can make difficult A. Capacity building in coordination, communication and management have been undertaken andthe coordination between PMU and will be continued. The number of ZCUs and their staffing will be increased to cater for theZone Coordination Units ZCUs. larger Project Area.

B. The larger volume of data B. The Project will upgrade the MIS to take into account the expanded Project Activities andgenerated by the expanded project expected increase in the volume of transactions and beneficiaries. Given the delays that havemay overwhelm the staff characterized the original MIS, improving the system will be a priority area for the PMU.managing the ManagementInformation System, and thesystem itself.

Resp: Client Status: Stage: Recurrent: Due FrequencyDate:

Resp: Status: Stage: Recurrent: Due FrequencyDate:

18

ANNEX 3: Revised Estimate of Project Costs

PARAGUAYAdditional Financing to the Sustainable Agriculture and Rural Development Project

Table A3.1: Project Financing Plan

US$ % US$ % US$ % US$ %1: Community Organization 3,500,000 3.50 500,000 8.0 0 4,000,000 3.4

2: Rural Extension 27,000,000 27.00 4.,500,000 75.0 0 31,500,000 27.2

3: Rural Development Fund 60,000,000 60.00 0 10,000,000 100 70,000,000 60.34:Animal Health Improvement 0 0 0 05: Project Management 7,100,000 7.10 1,000,000 17.0 8,100,000 7.06: Unallocated 2,150,000 2.15 2,150,000 1.97: Front-End Fee 250,000 0.25 250,000 0.2

TOTAL 100,000,000 100 6,000,000 100 10,000,000 100 116,000,000 100

Table A3.2: Disbursement Categories of the Additional Loan

Category Amount of the Loan Percentage of Expenditures toAllocated be financed

(expressed in USD) (inclusive of Taxes)(1) Goods, works non-consultingservices, consultants' services,Operating Costs and Training forPart 1 of the Project(2) Goods, works, non-consultingservices, consultants' services, 27,000,000 1000Operating Costs and Training forPart 2 of the Project

(3) Community Grants 60,000,000 100%

(4) Goods, works, non-consultingservices, consultants' services and 0 100%Training for Part 4 of the Project(5) Goods, works, non-consultingservices, consultants' services,Operating Costs and Training forPart 5 of the Project(6) Unallocated 2,150,000

(7) Front-End Fee Amount payable pursuant to Section2.03 of the Loan Agreement in

250,000 accordance with Section 2.07 (b) of theGeneral Conditions

TOTAL AMOUNT 100,000,000

19

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