Document of

The World Bank

FOR OFFICIAL USE ONLY

y hz GC-_ >Co

Report No. 5954-CO

STAFF APPkAISAL REPORT

COLOMBIA

IRRIGATION REHABILITATION II PROJECT

February 28, 1986

Projects DepartmentLatin America and the Caribbean Regional Office

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

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CURRENCY EQUIVALENT

Currency Unit Colombian Peso (Col$)

US$1 Col$ 172.37(12/31/85)

WEIGHTS AND MEASURES

Metric System

GLOSSARY OF ABBREVIATIONS

BOR - Banco de la Republica(Bank of the Republic (Central Bank))

CAJA - Caja de Credito Agrario, Industrial y Minero (Caja Agraria)(Agricultural, Industrial and Mining Credit Bank)

DNP - Departamento de Planeacion Nacional(National Planning Department)

FEDEARROZ - Federacion Nacional de Arroceros(National Federation of Rice Growers)

FFAP - Fondo Financiero Agropecuario(Agricultural Financing Fund)

HIMAT - Instituto Colombiano de Hidrologia, Meteorologia yAdecuacion de Tierras(Colombian Institute for Hydrology, Meteorology and LandImprovement)

ICA - Instituto Colombiano Agropecuario(Colombian Agricultural Institute)

IDEMA - Instituto de Mercadeo Agropecuario(Institute for Agricultural Marketing)

INCORA - Instituto Colombiano de la Reforma Agraria(Colombian Institute for Agrarian Reform)

INDERENA - Instituto Nacional de Recursos Naturales Renovables(National Institute for Renewable Natural Resources)

OPSA - Oficina de Planemiento del Sector Agropecuario(Planning Office for the Agricultural Sector)

SENA - Servicio Nacional de Aprendizaje(National Apprenticeship Service)

GOVERNMENT OF COLOMBIA

FISCAL YEAR

January 1 - December 31

FOR OMCIAL USE ONLY

COLOMBIA

IRRIGATION REHABILITATION II PROJECT

Table of Contents

Page No.

I. LOAN AND PROJECT SUKKARY ....... ........ ....... .. ............. 1

II. THE AGRICULTURAL SECTOR ........................ ...... ..... 3

Agriculture's Importance to the National Economy ................ 3Sectoral Performance ......................... 00......0 3Sectoral Institutional Framework ................................ 4Government Strategy for Agricultural Production ................ 5Bank Role in the Sector ....... .................. ............... 5Experience with Past Projects ...... ........................ 0 .. . 6The Irrigation Authority ...... ............... .................... 6The Irrigation Subsector .......... ................... ........... 7

III. THE PROJECT ................. 8

Background .............................................................. 8Project Objectives ........... ................ * ............... ** 8Project Description .......................................... .. 9Project Implementation .......................... W........................... 10Status of Project Preparation ................... ................ 11Project Cost .................. .................. ................ 11

Financing ......................................................... ...... 12Procurement ................................ ..................... 12Disbursements ................ 13Accounts and Audit ....... ............. ......... ............. . 14Cost Recovery ................................................... 14Production, Marketing and Financial Analysis .................... 15Project Benefits and Justification .............................. 15Ehvironmental Impact ................................................ 16Project Risks .................................................... 16

IV. AGREEMENTS TO BE REACHED AND RECOMMENDATION ..................... 17

This report is based on the findings of an appraisal mission which visitedColombia in June 1985. The mission comprised Messrs. J.H. Laeyendecker(Engineer), P. Marko (Agronomist) and M. Mendez (Consultant, Economist).

I| s document bu a rstrictd distributionand m ay be used bya ts only in tbe pefomcofthe official dude Its cttens may anoerSwiae be dbdoed without Wold Bank audlx a I

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Page No.

ANNEX 1 - PROJECT DESCRIPTION .. * *.............. .. ... ** ** ....... 19

Table 1 - Present/Future Hectares and Yields ........................ 262 - Farm Size Distribution .......................... a....... 28

3 - Technical Assistance Contracts ....... O ............ .... 294 - Summary of Project Cost ................................... 30

5 - Schedule of Expenditures ... * ... * .* ... * .................. 316 - Schedule of Expenditures, Sources of Financing and

Disbursements ........ ....... ...... ............... 32

7 - District Investments ................. . . .... . 338 - Equipment and Vehicles, Location, Quantity and Cost....... 34

9 - Disbursement Schedule ........................ ............ 3510 - Erosion Control ............................................. .............. 36

ANNEX 2 - PROJECT ORGANIZATION AND MANAGEMENT ....................... 37

Table 1 - HIMAT Employment (6/11185) ................................ 43

2- HIMAT: Condensed Income Statement .................... .... 443- HIMAT: Condensed Balance Shret ........................... 454- DIAT District Information (1984) ............ &............. 465 -HDIAT Production Statistics ........... ............... 476 -Summary HDMAT Districts (1984) ............................ 487 - 1984 Water Charges and Cost Recovery Plan .............0 .... 49

ANNEX 3 - FINANCIAL AND ECONOMIC BENEFITS .......................... 50

1 - District Features and Development ......................... 532 - Summary: Production and Gross Value of Production ......... 54

3 - 1983 Export and Import Statistics ......................... 554 - Income Levels and Financial Rates of Return ............... 565 - Summary of Economic and Sensitivity Analysis .............. 576 - Financial and Economic Prices ............................. 587 - Price Contingencies and Devaluation ................ 59

ANNEX 4 - DOCUMENTS AVAILABLE IN THE PROJECT FILE ................... 60

MAP: IBRD 19223 - Project Location

COLONBIA

IRRIGATION REHABILITATION II PROJECT

I. LOAN AND PROJECT SUMMARY

Borrower: The Colombian Institute for Hydrology, Meteorology and LandImprovement (HIMAT).

Guarantor: Government of Colombia.

Amount: US$114 million.

Terms: 17 years, four years grace, at the standard variableinterest rate.

ProjectDescription: The project is part of Government's efforts to revitalize

the agricultural sector and to improve the economic effi-ciency of public sector institut:ons. At the subsectorallevel, it is part of the strategy to rehabilitate existingirrigation facilities and to construct small-scale irriga-tion schemes before investing in large new irrigation dis-tricts. It aims to maximize returns on past investments andto improve the generation of funds for operation and mainte-nance of the irrigation network. The project is a follow-upto the Irrigation Rehabilitation I Project (Loan 1996-CO).The main project objectives are to: (a) increase crop pro-duction on 108,000 ha in six districts, through rehabilita-tion and improved technical and extension services leadingto more intensive land use; (b) improve the incomes of some3,900 poor farmers located on about 7,800 ha in the foot-hills of the Andes and in the savannah country of NorthernColombia through small-scale irrigation davelopment;(c) partially restore the agricultural production base inthe area affected by the recent volcanic disaster throughreconstruction and addition of irrigation facilities; and(d) improve the sustainability of public irrigationinvestments through full recovery of operation andmaintenance costs and the building up of water users'associations. Project beneficiaries would be some10,800 farmers, of which 50Z have incomes below the povertylevel. The average beneficiary per capita income of aboutUS$1,060 before the project is expected to rise to aboutUS$1,940 at full development.

Project Risk: The major risk is slow adoption of technological changesincluding land levelling, thus delaying or reducing projectbenefits. Based on the experience under the first rehabili-tation project, this risk can be overcome through technicalassistance, training and access to credit, all of which arefeatures of the proposed project.

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Estimated Cost. Local Foreign TotalUS$ million

Civil Works 39.7 33.9 73.6Equipment 0.8 8.8 9.6Medium-Term Credit 28.2 16.4 44.6Incremental Working Capital 1/ 11.9 6.0 17.9Small-Scale Irrigation 5.8 5.0 10.8Armero Development Program 10.4 8.8 19.2Other 18.7 4.1 22.8

Base Cost 115.5 83.0 198.5

Physical Contingencies 6.6 5.6 12.2Price Contingencies 21.4 25.4 46.8

Total Project Cost 143.5 2/ 114.0 257.5

Financing Plan:

Bank Loan - 114.0 114.0Government 59.9 - 59.9Banking System 54.1 - 54.1Beneficiaries 29.5 - 29.5

Total Project Cost 143.5 114.0 257.5

EstimatedDisbursements:

Bank FY 1987 1988 1989 1990 1991 1992 1993 1994-US$ million

Annual 5.7 8.0 18.2 21.7 21.6 17.1 11.4 10.3Cuimlative 5.7 13./ 31.9 53.6 75.2 92.3 103.7 114.0

Economic Rateof Return: 28%.

Staff AppraisalReport: Report No.5954-CO, dated January 7, 1986.

IBRD No. 19223 - Project Location.

1/ Short-term agricultural credit on the basis of farm models.2/ Includes US$1.1 million in taxes.

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II. THE AGRICULTURAL SECTOR

Agriculture's Importance to the National Economy

2.01 Agriculture is the most important sector in the Colombian economy,accounting for about 22% of GDP. Within the sector, crop and livestockproducts contribute about 52Z and 43%, respectively, to the gross value ofproduction; the remaining coming from other rural activities. Agricultureprovides employment for two million people, or a quarter of the nationallabor force. The sector's share in the country's total registeredmerchandise exports fluctuated between 67% and 75% in recent years. Of thetotal value of agricultural exports of US$2 billion in 1983, coffee accountedfor 73Z, followed by bananas (7%) and flowers (6%). Agricultural importsrepresent 7.5% of Colombia's total registered imports for 1983. The mainagricultural imports are wheat, soybeans and fish products. Yields of rice,sugarcane, coffee, cotton and bananas are comparable with internationallevels, but for many other commodities, they are low and the scope forimprovement is substantial. The performance of the livestock subsector hasbeen sluggish over the last decade, and only small productivity increaseswere achieved.

2.02 The national territory totals 112 million ha. This apparentabundance belies the fact that 93 million ha, or 83% of the total land,have no or limited crop potential and are used mainly for grazing andforestry. Of the remainder, 13 million ha is on sloped land in theinter-Andean valleys and only suitable for non-mechanized agricultureconsisting of inter-cropping with permanent crops; 3.8 million ha could beused for modern agriculture after providing some type of land reclamationworks (flood control, drainage and irrigation); and only 1.7 million ha issuitable for modern mechanized agriculture without restrictions. Structuralproblems in agriculture are the uneven land distributien and poor land use:in some parts of the country good crop land is used for extensive grazing andmarginal land for cultivation. Countryside violence is limited in areas withhigh population density, but widespread in newly colonized areas where noclear title to the land exists. This situation acts as a disincentive toprivate sector investment, as does the decline in agricultural profitabilitycaused by a decrease in commodity prices relative to the cost of agriculturalinputs.

Sectoral Performance

2.03 The recent performance of the sector has been heavily affected bymacroeconomic policies and by external events. After expanding at rates ofabove 4% during the seventies, the growth rate in agriculture fell to 1.3Zduring 1980-84. During the first half of the seventies, agricultural growthwas based on the dynamism of non-coffee agricultural exports, which expandedat an average annual rate of nearly 10% in real terms. In the second half ofthe 1970s, the coffee boom became the driving force, while growth ofnon-coffee agricultural exports decreased to less than 7% per annum. In

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contrast, during 1981-84 coffee exports were greatly affected by depressedinternational markets while non-coffee exports showed a negative growthrate. The decline of coffee and non-coffee exports in volume and in terms ofprices explains almost 80% of the fall in agricultural GDP growth during the1981-84 period.

2.04 Five factors explain the decline in the export and overallperformance: (a) unfavorable international conditions for agriculturalcommodities exported by Colombia (coffee, sugar, cotton, beef); (b) macro-economic policies in the late seventies leading to appreciation of theexchange rate and a reduction in export promotion. As the balance ofpayments deteriorated in the early 1980s, protection levels were raised firstby increasing import duties and later by imposing import quotas;(c) sector-specific policies, consisting of export restrictions for a numberof commodities and import restrictions for agricultural inputs due to foreignexchange constraints; (d) reduction of government investments in agriculturesince the mid-1970s and inadequate institutional capacity of the Ministry ofAgriculture to ensure appropriate design and execution and therefore maximumbenefit of these limited investments; and (e) a rapid increase of the realagricultural minimum wage rate in 1979 (32%) and again between 1982 and 1984,contributing to a rise in production costs. (Labor costs amounted to some32% of the gross value of agricultural output in 1982.)

Sectoral Institutional Framework

2.05 The formulation and execution of public sector agricultural policyand programs involve a sizeable number of institutions. The Ministry ofAgriculture has primary responsibility, and within it the Agricultural SectorPlanning Office (OPSA) has the responsibility for planning and coordinatingsector activities. OPSA maintains a close relationship with the agricultureand global investment divisions of the National Planning Department (DNP),since they have to approve the sector's development plan and investmentprogram. The Colombian Agricultural Institute (ICA) is responsible foragricultural research and extension. The Agricultural Marketing Institute(IDEMA) promotes the national marketing of crops and intervenes by procuringagricultural commodities to influence prices to the consumer and theproducer. The Agrarian Reform Institute (INCORA) carries out programs ofland distribution and farm support. The Natural Resources Institute(INDERENA) is mainly responsible for protecting the environment. TheColombian Institute for Hydrology, Meteorology and Land Improvement (HDMAT)is in charge of irrigation and drainage works and associated landimprovements, in addition to hydrology and meteorology. In addition to thesepublic sector institutions, well organized private commodity basedagricultural producer associations exist. These organizations are a dynamicforce in agricultural development and provide a wide range of services totheir members.

2.06 The bulk of agricultural credit comes from two principal sources:the Agricultural Financing Fund (FFAP) and the Agricultural, Industrial andMining Credit Bank (CAJA). FFAP is a rediscount window of the Bank of theRepublic (BOR) from which funds are onlent by banking institutions, mostly tocommercial farmers. Total credit to the agricultural sector from all sources

amounted to Col$ 85 billion (US$840 million) in 1984. In that year, FFAPprovided 68Z of the resources onlent to agriculture. CAJA is the principalsource of credit to the small farm sector. In addition, there are othersources of agricultural credit, such as the Livestock Bank, the Coffee Bankand the Financial Corporation for Agriculture and Export Promotion.Agricultural interest rates are generally lower than for other productivesectors. For FFAP resources, effective rates are 24-26%, while CAJA's ratesaverage slightly less.

Government Strategy for Agricultural Production

2.07 In its strategy to revitalize the economy, the Government hasaccorded high priority to agricultural development, given its importance interms of foreign exchange earnings, and overall economic growth andemployment. Agricultural productivity and production are being encouragedthrough programs and actions aimed at: (a) generating and diffusingagricultural technology; (b) rehabilitating existing irrigation lands;(c) providing credit; (d) diversifying agricultural production in the coffeezones; and (e) improving sector planning capacity and efficiency of publicsector institutions. To lower the costs of agricultural inputs, theGovernment has reorganized CAJA, a major supplier of agricultural credit andkey inputs, to increase its efficiency and effectiveness. To strengthenagricultural marketing, it has set up a special marketing fund in FFAP. TheGovernment has also redefined the functions of IDEMA to avoid financiallosses in the future.

2.08 While these investment programs and institutional reforms aredesigned to increase agricultural production and incomes and improveefficiency in the agricultural service institutions, the Government is in theprocess of undertaking a series of macroeconomic, trade and sectoral policymeasures that will restore profitability and private investment in thesector. These measures encompass macroeconomic policies and also address thefollowing specific trade and agricultural topics: (a) export and importrestrictions; (b) agricultural input and output trade policy; (c) coffeepolicy; (d) credit policy; (e) public investment in the sector; and(f) institutional strengthening. Policy actions in these areas will besupported under a planned Trade and Agricultural Policy Loan.

Bank Role in the Sector

2.09 Since 1966, the Bank has made 15 loans totalling US$463.0 millionequivalent. Three of these loans have been for agricultural credit, two forlivestock development, two for colonization, three for irrigation/drainage,two to support the Government's rural development program, one for a pilotwatershed management project, one for an agricultural research project, andthe most recent one for an agricultural diversification project in coffeeareas. Most of the projects have focused on increasing productivity, incomesand welfare of small farmers; all, except the last one, were executed bypublic sector institutions.

2.10 In the years ahead, the Bank intends to increase its lending insupport of the Government's efforts to modernize the sector and to maximize

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its contribution to socio-economic development. Emphasis will be given toprojects with a strong production impact and on improving the effectivenessand efficiency of the most important agricultural public sectorinstitutions. Private sector agricultural producer organizations are alsobeing drawn into the project preparation and execution process to ensuretheir support for the ensuing investment programs. Agricultural sector workhas been intensified through two reports: Colombian Agriculture: SelectedIssues and Some Directions for Strategy' (Report No. 4275-CO, January 1983),and Colombia-External Sector and Agriculture Policies for Adjustment andGrowth- (Report No. 4981-CO, April 1984). These reports have deepened thepolicy dialogue and have provided a strong basis on which to formulate theproposed project and the Trade and Agricultural Policy loan, which wereappraised at about the same time. Other projects under preparation for thesector cover a wide spectrum, namely: agricultural extension, agriculturalcredit, agricultural marketing, watershed management, and rural development.

Experience with Past Projects

2.11 Project Performance Audit Reports have been issued for six of theprojects (Loans 502-CO, Atlantico Irrigation; 624-CO, Agricultural Credit;651-CO, Second Livestock Development; 739-CO, Caqueta Land Colonization;849-CO, Second Atlantico Development; and 1163-CO, Cordoba II AgricultureDevelopment). An Impact Evaluation Report on the Atlantico IrrigationProject was issued in 1982. While these projects were by and largesuccessful, the irrigation and drainage projects experienced some technicaldifficulties and were hampered by INCORA's institutional weaknesses.Subsequently, the irrigation functions have been transferred from INCORA to anew institution, HIMAT.

The Irrigation Authority

2.12 The Colombian Institute for Hydrology, Meteorology and LandImprovement (HIMAT) was established in 1976 as an autonomous public entityattached to the Ministry of Agriculture. It took over public sectorirrigation and drainage investments from INCORA, which had carried then outin conjunction with land reform. HIMAT has a Board of Directors composed ofrepresentatives of public sector institutions. Its General Manager isappointed by the President of the Republic and he is supported by adequatetechnical staff in various disciplines. HDMAT obtains approximately 82Z ofits resources from Government transfers, with the rest emanating largely fromwater tariffs. In 1984 HIMAT's budget was US$40.0 million and its totalstaff some 1,900 people.

2.13 The experience with HIMAT under the ongoing IrrigationRehabilitation I Project (Loan 1996-CO), on which the proposed project isbased, has been good. Total loan disbursements of 65%, two and a half yearsbefore the closing date, are well ahead of the Bank disbursement profile forColombia. HIMAT has improved significantly its competence with respect totechnical matters. It has established good monitoring systems foragricultural production and O&M costs. Its performance in increasing O&Mcost recovery in accordance with a long-term plan agreed and annuallyreviewed with the Bank is generally on target, except in one district.

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However, its capacity for economic and financial analysis and for promotingintensive land use still needs further strengthening. Farmers' response tothe improved service provided by HIMAT has been positive and increases inyields in many cases exceed those estimated at appraisal.

The Irrigation Subsector

2.14 Although it is estimated that two to three million ha cantechnically be irrigated or reclaimed, land under private and publicirrigation accounts for only about 570,000 ha, or roughly 11% of Colombia'scultivated area. Public investment for irrigation commenced in the 1940s andexpanded during the land reform program during the 1960s. Today, about 80%of irrigation occurs in private schemes developed by highly productive,large-scale farmers. In the public schemes, which include drainagedistricts, the majority of farms are small. Land reform beneficiariesaccount for about one-third of the approximately 20,000 farmers in suchdistricts.

2.15 The area of the 25 public irrigation and drainage districts covers275,000 ha. Of this area, 32% lacks infrastructure because the works werenever completed or water resources are insufficient. Since irrigationschemes have a strong political impact, new districts were started at thecost of cutting resources for the completion of earlier constructeddistricts. The same attitude has resulted in inadequate allocations foroperation and maintenance (O&M), which has resulted in a great loss of publicinvestment prior to the start of the Rehabilitation I Project.

2.16 Five problems are related to poor development in public schemes:(a) the Government's policy that public construction should terminate at thefarm outlet, leaving necessary on-farm development to the initiative of theindividual farmer; and (b) the presence of large-scale farmers, who areinterested in maximizing returns to minimal annual costs rather thanmaximizing returns per hectare, thus continuing with extensive grazing. Both(a) and (b) result in 215,000 ha of unirrigated low value pastures, scrubland, fallow and subsistence crops still existing in the public irrigationand drainage districts; (c) reluctance of farmers to apply supplemental -irrigation for crops other than rice, resulting in the annual harvest of only122,000 ha of irrigated crops from the 110,000 ha with infrastructure insidethe public irrigation districts instead of a potential 220,000 ha; (d) lackof Government pressure forcing HIMAT to cover its annual OM costs fromtariffs: nationwide only 36% of these costs are recovered from watercharges. The balance has to be supplied from public subsidies, an unreliablesource in periods of fiscal restraint and changing government priorities; and(e) lack of knowledge in public authorities about the high costs and lowproductivity levels in the public irrigation and drainage districts. Thishas led to official endorsement of requests for investments in new irrigationdistricts before completing the existing districts.

2.17 In the context of the agricultural policy dialogue and the publicsector inver ment review, the Government and the Bank have agreed that majornew irrigation districts should only be considered once the existinginfrastructure is fully used. Furthermore, the Government and the Bank now

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agree on the importance of strengthening water users' associations, so thateventually management of these facilities can be transferred to them.Therefore, a program of rehabilitation, completion and extension of theexisting districts has been developed within the constraints of availablewater resources. Once a reliable irrigation service is established, HIMATwill gradually improve the recovery of OM costs thereby eliminating the needfor further budgetary allocations. Also, once full O& cost recovery isachieved, plans are that district management will be transferred to waterusers' associations. These two measures together will reduce HIMAT'sdependence on Government transfers and protect existing public irrigationinvestments against the changes in priorities of future governments. The twopublic districts presently under such management are recovering 110% of theirOM costs.

2.18 The rehabilitation program foresaw the rehabilitation of the 15most important districts in two phases. Phase I (Loan 1996-CO, effectivesince August 1982) includes eight districts covering 47,000 ha (net). Theproposed project would rehabilitate six of the remaining districts. Theseventh cannot be rehabilitated without permanently subsidizing pumping costsunless a feasible technical alternative is found. Since rehabilitationbuilds on sizeable past infrastructure investments it involves little risk toeconomic viability. The question of whether scarce public resources shouldbe allocated to new large public supplemental irrigation schemes would haveto be closely scrutinized in each case.

2.19 In the effort to improve HIMAT's performance, the Bank'sinvolvement not only focuses on full recovery of OM costs, but also on:(a) reducing O0M costs through rationalization of O01 procedures,(b) improving the economy of scale through the increase of contributinghectares, and (c) improving the recovery ratio of receipts over billings.

III. THE PROJECT

Background

3.01 The proposed project would support irrigation rehabilitation anddevelopment and is a follow-on from the first phase project that wassupported by the Bank under the Irrigation Rehabilitation I Project(Loan 1996-CO). The proposed project builds on the success of the firstproject which rehabilitated eight districts. Under that project, which wasapproved in May 1981, civil works are about 70% completed and increases inyields in some cases already exceed those estimated to be achieved afterproject completion. The proposed project was prepared by six Colombianconsulting firms contracted by HIMAT; four FAO/CP missions provided technicalassistance to these firms. It was appraised by the Bank in June 1985, andnegotiations took place in February 1986. The ColombLan delegation was ledby Dra. Clemencia Gomez, Vice-Minister of Agriculture.

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Project Obijectives

3.02 The objectives of the project would be to: (a) increase cropproduction on 108,000 ha in six districts, through rehabilitation andimproved technical and extension services leading to more intensive land use;(b) improve the incomes of some 3,900 poor farmers located on about 7,800 hain the foothills of the Andes and in the savannah country of northernColombia through small-scale irrigation development; (c) partially restoreagricultural production in the area affected by the recent volcanic disasterthrough reconstruction and addition of irrigation facilities; and (d) improvethe sustainability of public irrigation investments through full recovery ofO&M costs and the building up of water users' associations in the irrigationdistricts covered by the project. The Bank's role in supporting the projectwould be Lo improve the returns on public investment in irrigation and theefficiency and effectiveness of HIMAT, and to strengthen water users'associations. To this end, the project has been designed to intensify landuse, to improve HIMAT's water charge policies and collection rates in thedistricts to be rehabilitated and to induce HIMAT to gradually transfer itsmanagement responsibilities regarding maintenance and operation to theprivate sector.

Project Description

3.03 In order to achieve its objectives, the project would:

(a) design and construct small rehabilitation works covering some108,000 ha in the six districts of Abrego, Saldana, Coello, MariaLa Baja, Prado de Sevilla and La Doctrina (map IBRD 19223). Apartfrom numerous small civil works, there would be some larger worksentailing: (i) major drainage and flood protection in Saldana,Maria La Baja and Prado de Sevilla; (ii) a diversion weir withsedimentation structure in Saldana; (iii) a second intake withsedimentation structure, 1.8 km tunnel and a 30 km main canal inCoello; (iv) water control structures and a small diversion dam inMaria La Baja; (v) rehabilitation of nine small river intakes withsedimentation structures in Prado de Sevilla; and (vi) constructionof shrimp farming ponds in La Doctrina which is better suited forshrimp production, because of its saline soils and proximity tomarketing facilities in Cartagena (Annex 1);

(b) replace obsolete irrigation maintenance equipment to enable HIMATto carry out its maintenance program in the six districts coveredby the project;

(c) train district water users' associations, particularly inadministration and accounting, to enable them to begin taking overthe management of irrigation districts from HDMAT (Annex 1);

(d) provide technical assistance and demonstration areas to promotefarmer acceptance of supplemental irrigation, improved cultivationpractices, shrimp culture techniques and more intensive land use(Annex 1);

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(e) make available short- and medium-term credit for improving crop andlivestock management practices and for on-farm development;

(f) control erosion on some 3,000 ha in badly affected areas throughreforestation, terracing and gully control (Annex 1);

(g) develop small-scale, new irrigation schemes covering some 7,800 hain the foothills of the Andes and in the savannah country ofNorthern Colombia where small farms are concentrated and wheresmall-scale irrigation potential exists. Two types of developmentare foreseen: (i) tapping of perennial streams coming from the highAndes with gravity distribution of water through underground PVCpipelines. Application would be through garden-type sprinklers toirrigate mostly vegetables; and (ii) damming of intermittentstreams in the North for irrigation of pastures and garden crops.About 150 such schemes would be developed, ranging in size froi10 to 200 ha. Average irrigated holdings woeld be 2 ha and themaximum would be 10 ha. This couponent builds on the success offour such schemes which are under operation (Annex 1);

(h) reconstruct irrigation facilities on 5,000 ha and provide newirrigation development on about 8,000 ha L. the area around Armero,which has been affected by the eruption of the Ruiz Volcano; and

(g) provide funds to prepare new irrigation investments.

3.04 The project is expected to be carried out over six years. Itincludes consulting services for design work and supervision of constructionamounting to some 90 man-years and about 200 man-years of technical servicesfor surveying and mapping. An additional 6 man-years of technical assistancewould be contracted to provide the technology for shrimp farming. Duringnegotiations, HIMAT provided assurances that it would employ consultants withqualifications, terms and conditions acceptable to the Bank to enableeffective implementation of design, surveying, and construction supervisionunder the project (para. 4.01 (a)).

Project Implementation

3.05 HIMAT would be responsible for carrying out the proposed project,except for the credit component. All civil works, technical assistance andengineering services would be done under contract in accordance withprocedures acceptable to the Bank. During negotiations, HIMAT providedassurances that it would maintain a unit to supervise Project implementationwith staffing, functions and organizational structure satisfactory to theBank. (para. 4.01 (b)). At that time, HIMAT also provided assurances thatthe Project Coordination Unit would submit annual progress reports to theBank and DNP by June 30 of each year; such reports would include informationon the status of physical works under the project, progress in having waterusers' associations increase their responsibilities in irrigation districts,the impact on agricultural production, intensification of land use, and thelevels of cost recovery achieved (para. 4.01 (c)). By July 31 of each year,DNP would provide the Bank with its comments on the annual progress report.

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3.06 For this proposed rehabilitation project, the scattered nature ofthe repair work does not require a rigid schedule of phasing. However, thefollowing elements are the most urgent, and contracts for theirimplementation would begin in the first year of the project: (a) technicalassistance to farmers by crop federations; (b) construction of a diversionweir with improved Intake on the Saldana river; (c) a new intake on theCucuans river in Coello with a new main supply canal; (d) repair andelectrification of the main gates in the existing intake towers in Maria LaBaja; (e) installation of a refrigerated milk collection center in Abrego;(f) reconstruction of nine small intakes in Prado de Sevilla; (g) theconstruction of the first 100 ha of shrimp cultivation ponds in La Doctrina;and (h) reconstruction of destroyed irrigation facilities near Armero.

3.07 FFAP would provide credit for incremental on-farm investmentthrough the banking system. The project's total short- and medium-termcredit requirement of US$54.1 million equivalent, when spread over theproject period would amount to less than 1% of the 1984 insLitutional lendingfor agriculture. No Bank financing of the credit component is proposed underthis project. While the medium and large scale farmers have littledifficulty obtaining credit, small-scale farmers (i.e., below 10 ha)frequently have difficulties obtaining institutional credit since they mustshow that they will receive technical assistance from an approved agency orprivate source. To overcome this, the procedures developed under the ongoingirrigation loan would be used whereby RIMAT would contract private cropfederations, ICA and individuals to provide extension services. The NationalApprenticeship Service (SENA) would be contracted to provide specializedtraining for farmers, water users' associations and technical assistance forthe small-scale irrigation component. During negotiations, the Governmentprovided assurances that the necessary credit would be made available by FFAPthrough financial intermediaries (para. 4.01 (d)). The signing of suchcontracts covering the major crops in each district would be a condition ofeffectiveness of the Loan (para. 4.02 (a)).

Status of Project Preparation

3.08 Bidding documents have been completed for US$6 million of equipmentand for technical assistance. Design contracts for the major civil workshave been awarded. Financing for the design contracts is included in theongoing Irrigation Rehabilitation loan. For the small-scale irrigationcomponent, 70 schemes have been identified and designs for ten of these havebeen completed, sufficient for the first year's implementation. The requestto include funds for volcanic disaster relief measures was received inDecember 1985. Therefore this component could not be appraised.Presentation of feasibility studies and final designs would be a conditionof disbursement for this component (para. 4.03 (a)).

Project Cost

3.09 The total project cost, including contingencies, is estimated atUS$257.5 million, of which US$114 million, or 44% corresponds to the foreignexchange costs. Physical contingencies of 15X have been applied to civilworks only and amount to US$12.2 million, or 6% of base costs. Costs are

- 12 -

based on April 1986 prices and include expected price increases over theimplementation period of US$46.8 million, or about 22% of base costs, plusphysical contingencies. Price increases were computed using the Bank'sprojections for international and local inflation and for the changes in thelocal currency exchange rates.

Financing

3.10 The proposed Bank loan of US$114 million would finance 100% of theforeign exchange costs or 44% of total project cost exclusive of taxes. Thebalance of project costs would be financed as follows: US$59.9 millionequivalent, or 23%, by HIMAT from Government budgetary transfers;US$54.1 million, or 21%, by the banking system; and US$29.5 million, or 12Z,by beneficiaries. A breakdown of project costs is presented in Annex 1,Tables 4, 5 and 6.

Procurement

3.11 Three civil works contracts totalling US$29.5 million would betendered under ICB. These are the diversion weir in Saldana, the Cucuanaintake, tunnel and canal in Coello and the Corral-Matuya dam in Maria LaBaja. Assurances were obtained that HIMAT would submit the design of thisdam to a safety review panel before its construction and that the dam wouldbe periodically inspected after construction (para. 4.01 (e)). The remainingcivil works are small (less than US$2.5 million each) and dispersed in spaceand time. They are unlikely to attract international firms and would beprocured under LCB procedures that would be acceptable to the Bank.Contracts for heavy equipment and vehicles of more than US$300,000 each wouldbe procured under ICB, while items such as motorcycles, office and workshopequipment would be procured under LCB procedures that would be acceptable tothe Bank (Table 3.1). To be acceptable to the Bank, Colombian LCB procedureswould have to allow inter alia: (i) participation of foreign contractors andconsultants without requiring association with local firms; (ii) noexceptions to the rule to award to the lowest evaluated bidder; and (iii) useof market rates for shipping costs in bid evaluation. At negotiations,assurances were obtained that (a) HIMAT would follow procurement proceduresacceptable to the Bank; and that (b) for all contracts for works ofUS$700,000 or more and for goods of US$300,000 or more, the Bank's priorapproval would be required before invitations to bid are issued and beforecontracts are awarded (para. 4.01 (f)). About 20% of the value of civilworks contracts and 83% of the value of equipment contracts would receiveprior review by the Bank.

- 13 -

Table 3.1: Procurement Procedures and Bank Financing(US$ million)

Procurement Method TotalProject Element ICB LCB Other N.A. Cost

Civil Works 29.5 82.7 27.6 2.0 141.8(19.2) (53.8) (17.8) (1.3) (92.1)

Equipment 9.9 1.6 0.4 - 11.9(8.9) (1.4) (0.4) (10.7)

Credit & Farmer - - - 79.4 79.4Contribution C-) (-)

Technical Services - - 11.7 5.5 17.2(Extension & (7.6) (3.6) (11.2)Consultants)

Incremental Operating - - - 7.2 7.2

Expenses and Land (-) C-)

Total 39.4 84.3 39.7 94.1 257.5

Total Financed by Bank (28.1) (55.2) (25.8) (4.9) (114.0)

Note: Other Procurement Methods consist mostly of local limited competitivebidding requizing at least three bidders.Figures in parentheses are the estimated amounts to be disbursed by theBank.

Disbursements

3.12 Disbursements would take place over an eight-year period and werecomputed according to the Bank's disbursement profile for Colombia exceptthat 100% of the loan would be disbursed by the end of Year 8, whereas theprofile is for 98% disbursement by Year 8, and 100% by Year 9. Disbursementswould be made for 100% of the foreign expenditures for equipment, vehiclesand foreign consultants, 90X of expenditures for locally procured equipmentand 65% of expenditures for civil works, including the small-scale irrigationcomponent, technical assistance, training and local engineering consultants(Annex 1, Table 6). All disbursements would be against statements ofexpenditures except for contracts exceeding US$1 million, for whichsubmission of full documentation would be required in accordance with Bankguidelines. Retroactive financing of up to US$4 million for expendituresmade after July 1, 1985, on account of civil works, goods and consultantshave been included in the loan.

- 14 -

3.13 At negotiations an assurance was obtained from HIMAT that it wouldestablish a Special Account in Banco de la Republica, in US dollars, to coverall eligible Bank expenditures under the loan (para. 4.01 (g)). The Bankwould deposit up to an initial US$8 million upon receipt of withdrawalapplications. Subsequent replenishments by the Bank into the Special Accountwould follow the normal procedures. An assurance was also obtained thatHDMAT would establish a Project Account for an amount equivalent toUS$4 million to cover counterpart expenditures, and that by June 30, 1987,this Project Account would be fully funded (para. 4.01 (h)). Theestablishment and release of a peso amount equivalent to US$1.2 million(initial deposit) into the Project Account would be a condition ofeffectiveness (para. 4.02 (b)).

Accounts and Audit

3.14 Project accounts would be maintained by HIMAT in accordance withconsistently applied, sound accounting principles and methods, as has beenthe experience under the ongoing loan. Project accounts, including theSpecial and Project Accounts and statements of expenditures, would be auditedannually by the Controller General of Colombia which has been foundsatisfactory by the Bank. At negotiations, an assurance was obtained fromHIMAT that audit reports would be submitted within six months of the close ofeach fiscal year (para. 4.01 (i)).

Cost Recovery

3.15 Water charges are levied by a combination of a fixed per hectarecharge and a volumetric tariff. In two of the six districts covered by theproject, Saldana and Coello, water userst associations recover the fullannual costs of operation, maintenance and administration. HIMAT manages theother four districts under the proposed project, and recovery of annual O&Mcosts are still significantly below 100Z (Annex 2, Table 7). These districtsare in a poor condition and the resulting limited number of farmers receivingfull irrigation services is insufficient to recover full O&M costs in thosedistricts.

3.16 The project would concentrate on rehabilitating the irrigationsystem in order to provide fprmers with a reliable service. At negotiationsan agreement was obtained from HIMAT on the annual O&M recovery targets foreach district, based on the progress of extending service coverage(para. 4.01 (j)). Full O&M cost recovery in each district would be afunction of the time at which all farmers receive full service. Individualfarmers will pay their prorated share of the O&M cost not later than twoyears after receiving such service. In the aggregate, and based on currentprojected implementation schedules for the different districts, this meansthat full O&M cost recovery will be achieved on average within eight years(Annex 2, Table 7). In its annual review of the project progress report(para. 3.05) DNP would specifically comment on the adequacy of cost recoverylevels achieved.

- 15 -

3.17 At negotiations assurances were obtained that two years after thecompletion of civil works in any district, HIMAT would start investment costrecovery through a land betterment tax, according to the regulations of theColombian Land Valorization law (para. 4.01 (j)). This law foresees arepayment period of about 15 years and an interest rate corresponding toFFAP's rate for land improvement loans, presently at 22%. Farmers owningless than 3 hectares would be exempted from paying investment cost recovery.This provision, together with technical assistance and the establishment of areliable irrigation service can be expected to accelerate intensive landuse. For the district of Ta Doctrina, financial viability of shrimp farmingwould have to be demonstrated on the first 100 ha of the shrimp developmentas a condition for disbursements for subsequent extensions (para. 4.03 (b)).

3.18 For the small-scale irrigation development to be supported underthe project, the number of schemes and their small size preclude thepossibility of a permanent HIMAT presence for their operation andmaintenance. Therefore, they would be farmer-operated. No widespreadproblems with respect to operation and maintenance are expected, given thegood experience in existing farmer-operated small schemes.

rroduction, Marketing and Financial Analysis

3.19 The annual value of incremental production generated by theproject, about US$89 million equivalent in early 1985 pesos, would comeprimarily from crops (95Z), shrimp (3%), and livestock (2%) (Annex 3,Table 2). For all crops but sesame, soybeans and palm oil, the incrementalproduction would be small relative to national production and would beinsufficient to affect prices. For sesame and palm oil, however, theincremental production would constitute 80X and 26% of national productionrespectively. Since Colombia is a net importer of oil seeds, thesecommodities are not expected to face demand constraints and marketingchannels are adequate to absorb the increased production. Moreover, foreignexchange savings from reduced oil imports would amount to some US$30 millionannually at full development. Based on the analysis of nine farm investmentmodels, financial rates of return vary between 20% and 97X, demonstratingthat in all cases the private returns to farmers are expected to besubstantial.

Project Benefits and Justification

3.20 The project would increase productivity, employment and incomes onabout 6,900 farms in the six districts and on 3,900 farms in the small-scaleirrigation component. It would expand agricultural production significantlyand contribute to the expansion of exports of cacao, bananas and shrimp andimport substitution for commodities such as sorghum, milk and vegetableoils. The project would generate some 6,300 man-years of additionalemployment. The present 87,200 ha harvested per year would increase by 55%to 135,200 ha (Annex 3, Table 1). At full development, after about eightyears, average incomes of farm family beneficiaries would double on average,bringing the majority above the rural poverty level of US$210 per capita.Currently 2,700 farmers, or 39%, live below the rural poverty level in thesix districts covered by the project, while in the areas covered by the

- 16 -

small-scale irrigation component some 70%, or 2,700 farmers, are estimated tohave incomes below the poverty level. The present average per capita incomeof project beneficiaries in the six districts is estimated at US$1,400, andwould rise to an estimated US$2,700 at full development. This compares withthe 1982 average per capita GNP of US$1,460. In the poorer areas covered bythe small-scale irrigation component, incomes per capita are expected toincrease from average current levels of US$72 to US$196. The area occupiedby the poor represents about 14% of the district and small-scale project areaof 115,800 ha and about 16% of the project cost would be allocated to thepoor (Annex 3, Table 1).

3.21 The overall economic rate of return is estimated at 28% with arange between 15% and 40% for the six individual districts. Investments inthe areas covered by the small-scale irrigation component would have asatisfactory economic rate of return of 20%. Sensitivity analyses indicatethat for the project as a whole, it would take a 69% increase in costs or a41% decrease in benefits to bring the rate of return below the Colombianopportunity cost of capital of 11% (Annex 3). On the other hand, if moreintensive land use were to be achieved, e.g., from increasing the assumedcropping intensity of 116% to 120% at full development, the ERR for theproject would increase to 32%.

Environmental Impact

3.22 The execution of the proposed project would not increaseenvironmental hazards. It is expe~cted that the technical assistance programwould rather reduce the presenc indiscriminate use of aerial spraying,because it would promote the use of terrestrial applications of pesticides.In addition the project would specifically tackle problem spots in thewatershedE of the districts where there exist about 3,000 ha of badly erodedlands that contribute an excess of sediment. HIMAT would contract theanti-erosion works (civil works and reforestation) to a specialized firm.The total cost of this component is estimated at about US$2 million, or about1% of baseline cost. To prevent a potential future shortage in obtainingsufficient shrimp larvae from their wild habitat, HIMAT would contractINDERENt* to develop a technological package for hatcheries development.

Project Risks

3.23 The economic risk appears to be low and is related to a slowtransition towards more intensive land use. At negotiations an assurancewas obtaiaed from the Government that, should there be indications that theexpected transition to intensive land use is slow, it would take correctivemeasures (para. 4.01 (k)). The risk associated with shrimp farming in thedistrict of La Doctrina would be minimized by executing the component in twostages. The first stage, to be implemented in the first two years of theproject, would cover 100 ha, or 11% of the total area to demonstrate itsfinancial viability (para. 3.17).

- 17 -

IV. AGREEMENTS REACHED AND RECOMMENDATION

4.01 During negotiations, agreements were reached on the following:

(a) HIMAT would employ consultants with qualifications acceptable tothe Bank to enable effective implementation of design, surveying,and supervision of construction (para. 3.04);

(b) HIMAT would maintain a unit to supervise Project implementationwith staffing, functions and organizational structure satisfactoryto the Bank (para. 3.05);

(c) HIMAT would ensure that the Project Coordination Unit would beresponsible for submitting annual progress reports to the Bank andDNP by June 30 of each year; such reports to include information onthe status of physical works under the project, progress in havingwater users' associations increase their responsibilities inirrigation districts, the impact on agricultural production and thelevels of cost recovery achieved. By July 31 of each year DNPwould provide the Bank with its comments on the annual progressreport (para. 3.05)

(d) Government would ensure that the necessary credit would be madeavailable by FFAP through financial intermediaries (para. 3.07);

(e) HIMAT would submit the design for the Corral-Matuya dam to a reviewpanel of experts acceptable to the Bank and the dam would beperiodically inspected after its construction (para. 3.11);

(f) HIMAT would follow procurement procedures acceptable to the Bankand all contracts for works of US$700,00 or more and for goods ofUS$300,000 or more wold require the Bank's approval beforeinvitations to bid are issued and before contracts are awarded(para. 3.11);

(g) HIMAT would open a Special Account in Banco de la Republica, inU.S. dollars, to cover all eligible expenditures under the loan(para. 3.13);

(h) HIMAT would establish a Project Account for an amount equivalent toUS$4 million to cover counterpart expenditures and by June 30,1987, this Project Account would be fully funded (para. 3.13);

(i) HIMAT would submit audit reports to the Bank within six months ofthe close of each fiscal year (para. 3.14);

(j) For each district, HIMAT would achieve annual levels of O&M costrecovery in accordaece with a schedule agreed at negotiations.In addition, it would start investment cost recovery beginning twoyears after the completion of civil works in a given districtaccording to the Land Valorization regulations (paras. 3.16 and3.17); and

- 18 -

(k) The Government would take measures to intensify agricultural landuse (para. 3.23).

4.02 Conditions of effectiveness would be:

(a) HIMAT would contract crop federations, ICA and individuals for theprovision of extension services for the major crops in eachdistrict and and with SENA for training of farmers, water users'associations and small scale irrigation (para. 3.07); and

(b) The establishment of a Project Account with an initial deposit ofUS$1.2 million equivalent in Colombian pesos (para. 3.13).

4.03 Conditions of disbursement would be:

(a) HIMAT would submit to the Bank feasibility studies and finaldesigns for new irrigation schemes in the Armero area as acondition for disbursement for this component (para. 3.08); and

(b) For the district of La Doctrina, HIMAT would submit to the Bank thequantitative and financial results of the first 100 ha of shrimpfarming as a condition of disbursement for subsequent development(para. 3.17).

4.04 Subject to the above, the project provides a suitable basis for aa Bank loan to HIMAT of US$114.0 million equivalent; the terms would be 17years including a four-year grace period and interest prevailing when thedocuments are circulated to the Board.

February 28, 1986.

ANNEX 1-19 - Page 1 of 7

COLOMBIA

IRRIGATION REHABILITATION II PROJECT

Project Description

A. Project Components

1. The project would provide for:

(a) the design and construction of numerous small rehabilitation worksin all of the six districts;

(b) new small-scale irrigation development covering some 7,800 ha onthe slopes of the Andes and in the Northern savannahs whereminifundista farmers are heavily concentrated;

(c) replacement of obsolete equipment;

Cd) credit for improving crop and livestock management practice and foron-farm development;

Ce) technical assistance and demonstration areas on a commercial scaleto promote farmer acceptance of supplemental irrigation, improvedcultivation practices and more intensive land use;

Cf) training of Water Users' Associations in district management;

(g) erosion control; and

Ch) reconstruction of existing and construction of new irrigationschemes near Armero.

2. The project is expected to be carried out over a period of sixyears. Consulting services for engineering designs and technical assistancewould be procured locally. About six man years of foreign technicalassistance would be contracted for shrimp farming. Engineering designs forcivil works for the first year of construction were contracted in early1986. Since the works are small and dispersed, the remaining designs wouldbe prepared gradually during the project period.

B. Project Areas

3. Of the six districts, one is located at 1,400 m in Norte deSantander and five in tropical low lands; two in the Department of Tolima,and one each in Cordoba, Magdalena and Bolivar (IBRD 19223). The small-scaleirrigation component is concentrated on the slopes of the Andes and in thesavannahs of the North. This component would mostly irrigate fruits andvegetables on the slopes and forage in the cattle area of the North. Cropsin each district are indicated in Annex 1, Table 1. Rice, cotton, sorghumand oil palm are the principal crops. Except for Abrego and La Doctrina, alldistricts have a seasonal shortage of water.

- 20 - ANNEX 1Page 2 of 7

4. The average holding for all six districts is 16 ha. Even in Pradode Sevilla, the district with land distribution skewed towards largerholdings, the average farm size is still only 31 ha. Overall, farmers withless than 10 ha account for 62Z of the project's beneficiaries and 16% of theland area (Annex 1, Table 2). The total number of beneficiaries in the sixdistricts is 6,900 families, while in the areas where small-scale irrigationis to be developed there are about 3,900 farmers, giving a project total of10,800.

C. Detailed Features

Civil Works for the Six Irrigation Districts

5. The main types of civil works to be done in the six irrigationdistricts are:

(a) major drainage or flood protection would be constructed in Saldana,Maria La Baja and Prado de Sevilla;

(b) a diversion weir with sedimentation structure would be constructedin Saldana;

(c) a second intake with sedimentation structure on the Cucuana riverwith a 30 km long main canal to meet its water requirements wouldbe built in Coello;

(d) control structures would be installed in Maria La Baja to reduceoperational losses. This would be followed by construction of asmall dam;

(e) nine small river intakes with sedimentation structures would berehaabilitated in Prado de Sevilla.

(f) shrimp farming ponds would be constructed in La Doctrina becauseits soils are very saline which together with its location nearmarketing facilities make the district more suitable for shrimpfarming.

6. The following list only includes the larger structures bydistrict. In all districts calibrated farm inlets would be constructed(mostly Ballofet flumes).

(a) Abrego

- Lining of existing canal Rio Frio and secondary canals- New secondary canals- Two small pumping stations with their power connection

(b) Saldana

- Diversion weir across the Rio Saldana- Sedimentation reservoir in the main canal

-21- ANNEX IPage 3 of 7

River protectlon on the right bank of the Rio SaldanaRepair of main intake gatesWidening of canal AnimasMain drainsRiver protection dikes along the Rio ChencheWidening of the Carmen and Holanda canalsConstruction of two pumping stations, CRB1 and CRB2, at the end ofcanal El Carmen13 km of power line connectionControl structures in the main canal networkA linear move sprinkler installation

Cc) Coello

A fuseable intake on the river Cucuana1,800 m of tunnel behind the intakeA sedimentation reservoirNew canal Cucuana (30 km) with structuresA new canal distribution system in the Flandes extension areaErosion protection at Los PijaosControl structures in the canal networkA system of teleinformation on water levelsA linear move sprinkler installation

Cd) Maria La Baja

Electrification and repair of gates in the existing intake towersControl structures in the canal networkA dam at Corral-MatuyaCanals and drains in the district extensions

(e) Prado de Sevilla

Rehabilitation of nine small river intakesConstruction of nine sedimentation reservoirsExtension and repair of the irrigation systemsDrainage networkFlood protection dikesRoads along major canalsRehabilitation of the administration center

Cf) La Doctrina

Rehabilitation of the freshwater interceptor canalA mixing canalA seawater canalA pumpiag station with its power connectionDistribution canalsDikes and drains forming shrimp farming pondsProtection of the Sinu river banksSecondary irrigation canals

- 22- ANNEX IPage 4 of 7

Civil Works in the Small-Scale Irrigation Areas

7. The works to be done in the areas covered by the small-scaleirrigation component are designed to make it possible to grow higher value,short rooted crops during the two dry seasons, thereby improving the incomepotential from very small holdings. Two types of development are foreseen:

(a) tapping perennial streams coming from the high Andes anddistributing water through underground PVC pipelines to garden typesprinklers operating under natural pressure, largely forvegetables; and

(b) damming intermittent streams in the North and using the waterstored in small lakes to irrigate mostly forage for dual purposecattle and some garden crops.

8. The proposed schemes would number about 150 and would range in sizebetween 10 ha and 200 ha with average irrigated holdings of 2 ha and notexceeding 10 ha. At present, four such schemes are under successfuloperation and HIMAT has identified 70 other schemes of which ten of thedesigns have been completed. HIMAT has developed a small-scale irrigationprogram called -slopes and lakes- (laderas y lagos). Under the -slopes-schemes, perennial streams from the high Andes are tapped with an intakestructure, and the small amount of water is ccnveyed via an underground PVCpipe network. The excess natural pressure is reduced by pressure reductionvalves and water is supplied to the crops via small sprinklers connected togarden hoses-. A farmer-elected watermaster, or common irrigator, isresponsible for the weekly rotation schedule, opening and closing the valvesof the lateral pipelines. This has worked well for the four operatingschemes (Tenza and Chiquiza in Boyaca, and Potosi and Dalmacia in Narino) andthe same system would be followed under the project. The irrigated areas perfarmer in the operational schemes are counted in fractions of hectares.Farmers have rapidly adapted to cultivation of cash crops, such as tomatoes,beans, onions, cabbage and a number of fruits. They have also learned toadjust the timing of seeding to meet the period of highest prices in thelocal markets at the end of the dry periods. The widespread use of smallsprinklers automatically solves the lack of on-farm development, which is oneof the most serious problems in public irrigation schemes in Colombia.

9. For the savannah area in the North, the lakes" component aims atdamming small intermittent streams to store the water thus obtained for useduring the dry season. Depending on the topography, irrigation can takeplace either by gravity or by pumping from tne lakes. The most common use ofwater in this area is expected to be for the cultivation o' irrigated forage,given the existing livestock tradition. Cultivation of small areas ofgarden crops will also become possible. The availability of irrigated foragewill enable a small farmer at least to triple the number of animals perhectare. In addition, it provides the possibility of producing milkthroughout the year. This is presently impossible given the lack of greenfodder and drinking water, the latter also resulting in high animal mortalityrates.

ANNEX 1- 23 - Page 5 of 7

Civil Works in the Armero Disaster Area

10. Upon request from the Government, a program for the rehabilitationand extension of irrigation in the volcanic disaster area near the devastatedtown of Armero was included in the project. The request was received in theBank while the appraisal was reaching the Green Cover stage. No costestimates were available for this component and Bank disbursements would becontingent upon presentation of acceptable feasibility studies and fina;designs for new irrigation works. The repair of the existing works on about5,000 ha would not require such studies, since the minor investments involvedwould not need to be justified. It is estimated that about 8,000 ha (net) ofnew irrigation development would be constructed in three differentlocations. The number of beneficiaries is presently unknown and for lack ofdata no financial and economical analyses could be made.

11. The Government requested that the originally foreseen much largersmall-scale irrigation component be reduced in such a way, that its originalcost would be equal to the cost for the Armero development plus the cost ofthe reduced size small-scale irrigation component. This smaller sizesmall-scale trrigation component is therefore used in this report. Anysavings made in the execution of the Armero component would be used toenlarge the small-scale irrigation component.

12. During negotiations it was decided that one of the three locationsfor new irrigation development in the Armero area of about 1,600 ha would beequipped with linear-move sprinkler equipment in its entirety. It is thoughtthat such type of irrigation may be of great potential for future large-scaleirrigation developments in Colombia, not in the least because it would solvethe problem of the lack of on-farm development. Instead of a Governmentirrigation service stopping at the farngate, the proposed solution wouldresult in providing a Goverment 'rainfall service."

Technical Assistance

13. Under the project HINAT would contract the extension servicerequirements to the crop federations that cover the different crops grown inthe project area. Under turn-key contracts, the federations would beresponsible for purchasing all necessary demonstration inputs, equipment andvehicles (Annex 1, Table 3). Apart from the emphasis in improving standardcultural practices,special emphasis would be given to demonstrate thebenefits from supplemental irrigation for all crops. This is necessarybecause one of the main problems in the irrigation districts is that, withthe exception of rice and bananas, few farmers use irrigation although theinfrastructure is available in the districts. This results mostly from lackof on-farm development. Thus, the crop federations would promote the use ofsprinkler equipment, since this is the most appropriate for annual cropsrequiring a little supplemental irrigation. In addition, it cannot beexpected that farmers will carry o-it land levelling when a substantialpercentage of their land is rented. For perennial crops, the moreappropriate types of irrigation would be gravity and localized irrigation(e.g., drip). For the small-scale irrigation component, HDMAT would contractextension service requirements to ICA.

-24- AIINEX IFage 6 of 7

14. Based on the experience with the on-going FEDEARROZ and SENAtechnical assistance contracts. as well as the cost of land levelling for therice demonstration areas, the basis for estimating the new technicalassistance contracts is Co]$ 2,400/ha (US$21/ha) for the crop federations andCol$ 1,200 (US$10.50) per hectare for SENA, to be spent over a three yearperiod. The experience also showed that about 3% of the total hectares underone particular crop should be used as demonstration area. Annex 1, Table 3shows the guideline hectares in each district used to arrive at the value ofthe technical assistance contracts with the various federations as well assize of the proposed demonstration areas.

Training

15. SENA is responsible for training of farmers. Such training wouldconsist of improving farming practices (i.e., courses in repairing tractors,home fabrication of cheese, etc.) and in interpreting and disseminating theresults obtained from the demonstration areas developed by the cropfederations. In addition, SENA would give courses in basic accounting andadministration to the Water Users' Associations to involve them in a moreknowledgeable way with the operational procedures of the districts. This isnecessary, because at present most Water Users' Associations function more asa body for voicing criticism or requests to HIMAT's district management,without showing much interest in the actual management of their district.

D. Project Cost

16. The total cost including price contingencies is estimated atUS$257.5 million, of which US$114 million corresponds to the foreign exchangecosts. Physical contingencies for civil works of 15% have been included andprice contingencies amount to 22% of US dollar costs including physicalcontingencies (Annex 1, Table 4). To compute price contingencies for theCost Table (Annex 1, Table 4) and the Schedule of Expenditures (Annex 1,Table 5) all peso prices were first brought to a common date of April 1,1986. Subsequently, local and foreign cost Liflation projections as well asexchange rate projections published September 23, 1985, were applied to thelocal and foreign cost components. Annex 1, Table 5 presents the deflatorsused in the calculation of price contingencies which were derived fromAnnex 3, Table 7, while Annex 1, Table 7 provides a breakdown of costs bydistrict.

E. Project Financing

17. See para. 3.10.

F. Procurement

18. See para. 3.11.

G. Disbursements

19. See Paras. 3.12 and 3.13.

- 25 - ANNEX 1Page 7 of 7

H. Accounts and Audit

20. See para. 3.14.

I. Progress Reporting - Monitoring and Evaluation

21. See paras. 3.05 and 3.16.

J. Environmental Impact - Erosioti Control

22. In the watersheds of the districts exist particularly eroded spotswhich contribute excessive amounts of sediment. These would be treated witha combination of reforestation and civil works (terracing, gully control).RIMAT would contract this type of treatment to CONIF (National Company forForestry Investigation and Development) or similar organization specializedin executing anti-erosion work. Apart from a 202 advance to establish treenurseries, the contractor would further be paid on the basis of a fixed feeper hectare treated. An;aex 1, Table 10 shows the area, distribution andcosts of the proposed erosion control program. The costs are based onpresent contracts for similar work done for the Corporacion Autonoma Regionalaround the savannah of Bogota.

anUMA

PremitM/F e thctce ad Yields

ftsnt ad fiutu 1'ctars RC Rim sorgtm Srg= Boy ba (bttcm Oottcn Seam Ceau tna tis Osea Plaitan Plauinbt Diatrict bectase fitiml bent Raited irrirpted Irripted Raifed Irripted Rduad IrrigRted Irrigated Ratfed Irrigat Rated Irrigted

Abrq Matisg 140with Project 140

SaLk. hIting 13,000 - 1,200with Project 12,800 8,400 3,600

OeIDo hitiriq 16,000 - 6,500 1,400 - 6,650 2,850 1,750 -with Project 6,COO 10,000 - 10,500 7,000 - 11,0)0 - 4,000

Maria la Baja Mating 3,100 - - 1,100 1,950 ISOwith Project 1,500 3,000 1,000 1,IOD 1,600 1,200

Prad de dat.ig 3,100 - 0 2,900Seville with Project 2,500 2,040 2,3 2,900

IA Dbctrina Wdsthn 830 - 20 170 - 70with Project - 1.20 _D_ - 13 - 70

Thtal Hect Mating 36,030 - 6,500 2,600 - 6,650 2,850 1,770 - 800 1,410 2,900 2,02D 150with Pmject 2,800 24,600 1,000 14,100 7,ODD 6,650 11,000 - 4,000 2,3 1,370 2,900 1,670 1,2)

yiedb buflh

Ahbcp Mdjtingwith Project

SilAs. Mdstirg 6,0 - - 2.0with Project 6.0 6.0 - 4.5

teI wating 6.0 - 2.0 2.0 - 2.0 2.0 0.5 -with Project 6,0 6.0 2.6 4.5 2,0 2.1 2,6 0.8 1.2

Maia la Baja Mstirg 4.6 - 1.8 1.0 4,0 7.0with Project 5.2 5.5 2.5 1.8 6.5 12.0

Prd dei Mstirg 4.8 - 10 10 ,, ,

Scull with Pmject 5.2 6.0 22 15

la Ibctris Mating 4.8 - 0.5 1.0 4.0with Poject - 5.5 0.8 1.8 6.5

Febmey 27, 1986.

0O1 Pain 01 Palm Total haPnt tai hture hectares Tobwc lbbec 011 Palm !bdatirg New Fbrage Lvro%vd B sw Buma 9wiqp 3dst1zq adby Distrtet har-m olirs De TB mtos 1 Hoe P ua RPadnifdl Irrigate Redtli Dr4ip rr. Plhtz Qicad Irrigated Pasture Edt1ig Drip Irr. Farxim with Prolect C/

Abrege Eadtirz 290 145 65 - -

with Project 360 18D 115 185 481 1,460

SaLida Eidati,g 14,20Dwith Ptoject 24,803

Coello Exdstifg BD 160 35, 390with Project - IS 50,500

Ebria La Deja Exbtirg 1X 2,6 9,CGOvith Pjrject UO 4,60 14,400

Prfot de Fat1r- 7,60) - - 2,400 1,2D 3,40 - 21,40DSe11 with Project hOO 5,axl 2,600 5,100 2,400 1,60) - 3,4M3 30,3W

La lbctrina Edaltil- - 1,090 h

vith Project -- - __ 930 2,330

Total hectam Wattrl 290 145 65 5) 160 7,600 2,4i00 1to 3,800 3,4D0with Project 360 180 115 6a 1,503 5,000 2,6()0 5,C10 2,40D 585 6,68D 3,4X0 930

Yialds Movema

Abre Edstn 0 0.8 20 Mlk 160 LU/ah L'ninpdv Pturewith Pmject 20 1.3 35 Mil4k 1,675 Its//ha Irrigate Forage + ( et 528 kg/ht)

Salda Fjdscizwith Project

o(eUz Fadatirg 1.0 1.3with Pmject 1.3 1.8

Miria la Heja bdtLir Milk 160 Ltsha 1provd Rdnfed Pstume + bwroved Pmturewith Project Mlk 9o ItaAha Irrigted PstuWre + 4H Tapmv Pitux

(No irprwmment oontiuplated In t produictln)

Prnxo de Eaxetsig 12 122/ - 5 1,381J bSella with Poject 12 19 222/ 24a, 0.8 2,10b/

La IDctrine Fdatir,with Project 0..

Yield in tore of mF A.b/ Crtwu per ha. OmwuatonS 18 Vg. S/ Total hlctareeI hvr'tei airw fm p I 2.

Faxuay 27, 1986.

COLOMBIA

IRRIGATION REHABILITATION II PROJECT

Farm Size Distribution

Prado de MariaAbrego Coello Saldana Sevilla La Baja La Doctrina Total Percent

Farm Size --Number of farms

0- 5 ha 408 785 916 534 479 21 3,143 46 %5- 10 ha 19 130 166 135 552 143 1,145 16 %10-20 ha 40 242 214 283 254 64 1,097 16 %20-50 ha 8 535 175 193 137 0 1,048 15 X50-100 ha 0 153 43 114 37 2 349 5%> 100 ha 0 17 0 91 10 0 118 2X

Total Farms 475 1,862 1,514 1,350 1,469 230 6,900 100 %0

Farm Size Number of Hectares

0 - 5 ha 680 1,974 1,700 1,085 1,004 54 6,497 6%5 -10 ha 168 1,950 1,246 1,680 4,570 1,055 10,669 10 X10-20 ha 352 4,050 3,003 2,811 3,578 1,037 14,831 13 X20-50 ha 200 10,028 5,402 6,390 3,638 0 25,658 24 X50-100 ha 0 9,131 3,649 7,854 2,605 154 23,393 22 %> 100 ha 0 2,867 0 22,180 1,905 0 26,952 25 %

Total HectareS 1,400 30,000 15,000 42,000 17,300 2,300 108,000 100 %

Source: HDIAT.

February 27, 1986. t4

COLBMIA

IRRIGATION REHABILITATION 11 PROJECT

Technical Assistance Contracts

-- - - - - - - - - - - - - - -- - aideline Mactares Under Crop a/ - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -Fruits and tproved

all Pals Bananas Cacao Citrus Plantain Rice SorLmm Soybeans Cotton Sesase Tobacco Vegetabls Pascures b/ Shrip

Abrego - - - - - ' - - - - - 475 665 -Saldans - - - - - 10,600 1,840 - - - - - - -Goello - - - - - 8,000 8,500 7,000 11,00n 4,000 1,500 - - -Maria L.a aja - - - - 2,800 3,000 I,C - - - - - 5,000 -Prado de Sevilla 12,600 3,400 2,400 2,300 - 2,250 - _ _ _ _ bO 1,0 -la Detrina - - - - - 0- - - - 930Tetal 260 3 2,400 4 30230 I (W4O 4 0 noo i10 S,OO 1, 075 7%265 930

Dtsnstration Areas (ha) c/ 350 100 70 70 80 700 340 200 300 120 45 30 200 100

Source of Tech, Assist. Fedepalmi Asobana Fedecaca0 Private Private Fedearror Fenalce & Private Fedealgodon Federajonjoli Private Private Fedesan Foreign +Fedearroz Local

Value of Crop Federation d/ 30 8 6 6 7 57 27 17 26 10 4 3 17 72C4ntracts (MIP mililon)

SENA Ctntract d/ (CblS million) 15 4 3 3 2 29 14 8 13 5 2 1 9 I

Value of Technical Assistance Contracts per District (Col$ million)

- - - -8/1/84 prices- - - - - - -1/1/85 prices- - -Federatlons SENA Federations SENA

Abrego 2.5 1.3 2.7 1.4Saldans 27.3 13.6 29.8 14.9Coello 88.0 44.0 96.0 48.0Maria La Baja eI 28.3 14.1 28.3 14.1Prado de Sevilla 55.3 27.7 60.4 30.2La Uoctrina e/ 72.0 1.1 72.0 1.1Total 289 2 T1097

a/ Maximau nunber of hectares unt-r one crop during one semester.61 Includes 585 ha of irrigated forage and 6,b80 ha of Improved pasturelcl Between 22 and 52 of cropped area. Guidetine is 32./ For all districts except Maria La Baja and La Doctrina In August 1984 prices. For Maria La Baja and La Doctrlna In 1/1/85 prices.e/ In 1/1/85 prices. gin

February 27, 1986.

-30 ANNEX 1Table 4

COLOMBIA

IRRIGATION REHABILITATION II PROJECT

Summary of Project Cost a/

ForeignLocal Foreign Total Local Foreign Total Exchange--- Col$ million - USS million Z

Civil Works b/ 6,850 5,841 12,691 39.7 33.9 73.6 46Equipment b/ 144 1,517 1,561 0.8 8.8 9.6 91Medium-Term Investment 4,863 2,820 7,683 28.2 16.4 44.6 37Incremental Working Capital 2,050 1,034 3,084 11.9 6.0 17.9 34Development Services b/ 430 111 541 2.5 0.6 3.1 21Engineering b/ 1,857 244 2,101 10.8 1.4 12.2 12Incremental O&M 430 368 798 2.5 2.1 4.6 46Land 199 0 199 1.2 0 1.2 0Small-Scale Irrigation b/ 1,004 858 1,862 5.8 5.0 10.8 46Disaster Relief Program b/ 1,792 1,520 3,312 10.4 8.8 19.2 46Erosion Control b/ 294 0 294 1.7 0 1.7 0

Base Cost 19,913 14,313 34,226 115.5 83.0 198.5 42

Physical Contingencies 1,138 965 2,103 6.6 5.6 12.2 46

Price Contingencies 18,508 15,940 34,448 21.4 25.4 46.8 46

Total Including PriceContingencies 39,559 31,218 70,777 143.5 114.0 257.5 44

a/ Prices of December 31, 1985 - US$1 - Col$ 172.37.b/ Items financed by the Bank.

February 27, 1986.

DuGnaA

(fI'll Ilu) ,'

Tma M9 9Q87 19e 1989 9 1991

C5W Ueal Fomigp 11ml meAI lnMlw local meal 9

Mon 1twa Total TorIgn 2cat tal Yormg lAS oAl Pe Loc 1uol ?'a' 13

CQ tlbwla 44 12,691 S,842 6,AsD 874 433 471 2,116 971 1,143 3,443 2184 1.111 2,997 1,P39 1,611 2,Il 95 1.113 1,198 552 wZ1*d 91 ,tb2 1,517 244 3B 2 3 267 244 23 6b0 59 Sb Sm b is 2ID 26 - -_HoUr'I4e lnwsmt 37 7,b58 2,9 4,963 *3 It 17 1AI IA 115 1,151 434 741 2,w S2I I.ml ,95S ItI I,2m 2,156 1,011 1,745kmnal tUK" CA,IcI 34 1,54 1,034 2,050 63 214 424 Is lb la 1ra hi 122 574 293 '2 429 24 85 an as sw17t 5 srvl 21 S4 II2 41) 144 29 2is 147 11 26 148 11 117 to 12 48 2b 5 21 26 3 13rwiJai 22 2,101 244 1,hS7 237 34 256 441 #2 In b0 63 W)7 42 49 176 22 32 250 117 14 1031mnatalWCA 44 PA YA 433 19 is 21 73 34 J9 Ic 49 59 2 1% 69 5l 29n of 104 23U 109 226Lad 0 I" 0 199 64 0 64 41 0 43 77 2 77 10 o 20 5 0 5 - - -sel1frahKw2ta1 46 2,52 83 2,04 285 81 [0D 28S 85 2m 31 2 In 120 371 112 22 373 IU MI 373 172 MtDale kUct F111 1,1S2 123 1'm2 112 252 21D 112 1V 18D 662 3) 31A t62 314 358 b2 D: 358 bb2 324 3S8Mad Cqitl 0 2'94 0 29% 0 0 0 29 0 29 65 0 65 b6 0 66 b8 0 b6 66 0 46

_s Owe 42 13,22b 14,312 i9,923 2,522 911 2,652 3,63 1,b63 2,231 1,437 1,291 4,123 7,729 3,343 4,36 6,242 2,7 )3,65 9 6,35S 2,462 3,864mitcal tb2llni 44 2,03 965 ,I3 122 b0 72 424 2 224 6 2 MS 335 *? a30 242 D29 42 27 I82 83 Twal 3t flrt. Np. n.3) 42 3b,329 12,278 21,051 2,754 1,n32 12723 4,312 1,851 2,459 8,050 1,S77 4,473 85,76 1,544 4,b2b 6,SSI 2,715 3,6 6,486 2,5 3,942Ddllcon_ _ 1.22 1.14 2 1.4 I,15 - 2S74 .W 19 2,05 I.7 2* 44 L2I - 78 LSSPrIm E btlrIa 4 34,44 25,9W 18,5 06 227 241 O ) 8b 862 5.36b 2.4A 2 t6l 7IS1 3,725 4023 S.553 3,924 4,629 20,t863 4,526 4,20717UL P CMI 44 70,77 31,218 39,159 3,222 1,258 1,964 6,062 2,742 3,3D 21,136 6,U4 7,113 1S,92 7,2131 5,tS IS.104 6,69 5,455 17,124 7,072 10,052

roa Ouw (L 1Ills,) 42 210.7 88.6 122.1 26.0 6.0 I2.0 25.0 10.7 14.3 46.7 23.7 26.0 4.74 22.6 26.8 3.0 I2.8 U.2 37.6 24.8 22Lt8Lr R"Irst

lWior v - - - 2.05 0.98 - 2,23 1.42 1.21 1,( 1 7 - 2.2U 2.i2 - 1.40 1.27 - 2.44 1.34Prim Qtlrzwilu 54 44,8 25.4 21.4 0.1 0.3 (0.23 1.5 2,4 0.4 b.9 43 2b6 11.0 6.2 4,6 22.4 6.4 6. O4,6 4t.8 7.8

11KM L. DIm OT 44 l57.5 114.0 I431S 1h.l t.3 9.8 26.8 12.1 14.7 51,6 25.0 28.6 54.4 2t.8 32.4 10.4 2.2 232 52.2 21.6 3,6

Ai C Lam pM" of *r 31, 2995.y IwISl 0,enant Ior Mw%w laz mu,unn. sm hwe 3, Table 1.

h isy 27, 18b.

N

COLLUWIA

IRRIGATION REHABILITATION 11 PRCJECT

Schedule of Expenditures, f/ Sources of Financing and Disbursements (USS million)

IBRDSchedule of Expenditures Disbursement Sources of Financing

FY 1987 1988 1989 1990 1991 1992 Total Percent IBRD Government FFAP and

Project Year 1 2 3 4 5 6 local Banks Beneficiaries

Civil Works b/ 5.1 1.2 23.0 '1.5 15.9 9.7 88.4 65 2 57.5 30.9 -

Equipment b 0.2 t.7 4.5 4.0 1.5 - 11.9 90 X 10.7 1.2 - _

Mediua-Terc investment 0.2 1.1 7.8 11.3 14.9 22.1 57.4 - - - 43.1 14.3

Incremental Working Capital 3.7 0.5 1.2 6.2 3.3 7.1 22.0 - - - 11.0 11.0

Development Services b/ 0.8 0.9 1.0 0.4 0.2 0.1 3.4 65 2.2 1.2 -

Engineeringb/ 1.7 2.7 3.5 2.9 2.1 0.9 13.8 65 2 9.0 4.8 -

Incremental O 0.2 0.5 0.7 1.1 1.5 1.9 5.9 - - 3.0 - 2.9

Land 0.4 0.3 0.5 0.1 - - 1.3 - - 1.3 - -

Small Scale Irrigation b 1.1 1.1 2.5 2.6 2.9 3.0 13.2 65 2 8.6 3.3 - 1.3

Disaster Relief Program/ 1.9 2.1 4.4 4.8 5.1 5.2 23.5 65 2 15.2 8.3 -

Erosion Control / - 0.2 0.4 0.4 u.5 0.5 2.0 65 2 1.3 0.7 -

Physical Contingencies b/ 0.8 2.6 4.1 3.2 2.5 1.5 14.7 65 X 9.5 5.2Total T61T 26.9 7 5i.5 50.4 52.0 257.5 114.0 59.9 54.1 29,5

Percent ofEnd-of-Year Theoretical Project Cost 44 2 23 2 21 2 12 2

Disbursements 7.6 16.3 29.3 26.9 20.3 13.6 114.0

Year 7 Year 8 Year 9

Colombia Ave. Disb. Profile c/ 2 2 12 2 28 X 47 2 66 2 81 t 91 2 98 2 100 2Loan 1996-CO Performance c 0 2 13 2 34 X 52 2 - - - - -

Assumed for this Project 5 % d/ 12 2 28 2 47 X 662 81 2 91 2 100 2

Disbursements US miLlion 5.7 d/ 13.7 31.9 53.6 75.2 92.3 103.7 114.0

a/ Including price contingencies.b/ Items financed by IBRD.c/ Percentages indicated are for whole years after Board Presentation. For computational ease, Board Presentation assumed at 6/30/86.

d/ Initial Deposit in Special Account estimated at US53.0 million or 2.62 of the Loan.

Sourcet Bank.

February 27, 1986.

_33 - AN= 1T;ebl 7

IRRG&fl0 IEEABILITATION fl PRJEM

District Investmit

Services andDistrict Civil 1*bnks a/ ,#et FId-rlg Ttl Raa oa

MGDI$ U$/h blMDICS/b. Wl$ US$/ha WU$ Hectare lS$79

Abrelp 38 238 54 339 9 56 101 1,400 633Seldana 1,591 931 255 149 282 165 2,128 15,000 1,245QIeL1 3,405 997 284 83 653 191 4,342 30,000 1,271Maria la Baja 1,210 614 170 86 231 117 1,611 17,300 817Pracb de SevilIa 3,547 742 22-5 47 620 130 4,392 42,000 919La Doctrima 786 3,001 112 427 192 73 1,090 2,300 3,501

Subtotal Districts 10,577 - 1,100 - 1,987 - 13,664 108,000 -

Sinall-Scale IrrItipon 1,332 1,400 - nA. - NA. 1,332 7,8D0 1,400

a/ InclxUig Pthysial Gmtneie; prices of 1/1/85.hi/ Per physical ba equipped %with irrlgatm I InratrUctr.

Februar-y 27, 1986.

COLOMBIAIRRIGATION REHABILITATION 1I PROJECT

ECUIPMENT AND VEHICLESi LOCATION, QUANTITY AND COST (IN 1/1/95 COL $ HILLIONI

PRADO DEMARIA LA BAJA LA DOCTRINA SEVILLA ABREGO COELLO SALDANA

UNIT T O T A LCOST UNITS COST UNITS COST UNITS COST UNITS COST UNITS COST UNITS COST UNITS COST

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15

DRA6LINE 3/4 YD, TRACKS 16.0 2 32.0 0 0.0 2 32.0 0 0.0 I 16.0 1 16.0 6 96.0DRAGLINE 3/4 Yn, NHEELS 22.0 1 22.0 1 22.0 1 22.0 0 0.0 2 44.0 1 22.0 6 132.0HYDR.EICAVATOR 3/4 YD, TRACKS 14.0 1 14.0 0 0.0 1 14.0 1 14.0 1 14.0 1 14.0 5 70.0HYDR.EICAVATOR 3/4 YD, WHEELS 11.0 0 0.0 0 0.0 2 22.0 0 0.0 I 11.0 1 11.0 4 44.0FRONTLOADER I 112 YD 7.0 1 7.0 0 0.0 1 7.0 1 7.0 1 7.0 1 7.0 5 35.0BULLDOZER 200 HP 12.0 0 0.0 0 0.0 0 0.0 0 0.0 2 24.0 0 0.0 2 24.0BULLDOZER 105 HP 6.5 2 13.0 0 0.0 3 19.5 1 6.5 2 13.0 3 19.5 11 71.5TRACTOR 80 HP 2.3 2 4.6 1 2.3 3 6.9 1 2.3 3 6.9 3 6.9 13 29.9MOTOR5RADER 120 HP 8.0 I 8.0 I 8.0 2 16.0 0 0.0 2 16,0 I B.0 7 56.0VYIRO COMPACTOR 50 HP 2.0 1 2.0 0 0.0 1 2.0 1 2.0 1 2.0 1 2.0 5 10.0HYDRAULIC BUCKET ROMER 4.0 1 4.0 0 0.0 2 8.0 1 4.0 2 8.0 2 8.0 8 32.0SERVICE TRUCK 7.5 1 7.5 0 0.0 1 7.5 0 0.0 1 7.5 1 7.5 4 30.0FLAT BACK TRAILER 12.5 0 0.0 0 0.0 0 0.0 0 0.0 1 12.5 0 0.0 1 12.5 wDUMP TRUCK 4 h3 4.5 6 27.0 3 13.5 9 40.5 2 9.0 9 40.5 6 27.0 35 157.5BUS 4.5 1 4.5 0 0.0 0 0.0 0 0,0 0 0.0 0 0.0 1 4.54 KHEEL DRIVE VEHICLE 1.5 4 6.0 3 4.5 6 9.0 1 1.5 9 12.0 7 10.5 29 43.5PICK UP/STATION WA60N 1.6 4 6.4 2 3,2 4 6.4 1 1.6 2 3.2 2 3.2 15 24.0MOTORCYCLE 0.2 11 2.2 3 0.6 24 4.9 4 0,8 19 3.9 12 2.4 73 14.6CONCRETE MIXER 10 HP 0.4 1 0,4 1 0.4 2 0.8 1 0.4 2 0.9 1 0,4 8 3.2REFRIGERATED HILK TANK 1.0 0 0.0. 0 0.0 0 0.0 1 1.0 0 0.0 0 0.0 1 1.0200 HA LINNEAR HOVE SPRINKLER 29.6 0 0.0 0 0.0 0 0.0 0 O.C 1 29.6 1 29.6 2 59.2FIIED RADIO 0.3 3 0.9 1 0.3 1 0.3 1 0.3 1 0.3 2 0.6 9 2.7MOBILE RADIO UNIT 0.1 9 0.9 5 0.5 11 1.1 2 0.2 11 1.1 10 1.0 48 4.9CURRENT HETER 0.2 2 0.4 1 0.2 4 0.8 1 0.2 4 0.8 3 0.6 15 3.0SEDIMENT SAMPLER 0.3 0 0.0 0 0..0 2 0.6 0 0.0 4 1.2 2 0.6 9 2.4TOPOGRAPHIC INSTRUMENTS 0.7 2 1.4 1 0.7 3 2.1 1 0.7 4 2.8 3 2.1 14 9.9LABORATORY INSTRUMENTS 1.0 1 1.0 0 0.0 1 1.0 0 0.0 1 1.0 0 0.0 3 3.0OFFICE EQUIPMENT 1.0 1 1.0 I 1.0 I 1,0 I 1.0 I 1.0 1 1.0 6 6.0BOATS 1.5 0 0.0 3 4,5 0 0.0 0.0 0,0 0.0 0°0 0,0 0.0 3 4.5

TOTAL 166.2 27 61.7 97 225.3 22 52.5 97 290 66 200.9 347 86,6 '-'

TOTAL IN COST PERIOD REPORT 166.0 62.0 209.0 49.0 260.0 197.0

-35- ANNEX 1Table 9

COLOMBIA

IRRIGATION REHABILITATION II PROJECT

Disbursement Schedule

IBRD Disbursement CumulativeFiscal Year During Semester USS million Percent

1987 12/31/86 3.0 3.0 2.6%30/06/87 2.7 5.7 5%

1988 12/31/87 3.4 9.1 8%30/06/88 4.6 13.7 12%

1989 12/31/88 9.1 22.8 20%30/06/89 9.1 31.9 28Z

1990 12/31/89 10.3 42.2 37%30/06/90 11.4 53.6 47%

1991 12/31/90 11.4 65.0 57%30/06/91 10.2 75.2 66Z

1992 12/31/91 9.2 84.4 74%30/06/92 7.9 92.3 81%

1993 12/31/92 5.7 98.0 86%30/06/93 5.7 103.7 91%

1994 12/31/93 5.7 109.4 96%30/06/94 4.6 114.0 100%

February 27, 1986.

-36 - ANNEX 1Table 10

COLOMBIA

IRRIGATION REHABILITATION II PROJECT

Erosion Control a/

Maria La Prado deItem Abrego Saldana Coello Baja Sevilla Total

Hectares Treated 60 1,000 800 250 1,000 3,110

Investment (Col$million)

Nursery 0.5 6.0 5.0 5.0 6.0Fruit Trees 0.8 20.0 16.0 5.6 24.0Timber Trees 1.2 15.0 12.0 3.6 18.0Trees and Shrubs 0.7 8.8 7.0 2.1 7.0Integrated Grazing 0.5 12.5 10.0 3.0 10.0Civil Works 2.1 35.1 28.1 8.8 35.6

Total b/ 5.8 97.4 78.1 28.1 100.6 310.0

Total in 1/1/85 cost(rounded) 4 71 57 21 73 226

a/ La Doctrina does not require erosion protection.

b/ In pesos of September 1985 - US$1 = Col$ 156.

November 15, 1985.

_37 - ANNEX 2Page 1 of 6

COLOMBIA

IRRIGATION REHABILITATION II PROJECT

Project Organization and Management

A. Institutional Aspecus

Roles of Implementing Agencies under the Project

1. HIMAT would be responsible for carrying out the project. All civilworks, technical assistance and engineering services would be contracted tofirms, farmer's crop associations and individuals. HIHAT would maintain itspresent Project Coordinating Unit with duties and responsibilities acceptableto the Bank and it would maintain a senior HIMAT staff member to be a fulltime project coordinator (Para. 3.05).

2. FFAP would provide credit for incremental working capital andon-farm investment through the banking system. The medium and large scalefarmers in the six districts covered by the project would have littledifficulty in obtaining their credit requirements. At times however,small-scale farmers (below 10 ha), who lack the financial capacity tocontract technical assistance, have limited access to credit.

3. ICA and private Crop Federations would be contracted by HIMAT toprovide extension services under multi-year contracts to set-up an extensionand demonstration program, under arrangements satisfactory to the Bank. Sucha formula is working satisfactorily undier the first rehabilitrtion loan andRIDAT would enter into such contractual arrangements within three months ofloan signing (para. 3.07). FFAP would accept the proposed technicalassistance project as a basis for farmers to obtain credit for on-farminvestments HEIAT would contract SENA to provide training to farmers.

4. SENA would be contracted to provide extension services to thesmall-scale irrigation component.

HIKAT - The Borrower

5. Institutional Framework. In 1976 the Colombian Institute forHydrology, Meteorology and Land Improvement (HDMAT) acquired technicalresponsibility for public irrigation and drainage districts, transferred fromINCORA, reflecting the decline of Agrarian Reform as a national priority.HIMAT is governed by a Board of Directors from several public institutions,presided over by the Minister of Agriculture. HIMAT's General Director isappointed by the President of the Republic, so that the position becomesvacant once every four years. New directors usually replace departmentheads, as well as the 13 regional directors who are responsible for rtanagiugHIMAT's activities in the country. This results in a frequent turn-over ofexecutive level staff and reduces opportunities for career growth of HIMATstaff to executive level positions. HIMAT has a total staff of-l,942 ofwhich 585 are in the Central Office in Bogota (Annex 2, Table 1).

- 38- ANNEX 2Page 2 of 6

6. HIMAT's income derives mostly from Government transfers. TheCondensed Income Statement (Annex 2, Table 2) shows that Government transfersaccounted for between 77Z and 82Z over the years 1979 through 1984. Theremainder of HIMAT's income is derived from watercharges. In 1984, HIHATrecovered on average only 36% of the annual operation and maintenance costsof the districts (Annex 2, Tables 2 and 4). Given the cost of HDMAT's otherresponsibilities, operation and maintenance in 1984 only constituted 38Z ofHIMAT's overall costs. Nevertheless, HIMAT's total 1984 income increased by36% over 1979 when expressed in constant 1979 pesos, but the amount spent onO&M in the districts improved by 71% in constant terms over the same period.HIMAT's condensed Balance Sheet is shovu in Annex 2, Table 3.

7. Besides poor cost recovery, other major problems in the Colombianirrigation and drainage districts are: (a) continued poor land use over largeareas in spite of the public investments in infrastructure; (b) lack ofon-farm development; and (c) the tendancy of Government to start constructionof new irrigation schemes instead of complvting its existing districts. Thefirst two problems are interrelated. From .Annex 2, Tables 5 and 6, it can beconcluded that in 1984 there were 274,930 gross hecLares in all operationaldistricts and that of these 214,983 ha, or 78%, were under un-irrigatedlow-value use, such as grazing, scrub land, fallow and subsistence crops. Inthe irrigation districts only, 294,191 ha were under crop (including doublecropping, but also scrub) but only 121,594 ha, or 41%, received irrigation.Of the 274,930 gross hectares of all the districts, only 186,430 ha, or 68%were equipped with infrastructure. This situation is reason for the Bank toemphasize the rehabilitation and completion of existing districts, togetherwith technical assistance to farmers to promote better land use, beforeparticipating in the financing of new districts.

8. The reasons for the poor land use are the following:(a) large-scale farmers have their land under extensive grazing, whichprovides maximum risk-free zeturns to 1T nimal annual expenditures. OnceGovernment provides'irrigation infrastLacture, such land owners cannot affordthe unacceptably high investments and greatly increased risks associated withconverting their unimproved pastures to irrigated crop land. This problem isdirectly related to the size of land holdings; (b) in Colombia, the role ofthe state in public irrigation and drainage development terminates outsidethe farm. All work inside the farm, such as land levelling, is left to theinitiative of the individual farmer, who is supposed to take out medium-termcredit for this type of work. With the exception of rice, all crop waterrequirements are for supplemental irrigation and harvests can be obtainedwithout irrigation. The official philosophy certainly results in a cheaperinitial public investment, but the lack of, or very long delays in farmerscompleting their necessary part results in a poor overall economy. Otherirrigation countries, such as Spain and Morocco, went through the sameexperience 40.years ago. As a result, they have drawn the conclusion thatGovernment had to take the final step of providing on-farm development inorder to realize the production potential expected from the publicinvestment.

9. The Bank's approach to solve this problem in Colombia has been totry to do the best within the unsatisfactory official framework. It is based

- 39 ANNEX 2Page 3 of 6

on: (a) establishing a reliable service to the farmers by the districts,requiring a rehabilitated and completed infrastructure and new maintenanceequipment; and (b) a concentrated demonstration and extension effort toconvince farmers of the financial benefits to be obtained from on-farmdevelopment. Under the first rehabilitation project this has been quitesuccessful by showing that the reduction in production costs would pay infive harvests for the investment in land levelling in the case of paddyrice. Under the proposed project such work will be intensified but with ashift in emphasis on the use of sprinkler irrigation for crops in need ofsupplemental irrigation. This would also solve the problem of providingirrigation oa the sizeable percentage of land which is rented.

10. Operation and Maintenance Costs. Annex 2, Table 4 shows that in1984 HIMAT's average annual cost of O&M in the irrigation districts withinfrastructure was Col$ 8,300 per hectare with a range between Col$ 3,700 andCol$ 32,000. This compares to an average of Col$ 4,800 per hectare for thetwo user-managed districts, Coello and Saldana. Even allowing for highpumping costs in some of HIMAT's districts, the O&M costs are unacceptablyhigh in many cases as a result of over-employment. In the districts of theongoing project (Loan 1996-CO), the average production costs are about 71% ofthe gross value of production. Using this percentage, O&M costs expressed aspercentage of farmer's production costs (Annex 2, Table 4, column 15) showthat average O&M costs are a reasonable 4% of the production costs in theirrigation districts only, but that in some districts they amount to between127 and 25% of production costs which is more than farmers are willing topay. It is not surprising, therefore, to see that actually collected watercharges (Annex 2, Table 4, column 17) never exceed 8% of production costs.The gap between the high costs and low collections is filled by governmentsubsid.es.

1I. Collection of Water Charges. Water charges are billed twice a yearafter the main harvest periods. HIMAT has an excellent centrallycomputerized system in which its customers are registered. A new internalHIMAT proposal is to earmark the collecLed amounts for use within thedistrict in which they were collected. However, there is no budgetaryincentive imposed by the Treasury to force HIMAT to collect recoverycharges. To the extent that water charges are not collected the transferfrom the Government budget is higher. Water Users' Associations exist in alldistricts, but they are active only when there are a sufficient number ofwell-educated, larger-scale farmers. In districts with many small farmersand many beneficiaries of Agrarian Reform, farmers generally submit to apaternalistic role by the Government, expecting free irrigationinfrastructure and cheap services. This is what the project attempts tochange through a training program.

12. Although Colombian law has a policy on cost recovery correspondingclosely to that endorsed by the Bank, namely that farmers benefiting frompublic investments should pay for them, the law is seldom applied inpractice. In a situation where, nationwide, only 36% of the annual O&M costsin the districts is recovered, discussions about investment cost recoverybecome rather academic. A recently circulated draft OED report on recoveryof water charges in 48 completed Bank irrigation projects concluded that

- 40 - ANNEX 2Page 4 of 6

recovery of full O&M costs should take precedence over investment costrecovery. The reason for OED's conclusion is the observed state of disrepairand lack of reliable service and the resulting loss of public investment andless than expected agricultural production in irrigation projects. The costrecovery covenants for the proposed and on-going rehabilitation loancorrespond with the conclusion in the OED report by giving priority to O&Mcost recovery over investment cost recovery. HIMAT would introduce aseparate investment recovery charge, starting two years after all civil worksin a district would be completed. Realistic estimates, however, are thatonly the first group of farmers would begin to pay such charges during thelast project year. A summary of the 1984 cost recovery and the proposed planfor the reduction of subsidies is given in Annex 2, Table 7.

13. The small-scale irrigation component is the poverty orientedprogram in the proposed project. The about 150 individual irrigation schemesunder this program are restricted in size between 10 and 200 hectares becauseof limitations in water resources. Their number and small size precludesthe possibility of a permanent HIMAT presence for their operation andmaintenance. Therefore, they would be farmer-operated. No widespreadproblems with respect to operation and maintenance are expected, given theexperience in existing farmer-operated small schemes, provided that theirsize remains within a manageable scope. The reason is that, when maximizingreturns per hectare, most farmers want to maintain the source of theirenhanced income.

B. Project Implementation

Implementation of the Small-Scale Irrigation Component

14. HIMAT has created a special unit to organize and administer thesmall scale irrigation component. A national radio and television campaignhas resulted in many requests for small irrigation schemes. Although theoriginal designs and supervision of construction for the first schemes werecarried out by HIMAT, it intends to divest itself from these activitiesbecause of the hundreds of schemes planned. Instead, it intends to carry outdesign and construction through local engineers and contractors while HIMAT,through its departmental directorates, would maintain responsibility for theselection process as well as overall administration and supervision of theprogram. The program will contribute to bringing irrigation activities intosome of the remotest parts of the country.

15. While relatively cheap in construction, because the "slopes'component uses beneficiary participation whenever possible, the engineeringpart is costly because of the diseconomies of scale. The Bank carried out arate of return calculation for what it considered the economically leastattractive case: a small lake scheme serving irrigated forage productiononly. A rate of return of 20% was obtained for an investment ininfrastructure equivalent to US$ 2,000 per hectare. An investment ofUS$ 2,000 per hectare was therefore assumed as the level below which noeconomic justification of a mini-scheme would require prior Bank-approval.

- 41 - ANNEX 2Page 5 of 6

16. The following criteria would be used by HID4AT in administering thesmall-scale irrigation component:

(a) there will be a minimum of five families in one small irrigationscheme;

(b) the size of one small scheme will range between a minimum of 10 haand a maximum of 200 ha;

(c) the maximum irrigated acreage per family will not exceed 10 ha;

(d) the investment in irrigation infrastructure will not exceedUS$2,000/ha equivalent. Exceptions will require prior Bankapproval;

(e) diesel motorpumps, when required, will be air cooled and withmanual starter. With this condition, the horsepower will belimited to 37 HP per unit;

(f) for small dams, the cost per m3 stored will not exceed US$0.30/m3.

(g) pumps, sprinklers and mobile equipment, where such elements arerequired, will be private property of the participants, who willobtain them under medium term credit. Exception will require priorBank approval;

(h) participants in small schemes will not be charged to repay morethan 50Z of the cost of civil works (this applies in particular tosmall dams);

Ci) the economic rate of return for each system will be at least 12%.No economic justification for a small scheme has to be submitted ifits investment cost is below US$2,000 per hectare;

(j) participants in a small-scale irrigation scheme will establish aUser's Association with legal status, inscribed with the Ministeryof Agriculture;

(k) members of the Users' Association will pay an annual contributionto cover their O&M costs;

(1) assistance for the establishment of Users' Associations will beprovided either by (a) the extension staff for Rural Development inthe Departmental Agricultural Secretariats, or (b) the extensionstaff in the Community Action Program of the Ministry ofGovernment;

(m) for the administration of the small-scale irrigation program, HIMATwill establish a special section at headquarters (Programa PequenoRiego de Lagos y Laderas). At the departmental level, theresponsibility for this component falls under the DevelopmentGroups of the Section Operation for the (large) districts;

- 42 - ANNEX 2Page 6 of 6

(n) technical assistance for Irrigation development(technical/organizational part) will be provided by HINAT, theDepartmental Agricultural Secretariats, INCORA or other entitiescontracted by HIDAT, for periods not exceeding three years.Technical assistance for agricultural production under irrigationwill be provided by ICA, DRI or private persons contracted byHIMAT;

(o) the small-scale irrigation component would be a separate categoryin Schedule 1 of the Loan Agreement of the proposed loan. Theampunt would finance feasibility studies, design, construction andtechnical assistance;

(p) the component will have its separate monitoring and evaluationsystem. For each scheme, this would imply obtaining agriculturalinformation on the before' and 'after' project situation, as wellas information on the investment;

17. The Bank would assist in financing the small scale irrigationcomponent with its base cost of Col$1,862 million (US$10.8 million).Assuming an average cost of US$1,400 per hectare, about 7,800 hectares wouldbe involved, or about 156 schemes with an average size of 50 hectares each.Assuming an average of 2 hectares per beneficiary, 3,900 beneficiaries wouldbe reached. As of July 1985, HIMAT had identified 70 sites for small schemesand for ten of these final designs were completed.

18. While water will be equally distributed among beneficiariesaccording to the quantity available, it will be impossible to avoidincluding some larger-scale farmers with these types of works. Such asituation arises, for instance, when a small dam site is encountered on theland of a large-scale farmer or an irrigation ditch crosses his land.Therefore it is assumed that 70% among the beneficiaries, or about 2,730,would belong to the poorest segment below the poverty level.

- 43 - ANNEX 2Table 1

COLOMBIA

IRRIGATION REHABILITATION II PROJECT

HIMAT Employment (6/11/85)

Central OfficeBogota Regional

No. of Employees Offices

Direction 4 146 a/Secretariat 31

Support Offices

Planning 50Legal 7Operational Control 4

Sub-directorates

Fiuancial and Administration 171Irrigation and Drainage 54 954 b/Hydrology and Meteorology 264 257

Total Bogota 585 Field 1,357

Total Permanent Staff 1,942

a/ Includes personnel for administrative services.

b/ O&M staff, of which 165 higher level employees and 789 permanent lowerstaff, such as machine operators.

Source: HIMAT.November 15, 1985.

- 44 - A 2M1a 2

EMIGTM - n IAI

HMO: Qmxdwnseed Ime Statesent

1979 1983 1984 1979 1983 19B4- - - In twutt 1979 AlS b/ - -- -

- oS *dlll __ __…

nIcM z z z

Govenrent Trvnsfer 458.6 79 1,314.2 77 1,775.5 82Water mnlP a/ 81.7 14 321.7 19 306.7 14 81.7 138.7 111.9VIteorOlgy and hydroMg services 1.2 18.2 57.4Otber I includ p-iyear adjustnit 36.1 50.4 19.0

Total Income 577.6 100 1,704.5 100 2,158.6 100 577.7 734.7 787.8

COST

Mnagnemet and ad-fnistration wost 70.5 12 277.0 16 352.1 16

FERATD -COE

Hydroff antd 1.terology 171.7 467.3 541.1Other operating ets 28.4 53.8 85.7Codtnsdtlio of regional offices 68.8 133.3 171.3Mulntewie In thegregis 128.3) 429.1) 625.1) ) ) )

) 32 ) 35 ) 38 )180.0 )260.6 )3D7.3( tim In 1the region 51.7) 175.6) 217.0) ) ) )

FIMIW (DST 2.6 150.4 233.7

Oter wosts, iwJinlig authntsfor prevmo. years 44.5 39.3 0.1

Total Cost 566.5 100 1,725.8 100 2,226.0 100 566.5 734.9 812.4

Siplus (defict) 11.1 (21.4) (67.5)

(Cst of ivg inex(Z) 100 232 274

Water sa8d inne as 2 of O( oosts 45% 53% 36%

a/ InlizlCjg interest on overues and -t of tmajy equipment._/ xQdted byd tvigb DSt of vxig r

Soue: HIM.Nbver 15, 1985.

-45- AN= 2Table 3

aixmIA

IRRn On RlTON III fl R

HIUAT: Cmdensed Balance Sheet (Col$ adilim)

1979 1983 1983 1984

ASSE5 LTABUnXrES

Caxeat Assets Current Liabilities 345 849

Cash In Bmaks 67 6 38 long t-erm lahUities 924 2,018Receivables ad aivaxs paid 1,090 1,326Tnvobmy 153 232 Otber 12 22

Tbotl wrreat assets 1,310 1.6K Total Liablities 1,281 2,889

Fixd Asets

wnvtory in irrigatinw districts 495 11,047 E4INehinexry and e*dpupt 173 5741Q'diuetexooegical statiuis 119 157 Cupital 58 58Stadtes 106 156 Annual finanrial results (21) (68)Othbr assets 1.43 2,142 Acuuilated supplies 2,322 12806

Ibtal fixed assets 2.3D 14,076 Ibtal equity 2,359 12,796

7btal Assets 3,640 15,685 Tbtal liaialities and equity 3,640 15,685

- _ - - - - - - -nea Rats - - - - - - - - - -

1983 1984

1. owrrewt PtiAO (Qrreat assets awrren liabilities) in Z 1,310 : 345 - 380% 1,606 : 849 - 189Z

2. Debt: Equity ratio 1,281 : 2,359 - 35:65 2,889 : 12,796 - 18:82

S:c HD.?ber 15, 1985.

IWW~~~~~~~~~~~~~~~~~~~~~~~e llm 3t Inn(1N

olaalA ~ ~ ~ ~ ~ ~~~~SHX

1963 alH Xt aHg Pnr CI ?mltalIth CIH am i Per Ib tra- 4 t Cm Pmd. uita p hr

19X3 kmh Pled . k Q Vls e nftAU - L 06 4N b wm Pl-d Ricu pwr GUP la t ft Pe G#P. amThIAL hr ftm*muu z gm aatl aML -IM&p_tW R TOW Clm 4 (O9 9J (9a2) (L L The) ((1d.IJ) (10a00(

bIw46Utt lm 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17

NPSI- 3,Z0 2,I 1,648 4,839 6,467 390 216 96 74 7 92 1140aD 32,0z 122 172 iI 22PmA , di (1 0 50-M) 3,300 2,41 391 4,996 5 3S 33 22 55 n.a. n.&. - - - - - - -ma in it 19,5ND 0,0D 4.354 19,316 23,670 OB 1,027 1,435 83 17 2)2 3,SW 10,'dD U a II a_ 1 2,mU 7 1,010 3,32D ,4W 2me 148 356 19 2 II 4.,m 27,10 52 BX It 12bn html 53D 3 610 45 655 6t A n n.m. n.a.li 04triz n 1,009 2,00 1,06b 3.622 4,6m2 114 56 170 3D 2 ?n 6t,sx 5,0 lag 25X 1 22a inl I 3,5m 3 s 3, 3,714 2,571 6,35 632 42 674 56 39 6 e 8B,S9D 16,o SX in fi BXl3 R 539 18 4 M54 736 35 41 76 n.a. n... - - - - - - -Sm Alf l,Sm 1,10 1,347 ,10 2,101 222 16 238 16 4 2.x 6,O 14, 72 9n n2 22Prdn de SrilA U 35,sm 23,SOO 2,076 26,661 54,757 5,165 1,415 6,b0D 91 34 372 1,70 3,91 Li n Li isaOnp 1t 2,OM 1,230 907 1,775 2,392 3sD 62 452 21 3 IU4 8, BD 17,502 st n 12 12La" I 15,0D s9,o 11,326 9.061 23,647 1,410 513 1,953 D3 32 602 2,&6D 5,m 3X Al a n(sl n 11 32,502 25,cm 2b,956 4,137 74,295 3,591 2,351 6,192 93 102 I12 1,33m 3,70D 2 n a aRnI da 1 12,039 8,m 135,353 12,341 27,89 1,70B 19 1,727 5s 10 4n 1,839 6IDD 32 a1 22 aS&Ldnu 11 D3.03 13,O3 19,096 20,643 39,749 I,792 27 1,19 a 97 1I02 2, 23 6,BD Ux n U Bmm i 10.50 8O.0 6,152 13,610 9.822 1.443 1.49 2.932 72 36 Su9 1,¢ 9,039 2 39 12 a

Tbtal krnilm Etridt 165,47D 109.S30 121,594 172,597 294,191 17,839 7,448 25,337 746 414 552 2,OM )1 7,10D 393/ 4/ n z/ a

Hmu4hwd maaicta 112,93D 71,5D 76,336 103,817 190,155 12,256 5,070 .7,326 565 215 34e 3.3m3 8,3 21 n St Ls £31_- d 0m t uica 52,53D9 38,000 45,256 68,7 114,036 5,13 2,378 6,011 181 199 1102 1,600 4,69 a 12 22 32

No el (m 649.M) 27,039 17.a0 0 29,O3D 29,09D 0 297 297 n.m. n.m. - -Alt 0dd -Fryh 9,913 7,sx 0 9,3r 9,370 0 243 245 n.A. n.a. - - - - - -da4'a i (tin 11630D) s55,D 39,00 1,54 75,55. 77,102 aJ 4,717 4,925 n.m. n.m. - - - - - -Szly B,O8.039 8,O 0 9,391 9,391 0 24 284 51 0 02 5,43 6,400 1d 252 02 o0lerjJa I 10.IO3 5.CW 61 13 ,0 tB 13.068 7 672 679 39 5 132 3,00D 7,3 62 BX Ix I1

ThW Mani owhm Matrkta 109,50D 76,9 1,609 136,322 137,931 215 6,215 6,470 - - - - - - - - -

1MJ A.l*zAl / 1,4W l,tW n.n. na.. n.m. n.a. n.a. n.n n.m. n.m. - -

hn Pra.& / 5,C 0 - - - - - - - - - - - - - - -

TAtl 281,33D 187,BD 123,2D3 398,919 432,122 13,104 13,663 11,767 1,023 MG 492 2, - - - - -

bcal for I6DW4XIf 0Mtrcts P"i. I~.1 hImALmt ml

Kn Prod 222,4U 148,430 77.947 240.139 318,086 12,471 11,285 23,756 W ! 305 3 36 2,63 5,70) 4U 5 11 22

cb th boi of hi 1tm fw m I 1999-00, Ih zW praftien lo is 712 of th1 mam vii at pm&ction.1 klu tn . tucid, go kfn l ml RI Puhit.3mlun Qd1 oId aSl4 iM.

%aus me it ld, b* Im an mbiln. U.a trid -

3ml g -ar un2w 611w md crub.rho MW's 19U nl1A.d balam dhat,

h.-l MM.Ib_ 15, 199.

cXIAM1IA

RRIGATION cEHHABILIFATIGA II PR JECT

HOWAT Productlion Statistics

1984 Area Planted - 1984 GrwOe Valim of ProductlonUTirgated Rainfed Total ted Rainfed _ Total

Ha 2 Ha % Ha 2 Col$ M Col$ M % Cbl$ H X

Pasture 12,882 10 116,940 38% 129,822 30% 546 2,854 3,400Fallow an Scrub 4,982 87,329 28% 92,311 21% - - -Subsistence (kCps 978 9,253 10,231 367 815 1,182Other Low Value Crops 68 1,461 1,529 1 58 59

Subtotal Low Value Crops 18,910 15% 214,983 70% 233,893 54Z 914 5% 3,727 27% 4,641 15%

Rice 63,111 51% 7,421 70,532 162 9,047 50% 703 9,750 31%Cotton 10,058 22,123 7% 32,181 1,566 9% 3,502 26% 5,068 16%BWa'aa 3,470 607 4,077 2,255 12% 473 2,728Cacao 2,944 657 3,601 541 78 619Maize 385 9,672 10,057 44 511 555Oil palm 6,796 2,416 9,212 532 340 872Plantain 834 3,758 4,592 255 289 544Sbrltvn l8,739 33,563 11% 42,302 10% 694 2,238 16% 2,932Soybean 3,174 4,907 8,081 386 479 865Ibcto 1,158 160 1,318 436 82 51bGrapes 267 89 356 368 111 479Other High Value Crops 3,357 8,563 11,920 1,066 ',130 2,196

Subtotal High Value Crops 104,293 85% 93,936 30% 198,229 46% 17,190 95% 9,936 73Z 27,126 852

lbtal 123,203 100% 308,919 100% 432,122 100% 18,104 100 13,663 1(O)% 31,767 1OOZ

Source: HT.tNvember 15, 1985.

m

RRI'GAInoN REHABH1XrAIION II ROJECT

S9mmry IlMAT Districts (1984)

ft Psical HectaresWithout With

Infrastructure Infrastructure Tbtal

Ha X Ha Z Ha %

Irrigation Districts 55,900 20Z 109,530 402 165,430 60%Drainage Districts 32,600 122 76,900 28Z 109,500 40%

Subtotal Operating Districts 88,500 32% 186,430 682 274,930 100%Modulos Retiailares and Rio Prado 5,000 1,400 6,400 2% 1

Total 93,500 187,830 281,330 102% c

Area Planted - Gross Value of ProduictionIrrigated Rainfed Total Irrigated Raln£ed Tbtal

Ha X Ha X Ha X Col$ M 2 COl$ M 2 Cbl$ M Z

Low Value Crops a/ 18,910 42 214,983 50% 233,893 54X 914 3% 3,727 12U 4,641 15%Hlgh Value CrOps 104,293 242 93,936 222 198,229 46% 17,190 542 9,936 31% 27,126 852

lbtal 123,203 b/ 282 308,919 72% 432,122 100% 18,104 572 13,663 43% 31,767 1002

Irrigation Districts 121,594 28X 172,597 40% 294,191 682 17,889 57X 7,448 232 25,337 802Draixage Districts 1,609 02 136,322 32% 137,931 32% 215 0% 6,215 202 6,430 2

Total 123,203 28% 308,919 72% 432,122 100% 18,104 572 13,663 43% 31,767 100%

/ Pasture, fallow, scrub, subsistence crops. Lowest value crops are those umder "aunfed."b/ Includes 1,609 ha irrigated in the M*cavi and Lebrija drainrge districts.

Source: HIMAT.,NNveer 15, 1985.

COWeA

IRRIGMTIoN REHABDIISATlGN II PFEB:C

1984 Water Qiargus a-d Cost Recovey Plan

Water Lurages 06H CoSts06H Receipts as Reoeipts as He cropped Volumetric Finxd per ha

District CstS Bluing Receipts % of wets % of billing per year e/ Cob$/m3 Col$/ha/yr hurvted /- -Cbl$ '000- …

Saldama 88,287 n,a 97,249 110% 100% 14,800 0.28 1,000 5,965Prado deSevilla 90,849 46,963 34,438 38% 73% 24,300 0.18 779 3,739Cbello 93,406 n,a 102,436 b/ 110% 100% C/ 37,310 0.28 1,702 2,504Mara la Baja 82,596 22,023 16,620 20% 76% 8,400 0.18 1,440 9,833Abregp 20,611 3,681 2,837 14% 77% 740 0.15 1,161 27,853La Db,trina 29,501 6,284 2,365 8% 38% 960 0.31 1,440 30,730

a/ lUer-iimugaI districts. OSM owets include adminlstration cDsts.S Exces8 percentage due to payment into equipmint replawnt fund. Since amrtization of equipment is not included in the 064 Mets, the

110% is soewhiat optimistic.C/ Altho4uh amoumt of billirg nDt available, the recovery percentage is reported to be high.

/ Excludes fallow and wiloproved pastures./ Whether irrigated or nDt.

AG= 0K 006r RBOVE PLAN

Icome from Water Coarges as Percent of 06M Costs

- - - - - - - - - - - - - - - - - - - - -frject Year- - - - … - - - - - - -

Present 1 2 3 4 5 6 7 8 9 10

Saldana 110 100 80 80 80 eD 100 100 100 100 100Prado de Sevilla 38 50 52 55 58 60 70 80 90 100 100abello 110 100 80 80 81 80 100 100 100 100 100Maria La Baja 20 40 4.5 50 55 60 70 80 90 100 10DAbregp 14 25 28 30 35 37 39 50 60 70 100La Dxctrina 8 30 32 35 38 45 50 60 70 8s 100

F 2 1Fetm aary 27, 1986. F

- 50 - ANNEX 3Page 1 of 3

COLOMBIA

IRRIGATION REHABILITATION II PROJECT

Financial and Economic Benefits

A. Project Benefits

1. At full development, the area under intensive cultivation withinthe six districts is estimated to increase by about 42,000 ha per year(Annex 3, Table 1) giving rise to annual increments in production valued byyear 12 at Col$ 10 billion (US$88 million) (Anniex 3, Table 2). The smallscale irrigation component is expected to bring into intensive productionabout 7,800 hectares.

2. Project beneficiaries in the six districts total about 6,900 anddiffer substantially by type and size of farm between the various districts.About 2,700 of them could be considered having incomes below the ruralpoverty level estimated at US$210 per capita in 1984. With the project,those beneficiaries would be able to increase one or two times their familyincome. The small scale irrigation component would benefit about 3,900additional families, of which about 70% (2,730) are estimated to be under theColombian rural poverty level. Most of them are expected to start producinghigh value crops, such as vegetables, and impro-e substantially their income.

3. Seasonal unemployment in project areas is high in the presentsituation, although less than in the non-irrigated rural areas in Colombia.Therefore, labor availability is not expected to be a constraint. At fulldevelopment, the project would create the equivalent of 6,300 man-years ofadditional agricultural employment, most of it for unskilled labor that couldbe supplied by family labor. Additional employment would be created inmarketing, processing plants and machinery services, as an indirect impact ofthe increase in cropped areas and production.

4. The impact of the additional production on Colombia's balance ofpayments is highly positive. About Col$2,500 million of bananas, melons,shrimps and rice would be exported annually and more than Col$3,900 millioncould be reduced from imports with the additional production of oil-palm,soybeans, sorghum and milk. (Annex 3, Table 1).

B. Financial Analysis

5. Internal financial rates of return on all incremental resourcesinvested at the farm level vary from 20% for oil palm plantations (Prado deSevilla) to over 40% for annual crops. They are summarized in Annex 3,Table 4. The private returns on equity would be much higher and theopportunity to improve substantially the family income implies that theresbould be ample incentive for farmers to adopt changes to be introduced underthe project.

-51- ANNEX 3Page 2 of 3

C. Economic Analysis and Sensitivity

6. The overall rate of return of the project, for all six districtsexcept the small scale irrigation component, has been calculated on the basisof a combined cost/benefit stream and is estimated to be 28%. All costs havebeen included, except those for price contingencies. Economic rates ofreturn were computed for each individual subproject; details of each analysisare included in the Implementation Document and are summarized in Annex 3,Table 5. The economic rates of return of most of the subprojects are highbecause of large sunk costs and the opportunity to incorporate new areasunder production with reduced investment for infrastructure. In the case ofLa Doctrina a less outstanding rate of return is expected due to theconversion of the district to a for Colombia new culture (shrimp farming).

7. Activities under the small scale irrigation component will bedesigned t_ ensure an attractive return on investment and to allowsignificant increases in farmers' income. Present schemes underimplementation are expected to produce even better results than thoseexpected in rehabilitation districts, because of the small farmers'incline_ion to maximize returns per hectare. An economic an2alysis for aworst case small-irrigation development, assuming only irrigated forageproduction, gave an economic rate of return of 20% for an investment ofUS$2,000 per hectare. Since present small schemes required investments ofless than US$800/ha and are producing vegetables for sale in the season withhighest local prices, the average rate of return for the small-scalecomponent is expected to be over 20%.

8. General assumptions and principles applied in the analysis are asfollows:

(a) Output from the project was valued at estimated efficiency pricesat farm gate. For major commodities such as rice, sorghum, cotton,soybeans, palm oil, bananas and milk, import or export parityvalues were calculated and the Bank's 1984 constant price commodityforecasts were applied. In the case of the remaining commodities,output has been valued at the domestic market price adjusted by thestandard conversion factor. All prices used appear in theImplementation Document, and are Pummarized for the base year inAnnex 3, Table 6.

(b) Inputs were valued at estimated efficiency prices, either bycalculating specific conversion factors (e.g., in the case offertilizer and chemical pesticides), or by applying sectorial orgeneral conversion factors. In the case of unskilled labor, shadowwage-rates were estimated for each region to take account of thespecial circumstances of each regional labor market. The shadowwage rate factor utilized in the Tolima department districts(Coello and Saldana) is 0.80; and in the Atlantic coastal region itis 0.68.

- 52- ANNEX 3Page 3 of 3

tc) The without project situation was supposed to remain unchangedduring the analysis period, given the stagnation and decline in thedistricts.

(d) In the analysis, provision was made for replacement of machineryand equipment at the farm and district levels.

D. Project Risks and Sensitivity Analysis

9. Sensitivity testing was carried out for each subproject and for theproject as a whole. For the overall project, the resulting switching valuesfor costs and benefits indicates that bringing the economic rate of return tothe level of the estimated opportunity cost of capital in Colombia (11%)would require either increases of more than 69% in costs or decreases of morethan 41% in benefits. Also, assuming a slower development pace by laggingbenefits and on-farm operating and investment costs by one year stillproduces economic rates of return high above the estimated opportunity costof capital. Given the relative unresponsivene-s of the economic rate ofreturn to delays in the adoption rate and changes in costs and benefits, itis unlikely that rehabilitation of the project districts would becomeuneconomic due to market or technical risks or delays in implementation.Furthermore, the project will benefit from experience with the on-goingIrrigation Rehabilitation I Project, which has proven to performsatisfactorily and has enhanced HIMAT's implementation capabilities andprocedures.

10. Saldana and Coello are user-managed districts with qualified andmotivated farmers willing to expand their cropped area with an efficient useof water. In the other districts risks would be possible because of farmer'sreluctance to invest in land leveling and to convert present extensivegrazing land into cultivation. To overcome those risks, all districts willbenefit from the technical assistance by specific crop growers federations,which will establish demonstration areas at commercial scale as an incentivefor technical improvements in irrigation and cultivation practices. In thecase of La Doctrina only a small scale first stage is contemplated in thefirst year, in order to test the viability of shrimp farming in thesubproject before major investments are realized for the second stage. Yieldassumptions for the shrimp farming component were kept at 22Z of thoseconsidered obtainable by a shrimp farming consultant.

RIIGArn4 raux0m 11 pIaC

Mstrict Features asd Inwesnt

La d. la Total Percnt small-ale TotalAbrep SIdanna Coello Baja SevilUa Dbctrin& Districts DMstricts Irription Project

lBefore ProjectERaltcal has wider crops 350 7,100 18,430 7,200 18,700 790 52,570 49 2 3,500 56,070wroved Pasture/ 0 600 0 3,100 1,200 0 4,900 5X - 4,900

Ikmpwed Pasture and Pallow 1,050 7,30D 11,570 7,000 22,100 1,510 50,530 46 2 4130 54,830botal Physical Hectares 1,40o 15,000 30,000 17,300 42,000 2,300 108,000 100X2 7,800 115,80

With ProjectEhysical hus urder crops 435 12,400 25,000 8,900 26,450 1,730 74,915 69 % 4,300 79,215IJprowl PastureS a/ 665 iO0 0 5,400 1,600 0 8,265 8 % 3,500 11,765Unluproved Pasture ad Failw 300 2,000 5,OM 3,000 13,950 570 24 8ZO 23 X - 24,820Tbtal Physical Hectares 1,400 15,000 30,000 17,300 42,000 2,300 108,000 100 % 7,800 115,800

Incr- tal Prductive han (physical) b/ 750 5,300 6,570 4,000 8,150 940 25,010 4,m30

Future Fas haryested per year b 1,460 25,400 50,000 15,800 30,300 2,330 125,290 9,900 135,190PresAt has harvsted per year 640 14 840 35,390 10,400 21,400 1,090 83,720 3,500 87,2201Incntal has harvested per year 820 10,600 14,610 8,900 1,240 41,570 6,400 47,970

(ow ing Intensity, Preet % 46 % 99 2 118 X 60 2 51 % 47 2 - 18 45 ZCroppingIntuuity, Fuure Z f/ 104 2 169 2 167 2 91 X 72 2 101 2 - 116 2 127 2

tNaber of Direct 1mficiaries 475 1,514 1,862 1,462 1,350 230 6,900 3,900 10,800

Baeficiaries bealm oerty Level 250 500 350 880 530 190 2,700 2,730 5,430Percent below Poverty lavel 53 Z 33 Z 19 Z 60 Z 39 X 83 2 39% 70 S 50 2

Project tOsts Directed to Poor CoD1 M 30.1 131.6 127.4 584.1 112.6 519.0 1,504,8 937.4 2,442.2Paercmta of 0st Directed to bor 30 Z 6 Z 3 % 36 % 3 2 48 2 11 % 70 2 16 2

C/ Includes irrigpted foreg.Includes iqw!s wpasture.Emi tw udes hioved Pasture.O*Cbets eas-iti of brmobnt In Civil UD*J, pmit, DeMopeint Servieas, FgLneerIng aid hRysical aitinies.

FaWuy 27, 19B6.

-54- AME( 3

CaIA

DItTIQ mniTm H I JEDr

Su9zi: Pzuh,ti and 0mu Valu of Prodmctfo

1984-Pvwje t 1_roducdon - Nationa l11retl Project - e Value of

am" Wst With Ph>ject bar itl PiCdctio Ppmaetu a. X of ldstkg 1Lth ftujea JncintalOOv000 t 10'0 t N 1tiona1 Pwduction -CoI.$

Rm 198.2 271.0 72.8 1,695.8 4.3 Z 4,95 6,775.0 i,m1.

so5 18.2 66.0 47.8 589.6 8.1 2 424.0 1,537.8 1,113.8

9^a - 14.0 14.0 94.1 14.9 2 - 630.0 60

IYsttmz 19.0 29.0 10.0 243.3 4.1 X 1,425.0 2,175.0 750.0

Sem 0.9 4.8 3.9 4.9 79.6 2 70.0 3K.0 314.0

Cltns 8.0 50.6 42.6 611.8 7.0 Z 134.4 80 715.7

lhze 1.2 2.1 0.9 864.3 0.1 2 33.8 581 24.3

CANInav 29.0 43.5 14.5 1,674.5 0.9 I 290.0 435.0 145.0

FlmtAhu 8.9 24.8 15.9 2,277.4 0.7 S 106.2 297.6 191.4

onamu 5.8 7.2 1.4 1,304.0 0.1 X 185.6 230.4 44.8

0.1 0.2 0.1 1.304.0 0.0 X 1.4 2.9 1.5

Tmwto. 1.3 4.0 2.7 1,304.0 0.2 Z 19.5 60.8 41.3

Tabscal 0.3 2.7 2.4 243.3 1.0 2 43.2 40S0 3618

01i PNI CM11) 91.0 272.0 180.0 695.3 26.0 2 1,048.8 3,130.3 2,081.5

Cmw 1.2 L9 0.7 41.6 1.7 X 192.0 3D7.2 115.2

_ Sa 4.7 7.8 3.1 296.9 1.0 : 1,642.2 2,737.0 1,096.8

Milk 1.9 6.3 4.4 2,798.0 0.1 2 47.5 157.5 110.0

mit 0.4 1.9 1.5 1,121.4 0.1 32.0 1520 120.0

MeHms - 7.2 7.2 611.8 1.2 Z - 180.0 180

9p~ - 0.5 0.5 6.9 7.2X - 265.0 265.0TUIL 10,650.6 2,7J.7M lO,ID.I

a/ In 00'D om of 18 kg.In 115,z 19of L5.

-55- ANNEX 3Table 3

COLOMBIA

IRRIGATION REHABILITATION II PROJECT

1983 Export and Import Statistics

Exports US$ millionX

Total exports 3,081 100Total agricultural exports 2,052 67Coffee exports 1,506 49

Agricultural exports

Coffee 1,506 73Plantains and Bananas 148 7Flowers 121 6Raw sugar and molasses 76 4Beef 31 2cotton 23 1Others 147 7

Total 2,052 100

Imports

Total imports 4,968 100Total agricultural imports 373 8

Agricultural Imports

Wheat 127 34Soybean oil and cakes 53 14Fish meal and fish oil 30 8Sorghum 27 7Beans and pulses 22 6Barley 21 6Tallow (cattle) 16 4Apples 15 4Others 62 17

Total 373 a/ 100

a/ Value of agricultural imports is 18Z of agricultural exports.

Source: DANE.November 15, 1985.

- 56 - ANNEX 3Table 4

COLOMBIA

IRRIGATION REHABILITATION II PROJECT

Income Levels and Financial Rates of Return

Financial RateAvailable Pre-Tax of Return on

Farm Model Income all FinancialDistrict Size Without Project With Project a/ Resources

(US$ Per Capita) Ei (Z)

Saldana 15 ha 1,490 2,940 77

Prado de Sevilla 8 ha (Model I) 770 1,830 n.a. c/80 ha (Model II) 7,560 15,130 20

Coello 5 ha (Model I) 690 970 432f h- (Model IT) 2,240 3,480 97

Maria La Baja 5 ha (Model I) 180 490 8420 ha (Model II) 180 1,050 26

Abrego 3 ha 300 920 48

La Doctrina 10 ha 420 1,320 n.a. C/

a/ At full development.b/ In August 1984 constant prices. Average family size of 6.

US$1 Col$ 105.C/ No internal rate of return exists because on-farm investment costs are

negligible.

November 15, 1985.

- 57 - ANNEX 3Table 5

COLOMBIA

IRRIGATION REHABILITATION II PROJECT

Suwrary of Economic and Sensitivity Analysis

Sensitivity TestsBest Estimate Switching Values a/

Economic Rate of Increase Decrease One-YearReturn (ERR) in Costs in Benefits lag (ERR)

?. % X Z

Saldana 30 165 62 28Prado de Sevilla 30 46 31 25Coello 27 44 30 22Maria La Baja 29 51 34 23Abrego 40 102 50 36La Doctrina 15 25 20 13

Total Project 28 69 41 24

a/ Percentage increase in costs or decrease in benefits required in order toreduced ERR to the economic opportunity cost of capital (11%).

b/ Benefits and on-farm investment and operating costs lagged one yearbehind district investment.

November 15, 1985.

0UIA

TRRIRGATIG FAWILAII. 11 FYWECr

FinAnln and Fa lmc Prices (0bl$/t) n/

Salduia P&v& de Sevilla d ol]o Ioria la Baja La I)xtdlnsFinaial EoNrdc Firnial Eoxoadc Firancial Ewm.1c Finncial ec Fina cal Exxdc FinEncLal Fwadc

Rice 25,000 34,000 24,(00 33,000 25,000 34,000 24,000 33,000 - - 24,000 33,000SsEoqf 23,500 23,300 - - 23,500 23,300 23,300 23,000 - -

Cotton - - - - 75,000 81,2D0 - - - - - -

Soybeam - - - - 45,000 42,100 - - - - - -Sesam - - - - 80,000 74,400 - - - - - -MIhze - - - - - - 26,600 24,700 32,000 29,800 26,600 25,0Q0 0WA Palm - - 11,500 10,200 - - - - - - - -Citrus - - 16,800 15,600 - - - - - - - -Clcan - - 210,000 195,000 - - - - - - - -Banana?/ - - 350,000 325,000 - - - - - - - -Plaitain - - - - - - 12,000 11,200 - - 12,000 11,200onlon - - - - - - - - 32,000 29,800 - -Tomto - - - - - - - - *15,000 13,900 - -

BEan - - - - - - - - 120,000 111,600 12D,000 111,600

Milk / - - - - - - 25,000 18,000 30,000 19,600 - -

Meat - - - - - - 90,000 83,700 00,000 74,400 - -swrims / - - - - - - - - - - 530 850

a/ Au0st 1984 prioes for all districts, accept Mbria La Deja and La Doetrina (January 1985), corresponding to bese project year.bl In tlusands of bke.c/ dwutlnds of liters.

Tn kg of hands-on shrimps.

November 15, 1985,

- 59 - ANNEX 3Table 7

COLOMBIA

IRRI&GTION iREHABILITATION II PROJECT

Price Contingencies and Devaluation

Inflation Index al Exchange -- Conversion Factors-Calendar Project Local Foreign Rate b/ US$ Costs Col$ costsYear Year Cost Cost Index into Col$ c/ into US$ d/

1984 1.00 1.00 1.00 1.00 1.00

1985 1.24 0.99 1.43 1.42 0.87

3/1/86 1.3020 1.0124 1.5136 1.532 0.86

1986 1 1.49 1.06 1.76 1.87 0.85

1987 2 1.76 1.14 1.98 2.26 0.89

1988 3 2.07. 1.22 2.18 2.66 0.95

1989 4 2.44 1.32 2.39 3.15 1.02

1990 5 2.88 1.42 2.63 3.73 1.10

1991 6 3.32 1.48 2.89 4.28 1.15

a/ All indices are end-of-year.F/ As of 12/31/84 US$1 = Col$ 113.88. The predicted exchange rate for 3/1/86 is

US$1 = Col$ 172.37.c/ This column results from multiplying the foreign inflation index by the

exchange rate index.d/ This column results from dividing the local inflation index by the exchange

rate index.

Source: Programs Division LC2CL and OPS International Price Increases estimatedated 8/15/85.

November 15, 1985.

-60 - ANNEX 4

COLOMBIA

IRRIGATION REHABILITATION II PROJECT

Documents Available in the Project File

Implementation Document

Part 1 - Economic AnalysisPart 2 - AbregoPart 3 - SaldanaPart 4 - CoelloPart 5 - Maria de la BajaPart 6 - Prado de SevillaPart 7 - La Doctrina

Abrego: Main report, 16 annexes, in total two volumes, prepared byPiDelta.

Saldana: Main report, Adenda, and 15 annexes, in total eight volumes,prepared by Ingenieria e Hidrosistemas Ltda.

Coello: Main report, 12 annexes, in total nine volumes, prepared bySodeic Ltda.

Prado de Main report, 11 annexes, in total four volumes prepared by CPTSevilla: Ltda.

Maria de La Main report, 13 annexes, in total seven volumes, prepared byBaja: Hidroestudios Ltda.

La Doctrina: Main report, 10 annexes, in total six volumes of which volumes1, 5 and 6 in the project file, prepared by Estudios yAsesorias Ltda.

La Doctrina: Estudio de factibilidad para el cultivo de camarones encautiverio, one volume, prepared by HIMAT.

La Doctrina: Evaluation of the Potential of the La Doctrina IrrigationDistrict for Shrimps Farming, one volume, prepared by TropicalMarine Technology, Inc.

COLOMBIA iS 4 7

I RRIGATION o s o s 0 ° °- REHABI'LITATION 11 o1 so Igo I,SO lo001

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