Document of

The World Bank

FOR OFFICIAL USE ONLY

Report No. 1991

FILE COPYProject Performance Audit Report

PARAGUAY THIRD LIVESTOCK CREDIT PROJECT

(Credit 156-PA/Loan 620-PA)

March 28, 1978

Operations Evaluation Department

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

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Currency Equivalents

Currency Unit = Guarani (0)

1968-1975 = US$1.00 = 0126.00

= 01.00 = US$0.008

Abbreviations

IDA = International Development Association

LPD = Livestock Projects Division

LF = Livestock Fund

CB = Central Bank

NDB = National Development Bank

LD = Livestock Fund Technical Department

IDB = Inter American Development Bank

FOR OFFICIAL USE ONLY

Project Performance Audit Report

PARAGUAY THIRD LIVESTOCK CREDIT PROJECT

(Credit 156-PA/Loan 620-PA)

TABLE OF CONTENTS

Page

PrefaceBasic Data SheetHighlights

PROJECT PERFORMANCE AUDIT MEMORANDUM

I. The Project 1II. Principal Results 3

III. Comments on Results 5

A. Technological Transfer and Impact 5B. Rates of Return 7C. Technical Assistance and Institution Building 8

IV. Bank Performance 12

PROJECT COMPLETION REPORT

I. Introduction A 1II. Project Objectives A 2

III. Performance of Consultants A15IV. Conclusions and Lessons Learned Al5

Annex

1. Livestock Fund - Organization Chart2. Project Disbursements by Categories3. Schedule of Disbursements4. Livestock Fund Balance Sheet, December 31, 1975

Map

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

Project Performance Audit Report

PARAGUAY THIRD LIVESTOCK CREDIT PROJECT

(Credit 156-PA/Loan 620-PA)

PREFACE

This is a report on an audit of performance under the Third Live-

stock Credit Project in Paraguay, supported by Credit 156 and by Loan 620.

The project was appraised in September 1968. The execution of the projectwas governed by two separate agreements, a Credit Agreement for US$4.3 m

and a Loan Agreement also for US$4.3 m. Both were signed in June 1969,and became effective in December 1969. The original closing date for

Credit 156 was June 30, 1972, later extended to June 30, 1974; the originalclosing date for Loan 620 was June 30, 1974, later extended to June 30, 1975.Credit 156 was fully disbursed by January 1973 and Loan 620 was fully dis-bursed by June 1975.

The report consists of an Audit Memorandum and the Project Comple-tion Report. The audit was based on discussions with Bank staff and on areview of the Third and Fourth Project Appraisal Reports, the PCR, Bankfiles, and an evaluation carried out during the third livestock project ofdevelopments under the first and second livestock projects.

The Project Completion Report was issued by the Latin America andthe Caribbean Regional Office in December 1975. To save staff and consul-tant time, it was decided to carry out the performance audit of this projectand of the Brazil First and Second Livestock Projects (Loans 516 and 868-BR)at the same time..L/ Unfortunately, the PCR for the latter was delayedbeyond the original expectations, creating a long gap between the PCR onParaguay (December 1975) and the auditing procedures (mid-1977). The PCRwas not up-dated; the rate of return calculations in the Memorandum, however,considered up-to-date information on beef prices.

1/ The PPAR on the Brazil projects is being scheduled for June 1978.

BASIC DATA SHEET

PARAGUAY THIRD LIVESTOCK CREDIT PROJECT

(Credit 156-PA/Loan 620-PA)

A. Amounts (in US$ million)

Original Disbursed Outstanding

Credit 156-PA 4.3 4.3 4.3Loan 620-PA 4.3 4.3 4.3

B. Project DataOriginal Plan Revisions Actual

First Mention in Bank Files (Repeater Project)Government Application 1/68Bank Approval 06/17/69Credit and Loan Agreement 06/25/69Credit Effectiveness 09/30/69 10/30/69 12/24/69Loan Effectiveness 09/30/69 12/30/69 12/24/69Physical Completion 06/30/74 06/30/75 06/30/75Percentage of Original

Project Actually Completed 100.+Credit Closing Date 06/30/72 06/30/74 06/30/74Loan Closing Date 06/30/74 06/30/75 06/30/75Total Costs (US$ million) 8.6 8.6Economic Rate of Return 29% 11%

C. Mission DataMonth, No. of No. of Date ofYear Persons Weeks Manweeks Report

Appraisal 9/68 4 3 12 05/28/69

Supervision I 7/69 2 1 2 07/30/69Supervision II 6/70 1 1 1 07/31/70Supervision III 2-3/71 1 1.5 1.5 03/15/71Supervision IV 11-12/71 2 1 2 01/11/72Supervision V 8-9/72 1 1 1 10/18/72Supervision VI 2-3/73 2 1.5 3 03/20/73Supervision VII 9-10/73 2 1 2 11/16/73Supervision VIII 7/74 2 1 2 08/01/74Supervision IX 1/75 2 1.5 3 02/05/75

Project Completion 8-9/75 1 2 2 12/17/75

D. Follow-on Project: Fourth Livestock Credit (Loan 1037-PA), effective February 21, 1975.

Project Performance Audit Report

PARAGUAY THIRD LIVESTOCK CREDIT PROJECT

(Credit 156-PA/Loan 620-PA)

HIGHLIGHTS

The project continued efforts begun in 1964 to develop beef cattleproduction by large scale commercial ranchers in Paraguay, focusing on basicranch infrastructure, pasture improvement, breeding stock, and the provisionof more skilled and intensive technical assistance.

Subloans during the first three years 1970-72 were made at aslower rate than originally projected, proceeded more rapidly in 1973 underthe stimulus of improving international beef prices, and fell back to slowergrowth after the world beef market went into a depression in 1974 and 1975.The project was completed about one year later than expected.

The project successfully established important infrastructureon participating ranches. Increases in beef production and in ranch tech-nical coefficients, however, have fallen well short of those projected atappraisal, because of inefficient ranch management, inadequate technicalassistance to ranch sub-borrowers, and an inability to achieve a substan-tial diffusion of tropical legumes as the basis for improved pastures inParaguay. The weakness of the technical assistance component was largelyassociated with institutional difficulties in Paraguay. Since 1974, tech-nical assistance to borrowers has improved significantly. Financial rateof return to sub-loan borrowers is currently estimated at about 17-19%,and the economic rate of return at 11%.

Points of interest are:

- Shortfall of technical achievements on participating ranches(paras. 13 and 14, and PCR paras. 8, 23, 25-27 and 29);

- Poor economics of tropical legume pastures under Paraguayanconditions (paras. 15, 16 and 33, and PCR para. 23);

- Limited impact of institutional reform on the level of tech-nical assistance (paras. 20, 24-29, and PCR paras. 16-18);

- Special evaluation exercise and resulting improvements infollow-on project design (PCR paras. 26-29, 46 and 47);

- Inadequate reporting on technical shortfalls (paras. 32 and 33).

Project Performance Audit Memorandum

PARAGUAY THIRD LIVESTOCK CREDIT PROJECT

(Credit 156-PA/Loan 620-PA)

I. THE PROJECT

1. The Third Paraguay Livestock Credit Project financed by Credit156-PA and Loan 620-PA in the amounts of US$4.3 million each for a total ofUS$8.6 million was a follow-on of the two preceding IDA-financed First andSecond Livestock Projects. The Third Livestock Credit Project was appraisedin September 1968, negotiated in May 1969, and approved and signed inJune 1969. It became effective on December 24, 1969 and was closed onJune 30, 1975. A fourth project became effective in February 1975 and afifth project is now under consideration.

2. The third project continued efforts to develop livestock produc-tion by large scale commercial ranchers in Paraguay. The first two projectsfinanced 222 and 490 subloans, respectively, focusing on improvements inbasic ranch infrastructure, principally fencing, water supplies, cattlehandling and disease control facilities, plus the purchase of improvedbreeding stock. The third project proposed to finance additional invest-ments on about 180 ranches in the Chaco region, averaging 10,000 ha and2,800 animals each, and about 270 ranches in the Oriente region, withabout 4,000 ha and 1,300 animals per unit. It placed greater emphasis onpasture improvement, on the purchase of additional breeding stock to allowmore rapid expansion of herds on ranches developing their basic infrastruc-ture, and on the provision of more skilled and intensive technical assistance.

3. Project costs were estimated at US$15.5 million, of which US$15.1million would be for ranch development and loans to contractors, and US$0.4million for technical services. Bank/IDA financing was to cover 56% oftotal project cost with the balance being provided by the Central Bank (30%)and by ranchers (14%).

4. The responsibility for project implementation was shared betweenthe Central Bank and the National Development Bank (NDB). Credit and tech-nical services to ranchers were to be provided by a semi-autonomous LivestockProject Division (LPD) within the NDB. The project staff were employed byNDB, but were directed by a foreign technical specialist operating as Techni-cal Director of the project, actually employed and paid by a Livestock Fund(LF) which had been set up within the Central Bank and through which all ofthe proceeds of the Credit/Loan were channelled. A Coordinating Committeeconsisting of senior representatives of the two banks and the Technical

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Director approved all loans to ranchers on the basis of ranch plans and afinancial analysis carried out by LPD technicians.

5. Active lending began in the first quarter of 1970 and continueduntil full commitment in June 1974. Disbursement was completed onJune 30, 1975. The number of subloans made was highest in 1970, somewhatlower in 1971, moderate in 1972 and 1973, and dropped off in 1974 and 1975as market conditions for beef deteriorated. The final figure of 630 sub-loans exceeded appraisal forecasts. The average size of subloans wassmaller than expected in both the Chaco and the Oriente; the number of loansin the Chaco equalled appraisal assumptions while the number of loans in theOriente was nearly 70% greater. The average loan was about US$20,600; loansof less than US$20,000 comprised about 67% of the total loans by number and35% by volume. The overall investment pattern by end use of subloans wassimilar to appraisal expectations except that nearly twice as much wasspent on improved pastures with most of the required funds reallocatedfrom the "other" category.

6. Prices for beef cattle at the time of appraisal were relatively lowand were then projected to remain low throughout the project. However, inter-national markets began to improve in 1970 and both external and internalprices rose in response through 1973. The increase in internal prices stimu-lated producer interest in intensifying production, but also exacerbatedinflationary pressures in the domestic economy where beef is an importantconsumption item. Exports rose by nearly 50% in volume and 180% in valuefrom 1970 through 1973, but a 14% increase in slaughter allowed domesticconsumption to remain almost constant. Nonetheless, in an attempt to reduceinflationary pressures, the government imposed a reduced beef export quotain early 1973 and later in the same year introduced direct beef price con-trols. Neither measure achieved the desired result and in February 1974 thegovernment imposed a beef export tax of about US$16 per head. Shortly afterthis, however, international beef markets collapsed and both internationaland domestic beef prices sank drastically. Although beef export taxes werethen removed, beef prices remain low today.

7. The livestock projects sought to increase livestock productivityby shifting the traditional extensive (open range) system to a more inten-sive system. Basic infrastructure was provided for making improved pastureand herd management possible; watering facilities, disease control facili-ties, and improved pastures were financed; and technical services and the

training of technicians was planned. The greatest impact of the projectinvestments was to come from (i) increased weaning rates; (ii) herd mortalityfor adult animals was to decline; (iii) steer slaughter weights were to

increase; and (iv) carrying capacity of project ranches was expected to morethan double. Breeding heifer purchases and subsequent heifer retention wouldincrease the size of ranch herds to permit adequate utilization of the infra-structure investments being made. The breeding heifer purchases were expected

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to average 10% of the cow herd in the Chaco and 39% in the Oriente, in thefirst two years of development, and subsequent breeding herd growth throughheifer retention was expected to total an additional 40 and 50%, respectively,in the two regions. The growth through heifer retention would be made pos-sible by the increase in weaning rates which was to have taken place. A

relatively low beef price was used for the rate of return calculations, whichwas offset by the optimistic technical assumptions.

II. PRINCIPAL RESULTS

8. Actual project achievements are difficult to determine accuratelyinsofar as the data on physical impact are still limited.! The available

1/ Much of the available data is drawn from a comprehensive evaluation under-taken by a consultant retained under the project from mid-1973 to mid-1974. The emphasis of this evaluation was on the impact of the firsttwo projects, but data were also collected on 38 ranches involved in thethird project which had previously borrowed under the first two projects.The consultant surveyed 25% (127) of the ranches involved in the firsttwo projects with the post-development situation being measured as of1973. Although investments made during the third project were not com-plete in 1973, and certainly had not fully matured in their impact onproject ranches, the 1973 data should indicate what was happening onranches which had experienced 6-8 years of continuous development.Furthermore, 83% of the third project's sub-loans had been made by theend of 1973. On the other hand, investments during the first two projectsplaced more emphasis on fencing and water supplies while the third projectput more emphasis on pasture improvements. As about 54% of the borrowersunder the third project were repeaters from the first two projects, thecomplementarity between these investments plus improvements in technicalassistance since 1974 could have improved the technical coefficients abovethose found in the consultant's survey. Anyway, as the consultant pointsout, his findings must be treated with caution insofar as only a fewranchers maintained records which would permit accurate measures of manyof the productivity levels. Further, within the 127 ranches sampled,the dispersion of the responses is very large, suggesting that the averagevalue does not fully characterize the impact of the project on ranchdevelopment. The consultant found, for example, that while roughly one-half of project ranches had significantly improved their levels of effi-ciency, more than one-quarter were only barely above pre-developmentlevels. This variation in performance was attributed to the fact thatthe technical assistance program had been inadequate and had failed toinduce more uniform, and improved, performance.

data shows that the project achieved a substantial improvement in physicalinfrastructure on participating ranches through the provision of fences,watering facilities, pasture sub-division, the establishment of improvedgrass pastures and breeding animals of higher quality, as well as lesserimprovements in ranch operating policies such as pasture management, theuse of feed supplements, and early weaning. The actual production increaseis not known, but the PCR anticipates that "targets in terms of additionalbeef output could well be reached" (PCR, para. 8).

9. The project has clearly had a beneficial impact on ranch technicalefficiency, too, but one which is much below appraisal estimates and at asufficiently low level as to endanger the economic profitability of theproject. Data on the principal indicators of efficiency show that (i) adultherd mortality had fallen from 4 to 3%, (ii) stocking rates had risen from.33 to .43 animals per ha, (iii) steer slaughter weights had reached 424 kg -no data was available for specific pre-development slaughter weights on proj-ect ranches, and (iv) weaning rates had risen from 45 to 48%.

10. The financial rate of return to project sub-borrowers is estimatedto be about 18%, but much of this benefit is resulting from the fact thatsub-borrowers have debts fixed in nominal terms and a1 able to repay theseloans at lower real cost than originally anticipated- The economic rateof return is estimated to reach 11%, compared with the 29% forecast atappraisal.

11. Insofar as institution building is concerned, the project failedto strengthen the NDB; a new agency of the Central Bank, the Livestock Fund,was created instead to handle Bank-assisted livestock lending. The institu-tional arrangements established led to a number of administrative problemswhich negatively affected project implementation, particularly as regardstechnical assistance.

1/ As a result of the general inflationary trend in Paraguay, prices of bothproject inputs and outputs increased substantially throughout the projectimplementation period. Insofar as project sub-loans were expressed incurrent, nominal terms, the proportion of the project installments to

total farm expenses and total farm incomes decreased continually andsubstantially, bringing windfall benefits to the sub-borrowers.

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III. COMMENTS ON RESULTS

12. The audit found that while the project constituted a valuable con-tribution to Paraguay's livestock development, such contribution thus farhas proved to be less than anticipated in important respects. Experienceto date does not appear to substantiate the PCR expectations about improve-ments in ranch productivity. Since these improvements were a central projectobjective, the following paragraphs discuss this matter at some length.

A. Technological Transfer aad Impact

13. Although the principal indicators o productivity did improve, suchimprovements fell significantly short of project expectations. In the caseof mortality rates, for example, the 3% rate achieved in 1973 is on targetwith projections; in relative terms, however, mortality rates were reducedby only one-third (from 4% to 3%) instead of by one-half (from 6% to 3%),because the appraisal estimate of pre-development mortality rates had beentoo pessimistic. Since it is the relative improvement over original con-ditions, rather than the absolute level of post-development productivity,which determines the rate of return achieved on project investments, thechange in mortality falls substantially short of that projected. Appraisalestimates of pre-development stocking rates were also too pessimistic (.25,as compared with the actual .33); relative improvements were smaller thanprojected, and the appraisal target was not achieved. Instead of the pro-jected improvement of .25 to .58 animals per ha, which would have more thandoubled pre-project stocking rates, the increase is of .33 to .43, a bare30%. Most important, calving and weaning rates have only barely increased.L/As shown in appraisal report models, their increase was to be the principalmechanism by which ranch investments were to be converted to higher economicoutput. Without this increase the herd extraction rate, in equilibrium, willremain at about 13% instead of the projected 18%. Further, because calvingrates did not significantly increase, at least through 1973, ranchers wereforced to purchase more breeding animals than planned to bring their herdsize to an economic level. Without these purchases they could not have ade-quately utilized the infrastructure investments made. These greater thanexpected investments to obtain essentially the same ultimate herd size, andmore importantly, resulting in a lower offtake from this herd, imply sharplylower economic returns.

1/ The data are poor, but all available information are consistent in affirmingthis fact. Some 65% of the ranchers interviewed by the consultant did notknow what their calving rates were when asked, but the remainder, assumedto be above-average producers with respect to efficiency, answered 54%.The consultant also sought to deduce the calving rate from data on the

number of calves in ranch herds each year relative to the number of breedinganimals in the herd during the previous year. These calculations indicatedan average weaning rate of 47-51% in 1973 as opposed to 44-48% pre-develop-ment.

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14. The shortfall in herd technical coefficient improvement, relativeto appraisal forecasts, appears to be related principally to three factors:(i) inefficient ranch management, reflecting absentee ownership in largedegree; (ii) inadequate technical assistance relative to what had beenplanned and was needed; and, to a lesser degree, (iii) the failure of intro-ducing tropical legume improved pastures on project ranches.1/ Thedifficulties surrounding technical assistance are discussed later, aftertaking up the issue of tropical legumes and analyzing the project's rate ofreturn.

15. Efforts to introduce tropical legume pastures, a technology success-fully developed and utilized in Australia, have fallen far short of expectations.Pasture trials were implemented by the foreign technical director and a foreignpasture expert during the first two projects and ranchers were urged to estab-lish such pastures on a trial basis during the third project. However, mostranchers have found that the pastures have not been profitable and successivelyless emphasis has been placed on them. Instead of planting tropical legumes,ranchers have utilized a variety of improved grass pastures similar to thosewhich were introduced in the Bank-financed projects in parts of Brazil. Thenew grass varieties are highly productive during their first years relativeto the natural pastures, but their carrying capacity declines after severalyears because of gradual nitrogen depletion of the soil, particularly inareas of high rainfall. The tropical legumes would have provided thisnitrogen. On a per hectare basis, these pastures have not had as large animpact on animal nutrition as was expected, nor have they succeeded in grad-ually improving basic soil quality. However, because ranchers have plantedimproved grass pastures on nearly three times the total area originallyenvisaged for improved grass-legume pastures, the amount of nutrition poten-tially available for cattle on project ranches - assuming its proper utili-zation through good herd and pasture management, is equal to that assumedat appraisal.

16. The difficulty with legume pastures is an important issue. Thelegumes utilized in pasture trials in Paraguay have usually establishedthemselves after planting, but they have been dominated by competing grassesand weeds within a few years. The problem is associated with poor soildrainage, a lack of phosphorous and a'lack of other undetermined mineralelements in the soil - each to different degrees in different regions ofthe country. Although efforts were made by the foreign pasture expertduring the second project to undertake field experiments to determine the

1/ The technical director and the pasture expert recommended the provision ofphosphorous supplementation to breeding animals as another means ofincreasing calving rates and achieved notable results on a number ofranches, but most ranches apparently were reluctant to undertake thismeasure. A number of non-project livestock technicians and veterinariansactually opposed these recommendations, making adoption more difficult.

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response of different legumes to phosphate fertilizers, and to carry outsoil analysis for trace elements, Paraguayan officials were not stronglyinterested or eager to invest significantly in these activities. As aresult, it is still not possible to fully analyze the economic profitabilityof phosphate fertilization and legume use. However, given that phosphatefertilizers are currently very expensive in Paraguay, that transportationcosts from the point of importation to farm gate are high, and that theproducer price of beef is relatively low compared with prices in other beef-producing countries it is doubtful that for the time being the introductionof tropical legumes is a feasible strategy for significant livestock develop-ment. There is still substantial un- and underutilized land in Paraguay whichis suitable for livestock development, at least during a transitional stagebefore conversion to agricultural land, and it seems to be more profitableto incorporate these new lands into livestock production by providing basicinfrastructure - essentially the path which the livestock projects have

actually taken - than to move to more intensive techniques like the pro-vision of legume pastures.

B. Rates of Return

17. Since the project had not fully matured at the,time, the consultantcalculated rates of return for representative investments made in 1964-66using the survey results on productivity achievements to 1973, and informa-tion on cattle prices and rate of inflation in Paraguay. The residual valueof herd and infrastructure investments were computed at 1973 prices. Althoughtechnical coefficients had improved by less than expected, the increase inrelative beef prices and in the rate of inflation had provided projectborrowers with substantial unexpected benefits, raising the estimated finan-cial rate of return to about 36%. If the benefits received by sub-borrowersas a result of inflation were removed, however, this rate fell to 19%, and,if both the benefits of inflation and the unexpected price increase for beefwhich took place between 1971 and 1973 were removed, the rate of return fellto 8%.

18. Both international and domestic beef prices began to decline precipi-tously after 1974, just when the consultant's survey was completed, and havenot recovered. If the investments made in 1964-66 are re-evaluated todaytaking account of the prices received by producers in 1974-77, the estimatesfor the financial rate of return are lower than those estimated by the con-sultant, even allowing producers the benefits of price increases in the early1970s. Further, assuming that producers who made breeding animal investmentsbetween 1970-74 (third project) paid higher prices than the appraisal reportprojected and have subsequently faced lower prices for animals slaughtered,they will not have gained the benefits of rising prices but rather have suf-fered the damages of falling prices. Under these circumstances the finaneialrate of return will be about 17-19%, including the benefits obtained by borrow-ers as a result of inflation.

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19. The principal adjustments which must be made to transform thefinancial rate of return into the economic rate of return are: (i) an elimi-nation of the benefits to individual borrowers as a result of inflationinsofar as this reflects a loss by the lending institution, (ii) an increasein the benefits to reflect the depressing effect on beef prices of exporttaxes which were imposed briefly during the period considered, and (iii) anincrease in the costs to reflect the technical services paid for by theGovernment. The first adjustment is major, but the second and third adjust-ments, in this case, are of relatively minor amount. Also, the economicrate of return calculation requires use of total investments, not solelythose made by the rancher with his funds (leverage on funds borrowed plusself-financed investments). Adjusting for these factors, and assuming thatthe technical coefficients for the third project improve at the same rate ofprogress as during the first two projects, the economic rate of return isabout 8-10%. Of course, if the rate of technical achievement in futureyears is greater, the rate of return will also rise. We assume that theseimprovements occur and that the rate of return will therefore be 11%. Thesefigures compare with the estimate of 29% at appraisal.

C. Technical Assistance and Institution Building

20. In the absence of the unexpected price increase, project invest-ments would not have been economically profitable without substantial tech-nological progress at the ranch level - and this would not have been possiblewithout a much improved and more intensive technical assistance. This tech-nical assistance is precisely what the third appraisal report proposed.However, the quality of it seems to have been woefully inadequate. To indi-cate what the problems were, and why it may have been so difficult to improvethe situation, the arrangements for on-lending and technical assistance inthe third project must be briefly reviewed.

21. The first and second projects were administered on behalf of theGovernment by the Central Bank, operating through a Coordinating Committeeconsisting of a senior representative of the Central Bank as Chairman, arepresentative of the National Development Bank (NDB), and the TechnicalDirector (a New Zealand livestock expert) of the project. The Committeewas responsible for approving loans to ranchers. The Central Bank bore therisk of sub-loan default. The NDB used its technical and banking servicesfor the preparation of ranch development plans, for assessing the credit-worthiness of applicants, for making disbursements of approved loans, andfor collection of repayments, and was paid a percentage fee on the amountof loans administered to cover the costs of administration and technicalservices. The Technical Director was paid by and officed in the CentralBank.

22. Although it recognized that the institutional arrangements forproject implementation were not a desirable set-up in the long run, the

Bank chose them because it judged it inappropriate to entrust NDB with theexecution of the project because of its weak financial and administrativemanagement. At the same time, the Bank did not wish to encourage the forma-tion of a third public agricultural credit institution (in addition to theNDB and the Credito Agricola de Habilitacion (CAH)). The Bank looked onthe NDB as a much needed lending agency for the agricultural sector, andhoped that through the livestock project the Bank could assist its institu-tional development while also achieving improved lending to the livestocksector. Unfortunately, this did not occur.

23. The administrative problems encountered in each of the livestockprojects seem to have been largely due to the institutional arrangementsestablished. During the first two projects the NDB did not adequately ful-fill the role which it had accepted. The Technical Director found it necessaryto assume responsibility for project administration, thereby reducing the timespent on technical assistance. Further, while he was located in the CentralBank, the local technicians were employed by and located in the NDB, makingcoordination difficult. Therefore, during the third project the NDB wasrequired (as a condition of loan effectiveness) to establish a LivestockProjects Division (LPD) within its Development Department to be responsiblefor the technical aspects of the project. The LPD was to be under the direc-tion of the Technical Director who was to be employed by the Livestock Fund(LF) - an agency of the Central Bank established to hold and manage all fundsmade available for and accruing from the three livestock projects - and whowas to be seconded to the NDB. The Technical Director thus came to workdirectly in the NDB, reporting to the President of the NDB through theDirector of the Development Department. The Technical Director was to haveunder his direction a minimum of ten field technicians and such other fulltime administrative and temporary technical advisory personnel as wererequired.1/ The Technical Director was also given the nominal authority toassist in the training of the technicians, assignment of their duties, andto recommend their selection, promotion, and removal. The NDB was to financethe actual local currency cost of technical services and project administra-tion, being compensated by a fee amounting to a 2% spread on sub-loans madeduring the first two projects and a 1% spread on sub-loans made during thethird project.

1/ Ten technicians were probably too few to have permitted the degree of tech-nical assistance which the projects, as designed, required. By the end of

the second project in 1969 there were 638 ranches participating and thethird project proposed to add 450 more over four years. At 112 new ranchesper year 10 technicians could have dealt with the new ranches, but not with-out neglecting earlier borrowers.

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24. However, the arrangements made for the third project proved equallyunsatisfactory. The NDB was not given financial responsibility for the proj-ect, as this, as well as the ultimate direction of the project, lay with theCentral Bank. Institutional interests dictated that the Central Bank wouldtake credit for project evolution, while the NDB undertook the daily laborwithout possibility of substantial institutional gain. It appears that theNDB sought to collect its funds for administering the project, but resistedspending any more funds than necessary on the project - and also was hesi-tant to appoint key staff as livestock technicians, to pay for the trainingof such technicians, or to pay these technicians amounts which would makesuch jobs appear attractive to other NDB staff. Insofar as the TechnicalDirector was employed by the Central Bank but reported to the President ofthe NDB, opportunities for institutional rivalry were increased. The Presi-dent of the Livestock Fund sought to strengthen the role of his institution,displacing the NDB as the implementing agency for the livestock program, butcould do so only partially during most of the third project. The overall ,context led to a number of administrative problems which negatively affectedthe livestock project, particularly as regards technical assistance.

25. The actual technical staff remained below 10 during the first twoyears of project implementation. In addition, staff were underpaid vis-a-viswhat they could command in alternative employment, causing resignations; newpersonnel were not hired to fully replace resigning personnel, and severalstaff were sent abroad for training visits without adequate replacement.The technical staff were all located in Asuncion, the capital, and consis-tently lacked both land transport vehicles and an air travel budget (althoughfunds received by the NDB were explicitly intended to cover such costs),thereby making it extremely difficult for them to reach a large proportionof project ranches. It appears that ranch appraisal was carried out, largelybecause ranchers interested in obtaining a loan were willing to pay for afield visit for project technicians, but that the number of ranch supervisionmissions was very small. Ranchers, unconvinced of the value of technicalassistance, were not usually willing to pay for the latter. The LivestockFund was reluctant to step up the overseas training program for lack of anycertainty that such trained technicians would remain with the NDB or, evenif so, be assigned to the LPD. Only at the end of 1972, three years afterthe project began, did the number of technicians begin to increase. Thereasons for this are discussed in para. 27.

26. Midway during the third project the President of the LivestockFund succeeded in moving the NDB technicians to the Central Bank, estab-lishing de facto a "Livestock Fund Bank" although a number of the technicianswere technically still NDB employees. The Bank noted that this arrangementwas working relatively efficiently in terms of its impact on livestock proj-ect operations, but opposed the arrangement because it would weaken ratherthan strengthen the NDB. A recommendation was made that it be required thatthe personnel be returned to the NDB in the event a fourth livestock project

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were approved. Instead, as the PCR indicates, when the Operating Agreementbetween the Livestock Fund and the NDB expired on June 30, 1974, all tech-nicians, their vehicles and other fixed assets of the LPD passed to theLivestock Fund which subsequently acted as a livestock bank without referenceto the NDB. NDB remained the administrative agent for IDB-assisted sub-loansfor livestock development among smaller ranchers (a program which had beeninitiated during the third project), and is the implementing agency for aBank-financed agricultural credit project, since begun.

27. Following the change in organizational structure, improvements weremade in the technical assistance provided. As indicated in the PCR, by 1975the technical staff had increased to 29, the number of vehicles had increasedto 9 with an additional 8 on order, and four regional offices had beenestablished to provide additional contacts and better service to ranchers.These improvements came very late, however, having their effect only about5 years after the initiation of the third project and after ranch sublendinghad essentially been completed. Further, the improvements occurring areless associated with a natural growth of institutional maturity than with asimple change in institutional organization in which total responsibilityfor the project was ultimately given to an agency (the Central Bank's Live-stock Fund) which had both institutional and financial incentives to improvethe level of technical assistance.

28. The options available to the Bank in arranging for the implementa-tion of the livestock projects were limited by the existing institutionalframework in Paraguay. The NDB was judged inadequate to administer theprogram on its own; the Bank was unsure of its ability to upgrade the NDBrapidly; and the Bank wished to avoid the establishment of an additionalagricultural credit agency. In the long run, however, the NDB did not matureas an organization; the separation of responsibility for project implementationbetween the NDB and the Central Bank proved to be unworkable; and the Live-stock Fund came to establish itself for all practical purposes as a new creditagency.

29. Although more and better technical assistance would have improvedthe project's bio-economic performance, considerably intensified technicalassistance would not by itself have brought about a fully satisfactory per-formance. Given the difficult ecological conditions in Paraguay, theremoteness of many ranches, the large number of absentee owners, the lack ofqualified ranch management, and the prevailing price/cost relationships forthe livestock sector, most ranchers are likely to prefer to keep land inextensive, unimproved holdings, relying on land price appreciation for theirreturn. Unless there is an improvement in the livestock sector environment,the profitability of improvements promoted by the Bank-financed projects willremain marginal, and their declared objective of increasing ranch productivitymay remain difficult to realize.

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IV. BANK PERFORMANCE

30. The third project overestimated the technical improvements whichwould occur on participating ranches as a result of project investments andthus also overestimated the project's expected economic rate of return. Itseconomic success also depended on more skilled and intensive technicalassistance than was available or likely to have been provided. The fourthproject, in contrast, despite indications of an improving technical assis-tance component, predicted lower improvements in ranch technical coefficientsand lower economic rates of return, both of which seem more in line with theresults being achieved by the project.

31. Each Bank supervision mission seems regularly to have discussedthe problem of technical assistance with Paraguayan officials, and followedthe visit with explicit letters reminding these officials of the need andthe agreement to improve the situation, yet change seems to have occurredat an extraordinarily slow rate. The implicit economic costs of the result-ing reduction in investment productivity, borne by the sub-borrowersindividually and by Paraguay as a nation, are substantial. Confrontationbetween the Bank and Paraguayan officials over the issue of technical assis-tance, including transportation for technicians, does not seem to have beenseriously contemplated.

32. Supervision missions do not appear to have focused sharply on theimplications of the shortfall in herd calving rates. Improvements in othertechnical coefficients were thought sufficient to offset the impact of theshortfall in weaning rates; a UNDP project intended to study the reasonsfor the shortfall seems to have had the effect of tabling the issue untilafter the fourth project had been appraised and approved. After eightyears of project operation, a shortfall of the magnitude concerned in anarea of critical importance to project success should have been a flag formore deliberate analysis, indicating either a need for a change in projectdesign or a need for greater compliance with the project design in Paraguay.

33. Supervision missions should have given more prominent attention alsoto the problems involved with the introduction of tropical legume pastures.The experience in Paraguay is repeated in several other livestock developmentprograms OED has reviewed in Latin America, suggesting greater problems inherentin the successful transfer of this technology to that continent than were origi-nally expected.

PARAGUAY

THIRD LIVESTOCK CREDIT PROJECT

CREDIT 156-PA and LOAN 620-PA

PROJECT COMPLETION REPORT

December 17, 1975

PARAGUAY

THIRD LIVESTOCK CREDIT PROJECT

CREDIT 156-PA and LOAN 620-PA

Project Completion Report

Table of Contents

Page

I. INTRODUCTION A 1

II. PROJECT OBJECTIVES AND RESULTS

Physical A 2Institution Building A 5Technological Innovations A 7Lending Program A 9Financing and Disbursements A12Financial Performance of Livestock Fund A13Legal Covenants A14

III. PERFORMANCE OF CONSULTANTS Al5

IV. CONCLUSIONS AND LESSONS LEARNED Al5

Annex 1 - Livestock Fund - Organization Chart

Annex 2 - Project Disbursements by Categories

Annex 3 - Schedule of Disbursements

Annex 4 - Livestock Fund Balance Sheet, December 31, 1975

Map

- A 1 -

I. INTRODUCTION

1. The Third Livestock Project of US$8.6 million financed by Credit 156-PAand Loan 620-PA in the amounts of US$k.3 million from each source was designed as afollow-on of two previously IDA-financed First and Second Livestock Projects -Credit 47-PA and 86-PA for amounts of US$3.6 million and US$7.5 million respectively.The First Credit Project, made in December 1963 was fully committed in early 1966. ,The Second, approved in April 1966 was committed in 1969, almost two years ahead ofappraisal estimates. Consequently, and anticipating the early disbursement of thesefunds, the Government of Paraguay, in January 1968, requested financing for a ThirdLivestock Project to benefit a substantial additional number of ranchers not financedunder the First and Second Projects.

2. The Third Livestock Project was appraised in September 1968, and, aftersome delay occasioned by discussions with the Paraguayan Government on generaleconomic and financial policies, negotiations took place in May 1969, and waspresented to the Board and signed in June 1969. In order to allow the ParaguayanGovernment to comply with legal requirements to ratify the establishment of theLivestock Fund and the Livestock Projects Division specified in Section 7.01 of theLoan Agreement, the Effective Date of September 30, 1969 was extended to December 31,1969 and the Loan actually became effective on December 24, 1969 (para. 14). Theexecution of the Third Livestock Project was governed by two separate Agreements,a-Credit Agreement and a Loan Agreement with separate Closing Dates.

3. The original Closing Date for Credit 156-PA was specified as June 30, 1972in Section 7.01 of the Credit Agreement and June 30, 1974, as specified in Section8.01 of the Loan Agreement for Loan 620-PA, the two to run consecutively, withoutadditional conditions of effectiveness for 620-PA. Subsequently, the Closing Datefor Credit 156-PA was extended to June 30, 1974 (IDA letter of May 2, 1972) andthe Closing Date for Loan 620-PA to June 30, 1975 (Bank letter of May 29, 1974)representing an overall slippage of one year of which three months was due to delaysin effectiveness mentioned in para. 2 above.

4. In aggregate, Credit 156-PA and Loan 620-PA, constituting IDA/Bank financingto the Third Livestock Project, originally contemplated the following activities butwere subsequently modified by IDA/Bank letters of January 26, 1973 and May 29, 197,as shown below:

Oricinal Amount Modified AmountCateg ',US$ equiv.) US$

1. Sub-loans to about 500 ranchers 8,000,000 8,498,1202. Sub-loans to contractors 130,000 17,3803. Technical services, training and research 180,000 84,5004. Unallocated 290,000 -

TOTAL d,600,000 3,600,000WWWW mWWW W=WWWWW

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In addition to the reallocation of the use of the proceeds of the Credit and Loan,on February 17, 1972 IDA/Bank agreed to extend the use of the funds to include underCategory 3 the payment of the foreign exchange cost of consultants to evaluate thephysical and economic effects of Bank Group-financed livestock development projectsin Paraguay and amended the relevant schedules accordingly.

5. The Third Project was designed to help continue for a further four years thedevelopment initiated under the previous two projects. Basic investments in fencing,water supplies, construction, pasture improvement, purchase of breeding stock andtechnical services were similar to previous projects but with possibly more emphasison pasture improvement. It was expected that about 500 ranchers would be financed,i.e., about 200 with ranches of about 10,000 ha each in the Chaco Region and about300 of 4,000 ha each in the Oriente Region.

6. - The Project was estimated to cost a total of US$15.5 million, of whichUS$15.1 million would be for ranch development and loans to contractors and aboutUS$0.h million for technical services. Bank/IDA financing would cover about 560 oftotal Pro.ect cost, with the balance being provided by the Central Bank (30%) andranchers (1'). The foreign exchange was estimated to be about US$8.6 million--equalto the amount of the amount of the combined Loan/Credit.

7. The Project was designed tc be executed by an autonomous livestock unit(referred to in this report as the Livestock Project Division or LPD) providingcredit and technical services to farmers/ranchers. Administratively (for employment,salaries, etc.) the LPD was under the National Development Bank (NDB) but operationallythe LPD Director was totally independent. The financing of the Project was donethrough a Livestock Fund (LF) set up within the Central Bank (CB) through which allof the proceeds of the Credit/Loan were channelled. A Coordinating Co:'mitteeconsisting of senior representatives of the two banks and the Technical Directorof LPD approved all loans to ranchers an the basis of ranch plans and a financialanalysis carried out by LPD technicians.

II. PROJECT OBJECTIVES AND RESULTS

Physical

8. The Third Livestock Project, in common with the two previous ones, soughtto improve the productivity of the beef cattle industry of Paraguay as part of aGovernment program initiated with IDA assistance in 1963. The increase in annualbeef production at full development of the Project -(after 1' years) was estimated toamount to about 44,000 m tons, over the 1969 output of around 120,000 m tons. Asthe first sub-loans made under the Third Project commenced only in 1970 and the lastin 1974/75, and as each sub-loan had an investment period of from two to three yearswith an overall Project life of 15 years to reach full Droduction it is obviouslytoo early to directly assess whether the Project will reach objectives andtargets set at appraisal although available data on the results of the previoustwo Projects would indicate that targets in terms of additional beef output could

- A 3 -

well be reached. The indicators of improved national herd productivity are attributableto previous projects but there is no reason to suppose that the Third Project will notachieve similar or even improved results. All prices shown below are at current rates.Details of improved liveweights of cattle and dressing out percentages were derivedfrom a sample study undertaken by consultants in 1973-74.

- -----------Years---------------. July 31,

Indicator 1970 1971 1972 1973 1974 1975

National herd ('000 head) 5,529 5,58k 5,654 5,756 5,9001' 5,950'Cattle slaughtered ('000 ha) 697 695 693 715 590 n.a.Average liveweight at slaughtered (kg/head) n.a. 352 377 381 385 n.a.Beef production ('000 m tons) 120 126 133 140 120 n.a.Dressing out percentage 2/ n.a. h9.3 .9.5 51.0 52.0 n.a.-Beef exports ('000 m tons)2/ 35.0 37.1 48.0 51.8 27.7 n.a.Value of exports (US$ million) / 17.1 22.6 33.9 45.6 39.7 20.3Unit price per ton of beef (US$)3/ 635 813 902 1,137 1,867 1,575Price per kgLW to producer 4/ 17.8 25.5 36.5 51.7 56.1/ ho.0

As mentioned above, no firm conclusions can yet be drawn regarding the impact of thecurrent Project but the nationally upward trend is apparent. Because of reducedslaughterings (and exports) in 1974 and increased retention of both steers and cows,it is estimated that it would be theoretically possible to slaughter about 893,000 5/steers and old cows in 1975, which would yield about 175,000 to 180,000 m tons of beef.Thereafter the national herd could sustain an annual slaughtering rate of at least 13%,or about 750,000 head yielding about 150,000 to 160,000 m tons.5/

9. Appraisal of the Third Project took place against a background of buoyant worlddemand for beef and beef products and rapidly rising prices for exported beef andadequate returns to producers. Given the importance of livestock to the Paraguayaneconomy, for foreign exchange earnings through exports in contributing to the balanceof payments, in meeting a traditionally high domestic consumption and demand atvirtually all income levels, and to utilize relatively unexhausted land resources 6/for livestock development, the Government determined, on a priority basis, to continueto finance livestock development. This attitude has not changed in the interim andhas even further reinforced by an application to, and approval by the Bank of aFourth Livestock Project financed by Bank to the extent of US$10.0 million.

1/ Projected --due to high cattle retention.2/ Carcass weight as a percentage of liveweight./ International Financial Statistics, October 1975.h/ Livestock Fund data, April 1975./ Based on a normal livestock trade rule of thumb coefficient of an average of about

five animals to produce 1 metric ton of carcass beef., i.e., 200 kg dressed weightper carcass which at a 52% dressed coefficient is equivalent to 385 kg averageliveweight per animal.

6/ The Chaco region, to the west of the Paraguay River and extndling to the boundariesof Paraguay with Argentina and Bolivia comprises about 265,300 kin2 and containsonly 80,000 people or less than 3/P of the human population. It also carries over65% of the cattle -opulation, or about 3.9 million head. In the foreseeabLefuture these lands ,jill remain in livestock production.

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10. Following Bank/IDA recommendations and ratified at negotiations, theGovernment agreed to promote and maintain a disease control (Aftosa) campaign,continue a policy of free importation of vaccines, make available local currencies

as required, ratify the establishment of a Livestock Fund within the Central Bank 1/,supply technical servLces and review tax policies on exports, and promote market

freedom in cattle and beef marketing and exports to maintain incentives to producers

so as to intensify prDduction, whether for local or export markets. With only slight,and temporary departures, the Government has complied with these conditions to the

extent that cattle producers have had to face the consequences of declining externalmarkets and prices at farmgate in 1974 and 1975. tappraisal the estimated financial

rates of return to the beneficiaries was 30% for co ranchers and 24% for OrienteRegion ranchers. In the light of these projections, it was not the intention, eitherof Bank/IDA or of the Government, to subsidize production but rather to allow marketforces to have full play. Unfortunately, during the life of the Project, the ConsumerPrice Index, based on 100 in 1970, rose rapidly in 1972 to about 115 and reached 162and 170 in 1974 and 1975. Apart from the fact that livestock policy is a key issuefor the Paraguayan economy, it also affects consumer prices. Therefore, as part ofits overall strategy to restrain inflation, the Government embarkedon a policy oflowering domestic beef prices. First, a reduced beef export quota was instituted for1973, and in the second half of 1973, domestic beef price controls were directlyintroduced. Both measures failed to achieve the desired objectives and resultedinstead in the smuggling of cattle and beef abroad. and the birth of a black marketas producers withheld cattle from the local market.

11. As a result, in February 1974, the Government eliminated domestic controls,imposed a beef export tax of G/ 2,000 (US$15.87) per head on cattle for export slaughterand set an export ceiling for 197L of 220,000 head, equivalent to about 44,000 m tonsof beef, which is slightly higher than the average quantily exported over the pastfive years, but well below the export figures for 1972 anc.1973. The Governmentfurther agreed to review its marketing and pricing policies for 1975, in consultationwith the Bank with a view to maintaining exports and prodvcer incentives, but alsowith due attention being paid to the needs of the domestic market. However, onApril 1, 1975, the Law of Industrial Slaughtering authorized the treatment forexport of only 140,000 head (about 28,000 m tons of beef) 2/ but even though theavailable supply of cattle greatly exceeds this amount. In consequence, but alsopartly due to a depressed woT3d demand, prices to producers in 1975 fell from G/ 50ter liveweiaht kg to G/ 40 in March for domestically marketed cattle and to G/ 35Xor export cattle. At these prices and because of inflated operating costs, somesub-borrowers under the Third Project are experiencing financial difficulties inmaking interest and principal repayments.

12. The Bank has maintained a constant dialogue with the Borrower on exportmarketing and pricing policies as part of an overall review of economic performance.In view of the current depressed world demand for beef, t e Bank has agreed to deferdetailed consideration of such policies until the world demand situation becomesclearer and hopefully, improves.

1/ The Livestock Fund was established to replace the fiscal and fiduciary functionspreviously exercised by the Central Bank and with the Banco Nacional de Fomentoacting as the only participating bank.

2/ 385 kg liveweight, 52% dressing percentage.

-A 5-

Institution Building

13. Under the Third Project, the process of instituticn building continued

On the foundations laid down for the first two projects (paras ,7-and 10). To managefunds accruing from interest and principal recoveries fror the First and SecondProjects and also to handle the funds supplied under the Third Livestock Project,the establishment of a Livestock Fund within the auspices of the Central Bank wasproposed under the policy guidance of a Coordinating Committee.and with an accountfar its cash resources in the Central Bank. It was the irtention at the time ofappraisal of the Third Project to fuse the fiscal and fid.ciary experience of theCentral Bank with the credit knowledge technical services-capabilities of the NationalDevelopment Bank under an Operating Agreement to be agreed upon before Loan/Crediteffectiveness.

14. Decree No. 7383 of September 12, 1969 established and ratified the legal andoperational basis of the Livestock Fund and Coordinating Committee and the employmentif acceptable Technical Director 1/ for secondment to the Development Bank, therecruitment of sufficient additional NDB technicians for Iroject purposes andestablished sub-loan and operational norms for the managerent and execution of theThird Project. These.legal aspects resulted in a slippage of Effective Date of aboutthree months (para. 2).

15. This system worked well until June 30, 1974 at which time the OperatingAgreement with the Development Bank expired in accordance with the appraisal estimateof Project completion. At that time, due in part to the ranagement strength of thePresident of the Livestock Fund, it was proposed that all of the technicians, theirvehicles and other fixed assets should*pass to the Livestock Fund, which would actin the future virtually as a livestock bank without reference to the NationalDevelopment Bank. Initially this proposal met with some Eank/IDA opposition but itwas finally approved as a virtual fait accompli by Bank letters of July 2, 197k.On July 12, 1974, the Bank approved the appointment of a Faraguayan Technical Directorto replace the original expatriate Director.

16. Insofar as institution building is concerned, it might well be agreed thatthe Project and Bank/IDA failed finally to strengthen the NDB sufficiently byestablishing a LPD to control and supervise loans approved by the CoordinatingCommittee of the Livestock Fund. As it transpired, the strengthening of the NDBthat was accomplished was only a temporary phenomenon during the life of the ThirdProject. The Development Bank, as far as the current and future livestock projectsare concerned now exists solely as a name or a vote on the Coordinating Committee ofthe Livestock Fund of the Central Bank. On the other hand, the Livestock Fund ofthe Central Bank, due in part to the Bank/IDA approval, the strength of the Presidentof the Fund, and the transfer to it of the Technical Director and the technical staffof the NDB, has assumed a strength in Paraguay (for the granting of credit to thelivestock sector) that never existed before in one institition. The DevelopmentBank has, however, for commercial scale livestock lending been relegated to a purelypassive role of attending meetings of the Coordinating Committee for sub-loan approvaland offering its strictly banking services to sub-borrowers.

I/ This was in fact the extension of the contract of the Technical Directorwho had worked in the execution of the previous projects.

-A 6-

17. In spite of the consolidation of lending, judicial, technical andadministrative operations of the Third (and future) Project in the Livestock Fundof the Central Bank, problems of an institutional and managerial nature still existbut are being remedied partly at Bank/IDA instigation and also voluntarily by theLivestock Fund. Principal problems are:

(a) initial over-centralization of credit/technical services operations,but now regional offices have been opened in Concepcion, San Ignacioand steps have been taken to open a third office in Puerto Stroessner.This process of decentralization will continue;

(b) over-preoccupation in the past on volume of lending and on subloaninterest and principal recovery with lesser emphasis on quantity anciquality of technical services to sub-borrowers to reasonably assurefinancial viability. There has however been a transfer of improvedtechnology and with decentralization and recruitment of additionaltechnical staff the situation.has greatly improved;

(c) lack of well defined operational norms and procedures for thevarious technical, administrative, control and monitoring branchesof the LF and also to date, a lack of delegation of responsibilitiesand authority to the separate heads of operational units within theFund; and

(d) to date insufficient attention has been paid to granting funds forscholarships or studies to,the technical/professional staff fortraining purposes, as is provided for under the founding Decree ofthe Livestock Fund and the Ln/Credit Agreements of the Third Project.

18. In effect, these defects are inherent to a unit which has only recentlystarted from scratch and indicate changes which are being or should now beintroduced. That there are some shortcomings does not detract from the fact that theLivestock Fund stands unique in Paraguay as the vector for livestock credit andtechnical services. As it was established only in late 1969 and assumed its bankingfunctions in mid-1974, its lending performance has been satisfactory. Also, it ismoving, to improve its staffing, training, administrative procedures, and decentra-lization of field activities, and to purchase adequate accounting equipment andvehicles. An organization chart of the Livestock Fund is shown in Annex 1. Thetechnical department (LD) now has a group of 29 well qualified technicians whichwill be expanded to 40.

19. An evaluation unit (section) has also been established within LF for thepurposes of data collection and monitoring on a permanent basis of (a) investmentplan compliance, (b) technical parameters, and (c) financial and economic results.This unit has been set up independently of the technical staff to maintain objectivityand to appraise on a systematic basis the Project's technical performance andconstantly review the needs for technical assistance.

20. As of June 30, 1975, there were 34 directive and adinistrative personneland 29 field staff. It is felt that this is a result of the previously markedcentralization.of operations.

-A7 -

21. The Livestock Fund has, however, made substantial efforts to decentralizeits operations to benefit end-users of the Loan, to provide more direct supervision,and to supply adequate technical services. With the expansion of the technical staffto 40; the continued decentralization of field operations; and the need to publicizethe Loan, prepare new subloans and supervise projects under implementation, additionalvehicles will be required. There are at present 10, six of which are assigned to theregional offices and the Puerto Stroessner area, but preparation for bidding andpurchase is under way. The recruitment of additional field staff also requiresattention to attend to the proposed expansion of the lending program.

22. The administrative department of LF has suffered from a back-log of workbrought about mechanical difficulties with its accounting machine. A new machine isnow in use and the workload will shortly be back at normal. The AdministrativeManager should review his accounting needs and machine capacities and compatibilitiesfrom time to time to keep abreast of the growing work volume, minimize the use ofmanual methods and thus maintain a reasonable balance between administrative andtechnical staff.

Technological Innovations

23. The Government's livestock policy of lifting national production throughimproved productivity was based on a shift away from the traditional extensive(virtually open range) system to a more intensive controlled system (para. 8).Initially, under the irst Project, basic infrastructural improvements were financedfor bringing the herds under control and as a necessary prior stage to furtherimprovement and development. The Second Project continued with the program of finan-cing infrastructure and also included'a pilot operation of pasture impr6vement 1/for raising the nutritional status of the native pastures. Trials were initiatedunder an expatriate tropical pastures expert on a number of participating commercialIranches and an experinental farm at San Lorenzo run by th3 LD. Results, some ofwhich are shown below in para.26 were promisind, so these trials were continued anda substantial part of on-ranch development plans provided finance for compercialpasture improvement under the Third Project.

24. In addition to financing basic herd control, infrastructure, and pastureimprovement, credit was also made available for facilities for parasite and diseasec.,ntrol, improved breeding stock, improved ranch workers' housing and furthertechnical services and training of technicians. Rotational grazing was introducedas well as techniques for selection of better breeding stock, controlled mating,early weaning, and overall more logical herd management. Such innovations andfinancing were confidently expected to raise productivity.

21. The First Project financed 222 ranches and the Second 491 ranches, whilethe Third Project financed 630. In all, about 93,000 ha of improved pastures havebeen financed, of which 76,000 ha were financed under the Third Project which is anirdication of the transfer of grassland technology. Estimations made at appraisalirdicated the following expected results.from the technical innovations of the ThirdProject:

1/ This field project was based on the replacement of native pastures with moreproductive improved varieties either alone or in association with legumes.The grasses were mainly of the Setaria, Pangola, Buffel species while the mainlegumes were Stysosanthes, Siratro, Centrosema and Desmodium sDecies.

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CHACO ORIENTEBefore After Full Before After FillDeve- Five Deve- Deve- Five Deve-

Indicators lopment Years lopment lopment Years lopment

Adult mortality (%) 6 3 -3 6 3 3Branding rate (M) 1/ 45 70 75 70 70Extraction rate (%T 12.1 12.5 18.2 10.9 10.0 17.9Stocking rate (ha/AU) 4.4 3.0 2.0 3.6. 2.3 1.5Liveweight steers (kg) 380 440 40 400 410 440

As the average life of investment plans is only about three years, no actualcomparative figures are available. These will be collected by the Livestock Fundevaluation unit in the process of normal monitoring.

26. During the life of the Third Project, and also financed from the Credit/Loan, an international consultant was contracted in 1973 to evaluate the impact ofthe previous two projects. The evaluation was based on a 25% sample or about 127ranches of final census participants. The main results were as follows:

Before Appraisal Estimate Consultants'Indicators Development At Full Development Study

(1963 and 1966) (1974)

Adult mortality (%) 5 3 2.87Branding rate (%) 1/ 50 60 53.5Extraction rate (%T 10 i - 18 n.a.Carrying capacity (ha/A.U.) 2.9 2.0 2.1Liveweight steers (kg) 356 400 - 420 424Increase in cattle Numbers () - SO 55Carcass yield (LW/DW,;) 49 50 51

.27. Apart from the effective calving (or branding) rate, the previoustwo projects have achieved the technical improvements expected at appraisal. Given,however, the continued emphasis on pasture improvement, which is relatively muchgreater under the Third Project than under the first two, and steady improvementsin management, gradual identification of low producers and their elimination,controlled mating to uiinimize dry season losses, early weaning of calves to protectcalving cows, and parasite control, there is reason to assume that performance underthe Third Project will be better than under the previous ones and that Projectobjectives could be achieved even though the effective calving rate does not quitereach expectations.

1/ In an extensive system of livestock production with generally uncontrolledmating and possibly only one or two "roundups" of cattle during the year,actual calving figures are unknown. The only known figure is the number ofcalves which are branded. In other words there could be a 70% calving ratebut only a 50% branding rate. This difference is calf mortality. Graduallyas ranches are subdivided and there is better management control, brandingrates will move closely approximate to calving rates.

-A 9-

28. The increase of the technical staff of the Livestock Fund to 40 and the

continued decentralization of the field staff and sub-project monitoring on acontinuous basis will enable more effective trouble shooting and the application

of appropriate remedies.l/ Continued in-service training of Project staff will also

maintain technical skills and facilitate the transfer of technological change to the

producer, always provided that Government policy or market forces maintain an

adequate financial incentive to a reasonably efficient producer.

29. One positive effect of the consultant study under the Third Project wasthe realization that the transfer of technology is not a simple process and,consequently, productivity targets set for the Fourth Livestock Project were

significantly reduced. As time goes an the impact of the transfer of knowntechnology will become less difficult to achieve.

Lending Program

30. The lending program under the Third Project was initially delayed becauseof slippage in the Effective Date. Active lending thus began in the first quarter ofcalendar year 1970 and continueduntil. full commitment in June 1974. Disbursementof the US$8.6 million of the Credit and Loan was completed on June 30, 1975, 12months behind appraisal estimates. The table below compares actual performance withappraisal estimates.2/

Chaco Region Oriente RegionAppraisal Actual Appraisal Actual

Item Estimate June 30, 1975 Estimate June 30, 1975

Subloans (number) 180 179 270 451Total value of subloans

(US$ million) 6.5 .4.9 6.6 8.1Average size of subloan (US$) 35,000 27,'800 24,000 18,000Average ranch size (ha) 10,000 12,000 4,,0 00 3,000Improved pastures (ha) 6,120 20,500 16,470 55s,80

The shift in emphasis in the use of Project funds from the larger ranches of theChaco to medium size ones of the Oriente is noteworthy as is also the reduced sizeof subloan per borrower as compared with appraisal estimates. More impre3sive isthe area of pasture developed (76,000 ha) as compared with about 23,000 ha anticipatedat appraisal. Such emphasis will greatly aid in reaching Project objectives.

31. During the five-year period of investment, 630 subloans totalling aboutUS$13.1 million equivalent, net of cancellations, were approve', with an averagesubloan size of about US$21,000. Cancellations up to June 30, 1975 amounted toabout US$1.5 mil.lion. The ratio of cancellations to original applications ofapproximately h4 of numbers is satisfactory, considering that some problems oftitling still exist.

21 As an indication of the growth of technical services it is important to note thatthe First Livestock Project initiated in 1964 started with the services of atechnical director and five field technicians. In 1969 the number of technicianshad grown to about 12. In 1975, there were 29 technicians and it is plannedthat the number will reach 40 in 1977.

2/ 'Derived from appraisal report and quarterly report as at June 30, 1975.

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32. Lending proyress by number of active subloans and values is as follows:

Yearly Cumu-Quarter Number Value of lative Net of Cumulative

Year Ending of Loans Loans Cancellations Cancellations Value-------------------------- 00--------------------

1970 March 81 1,825 - --

June 46 983 - 2,808September 40 858 - - 3,666December 26 443 - 4,109 4,109

1971 March 15 233 - - 4,342June 23 453 - - 4,795September 28 586 - - 5,381December 38 641 139 5,883 6,022

1972 March 26 511 - - 6,533June 33 972 - 7,505September 26 622 - - 8,127December 34 798 224 8,512 8,925

1973 March 38 979 - - 9,90June 36 1,024 - - 10,928September 33 648 - - 11,576December 36 1,531 531 12.163 .13,107

1974 March 28 505 - - 13,612June 35 563 - - 14,175September 20 212 - - 14,387December 8 69 367 13,145 14,456

1975 March 4 26 - - 14,482June 5 148 45 13,100 14,630

TOTAL 630 - 1,530 13,100 14,630

The final figure of 630 subloans is the adjusted figure after cancellation of29 subloans that had been previously approved.

33. As may be seen from the rate of approval of subloans and commitment ofProject funds, the performance by quarters was variable during the life of theProject, with a marked drop in 1974. The drop in 197k was mainly due to produceruncertainty over export markets and prices. Subloan demand has, however, pickedup in 1975 and the use of the proceeds of the Fourth Loan are proceeding satisfac-torily.

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34. The overall investment pattern by value was fairly close to thatenvisaged at appraisal as can be .seen from the following table.

Actual Percentage Percentage PercentageItem gas of June 30, 1975 Appraisal Estimate Change

Breeding stock 28 26 +2Improved pasture 25 11 +14Fencing of pastures 20 21 -1Water points 17 18 -3Corrals and dips 6 9 -3Others 4 15 -9

Investments in pasture improvement were more than double those estimated, due toa sharply increasing marginal productivity from investment in this item, andactivity in the "others" category was much less than envisaged. Actual allocationof the Proceeds of the Credit and Loan as compared with appraisal is shown inAnnex 2.

35. The distribution of subloans by size during the life of the Project isshown below:

Size of Total Percent of Total Value PercentSubloan Number Numbers (US$'000) of Value

less than .5,000 55 9 216.5 1.75,001-- 10,000 169 26 1,356.9 10.4

10,001- 20,000 210 32 3,024.9 23.120,001 - 30,000 98 16 2,554.6 19.530,001 - 50,000 54 9 1,914.4 14.650,001 - 75,000 22 4 1,283.4 9.875,oo1 -100,000 17 3 1,553.2 11.9

over 100,000 < 1 1,187.k 9.0TOTAL 630 100 13,100.0 100.0

Given the general extensive characteristics of the livestock industry of Paraguayin which the Chaco plays a very importan+ part(.para. 9 ) the frequency distribution byloan size shown above and by ranch size (para 2b ) is not inconsistent withappraisal estimates nor Government policy for the logical development of its narrowresource base. As mentioned in para 9, the Chaco is the most important livestockregion of Paraguay, has a low population, extensive natural grazing and averageranch sizes of from 20,000 to 50,000 ha. The construction of roads in the Chaco isvery recent with priority emphasis on the Trans-Chaco highway which will facilitatetransport of cattle out of and supplies into the area. The infrastructural needsof the Chaco and the physical limitation of water supply, soils, drainage and climateare such that dense settlement or small farms are unlikely to develop in the fore-seeable future. Livestock (beef) sub-borrowers will therefore also be relativelylarge commercial type ranchers and subloan sizes will be high. Settement and

- A 12 -

the prospects of more intensive farming are greater in the Oriente Region and it islikely that the livestock production phase there will play more of a pioneeringrole and become more specialized as settlement develops. Other lines of creditare available for the smaller farmers of the Oriente even though the LivestockFund is financing medium size livestock producers there.

36. The percentage frequency distribution of numbers and value of loans by farmsize and region is show below.

Chaco OrienteSize of Ranch (ha) Number Value Number Value

less than 1,000 2 <1 21 101,001 - 2,500 18 5 36 262,501 - 5,000 25 13 22 24

.5,001 - 10,000 25 23 13 2110,001 - 20,000 14 9 5 10over 20,000 16 49 3 9

The above distribution indicates the marked difference of ranch sizes of sub-borrowersin the two regions. This is a result of the totally different ecological and infra-structural conditions of the two areas and the situation was reflected in the indica-tive ranch models used in the appraisal report.

37. By and large, appraisal estimates were good. To arrive at closer estimates,the mission would have been obliged to carry out detailed stratification by ranchsize, both between and within each region,vhich would have lei to a profusion ofmodels that would not necessarily have controlled the outcome without setting quotasfor the various types of ranch represented by the models. This would also have placedsevere restrictions on the Livestock Fund in its attempt to service demand as itarose and would have hindered commitment of Project Funds. Now that the LF is betterstructured, staffed and becoming more decentralized, emphasis is gradually shiftingfrom the Chaco region and very large ranchers. A change in policy and orientationwas introduced in the Fourth Livestock Project by increasing lending in the Orienteto smaller producers. However, to reach small farmers who are crop as well aslivestock producers, the National Development Bank appears to be the appropriateinstitution.

Financing and Disbursements

38. The Livestock Fund established in the Central Bank under the Third LivestockProject, was financed by the Third Livestock Credit/Loan of US$8.6 million, the undis-bursed balance of US$0.82 million from the Second Livestock Credit, and US$0.38,million transferred from the ex-Bank of Paraguay representing a basic fund ofUS$9.8 million. In addition the LF was authorized to receive for further lendingpurposes, the proceeds generated from the recovery of interest and principal paymentsdue from subloans made under the First and Second Projects and from such paymentsthat would in the future be generated from the Third Livestock Project. Thesereceipts were calculated to reach ultimately an amount of about US$.93 million

- A 13 -

over and above those amounts needed for payment to IDA/Bank cf service charges,interests and Credit/Loan amortization of principal. At the date of Projectcompletion (June 30, 1975) about US$1.0 million had been bui3t up and was beingused as a Complementary Fund for generally medium-term lending.1/

39. To refinance the Fund for the subloans made-for ranchers, contractors andtechnical services, research and training, Bank/IDA disbursed against appropriatedocumentation 65% of subloans to ranchers and contractors and 70,, for technicalservices. After agreement to reallocate certain proceeds as shown in Ahnex 2,disbursement of the US$8.6 million Credit/Lcan was completed by June 30, 1975.Actual disbursement performance as compared with appraisal estimates is shown inAnnex 3. The lag in disbursement performance which followed the delay in eff&ctive-ness was never caught up and also it appears that appraisal estimates for disburse-ments were somewhat optimistic.

Financial Performance of Livestock Fund

60. The performance of the Livestock Fund has been very satisfactory sinceit was established in 1969. According to data (Annex 4) presented .in the auditedaccounts for the year ending December 31, 1974, the size of ptrtfolio after debtservicing of Bank/IDA Loans or Credits amounted to an equivalent of about US$25.2million with an operating profit for 1974 of about US$1.05 million after provisionof about US$80,000 for bad debts.

41. Subloan recovery performance has been excellent as shown in the table below.

Interest and Principal (US$ million)

Approxirate Percentage.ofYear Due 2.Pai Recueration (

1969 1.40 1.23 881970 1.60 1.38 861971 2.38 2.24 9h1972 3.29 3.16 961973 3.45 3.38 981974 3.10 2.95 9

The figures speak for themselves and there is no reason to thir that the recoveryperformance will diminish unless there is a total collapse of tae beef export marketor some physical disaster.

h2. The outlook of the LF financial si+uati,)n remains go.,hnwev$r, with itsheavy dependence on Bank/IDA financing (800 of its resources) ir_d with repaymentsfor principals coming un in increasing amounts in the next few years, the LF shallhave to keep under constant review (yearly) its projected leve of operations (overfive years) and resources it requires to meet its d-t-f:vice is well as the demandfor loans in the livestock sector.

I/ BeforF the Closing Date of the Third Project ar." %igal TS$10.0 for livestockdevelopment was financed by the Bank under the Fourth Livetock Project. The LFwas authorized to manage these funds.

- A 14 -

Legal Covenants

43. Under the Third Livestock Project, the legal covenants, as set forth inthe Credit and Loan Agreements for the Credit and Loan that financed the Project(156-PA and 620-PA), aimed at ensuring proper execution of the Project, the useof the proceeds of the Credit/Loan and improving and maintenance of Governmentpolicies to achieve Project objectives.

Wh. Particular covenants committed the Borrower to:

(a) administer and execute the Project under an OperatingAgreement with the Central Bank, Development Bank and theLivestock Fund;

(b) establish and maintain a Coordinating Committee to hold andmanage all funds of the Livestock Fund and keep its cashresources in denosit with the Central Bank;

(c) cause the Livestock Fund toemploy-a Technical Director;

(d) cause the Coordinating Committee to apnrove all subloans on therecommendation of the Technical Director, exceDt for subloansexceeding US$100,000 equivalent (which required the additionalprior apDroval of Bank/IDA) and limit livestock purchase to50% of the amount of any subloan;

(e) cause the Livestock Fund to use all of its funds available,or becoming available, to lend for livestock development for30 years;

(f) cause the National Development Bank to establish and maintain aLivestock Projects Division with not less than 10 field technicians;

(g) cause the Livestock Fund to maintain accounts and supply anpropriatefdnancial statements, audited copies of such statements and auditors'report to Bank/IDA on an annual basis;

(h) ensure the availability and free imDortation of Food and Mouthvaccine and ensure vaccination against Foot and Mouth of alllivestock of DarticiDating nroducers;

(i) establish such slaughter, taxation, exnort and pricing Dolicies aswould promote freedom of marketing for exnort and consult with theBank/IDA with six months of Effective Date on reforms to promotethe above; and

(j) maintain adequate records to identify the uses of Project funds.

- A 15 -

45. After a short initial delay, all legal covenants conditioningeffectiveness were comnlied with as were other covenants during the course ofProject execution. All have been maintained in the original form with some modi-fications aproved by Bank/IDA. The most notable of these changes Kere:(a) anagreement as of July 1, 1974 to modify the Onerating Agreement to allow for thewithdrawal of the National Develonment Bank from Project execution to and transferits technical staff to the Livestock Fund; (b) modification of the Allocation ofthe Proceeds of the Credit Lian to reflect local demand for credit and other needs;and (c) approval of apointment of a local Technical Director to replace theoriginal expatriate. Exnort and pricing policies have been constantly reviewedwith the Bank/IDA as required in the Credit/Loan Agreements.

C. PERFORMANCE OF CONSULTANTS

46. The use of consultants was not -rovided for underie Credit/Loan Agreements;however, on February 17, 1972, Bank/IDA agreed to use funds available under TechnicalServices to finance the cost of a foreign consultant to evaluate the thysical andeconomic effects of the Bank Groun-financed livestock nrojects.

47. This work was satisfactorily completed and a final report was publishedin late 1974. The report made imnortant technical, financial and organizationalcomments and led to steps being taken to decentralize the technical operations of theLivestock Fund, and forming a permanent evaluation unit. Importantly, the reportwas instrumental in determining the direction and components of the Fourth LivestockProject which takes into consideration some of the weakness which existed in theFirst, Second and Third Livestock Projects.

D. CONCLUSIONS AND LESSONS LEARNED

48. From the discussion,above and an analysis of the field data available sofar from.the Third Project, it may be concluded that Project objectives insofaras the lending and investment program is concerned have been achieved. Althoughknowledge of technical responses will have to wait until the full developmentstage is reached in about 10-15 years, there are indications that the overallobjective of improving productivity to increase national beef oroduction byW,000 m tons, 15 years after the Effective Date, is likely to be achieved. It isimmaterial at the moment whether this is done through an improvement of any one ofthe particular technical coefficients such as an increase in effective calvingrates, reduced mortality, or improved weight for age, or a combination of all ofthem. Sufficient emnhasis is being Tlaced on nutrition through imoroved pasturesso that it is likely that this, together with better management standards, willbring about the desired improved physical nroductivity.

49. Financial imnrovements will denend on maintaining favorable cost/pricerelationships while whievement of economic targets will in addition deyend onexternal market demand.and price levels. Managerial efficiency in investment andcost control will be an imnortant element as well.

50. Whether exoort targets are reached will denend on international meatmarket conditions and Paraguay's ability to diversify export markets. Governmentpolicies on supoly of beef for domestic consumotion and those on prices and exnortwill play a vital role, and a review should be made of nolicies for beef andcattle taxation for exnort.

- A 16 -

51. Back in the "sixties" under orevious nrojects, Bank/IDA were confrontedwith a weak National Development Bank with Derennial liquidity and staff nroblems

and so it was opted to pursue as major nroject objectives an imnrovement in livestock

production and not to seek the overall "institutional improverent" of NDB. Under theproject a rather gradual aoproach to build up and strengthen a livestock 'developmentunit was taken with a view to considering later how NTDB problem should be tackled.There is no doubt that NDB has an important nart to play in agricultural develoDmentbut the final decision on how the Livestock Fund, the Livestock Project Division andthe National Development Bank will evolve, will require special attention by theGovernment.

52. Bank/IDA involvement in the Third Livestock Project is consideredjustified and worthwhile, bearing in mind the nhysical features of Paraguayand the imDortance of beef in the economy and local diet. Although therewere some deviations from norms and targets set at anomaisal, it is oncludedthat the basic assumptions that could be made, using only two models wererealistic.- Institution building, although not quite as nerceived at anoraisal,has been positive. The technical staff of the Third Project has been strengthenedand onerations have been decentralized and the nrocess will continue. The eval-uation survey carried out by consultants under the Project was innortant andhas led to the formation of a permanent evaluation unit within the Fund to monitornot only investments and technical data, but also financial results. This willDermit an important feedback to the industry, Fund and Bank/IDA, and also enableGovernment to define its nricing policies more accurately.

53. An important snin-off from the execution of the Third Project was theexoerience gained which enabled the Bank to incorporate desirable features intothe Fourth Project to conform more realistically with Government and Bank nolicies.

4. The transfer of technology is nroceeding and should yield good resultsin the long term. In the short run, producers are responding well to technical-advice, and a large degree of confidence in the Livestock Fund has geen generated.With greater decentralization and strengthening of technical services envisagedunder the Fourth Project, this process should continue and lead to a gradualmodernization of a self-sufficient livestock industry in Paraguay.

PARAGUAT ANN=1

IID LTVESTOCK DEVEIPMENT PROJECT

Credit 156-PA and Loan 620-PA

Livestock Fund - Oranisation Chart

A. At Appraisal (December 24, 1969 to June 30, 1974)

Central Development LivestockBank Bank Fund

Ch i ~Director of TechnicalDevelopment Dept. Director

S S

- -....... -.....-- Coordinati Camittee

Development Dept. ofDevelopment Bank

Directdr

l PoLivestock ProjectsAdministration Division

Technical Director

Field Technicians

B. Actual (From July 1, 1974)

Representatives

Coordinating Committee Central BankDevelopment Bank

Technical Director

President ofLivestock Fund

General SecretariatS'ecretariat Coordinating Committee

Technical Evaluation AdIministrative LegalDirectorate Unit Director Advisor

Divisiono ClerIcalidvestock PrjcsAccounting STaf.I

i Livestock I * Central OfficeVaechnicians Regional Officesi

ANNEX 2

PARAGUAI

THIRD LIVESTOCK DEVELOPMENT PROJECT

Credit 16-PA and Loan 620-PA

Disbursement by Categories !

Originally Actually Actual as %Category Allocated Disbursed of Allocated

(US$) (US) )

1. Ranch Development Loans 8,000,000 8..498,120 106

2. Sub-loans to Contractors 130,000 17,380 13

3. Technical Services, training,research, and consultants 180,000 846,500 47

4. Unallocated 290000 - -

TOTAL 8600 000 8,600,000 100

I/ June 30, 1975, date of completion.

PARAGUAY

TKIRD LIVESTOCK PROJECT (Credit 156-PA. Loan 620-PA)

Schedule of Disbursements(M$'000)

IBRD/IDA Latest Revised SupervisionFiscal Year Actual Appraisal Estimate Mission (4) as %6 Semester Disbursements Estimate (August 1, 1974) Estimate of (2)

1)(2) (3) (4)

1969/70

1s t -- -a

2nd 857 1,430 - - -

1970/71

1st 1,618 - * - -

2nd 20,95

12711

1st 2,827 4,100 - - -2nd 3,51o - - -

1972/73

1st 4,480 a a a a

2nd 5,200 -a a

1973/7i

let 6,000 8,600 - a -

2nd 7,400 - a - -

1st 8,350 - 8,200 - 992nd 8,600 - 8,600 8,600 100

2/-Closing date extended to June 30, 1975.

PARAGUAY LIVESTOCK FUND

BALANCE SHEET AS AT DECEMBER 31, 1974

ASSETS Guaranles LIABILITIES Guarankes

1973 1174 197 1974

i barltCer.ttat.CuentaOperst.a 109 390.94 38 6937870.2 B39-coCnt.FodoEscsaOpr83 7855.737'> Bö%cG Cenital- Fodo p~raPfeisasaIPonl 532745 67 8n. 1 AsoC Ii de Fom Ca Prösamo47PA 450 854910 80 0111 224 Banco NNcvr-a de Fon~o -Cuwnta Correr,. 2.Asoc Ini de Fom.Cta Préstamo8IPA 944 325 616 50 11 8 243 13lu5 8e.. Muheles 101385243.18 3 Asoc Ini.de Fom Cta Prstlo156PA 541 O00000 a 70 ki e

Me.,sFondodiArmrt«Icn 3354.82509 380055321 7.03061809 4.Bo Int deRec.yFom Cia Prst.620PA 25403803239 C 39496 e 21107 964 9194.750. 5 Sco Int de Rec.y Fom Cia Pslt.1037 PA7 Caj 40000. 8 Banco Cental-Cuenta Adelanto 2 420 10 b tes sa-998 .uftresore eiees Tsanscidos 21 850 265. 30 375601 7.Fondop AporteLocaIP,éstamoGanadeo 160 049 479 12 991h46 4819 .tebes 8. Prevasin pafaCuanIasIncobrableu I= =0E

10 Prestaoeeficanos Co.47PA 290323368 222761 220. 9 Resenas 4178514912 2106»2C3411 PrestlmosaBeref:c~ros.Conv 6PA 727 136515 599289241. 104VanaCuentasAcrdoa 48575 431M75112 P:es-uncs ,Bee41cwr.09. Coim 156PA 763.804 954. 757 3086418. 1 - PERDIDAS V GANANSCIAS 135 S21 381 48 0.47813 P-cswaiussaBeS4caros CCn 620PA 428046.546 787.437046.14 P>,.s anj'Gsaecnhcwra.os C7ont 1037PA15 PresIm.osaBeiscar.OsFondoAotanmo 527 99 200 .747 229 0015 P .a,rsenCesh n deCoo 37 984 37154

-V.a o.rcla 36364922.V.a.luqc5a 28 744 8564 6510977554

17 PapUteyUlDOpondo 57331343 7774766118 S . as.jsu~nentoqvctearocyOör~8 74742490 550 1519419, vas.Cuent.bao0udoas 1164794 6.726 049

Total 2935 247 344 46 3 291130 207 18 TOTAL 2935 247 34 46 3291 131 c. lp

EXPENSES Guarankes INOOME Guaranies

1973 1974 1973 1974

1 AmoracaóndeB4enn MisbIes 763479 62 1 540 882.72 1 Cambos2 1Bee! ci.s SocsaleslonaI 224089058 3490655 2 Cms,onesCob,adas 1854 CC23 Cant o 3 Ilnteeses Cobrados 47 PA 31661467 26 6334 Cc.,ma. no 74cr E4938 7t2 1921702 4 ieescsCobadds86PA 82 330 332. 57 1f C..5 G gte ii 554590408 11 31638424 5 Inleres Cibadns156PA 70 153907. 6! 931 731

6 , corr P'st 6.00AOIRF. 36102.7 76 1934 78670 6.InteresasCobtado620PA 5423143. 23.5 47 Gastz d. Copc Prii i3 PA SIRF 7 Int,eesCobrados 1037 PA8 lnt..e4.sPgAcdaPftt W2VPABIRF 3.96165798 1952687142 6 i Cob.adosmne Plést Rotatso. 21481228 44C13 O4C9 I.se s13/.sdosPresI 103/PAIPFIF. 9 Negociac,Ön Böencs Adjudicados 4 570 618 5 63C 86

10' r,acin B.o'.es Addi~cados 10 Ulidades Vanas5 2 660 107 2 804 7 101 Prd.da s Varaa 1 200 11. Ventaltde Som.ilas Inst Volm yotro$

12 år, c,3s.ahcotclonaI de Fon.anto 36 005823 3171591413 S..elc13y C!,s R.tcCs0.Co 8260620 15 68094714 Taa dj Sero.caPr411o47PA 4 100 194 98 407345415 Taa de.4oPrsUao66PA 853590906 8544000.i6 1:de Som.oPr45tamf 16pA 4-734 447 48 4813 70417 Ventas de Somellas.tn,t Vet. yotr0o 50 532 98 1972729.

Profit 13552131146 132472825;0 )ss

TOTAL 218215 00 237.230 63 10 210 280 00 237 23C 63 10

UjVESTOCK POPULATION BY DEPARTMENTSB OL IV IA ..- Å I

... - son AAMER CA

PRESIDENTE I-A'r: CENTRAL

OL I ATO PARAN CONCEPC.

AMAMBAY CORDILLERA MI1WNES

_1-RT OLIMPO

0rFrr F c. ALdpe PurGuAar(TAPUA NEEMSUCO

e~~~~ 0a ea Q U E R Ó NF SjnA cAAZAPA GUAIRA G

v'" $AMN PEDRO

,04,425."ø

2c-,cCONCEPCIóN

S-c-

259,A00 1g1

OS'aå General9Dio'

A RG E N TlN A PRESIDEN E H AYES e - AN PEDi- 251,d02G8ly

SAN P EDRO

PARAGUAY O7

FOURTH UIVESTOCK CREDIT PROJECT 3 26,470

C.t,l. Popoloner by D.p.r~en

- o d f -~~ A-cs cRN aes

2 B.._ ~ 5soes..dn39 ,8

90- 0 G - I d .,,h 3,, @L R . ,c A Fg i . 0,0N A AbA

419,168 r5

Deportnas B-ndRrGsNTrIcA