REORWITS NE | CIRCULATiNi6 COPT RESTRICTED

ONE WEEKC | TO BE RETURNED TO REPORTS DESK

This report was prepared for use within the Bank and its affilioted organizations.They do not accept responsibility for its accuracy or completeness. The report maynot be published nor may it be quoted as representing their views.

INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT

INTERNATIONAL DEVELOPMENT ASSOCIATION

THIRD LIVESTOCK DEVELOPMENT PROJECT

BOLIVIA

May 11, 1971

Agriculture Projects Department

Pub

lic D

iscl

osur

e A

utho

rized

Pub

lic D

iscl

osur

e A

utho

rized

Pub

lic D

iscl

osur

e A

utho

rized

Pub

lic D

iscl

osur

e A

utho

rized

Pub

lic D

iscl

osur

e A

utho

rized

Pub

lic D

iscl

osur

e A

utho

rized

Pub

lic D

iscl

osur

e A

utho

rized

Pub

lic D

iscl

osur

e A

utho

rized

CURRENCY EQUIVALENTS

Us$ $ 1 = Pesos $ 11.88Peso $ 1 = US $ 0.08Pesos $ 1,000,000 = us$ $ 84,175.00

WEIGHTS AND MEASURES

Metric System

1 Kilogram (kg) = 2.20 Pounds1 Metric Ton (m ton) = 0.98 Long Tons1 Kilometer (km) = 0.62 Miles1 Hectare (ha) = 2.47 Acres1 Square Kilometer (km2) = 0.39 Square Miles

GLOSSARY OF ABBREVIATIONS

BAB = Agricultural Bank of BoliviaIDB = Inter-American Development Bank

BOLIVIA

THIRD LIVESTOCK DEVELOPMENT PROJECT

TABLE OF CONTENTS

Page No.

SUMMARY AND CONCLUSIONS ................................. i-ii

I. INTRODUCTION ............................................ 1

II. BACKGROUND .............................................. 1

A. General ............................................. 1B. Agriculture ......................................... 2C. Animal Health ....................................... 4D. Agricultural Services and Credit .................... 4E. Cattle Slaughtering and Meat Transport .... ...... 5F. Performance Under Credits 107-BO and 171-BO .... ..... 6

III. THE THIRD LIVESTOCK DEVELOPMENT PROJECT ................. 7

A. Project Description ................................. 7

B. Detailed Features .................................. 9C. Cost Estimates ...................................... 13D. Proposed Financing .................................. 14E. Procurement .......................................... 15F. Organization and Management ......................... 16G. Lending Operations .................................. 16H. Disbursements .................................. 17I. Auditing .......... .................................. 18

IV. MARKETS, PRICES, PRODUCER BENEFITS AND REVENUE GENERATION 18

V. ECONOMIC BENEFITS AND JUSTIFICATION ..................... 21

VI. RECOMMENDATIONS ......................................... 21

This report is based on the findings of an appraisal mission to Bolivia inNovember 1969 composed of Messrs. D. N. Sutherland, D. B. Argyle (IDA),W. Dunn, T. Kwon and E. Root (consultants).

-2-

ANNEXES

1. Banco Agricola de Bolivia (BAB)

Table 1 - Source of FundsTable 2 - Consolidated Balance Sheets - 1966 to 1970Table 3 - Portfolio DistributionTable 4 - Description of External Lines of CreditTable 5 - Loans on Default - 1964-1970Table 6 - Consolidated Profit and Loss - 1966-1970

2. Cattle Slaughtering, Meat Transport and Marketing

3. Beef Cattle Ranch Model:

Table 1 - Projections of On-Ranch InvestmentsTable 2 - Herd Development ProjectionsTable 3 - Projection of Operating CostsTable 4 - Financial Projections

4. Sheep Cooperative and Medium Size Sheep Property Model:

Table 1 - Projections of On-Property InvestmentsTable 2 - Flock Development ProjectionsTable 3 - Projection of SalesTable 4 - Projection of Operating ExpensesTable 5 - Financial Projections

5. Sheep Sub-Cooperative Model:

Table 1 - Projections of On-Property InvestmentsTable 2 - Flock Development ProjectionsTable 3 - Projection of SalesTable 4 - Projection of Operating ExpensesTable 5 - Financial Projections

6. Project Administration and Technical Services Cost

7. Projected Sources and Application of Funds - Livestock Project Account(Central Bank)

8. Projected Sources and Application of Project Funds - BAB

9. Projected Sources and Application of Funds 1971-76 - BAB

10. Financial Rates of Return

11. Incremental Costs and Benefits and Economic Rate of Return

MAP - Project Areas

BOLIVIA

THIRD LIVESTOCK DEVELOPMENT PROJECr

SUMMARY AND CONCLUSIONS

i. The Government of Bolivia has requested an IDA Credit to enableit to continue its program of livestock development. The Project for whichfinancing is sought would be the Third Livestock Development Project sup-ported by IDA in Bolivia. Credit 107-BO, signed in May 1967, and Credit171-BO, signed in January 1970, provide funds for development loans to ap-proximately 260 beef cattle ranchers in the Beni Department of the tropicallowlands and for technical services to the participating ranchers.

ii. The proposed Project would comprise two sub-projects, one con-cerned with beef and sheep ranch development and the other with cattleslaughtering and meat marketing.

iii. The beef and sheep ranch development sub-project would provide forsubloans through Banco Agricola de Bolivia (BAB) to finance development oncattle ranches in the tropical lowlands and sheep properties on the altiplano;while the cattle ranches would be individually owned most of the sheep proper-ties would be cooperatives of smallholder sheep owners. Technical servicesfor administration of the Project would be provided through the LivestockProject Division (LPD) of BAB created under Project 107-BO.

iv. The cattle slaughtering and meat marketing sub-project would pro-vide for engagement of consultants by Government to prepare recommendationson a program for marketing increased cattle and beef output from the Projectarea. In addition it would provide finance for construction of new slaughter-houses and cold storage facilities, and for renovation of some of those al-ready existing and for training of up to six meat inspectors.

v. Total cost of the Project is estimated to be US$11.0 millionequivalent, comprising US$10.1 million for the beef ranch and sheep prop-erty development sub-project and US$0.9 million for the cattle slaughter-ing and meat marketing sub-project. The estimated foreign exchange componentis US$6.8 million, or 62% of total Project cost. The proposed contributionfrom the IDA Credit would finance the foreign exchange component.

vi. Proceeds of the IDA Credit would be on-lent to BAB at an in-terest rate of 7-1/4% per annum for 16 years including a five-year graceperiod. BAB would make sub-loans to cattle and sheep ranchers at 12% in-terest for 12 years including a four-year grace period. These sub-loanswould be for purchase of breeding cattle or sheep and for on-ranch devel-opments such as fencing, water facilities, stock yards and pasture improve-ment. Technical services would be provided through the Livestock ProjectDivision of BAB as under the two previous Projects. The IDA Credit wouldfinance 85% of the cost of consultant services under the cattle slaughteringand meat marketing sub-project and up to 55% of cost of construction of newslaughterhouses or repairs to existing ones.

- ii -

vii. The financial rate of return is estimated at 17% to cattleranchers and 18-20% to sheep ranchers. The economic rate of return ofthe beef and sheep ranch development sub-project is estimated at 18%.By year 10, the Project is expected to increase annual production byapproximately 10,400 m tons of beef, 1,450 m tons of mutton and 575 mtons of wool with an aggregate value of approximately US$6.8 millionequivalent of which about US$5.5 would be earned from exports.

viii. The Project is suitable for an IDA Credit of US$6.8 million. TheRepublic of Bolivia would be the Borrower and it would assume the foreignexchange risk.

BOLIVIA

THIRD LIVESTOCK DEVELOPMENT PROJECT

I. INTRODUCTION

1.01 The Government of Bolivia has requested an IDA Credit to helpfinance the continuation of its program to develop the livestock industry.This was initially supported by IDA Credit 107-BO of US$2.0 million, signedin May 1967, which provided finance for development of the cattle industryin the Beni Department of the tropical lowlands. Under this Project fundswere made available for subloans to ranchers and for technical services,administered through the Banco Agricola de Bolivia (BAB). A Second Creditof US$1.4 million (171-BO) was made by IDA in January 1970 to enable BABto continue to finance ranch development while this more comprehensive thirdProject is under consideration.

1.02 The first Project was prepared by the FAO/IBRD Cooperative Program.The Interim Project was prepared within BAB under the direction of the Live-stock Project Director, after a visit by an IDA mission. The Third Projectwas also prepared under direction of the Livestock Project Director, withassistance of an IDA mission.

1.03 This report is based on the findings of an appraisal mission toBolivia in November 1969 led by D.N. Sutherland (IDA) and composed ofD.B. Argyle (IDA), W. Dunn, T. Kwon and E. Root (consultants), and broughtup to date on information collected during supervision missions in September1970 and January 1971. Negotiations were delayed by Government changes, byuncertainties related to the nationalization of oil properties and by Govern-ment consideration of livestock sectoral policies.

II. BACKGROUND

A. General

2.01 Bolivia, with an area of 1.1 million km2, has a population ofabout 4.9 million two-thirds of whom are dependent on agriculture, mostlyon subsistence holdings. Per capita income is US$200 per annum, one ofthe lowest in Latin America. The rate of inflation has averaged about4-1/2% per year since 1962. The exchange rate of b$ 11.88 to the US dollarhas remained constant since 1959.

2.02 Bolivia is divided into three fairly distinct geographical zones:the altiplano or mountain highlands of 12,000 ft and above; the yungas orintermediate valleys; and the tropical and sub-tropical lowlands. There isrelatively high pressure on land resources in the altiplano where two-thirdsof the population live on one-third of the country's total area. By con-trast, population pressure is very low in the extensive area of the lowlands.

-2 -

B. Agriculture

General

2.03 While agriculture employs more than half of the work force, it pro-duces only one-fourth of the country's Gross Domestic Product (GDP). Agricul-tural production declined for some years following redistribution of land af-ter the 1952 revolution. However, there have been significant increases inproduction in recent years, particularly in sugar, rice and cotton in theSanta Cruz area of the lowlands. Beef production in the Beni Departmenthas also increased significantly in recent years.

2.04 Agricultural imports are approximately US$25 million annually,the principal items being wheat, wool, dairy products and animal fats.Apart from increasing production to replace imports of some of these items --particularly wool and wheat -- a major opportunity for increasing agricul-tural production lies in further development of the cattle industry in theextensive land area of the lowlands. In addition to an increasing marketwithin Bolivia, there are good prospects for exporting beef to meat deficitareas in adjoining countries, mainly Peru and northern Chile and, on a small-er scale, north-western Brazil.

The Livestock Sub-Sector

2.05 Climatic conditions differ markedly between the three geographiczones and this largely determines the type of agriculture practised and thedistribution of livestock. Sheep production is virtually limited to thealtiplano and the valleys. Dairy production is limited -_ concentratedaround the larger population centers of La Paz, Cochabamba, Santa Cruz andSucre, except for some production of cheese from beef nerds in the Beni andSanta Cruz Departments. In the Beni, beef ranching is practically the soleform of land use. It is also conducted on a lesser scale in the Santa Cruzand Chaco areas (see Map). Beef cattle are carried in very small herds inconjunction with sheep on the smallholdings of campesinos on the altiplano.

Beef Cattle

2.06 There are no reliable statistics on numbers of beef cattle or num-bers of cattle ranches in the various departments of Bolivia. A study ofmarketing of meat and live cattle carried out in 1969 under the First IDALivestock Project estimated total cattle population at approximately twomillion head with 820,000 head in the Beni Department, 430,000 in the SantaCruz Department and 220,000 in the Chaco Department. The bulk of the re-maining cattle are on smallholdings in the altiplano, with limited numbersin the intermediate valleys.

2.07 Extraction, or offtake rate, of cattle is estimated to be about10 to 11%, thus providing about 200,000 to 220,000 cattle for slaughter eachyear from the total national herd of about 2 million head. Average carcassweight of cattle slaughtered is about 160 to 170 kg, and total production

of carcass beef is in the range 32,000 to 36,000 m tons per year. Until theend of 1970, there was relatively little import or export of beef. Averageper capita consumption is approximately 8 kg carcass beef per year, one ofthe lowest in South America. However, there are wide variations in consump-tion between different regions with relatively high levels in the largercities.

2.08 For the Beni Department, production in 1968 was estimated at about16,500 tons of carcass beef. At an average carcass weight of about 170 kg,this is equivalent to about 97,000 cattle, giving an extraction rate ofnearly 12% from the estimated cattle population of 820,000. This is similarto the extraction rate for the beef cattle herds of Ecuador and Colombia.Some of the cattle sold for slaughter are steers purchased from Brazil forfattening. However, this is offset by the high retention rate of femalecattle in herds in the Beni to build up herd numbers.

2.09 Both the Beni and the Santa Cruz Departments have great potentialfor increased beef production. This is true also, to a lesser extent, of theChaco area where rainfall is a limiting factor. The Inter-American Develop-ment Bank (IDB) made a loan of US$5 million to Bolivia on April 21, 1970 tohelp finance a project, estimated to cost a total of about US$7 million, fordevelopment of the beef cattle industry in the Santa Cruz and Chaco area.While heavy land clearance expenditures must be incurred in the Santa CruzDepartment, that area enjoys some advantages over the Beni Department; ithas more fertile soils and it can produce beef carcasses of better quality;it also has better communications and tranport facilities. On the otherhand, the Beni Department, with its very large areas of well-watered grass-lands, can produce beef at relatively low cost under the existing system ofmedium- to large-scale ranching. Because of this, further investment in beefproduction in the Beni is given high priority in order to capitalize on theavailable export markets in Peru and Chile. The Beni area is relativelysparsely-populated with no apparent land pressure. Stimulation of economicactivity, based mainly on the natural grassland resources, should induce im-migration of population into the area.

The Sheep Industry

2.10 The sheep population is estimated at about 7.2 million head, prac-tically all being run by peasant farmers (campesinos) in small flocks of20 to 150 head on the altiplano or in the intermediate valleys. The standardof sheep husbandry generally is poor. Little attention is paid to such prac-tices as castration, docking, drenching to control parasites or selectivebreeding. All except a few flocks are composed of indigenous criollo sheep,which are very small and produce only a low yield of wool of inferior quality.

2.11 Wool production is estimated at about 4.2 million kg per year,about half of which is used by the local manufacturing industry and theremainder by cottage industries. There are a number of small- to medium-size textile plants in La Paz. In 1968, in addition to using local woolproduction, the country imported about US$1.1 million worth of higher qualitygreasy wool and wool products.

- 4 -

2.12 The number of sheep slaughtered in 1968 was estimated to be 400,000head, equivalent to approximately 3,330 m tons of mutton, but this is prob-ably a low estimate. There is a strong demand for mutton and the presentprice to the farmer is equivalent to approximately b$ 3.50 (US$0.28 equiva-lent) per kg liveweight, which is higher than the price for beef.

2.13 While there is considerable scope on the altiplano to improve pro-ductivity of the sheep flocks, the implementation of a program for this pur-pose must take cognizance of the traditional system of communal land use withfairly strict controls over grazing rights. Apart from a limited number ofindividually-owned sheep ranches of medium size, improvement of the sheep in-dustry can best be organized through the extension of credit and technicalservices to cooperatives and sub-cooperatives involving a number of small-holders with grazing rights over a certain area of land. Government policyalso supports this objective. The Project proposal in the report would in-clude an initial element of support to this industry (see para 3.01) utilizingsome of the experience gained under USAID technical assistance. Since thiswould be a new feature of external support for livestock development, theinitial phase included in this Project is limited in scope. Provided thisapproach proves successful further support may be indicated.

C. Animal Health

2.14 A number of strains of foot and mouth disease occur in Boliviancattle herds. Other diseases are paralytic rabies and brucellosis andregular vaccination is required to control them. Preliminary investigationsindicate an iodine deficiency in cattle, at least in so,. 1arts of the Beni.It is not known how much effect other mineral deficiencies and infestationswith internal parasites have on cattle performance. Cattle ticks occur butthey do not present a serious problem. Despite che presence of these dis-ease conditions, mortality and sickness rates in cattle are not high in theBeni.

2.15 While internal parasites are a major disease problem of sheep onthe altiplano, effects of infestation can be reduced by regular anti-para-sitic drenching and by improved management. Malnutrition is also fairlycommon in sheep as a result of overgrazing of pastures. Experience on anumber of sheep ranches and cooperatives indicates that improved breeds ofsheep can be run successfully on the altiplano, given a reasonable levelof management.

D. Agricultural Services and Credit

2.16 The Ministry of Agriculture is responsible for agricultural andlivestock extension services, veterinary services, agricultural researchand regulatory services such as meat inspection and control of seriousdisease outbreaks. It receives assistance from a number of external aid

- 5 -

sources -- USAID, UNDP/FAO, UK Ministry of Overseas Development, WestGerman Technical Aid and the US Peace Corps. Despite this the servicesprovided to the livestock industry by the Ministry are inadequate. Forthis reason, provision has been made in each of the IDA livestock Proj-ects for a relatively large technical services component.

2.17 Medium- and long-term agricultural credit has been available inreasonable amounts only from public sources; the most important of whichis Banco Agricola de Bolivia (BAB), an autonomous organization under thegeneral guidance of the Ministry of Agriculture (see Annex 1). The CentralBank through its commercial banking department has also supplied some long-term credit, but much less than BAB.

2.18 The usual cost of borrowing from banks is 30-40% per annum includ-ing 15% interest, a tax of 9% and 3% contribution for social security. De-velopment banks are able to lend at lower rates (12% in BAB's case) withouttax. The minimum interest payable on saving accounts is 10% and while mostcompanies are forced to maintain low interest balances in the banks, it isdifficult for the commercial banks to invest in agriculture at interest ratesthat are competitive with BAB. BAB has been the major source of agriculturallending. It has a wide network of branches, an experienced staff, and hasdisbursed IDA Credits 107-BO and 171-BO in a satisfactory manner. It is thelogical organization for disbursing the funds under the proposed Credit.

E. Cattle Slaughtering and Meat Transport

2.19 Slaughtering of cattle and transport and marketing of meat aregenerally carried out under primitive conditions in Bolivia. There is noofficial system of meat inspection or supervision of premises for sanitaryconditions. There has been some investment in medium-sized slaughterhousesbut it appears to have been badly planned. The modern, well-designed LosAndes plant near the El Alto airport for La Paz, lies idle while slaughterof cattle and sheep is carried on under most unhygienic conditions in thebadly designed La Paz municipal plant. A large plant was constructed atCameare in the Beni in the early 1950's but it has operated only to a limitedextent. A modern plant (Todos Santos) was constructed several years agoabout 80 km from Santa Cruz for slaughter of pigs but it also is idle.There was inadequate investigation of the supply of cattle and pigs forslaughter and of the demand for beef and pork output before constructionof the Los Andes, Cameare and Todos Santos plants was undertaken.

2.20 In the Beni, cattle are slaughtered at about 43 widely scatteredestablishments owned by ranchers, municipalities and meat wholesalers. Mostof them are without cold storage facilities and of very primitive design,comprising no more than a cement floor (some lack even this) and a roof.Because of lack of road or rail communications within the Beni and betweenthe Beni and the altiplano, the cattle industry is completely dependent onair transport for marketing of beef and is likely to remain so for some years

- 6 -

to come. Airstrips are adjacent to all slaughtering establishments andslaughtering is carried out when marketing of a plane-load of beef has beenarranged.

2.21 There are six private air transport operators engaged regularly inmeat transport operations between the Beni and the altiplano with a fleet ofabout 18 aircraft, including one DC-6, two Convairs and ten C-46's. Thefleet has a capacity in excess of the demand for transport of beef and cattlebut there are periodic breakdowns in service due to poor serviceability ofaircraft. This in turn is due to owners' lack of finance for essential re-pairs and maintenance.

2.22 Despite the shortcomings of the present system of cattle slaugh-tering and beef transport, it has provided an essential service to the Benicattle industry. In 1968, some 15,700 m tons of beef were supplied fromthe Beni to the altiplano by this system. This represents a trade worthapproximately b$ 100 million (US$8.0 million) per year. The system of slaugh-tering at their own premises has been established by ranchers because therehas been no alternate means. Most would probably close such establishmentsif they could market their cattle through central slaughterhouses at rea-sonable prices. Cattle slaughtering and meat marketing are discussed inmore detail in Annex 2.

F. Performance Under Credits 107-BO and 171-BO

The Projects

2.23 IDA Credit 107-BO provided financing for development of approxi-mately 150 cattle ranches in the Beni Department and for establishment ofa Livestock Project Division (LPD) within BAB to provide technical servicesfor the Project, including preparation of ranch development plans and super-vision of approved ranch sub-loans. Sixty-eight percent of long term ranchinvestment was financed by the IDA Credit, 12% by BAB and 20% by ranchers.In addition, BAB provided short-term loans to ranchers from its own re-sources for purchase of steers for fattening in the early years of the Proj-ect. Funds from the IDA Credit were made available to BAB through a ProjectRevolving Fund at the Central Bank at an interest rate of 4% per annumfor a period of 16 years including 5 years grace. Subloans to ranchersby BAB were to be at an interest rate not exceeding 12% per annum for aperiod of 12 years including 4 years grace. Under the Project, BAB was tocarry out a survey of live cattle and meat marketing to be financed by theGovernment and a survey of land tenure in the lowlands. BAB was also to makeloans from its own resources to eight representative ranchers in the SantaCruz and Tarija Departments.

2.24 IDA Credit 171-BO of US$1.4 million for an Interim Second LivestockDevelopment Project provides for approximately 100 subloans to ranchers inthe Beni on terms and conditions identical to those of Credit 107-BO (para

- 7 -

2.22). As under Credit 107-BO, funds are provided to BAB for Project pur-poses at a 4% interest rate for 16 years including 5 years of grace.

Performance

2.25 Progress under the Projects has been more rapid than anticipated.BAB established the LPD soon after the Credit became effective and efficientprocedures were quickly established for preparation of ranch developmentplans and for approving and supervising sub-loans. By early October 1969,160 subloans to ranchers had been approved, committing all the funds pro-vided in Credit 107-BO for this purpose, 12 months ahead of forecast. Allfunds for on-lending to ranchers were disbursed from the Credit by the thirdquarter of 1970.

2.26 The ranch development plans drawn up for subloans have followedfairly closely the models prepared in the appraisal report of the Project.However, initial herd size has been somewhat larger with a median of about800 compared to 600 in the report model. In consequence, ranchers have notneeded to purchase as many additional breeding cattle as forecast and theoverall average loan has been about US$13,500 compared to US$14,500 forthe model. The appraisal mission for this Project inspected improvements andcattle financed under the First Project on a number of ranches and was satis-fied they were up to the standard required.

2.27 The live cattle and meat marketing survey required under the FirstIDA Credit was completed in September, 1969. The survey of land tenure inthe lowlands was carried out by a team from the University of Wisconsin.Its report has been received by BAB but has not been transmitted to IDA yet.Satisfactory procedures have been established for granting land titles toparticipating ranchers. Loans to the eight representative ranchers in theSanta Cruz and Tarija Departments have been made.

2.28 To the end of 1970, a total of 232 loans to cattle ranchers hadbeen approved by BAB under the two Projects. In late 1970, the Federationof Ranchers of the Beni made representations to the Government for easingterms of repayment of subloans under the Project. The LPD in February-March1971 reviewed in detail the position of 100 participating ranchers who hadsought deferment of interest payment. The review indicated that only 24 ofthese ranchers needed financial assistance in the form of deferment of in-terest payments for 3-6 months due primarily to delays in marketing of cattle.It also indicated that, in general, the assistance made under the first twoProjects had led to substantial increases in herd numbers which will enableranchers to earn much higher incomes in the future.

III. THE THIRD LIVESTOCK DEVELOPMENT PROJECT

A. Project Description

3.01 The Project has two basic objectives:

- 8 -

(a) The proposed additional lending for the development of thebeef cattle industry in the Beni would help to achieve theobjectives of increased exports which are crucial to thecontinued growth of the economy. The new production wouldtake place on areas of natural grasslands which have beenhistorically underutilized. Furthermore, this developmentwould require very little Government expenditure for infra-structure, such as roads, and for recurrent expendituresfor services, thus sparing Government's limited resources.

(b) At the same time that the export objectives are pursued asdescribed above, the proposed Project would provide for amodest import substitution program through increased pro-duction and upgrading of wool to supply the local wool tex-tile manufacturing and cottage industries. Moreover, itwould provide an increase in supply of mutton which is theprincipal form of intake of animal protein for the bulk ofthe population. This sheep development program, in contrastto the beef production program, would mainly assist small-holders and would achieve an important social objective inproviding additional income to over 3,000 families on exist-ing smallholdings in the economically depressed highlands.

3.02 The Project would comprise two sub-projects as follows:

(a) Beef and Sheep Ranch Development Sub-Project, providing for:

(i) further subloans for on-ranch development ln arproximately250 ranches in the Beni and adjoining area-;

(ii) subloans to approximately 150 sheep property owners in thealtiplano for property developre.:L and purchase of improvedsheep; these would be made to approximately 100 sub-coop-eratives and 35 cooperatives of smallholder sheep ownersand to about 17 medium size privately owned properties; and

(iii) technical services in relation to both sheep and cattleproperty development.

(b) Cattle Slaughtering and Meat Marketing Sub-Project, providing for:

(i) employment of consultants to make detailed recommendationsin respect to Government meat policies; establishment ofan adequate meat grading and inspection service; construc-tion of additional slaughterhouses and creation of adequatetransport and other marketing facilities;

(ii) finance for construction of new slaughterhouses and coldstorage facilities and for renovation of existing onesand for training up to six meat inspectors, dependent onfurther consideration by IDA on receipt of the report ofconsultants.

- 9 -

B. Detailed Features

Beef and Sheep Ranch Development Sub-Project

3.03 Beef Ranch Development. This part of the sub-project would con-tinue the program of lending for beef ranch development initiated underCredit 107-BO and extended under the Interim Second Credit 171-BO. It isenvisaged that approximately 210 ranch subloans would be made in the BeniDepartment, 25 in Iturralde Province and Pando Departments, 10 in Alto BeniProvince and 5 in Chapare Province (see Map).

3.04 As in the first two Projects, subloans to ranchers would providefinancial assistance for purchase of additional breeding cattle and for con-struction of property improvements such as fencing, water facilities, cor-rals, barns and housing and some pasture improvement and purchase of toolsand equipment.

3.05 The Alto Beni, Iturralde, Pando and Chapare areas are of highertopography than the Beni and all include areas suitable for pasture improve-ment. Because of the need for land clearing and pasture establishment, costsof establishing beef ranches in these areas will be higher than those in theBeni. However, improved pastures would be suitable for fattening cattle andthese areas have the advantage of better transport access to markets in LaPaz and Cochabamba and to potential markets in adjoining areas of Peru andBrazil. Thus in addition to normal breeding operations ranches in theseareas could play an increasingly important role in fattening a percentage ofsteers from the Beni to supply better quality meat for the higher incomegroups in these markets. Development of a limited number of ranches underthe Project could lead to development on a more extensive scale in theseareas in the future.

3.06 The Project would increase beef production on the ranches of sub-borrowers in three ways: first, by increasing the size of breeding herds onpastures that are at present greatly understocked; second, by improving thestandard of cattle through introduction of better bulls of the Zebu breed;and finally, by providing technical services to help ranchers improve theirmanagement and raise productivity. The illustrative model for a beef ranchof 4,000 ha (Annex 3) shows an increase from a herd of 810 cattle, with annualofftake of 103 head (13%), to a herd of 1,595 cattle with offtake of 272 head(18%). The increase in carcass beef production per herd would be 230%, from17,500 kg to 58,000 kg per annum. Herd sizes of potential borrowers arelikely to vary substantially, ranging from about 150 head up to as many as5,000 head on a small number of ranches.

3.07 Sheep Ranch Development. Long term subloans to three classes ofsheep producers on the altiplano are proposed: approximately 100 sheep sub-cooperatives, 35 sheep cooperatives and 17 medium sized individually ownedranches. This part of the sub-project aims to increase mutton and wool pro-duction on participating properties by replacing the existing criollo sheep,with improved breeds such as Corriedale, Targai, Rambouillet and Junin. Con-

- 10 -

currently with introduction of these improved sheep breeds, property improve-ments and improved management will need to be initiated. A significant areaof each property will be sown to improved pastures since the improved breedsof sheep are about twice as large and require about twice as much feed perhead as criollo sheep.

3.08 A typical sheep cooperative would have a membership of approximately45 families, with a total of about 4,300 criollo sheep before development onabout 2,000 ha (Annex 4). Under the Project, finance would be provided forpurchase of rams and a nucleus flock of ewes of improved breeds; machineryand other inputs to improve pastures; and a limited amount of fencing, waterfacilities, sheep yards, shearing sheds and plant, tools and equipment. Atfull development in the ninth year, flock numbers would reach approximately5,300, all of which would be virtually pure bred of an improved breed.

3.09 A typical sub-cooperative (a precursor of a sheep cooperative)would have 19 to 25 members, owning about 1,150 criollo sheep on 400 ha be-fore development and building up to 1,450 head of improved breed by the ninthyear (Annex 5). Inputs financed by the Project would be the same as forcooperatives except that purchase of machinery for pasture improvement wouldnot be included. These smaller holdings would have ploughing done by con-tract for pasture improvement.

3.10 The typical medium sized privately owned ranch would have an areaand initial flock size similar to that of the sheep cooperative. Inputsfinanced on these properties would be the same as those financed for develop-ment of cooperatives, and similar increases in flock size and production areexpected.

3.11 Technical Services. The provision of technical services for Proj-ect administration and execution would be continued through the LPD of BAB,as under Credit 107-BO and Credit 171-BO (Annex 6). The present Project Di-rector took up duty in January 1970 and it is proposed that he also act asDirector of this Project. BAB would continue to employ a qualified and ex-perienced Project Director on terms mnd conditions acceptable to IDA andmaintain adequate staff in the LPD to administer and execute the Project.

3.12 Technical services in connection with subloans to beef ranchersin the Beni and adjoining Departments would be administered through BAB'sregional office at Trinidad. Staff of the LPD at that center would compriseone regional sub-project director, eight technicians, two veterinarians, onepilot and auxiliary staff. Technical services in connection with subloansto sheep property owners would be provided through LPD staff at BAB's re-gional office at Oruro. Staff would comprise one regional sub-project di-rector, one sheep husbandry expert, five technicians, one veterinarian andauxiliary staff.

Cattle Slaughtering and Meat Marketing Sub-Project

3.13 In 1970, for the first time, there was a surplus, estimated atabout 1,500 tons of beef, in the availability of cattle for slaughter in the

- 11 -

Beni, above the demand for beef on internal markets in Bolivia. There hasbeen an increase in the supply of cattle for slaughter in recent years, andone of the major contributing factors has been a fairly large-scale introduc-tion of steers for fattening, many of them coming from western Brazil. Overthe past 12 months, the prices of cattle have risen sharply in Brazil andthe sale of steers to Bolivia has practically ceased. In 1971, there willstill be a flow of steers for slaughter as a result of earlier purchases.Thereafter, there will be an increasing supply of cattle for slaughter result-ing from investments made under the first two livestock development Projects.

3.14 Increasing demand for beef has resulted in marked increases in cat-tle and beef prices in most parts of South America during 1970. As a resultof the deteriorating supply situation, Peru and Chile, both meat importingcountries, have sought to purchase beef from the Beni. A contract was signedin March 1971 by the Federation of Ranchers of the Beni to sell 18,000 steerson the hoof for slaughter to importing agents in Lima over six months. Atthe same time representatives of the Chilean Government were in Bolivia en-deavoring to negotiate a contract for sale of carcass beef from the Beni andthe Santa Cruz regions to northern Chile. Prices in Peru and northern Chileare much higher than the internal prices in Bolivia. However, in the caseof the contract for sale to Lima, the price received f.o.b. in the Beni willbe a little higher than the price for sales to La Paz. The sellers in Boliviaare not in a strong negotiating position at present because of their lack ofa marketing organization and of modern slaughtering and cold storage facili-ties.

3.15 Demand for meat will certainly grow over the next ten years inPeru and northern Chile. Bolivia -- and the Beni and adjoining areas inparticular -- is well situated to supply beef to both markets. The invest-ments made under the first two Projects and those proposed under this Proj-ect will result in increased production to supply these export markets.However, to establish a regular export trade on a sound footing, certainother measures will have to be taken with regard to marketing organization,provision of slaughtering and cold storage facilities, establishment of ameat inspection service of satisfactory standard, improvements in the airtransport system, removal of restrictions on export of beef and of cattlefor slaughter and the adoption of a meat pricing policy by the Government toprovide for differential prices for different grades and qualities of beef,in place of the present policy which provides one price for all grades andqualities.

3.16 An amount of about US$100,000 would be provided under the Projectto engage consultants to formulate recommendations on a program to developfacilities and organization for cattle slaughtering, beef marketing andtransport to enable Bolivia to enter the export trade. The work of the con-sultants would cover the requirements of modern cattle slaughtering and beefstorage facilities needed to handle increased beef output for the internaland external markets; establishment of a meat inspection service and a systemof meat grading; policy measures to be adopted by the Government to encourageexport of beef and provide producers with incentives to increase production;measures needed to provide a satisfactory system for transport of beef both

- 12 -

internally and to export markets in Peru, northern Chile and Brazil. Theywould provide estimates of costs of construction of any proposed new slaughter-house and cold storage facilities and repairs to existing ones; they wouldalso provide a projected cash flow for operation of new slaughtering facili-ties. The consultants engaged, the individual specialists and the terms ofreference for their study would be subject to IDA approval. The report ofthe consultants is to be submitted to IDA within 12 months of the date ofeffectiveness.

3.17 There is at present one well-designed slaughterhouse in theBeni, at the Espiritu ranch, with cold storage space for about 8,000 kgof beef. The owners of this ranch are considering increasing the coldstorage capacity to 15,000 kg. The Corporacion Boliviano de Fomento (CBF)has a large well-designed slaughterhouse with cold storage chambers on itsranch at Reyes but it is in need of repairs to bring it up to a suitablestandard to handle beef for export. These plants could participate in theexport trade but as they are intended essentially to handle offtake oftheir onœn ranches they will not serve as central abattoirs through whicha large proportion of Beni offtake could be handled.

3.18 Trinidad is the major center for slaughter of cattle in the Beniwith a throughput of 11,000 cattle per year through two slaughterhouses,both of primitive design and lacking cold storage. The majority of cattlein the Beni are within one week's travelling time of Trinidad by stock route.The airstrip there is being improved with assistance from USAID, to providefor all weather operations and night landings and takeoff. It appears tobe the logical site for a central slaughterhouse for the Be.i. P-ovisionis made in the Project for finance for construction of or new slaughterhousewith capacity for slauglhtering 40 cattle per hour. Estwi- eu cost of sucha plant is approximately US$550,000.

3.19 In addition to the amount of US$550 -' provided in the Projectfor construction of a new slaughterhours riiaance would be provided for re-pairs to the existing CBF plant at Reye , for cold storage facilities at LaPaz or other sites for handling of beef from the Beni and for training of upto six meat inspectors. Overall, an amount of US$800,000 would be providedto cover all of these items. Expenditure of IDA funds on any of these itemswould be subject to IDA approval following receipt of the report of the con-sultants (para 3.15). It would also be conditional on formation of a com-pany which would provide at least 45% capital investment in the new slaughter-house.

3.20 The Bolivian Government has maintained a policy of controllingexports of beef and cattle by licensing, which has in the past virtuallyprecluded exports. During negotiations, assurances were obtained that theserestrictions would be removed before Credit effectiveness. In January 1971,a permit was issued for the export of cattle for slaughter to Lima (para3.14). A system of beef price control setting lower maximum prices for lowergrades of beef and permitting higher prices for better grades would encouragedomestic consumption of the lower grades and export of the higher grades,increasing export earnings. Assurances were obtained during negotiations

- 13 -

that the Government's beef pricing policy would be amended along these lineswithin nine months of submission of the report of the consultants engaged tostudy meat marketing (para 3.16), and that the Government would submit aplan for establishing a meat inspection service and a timetable for implement-ing it, both satisfactory to IDA, before any funds from the Credit were com-mitted for construction of slaughterhouses or cold storage facilities.

3.21 Air Transport of Beef. For many years to come, air transport willremain the only system of transport for the great bulk of the beef output ofthe Beni. The existing fleet of aircraft engaged in this operation can con-tinue to provide a good service provided they are adequately maintained.There is already one DC6 in service with another one to be added very soonand they can provide transport for beef to Peru and northern Chile at rea-sonable rates. For the contract for sale of 18,000 steers to Lima, trans-port will be by Hercules aircraft provided by the buyers. During negotia-tions, assurances were obtained that the Government would take all measureswithin its powers to ensure provision of an adequate air transport service tomeet the needs of the Project, including fixing of freight rates at levelsgiving efficient operators a reasonable margin of profit. These freightrates were raised by approximately 10% early in 1970, following an inquiryby an inter-ministerial committee.

C. Cost Estimates

3.22 The total cost of the Project is estimated at US$11.0 millionequivalent, with a foreign exchange component of 62%. The major categoriesare shown below:

% Foreign--- b$ (Million) - ----- US$'000------ Exchange

Item Local Foreign Total Local Foreign Total Component

Beef Ranch & SheepProperty Sub-ProjectBeef Ranches (250) 25.0 42.5 67.5 2,100 3,600 5,700 63Sheep Properties (150) 10.4 19.2 29.6 880 1,620 2,500 65Technical Services 4.2 3.1 7.3 350 260 610 43

Sub-total 39.6 64.8 104.4 3,330 5,480 8,810 62Incremental Working Capital 6.6 8.8 15.4 550 730 1,280 57

Total 46.2 73.6 119.8 3,880 6,210 10,090 62

Cattle Slaughtering & MeatMarketing Sub-ProjectConsultant Services 0.1 1.2 1.3 10 100 110 90Slaughterhouse Construc-

tion and Renovation /1 4.3 5.2 9.5 360 440 800 55

Total Project Cost 50.6 80.0 130.6 4,250 6,750 11,000 62

/1 Finance for training of meat inspectors is included in this item.

- 14 -

D. Proposed Financing

3.23 The estimated Project cost of US$11.0 million would be financedas follows:

Slaughter-Ranchers/ houses

Category IDA BAB Farmers Companies Total- - US$ million -

Beef Ranch Development 3.60 1.00 1.10 - 5.70Sheep PropertyDevelopment 1.62 0.58 0.30 - 2.50

Technical Services 0.26 0.35 - - 0.61

Incremental WorkingCapital 0.73 0.55 -- 1.28

Sub-total 6.21 2.48 1.40 - 10.09(Distribution) (62%) (25%) (13%) - (100%)

SlaughterhouseConstruction/Renovation 0.45 - 0.35 0.80

Consultant Services 0.1 0.01- - 0.11

Sub-total 0.55 0.01 0.35 0.91(Distribution) (61%) _ (?M%) (100%)

Total Project Cost 6.76 2.49 1.40 0.35 11.00

(Distribution) (62%) (22%) (13%) 3 (100%)

/1 This amount will be contributed by Government rather than by BAB.

3.24 The proposed contribution from the IDA Credit of US$6.8 million isbased on the estimated foreign exchange component of expenditures under eachcategory of the Project. As under Credits 107-BO and 171-BO, cattle ranch-ers would contribute 20% of costs of on-ranch development. Sheep rancherswould contribute only 12% as they would in general be unable to provide asmuch finance as cattle ranchers. An amount of approximately 10% for con-tingencies is included in the cost estimates for each category of expendi-ture.

BAB Contribution

3.25 BAB would be required to provide approximately US$2.5 million equiv-alent for technical services and loans to ranchers. The projected flow ofProject funds through BAB (Annex 8) shows that the maximum deficit arisingfrom the Project in year 3 would be US$1.3 million equivalent, if interestdue from BAB to the Government were deferred during the disbursement period.

- 15 -

3.26 BAB's ability to find its contribution to this Project is partlydependent on its other resources and requirements. Excluding IDA funds,BAB at June 30, 1970, had about b$27 million (US$2.2 million) available asexternal resources (see Annex 1, Table 1). These resources are a number oflines of crelit for specific purposes. BAB should be able to maintain itslevel of external borrowings for those sectors outside the scope of the IDACredits and the proposed IDB livestock loan. Under this latter loan, BABis required to provide US$855,000 but approximately US$500,000 of thisamount will be provided by the Government to BAB.

3.27 To examine BAB's ability to contribute to the proposed IDA Credit,a cash flow projection was prepared for BAB on the basis that:

(a) the Government would contribute about US$500,000 to theIDB Project; and

(b) other net resources and lending to sectors outside thescope of IDA Credit and the proposed IDB loan would remainconstant.

3.28 From this it was apparent that BAB would not, during the develop-ment period, be able to meet its proposed contribution and pay interest toGovernment on the Third Livestock Loan without drawing on its other lines ofcredit. Over the proposed 16-year repayment period, however, BAB could paythe IBRD rate of interest to Government and still have a surplus at the endof the period. During negotiations, BAB and Government suggested that toovercome this short-term problem, Government would for five years allow BABto defer payment of this interest, except for the amount required to meetIDA service charges. The deferred interest would be capitalized and addedto the principal at the end of year 5. The capitalized value of this inter-est would be approximately US$1.5 million.

3.29 A projection of BAB's cash flow over the next five years (Annex9) assuming (a) and (b) above, and the deferment of interest shows a cumula-tive deficit reaching about b$ 3.5 million (US$0.3 million equivalent) bythe end of the second year. This is only about 1-1/2% of total portfolio andcould be easily covered from additional borrowing from current lines ofcredit, etc. Subsequent cash surpiluses would quickly cover this deficit andthen allow BAB to build up its reserves and loan portfolio.

E. Procurement

3.30 Goods required for development of cattle ranches and sheep pro-perties would be obtained by property owners through existing commercialchannels. Experience under Credit 107-BO has shown that these channelsare adequate for Project purposes. Vehicles and office equipment for theLPD would also be purchased througlh existing commercial channels.

- 16 -

3.31 All purchases of breeding livestock would be subject to the ap-proval of the Project Director, with respect to quality, suitability andprice. Breeding rams and ewes would have to be imported from the neigh-boring countries of Argentina, Chile, and Peru or from Uruguay. Plant andequipment supplies for abattoirs would be subject to international competi-tive bidding and contracts for construction and renovation of abattoirswould be subject to competitive bidding.

P. Organization and Management

Administration and Technical Services

3.32 Government would be the Borrower as under Credits 107-BO and171-BO. All lending to cattle ranchers and sheep property owners under theProject would be done through BAB. The Project Director appointed for Credit107-BO would also serve as Director for this Project. He would also be thedirector of the LPD established within BAB under Credit 107-BO. The LPDwould provide technical services and prepare property development plans asa basis for all subloans to both cattle ranchers and sheep property owners.

3.33 The Project Loan Committee, created under Credit 107-BO andcomposed of the BAB General Manager, the BAB Credit Manager and the ProjectDirector, would continue to have responsibility for approval of subloansrecommended by the Project Director on the basis of property developmentplans drawn up by staff of the LPD. It would disapprove loan applicationsonly on the basis of the prospective borrower's creditworrhin2ss. Assur-ances on these points were obtained at negotiations. Financially and admin-istratively BAB would process the approved cattle rarc' and sheep propertysubloans through its Trinidad and Oruro regional offices, respectively.Assurances were obtained during negotiations that IDA approval would be ob-tained for any individual subloans in excess of US$100,000 equivalent asunder Credit 107-BO and 171-BO.

3.34 A Project Commission has been established comprising representa-tives of the Central Bank, Ministry of Agriculture, Ministry of Finance, Fed-eration of Ranchers of the Beni and BAB. This Project Commission would beresponsible for drawing up terms of reference, acceptable to IDA, for the con-sultants to be engaged for further investigations on cattle slaughtering andmeat marketing (para 3.16). It would also be responsible for engaging andsupervising the consultants. It would review the report of the consultantsand prepare recommendations for review with IDA before further expendituresunder the cattle slaughtering and meat marketing sub-project would be made.

G. Lending Operations

3.35 IDA funds would be channeled through a Project Account at the Cen-tral Bank. Under the first two Credits, funds were passed on to BAB for

- 17 -

approved project purposes at an interest rate of 4% per annum. For theThird Project, funds would be passed on to BAB for approved Project purposesat current IBRD interest rate (7-1/4%) for a period of 16 years, includinga five-year grace period on repayment of capital and on interest except foran amount of 3/4% per annum. The resultant spread of 4-3/4% is consideredadequate to cover BAB's expenses associated with the Project, provision fordoubtful debts and to enable BAB to accumulate reasonable reserves (paras3.25-3.27).

3.36 Long-term subloans would be made by BAB to cattle ranchers to cover80% of on-ranch investment cost and to sheep property owners to cover 88% ofon-property investment cost. In both cases, subloans would be at an interestrate of 12% per annum, or such other rate as may be agreed from time to timebetween IDA, the Borrower and BAB, for a period of 12 years, including afour-year grace period on repayment of principal.

3.37 BAB would also make short-term loans to participating sheep andcattle ranchers over the first five years of the Project to cover their re-quirements for working capital as determined by the relevant ranch developmentplan. These loans would be at an interest rate of 12% per annum, or suchother rate as may be agreed between IDA and BAB and for periods up to twoyears as determined by the ranchers' ability to repay. Assurances wereobtained during negotiations that short-term loans would be made on theseconditions.

3.38 Bolivia's rate of inflation during the past few years has heldsteady at about 4-1/2% per annum. If this rate continues during the Creditcommitment period of the subloans, there would not be a need for indexingof subloans at a nominal interest rate of 12%. If, however, the rate ofinflation should increase substantially, then a suitable system of indexingwould be neeced to sustain a positive rate of interest and prevent impair-ment of capital. Assurances were obtained during negotiations that if therate of inflation in Bolivia should rise above 8% per annum during thelife of the Credit, Government would ensure that BAB would make no furtherloan commitments nor permit further withdrawals in respect thereof underthe subsidiary Loan Agreement until an agreement had been reached withIDA on arrangements to be applied for indexing in respect of future sub-loans.

3.39 Terms and conditions for loans for construction of a new slaughter-house or renovation of existing ones would be determined at the time IDA ap-proval of such loans was requested, following receipt of the consultants'report.

H. Disbursements

3.40 Disbursement of the Credit would be made, subject to appropriatedocumentation and certification by the Project Director against:

- 18 -

(a) 78% of long-term subloans for ranch development;

(b) 57% of short-term subloans to cattle and sheep ranchersto cover their requirements of working capital;

(c) 85% of approved expenditure for consultant services tocarry out studies and submit recommendations on cattleslaughtering and meat marketing;

(d) the foreign exchange cost of technical services providedthrough the LPD of BAB; and

(e) up to 55% of expenditure approved by IDA (100% of BABloans) on construction and renovation of slaughteringand cold storage facilities and on training of up tosix meat inspectors.

I. Auditing

3.41 Accounts of the existing IDA Credits within BAB are subject to reg-ular internal auditing and are also audited each year as part of the generalexternal audit. Assurances were obtained during negotiations that separateaccounts would be kept by BAB and the Central Bank for the Project and thatthese accounts would be audited annually by an independent accounting serviceacceptable to IDA and that the audited accounts would be submitted to IDAwithin 3 months of the close of the financial year of the respective institu-tions.

IV. MARKETS, PRICES, PRODUCER BENEFITS AND REVENUE GENERATION

Beef Markets and Prices

4.01 As a result of increasing production arising from the three IDA-financed livestock Projects, it is expected that there will be increasingsurplus of beef for export from the Beni in the future. This is estimatedto be of the order of 8,000 tons by 1975 and 17,000 tons by 1980. Provideda sound system of marketing of cattle and meat is introduced, as proposedunder the Project, there should be little difficulty in selling these sur-pluses in Peru, northern Chile and northwestern Brazil.

4.02 The present system of price controls results in a substantial in-centive to export, but the elimination of quantitative restrictions and theintroduction of price control regulations to provide a system of qualita-tive differentials (para 3.18) would further stimulate exports as well asproduction of higher quality beef. The 'official' price in the Beni isb$ 4.60 (US$0.39 equivalent) per kg carcass beef for cattle delivered tothe slaughterhouse. There is some variation in actual prices paid from

- 19 -

b 4.20 to b$ 4.90 per kg, depending largely on whether the transaction iscash or credit. The wholesale meat trader meets costs of slaughter (aboutb$ 0.1 per kg) and air freight (b$ 1.10 to b$ 1.20 per kg) and sells beef excold store in La Paz at a price of b$ 6.30 (US$0.53 equivalent) per kg whichis well below the wholesale price in Lima (US$0.70 per kg) and northernChile (US$0.69 per kg). The price of b$ 4.60 per kg has been used in as-sessing future returns to ranchers, and this is considered a conservativeestimate of future price trends.

Markets and Prices for Mutton and Wool

4.03 Statistics on mutton production and consumption are inadequate.However, there is strong demand for mutton at a price equivalent to b$ 7.00(US$0.59 equivalent) per kg carcass weight. The production increase arisingfrom the Project is estimated at approximately 1,450 m tons of carcassmutton per year by year ten. This could be absorbed readily at the currentprice, particularly as the mutton would be of much better quality thanthe present supply. However, it would probably be purchased as a substitutefor beef and thus lead to an increased surplus of beef for export.

4.04 About 90% of the national production of wool is of coarse,inferior quality from criollo sheep. Criollo wool sells at b$ 3.00 tob$ 7.00 per kg, wool from cross bred sheep at b$ 8.00 per kg and wool frompure corriedale sheep at b$ 9.00 per kg. The local textile industry is aready market for finer wool from breeds such as corriedale and theircrosses. Current imports of better quality wool and wool products arevalued at about US$1.0 million annually. No difficulty is anticipatedin marketing the additional production of about 575 tons per year ofbetter quality wool from the Project at the above prices.

Producer Benefits

4.05 Substantial increases in income would accrue to ranchers andsheep property owners from investments under the Project (see Annexes 3,4 and 5). Typical results based on projections for the beef cattle ranchand sheep property models are shown below:

- 20 -

Before After AfterDevelopment 6 Years 10 Years

Beef Cattle Ranch:Total Herd (Animal Units) 622 1088 1186Production (No. of Cattle) 103 195 282Net Cash Income (b$ 000's) 40 41 122Herd Value (b$ 000's) 420 768 924

Sheep Sub-Cooperative:Total Herd (Sheep Equiv.) 550 750 900Wool Prod. (kg) 624 1690 2620Sheep Sales (No.) 135 217 288Net Cash Income (b$ 000's) 3 3 16Flock Values (b$ OOO's) 42 73 134

Sheep Cooperative andMedium Sized Property:

Total Herd (Sheep Equiv.) 2060 2940 3310Wool Prod. (kg) 2505 7278 10350Sheep Sales (No.) 516 1127 1180Net Cash Income (b$ OOO's) 6 9 80Flock Value (b$ 000's) 159 366 491

4.06 The financial rate of return on incremental investment is estimatedat 18% to the cattle ranchers, 20% to the sheep cooperatives and privatesheep properties and 17% to the sheep sub-cooperatives (Annex 10).

Revenue Generation

4.07 From Year 7 onwards, cattle ranchers would accumulate increasingcash balances. By Year 10, the aggregate incremental cash balance isestimated at US$2.25 million for 250 ranchers. Insofar as a land tax nowunder consideration by the Government, or other new taxes, are not introduced,most of this would represent disposable income and a large proportion of itwould be saved. In addition, ranchers would have substantially larger cattleherds which would provide a base for further increase in herd numbers. Therewould still remain substantial opportunity for further increases in beef cat-tle numbers on the extensive grasslands of the Beni. Provided appropriatemeasures are taken to ensure adequate incentives to export, it is expectedthat most of the additional revenue accruing to cattle ranchers would beinvested in further ranch development.

4.08 In the case of the sheep properties, total annual incremental cashbalance by Year 10 is estimated at about US$430,000, but, for the individualmembers of the cooperatives and sub-cooperatives increased cash income wouldonly be small -- US$200 and US$50 respectively. Most of this extra incomewould, no doubt, be used for consumption rather than for savings. The ownersof the medium sized sheep properties would probably save a larger proportionof their additional income and re-invest it in further property development.

- 21 -

V. ECONOMIC BENEFITS AND JUSTIFICATION

5.01 The Project is expected to increase annual production, in approxi-mately 10 years, by 10,400 m tons of carcass beef, 1,450 m tons of carcassmutton and 575 m tons of wool. It is expected that a large proportion ofthe beef would be exported for a return of US$5.5 million equivalent, netof freight. The additional wool production would have a value of approxi-mately US$410,000 and it would be used to replace imports. The additionalmutton, valued at US$850,000, would be consumed locally. The sheep sub-project would have considerable social benefits as it would provide addition-al income to over 3,000 families on existing smallholdings on the altiplano.

5.02 The economic rate of return on the new investment under the beefranch and sheep property development sub-project is estimated at 18%(Annex 11).

VI. RECOMMENDATIONS

6.01 During negotiations assurances were obtained that the Governmentwould:

(a) take all measures within its power to ensure the provisionof air transport facilities adequate for the needs of theProject including, without limitation, the establishmentand maintenance of air freight tariffs at levels adequateto ensure a reasonable profit for existing air transportoperators carrying livestock or livestock produce to do-mestic and foreign markets (para 3.21);

(b) if the rate of inflation in Bolivia should rise above 8%per annum during the Credit commitment period, ensure thatBAB would make no further loan commitments nor permit with-drawals in respect thereof under the Subsidiary Loan Agreementuntil an agreement with IDA had been reached on arrangementsfor indexing to be applied in respect of such further loans(para 3.38);

(c) engage consultants, approved by IDA, with terms of referenceand on terms and conditions acceptable to IDA, to carry outinvestigations and make recommendations on cattle slaugh-tering and meat marketing and submit the report of saidconsultants to IDA within 12 months of the date of Crediteffectiveness (para 3.16);

(d) within nine months of receipt of the consultants' report,and with due regard to the recommendations included therein,adopt a beef price policy acceptable to IDA to provide

- 22 -

for differential prices for meat of different grades andqualities (para 3.20); and

(e) prior to commitment of any funds from the Credit for con-struction or renovation of abattoirs or cold-storage facil-ities or for training of meat inspectors, submit to IDA aplan for establishment of a meat inspection service of astandard satisfactory to IDA and a timetable for implement-ing it (para 3.20).

6.02 During negotiations, assurances were obtained that BAB would:

(a) make subloans to cattle ranchers, on terms and conditionsacceptable to IDA, to cover 80% of total on-ranch invest-ments for approved Project purposes (paras 3.04 and 3.36);

(b) make subloans to sheep property owners, on terms and condi-tions acceptable to IDA, to cover 88% of total on-propertyinvestments for approved Project purposes (paras 3.07 and3.36);

(c) during the first five years of the Project, make short-termloans to participating ranchers on terms and conditions ac-ceptable to IDA, to cover their requirements of incrementalworking capital as determined by the relevant ranch devel-opment program (para 3.37);

(d) continue to employ a qualified and experienced -o1ect

Director, acceptable to IDA, on terms and cor. : _,s ac-ceptable to IDA (para 3.11); and

(e) maintain the Livestock Project Div-, established underCredit 107-BO to provide technical services for Projectadministration and executiorn (yara 3.11) and increase itsstaff to service increased Project lending (para 3.12).

6.03 It would be a condition of effectiveness of the Credit that allquantitative restrictions on the export of beef from Bolivia had beeneliminated (para 3.20).

6.04 The proposed Project is suitable for an IDA Credit of US$6.8million. The Borrower would be the Republic of Bolivia, which would assumethe foreign exchange risk.

May 11, 1971

ANNEX 1Page 1

BOLIVIA

THIRD LIVESTOCK DEVELOPMENT PROJECT

Banco Agricola de Bolivia

Introduction

1. The Banco Agricola de Bolivia (BAB) was established by supremeDecree, dated February 11, 1942, and was reorganized in 1963. Its mainfunctions are to promote agriculture and to provide agricultural credit.The Bank is a legally autonomous government agency under the generaldirection of the Ministry of Agriculture. Long-term policies are determinedby this Ministry but allocation of funds is the responsibility of the Min-istry of Finance.

Organization and Management

2. The Board of Directors is the highest authority in the directionof BAB's activities and is composed of a President and Vice-President,appointed by the President of the Republic, and three other directors. Onedirector is appointed directly by the Ministry of Agriculture, and the othertwo are nominated by the private agricultural and livestock sectors, butmust be approved by the Ministry of Agriculture. Terms of office are 4 yearsfor the President and 2 years for all other directors.

3. The Executive Committee, consisting of the General Manager asPresident, and the managers of the four divisions of Credit, Finance andAccounting, Cooperatives and Administration, acts as a decision-making bodyand as an advisory group to the Board. This Committee evaluates and approveslarge loans, decides on procedures in default cases and performs other normalexecutive functions.

4. The General Manager is selected by the Board of Directors and isofficially appointed by the President of the Republic. He is the principaladministrative and executive authority of BAB.

5. BAB is organized into three area offices under the national office.These area offices control eight regional offices, which in turn supervise41 provincial agencies throughout the country. BAB's staff is made up ofcareer officials and numbers 216 at present, 71 of whom are located in thenational office in La Paz.

Resources

6. The authorized capital of BAB is b$ 1,000 million. Lending re-sources come in part from grants and in part from capital subscriptions bythe Government. Special lending programs are carried out by BAB as an agency

ANNEX 1Page 2

of the Government. As of June 30, 1970, total resources amounted to b$ 257.3

million, of which capital funds were b$ 86.3 million, loan funds b$ 117.1 mil-lion and agency funds b$ 55.5 million (Table 1).

Lendin& Policies and Procedures

7. BAB grants short-, medium- and long-term loans. Regulations stipu-

late that maximum terms be 18 months for short-term, 7 years for medium-termand 20 years for long-term loans. The maximum period on long-term loansmade to date has been 12 years. Loans for the purchase of machinery andlivestock can be granted on a long-term basis with a 1 to 4 year grace per-

iod. IJhile the interest rate is 12% per annum for all loans, it is mandatory

for loans originating from resources contributed by AID by the terms of the

contracts with AID. All loans must normally be secured by mortgage of realestate or chattels.

Lending Activities

8. BAB has increased its activities considerably over the last 3 to

4 years. Outstanding loans rose 40% between December 1966 and June 1969(Tables 2 and 3). Over this same period, liabilities rose by 126% as most

of the new sources of funds came from borrowings rather than capital (The

source and terms of foreign credit can be seen in Table 4.). However, BAB'sdebt-equity ratio is low at 0.72:1. With the proposed livestock loans from

IDA and IDB, debt equity ratio will rise to about 3:1 -- a figure lower than

many banks.

9. As of June 30, 1970 BAB's total portfolio was aQllows:

b$ 'OO0 %

Outstanding Normal Loans 153,135 83.2Loans on Default 31,213 16.8

184,348 100.0Funds Committed 13,617

Total 197,965

(See Table 3 for detailed breakdown.)

10. The percentage of loans on default (16.8%) is high and arises from

lending a substantial part of the portfolio to farmers badly needing finance

but with very limited resources. As a government bank, largely capitalized

for this purpose, a high level of defaults can be expected. Also BAB does

not have a policy of readily refinancing loans in default and thus showing

them as normal portfolio. (See Table 5 for recent trends on percentage of

loans on default, which has been fairly constant between 1964 and 1970.)

11. In recent years BAB has adopted policies that should, in time,ensure improved collection performance. One is the encouragement of coop-

eratives and sub-cooperatives. A loan to a group is not only safer but more

ANNEX 1Page 3

easily administered than many loans to individuals. It is also more effec-tive in helping the individuals. BAB has also increased its lending to the

large and medium size farmers (particularly livestock) and a great part of

the increased future lending will go to this group.

Efficiency

12. BAB made small profits in 1966/67 and 1967/68, incurred a small

loss in 1968/69, and in 1969/70 broke even (Table 6). Considering the low

cost of BAB's resources, profitability is disappointing. Between 1964 and1968, loans under US$1,000 comprised 60% of the number but only 8.3% of the

value of loans granted. Large loans to cooperatives and individual loansover US$10,000 comprised 9% by number but 65% by value.

13. BAB is aware of the administrative costs of small loans and is en-deavoring to direct its assistance to small farmers by means of cooperativesand sub-cooperatives. With the increased lending program to large and medium

size farmers and cooperatives under the proposed IDA and IDB Livestock Proj-ect, efficiency should improve.

14. At present, salaries and associated costs comprise over 60% oftotal expenditure. (Salaries compare well with civil service and other sala-ries in Bolivia.) To obtain a guide to efficiency, BAB has delineated be-tween its various programs and prepared separate profit and loss statements.However, before these will provide a worthwhile guide to profitability, amore accurate determination of administrative costs is necessary. While BAB

has made progress on its accounting procedures, management is aware that these

need further strengthening and have a program for additional specialists andmore training. In connection with the livestock project in Santa Cruz, IDBstaff will assist BAB to determine this breakdown. Under Loans 107-BO and171-BO, IDA required BAB to establish and maintain separate accounts.

15. Part of the high costs of BAB's staff is a result of difficultiesin communication. This necessitates the establishment of many small andoften unprofitable agencies throughout the country. Consideration shouldbe given to closing some of these offices, except for, say, one day perweek when staff could come from a nearby larger office. With better organi-zation, it is felt that present BAB staff could cope with a greater volumeof lending and, apart from specialists needed for new programs, should be

adequate for several years.

Accounting and Auditing

16. BAB has an accounting section in La Paz that maintains reasonablerecords of all BAB activities. Accountancy procedures in branches are im-proving under the guidance of the head office staff.

17. External auditing is performed annually. AID has employed anauditor for recording BAB loan records and to assist BAB with its internalauditing section, which is now well established. The Chief Internal Auditorreports to the Board of Directors through the General Manager.

ANNEX 1Page 4

18. Generally, auditing and accounting practices appear satisfactory,except for the break-down of costs of administration (para 15). More use ofcost analysis as a management tool is required.

May 11, 1971

ANNEX 1Table 1

B O L I V I A

THIRD LIVESTOCK DEVELOPMENT PROJECT

Banco Agricola de Bolivia

Statement of Funds(As of June 30, 1970)

Initial Amount Amount Amount notAvailable Drawn yet Drawn

LOAN FUNDS

Inter-American Development Bank CBF/BID-1-SF 1,920,000 23,o40 23,o4o -

Agency for Internation Development AID-511-028 2,100,000 24,224 l0,473 13,751Bank of America - Sugar Cane - Santa Cruz 500,000 6,ooo 6,ooo -

Bolivia Central Bank:Tropical Production (Refinanced) 1,410,000 17,000 10,771 6,229

Bermejo Sugar Cane 500,000 6,ooo 1,750 4,250

International Development Association IDA-107/BD 2,000000 24,000 22,345 1,655

IDA-1 71/BD l 400000 16 800 - 16,800Sub-total ............. ,0 7 7,379 42,65

AGENCY FUNDS

Colonization Program BID-29-SF/BO 2,600,000 30,875 27,676 3,199iural Development Program BD-35-SF/H) 1,100,000 13,062 11,400 1,662

Coffee Program AID-443-60027 40,000 480 320 160

Wheat Program AID-1018 20,000 240 240 -

Rice Warrant and Production AID-1020 600,000 7,200 1,230 5,970

Argentine Government Loan 300 000 3 634 2 181 1 453

Sub-total ............. . 4,660 , 5,43001 7 t2SE117,42 55,129

BAB CAPITAL

Share Capital (Subscribed out of AID Loans to Government 5,664,500 67,974Donated Capital (ex-SAC) 1,598,000 19,179s:apital not represented by Snares (tovernment initial

orovision and recoveries) 92 800 1 114Leas: 7'355'3 ZeNet Losses (Cumulative to present year) 161,500 1 938

7,193,800 86 329Total ................. 2 . 2j't2

May 11, 1971

ANNEY. 1Table 2

BOLIVIA

THIRD LIV ',sTOCK DEVFLOPMENT PROJRCT

Bancorjcola De Bolivia

Consolidated Balance Sheets

ASSETS December 31, 1966 December 31, 1967 June 30, 1968 June 30, 1969 June 30, 1970- ----------- -------- ----------- - ---------- --- -$b ' 000------- --- ------- -- ------- -- - ------------ Cash 11,836

Local Currency 11,631 7,531 9,082 10,103 10,169Foreign Currency 526 519 695 592 l ,617Time deposits in foreign currency 2,063 531 2,793 443

Loan Portfolio 14,421 8,581 12,570 11,138

Normal Loans 75,520 81,743 85,805 106,402 111,755 173,581Past due Loans 2,174 2,353 2,075 1,826 2,105Loans in hands of Legal Dept. 13,316 15,027 14,855 23,811 24,200Interest & Commissions Receivable 7,287 8,337 7,286 11,894

Less Provision for Doultbf"1. Debts 4,257 5,330 5,958 1. 7,812 9,37386,753 101,079 105,1114 131,513

Accounts receivable 939 8314 6,157less nrovision - 150

993 955 939 683Pronerty and Eouiipment

(Less depreciation) 1,964 2,279 2,548 4,415 4,435

Other Assets 667 991 1,153 1,545 8 742

Operatiors Pending 81 789 447 407 ____0

TOTAL 104.799 114,675 122,771 1149,701 204,751

LIABILITIES

Loans Payable 21,591 17,561 25,188 53,932 105,076Provision for Interest 227 179 246 442 847Provision for Indemnsities 1,108 1,362 3,158 3,187 14,ll1Provisions for exchange differences 221 239 393 144 235Collection for National Treasury 3,787 3,787 3,787 3,787 3,787M4iscellaneoos account 583 895 1.118 951 223

TOTAL 27,726 24_351 33.891 62.711 _. .114579

Deferred Interest2,406 2,340 3.81h3

Capital 85,927 87,753 87,779 88,180 88,267 86,329

Less Accumulated DeficitPrevious 637 610 2,1440 959 1,924Current Year (107) 83.663 (614) 87.917 (902) 86,540 236 86.985 ------

TOTAL _ 104 799 114,675 122,771 149,701 - 204,751

May 11, 1971

B O L I V I A

THBID LIVSTODil 4DIOO P8ROCT

BOIO AB8L.OLL EC 02UVJ5

P087.10M10 DMSTRIBDIION

1964 1965 1966 1967 1968 1969 1970)

Progren Source of FPnd. June DecenbLer Jun Debr June Decr Deer June De e Ds cber June

Old Portfolio Intern 'l Sources(Previous to and Old Loans 4.131 3.591 3.1149 2.876 2.720 2,623 1.362 1.219 1.110 1.008 .966 894 8961963)

YoNrl 1.64L 1.190 792 552 4L20 369 403 266 183 1h6 1

34 -Overdue 111 80 92 93 h 2 1lh - - - 12 -So Ltlgtti-u 2.376 2.321 2.266 2.231 2.296 2.252 9hS 953 927 862 820 894 896

Regulur BAB Eu-Co, AID-511-Funde LC.L-019 end AID-

511-22-140-4h2 32.355 43.277 57.328 60.556 73.993 77.099 83.373 88.812 86.023 76.976 77.060 74,844 79,408

Culmittud 3.0145 2.941 5.813 6.415 7.93h 7.095 9.083 8.594 6.206 2.193 2.557 1,L42 2,659Nors 24.404 34.507 46.515 47.711 59.632 61.840 65.618 70.283 70.196 62.087 61.573 57,858 61,930Overdue 1.733 2.236 988 2.283 613 1,704 2.377 2.138 1.8b1 2.639 1i.03 2,972 i,487Is Litigntion 3.173 3.55h 4.013 h.148 3.814 6.501 6.296 7.796 7.779 10.057 11.427 12,572 13,332

Oegul BA3B 0ID-1/SF 11.9Th 15.572 18.983 18.896 17.80L 16.457 15.8h1 16.256 15.362 311.349 12.463 11.293 10,464

1june0l 10.848 l4.325 17.464 16.710 31.611 11.473 9.475 10.774 9.916 8.588 5.299 5,072 4,755Ovurdu- - 398 680 1.353 187 318 226 246 243 302 256 336 336

n Litigatigon 1.066 848 838 833 6.006 4.666 6.140 5.236 5.203 5.459 6.907 5,885 5,373

Thr-1 level- 35-SF/Bo 108 14b 928 3.639 3.149 5.002 7.958 10.217 10,629 10,679099000

C.-intted 78 78 393 2.125 1.177 1.209 2.976 2.381 1,083 197U.Lmlo 30 66 535 1.507 2.233 3.597 LO355 7.263 8,164 80,72

'ovrdue - - 6 39 199 331 359 892 232To Litigtioon - - 298 211 484 1,578

Clnom.-tio 29-SF BO 375 1.021 1.O0l 2.742 14.851 14.302 13.991 13.885 30,346 29,67fiO.064 3,1.0

C..nittod 81 68 l. 1.069 11.485 a.031 7.180 4.759 11,025 20,056DormSl 295 983 817 1.673 2.908 5.468 6.409 9.112 26 80Overdue - - 120 - 326 - 102 IL 631In t.tg - - - 133 - -L-

Coffee Coguer- AID-511-24-150-niLli-lo o n 43/60027 48o 180 480 440 402 209 362 320 320

Coeitted 220 220 - - - - -Nornal 260 260 480 440 1OO 209 - 2B0In Litigution - - - - - - 362 o -

- 3104ioe Conner- Al-lOin, ofeoialtottlon gonoE-o' 1.699 3.680

C-o,tlttul - 2Noovul 1.699 1.977overdue 1.7031

mport -nd iID-511-LCL-Lou. Pur- 028 820 6.549 6.9h2 9.574 10,274 10,584

or=Lnted 332 1.002 960 2.581 2,462 ,46o0Noml 488 5.547 5.274 3.209 3,797 7.253Overdoe _ 262 41 338 77I. LitigAtion - - 146 3.743 3,677 1,734

SCu-r rune C eotrLL Book 332 1,793 1,790 1.5';5 1,75,4CF-nittOd 138 331 46 -loonl 144 1,462 1,747 1,730 1,754

Wheot 4ID-511-LC-10108 37 268 634 031 510ToLLitted 6 61 314 150 103NoroLL 31 194 287 10 2 74o-erdue - - 24 281IT Litiuti-n - 13 9 32 113

Pice AID-511-LCL-102C 2,41C 1,525 2,8s5 1,349 1,187Co uetted 363 360 304 - _No.e-l 2,Z67 - 1.807 41 291Zverdue i,i65 678 924 179To Lititonlvn - 60 934 017

Deiry Cattle AengetteWv G.orereneet 872 2,102 2,063 2,087CsLLLtted 203 225 225 220no-mel 669 1,077 560 96vord-e - - 0IT Litigati-o - - 1,208 1,7f4

s Cg-r Banee Ovk of A.-erca 5,520 5,436 2,266 1,849Cumotted 385 200 290N-orenel 5.137 5,146 13 Oe cOverdue 970e Litigution - - 1,842

Benti Livst-ok 1DA-107/BO 9,607 22.881 33.908 39,218CgLLmintted 2,061 4,699 3,782 3,702lonooal 7,946 10,182 2369828 34,38

-verie - - 298 125To Litigation - - - 1,033

Rive Corner- SOe-i.1 flodo foroollinnine v-on-oic develop..ent

(Centrel Bool) - 3,000 2,707 5,002C =cittet - 1,oo0 - 369N.eal - 2,000 - 4,633Overdue - - 2.707 -rn Litiiation

Prouctign endCoen erolelil eionSo

CereaLs AID 511-:71C-10 _ - 1,200 4,401CoLLitted _ _ 35 1,247NorL LL- 1,165 3,154OverdueIn Litiglt-on

POPT3 LIo 48, 62,440 79,460 82,811 94,192 90,639 109,136 129.527 131 565 141,022 163,229 i84,479 197,965CoLLLitted 3.045 2,941 5,813 6,574 8,300 7,822 12,277 21,590 17 824 16.710 19,156 28,139 13.617verde. 36,096 50 62 64 771 65,297 72,972 75,254 800855 69,369 97,549 102,076 117,636 120 659 153,135Ovrr 1,044 2,711. 1,766 3,720 8o4 2,144 2,623 4,45o5 02023 5,101 2,087 9,954 2,516In Litigtl-on 6,615 6,723 7,117 7,212 12,116 13.419 13,381 14,118 13,909 17.135 23,550 25,827 28,697

I<ay 11, 1971

B O L I V I A

-THIRD LIVE:STOCK DEVELOPENT PROJECT

H BANCO AGRICOLA DE BOLIVIA

DESCRIPTION OF E'XTE7R1AL LINMES OF CREDIT

(June 30, 1969)

Date of Total Amount Grace Period Interest Rate TermSource Use nig (US$ 00) (Years (%(Years)

LOAN FUNDS

IDB Normal Loans 4/15/64 1,700 4- 4.5 104/27/65 220 -- -- --

AID Import of US Goods 3/22/66 2,100 9½ 1 (10 yrs) 402.5

BANK OFAMERICA Sugar Cane- Santa Cruz 12/15/68 500 -- 7.5 3

IDA BENI Livestock 5/26/67 2,000 5 4 16

ID- BENI Livestock (interim) 6/30/69 1,400 5 4 16

AGENCY FUNDS

IDB Colonization 5/20/65 2,600 3 4 15½

TDB Rural Development 6/26/65 1,100 3 4 15

AIlD Coffee 14/18/67 140 -- 7 6

AID Wheat 1/15/68 20 5 1 (5 yrs) 20

14

AID Rice Warrant & production 5/16/68 600 3 2 (3 yrs) 20

14ARGENTINE JIGOVERNMENT Dairy Cattle 7/18/68 300 1 4 3

CENTRAL BANK Rice Marketing 6/19/69 900 -- 6 1

IDB Oriental Livestock Proy. 4/21/70 5,000 5 3.25 25

B O L I V IA

THIRD LIVESTOCK DEVELOPMENT PROJECT

"3 BANCO AGRICOLA DE BOLIVIA

'0 Loans on Default

Dec. 31196D4 Dec 31. 1966 Dec 31, 1967 Dec. 31, 1968 June 30, 1969 ec. 1 130 Ju

Consolidated Portfolio 62,440 - 82,811 - 98,638 - 129,528 - 141,021 - 163,230 - 184,479 - 197,965 -

Less: Comitted Loans 2,941 - 6,574 - 7,821 _ 21,591 - 16,709 - 19,156 - 28,139 - 13,617 -

Effective Portfolio 59,499 100.0 76,237 100.0 90,817 100.0 107,937 100.0 124,312 100.0 144,074 100.0 156,34o 100.0 184,348 100.0

Normal Loans 50,061 84.1 65,297 85.6 75,255 82.9 89,369 82.8 102,076 82.1 117,637 81.7 120,659 77.2 153,135 83.1

Loans on Default 9,438 15.9 10,940 14.4 15,562 17.1 18,568 17.2 22,236 17.9 26,437 18.3 35,681 22.8 31,213 16.9

Consolidated Portfolio (ExceptLoans of Old Portfolio) 58,849 - 79,935 - 96,015 - 128,309 - 160,013 - 162,266 - 183,585 - 197,139 -

Less: Committed Loans 2,941 - 6,576 - 7,821 - 21,591 - 16,709' - 19,156 - 28,139 - 13,617 -

Effective Portfolio 55,908 100.0 73,361 100.0 88,194 100.0 106,718 100.0 123,304 100.0 143,108 100.0 ,,,446 lo0.0 183,522 100.0

Normal Loans 48,871 87.4 64,745 88.3 74,886 84.9 59,103 83.5 101,930 82,7 117,503 82.1 120,659 77.6 153,135 83.4

Loans on Default 7,037 12.6 8,616 11.7 13,308 15.1 17,615 16.5 21,374 17.3 25,605 17.9 34,787 22.4 30,387 16.6

Source: Computed using data from Table 3.

B O L I V I A

THIRD LIVESTOCK DEVELOPMENT PROJECT

H Banco Agricola de Bolivia

H Consolidated Profit & Loss (1966-70)

Jan. 1, 1966- Jan. 1, 1967- July 1, 1967- July 1, 1968- Jui- 1, 1969-Dec. 31, 1966 June 30, 1967 June 30, 1968 June 30, 1969 June 30,1970

I_N C 0 M E

Interest 8,760 4,854 11,562 12,541 16,089Commissions 264 126 173 246 222Other 180 64 491 1,305 823

Total .............. 9,204 5,044 12,226 14,092 17,134

OPERATING EXPENSES

Salaries 4,191 2,202 5,438 6,169 6,592Payroll taxes 1,543 528 1,264 1,461 1,492Provision for indemnities -- 141 336 404 517Office expenses 181 114 191 316 352Service expenses 302 174 420 568 591Travel expenses 364 190 468 821 679Vehicle maintenance 242 120 290 365 392Legal expenses 98 35 15 141 124Other expenses 54 86 60 226 -Audit fees 184 171 256 104 482Depreciation 283 141 338 486 1,038Provision for doubtful debts 179 535 1,274 1,514 1,634Losses of machinery, etc. 163 -- -- -- - HInterest on loans 1,484 500 974 1,753 3,254

Total .......... 9,268 4,937 11,324 14,328 17,147 c H

Profit (Loss) (64) 107 902 (236) (13)

9,204 5,044 12,226 14,092 17,134

ANNEX 2Page 1

BOLIVIA

THIRD LIVESTOCK DEVELOPMENT PROJECT

Cattle Slaughtering, Meat Transport and Marketing

Present Slaughtering Methods

1. Under the present system of slaughtering cattle in the Beni at43 widely scattered establishments no system of meat inspection or enforce-ment of hygiene is possible. Supreme Decree No. 07773 of August 1966,promulgated regulations for meat inspection and other sanitary requirementsin slaughterhouses but these regulations are not enforced either in theBeni or in other parts of Bolivia.

2. In 1969, about 97,000 cattle were slaughtered in the Beni forcarcass beef production of about 16,500 tons, 90% of which was transportedby air to La Paz and the three mining centers -- Oruro, Potosi and Quechislaon the altiplano. The average throughput per slaughterhouse was about2,200 head. However, four or five plants had a throughput in the range4,000 to 6,000 head, while many small plants had less than 1,000.

3. None of the plants operates on a full-time schedule as theycarry out slaughtering only when they have made arrangements to market aplane load of beef. Thus the largest plants (only one or two) slaughteron about 185 days a year and many of the smaller ones less than 50 daysa year. Airstrips at most of the plants are grassed and are often unusablebecause of wet weather. For safety, it is usually arranged that thechartered plane lands at the strip in the evening, slaughtering is carriedout before dawn and the meat loaded immediately. The operation employsabout 12 men and the cost is about US$1.65 equivalent per head.

4. There are two slaughterhouses at Trinidad, adjacent to the air-strip. Both are of primitive design and have no cold storage facilities.

5. The best slaughterhouse in the Beni is on the Espiritu ranch,the property of Elsner Hermanos Pty. Ltd. It is of simple but good designwith adequate equipment for handling and dressing cattle on the rail anda good water supply. The total annual slaughter of cattle at Espiritu in1969 was approximately 4,000 head, about 20% of which were purchased fromother ranchers. Espiritu itself carries about 18,000 cattle. The offtakeof 3,600 includes a proportion of steers purchased for fattening. It hascold storage capacity for 8,000 kg of beef and the owners have consideredincreasing this to 15,000 kg.

6. The Corporacion Boliviano de Fomento operates a slaughterhouse onits ranch at Reyes. Throughput in 1969 was about 2,500 head. It operates

ANNEX 2Page 2

as a service plant, slaughtering cattle for other ranchers at a fee ofb$ 18 (US$1.50 equivalent) per head.

7. Apart from a few ranchers, such as Espiritu, who have cold storageand sell their beef wholesale in La Paz, sales of beef from the Beni toLa Paz are made through about 16 wholesalers belonging to the Associacionde Proveedores de Carne. Individual wholesalers have cold storage chambersin La Paz with an aggregate capacity of approximately 110 m tons; i.e.,about 3 to 4 days' supply for La Paz.

8. In July 1969, the Federation of Ranchers of the Beni signed anagreement with the national mining corporation (COMIBOL) to supply 320 mtons of carcass beef per month at a price of b$ 4.60 per kg (net of tax)delivered at the slaughterhouse in the Beni.

Supply and Demand

9. Total offtake of the Beni in 1969 was about 102,000 head, 97,000being slaughtered in the Beni and 5,000 being transported by river to TodosSantos for slaughter for Cochabamba. There was previously a movement ofabout 15,000 head per year to Santa Cruz but this has been virtually stoppedbecause of taxation by the municipality of Ascension of cattle en route.

10. La Paz and the mining centers, which absorb over 90% of the Beni'sbeef output, consumed about 24,000 tons of carcass beef in 1969, one-thirdcoming from the altiplano and two-thirds from the Beni.

11. Production of carcass beef from the Beni has been increasing inrecent years, both on ranches participating in the IDA Project and on non-participating ranches. In 1970, there was a surplus of cattle for slaughter,estimated at 1,500 tons of beef above demand within Bolivia. Some of theproduction increase has been due to offtake of steers purchased from Brazilfor fattening but increasingly in the future there will be productionincreases through enlarged breeding herds and improved productivity.

12. An analysis of farm development plans of ranchers participating inthe IDA Livestock Development Project indicates that from these herds alone,there should be an increase by 1975 of 30,000 cattle for slaughter, equivalentto 7,660 tons of carcass beef and by 1980 of 81,000 cattle and 18,700 tonsof beef, above the 1970 production level. In addition, there will be sig-nificant increases in production arising from the IDB financed project inthe Santa Cruz and Chaco areas; some further increases can also be expectedfrom ranches in the Beni not participating in the IDA Project and fromlivestock owners in other areas. Allowing for growth in demand of 3-1/2%per annum in La Paz and the mining centers, it is estimated there will be asurplus of about 10,000 tons of beef for export from the Beni by 1975 and ofabout 19,000 tons by 1980.

ANNEX 2Page 3

Export Markets

13. Peru is a substantial importer of meat as shown by the followingofficial projections of imports for 1970, given to the appraisal mission inNovember 1969.

PERU

Projected MeatImports, 1970 Carcass BeefLive Cattle Equivalent Value

(no.) (m. tons) (US$)

Live Cattle ex Colombia 73,000 16,110 14,016,000Live Cattle ex Argentina 30,300 8,330 6,635,700Frozen Beef ex Argentina - 4,430 2,215,000Chilled Beef ex Argentina - 1,200 852,000Beef Offals 9,050 3,496,600

Total Beef and Offal 39,130 27,215,300

Frozen Mutton 8,100 3,402,000Sheep Offals 1,115 276,500

Total Meat 48,345 30,893,800

14. In addition to the above sources of imports, there is a largemovement of live cattle from Ecuador to Peru. Until 1966, some beef fromthe Beni was imported by air to Arequipa in the southern highlands of Peru.Exports in 1966 were estimated at about 600 m tons but the trade has beencurtailed by regulations that require all beef imports to Peru to be handledthrough the Government buying agency in Lima (EPSAP) and by Bolivian Govern-ment action to limit exports.

15. Discussions by the appraisal mission with Government officials inLima in November 1969 indicated that Peruvian authorities would considerfavorably import of beef from Bolivia through EPSAP, provided it was ofsuitable quality and price. Carcass beef of steers 3 to 4 years old, withdressed weight of 200 to 220 kg of the type that can be produced in the Beni,is quite acceptable.

16. The official price of carcass beef in Lima in November 1969 wasUS$700 equivalent per ton delivered into cold store. This is equivalent toapproximately b$8.32 per kg and it has almost certainly risen since then.After allowing for air freight to Lima, estimated at about b$ 2.10 per kg,the Lima market should provide a better return than the present price ofb$ 4.60 per kg for the markets of La Paz and the mining centers of thealtiplano.

17. In September 1970, Peruvian importers endeavoured to make acontract with producers in the Beni for purchase of about 1500 tons of beef

ANNEX 2Page 4

for delivery to Arequipa. This contract fell through because of failure toobtain an export permit from the Bolivian Government. However, in January1971, a contract was finalized between EPSAP and the Federacion de Ganaderosdel Beni for export of 18,000 steers to Lima for slaughter over 6 months anda permit for the export has been issued.

18. Northern Chile. The mission did not visit Chile, but the surveyof live cattle and meat marketing carried out under the First LivestockProject investigated prospects for export of beef from Bolivia to thatcountry. Chile as a whole is an importer of 40,000 to 50,000 m tons ofbeef per year, practically all from Argentina in the form of both livecattle and beef. Within Chile, livestock production is concentrated main-ly in the central and southern regions. The northern zone imports beefand cattle from Argentina and from other parts of Chile. In January 1971representatives of the Chilean Government visited Bolivia to endeavour toenter contracts for purchase of beef from Bolivia.

19. Northwestern Brazil. There is a market in some of the medium-sizedtowns of northwestern Brazil, such as Rio Branco, Guajara Mirim and PortoVelho, for beef or cattle from the northern Beni and the Pando Departments.In January 1971, one rancher in the Beni entered a contract to supply 750steers per month for slaughter to these towns.

Future Slaughterhouse Requirements

20. Present slaughter of approximately 97,000 cattle per year in theBeni is equivalent to approximately 390 per day on the basis of 250 days ofoperation per year. Projected offtakes for 1973 and 1975 are equivalent toapproximately 520 and 720 cattle per day, respectively.

21. The plant at Espiritu and the one at Reyes, if it is reconditioned,could handle some beef for export to Peru and Chile in the near future.However, there is a need to construct a new plant to operate as a centralabattoir and handle the bulk of the cattle to be slaughtered for export.

22. For a variety of reasons, the additional capacity could best beprovided through a central slaughterhouse at Trinidad, at present the majorcenter for cattle slaughter in the Beni. For purposes of hygiene and meatinspection to meet export requirements, a central plant is much more suitablethan a number of small plants. It would also be in a better position toestablish and maintain market outlets for beef on both internal and exportmarkets. Furthermore, it could cater to the needs of the different marketsby supplying meat of different grades and qualities, e.g., higher pricedcuts of hindquarter beef for the Lima market. As the Trinidad airstrip isbeing equipped for all-weather and night operations within 2 years, a centralplant with cold storage chambers would permit much more efficient use ofaircraft than is presently possible.

23. It is considered that a plant at Trinidad could expect to attaina throughput of about 50,000 cattle by 1974, through increase of offtake

ANNEX 2Page 5

and diversion of cattle from existing small slaughterhouses. This through-put would be expected to increase rapidly thereafter.

Air Transport

24. Because of lack of roads within the Beni and between the Beni andthe altiplano, practically all beef from the Beni is transported by air.This situation will almost certainly continue for many years to come.

25. At present the six air transport operators engaged regularly intransport of beef from the Beni make about 50 round trips per week, flyingbeef to La Paz, Oruro, Potusi and Quechisla on the altiplano. At the timeof appraisal, freight rate was fixed by government on the basis of b$ 2,400(US$202) per hour flying time for a C-46, equivalent to a cost of b$ 1.40(US$0.12) per kg of beef from Trinidad to La Paz. This rate gave operatorsonly a small margin for profit but it has since been raised by about 10%.

26. With adequate maintenance, the existing fleet has a capacity tohandle about 2000 tons of beef per month between the Beni and La Paz,assuming only 20 flights per plane per month. The actual supply at presentto La Paz and the mining centers is about 1300-1500 tons per month. Withone DC6 in service and another to be brought into service soon there willalso be adequate capacity to handle transport of the exportable surplus toPeru and northern Chile for some years to come. Under the contract forsale of 18,000 steers to Lima for slaughter, transport will be by Herculesaircraft provided by the Peruvian importers.

27. Figures on payloads and estimated freight costs between Trinidadand La Paz and Lima are given below for the C-46, the DC-6A and the Lock-heed Hercules, each used to capacity:

ReturnFlight Capacity

Aircraft Hours Load Time Cost per m tonsRoute Type Per Year (m tons) Hours Kg (b$) Per Year

Trinidad C-46 1,200 5.5 3.4 1.23 1,900to La Paz DC-6A 2,000 13.5 2.6 0.86/1 10,400

Hercules 3,800 20.0 1.9 0.7371 40,000Trinidad-Lima andReturn DC-6A 2,000 13.5 6.3 2.10/1 4,250Direct Hercules 3,800 20.0 5.15 1.9971 14,700Trinidad/2

Lima andReturn via DC-6A 2,000 13.5 7.2 2.47/1 3,750La Paz Hercules 3,800 20.0 5.8 2.407T 13,100

/1 Costs calculated with full payload but without backloading; costsinclude amortization of cost of aircraft at 12% over 7 years forDC-6A and over 15 years for the Hercules.

/2 This route would be undertaken only if there was backloading Lima-La Paz or La Paz-Trinidad, which would lower the quoted freight cost.

May 11, 1971

BOLIVIA

THIRD LIVESTOCK DEVELOPMENT PROJECT

x 4,000-ha Beef Cattle Breeding/Fattening RanchProjections of On-Ranch Investments

o 3

InvestmentPhasinr by',Year

Average Units Unit Average Cost 1 2 3 Total Cost for

Investment Per Ranch Cost Per Ranch Cost Cost Cost 250 Ranches F.E.C./

Category B$ B$O000 B$OOO0 B$'OO0 B$1000 Pesos '000 US$ '000 - U$$2000

Fencing(km) 20 3,200 64 20 22 22 16,000 1,347 50 673

Watering Facilities(no.)Farm ponds 1 2,000 2 ) 500 42 - -

Wells 1 3,000 3) 10 5 5 750 63 - -

Well-mill-tank .6 25,000 15 ) 3,750 315 50 157

Buildings (no.)Barns 1 5,000 5 3 2 - 1,250 105 20 21

Housing 1 12,000 12 4 4 4 3,000 253 20 50

Machinery Tools & Egui me)nt - - 6 6 - - 1,500 126 50 63

Corrals (no.) sets 1 8,000 8 4 4 - 2,000 168 - -

Pasture Establishment (no.) 20 600 12 4 4 4 3,000 253 25 64

Breeding Cattle (no.)Cows or heifers 90 900 81 81 - - 20,250 1,705 100 1,705

Bulls 13 3,000 39 21 9 9 9,750 820 100 778

Contingencies 23 15 4 4 5.750 503 17 89

Total 270 168 54 48 67,500 5,700 63 3,600

1/ F. E. C.: Foreign Exchange Component.

HILJ

ANNIII1

Table 2BOLIVIA

THIRBD LIVESTOCK D7IVELOPAWNT PBSIECT

4.000-ha Beef Cattle Breeding/patteping 5.n.hHer -1,eeot Proejectl

Before -- - Bhd of Projeet Tear - - - - - - - - - - - - - - - - - - - - - - -Category Develop,eet 1 2 3 4 5 6 7 8 9 10

Herd Composition

Bull3 12 16 16 16 16 18 18 18 18 18 18Breeding Coo 287 391 395 406 409 450 i50 450 450 450 450Clalee 11.1. 144 216 238 264 286 315 315 315 315 315Heifer, 9-24 o-onth. 72 72 72 108 119 132 143 157 157 157 157Steers 9-24 raonth3 72 72 72 108 119 132 143 158 158 158 158Heifer, 21-36 ,eoth, 68 69 69 70 106 117 130 11.0 151. 151. 151.Steer- 24-36 emeth. 68 68 69 69 106 117 129 110 155 155 155Steers 36-4.5 -moths 65 65 65 66 68 101 114 126 137 152 152Coll Cow,s 22 22 31 32 32 32 36 36 36 36 36Porcha,ed Steer, - 50 50 50 50 - - - - -

Total 810 969 1,055 1,163 1,289 1,388 1,478 1,5hO 1,580 1,595 1,595

Anial Unit, (a.oo) 622 781 791 877 975 1,036 1,188 1,114 1,179 1,186 1,186

Stocking Rate ha/a... 6.5 5.1 5.1 L.5 4.1 3.9 3.7 3.5 3.1 3.4 3.4

Technical CoeffiCient,

Effectire C3aling Percenta8 e 50 50 55 60 65 70 70 70 70 70 70Mortality Rate (Percentage:

Cows 10 10 8 6 5 5 5 5 5 5 5Other, 5 5 h 3 2 2 2 2 2 2 2

Eatractime Hate (Percentage) 12 10 9 9 9 9 13 IL 15 17 18Total Carrying Capacity (a'.o') 900 950 1,050 1,150 1,200 1,250 1,250 1,250 1,250 1,250 1,250Carcass Weights (kg):

Steer- 3-4 yeere 180 180 180 180 180 200 200 200 210 210 210Heifer, 2-3 year, 150 150 150 150 180 180 180 200 200 200 200C1l1 Coo, 150 150 150 150 180 180 180 200 200 200 200Bull. 200 200 200 200 200 220 220 220 250 250 250Porchased Steer, 180 180 180 180 180 190 - - - - -

Porchaseo

Bo11 3 7 3 3 4 5 3 h 3 3 3Breeding Cow,/Heifer 90 - - - -Steer, - 50 50 50 50 - - - - - -

Tota1 3 147 53 53 54 5 3 h 3 3 3

Mortality (No.)

Bu1 1 - - - - 1 - - 1 - 1 -Breeding Coo, 29 29 31 20 24 20 22 22 22 22 22Heifer 9-24 ..oths 3 3 3 2 2 2 2 3 3 3 3Steer 9-24 .moths 4 4 3 3 2 3 3 3 3 3 3Heifers 24-36 .- Dth, 3 3 3 2 1 2 2 2 3 3 3Steer- 24-36 ucnthe 3 3 3 3 2 2 3 3 3 3 3Steers 36-48 sontle 1 1 1 1 1 1 1 1 1 1 1P-r.has.d Steer, - - 1 1 1 1 - - -

Tctal 1.3 3 -45 36 34 31 33 35 35 36 35

Sale3

Steer, 36-48 Month, 64 64 64 64 65 67 103 113 125 136 150Purchased Steer, - - 19 49 19 49 - - - - -Coll C.., 22 22 22 31 32 32 32 36 36 36 36Heifer, 24-36 e.oth. 14 - - - 10 11 57 70 79 93 93Hollo _ 3 3 3 3 3 3 3 3 3 3 3

Total 103 89 138 147 159 162 195 222 243 268 282

Total Carca,. Beef Prodocti- (kg) 17,520 15,120 25,220 26,570 28,400 31,600 37,720 44,460 50,000 55,110 58,050

Vaue of Salle, (S B$4.6/kg) B$ 80,592 70,932 116,012 122,222 130,640 1b5,360 173,512 204,516 230,000 253,506 267,030

Mar1h 20, 1970

BOLIVIA

THIRD LIVESTOCIC DUEVTPMENT PROJECT

4,000.ha Beef Catthe Breiding/Fattening RanchProiection i! Operiting uosts

(Pesos)

- - - - - __ - __ - __ __ - __ __ -_--- Project Year v - - - - - - - - - - - - - - - - - -P! Beforeo Category npp o=pn t 1 2 3 4 5 6 7 8 9 10

Cow Tax4/ 144 144 189 196 207 233 250 250 250 250 250

U Slaughter Tax- 780 780 960 1,087 1,087 983 1,215 1,725 1,965 2,153 2,153

Labors' 8,400 8,400 8,400 10,800 10,800 10,800 10,800 13,200 13,200 13,200 13,200

Maintenance of Labor 7,200 7,200 7,200 9,600 9,600 9,600 9,600 12,000 12,000 12,000 12,000

Vaccires and /Veterinary Supplies 8,130 8,130 11,050 14,154 18,080 23,022 28,680 31,300 33,080 34,380 34,380

Salt, Mineral Supplants6/ 813 813 1,842 3,033 4,520 6,395 8,604 9,390 9,924 10,314 10,314

Maintenance and Repairs:Iachinery 10% 400 400 400 400 400 400 400 400 400 400 400Buildings 5% 750 1,100 1,400 1,400 1,400 1,400 1,400 1,400 1,400 1,400 1,400Fences 5% 1,000 2,000 3,100 4,100 4,100 4,100 4,100 4,100 4,100 4,100 4,100Water 5% 500 1,000 1,250 1,375 1,375 1,375 1,375 1,375 1,375 1,375 1,375Corrals 5% - 200 400 400 400 400 400 400 400 400 400

Purchase of BullsX 9,000 - - - 12,000 15,000 9,000 12,000 9,000 9,000 9,000

Contingencies 10% 3,712 3,017 3,619 4,656 6,396 7,368 7,581 8,754 8,709 8,897 8,897

Sub-total 40,829 33,184 39,810 51,201 70,365 81,076 83,405 96,294 95,803 97,869 Q7,869

Purchase ofdASteers - ; 35,000 35,000 35,000 35,000 - - - - - -

Total Operating Costs 40,829 68,184 74,810 86,201 105,365 81,076 83)405 96,294 95,803 97,869 97,869

1/ B$0.50 per cow.T/ B$7.50 per head slaughtered.3/ Foreman B$300 per month; other laborers B$200 per month.4/ B$200 per man per month. FM'

g/ B$10 per head befjre developmrfit, risini to B$20 per head Year:6.6/ Salt B$0.80 before developmen; rising to B$6.75 in Year 8; mineral supplants B$1.00 before development, rising to B$6 in Year 8./ For replacement bulls only, other purchases financed ex BAB loan.

BDLIVIA

THIRD LIVESTOCK DEVELOPMINT PROJECT

4.000-ha Beef Cattle Breeding/FatteninR Ranch- Fin-anciaProj cions

(T'0O Pesos)

Before - - - - - - - - - - - - - - - - - - - - - - - - - Project Year - - - - - - - - - - - - - - - - - - - - - - - - - - - -s Developmen t 1 2 3 4 5 6 7 8 9 10 L1 12

G CASH INFLOW

o0 Cattle Sales 80.6 70.9 116.0 122.2 130.6 145.4 173.5 204.5 230.0 253.5 267.0 267.0 267.0°) Long Term Loan - 134.4 43.2 38.4 - - - - - - - - -

Short Term Loan - 45.0 45.0 45.0 45.0 25.0Rancher's Contribution _ 33,6 10.8 9.6 - - - - - - - - -

Tctal Cash Inflow 80.6 283.9 215.0 215.2 175.6 170.4 173.5 204.5 230.0 253.5 267.0 267.0 267.0

CASH OUTFLOW

Investnmt1/ - 168.0 54.o 48.0 - - - - - - - - -Operating .cpenses 40.8 68.2 74.8 86.2 105.4 81.1 83.5 96.3 95.8 97.9 97.9 97.9 97.9

Total Caah Outflow 40.8 236.2 128.8 111i.2 105.4 81.1 83.5 96.3 95.8 97.9 97.9 97.9 97.9

ANNUAL CASH BALiANCE BEFORE DEBT SERVICE 39.8 47.7 86.2 81.0 70.2 89.3 90.0 118.2 134.2 155.6 169.1 169.1 169.1

SERVICE CHAROES

Long Term Loans

Interest - 8.1 18.7 23.6 25.9 25.3 24.0 22.0 19.4 16.2 12.3 7.8 2.6Amortizatimn - - - - - .0.8 10.8 21.6 .1. 32.4 32.4 43.2 43.2

Short Term Loan:

Interest - 2.7 5.4 5.4 5.4 5.4 1.5 - - - - -Amortization - - 45.0 45.0 45.0 45.0 25.0 - - -

Total Service Charges - 9.9 69.1 74.0 76.3 86.5 61.3 43.6 41.0 48.6 44.7 51.o 4J5.8

ANNUAL CASH BAIANCE AFTER DEBT SERVICE 39.8 37.8 17.1 7,0 ( 6.1) 2.8 A.7 75.6 93.2 1C7.0 124.4 11861 123.3

INCREUISETAL ANNUAL CASH BALANCE - ( 2.0) (22.7) (32.8) (45.9) (37.0) (1.1) 45.8 53.4 67.2 84.6 78.3 83.5

INCRE14ENTAL HERD VALUE (ANN1JAL) - 106.6 6.6 57.0 101.9 32.7 36.6 39.2 119.4 5.4 - - -

TOTAL INCREMt5TAL BALANCE (ANNUAL) - 104.6 (16.1) 24.2 56.0 ( 4.5) 35.5 85.0 172.8 72.6 84.6 78.3 t3.5

] Includes ranchers contribution to investment, 50% as labor.

2/ Repaid 5% years 5 and 6; 10% years 7 and 8; 15% years 9 and 10; 20% years 11 and 12.

BOLTVIA

THIRD LIVESTOCK DEVELOPMENT PROJECT

Sheep Cooperative or Medium SizedPrivate Property - 2,000 ha

Investment Phasing by YearsInvestment Unit Average Cost 1 2 3Category Average Cost Per Farm Cost Cost Cost Total for 50 Farms

Units/Farm - - -Pesos-- - -B$ B$ B$ B$'000 US$1000

o Structures and Equipment

o Fencing (km) 4 3,200 12,800 12,800 - - 640 54Farm Ponds (No) 3 3,000 9,000 3,000 6,000 - 450 37

% Wells (No) 6 2,000 12,000 6,000 6,000 - 600 50O Tractors and Implements (Sets) ½ 115,000 57,500 57,500 - - 2,875 240

Tools and Equipment (Sets) - 12,000 12,000 6,0oo 6,000 - 600 50Sheep Yards (No) 2 2,500 5,000 2,500 2,500 - 250 21Shearing Sheds (No) ½ 25,000 12,500 12,500 - - 625 52Shearing Plants (No) ½g 14,400 7,200 7,200 - - 360 30Veterinary Equipment (Sets) 1 3,000 3,000 3,000 - - 150 12

Pasture

Pasture Establishment (ha) 400 300 120,000 45,000 45,000 30,000 6,0oo 500

Livestock!/

Breeding Rams (No) 40 1,200 48,000 24,000 24,000 - 2,400 200Ewes 2-4 Tooth (No) 150 300 45,000 30,000 15,000 - 2,250 188

Contingencies-/ 34,000 20,500 10.500 3,000 1,700 142

Total 378,000 230,000 115,000 33,000 18,900 1,576

1/ Imported from neighboring countries.

2/ Estimated at approximately 10%.

(D&

BOLIVIA

TN1RD LlVESTOCO DE"ULMMT PROJEdT

ShoB o d :Is_.oo 00o h.

CATE30RY _ beifore - - - - End of Tear - - - - - - - - - -20CATEGOR ~ ~ ~ ~ ~ ~ Deeopnnt 02 36567 8-20

Flcok Oos,po.1tlnn (No.)

Flook Rage (2rp-eved breeds) _ 20 33 66 80 80 80 80 80FPlock Hes (Criolio) 144 90 70 30 - - - - -breeding E-e 1,800 1,900 1,965 1,968 2,0 0 2,000 2,000 2,000 2,000Lbste 990 990 1,140 1,277 1,378 1,500 1,500 1,500 1,5002-Tooth Bees 425 425 435 500 575 627 705 705 7052-Tooth Wether 275 275 335 303 325 277 150 150 1502-Tooth Rn, 1is 150 100 170 150 150 255 255 255

.,thorn 350 350 350 350 350 350 350 350 350

Coil Een 196 _ 196 152 195 295 300 300 300 300

Tote1 4.330 4,396 4.1'5 _ 4859 _.153 5,284 5,340 5,340 5,340

Dsothe (N..)

Flock Rams lh 14 11 8 7 6 5 5 5Breedi.g E.-s 180 180 170 l56 138 140 120 120 120

eL, 140 iLl 120 137 127 124 90 90 90

2-Tocth Ewns 43 43 38 35 35 L0 37 42 422-Tooth Wethers 28 28 25 27 21 24 14 9 92-Tooth R-2s 15 15 14 8 12 11 12 15 15Wethers 35 35 32 28 25 25 21 21 21Cu11 Ev _ 19 _9 18 12 21 21 18 18 18

Total 474 _7_ 428 413 386 391 317 320 320

Proha-es (No.)

Breeding Rraes - 20 20 - - - - - -Breeding Bwes _ 100 502-Tooth Bee.2-Tooth RBen _ - _ - - - - -

Total - 120 70

Solno (No .)

1o110e,sv 13 68 40 60 37 20 20 20 22Rans (9-23 month,) 107 107 167 56 130 113 113 215 215Raen I,ass - - - - 100 200 300 30C 300C011 Bee 177 177 178 130 27. 274 282 282 282Col1 2-Toot} Eoes 6 6 13 44 - 95 170 243 243Wethers - 2-Tooth 112 112 118 180 157 129 142 20 21Wethers _0 100_ 100 100 100 100 130 100 10O

Total 516 570 556 580 798 931 1,127 1,180 1,18C

Brfore - _ _~~~~ ~~~~~ - - - - - -- - - - Y - - - - - - - - - - - - - - - - - - - - - - - - - - - - -__ ievelops,t 1 2 3 4 6 7 8 9-20

lechniorl CoefiToleote

,hbing % 55 55 62 65 70 75 75 75 75 75

M-rt-lityAdoe- 10 10 9 6 7 6 6 6 6 o

(anOn; 6 134 14 _2 12 10 9 6 6 8 6otio Rs- to E-e 7 3 6 6 5 4 4 4 3 4 4

Stooking Rate (Corriedale Sheep Eqoivalents) 2,060 2,150 2,340 2,620 2,780 2,850 2,9L0 2.990 3,150 3.310Corryiog Capooity (Coroedole Sheep Eqolvolents) 2,100 2,200 2,400 2.700 2,800 3,000 3,000 3,100 3,200 3,200Cooroooioo RAte i: 12 13 12 12 15 15 21 22 22 22

Wool Yields(kg)

Adult Sheep per heed 0.75 0.8 0.9 1.0 1.2 1.5 1.7 1.9 2.1 2.5Sob-Total Wool 2,505 2,725 3,074 3,682 4,530 5,676 6,652 7,296 8,3064 ,602Lameb -e, 200d - - - - O.4 0.5 0.7 0.7 G.7 C.7Sob-Total Wool - - - - 551 750 750 750 750 750Total Wool 2,505 2,725 3,074 3,682 5,061 6,426 7,276 7,946 8,614 10.350Price: oreros lep kg 6.0 6.5 7.0 7.5 8.0 0.0 6.5 8.5 9.0 9.C

Sheep laronoe WeIght (kg)

Ra 9 9 P 10 10 12 16 18 20 24Ra (9-24 months) 8 9 10 12 18 l 20 20 22 24Co.ll Ee 7 8 9 10 11 12 12 12 ill 16Ones (9-24 .ooetha) 8 8 8 9 12 14 15 16 16 16Wethers 8 9 15 0h 16 17 18 16 20 72

7loe Per Sheep (peeoe)

RBsa 63 63 63 70 70 84 112 126 131 160Rens (9-24 0o0th,) 56 63 'O 84 126 126 140 140 154 168Cull Owes 49 56 63 70 77 84 84 84 98 112Iee (9-24 001th1) 56 56 56 63 64 98 105 112 112 112Wethers 56 63 70 96 112 119 126 112 140 154Ran L-lb - -_ -_ 100 100 112 112 124 136

M-arh 20, 1970

BOLIVIA

THIRD LIVESTOCK DEVELOPMENT PROJECT

Sheep CoperatiV4- .2,000-ha-- roenticn of Sales

- - - - - - - - - - - - - - - - - - Project Year - - -- - - - - - - - - - - - - - - - - -Before

Development 1 2 3 4 5 6 7 8 9-200

Wool Sales\0

O° Wool 15,030 17,712 21,518 27,615 40,648 51,408 61,863 68,391 79,326 93,150Skins 232 232 208 206 212 215 190 208 224 243

Sub-total 15, 262 17,944 21,726 27,821 40,860 51,623 62,053 68,599 79,550 93,393

Sheep Sales

Rams 882 4,264 2,520 4,200 2,590 1,680 2,240 2,520 2,800 3,360Rams (9-24 months) 5,992 6,741 7,490 4,704 16,380 14,238 15,820 30,100 33,110 36,120Ram Lambs - - - 10,000 20,000 33,600 33,600 42,000 42,000Cull Ewes 8,673 9,912 12,460 9,800 21,098 23,016 23,688 23,688 27,636 31,584Cull 2 Tooth Ewes 336 336 728 2,772 - 9,310 17,850 27,216 27,216 27,216Whethers 2 Tooth 6,272 6,272 8,260 17, 6 40 17,584 15,351 17,892 2,520 2,800 3,080Whethers 5J6oo 6s30o 7J000 9.800 11,200 11,900 12,600 12,600 14,000 15,400

Sub-total 27,755 33,825 389458 48,916 78,852 95,495 123,690 132,244 149,562 158,760

TOTAL SAIE 43,017 51,769 60,184 76,737 119,712 147,118 185,743 20o,843 229,112 252,153

I3CREKENTAL SALES - 8,772 17,167 33,720 76,695 104,101 142,726 157,826 186,095 209,136

CDw

BOLIVTA

THIRD LIVESTOCK DEVELOPMENT PROJECT

Sheep Cooperative - 2.000 haProjection of pOerating Costs

o - - - - - - - - - - - - - - - - - Project Y e a r - - - - - - - - - - - - - - - - - - - - - - - -o Before

ITEM Development 1 2 3 4 5 6 7 8 9.20

Adidnistration 1,200 4,800 4,800 4,800 4,800 4,800 6,ooo 6,000 6,000 6,000'IO Labor 24,000 24,000 24,000 26,000 28,000 30,000 34,000 35,000 35,000 35,000o Maintenance:

Tools & Equipment 10% 800 1,700 2,300 2,300 2,300 2,300 2,300 2,300 2,300 2,300Buildings 5% - 750 750 750 750 750 750 750 750 750Water Facilities 5% 100 550 1,150 1,150 1,150 1,150 1,150 1,150 1,150 1,150Yards 5% - 75 150 150 150 150 150 150 150 150Shearing Plant 10% - 720 1,440 1,440 1,440 1,440 1,440 1,440 1,440 1,440Machinery 10% 3,000 3,700 9,500 9,500 9,500 9,500 9,500 9,500 9,500 9,500

Veterinary ExpensesS/ 4,330 6,600 6,830 7,430 10,300 10,570 10,680 15,020 15,020 15,020Shearing Expeases - 720 720 720 800 800 840 880 920 929Dipping B$0.15 per head 650 660 680 740 770 790 800 810 810 810Salt & Minerals B$0.20 per head 870 880 910 990 1,030 1,060 1,070 1,070 1,070 1,070Pasture Maintenance _ - - - - - 5,000 10,000 15,000 17,500Taxation 2/ 2,280 2,460 2,480 2,490 3,370 4,090 4,680 4,900 4,900 4,900Sundries t10%) 3.720 4,760 5,570 5,850 6,440 6,740 7.840 8.900 9 400 9,650

TOTAL 4o,950 52,375 61,280 64,310 70,800 74,114 86,200 97,870 103,410 106,160

INCREMENTAL OPERATING COSTS 11,420 20,330 23,360 29,850 33,180 45,250 56,920 62,460 65,210

1/ B$1.0 before development, B$1.5 in Years 1-3, B$2.0 in Years 4-6, B$3.0 from Year 72/ B$4 per head slaughtered plus B$5 per family per year

BOLII

THIRD LIVESTOCK DEVELOPMENT PRhJWT

Development of a 2,000 Ha Sheep Cooperative

Financial Projections

Project Years

CATE30RY BeforeDevelopment 1 2 3 4 5 6 7 8 9 10 11 12 13-20

Pesos '000

o CASH INFLOW

Total Sales 43.1 51.7 60.2 76.7 119.8 147.1 185.8 200.8 229.2 252.2 252.2 252.2 252.2 252.2

BAB Long-Term Loan - 2 02 .4 101.2 29.0 - - - - - - - - - -

BAB Sbort-Term Loan 1/ _ 13.0 45.0 75.0 72.0 65.0 30.0 - - - - - -

Cooperatives Contribution - 27.6 13.8 4.0 - -

Sub-Total 43.1 294.7 220.2 184.7 191.8 212.1 215.8 200.8 229.2 252.2 252.2 252.2 252.2 252.2

CASH OUTFLDW

Investment - 230.0 115.0 33.0 - - - - - - - - - -

Operating Expenses 36.9 48.4 57.3 60.3 66.8 70.1 82.2 92.9 98.4 101.2 101.2 101.2 101.2 101.2

Sub-Total 36.9 278.4 172.3 93.3 66.8 70.1 82.2 92.9 96.4 101.2 101.2 101.2 101.2 101.2

CASH BtLANCE (Before Debt Service) 6.2 16.3 47.9 91.4 125.0 142.0 133.6 107.9 130.8 151.0 151.0 151.0 151.0 151.0

DEBT SERVICE

Interest on Long-Term Loan (12%) 13.8 30.4 38.2 39.9 38.9 36.9 33.9 29.9 24.9 18.9 11.9 3.9 -

Long-Term Loan Hepayment/ - - - - 16.6 16.6 33.3 33.3 49.9 49.9 66.5 66.5 -

Interest on Short-Term Loan (12%) .8 3.6 7.2 8.9 8.2 5.7 1.8 - - - - - -

Short-Term Loan Repayment - 13.0 45.0 75.0 72.0 65.o 30.0 - - - - - -

Sub-Total 14.6 47.0 90.4 123.8 135.7 1214.2 99.9 63.2 74.8 68.8 78.4 70.4

CASH BALANCE (After Debt Service) 6.2 1,7 0.9 1.0 1.2 6.3 9.4 8, 67.6 76.2 82.2 72.6 80.6 151.0

INCRDIDITAL CASH BALANCE (Annual) - (4.5) (5.3) (5-2) (5.0) 0.1 3.2 2.7 61.4 70.0 76.0 66.4 74.4 144.8

INCRldENTAL FLOCK VALE 21b.0 29.0 50.9 32.5 33.5 35.6 28.3 24.3 40.6 34.7 - - -

TOTAL ANNUAL INCREMETAL BALANCE 19.5 23.7 45.7 27.5 33.6 38.8 31.0 85.7 110.6 110.7 66.4 74.4 144.8

NOTE: 1/ BAB to cover short-term deficits in first three years. Cooperatives will not be able to find short-term funds, as well as their contribution to development, as they

have limited resources.2/ Based on a graduating scale of repayments. IZ

BOLIVIA

THIRD LIVESTOCK DEVEIOPMENT PROJECT

Sheep Sub-Cooperative - 400 haProjection of Investment Costs

Investment PhasingInvestment Unit Average Cost - - -by Years- - -Category Average Cost Per Ranch Cost Cost Total Cost for 100 Farms

o Units/Ranch - - - -Pesos - - - - - -Pesos - - - '000 Pesos US$'000

'° Pasture Improvement (ha) 150j0

Contract Ploughingand Seeding 250 37,500 18,750 18,750

Seed 90 13,500 6,750 6,750Labor 40 60ooo 3,000 3 000

Water Supplies 35iO 57,000 28,500 20 500 5,700 475Water Supplies

Wells (No) 2 3,000 6,000 3,000 3,000 600 50

Sheep Yards: Dips (No) 1 3,000 3,000 3,000 - 300 25

Tools and Equipment (Sets) 1 5,000 5,ooo 5,000 - 500 42

Veterinary Equipment (Sets) - - 2,000 2,000 - 200 17

Implements (Sets) - _ 3,000 3,000 - 300 25

Stock Purchases-/

Breeding Rams (No) 8 1,200 9,600 9,600 - 960 80Breeding Ewes (No) 30 300 9,000 9,000 - 900 75

Contingencies-/ 9.400 6,900 2,500 940 78

Total 104,000 70,000 34,000 10, oo 867

/ Imported from neighboring countries.

2/ Estimated at approximately 10%.

& |

0 m4

HJ mn

BOLIVIA

THIRD LIVESTOCK DOEVEWOP1T PROJECT

Sheep Sub-Cooperative - 1400 haFlock DeveloDment Projections

Before - - - …roject Year - - - - - - - - - - - - - - - - - - - - - - - - - - - - -Development 1 2 3 4 5 6 7 8 9 10-20

Flock Composition

rv Rams 2 15 15 20 20 20 20 20 20 20 20- Breeding Ewes 5440 531 531 532 548 551 547 549 550 550 550X- Lambs 324 324 335 346 367 386 410 410 410 410 410

2-Tooth Ewes (9-24 months) 130 133 133 140 147 157 168 180 185 185 1852-Tooth Wethers 30 33 82 101 113 119 111 111 113 113 1132-Tooth Rams 100 100 52 40 34 39 57 69 72 72 72Cull Ewes 27 68 60 59 57 75 90 101 103 109 109

Total 1,153 1,204 1,208 1,238 1,286 1,347 1,403 1,440 1,453 1,459 1,459

Deaths

Rams - - 2 2 2 2 2 2 2 2 2Breeding Zwes 81 76 53 53 48 49 50 44 44 44 44Lambs 64 58 58 54 52 52 50 50 40 40 402-Tooth Ewes 20 19 13 13 12 13 14 13 14 14 142-Tooth Wethers 5 5 3 8 8 11 10 8 9 9 92-Tooth Rams 15 14 10 5 4 3 4 5 5 5 5Cull Ewes 4 4 7 6 5 5 7 7 8 8 8

Total 189 176 146 141 131 135 137 129 122 122 122

Sales

Rams - - 1 6 4 4 4 4 4 4Rams (9-24 months) 85 81 87 39 28 25 29 46 58 61 61Cull Ewes 23 23 61 54 54 52 68 83 93 95 101Ewes (9-24 months) 2 6 7 7 7 7 7 8 18 18 18Wethers (9-24 months) 25 25 30 74 93 102 109 103 102 104 104

Total 135 135 185 175 188 190 217 244 275 282 288

Purchases

Rams 8 -Ewes 30 - - -

Technical Coefficients

Lanbing % 60 60 63 65 67 70 75 75 75 75 75Adult Deaths % 15 14 10 10 9 9 9 8 8 8 8Lamb Deaths % 20 18 18 16 15 14 13 12 10 10 10% Rams to Ewes % - 3 3 4 4 4 4 4 4 4Culling %

Ewes 10 15 12 12 12 14 16 18 18 20 202-Tooth Ewes 2 5 5 5 5 5 5 5 10 10 10

Stocking Rate Sheep Units 550 590 620 680 700 720 750 800 850 900 900Carrying Capacity 600 600 650 750 800 800 850 900 900 900 900Extraction Rate % 12 11 15 14 1," 14 15 17 19 19 20

Value of the Flock (pesos) 42,469 50,316 55,937 81,788 85,816 93,418 100,525 110,856 113,015 124,607 134,113

BOLIVIA

THIRD LIVfSTUCK DEVELOPMTMT PROJECT

Sheep Sub-Cooratives - 400 haS s roJec tion

Before - - - - - - - - - - - - - - - - - - Project Y e a r - - - - - - - - - - - - - - - - - - - - - - - - - -Development 1 2 3 4 5 6 7 8 9 lo-po

Wool Sales (Pesos) Pesos ---------------------------.-----------------------------------

Wool 3,745 4,420 5,425 6,675 8,800 11,520 14,365 16,660 19,710 21,690 23,580H' Skins 92 91 71 71 72 75 78 85 90 93 93

Sheep Sales (Pesos)

Rams - - 70 420 280 448 504 560 616 672Rams (9-24 months) 4,760 5,103 6,090 3,276 4,600 6,ooo 7,250 11,500 14,500 15,250 15,250Cull Ewes 1,127 1,288 3,843 3,780 4,158 4,002 5,236 6,972 7,812 9,310 11,312Ewes (9-24 months) 112 336 441 588 875 945 945 1,080 2,250 2,250 2,250Wethers (9-24 months) 1,400 1,575 1,720 7.252 10,416 12,138 13,734 12.978 12,852 114,560 114.560

Sub-total 7,99 o,302 1,14 14,960 20,469 23,365 27,613 33,034 37,974 41,906 44,0444

Total 11,236 12,813 17,620 21,712 29,341 34,960 142,056 49,779 57,774 63,769 67,717

Coefficients

Wool (kg)

Yields per head (Adult) .75 .8 .9 1.0 1.2 1.5 1.7 1.9 2.1 2.3 2.5Yields per head (Lambs) - - - .4 .5 .6 .7 .7 .7 .7Total Wool Production 624 680 775 890 1,100 1,440 1,690 1,960 2,190 2,410 2,620Price per kg 6.o 6.5 7.0 7.5 8.0 8.0 8.5 8.5 9.0 9.0 9.0

Sheep Carcass Weight (kg)

Rams 9 9 9 10 10 10 16 18 20 22 24Rams (9-24 months) 8 9 10 12 18 18 20 20 22 24 24Cull Ewes 7 8 9 10 11 11 11 12 12 14 16Ewes (9-24 months) 8 8 9 12 14 15 16 16 16 16 16Wethers 8 9 10 14 16 17 18 18 18 20 22

Value Per Sheep (Pesos)

Rams 63 63 63 70 70 70 112 126 140 154 168Rams (9-24 months) 56 63 70 814 200 240 250 250 250 250 250Cull Ewes 49 56 63 70 77 77 77 84 84 98 112Ewes (9-24 months) 56 56 63 84 125 125 125 125 125 125 125Wethers 56 63 70 98 112 119 126 126 126 140 140

'-,

BOLIVIA

THIRD LIVESTOCK DEVELOPMENT PROJECT

Sheep Sub-Cooperative 400 haProjection of Operating Expenses

Before - - - - - - - - - - - - - - - - - - - - - - Project Year - - - - - - - - - - - - - - - - - - - - -o _ Development 1 2 3 4 5 6 7 8 9 12-.20

o Expenses- -- _----- Pesos -----------------------------------------------------

H Managenrnt - - - - - - 1,000 2,000 4,000 4,000 4,000Labor 5,000 5,000 5,000 5,000 6,000 6,000 6,000 8,000 10,000 10,000 10,000Maintenance

Tools & Equipment 10% 400 400 800 1,200 1,200 1,200 1,200 1,200 1,200 1,200 1,200Buildings 5% 250 250 300 400 400 400 400 400 400 400 400Water Facilities 5% 200 200 400 800 800 800 800 800 800 800 800Yards 5% 100 100 200 300 300 300 300 300 300 300 300

Shearing 180 180 240 400 400 440 560 700 700 700 700Veterinary 300 600 940 1,250 1,850 2,250 2,800 2,900 2,900 2,900 2,900Dipping B$0.15 per head 180 180 180 200 200 210 220 230 230 230 230Salt & Minerals B$0.20 per head 200 200 200 250 300 350 400 400 400 400 400Pasture Maintenance - - - - - - 2,000 4,000 7,500 7,500 7,500Taxation 1/ 718 714 854 780 700 700 820 860 920 920 920Sundries T10%) 752 786 906 1,050 1,210 1,260 1,650 2,180 2,950 2,950 2,950

Total 8,280 8,610 10,020 11,630 13,360 13,910 18,150 23,970 32,300 32,300 32,300

B$4 pr sheep slaughead plus tlmnd tax B$5 per family per year.

CD

BOLIVTA

THIRD LIVUBTOCK IZV P;ODI PROJEOT

IEVlBPLOPME OF A 40D HA SHOEP SUB-ODOPHEATIVE

FTIHA.ILL PRO.CTIONB

s Bei'ore -- ProJect Year-CATEGORY DWelopjit 1 2 3 4 5 6 7 8 9 10 12 12 13-20

o~~ ~~ ~~~~~~~~~~~~~~~~~~~~-o

CASH INFWW

Total Sales 11.2 12.8 17.6 21.7 29.3 34.9 42.0 49.8 57.8 63.8 67.7 67.7 67.7 67.7

BAB Long-Term Loan - 61.6 29.9 - - - - - - - - - - -

bB Swt-Term Loan 1 / 2.0 7.0 11.0 8.0 4.0 - _ _ _ _ _ _

Sub-Cooperative Contribution _ 8.4 4.1 - - - -_ -_ _ _ _ _

Sub-Total 11.2 8h.8 58.6 32.7 37.3 38.9 42.0 49.8 57.8 63.8 67.7 67.7 67.7 67.7

CASH OuTnOd

Invefftment -70.0 34.0 - - - - - - - - - - -

Operating Epennes 8.3 10.1 12.0 12.9 13.3 13.9 18.1 24.0 32.3 32.3 32.3 32.3 32.3 32.3

Sub-Total 8.3 80.1 46.o 12.9 13.3 13.9 18.1 24.0 32.3 32.3 32.3 32.3 32.3 32.3

CASH BRLA (Bfore Dsbt Service) 2.9 4.7 12.6 19.8 24.0 25.0 23.9 25.8 25.5 31.5 35.4 35.4 35.4 35.4

D1EE SUBVICE!

interest on BAB Long-Term Loan (12%) - 3.7 9.2 11.0 11.0 10.7 10.2 9.3 8.2 6.9 5.2 3,3 1,1 -

Interwet on BAB Short-Term Loan (12%) - 0.1 o.5 1.1 1.1 0.7 0.2 - - - - - - -

Long-rm Loan Repaynt /- - - 4.6 4.6 9.1 9.2 13.7 13.7 18.3 18.3 -

Short-Term Lon Repapment _ 2.0 j.0 11.0 8.0 4.0 - - - - - - -

CASH BALUNCE (After Debt Servioe) - 0.9 0.9 0.7 0.9 1.0 4.9 7.4 8.1 10.9 16.5 13.8 16.0 35.4

INCRMETAL CASH BLAUNCE (Animal) - (2.0) (2.0) (2.2) (2.0) (1.9) 2.0 4U5 5.2 8.0 13.6 10.9 13.1 32.5

INCREMDAL FLOCK VALUE (Ann1) - 7.8 7.6 13.8 140 7.6 7.1 10.3 6.2 7.6 9.5 - - -

TOTAL INCRUCNTAL BLACE (Anual) - 5.8 5.6 11.6 12.0 5.7 9.1 14.8 11.3 15.6 23.1 10.9 13.1 32.5

NOTE, 1/ BAB to cover short-tore deficits in first 3 years as Sub-Cooperatives will not be able to supply more than their contribution to development.

2/ Beed on graduating scale of repaymento.

BOLIVIA

THMRD LIVESTOCK DEVELOPMENT PROJECT

Project Administration and Technical Services Budget(Beef Ranch and Sheep Property Development Sub-Project)

- -~~Y e a r s - - - - - - - - -1 2 3 4 5 - - -Total- Foreign Exchange Canponent

ITEMS '000 Pesos '000 Pesos -OOO US$ '000 US$ %

M, OPERATING EXPENSES0

Project Director 300 300 300 300 300 1,500 125 125 100Project Director: TravelY/ 24 24 24 24 24 120 10 10 100° Pasture Specialist 1/ 200 250 250 250 250 1,200 100 100 100

Pasture Specialists Travel- 24 24 24 24 24 120 10 10 100Regional Project Director(Trinidad) 48 48 48 48 48 240 20 -Regional Project Director(Oruro) 48 48 48 48 48 240 20 -Technicians & Veterinarians:

Trinidad 8 180 240 260 260 260 1,200 100Oruro 6 60 120 180 200 200 760 64 -

Pilot 24 24 24 24 24 120 10 - _Per Diem Allowances 70 100 112 112 112 506 42 -Office Expenses 8 10 10 10 10 48 4 -Transportation Expenses 79 97 108 108 108 500 42 -Training Grants k 48 48 48 48 48 240 20 20 100Administrative Personnel - La Paz 18 32 32 32 32 146 38 -Administrative Personnel - Trinidad 90 90 92 94 96 462 15Administrative Personnel - Oruro 16 40 40 42 42 180 10

Total Operating Expenses 1,237 1.495 1.600 1,624 1,b2b 7,52 632 265 4.

CAPITAL EXPENSES

Vehicles 144 72 - - - 216 18 18 100Office Equipment 20 8 8 - - 36 3 2 67Office Furniture 12 8 4 - - 24 2Veterinazy Equipment 36 - - - - 36 3 100

Total Capital Expenses 212 88 12 - - 312 2 23 88.5Total 1,449 1,583 1,612 1,624 1,626 7,894 656 288 5

Less Costs Shared with Credit 107-BO 288 288 - - - 576 48 27 40TOTAL COSTS TO THIRD PROJECT 1,161 1,295 1,612 1,624 1,626 7,318 6.08 261 42.9

/ Haoe Leave every 2 years2/ Overseas travel of sheep and cattle technicians. EK

B O L I V I A

THIRD LIVESTOCK DEVELOPMENT PROJECT

H PROJECTED SOURCES AND APPLICATION OF FUNDS

H LIVESTOCK PROJECT ACCOUNT (CENTRAL BANK)

THIRD LIVESTOCK CREDIT

Project Years ........... 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16

…$~~~~~~~~~~~~~~~~~~ b Million.-_______

C A S H I N F L O W

Credit from IDA for:

a) Ranch Development Loaos 12.99 20.28 19.25 7.57 1.94 -- -- -- -- -- __ __ __ __ __ __b) Ranch Short-term Loans 3.50 3.50 1.75 __ -- _- __ -- __ __ __ __ -_ __ __ __c) Slaughter House Loans 1/ __ 2.00 2.00 1.20 -_d) Technical Services 0.79 0.72 0.65 0.65 0.65 -- -- -- -- -- -- -- __ __ __ __e) Study of Meat Marketing 2/ 1.20 -- -- -- _ -- -- -- -- -- -- __ __ __ __ __

Sub-total ....... ,,.. 18.48 26.50 23.65 9,42 2.59 - - - - - -_ - - -__

Loan Repayments from BA8 -- -- -- -- -R 8.84 8.84 8.84 8.84 8.84 8.84 8.84 8.84 8.84 8.84 8.84Interest Payments from bAB (71X%)3/ .06 .24 .43 .56 .61 6.78 6.12 5.47 4.83 4.17 3.52 2.88 2.24 1.60 .96 .32

Total .18.54 26.74 24.08 9.98 3.20 15.62 14.96 14.31 13.67 13.01 12.36 11.72 11.08 10.44 9.80 9.16

C A S O U u T F L O W

Loans to BAB for:

a) Ranch Development Loans 12.99 20.28 19.25 7.57 1.94 -- -- -- __ __ __ __ __ __ __ __b) Ranch Short-term Loans 3.50 3.50 1.75 -- -- -- -- -- -- __ __ -_ __ -_ __ __c) Slaughter Houses -- 2.00 2.00 1.20 __ __ __ __ __ __ __ __ __ __ __ __d) Technical Services 0.79 0.72 0.65 0.65 0.65 -- -- -- -- -- -- -- __ -- -- --

Technical Study of Meat Marketing 1.20 -- -- -- -- __ __ __ __ __ -_ __ __ -_ _ -_Payment of IDA Service Charge (3/4 of 1%) 0.06 0.24 0.43 0.56 0.61 0.63 0.63 0.63 0.63 0.63 0.62 0.62 0.61 0.61 0.60 0.59Principal Repayment of IDA Credit -- -- -- -- -- -- -- -- -- -- 0.83 0.83 0.83 0.83 0.83 0.83

Total ... . .. . 18.54 26.74 24.08 9.98 3.20 0.63 0.63 0.63 0.63 0.63 1.45 1.45 1.44 1.44 1.43 1.41

Annual Surplus to Government -- __ __ __ -_ 14.99 14.33 13.68 13.04 12.38 10.91 10.27 9.64 9.00 8.37 7.75

Cumslative Surplus to Government -- -_ __ -_ -- 14.99 29.32 43.00 56.04 68.42 79.33 89.60 99.24 108.24 116.61 124.36

1/ Disbursement and other details to be determined by meat marketing consultants.Estimates are based on similar terms and conditions to other loans.

2/ Study by foreign consultants.3/ In years 1 to 5, 3/4 of 1% interest received. Balance capitalized and added

to principal at end of year 5.

BO0L IV IA

p. ~~~~~~~~~~~~~~~~~~~~~~THIRD LIVESTOCK DEVELOPMENT PROJECT

H ~~~~~~~~~~~~~~~~~~~~PROJECTED SOURCE AND APPLICATION OF PROJECT FUNDS

H S~~~~~~~~~~~~~~~~~~~~~~~~ARCO AGRICOIA SE BOLIVIA

1 2 3 4 5 6 7 B 9 15 11 12 13 14 15 16

LONa,O fro Central Rank Project Account:

.) R... D-.p . t / 12.99 20.28 19.25 7.57 1.94a) Ranh- Developmenth - 2 3.50 3.50 1.75 - -h) Shorgt-Tr Ranc .e ne 2.00 2.00 1.20 -

d) For TechnIcal Ser-i..a.4 0.79 0.72 0.65 0.65 0.65

Sub-total.............. 17.28 26.50 23.65 9.42 2.59

Collections fro:

a) Ranch Development Loan RePayments /- - - 1.24 2.97 5.36 6.99 9.38 11.01 13.40 15.05 10.74 4.22h) Ranh Short-ter Loan Repayments- 4.67 9.96 13.83 15.40 03.82 8.40 2.37 0.60 -- -- -- -- --c) Sloughter Houoe Loam Repayments U -- -- -- -- 0.65 0.65 0.65 0.65 0.65 0.65 0.65 0.63 --d) Interest Rece:ipts on Long-teem Loans (12%)2' -- 2.00 5.16 8.16 9.42 9.32 8.82 8.07 7.06 0.86 4.40 2.70 1.10 0.25

) Int_eret R.ceipta on Short-tern Loansa (12%) ~/ 0.28 0.88 1.43 1.76 1.87 1.45 0.76 0.24 0.04 ------ -

Sub-tota.1.............. 0.28 7.55 16.79 14.23 28.65 28.79 24.49 19.74 18.10 17.79 18.64 18.49 12.59 4.47

Total ................ 17.56 34.05 40.44 33.65 31.24 28.79 24.49 19.14 lR.lO 17.79 18.64 18.49 12.59 4.47

C ASE O U TF LO0W

a) Masch Development Loann 18.70 26.29 25.30 9.86 2.50 -- -- -- - -- --

b) Ranc h Short-ter Loans 4.67 9.96 13.83 15.40 13.82 8.40 5.37 0.60 - -- --

r) Slaughter Hoso.. Loano - 2.00 2.00 1.20 -- -- -- -- - -- --

Sub-tota.1.............. 21.37 38.25 40.93 26.46 16.52 8.40 3.37 0.60 - -- --

Loan RepaymentS to Central Rank Project Arcoont9l! -- -- -- -- -- 8.84 8.84 8.84 8.84 8.84 8.84 8.84 8.84 8.84 8.84 8.84Interet Payments to Central Bank Pr-jert Ac-&n

1 2.06 .24 .43 .52 .56 6.7R 6.12 5.47 4.83 4.17 3.52 2.88 2.24 1.60 .96 .32

Technical Sevcs1.16 1.50 1.61 1.62 1.62 0.80 0.60 0.40 0.35 0.30 0.50 0.25 0.20 0.10 -- --Adsisistration Conts BAB 11/ 0.16 0.56 1.06 1.57 1.47 1.41 1.28 1.12 0.96 0.77 0.63 0.37 0.15 0.08 0._06 0.03

Sub-total .............. 1.38 2.10 3.10 3.31 3.67 17.83 16.84 15.83 14.98 14.08 13.29 12.34 11.43 10.62 9.86 9.29

Tota.1 ............... 22.75 40.35 44.03 29.97 19.99 26.23 20.21 16.43 14.98 14.08 13.29 12.34 11.45 10.62 9.86 9.-1-9

AnnualI Cash Surplus or (Defiit) (5.19) (6.30) (3.59) 3.68 11.25 2.54 4.28 3.31 5.12 3.71 5.35 6.15 1.16 (6.15) (9.86) (9. 19)

Interna on Cost Surplus (Deficit)(77.) 12/ (0.18) (0.59) (0.98) (1.05) (0.62) (0.18) 0.04 0.32 0.56 0.84 1.20 1.70 2.07 2.05 1.61 1.08

Annual lank OSurplus or Deficit after lotetont (5.57) (6.89) (4.57) 2.33 10.63 2.36 4.32 3.63 3.68 4.55 6.55 7.85 3.25 (4.10) (8.25 (9. 11)

Osnaltiv- Cash S-rplun or (DefOsit) after Interet (5.37) (12.26) (16.83) (14.50) (3.87) (1.51) 2.81 6.44 10.12 14.67 21.22 29.07 52.30 28.20 19.05 10.84

I/ 78% of osb-Soano to cattle and sheep rancher. 6/ Twelv-yea loans, 4-years grace. 8 equal repayments of principal.2/ 57% of short-tern loon funds 7/ Both for anchen and nlasgherhooa....-3/ 100% of loans 61 Interet calcolared on v-rge of loan ... m tnc outstanding during yea.4/ Foregn o.Change componen.t 9/ lintcen-year loan; 5-yearn grac., 11 equal annual installomot,5/ ToeBy-year loan.a, 4-ynar grace on Principol; RePayment ochodule: 5%; 5%, 10%; 10%., 15%; 10/ Int-ret at 7Vl. In year 1-5, 3/4 of 1% ist-reo paid Co cover IDA charges

15%, 20%; and 20. of princIpal Balance capitalioed and added to principal.

II/ 1-1/2% of ootstandinR loans to covot gener al administrative costs.12/ Net interest rate of 7% allowd for smiler type lending.

BOLIVIA

THIRD LIVESTOCK DEVELOPM4ENT PROJECT

PROJECTED SOURCES ASD APPLICATION OF FUIDS 1971-1976i/BANCO AGRICOLA DE BOLIVIA

__-_-------__-------_------ For Year Ending June 30th ------------- _______---_____1971 1972 1973 1974 1975 1976

-- _---------- ----- -- ---------------- ----- $b '000- -------------------- _-- ---------------------

CASH INFLOW

Livestock Loans and Credits:a) IDA - Credits 107-BO and 171-BO_/ 18,500 - - - -b) IDA - Third Livestpoqk Crediti/ - 17,280 26,500 23,650 9,420 2,590c) IDB Livestock LoanJi/ - 9,540 16,760 19,360 13,840 -d) IDB Livestock Loan (Government Contrlbution)2/ - 950 1,680 1,940 1,380 -e) IDA Livestock Project Revolving Fund§/ - 1,400 1,4oo 2,500 2,500 2,500

Collections from:a) Repayments IDA Livestock Projects - - 300 1,200 2,050 3,700b) Repayments Non Livestock Portfolio 40,000 42,ooo 44,000 45,000 46,ooo 46,oooc) Interest Receipts IDA Project Sub-loans 12$ 4,300 6,800 9,400 13,300 16,800 18,500d) Interest Receipts IDB Project Sub-loans 12% - - 1,400 3,600 5,600 7,200e) Interest Receipts Non Livestock Portfolio-/ 15,000 15,000 15,000 15,000 15,000 15,000

Other Income 520 500 500 500 500 500Total 78,320 93470 116,94050 113,090 95,990

CASH OUTFLOW

Livestock Sub-loans under

a) IDA - Credits 107-BO and 171- 0 21,000 - - - -b) IDA - Third Livestpc,k Credit 3 - 21,870 33,580 30,970 12,630 920c) IDB Livestock Loar/ _ 11,650 18,380 18,800 15,120 -Sub-loans Non Livestock Portfoliol/ 40,000 42,oo0 44,000 45,000 46,ooo 46,000

Payments

a) Loan Repayments to Government under IDA Projects - - - 1,200 1,200 1,200b) Interest Payments to Government (IDA Projects) 1,000 1,680 1,840 2,030 2,160 2,190c) Interest Payments (TDB Project) - 200 720 1,440 1,700 2,380d) Interest on Non Livestock Portfolio 3,800 3,900 4,100 4,400 4,600 4,700

General and Operating Expenses 12,100 13,000 14,100 15,600 17,200 19,000Purchase of Assets, Reserves, etc. 1,200 1,400 1 600 2,000 2,4oo 2,800

Total 79,100 95,700 T -t 1023,400 79,190

Annual Surplus (Deficit)}/ (780) (2,230) (1,380) 4,610 10,080 16,800

j This projection is based on the assumption made by BAD that its borrowings, apart from the proposed livestock projects, will remain constantover this period. (BAB has manvy i)rogramsibut cornsiders that the value of sub-loans to borrowers, other than livestockrnhr, ilrmiover his erio. (RR ha man mror5msbut cnsidrs tat te vaue o subloan tbrows,thrhnlieock ranchers, will remainabout the same). BAB will be able to meet repayments due on external loans by drawings on current lines of credit.Balance remaining at June 30, 1970 and expected to be fully drawn by about June 1971.

3/ From 3overnment US$6.8 million at 7-1l41 interest. During first 5 years only 3/4 of 1$ paid - balance capitalized and repaid during years 6 to 164/ Based on IDB US$5 million - interest 4$, 5 years grace, 20 year repayment.5/ 10$ of IDB Loan Fundsi/ Project 107-BO and 171-BO7/ Assumed by BAB that non livestock lending total will be constant, but collections will show improvement. Interest rate 12% per annum.

Small deficits could be covered by slight increase in other borrowings, etc.

May 11, 1971

ANNEX 10

B O L I V I A

THIRD LIVESTOCK DEVELOPMENT PROJECT

Financial Rates of Return - Cattle and Sheep Property Models

1/

Project Years ..... 1 2 3 4 5 6 7 8 9 10-20 20

…--------------------------------------- ('000 Pesos) -------- …--------------------------------

BEEF CATTLE RANCH

Benefits

Incremental Sales (9.7) 35.4 41.6 50.0 64.8 92.9 123.9 149.4 172.9 186.4 495.4

Costs

Investment Costs 168.0 54.0 48.0 -- -- -- -- -- -- -- --

Incremental Operating Costs 27.4 34.0 45.4 64.6 40.2 42.7 55.5 55.0 57.0 57.0 -_

Total ............ 195.4 88.0 93.4 64.6 40.2 42.7 55.5 55.0 57.0 57.0 -_

Net Cash Flow (205.1) (52.6) (51.8) (14.6) (24.6) 50.2 68.4 94.4 115.9 129.4 495.4

Rate of Return: 18%

SHEEP COOPERATIVE

Benefits

Incremental Sales 8.8 17.2 33.7 76.7 104.1 142.7 157.8 186.1 209.1 209.1 331.0

Costs

Investment Costs 230.0 115.0 33.0 - -- -- -- -- -- -- --

Incremental Operating Costs 11.4 20.3 23.4 29.9 33.2 45.3 56.9 62.5 65.2 65.2 __

Total ............ 241.4 135.3 56.4 29.9 33.2 45.3 56.9 62.5 65.2 65.2 __

Net Cash Flow (232.6) (118.1) (22.7) 46.8 70.9 97.4 100.9 123.6 143-9 143.9 __

Rate of Return: 20%

SHEEP SUB-COOPERATIVE

Benefits

Incremental Sales 1.6 6.4 10.5 18.1 23.7 30.8 38.5 46.5 52.5 56.5 87.0

Costs

Investment Costs 70.0 34.0 -- - -- -- -- -- -- -- --

Incremental Operating Costs 1.8 3.7 4.6 5.1 5.6 9.9 15.7 24.0 24.0 24.0 __

Total ........... 8. n.s 37.7 4.6 5.1 5.6 9.9 15.7 24.0 24.0 24.0 __

Net Cash Flow (70.2) (31-3) 5.9 13.0 18.1 20.9 22.8 22.5 28.5 32.5 __

Rate of Return: 18%

1/ Incremental Herd Value.

April 22, 1970

BOLziVA

THRD2 LIVESTOCK DE7ELOPIENT PROJECT

Isersietel re-te 'nd Re- ite

F------------------------------------------------------------------------------- Y..,-Year of -evelop-nt-0 1 2 3 4 5 6 7 8 9 10 11 12 13 i14 1S 16 17-19 20 1

Benefits

Increontal Sales:

Beef Ranches (966) 4508 8186 10939 13564 17272 24923 31979 38428 43407 45936 46613 46613 46613 46613 46613 46613 170463

Sheep CGoperltives & Ranches 88 364 891 i8e2 3472 5251 6800 8185 9123 10213 10873 10873 10873 10873 10873 10873 10873 - 20085

Sheep Sub-COeperativ-s 32 191 528 1036 1617 2289 2953 3706 4454 5091 5487 5643 5643 5643 56143 5643 56143 14793

(846) 5063 9607 13827 18583 24812 34676 43870 52005 58711 62296 63129 63129 63129 63129 63129 63129 213341

Casts

Ieecrsenta. Investment

Boef Ranches 16800 22200 18600 7500 2400

Sheep Cooperatives & Ranchea 2300 6210 7460 3026 660

Shr-ep Sub-Cooperatives 1400 3480 4160 1360 -

lncre_ntal Operating Costs

Beef Reaches 2736 6134 9303 12690 12748 11520 11827 13377 13974 14157 14260 14260 1426o 14260 1426o 14260 14260 1 14260

Sheep Cooperatives & Ranches 114 454 909 1220 1456 1780 2229 2782 3164 3335 3390 3390 3390 3390 3390 3390 3390 3390

Sheep Sab-Cooperatives 7 48 150 306 450 625 934 1503 2069 2402 2402 2402 2402 2402 2402 2402 2402 2402

Technical Services 1161 1295 i612 1624 1626 900 800 570 1 400 300 300 300 250 200 - - - -

Adhin ist.-ative Costs 16o 56o 1010 1322 1390 1330 1190 13140 932 730 550 340 140 30 37 30 - -

24678 40381 43204 29046 20730 16155 16980 19202 20507 20924 20902 20692 20442 20282 20082 20082 20052 20052

(25524) (35318) (33597) (15219) (2147) 8657 17696 24668 31498 37787 413914 42437 42687 42847 43047 43047 43077 193289

Sncrseslntal Bevende te Government - 450 1104 1650 1173 881 904 1257 1627 1997 2231 2316 2316 2316 2316 2316 2316 2316 2316

Net Flow to ths Econonc (25074) (34214) (31947) (14046) (1266) 9561 18953 26295 33495 40018 43530 44753 145003 45163 45363 45363 45393 195605

1/ Includes inoresental raise of heeds end flecks. Ewic Rat. of Rtun 185

2/ increased r-vee to Go-vernent, llctcipalities & Universlty of Beni.

BOLIVIA

THIRD LIVESTOCK DEVELOPMENT PROJECTPROJECT AREAS

2- /

'6EAS' "O// B S *> "'

( W- 7 X \ ~~~~~COCHABAMBA .A>\.

N T A C R U IL F N T F A L I JK A I

J N E

\OSE

< ~ ~~~ .\ t IA ,* * /v

t L OX ' .'' *< .......... ,|_HI 0

U R

MAY 1971 I~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~BR D-2897RI