Document of

The World Bank

FOR OFFICIAL USE ONLY

Report No.6015

PROJECT COMPLETION REPORT

COSTA RICA - AGRICULTURAL CREDIT AND DEVELOPMiENT PROJECT

(LOAN 1410-CR)

December 31, 1985

Latin America and the Caribbean Regional Office

This document bhs a restieted disibution nd may be ud by ipients only in the performce oftheir official duties. Its contents may not otherwise be dislosed without World Bank authorkatlon.

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ABBREVIATIONS AND ACRONYMS

BACR - Banco Anglo-Costarricense(Anglo-Costa Rican Bank)

BCAC - Banco de Credito Agricola de Cartago(Agricultural Credit Bank of Cartago)

BCR - Banco de Costa Rica(Bank of Costa Rica)

CB - Banco Central(Central Bank)

CNP - Consejo Nacional de Produccion(National Production Council)

DCD - Departamento de Credito de Desarrollo - BancoCentral (Development Credit Department of CB)

IDA - Instituto de Desarrollo Agrario(Agrarian Development Institute)

IFAM - Instituto para el Fomento y Asistencia a lasMunicipalidades (Institute for Promotion andAssistance to Municipalities)

MAG - Ministerio de Agricultura y Ganaderia(Ministry of Agriculture and Livestock)

PB - Participating Bank

FOR OFFICIAL USE ONLY

PROJECT COMPLETION REPORT

COSTA RICA - AGRICULTURAL CREDIT AND DEVELOPMENT PROJECT_________ _ _(LOAN_1410-CR)

"able of ContentsPage No.

Proface ......... ^^. .. ... iB-ic Data Sheet ...... §***** ******¢***e*-** ii

Evaluation Summa-ry ...... .oo. ...... OeC. *0@Ce* .iii

I. INTRODUCTION ............*....*..*.e.........*** I

II. PROJECT FORMULATION,.&..**.e..., *o........ oo.. .o.... 1

A. Identification/Pr.paration and Appraisal 1B. Negotiations and Board App-)val ........ 2C. Project Objectives and Components 2D. Project Cost and Financing ..................... 2

III. IMPLEMENTATION .................. 2....*.* 2

A. Implementation Schedule 3B. Implementation of Project Components 3C. Cost Estimate .... 0-0- ............ 6D. Disbursement ....... 7E. Procurement 8 .... 8F. Reporting 8

G. Auditing 8H. Compliance with Loan Covenants .. e............ 9

IV. INSTITUTIONAL PERFORMANCE ............ *... .......* 9

V. ROLE OF THE BANK ,....... ............ o..... ... .oo 10

VI. AGRICULTURAL IMPACT ... .. . ..... .. a a * .* 10

VII. SUMMARY AND LESSONS LEARNED .......... ... ,......... 13

Annex 1 - Key Indicators of the Credit Component ..... 15

Annex 2 - Borrower Comments . .17

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This document has a restricted distribution and may be uwied by recipients only in the performance oftheir offi-id duties. Its contents may not otherwir be disclosed without World Bank authorization.

PROJECT COMPLETION REPORT

COSTA RICA - AGRICULTURAL CREDIT AND DEVELOPMENT PROJECT(LOAN 1410-CR)

PREFACE

This is the completion report on the Agricultural Credit and Devel-opment Project in Costa Rica (Loan 1410-CR), for which a loan of US$18.0 mil-lion was approved in April 1977. The Closing Date for the Loan was December31, 1984. Final disbursement took place on March 26, 1985, and an unusedbalance of US$144,063.95 was cancelled.

The project is the third agricultural project financed by the Bankin Costa Rica. While the two preceding projects focused on large-scalefarms, the emphasis of this third proJect was on medium and small farms.

This report was prepared by Agriculture Division A of the LatinAmerica and the Caribbean Regional Office on the basis of statistical dataprepared by the Central Bank of Costa Rica (CB); and information on the proj-ect which is available in the Bank, including: the Staff Appraisal Report(No. 1399a-CR) dated April 1, 19.7; the Loan Agreement and Project Agre^mentdated June 2, 1977; supervision reports; and correspondence with the Borrowerand internal Bank memoranda as contained in relevant Bank files.

A copy of the draft report was sent to the Borrower for comments onOctober 17, 1985. Comments received from the Borrower are attached as Annex2.

This project has not been subjected to an audit by OED.

PROJECr COMPLETIOK REPORT

CtUSTA RICA - AGRICULTURAL CREDIT AND DEVELDFt5ENT OJCT(LAO 141t4-CR)

BASIC DATA SHEET

KEY PROJECT DAt

Actual IVr Artu.a as IAppr.lsal Eatisated of AppralsalFKetisaa.r Actual Esttiate

ProJect Costs Its'r 3' . 3S.t 9Stoa. A ... t ti5S 18;,, linu 18.0 100

DistDur.ed iCqs oiiltoo' 1. 17.86 S9C-enl1lld lt'SS ollt-l - 0.14

D.t., of Syd App-oot 04/26/77 -Loso. AgroeoE Dt Iac - ,6!02/77DaLL f PI.o: Effe c-r--- 10104/72 01/21/t7 150/atace Ph'IcAl ct - oinpleted O0/93 12/84 124/.

ftp,,rrtoo lhen i C il I. I tOo LoAn

2ioeinfI 0ctp 12 31/83 12/31/84 Its/*

Ecoi.px Biate of R,;. (1 16 16/b 100Ft-anclof rvte rl PM .rn lt) 11-24 l'-i7h. InaInLt,itt-onal Perfc'rna,-e - mixied/c -Yuaber of ilrect Beneflnlarn Farmsa'd 3,260 1. 52 47

ai:,.A1f 1 2ISBRlRSEhEfSS

FY78 FY79 FYO FY71 FY82 FY83 FY84 fY85

Appoal Esrttate '(S$ mllion) 1.0 4.' 9.2 11.9 16.7 18.0 18.0 1Q .0Actoal (1SS rition) - 2.5 10.8 15.4 16.2 16.9 17.2 18.0 (est.)Acc.al a. Y of Appraisal E.f-Yta - Si 117 I II 97 94 96 100Date of Final Disboosercnt March 26. 1985

Dat. in. of Staff/Days Spectalltattons Ferformase Types ofNl0Dt ItL,-r) Pe-oons It FtIeld Represented /e Rating /f Trend/S Problesu/b

Identific-t-o Oi/74 : 2l ejfFrep-l-tioc 04/76 5 5r d,e,eAppralnci 097;6 6 95 d.. b c,f g

$cuiceCc1n' J2 if I S a I I n.a.S pervItloo 2'i ft I79 1 2 a n.a_ a. a ..nSop.,rvisioc 3 70.78 25 a.b,b.g 2 2 HSoyetclnloo _ sG759 1 I a 2 2 NSuocroniron S.f 0-. 70 2 t.c 0 0 0.8.

5,rer siton 6.U Q7; 79 4 32 b,g,h 2 1 4SO7rerOCVIS 1/7 ,2/86 2 13 a b 2 2 MOS'cer-slt- 9_' bb.C9 2 6 b,g 2 2 MOSo2 CnolCincc 9 P 1 7 a 2 1 MOSopocc'ininn !' 'r2 ' 2 16 a.e 2 1 N

Supervisfoo liSt 06/,81 . 9. .. na, n... D..Sup-ovfo.no 12 01/82 1 6 a 2 1 4Soper,-lon !3 10882 1 4 c I HSupe ointoo. 4 . .83 1 4 c 2 I sSup rrclnoon:0 It 83 4 a 2 2 4Sup.rOistoo 1t61 '22198. i 2 e c.a. n... n-.aqopeCrlnlo' 17 11 .4 2 12 a.g 2 2 MP

irHER PRfOJECT DATA

&--rVoec Republic of Cost. RicaixeVcotng Aenely - Ba.Co Centr-l do Costs RIca

- Ftioit.ri. de Agrrl.tlura y Gtnadnrla- Consejo Ractonial d. Produccton- Istitoto p8r0 el FPo.eto y A.Sftencis a la, sl,tlptlidadea,

and- HsoOIcIp1I1dad do Pe-e, Ztle.doo- itn0sterto d. Pla.iftcactoo Y Politics Ecoon.aca

f.s N-r .1 B.-c-cer J-coacy I to December 31

Nsloe c -! -reny CAbcreot.ftlcc Coltn (CY

Curr-r-y nn-g.sa lAtt4pn aiini Yenr A-trage USS1.00 - C 8,54

bntc rering Ye.- Average lSSI.OO . C 19.79-tp;etion Year Average "SS1.0 - C '5.00

F3ilo.-or Projectcarr Proposed Atlantic neveloptent Project

3 CalcuIated In teran of sonths fro. date of Board approval.t hI, rates o f ret,r c-uld nor be -e-calcited because of lack of data. owever. Indications

ace that vetoInG ore likely to be clse to appraisal estimates.C-od for the oa-ticlp.ting Lanka and IFIAM (EMad component); fair for the Ministry of P i.Ing(furfl Seelorooent Study pant o..

1y3 ar-Viofactory for MAC (E.tension and Seed coxapoo...t),

tIe CS M04-ral; 41E of the Cr-dit component), and the Ministry of Planning (overyalco -dinati- of the coo-credit component).

lTht ropteotent only be-efirlcries of the creditt coeponent. The appraisal report dt notenclaste ob. beneficiaries of th otber s-po"eotsr and no data are available on them, atcoptPlticn.e a - ogolcultuet. b - agricultural tcosanIst, c - ftanatal an lyst; d - mission leader; e -11enol ,i spe-laltscI f - agrl-ultural credtt pec-alist; g * roads specialist; h - conaultantto toooltcioft and enaluatios.

t 1 - pr.blet-free or aelr problens; 2 - moder-te problen; and 3 - mjor problet.,g - siaprovlng; 2 s etattonary; and 3 * detertotating.

bt, H _sManagerial; T Technical; P * Pottlcai O - Other tth. poor quality of technicalansIstance provided hy c Ministry of Agrticuiture, the eeds component han not beeninp7c.ceotd *-ad the liot-onal Produ-tton CounItb hba nithdann froft the Project).

13 IlcoItod nop-lnik nlmlc,-nO forem 590 filled.1 -lorleesec or t ore short Iataions to L up tnpI& lodistdul components.

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PROJECT COMPLETION REPORT

COSTA RICA - AGRICULTURAL CREDIT AND DEVELOPMENT PROJECT(LOAN 1410-CR)

EVALUATION SUMMARY

Introduction

The project is the third agricultural project financed by the Bankin Costa Rica. The two previous projects were: the First AgriculturalCredit Project (Loan 538-CR) financ-ed by a 1968 Loan of US$3.0 million -andwhich was completed in April 1973; and the Second Agricultural Credit Project(Loan 827-CR) financed by a 1972 Loan of US$9.0 million and ~--'ich was com-pleted in September 1980.

Objectives

The objectives of the project were to increase agricultural output,particularly beef and milk; raise income ±evels, particularly those of small-and medium-size farms; and strengthen the extension service of the Ministryof Agriculture and Livestock (MAG) as well as its seed production capa-bility. The project included credit for development o:5 livestock, crops andagroindustries; support for strengthening the national extension service;support for implementation of a seed improvement program; funds for a pilotscheme for the rehabilitation and maintenance of feeder roads; and assistancein preparation of a rural development project.

Implementation Experience

Project start up was delayed due to late ratification of legaldocuments. Implementation was about 18 months slower than expected, largelybecause of inadequate loan promotion by the Central Bank, a sharp reductionin subloan demand in the latter project years, procurement delays, and latecompletion of the rural development study. Project costs amounted to US$35.6million, or about 6% less than estimated at appraisal.

Results

About 1,520 subloans were financed, compared with 3,260 estimatedat appraisal, although the volume of credit disbursed almost equalled origi-nal expectations. Nearly 70% of the subloans were for livestock development,28% for crop development, and 2Z for agroindustries. As stipulated in thteLoan Agreement, small farmers accounted for more than 25% of the subloans.Additional extension staff were hired and trained, but eventually most of the

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staff -ransferred to other positions because of better employment conditionselsewhere. The project's seed program component was restructured duringimplementation, and a substantial contribution was made to improving the seedproduction capability of the Ministry of Agriculture and Livestock. Thefeeder road component was successfully implemented, but only after the Bank'sdisbursement percentage was increased from 30% to 70%. The rural developmentstudy financed under the project was completed with much delay as a resultmainly of changes In the Government's priorities.

Monitoring and evaluation under the project was unsatisfactory.Consequently, available information on the agricultural and socio-economicimpact of the project is poor. However, indications are that, with minorexceptions, crop and livestock production supported by project funds wassatisfactory; the project viability is presumed to be close to appraisalexpectations.

Sustainability

The general prospects for sustainability of production and benefitsare good. There is now established business relationship between the bene-ficiaries of the credit program and the intermediary credit institutions, andthis relationship is expected to continue after the project. Project effortsto strengthen the agricultural extension service have failed as newlyacquired staff had left the setvice by the time of project completion.

Findings and Lessons

Procurement encountered problems (para. 3.20), and monitoring,evaluation and reporting were unsatisfactory. No funds for project adminis-tration, including monitoring and evaluation were provided, contributing topoor performance of M&E functions. The project included several componentsscattered throughout the country. This has contributed to the difficulty inmonitoring and evaluation. A more focused and simpler project would havebeen easier to monitor, and perhaps could have been more effective in itsdevelopment impact, The Bank should be more assertive in ensuring compliancewith Loan conditions, and in promoting efficient implementation; it has beentoo accommodating concerning the project's organization, implementation ofthe extension component, and submission of audit reports (paras. 3.21,3.25-3.26 and 7.02).

Institutional performance was mixed. The Central Bank (CB) has notproven to be an appropriate intermediary for implementing the credit compon-ent. Its role under this project did not fit the general mandate of the CB,and funds allocated for administering the project were grossly inadequate.In projects which include several components and implementing agencies, acentral agency such as the Ministry of Planning may need to take the overallcoordinating function. In such cases, however, the responsibilities of theseveral agencies must be defined clearly, and extreme care should be taken inthe selection and appointment of at least the managerial staff (paras. 4.01and 7.01).

v

The extension component was too small to have had a significantimpact on the overall improvement of the Extension Service of the Ministry ofAgriculture and Livestock. To improve the overall Service, the Governmentsubsequently chose a national project on technology transfer instead ofthrough a piecemeal approach as under this project, an approach which islikely to prove more effective (para. 3.09).

COSTA RiCA

AGRICULTURAL CREDIT AND DEVELOPMENT PROJECT

PROJECT COMPLETION REPORT

I. INTRODUCTION

1.01. At the time when the project was appraised in September 1976, CostaRica's GNP per capita was about US$900, and the GNP was growing at an annualrate of 6% while agricultural production was growlag at around 4.1%. Theagricultural sector accounted for about 20% of GDP and 75% of merchandizeexports, and employed about 35% of the labor force. Coffee, bananas, sugar,and beef cattle were the principal sources of foreign exchange, and foodimports (principally wheat) account:d for nearly 10% of total imports. Thetotal population was estimated at about 2.0 million, and the rural populationnumbered 1.1 million. About 25% of the rural population was below therelative poverty income level then estimated at about US$255 equivalent. TheGovernment's multi-pronged agricultural development strategy was to redressrural poverty by financing projects which benefited the rural poor, expandagricultural production and productivity through increased availability ofcredit, and improved research and extension services; and diversifyagricultural production by encouraging increased production of livestockproducts and basic grains. The project was designed to support thisstrategy.

1.02 Over the past 9 years, no dramatic changes have occurred in thestructure of the economy: agriculture still accounts for the same percentageof GDP; the sector's share of total exports and labor force has declinedslightly to about 70% and 30%, respectively; coffee, bananas, beef and sugarcontinue to be the major sources of agricultural exports; and food importsstill account for nearly 10% of total imports. The population is about 2.4million, and the most recent estimate of the GNP per capita amounts toUS$1,280 (estimate for 1980-82 computed in then prevailing prices).The country is now going through severe economic difficulties. As in therest of the economy the rate of growth of agricultural production hasdeclined in recent years, although the sector h.3 performed better than theeconomy as a whole. The Government is now giving high priority to projectswhich would increase and diversify agricultural exports.

II. PROJECT FORMULATION

A. Identification, Preparation and Appraisal

2.01 The project was identified in early 1973 jointly by the Governmentand the Bank and was prepared by the Government. It was appraised by theBank twice: the first time in April 1974 and the second in September 1976.

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After the first appraisal, the processing of the project was delayed by twoyears because of protracted negotiations between the Government and the Bankregarding subsidized on-lending interest rates. As a result of this delay,and because of changes in the project scope in the intervening years, theBank reappraised the project in 1976.

B. Negotiations and Board Approval

2.02 Negotiations with representatives of the Government took place inWashington in March 1977. The Loan was approved by the Board, withoutdiscussion, on April 26, 1977.

C. Project Objectives and Components

2.03 Objectives. The objectives of the project were to: increaseagricultural output, particularly beet and milk; raise income levels,particularly those of small- and medium-size farms; and strengthen theextension service of the Ministry of Agriculture and Livestock (MAG) as wellas its seed production capability.

2.04 Components. The project included: credit for development oflivestock, crops and agroindustries (accounting for 81% of the total projectcost); support for strengthening the national extension service (5%); supportfor implementation of a seed improvement program (7%); funds for a pilotscheme for the rehabilitation and maintenance of feeder roads (6%); andassistance in preparation of a rural development project (1%).

D. Project Cost and Financing

2.05 Total project cost was estimated at US$37.6 million, of which theBank contributed US$18.0 million (48%) to cover 100% of the estimated foreignexchange component. Financial intermediaries or participating banks (PBs)contributed US$3.3 million (9%); the CB and other Government agencies US$11.2million (29%); and farmers the remaining US$5.1 million (14%).

III. IMPLEMENTATION

3.01 Introduction. This chapter compares actual performance with thetargets established at appraisal, including comparative analysis ofimplementation of the different components (credit, technical assistance,seed improvement, roads and the regional development study), assessment ofproject cost, disbursements, procurement, reporting and auditing, andcompliance with loan covenants. The implementation schedule is presentedfirst.

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A. Implementation S zedule

3.02 Effectiveness. The Loan became effective on January 23, 1978, ninemonths after it was approved by the Boare'. The country was in the middle ofnational campaign for .itions in 1977 which made it difficult to obtaincarlv ratification of tbh legal documents by the National Assembly. Thiscontributed to a delay in initiating the project's implementation.

3.03 Implementation Period. According to appraisal projections, theproject was expected to be completed by June 30, 1983 and the Closing Date tobe December 1983. CompLution was delayed by about one and a half years dueto: (a) inadequate loan promotion by the CB which contributed to a delay ininitiating the project, (b) sharp reduction in demand for subloans in thelatter y:ars of the project which required three years to disburse the last5% of the amount of the loan allocated to this category, (c) delay by MAG inprocuring equipment caused by cumbersome bureaucratic procedures, and (d)delay in completing the rural development study.

B. Implementation of Project Components

3.04 Credit. The total number of subloans financed amounted to about1,520 compared to an appraisal expectation of 3,2601/. About 70% of thesubloans were for livestock development, 28% for crop development, and theremaining 2% for agroindustries. The average aEount of subloan perbeneficiary was much higher than the appraisal expectation so that the totalcost of subloans financed was virtually the same as the appraisal estimate.The demand for subloans was greatest during the initial three years of theproject; about 95% of the loan allocated to the credit component wasdisbursed by the end of 1981. Thereafter, the demand for credit declinedmainly due to an increase in the rate of interest charged on the subloans(from 8% to 12% for small farmers and from 12% to 16% for other farmers),2 /and due to reduced enthusiasm by the credit intermediaries for promoting newsubloans since the undisbursed portion of the loan was small. Because of theabove factors and a sharp devaluation of the local currency, it took anotherthree years to complete disbursement of the last 5% of the loan amountallocated to the credit category.

3.05 Livestock accounted for about 1,060 of the subloans. About 645 ofthese were for beef cattle breeding which represented over six times theappraisal estimate; the large increase in the demand for such subloans wasdue to sharp increases in beef prices during 1978-80. There were 330subloans for dairy development, which represented about 80% of the appraisalestimate. Of the remaining subloans for livestock, 45 were for pig

/ About 2,300 of the sub-loans projected at appraisal were formiscellaneous "complementary investments", but no such investments werefinanced. If such categories of sub-loans are excluded from theappraisal's projection, then the actual number of sub-loans financedunder the project exceed the appraisal's projection of sub-loans for thenon "complementary investments".

2/ The on-lending interest rates were in line with rates charged throughoutthe agriculture sector. They were positive in real terms until about1980 when they turned negative due to an accelerated domestic rate ofinflation.

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development and about 20 were for poultry development, both of which were notforeseen at appraisal. The rest were for dual-purpose livestock development(dairy and beef).

3.06 About 480 of the subloans were for crop development representingabout 30% of the appraisal estimate. The farms developed were mainly usedfor growing citrus, coffee, and cocoa. The citrus and coffee farms weresuccessful in increasing pr3duction, but the cocoa farms have not been assuccessful due mainly to problems with Moniliasis disease. The medium- andlarge-scale growers of cocoa have succeeded in dealing with this disease byapplying improved cultural practices in soil drainage, cleaning, pruning,weeding, fertilizing and using appropriat4 shade trees; they also usedprivate extension services financed through their own resources to help themcombat the disease. The results on cocoa farms owned by small farmers aredisappointing since these farmers did not receive sufficient technicalsupport .rom the extension service. One-third of the small farmers abandonedtheir plantations after some investments had been made, the other two-thirdscompleted the infrastructure investments; even here, the results were mixed.A few subloans were also made for other crops such as bananas, plantains,macadamias, sugarcane, cotton, rice, cassava and basic grains. No data areavailable on the performance of these sub-projects.

3.07 About 25 subloans were granted for agroindustries and servicescompared to an appraisal estimate of about ten. A major subloan was made toCentral Agricola de Cartago, a private enterprise, for the construction of 13silos and warehouses for seed storage of about 5,500 m ton and purchase ofdrying equipment. This sub-project was expected to be implemented by theNational Production Council (CNP), but the CNP shifted the responsibility forbuilding commercial seed storage facilities to private enterprise, as aresult the Government proposed and the Bank accepted in December 1978 toreallocate to the agricultural credit component about US$0.9 million of fundsallocated to CNP for this activity. Implementation of the sub-project wassatisfactory.

3.08 As required by the Loan Agreement, small farmers accounted for morethan 25% of the subloans (nearly 80% of the number of subloans and more than35% of the subloan amounts). The key indicators of the credit component aresummarized in Annex 1.

3.09 Extension Service. Under the project, MAG was to hire anadditional 65 extensionists to provide technical assistance to farmers whowere expected to benefit under the project. The project provided vehicles,equipment, and training to these extensionists. The extensionists were hiredand were given on-the-job training for about two years in the application ofthe T&V system using internationally recruited consultants; about 30 of themwere trained in Israel for one month each. However, the performance of MAGin sustaining the system and in providing technical assistance to the farmershas not been satisfactory. This was mainly due to budgetary problems causedby the general economic crisis in the country. Thero was no coordinationbetween MAG and the PBs, there was no link between research and extension,budgetary allocation to the service was grossly inadequate, and virtually allof the extensionists hired and trained left the Ministry for other moreremunerative jobs.

3.10 Seed Program. The project included funds to finance constructionof physical infrastructure and the purchase and installation of relatedequipment for the implementation of a National Certified Seed Program. Theworks involved construction of two foundation seed storage rooms andassociated field equipment to be owned and operated by MAG, and 26 warehousesfor storage and distribution of certified or improved seed to be owned andoperated by CNP.

3.11 The CNP withdrew from the project in 1978 because of: (a) a changein Government policy to permit the private sector to take the responsibilityfor seed storage; (b) it had previously experienced administrative andfinancial difficulties in dealing with seeds; and (c) it lacked counterpartfunds. This part was, therefore, financed under the agroindustries componentof the credit program (para. 3.07).

3.12 Construction of the two foundation seed storage rooms was financedentirely by thte Venezuelan Investment Fund. Bank funds were used only forprocuring the associated equipment. There was a three-year delay in theprocurement of the seed production equipment caused mainly by lengthybureaucratic procedures, lack of coordination within the pertinent agenciesin finalizing tender documents, and difficulties in obtaining importpermits. In the end, most of the equipment was procured, but a small amountof funds left in the loan originally allocated for this purpose wasreallocated to the road component.

3.13 As a condition of disbursement, the Bank had insisted on theGovernment preparing a timetable for developing a national seed program,including production of foundation seeds and training of experts. TheGovernment prepared the program which was approved by the Bank. As part ofthat program, two agronomists were trained in Iowa State University usingproject funds; more could not be trained due to a shortage of qualifiedcandidates. MAG also created a Seed Department in April 1984, and staffedit with five agronomists and two field assistants. Although the projecthelped in improving the seed production capability of MAG, much remains to bedone to achieve self-sufficiency in seed production for at least the majorcrops; the country is now self-sufficient in only rice seeds.

3.14 Feeder Roads. The project included a pilot scheme for selection,construction, and maintenance of third-class feeder roads by financingequipment, civil works, and six man-months of an internationally recruitedengineering consultant service. About 110 km of roads were planned to beimproved.

3.15 Implementation of the road component started slowly due to lack ofsufficient counterpart funds, but the Bank agreed in early 1981 to increasethe disbursement percentage from 30% to 70% to alleviate the counterpartfunding problem and to offset the impact of the devaluation; this improvedsubstantially the implementation performance. At the end of 1983, all fundsoriginally allocated for this component were fully utilized requiringreallocation from other categories to complete the targets established atappraisal and also to finance unforeseen expenditures in rehabilitation ofsome project roads that were partially destroyed by an earthquake and torehabilitate the road equipment acquired with project funds for roadmaintenance since the equipment was in disrepair. In the end, all physicaltargets wer( fulcilled. The successful implementation of this component wasdue to good coordination between the Municipality of Perez Zeledon (the area

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selected for the pilot scheme), the implementing agency (the Institute forPromotion and Assistance to Municipalities, or IFAM), the Ministry of PublicWorks and Transport (MOPT), and active participation and commitment of thebeneficiary (the municipality of Perez Zeledon) in the component (includingfinancial contribution).

3.16 Rural Developmcnt Study. The project financed preparation of arural development project. The Ministry of Planning, with assistance frominternationally recruited consultants, was expected to undertake the study.In 1978, the Ministry prepared an Integrated Development Plan for theAtlantic Region as part of a technical assistance agreement with theOrganization of American States, on the basis of which the Atlantic Regionwas selected for a project which might be suitable for financing by theBank. However, no progress was made in undertaking the study until the endof 1980 when the Ministry passed the responsibility to the AgrarianDevelopment Institute (IDA). The preparation of the study was furtherdelayed until 1983 because of the Government's indecision on prioritydevelopment options, lack of initiative by IDA in proposing the design andscope of the project, and poor coordination and lack of clear-cut definitionof responsibilities between IDA and the Ministry of Planning. Withassistance from various FAO/CP missions, the area and main components of theproject were finally defined and preparation was initiated in late 1983 withassistance from the Regional Unit for Technical Assistance (RUTA). Thereport on the feasibility study was submitted to the Bank in December 1984,the quality of the report is good.

C. Cost Estimate

3.17 The total cost of the project at completion is computed at aboutUS$35.6 million equivalent compared to an appraisal estimate of US$37.6million, and the proportion of actual expenditures on the differentcomponents were virtually the same as appraisal estimates. Except for theextension component where the actual cost is higher by about 10%, the actualcosts of the other components are lower than appraisal estimates as shownbelow:

CostActual as

Appraisal % ofAppraisal

Item Estimate Actual Estimate..... ('000 USS).....

Agricultural CreditBeef Cattle Breeding 3,370 10,410 310Dairying 6,500 5,730 90Crops 7,220 6,510 90Mixed Farms 11,200 3,870 35Agroindustries 1,810 2,650 150

Subtotal 30,100 29,170 97

OthersExtension Service 1,990 2,170 110Seed Program 2,590 1,900 70Feeder Roads 2,390 2,120 90Rural Development Study 520 230 45

Subtotal 7,490 6,420 85

Grand Total 37,590 35,590 95

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D. Disbursement

3.18 As shown below, with the exception of some reallocation of theproceeds of the loan, actual disbursement by categories was virtually thesame as agreed at negotiations:

Participating Gov. andCategory Producers Banks Central Bank Bank Total

~~~~......... (USS$ilo)......

Appraisal Esti-mate/Legal Doc.

a,

Agr. Credit 5.10 3.30 6.40 13.80 28.60ExtensionService - - 1.43 0.57 2.00

Seed Program - - 1.80 0.80 2.60Feeder Roads - - 1.37 1.03 2.40Rural Dev. Study - - 0.20 0.30 0.50

Unallocated - - - 1.50 1.50

Total 5.10 3.30 11.20 18.00 37.60=~ ~ = =

Actual

Agr. Credit 4.67 1.20 8.60 14.70 29.17ExtensionService - - 0.82 1.35 2.17

Seed Program - - 1.71 0.19 1.90Feeder Roads - - 0.57 1.55 2.12Rural Dev. Study - - 0.02 0.21 0.23

Total 4.67 1.20 11.72 18.00 35.59= = = .= w m

a/ Excluding the "unallocated" category.

3.19 Up to the end of FY79, only US$2.5 million of the Loan (14%) wasdisbursed. At the end of FY82, US$16.2 million (90%) was disbursed, and ittook another three years to disburse the remaining 10% of the Loan (assumingUS$180,000 which remains undisbursed will be disbursed by June 30, 1985).The slow pace of disbursement in the latter years was caused by: a sharpdecline in the demand for subloans, inadequate project promotion by the CBand PBs, and devaluation of the domestic currency.

- 8 -

E. Procurement

3.20 Procurement of equipment for seed production and roads took moretime than anticipated. In some cases, bidding documents for InternationalCompetitive Bidding prepared by the Borrower did not clearly specify thecriteria for bid evaluation, and, in others, award and signing of contractstook too much time. Bureaucratic procedures for processing tender documentsexasperated the proiblem. Goods financed under the subloans were procureddirectly by the beneficiaries and no serious problems were encountered.

F. Reporting

3.21 The CB was responsible for monitoring and evaluating (M&E) thecredit component, while the Ministry of Planning was responsible for M&E ofthe non-credit components. Except for reporting data on the number andamount of subloans, the CB did not keep a systematic record of the impact ofthe credit component, and did not prepare a completion report as required bythe Project Agreement. The Ministry of Planning, in cooperation with IFAM,kept good records on the road component and submitted the same to the Bankin a timely manner. The reporting by the Ministry on the other components(seeds and extension) was neither satisfactory in quality nor in timeliness.

G. Auditing

3.22 Auditing was divided between two auditors: the Auditoria Generalde Bancos (CB's general auditor of banks) audited the credit component, whilea private firm (Venegas, Alvarez and Co.) audited the remaining components(seeds, extension, roads and the Ministry of Planning).

3.23 The audit of the Auditoria General de Bancos contained some goodfeatures such as field review of the subloans made up to the end of eachyear. The information submitted included statements of disursement from theloan by category; reconciliation of balances of the credit component asshown by the PBs as compared with CB balances; statements of payments madeand received by the CB for the accounts of the PBs; and analysis of subloanarrears. The information did not include balance sheets, income statements,and sources and application of funds for the PBs. The Bank sent letters tothe Auditoria General de Bancos advising them on the minimum requirements forauditing of Bank projects and also supervision missions discussed this issuewith them, but the efforts did not change the quality of reporting. Also,the reports were submitted to the Bank with considerable delays of at leastfour months.

3.24 Concerning the auditing of the non-credit components, theabove-mentioned private firm included in its statements comments ofinvestments financed under the project, sources and application of funds, andstatement of loan disbursements. Notes and comments on the execution of theproject were also given. The firm was retained to audit project accountsuntil 1982, but after that the Government, with the agreement of the Bank,

readvertised to retain new auditors due to a perceived high cost of retainingVenegas, Alvarez and Co. When the final selection was made in 1984, the samefirm won the bidding. The audit reports for the non-credit components for1983 and 1984 have now been received by the Bank.

H. Compliance with Loan Covenants

3.25 CB did not fully comply with the condition of Section 2.04(c) ofthe Project Agreement, which states: "Banco Central shall, through itsDevelopment Credit Department (DCD) establish, no later than March 1, 1978,and maintain thereafter, a monitoring system to collect and analyzestatistical data related to the carrying out of Part A of the project, and toaid in the preparation of completion and evaluation reports concerning Part Aof the Project." The department was never effective in monitoring andevaluating the credit component. It was not fully committed to the project,did not have the full backing of the management of CB, and was disbanded in1984. There were no people to collect, collate, and evaluate data on theperformance of the credit component, which was the major part of the project.

3.26 Another condition not fully complied with was Section 4.02(ii) ofthe Loan Agreement concerning submission to the Bank of audit reports. TheBank has not yet received complete audit reports on the project for 1983 and1984. Also, the Government did not provide sufficient Nunds to maintain theextension component (Section 3.01 of the Loan Agreement) which contributed toan unsatisfactory performance of that component.

IV. INSTITUTIONAL PERFORMANCE

4.01 The performance of CB in implementing the credit component has notbeen satisfactory. That bank did not keep proper records of the subloansfinanced under the project, and hence was not able to monitor and evaluatethe impact of sub-projects. It also failed to prepare a completion reportalthough this was a requirement under a Project Agreement between CB and theBank. Also, coordination was poor between the extension service, MAG and thePBs. As a result, the extension service had very little or no influence inprocessing of sub-projects, although is was expected to participate inprocessing sub-projects. Of all the agencies, IFAM was the most efficientand committed agency and as a result the road component was the bestimplemented part of the project. Although the Ministry of Planning was notdirectly involved in implementing the different components (except theregional study), the Ministry did not do well in its primary responsibilityof coordinating the implementing of the non-credit implementing agencies.This was primarily due to frequent changes in the leadership of the ProjectCoordinating Unit (there were six managers during the seven years of projectimplementation), the inexperience of some of the people appointed to head theUnit, and inadequate budgetary support.

- 10 -

4.02 There were four participating banks, of which the Banco Nacional deCosta Rica (BNCR) was the most active accounting for nearly 80% of the numberof subloans and 75% of the subloan amount. The others were Banco de CostaRica (BCR) accounting for about 15% of the number of subloans and 20% of thesubloan amount; and Banco Anglo Costarricense (BACR) and Banco de CreditoAgricola de Cartago (BCAC), jointly accounting for the remaining volume andamount of subloans. In general, the participating banks have done fairlywell in identifying and processing subloans, but their supervision effortshave not been as satisfactory. The low level of the supervision effort ispartly the cause of arrears which have tended to increase over time, risingfrom about 20% in 1980 to nearly 40% in 1982. The arrears are worse for thelarge farmers compared to the medium and small farmers reflecting thepolitical leverage the large farmers have in delaying or not paying theirloans.

V. ROLE OF THE BANK

5.01 The role played by the Bank throughout the execution of the projectwas fair. Relations among Bank, CB and the Ministry of Planning personnelwere cordial at all times, and the Bank acted supportively and flexibly inresponding to the Government's request for reallocation of the proceeds ofthe loan, extending the Closing Date for the loan to allow completion of theproject, helping to initiate the regional development study, and organizing aseminar in M&E. The appraisal was a bit optimistic about the speed oforganizing the coordinating agencies and their efficiencies in administeringthe project. The Bank could have taken a more forceful position early on toensure proper monitoring of the project and satisfactory performance of theextension service, smoother coordination among the various implementingagencies, and proper compliance with the conditions of the Loan.

VI. AGRICULTURAL IMPACT

6.01 Introduction. It is difficult to assess fairly the agriculturalimpact of the project because of the lack of data (the appraisal report isbased on expected benefits from beef, dairy, and crops, but did not includeexpected benefits from agroindustries and seeds). In the absence of data,the assessment here of the project's agricultural impact is based on: (a)results of a 1983 survey undertaken in connection with preparation of anotherproject focusing on beef and milk production. That survey's findingsconcerning the parameters of beef and dairy production in the base year(1983) are considered as proxy indicators of possible performance for thebeef and dairy farms financed under the project; and (b) informationcorntained in various Bank documents concerning production of other farmsfinanced under the project (poultry, pig, permanent crops, and annualcrops). While the above pieces of information may serve as general indicatorsof the likely impact of the project, they may not provide conclusive evidenceof the project's impact. There is also no data base to compare the income ofthe beneficiaries before and after the project, and to evaluate the ex-postrate of return on investments.

- 11 -

6.02 Beef and Dairy. The key parameters of beef and dairy production(birth rate, adult mortality, calf mortality, culling rate, milk production,etc.), estimated at appraisal and compared with the results of theabove-mentioned survey are summarized below.

Beef

Appraisal Estimate Survey ResultsWithout With Project

Item Project (Full Dev.)

Production Capacity Indicators:

Average total area/farm (ha) 200 200 180Area under grass (ha) 135 135 105Improved pastures (ha) - 65 45Total cattle (head) 216 299 460

Productivity Coefficients:

Birth rate % 60 70 70Adult mortality % 4 2 3Calf mortality % 6 3 5Cow culling % 22 14 18Carrying capacity (AU/ha) 0.86 1.12 1.78

Dairy

Appraisal Estimate SurveySmall Farms Other Farms Results

Without With Proj. Without With Proj. Small OtherItem Project (Full Dev.) Project (Full Dev.) Farms Farms

Production CapacityIndicators:

Average total area/farm (ha) 5 5 33 33 20 40

Improved pastures(ha) 3 5 15 33 8 24

Total cattle (head) 21 24 72 132 63 142

Productivity Coef-ficients:

Birth rate % 60 70 60 75 68 75Adult mortality % 2 2 5 5 4 3Calf mortality % 5 5 2 2 10 5Cow culling % 20 36 20 20 25 20Milk production(1./cow/day) 5.6 7.8 7 9.2 7 10

Av. no. of daysin lactation 280 300 280 300 300 305

- 12 -

According to appraisal projections, the above-shown production coefficientswere expected to be attained by year 6 for dairy and by year 10 for beefbreeding following initiation of the project. The results of the 1983 surveyshow that the coefficients for nearly all categories of productivityindicators have already reached or exceeded appraisal expectations.

6.03 Pig and Poultry. These operations were not foreseen at appraisal.Nevertheless, the project financed a few subloans which, according to thetechnicians of the PBs, were successful. The farms are reportedly applyingmodern techniques of production, and they are considered to be profitable.Some of the farmers are expanding their operations using their own funds, andtheir loan repayment record is good. In the case of poultry, the country hasattained self-sufficiency in the production of eggs and the project isacknowledged to have helped in this.

6.04 Perennial Crops. The main perennial crops financed were citrus,coffee and cacao. Citrus plantations five years old are reported to beyielding about 4 tons per ha compared with appraisal estimate of 3 tons perha. Financing of coffee and cacao was not anticipated at appraisal but about200 na and 500 ha, respectively, of new plantings or rehabilitations werefinanced. New coffee plantations five years old are reportedly yieldingabout 10 tons per ha compared with the national average of about 9 tons perha. The cacao development was mainly carried out in the Atlantic Zone andthe performance was mixed. Plantations that are following appropriatecultural practices in combating the Moniliasis disease are doing well. Cacaoplantations owned by small farmers and which suffered from the Moniliasisdisease because of poor cultural practices have been abandoned but these canbe rehabilitated with further investment. There are indications that somefarmers who have rehabilitated their fields are showing encouraging results.

6.05 Other Crops. The other miscellaneous crops financed with a totalof about 40 subloans were rice, cotton, cassava, basic grains, andsugarcane. On average small farmers have 3 ha of sugarcane and medium-sizefarmers have 25 ha. Cane yields reportedly average 70 tons per ha, 14% abovethe appraisal projections of yields at full development.

6.06 Financial and Economic Rates of Return. There is no satisfactorydata base to compute the ex-post financial and economic rates of return oninvestments; these are assumed to be the same as appraisal estimates Thefinancial returns to the beneficiaries are presumed to have been satisfactoryreflected by the demand for credit. The economic rate of return is presumedto have been satisfactory because (a) the total cost of the project isvirtually the same as appraisal projection, and the average cost ofsubprojects, computed in constant 1976 prices, is lower than appraisalestimate. This should improve the economic rate of return (ERR) compared toappraisal estimate, assuming all other things remain unchanged; and (b) thereare preliminary indications that, as expected at appraisal, the project mighthave improved significantly the productivity and production of subprojects ofparticularly livestock. Sensitivity tests made at appraisal showed that evenif the benefits were to be reduced by 10%, the ERR would be about 13%.

- 13 -

VII. SUMMARY AND LESSONS LEARNED

7.01 Summary. A key objective of the project was to support the poorestsegment of the farm population. This objective has been attained since, asagreed at negotiations, more than 25% of the subloans were made tosmallholders considered to be among the poorest. Although conclusive dataare not available, the project is perceived as having contributedsignificantly to the improvement of production, particularly of livestock.The physical road improvement targets established at appraisal, as well asthe training of extensionists have been met. Despite the substantial effortin training extensionists, however, all the trained staff left the Serviceand there is no clearly identifiable improvement in the extension service ofMAG which can be attributed to the project. Despite about two years of delayin completing the project, the actual cost of the project (computed in USdollar equivalent) is less than the appraisal estimate; the lower thananticipated number of subloans (including the projected subloans forcomplementary investments) contributed to this. The performance of theimplementing agencies has been mixed. The CB did not do well inadministering the credit component, partly because the project did not fitwell into the overall functions of the Central Bank. The Ministry ofPlanning did not do well in coordinating the overall implementation of theproject because of managerial weaknesses, inadequate budgetary support, andthe perceptions of the implementing agencies considering the ProjectCoordination Unit as another bureaucratic layer that did not materiallycontribute to their efforts.

7.02 Lessons Learned. The key lessons learned include:

(a) the CB has not proven to be an appropriate intermediary forimplementing the credit component. Its role under thisproject did not fit the general mandate of the CB, and fundsallocated for administering the project were grosslyinadequate. Perhaps future projects in Costa Rica should notuse the CB as an executing agency for credit components, butthe bank may continue to rediscount funds;

(b) in projects which include several components and implementingagencies, a central agency such as the Ministry of Planningmay need to take the overall coordinating function. In suchcases, however, the responsibilities of the several agenciesmust be defined clearly, and extreme care should be taken inthe selection and appointment of at least the managerialstaff; the Bank should play an active role in this;

(c) no funds were included in the project (and in the loan) forproject administration, including for monitoring andevaluation. This should be done in future;

- 14 -

(d) the project included several components scattered throughoutthe country. This has contributed to the difficulty inmonitoring and evaluation. A more focused and simple: projectwould have been easier to monitor, and perhaps could have beenmore effective in its development impact;

(e) the extension component was too small to have had significantimpact on the overall improvement of the Extension Service ofMAG. To improve the overall Service, the Government chose anational project on technology transfer (extension, research,and training) financed by the Inter-American Development Bankinstead of through a piecemeal approach as under thisproject. That approach could prove to be more effective thana piecemeal strategy of research and extension development;and

(f) the Bank should be more assertive in ensuring compliance withLoan conditions, and in promoting efficient implementation.In the case of this project, the Bank appears to have been tooaccommodating concerning the project's organization,implementation of the extension component, and submission ofaudit reports.

- 15 -

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-17- Annex 2Page 1

Borrower Comments

E475/86 December 19, 1985Spanish (Costa Rica)OED DRJB:cc

MINISTRY OF NATIONAL PLANNING AND ECONOMIC POLICYSan Jose, Costa Rica

November 27, 1985DRE-198-85-CP

Mr. Yukinori WatanabeActing Director-GeneralOperations EvaluationWorld Bank

Subject: Completion Report on IBRD Agriculture Creditand Development Project (Loan 1410-CR)

Dear Sir:

As you requested in your letter of October 17, we are remittingherewith this Department's comments on the draft Completion Report on IBRDAgriculture Credit and Development Project, Loan Agreement No. 1410-CR.

The institutions responsible for project execution (components B, C,D and E) indicated they had no comments on the draft Report, and we areattaching copies of their letters to us to that effect. We are also attachingcopies of the external auditors' reports for fiscal years 83 and 84, documentswhich were forwarded to the Bank on April 18, 1985.

We should like to take this opportunity to thank you and, throughyou, all those Bank staff members who in one way or another were involved inthe project and from whom this Coordination Department received :upport,assistance and many kindnes.: s over the years needed to bring it to completion.

Yours, etc.

Beatriz R. de CorellaChief, Department of Budget Coordination

and IBRD Project Coordinating Unit (1410-CR)

-18 - Annex 2Page 2

MINISTRY OF NATIONAL PLANNING AND ECONOMIC POLICY (MIDEPLAN)San Jose, Costa Rica

COMMENTS ON PROJECT COMPLETION REPORT PREPARED BY THE WORLD BANK:AGRICULTURE CREDIT AND DEVELOPMENT PROJECT (LOAN 1410-CR)

Paragraph 1.02

With regard to changes in the economic structure of Costa Rica, itcan be demonstrated that it is not entirely true that over the past nine yearsthere has been no dramatic change. In fact, the economy has been recoveringfrom the sharp decline experienced over the period 1980-82. Real GDP grew by2.3% in 1983 and 6.6% in 1984, and is expected to grow by 2.42 in 1985.

Following a decline of 4.7% in 1982, agricultural production rose by3.9X in 1983 and 7% in 1984, and is expected to rise by 1.8% in 1985.

Paragraph 3.16

The discussion of particular administrative aspects of thedevelopment of component E should also mention the quality of the feasibilitystudy submitted in December 1984, its advancement to the point where financingwas obtained, and the benefits that will accrue to the area selected.

It is important to emphasize the work carried out by the MIDEPLANCoordination Department in 1983 which resulted in IDA's finalizing thefeasibility study with assistance from other agencies, when, for a variety ofreasons, neither IDA nor MIDEPLAN had been able to bring it to a conclusion insix years.

With regard to project administration, two phases should be clearlydistinguished: one lasting from the time the Loan Agreement was approved untili983, and the other tne period when the project design aas being finalized.

Phase I:

OFIPLAN was designated as executing agency;

- because of administrative problems, OFIPLAN transferred itsresponsibilities to IDA (ITCO);

- this phase resulted in the assembly of a great deal of scatteredinformation.

Phase II

- the Project CoordinatiXig Unit took a more active role in theexecution process (analyzing agreements and results and definingresponsibilities); a new agreement was signed with IDA, UNDP and RUTA

- 19 - Annex 2Page 3

conditional upon the achievement of specific goals and objectives,with participation to that end by international experts;

- the result wa; the Atlantic Region Agriculture Development Study;

- this phase was characterized by IDA's great willingness to work inconjunction with other entities in the interests of projectexecution, the assistance afforded by RUTA, UNDP and the World Bank,and the acceptance of a higher level of responsibility by the ProjectCoordinating Unit.

Paragraph 3.21

rhe responsibility for coordinating IBRD Project 1410-CR was assignedto MIDEPLAN, although the Loan Agreement itself names the Minister of theTreasury as Borrower and Representative and gives MIDEPLAN certain clearlyiaentified functions, set out in Section 3.10, where its responsibilities aredeclared to be the preparation of reports, project follow-up, and facilitationof the work of the executing agencies, although without any clear statement asto how they were to be carried out.

Regarding the presentation of reports, it is noted that the Ministryof Planning, in cooperation with IFAM, kept good records on the road componentand submitted them to the Bank in a timely manner, which was not the case withthe other components (seeds and extension).

It needs to be made clear that this was not the result of anynegligence on the part of the MIDEPLAN Coordination Department. What occurredwas that, as time elapsed and funds diminished, the executing agencies loweredthe quality and regularity of their reports, which meant that the ProjectCoordinating Unit had difficulties in preparing its own reports. Thissituation was exacerbated by the constant turnover of both policy and technicalstaff responsible for liaison among the various institutions involved.

Clearly, the coordination process proved satisfactory with aninstitution like IFAM, which carried out the roads component very ably, makingit possible to keep the Bank informed and provided with the corresponding data.

Paragraph 3.24

This paragraph, which deals with the external auditing of thefinancial statements on the non-credit components, mentions that audit reportsfor 1983 and 1984 had not been received by the Bank, whereas they were in factremitted by this Department on April 18, 1985 under cover of a letter bearingreference RE-CP-095-85, a copy of which is now attached.

The contract with the firm of Venegas y Alvarez could not berevalidated, as the Comptroller-General of the Republic did not consider itadvisable, with the consequences you are already aware of. We are attaching acooy of the letter referred to and that from Venegas y Alvarez.

20- Annex 2Page 4

Paragraph 4.02

This paragraph, on the subject of institutional performance, makes anumber of assertions regarding MIDEPLAN in general and the Project CoordinatingUnit which need clarification.

According to the Report, it was MIDEPLAN's responsibility tocoordinate execution of the non-credit components, although in actual fact itsfunctions were not defined exactly.

Taking into consideration the possible changes in administrative andbudgetary focus made during the two presidential periods when the project wasin execution, MIDEPLAN cannot be held responsible for tasks that properlybelonged to the executing agencies; indeed, as the Report states, its soleresponsibility was the coordination process (see Section 3.10 of the LoanAgreement). It is of course true that the ProJect Coordinating Unit hadseveral managers during the seven years of project implementation, but thatgives no grounds for underestimating the work done by the Unit and much lessfor generalizing that the personnel who coordinated it were inexperienced.

Paragraph 7.02

Subparagraph (b): The Project Coordinating Unit agrees with thepoints raised here, since they would lead to less dependency on politicalorgans. However, in addition to clarifying the responsibilities of theparticipating agencies and the coordinating entity, some mechanism forconsultation should be set up promptly by the World Bank; despite the goodwillmentioned in paragraph 5.10 of the Report, which we also can attest to, timeand distance prove to be limiting factors in some cases.

Subparagraph (c): It must be recognized that budget limitationsprevented adequate monitoring of the various components in the field, as wellas MIDEPLAN's being able to contract for the services of technical specialistsin the specific subject areas targeted by each component. We regard it as amajor failing, as does the Report, that no funds were included which would havepermitted "smoother coordination among the various implementing agencies."Moreover, the present legal structure does not permit quick procurement ofequipment (competitive bidding), and the conditions attaching to the use oftraining funds did not allow compliance with Section 3.10(a).

In this sphere, it would be advisable to take advantage of theexperience gained from the mechanisms used in connection with component E (UNDPAgreement).

Subparagraph (f): There is no objection here, provided direct accessto the Bank is made easier.

-21- Annex 2Page 5

INSTITUTO DE DESARROLLO AGRARIO (IDA)

San JoseCosta RicaNovember 14, 1985

AP-278-85

Mrs. Beatriz R. de CorellaChief, Department of Budget Coordination andIBRD Project Coordinating Unit (1410-CR)

Ministry of National Planning and Economic PolicySan Jose

Dear Madam:

In response to your communication DRE-188-85-CP, requesting our commentson the Completion Report on IBRD Agricultural Credit and Development Project(Loan 1410-CR), I wish to advise you that we have no additional observationsto make. In the particular case of this Institute and of the country ingeneral, the most important thing would be to attempt to ensure that the sameproblems which affected this project do not occur again.

Yours, etc.

Miguel Alb. Rosales R.Planning Advisor

-22 - Annex 2Page 6

MINISTRY OF AGRICULTURE AND LIVESTOCKSan Jose, Costa Rica

San JoseNovember 4, 1985

Mrs. Beatriz R. de CorellaChief, Department of Budget Planning andIBRD Project Coordinating Unit (1410-CR)

Ministry of National Planning and Economic PolicySan Jose

Dear Madam:

In reference to your communication DRE-188-85-CP of October 30 addressedto the Minister of Agriculture and Livestock, I wish to advise that we haveexamined the document on the IBRD Agriculture Credit and Development Project(Loan 1410-CR).

Kindly note that we have no comments to make on this document. All ourconcerns were made known during the course of the project and our reportsfiled at the relevant times.

Yours, etc.

Alexis Vasquez M.Director General of Researchand Agricultural Extension

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