Document of

The World Bank

FOR OFFICIAL USE ONLf

Report No. 6620-ME

STAFF APPRAISAL REPORT

MEXICO

AGRICULTURAL EXTENSION PROJECT (PROCATI)

May 28, 1987

Projects DepartmentLatin America and the Caribbean Regional Office

This document has a restictee distdbution and may be used by redput only In the performanee oftheir oMcial duties. Its cntents may not otherwise be disclosed w= World Bnk authoraon.

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CURRENCY UNIT - PESO (Mex $)

On May 12, 1987, the exchange ratein the controlled market wasUS$1 = Mex$ 1,218.30; the free marketexchange rate stood at US$1 = Mex$ 1,214.00

FISCAL YEAR

January 1 to December 31

UNITS AND MEASURES

The metric system has been used throughout the report.

GLOSSARY OF ACRONYMS

ANAGSA - National Insurance Company, S.A.BANRURAL - National Rural Credit Bank.DGA - Director General for Agricultural Development

(Normatividad Agricola)DGPO - Director General for Producer Organization and

Community AffairsFICART - Trust Fund for Credit in Irrigated and Rainfed

Areas.FIRA - Agricultural Trust Funds in Bank of Mexico.IICA - International Institute for Agricultural CooperationINIA - National Institute for Agricultural Research.INIFAP - National Institute for Forestry, Agriculture

and Livestock Research.INIF - National Institute for Forestry Research.INIP - National Institute for Livestock Research.NAFIN - Nacional Financiera, S.N.C.PLAN PUEBLA - Puebla Maize Development Scheme.PLANAT - Plan to Improve Rainfed Agriculture.PROCATI - Producer Organization, Training, Extension

and Research Project = Agricultural ExtensionProject

PRODERITH - Program for Development of the Humid Tropics.PRONADRI - National Program for Integrated Rural Development,

1985-88.SC - Service Centers.RDD - Rural Development Districts.SARH - Secretariat of Agriculture and Hydraulic Resources.SHCP - Secretariat of Finance and Public Credit.SOE - Statement of Expenditure.SPP - Secretariat of Programming and Budgeting.UAIM - Women's Agroindustrial Unit

(Unidad Agricola Industrial de la Mujer)

FOR OMCLAL USE ONLy

MEXICO

AGRICULTURAL EXTENSION PROJECT (PROCATI)

STAFF APPRAISAL REPORT

Table of Contents

Page No.

I. LOAN AND PROJECT SUMMARY *.,............. ...... 1

II. THE AGRICULTURAL SECTOR eo o o aav.o .. ............... 3

Past Policies and Performance ................ *....... 3Present Agricultural Policy *............................. 4Extension and Research Subsector .........., .............. 4Bank Involvement in the Agricultural Sector .............. 6Bank Experience in Extension and Research in Mexico ....o. 6Bank's Overall Strategy 7................................ 7

lIII THE PROJECT 7

Background and Rationale .............. 7Objectives .............. 8Project Area ... ................... 9Detailed Description ***v*v*@e*b**ve¢ 10Project Implementationr 13costs ............. ....... o 13Financing 14Special Account 14Procurement 14Disbursements ....................... ^ 15Accounts and Audit 15Monitoring and Evaluation *...o......ooo...o..e........... 16Benefits, Incremental Production, Marketing and Inputs 0.0 16Sustainability ..................... .. .e.........oo 17Environmental and Sociological Impact .......-........ 18Project Risks *...............e.,...,.,......,. 18

IV. SUMMARY OF AGREEMENTS REACHED AND RECOMMENDATION ........ 19

This report is based on the findings of an appraisal mission which visitedMexico in October 1986. The mission comprised Messrs. M. Wilson, T. Prins,A. Tobelem (Bank), M. Hagerstrom, R. Laird and C. Ponceano (Consultants),

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

TABLE OF CONTENTS (CONTINUED)

Page No.

ANNEXES

1a Extension ........... e o 202. Research e........ ............................. *.. 253. Administrative Changes in SARH .......................... ,.. 294. Institutional and Manpower Development ..... ,.......,.*.*.*. 305. Monitoring and Evaluation ...... i.i.i.i......... ...*... 346. Project Costs and Financing ......... e.....e.............. 37

Table 1 - Project Cost Summary .,........................ 37Table 2 - Financing Plan by Summary Accounts *........, 38Table 3 - Proposed Schedule 1 of Loan Agreement ......... 39Table 4 - Estimated Disbursement Schedule ............... 40Table 5 - Summary Accounts by Year ..........,........... 41Table 6 - Annual Project Cost by Componentt 42Table 7 - Summary Accounts by Project Component *........ 43Table 8 - Physical Targets: by District ................. 44

7. Production and Benefits .................................. 458. List of Selected Documents and Data Available in the

Project Technical File ...................... e........... 54

CHARTS

I* SARH J*-v^**...¢ ................e552. State Delegation 563. Rural Development District .. 57

MAP: IBRD 20373

MEXICO

AGRICULTURAL EXTENSION PROJECT (PROCATI)

I. LOAN AND PROJECT SUMMARY

Borrower: Nacional Financiera, S.N.C. (NAFIN).

Guarantor: United Mexican States.

Beneficiary: Secretariat of Agriculture and Hydraulic Resources(SARH)e

Amount: US$20.0 million equivalent.

Terms: Repayment in 15 years, including three years of grace, atthe standard variable interest rate.

Project The proposed project would promote the setting in placeObjectives: of an extension methodology similar to the Training and

Visit (T&V) system to enhance the quality, efficiency andeffectiveness of Mexico's extension service. It wouldimprove agricultural productivity and income, and therebyhelp alleviate rural poverty. In this context, it would:(i) develop a better understanding of farmers' needsprior to beginning extension service activities;(ii) focus extension on priority areas, farmerorganizations using technology proven under fieldconditions, and women's groups; (iii) improvecoordination between extension, farmers, research, inputsuppliers and credit agencies; (iv) focus adaptiveresearch on validation and diffusion of technology;(v) promote a more cost-effective extension system and agreater sharing of extension costs by farmers in higherincome areas; (vi) stimulate further development ofprivate extension services; and (vii) streamline theoperations of SARH.

Project The proposed project would test extension strategies inDescription: 20 of Mexico's 192 Rural Development Districts (RDD).

Proj ct areas are representative of two of the country'sfour major agroecological zones: the irrigated areas ofthe arid northwest and the temperate central highlands.It would finance: (a) training programs for extensionpersonnel, researchers and farmers; (b) construction oflimited office facilities at SARH service centers;(c) procurement of vehicles and equipment for extensionand research personnel; and (d) recurrent expenditures ofthe extension service.

Beneficiaries: About 400,000 small and ejido farmers on about 1.8million ha are expected to benefit from the project. Atfull development, it would also provide additionalemployment opportunities equivalent to about 11,200 fulltime jobs in intensified crop and livestock productionactivities and would promote the development of women'sgroups in agricultural production and related activities.

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Pro ect Risks: The main risks include: (a) shortage of counterpartfunds; (b) inadequate coordination between agencies;(c) farmer unwillingness to adopt technicalrecommendations; and (d) insufficient incentives tomotivate extension personnel. Remedies have beendeveloped. With regard to counterpart funds, Governmenthas approved budget allocations for 1987 in line withappraisal estimates. Linkages between agencies would bestrengthened under the project. A major effort would bemade to involve farmers in the identification andevaluation of technical packages to be promoted under theproject. Furthermore, improved training and financialincentive schemes to be promoted under the project areexpected to provide sufficient incentive to createmotivated, professional extension staff. Finally, theBank intends to provide close supervision of the projectto ensure that the lessons learned are incorporated intothe national extension system.

Estimated Costs: 1/ Local Foreign Total(----- (US$ Million)

Extension 48.0 9.8 57.8Training 4.3 4.2 8.5Research 2.1 0.9 3.0Monitoring and Evaluation 0.3 - 0.3

Base Cost 54.7 14.9 69.6

Physical Contingencies 0.4 0.4 0.8price Contingencies 1.8 1.6 3.4

Total project Cost 56.9 16.9 73.8

Financing Plan: Local Foreign Total… ~~~--- - (US$ Million)

Government 53*8 _ 53.8Bank 3.1 16.9 20.0

Total 56.9 16.9 73.8

Estimated Disbursements:

Bank FY: 1988 1989 1990 1991 1992(US$ Million) --

Annual 0.8 3.8 7.6 6.8 1.0Cumulative 0.8 4.6 12.2 19.0 20.0

Map: IBRD 20373

11 Rounded. Excluding taxes and duties.

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II. THE AGRICULTURAL SECTOR

Past Policies and Performance

2.01 The agricultural sector contributes about 9% of GDP (withagro-industry contributing approximately another 7% to GDP), employs about25% of the labor force, and provides some 26% of non-oil exports. However,rural incomes are extremely low with 78% of rural households earning incomesless than 30% of the national average. Rural-to-urban migration continues tobe a problem, slowed only by the deteriorating urban situation brought on bythe economic crisis. Because of its large share of employment, the direpoverty of many rural areas, and the historically important political role ofthe sector, the Government considers the revitalization of agriculture to bean important economic and social element in the structural recovery ofMexico.

2.02 The concern about agriculture is heightened by the recentlackluster performance of the sector, relative to its historically dynamicrole. After World War II to the mid-1960s, Mexican agriculture was asuccess, growing faster than in any other Latin Ararican country. Employmentand income rose rapidly in the rural sector as cultivated and irrigated areasexpanded. Thus, in the 1950 to 1965 period, agricultural GDP growth averaged4.3% per annum, well in excess of the population growth of slightly over 3%.However, beginning in the late 1960s, several factors began to converge toretard growth. As the costs of bringing marginal land into production rose,expansion of irrigated areas slowed down. In the 1970s, exchange rate andpricing policies discriminated against agriculture and further contributed tothe deceleration of the growth of agricultural production. As income growthin other sectors and rapid population growth of over 3% per year increasedthe demand for food, food imports increased and the sector's share of exportsfell. While before 1970, Mexico produced sufficient food to feed itspopulation and export substantial surpluses, by the end of the 1970s, it hadbecome a major importer of basic foodstuffs. These adverse circumstancesresulted in a growth rate of agricultural GDP averaging 2.4% per annumbetween 1965 and 1980, compared to overall GDP growth of arcand 6% andindustrial GDP growth of around 7%.

2.A3 In March 1980, the Government resorted to drastic remedies toreverse the decline of agriculture by making use of the growing revenues fromoil. Higher support prices, more input subsidies, and expansion insubsidized credit, coinciding with favorable weather, led to a substantialincrease of agricultural production of 6% in 1980 and in 1981. However, withdeclining oil prices, rising interest rates and debt service, and growingconsumer subsidies, these Government actions in support of agriculture provedto be unsustainable. In 1982, when farmgate prices were allowed to fall inreal terms in the face of high inflation, agricultural production declined by1%. At the end of 1982, the costly push for agricultural recovery waslargely abandoned; the set of policies designed to solve food problems bychannelling much of the country's new petroleum wealth into the sector andinto providing cheap food for urban dwellers was an early victim to Mexico'scontinuing economic crisis.

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2.04 Beginnirg in 1983 and thraugh the 1985 crop year, agriculturalproduction recovered moderately to an average growth of about 2.52, primarilydue to a supportive exchange rate and favorable weather. However, in 1986,agricultural production fell by close to 3%. Crop output declined by 3.52,partly due to poo. weather, while livatock production fell as demand for meatand milk contracted dramatically (a result of falling inc'mes and the highincome elasticity of demand for these products) and higher costs ofproduction and price controls made it difficult to maintain profits in thissector, However, increasing exports (led by coffee and fresh fruits andvegetables) and declining consumption of hlgher valued products (particularlymeat and thus imported feedgrains), produced a substantial agricultural tradesurplus estimated at over US$1 billion. This was the first agriculturaltrade surplus since 1979.

2.05 With rural poverty remaining oppressive, world markets foragricultural commmodities depressed, and the economic crisis forcing declinesin urban food demand, the Government continues to seek remediea to criticalrural problems. Fiscal constraints prevent it from reverting to the kinds ofcostly subsidy policies used in the early 19809, however, and the Governmenthas instead turned its attention to increasing the efficiency of production,improving the effectiveness of remaining subsidies and public Investments,and reducing its intervention in the market. In this context, the Governmenthas decided to push aggressively for policy reforms that will bring aboutgreater sectoral efftciency.

Present Agricultural Policy

2.06 As part of its stabilization and structural reform program, theMexican Government has taken bold steps to reform agricultural and foodpolicy, including reducing the fiscal burden of food and agricultural inputsubsidies, liberalizing agricultural trade, reorganizing and reducing excessstaff in the Ministry of Agriculture, and eliminating unsound publicinvestments. An integral part of Government's strategy is SARH's 1985-1988National Program for Integrated Rural Development (PRONADRI). The Bankendorses the objectives of PRONADRI which, inter alia, aims to: (a) increasefarm productivity through more efficient extension services; (b) improve theagricultural trade balance: (c) improve incomes of the rural poor;(d) reduce and target subsidies; and (e) provide more direct assistance tothe rural sector, particularly to low-income farmers and thereby reduce ruralto urban migration. Government is also taking steps to decentralizeplanning, programming and implementation of rural development projects todelegate greater authority to state and local levels and to improveinter-agency coordination.

Extension and Research Subsector

2.07 Extension. Mexico's extension services have evolved in step withagricultural policy. Between the 19508 and the mid-1970s, growth inagricultural production resulted from an expansion in cultivated area, mainlyby bringing newly irrigated land into production. However, productivityincreased slowly. By the mid-1970s it became clear that a greater emphasisneeded to be given to rainfed areas, small farmers and improvementof productivity. At the time there were about 1,000 public extension staffwho provided mainly engineering support in irrigated areas. However, by theearly 1980s SARH's extension staff had grown to about 12,400 technical staff,each of whom, according to SARHt's estimates, was servicing an average of300-350 farmers and 1,200-1,500 ha of cropped land. The cost of providing

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extension and research support to Mexican agriculture was estimated in 1980at 2.1% of agricultural gross value of production (GVP), compated to anaverage value for othar middle-income countries of about 1.7% of GVP.Details are given in Annex 1.

2.08 When the current Government took office, it recognized thatextension services had made little impact on technical change and improvingfarm incomes despite this large staff build-up. Furthermore, the servicecomprised large numbers of low quality staff who had little formal contactwith agricultural research. This disappointing situation led SARH to agreeto a subsector review of Mexico's extension services (Bank Report No. 5255,dated November 11, 1984). The recommendations of this report (para, 2.12)led to the preparation of the proposed project and the beginning of a changein SARH's approach to its extension service. The present SARH administrationis determined to make the service more efficient, streamlined, cost effectiveand responsive to farmers' needs.

2.09 Administratively SARH has begun to decentralize its activities.Chart 1 outlines the structure at the federal level and Chart 2 the set-up atSARH's state delegations. At the federal level, the Subsecretary ofAgriculture, Livestock and Forestry Development is responsible forestablishing the technical norms of extension services through its DirectorsGeneral of Agriculture, Livestock and Forestry. In addition, thesemi-autonomous National Institute for Forestry, Agriculture and LivestockResearch reports to the Subsecretary. SARH State Delegates report to aCoordinator of Delegations who in turn reports directly to the Secretary ofAgriculture. Linkages between the Coordinator and the Subsecretary occurthrough regular meetings of federal technical committees, however, theseformal links need to be considerably improved. At the state level, SARHoperates a system of RDD, within which there are an average of about fourService Centers (SC) where extension, research, credit and input supplyagencies are to coordinate their efforts. This coordination occurs throughparticipation in RDD technical committees and SC municipal committeescomprising SARH, other service agencies and farmers, however, these againneed to be considerably improved and in many cases actually made operational.

2.10 Research. Agricultura'l research in Mexico has a long and respectedtradition of qu-Flity research especially in irrigated crop agriculture. Itis currently directed by the National Institute for Forestry, Agriculture andLivestock Research (INIFAP). INIFAP was formed in 1985 from the union ofthree previously separate institutes for crop (INIA), livestock (INIP) andforestry (INIF) research. However, the reorganization of agriculturalresearch is still underway and SARH is considering decentralizing researchand linking it more closely with the state-level agricultural universitysystem. As in most countries, INIFAP has been able to attract and hold thebetter agricultural graduates from Mexico's university svstem but has notbeen effective at focusing its research on the specific needs of farmers.Research work is largely carried out on research stations and there isinadequate field testing of research station results under farm conditions(validation). Recommendations are often made in leaflets for: (a) moresophisticated farmers who have better research contacts; or (b) extensionagents who may have a demonstration plot on a farmer's field, however, themessages being demonstrated are often not needs-based because of the absenceof a faimer-to-researcher feedback mechanism. Details are given in Annex 2.

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Bank Involvement in the Agricultural Sector

2.11 Between 1976-1986, Bank lending t^ agriculture totalled US$2,727million among 20 projects. During the past year, completion reports havebeen issued on two projects. In general, implementation of ongoing projectshas been satisfactory. However, tihe economic crisis of the recent past hascaused severe shortages of counterpart funds. This has slowed theImplementation of all but the credit projects and has led to che prematureclosure of two loans and the reduction in scope and partial cancellation ofothers. Some procurement problems have also been encountered. With SARH'slocal competitive bidding procedures on civil works contracts, there havebeen problems with: (i) the short length of bidding period; and (ii) failureto seek ex-ante approval from the Bank of certain contracts above previously-agreed thresholds. Government has also been unwilling to permit ICB forvehicle and equipment purchase. These issues are under discussion withGovernment.

Bank Experience in Extension and Research in Mexico

2.12 In 1984, the Bank carried out a subsector study to evaluateextension services in Mexico. This included an analysis of individualprograms promoted in different regions by Government as well as the Bank'sexperience with research and extension components in several projects. Someof the factors identified as being important to successful extension servicesin Mexico included: (i) working directly with farmers' groups; (ii) highlevels of extension coverage for a short period followed by less intensivecoverage after extension agents and farmers had been trained; (iii) use ofmass media techniques (video) to increase coverage and reduce unit costs; and(iv) strong and timely budgetary support. On the other hand, typicalproblems included: (a) inadequate local development planning and farmerinvolvement; (b) poor coordination of extension with other agriculturalinputs such as credit, where local banking limits often did not permit use ofall inputs included in the improved technical package being promoted byextension agents; and (c) failure to integrate into the national extensionprogram the lessons learned from successful small-scale, regional programs,such as the Puebla Maize Development Scheme (PLAN PUEBLA), the Program forDevelopment of the Humid Tropics (PRODERITH), and the Plan to Improve RainfedAgriculture (PLANAT)(Annex 1).

2.13 Since publication of the subsector report, and in keeping with theobjectives -f PRONADRI, SARH has embarked on a program to improve not onlyits extension services but also to streamline its entire sector cperations.Significant advances have been made, including the creation of 192 RDD with708 SC to unify extension services, improve coordination of inputs supply tothe farmer, and to delegate more responsibility to SARH's field staff. Otheradministrative changes made since 1985 are outlined in Annex 3. Despitethese changes, significant problems remain. For example: (i) a majorretraining of extension staff is needed; (ii) administrative linkages toimprove coordination at the district level, especially with researchers, needto be made operational; (iii) logistical support needs to be provided tofield staff; and (iv) mechanisms need to be developed to control the cost ofextension. The proposed project would test several strategies to tacklethese problems under field conditions.

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Bank's Overall Strategy

2.14 The Bank's strategy for Mexico's agriculture sector has four mainelements. The first element reflects Mexico's current need for structuraladjustment and quick disbursing assistance and involves a program of sectorwork and sector lending to address general policy issues. An agriculturesector adjustment loan is being prepared which focuses on: (a) reducing foodsubsidies and ensuring that remaining subsidies are targetted to the trulyneedy; (b) phasing out consumer and farmgate price controls on manyagricultural commodities; (c) selling or closing inefficient publicenterprises; (d) moving towards more cost recovery of Government expendituresand more economic pricing of agricultural inputs; (e) liberalizlng over timethe import and export regime; (f) rationalizing the sugar sector;(g) restructuring and decentralizing SARH; and (h) promoting a soundmulti-year public investment program. A second element supports privateInvestment in agriculture through credit operations; this has been and shouldcontinue to be an important part of Bank assistance. A third element focuseson improving productivity. This would include the proposed project, as wellas rehabilitation and improved operation and maintenance of irrigated areas,and regional development programs comprising small, productive andinfrastructure investments aimed at poorer, less-developed areas. The fourthelement comprises specific projects aimed at supporting important investmentopportunities; currently under preparation are agroindustries, forestry anddairy development projects. These also have a heavy credit element.

III. THE PROJECT

Bacground and Rationale

3.01 The project would build on the recommendations of the 1984subsector report. SARH prepared the project with technical assistance fromthe International Institute for Agricultural Cooperation (IICA) and severalBank review missions. A Bank preparation mission visited Mexico in June1986, and the appraisal was carried out in October 1986. Negotiations tookplace in Washington from April 23 to 27, 1987. The Mexican delegation washeaded by Lic. Luis Nava.

3.02 The fundamental rationale for the project is the importance of theagriculture sector in Mexico. Because of its large share of employment, thepoverty in many rural areas, and the historically important political role ofthe sector, the Government considers the revitalization of agriculture to bean important economic and social element in the structural recovery ofMexico. This project is important because it would make agriculturalproduction more efficient. In this context, Bank involvement is justified bythe need: (a) to improve productivity and output from Mexico's alreadycultivated areas as cost-effective opportunities for area expansion diminish;(b) to utilize the Bank's cross--country experience and technical expertise toassist SARH in improving extension and research services; (c) to alleviatethe poverty level of project beneficiaries; and (d) to streamline SARH. Theimprovement of the efficiency of SARH and, in particu:ar, its extension andresearch services, is of such strategic importance as to justify Bankinvolvement in a program with low capital and foreign exchange costs.Furthermore, since improved extension would improve farm-level productivity,the project would complement the policy reforms being promoted under theproposed sector oan. This would also greatly enhance the viability of theBank's agricultural project portfolio in rural development, irrigation andcredit.

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Objectives

3.03 The project would test strategies to enhance the quality and costeffectiveness of extension services in MSexico (paras. 3.32-3.34).Flexibility and replicability would be key criteria since the aim would be todevelop a workable system to improve Mexico's national extension service.The project's specific objectives are given belowt

(i) To develop a better understanding of farmers' needs prior toimplementilng extension programs. This would be achieved bystudying the local situation and developing priorities andstrategies with farmer groups and local service agencies. Morespecifically farmers would become more involved in the design andevaluation of extension services and research programs. This wouldbe achieved through the RDD technical committees and meetings atthe municipality level (para 2.09). Workshops would also becarried out for public service agencies to promote the strategiesdeveloped;

(ii) To im2rovethe qualityof extension staff. The project wouldconcentrate heavily on human resource development through improvedselection, training and technical backstopping of field staff bysubject matter specialists. This would involve a skills-gapanalysis of all district personnel and, when appropriate, amodification of job descriptions to focus on productive rather thanon bureaucratic tasks. The project would also study alternativeincentive packages to stimulate professionalism and dedicationwithin the extension service;

(iii) To focus extension on priority areas, farmer groups and wooen's

organizations. Tte primary goal would be to increase farm incomesby increasing the number of farmers who adopt improved technicalpackages. Overall, the intent would be to build upon successfulexperiences already developed elsewhere in Mexico: PLAN PUEBLA,PRODERITH, and PLANAT (para 2.12), as well as improved technologyalready being used by better farmers in the project area. Theformation of producer and women's groups would also receive specialeffort. In the context of tapping the underexploited resource ofwomen in rural areas, the aim would be to expand the Women'sAgroindustrial Unit (UAIM) which has been succesfully promotedunder PRODERITH. UAIM focuses on improving the nutritional statusof women and children by: (a) establishing vegetable gardens;(b) establiuhing small-scale livestock units; and (c) generatingadditional income for rural households through establishment ofbakeries and other cottage industries (Annex 1);

(iv) To stimulate greater sharing of extension costs by farmers andState Governments, and increase competition from private technicalassistance groups already operating in certain areas. The focus ofthis activity would be on farmer groups in higher-income, irrigatedareas. The project would also test the effect of limiting the timea group of producers receives intensive extension assistance tothree to four years. Thereafter, if the group wished to continue

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to receive intensive support it would meet the extra cost overnormal coverage levels otherwise the intensity would drop and thefocus would move to new groups (details are given in Annex 1). Avariation on this approach to providing intensive coverage for alimited time followed by a reduction in coverage has already beensuccessfully tested under the PRODERITH project. By requiringfarmers to pay for public services, this would place publicservices in more open competition with private services. Thiswould in turn provide a fairer environment for private services tocompete;

(v) To streamline SARH's operations based on (a) the actual needs offarmers at the district level and (b) cost effectiveness criteriabetter suited to the current economic environment in Mexico. Thisprocess would begin with a manpower development and skills-gapanalysis at the district level. The long-term goals would be areduction in SARH's overall staffing and an increase in theproportion of staff in operational assignments. In addition, thiswould mean replacing poor performing extension staff with betterqualified individuals;

(vi) To improve coordination between extension, farmers, research, inputsuppliers and credit agencies. The focus would be on activities atthe service centers and would involve active participation of allthe above groups in the RDD Technical and SC MunicipalityCommittees in planning, coordination and supply of services to thesector; and

(vii) To focus adaptive research on validation and diffusion oftechnology. This would require an increase in on-farm researchwith a farming systems, rather than a single commodity, approach.Researchers would also become more involved in the program ofdemonstration plots in farmers' fields used by extension agents intheir promotional campaigns.

Project Area

3.04 The 1.8 million hectare project area involving about 400,000 farmfamilies would comprise 20 RDD in two of Mexico's four agroecological zonesnamely, the irrigated areas in the arid northwest and the temperate, centralhighlands. The remaining two agroecological zones (humid and dry tropics)were rejected at appraisal since: (a) the Bank-financed PRODERITH II project(Loan 2658-ME) already supports development activities in the humid tropics;and (b) the dry tropics lacks an overall, coherent agricultural strategy andhas a poor resource base (Annex 7). The overall focus in the project area'stwo zones would be the same as outlined in para. 3.03; however, certainaspects would be emphasized depending on the particular needs of the areaconcerned. For example, in higher-income areas the focus would be on:(a) increased cost sharing with producer groups; (b) gradual reduction indistrict staffing levels; (c) promoting more direct diffusion of technologyfrom research to farmer groups; and (d) stimulating further competition fromprivate extension services which are already operating in the area.

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3.05 Although four districts were studied at preappraisal (one for eachof Mexico's agroecological regions), only two were selected as models underthe project (Cajeme in the irrigated Northwest, and Tlaxcala in the temperatehighlands). These two RDD would form the basis of the first year of theproject. An additional eight would be studied in year 1 (1987) for fullincorporation into the project in year 2 (1988), and a further ten in year 2(1988) for incorporation in year 3 (1989). In the central highlands it isanticipated that about four of the districts still to be studied would beselected from the successful districts developed under PLANAT, for whichsignificant information already exists and district management is good. Inthe irrigated northwest, where districts are more homogeneous and farmers aremore commercially-oriented, the process of completing studies is expected tobe straightforward and quick. It is also proposed to select, to the extentpossible, extension programs in those irrigated districts to be includedunder the proposed Bank-financed Irrigation Rehabilitation Project, Detailsof project components are discussed below.

Detailed Description

3.06 Extension (US$60-5 million, 82% of project costs). Logisticalsupport would be strengthened to increase the effectiveness and coverage ofSARH's field extension staff. Specifically, the project would finance:(a) construction of new offices at about 40 SC, mostly in remote areas, andthe renovation of some existing offices (including limited office facilitiesfor input and service agencies); and (b) provision of equipment and officefurnishings at the RDD and SC level, and procurement of about 640 vehicles.The office equipment would include equipment to produce and disseminateaudio-visual and written materials. Within extension, the project would alsocover the entire extension recurrent expenditure budget (operatingexpenditures and salaries) at the 20 project RDD at an estimated cost ofUS$52.4 million (71% of total project costs). Bank financing would berestricted to incremental recurrent expenditures (5.9% of total projectcosts).

3.07 The extension strategy to be followed contains the fundamentalfeatures of the Training and Visit (T&V) system including: (a) a unifiedextension service with a generalist extension worker; (b) regular training ofextension personnel; (c) backstopping by subject matter specialists;(d) regular farm visit schedules; (e) regular feedback between farmer,extensiorn worker and researcher; and (f) systematic monitoring and evaluationof project impact. There would be a limited increase in staff numbers,maitly technical staff in operations (Annex 6, Table 8'. However, it isexpected that the bulk of these would come from transfers within SARH'sexisting national cadre of personne>.

3.08 To tackle the problem of incentives to field extension staff, SARHwould test strategies which would include: (i) promotion based on evaluationafter training; and (ii) bonuses to extension staff for increases in farmproductivity. Details are given in Annex 1.

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3.09 Despite changes to be made, the unit cost and coverage of extensionwould be improved (paras. 3.28 and 3.32). This would be achieved by:(a) working more with farmers' and women's groups; (b) applying successfulmass media techniques already developed under PRODERITH; and (c) a vigorousprogram of demonst-ration plots (one for every two communities). Initiallyabout 220,000 of the 400,000 project area families would receive higherdensity extension coverage. The balance of the area would receive lowerdensity coverage until appropriate technical packages have been developed fortheir specific needs.

3.10 Institutional and Manpower Development - Training (US$8.2 million,11% of project costs). The institutional and manpower development component,a key element of the project, has been carefully planned with considerableinput from the Bank. It would be implemented by SARH's Director General forProducer Organization and Community Affairs 'DGPO) with assistance from theDirector General for Agricultural Developmert (DGA). It would bridge thegaps in SARH's ability to carry out effective transfer of technology andorganization of producers in the pilot districts. Detailed job descriptionshave been formulated for each pos4'ion at the RDD level. These have beenused in the first two pilot districts to identify skill-gaps of individualstaff members. This detailed process would be carried out for the remaining18 districts by the end of year 2 of the project. Specific training coursesto cover identified skill-gaps would be carried out in: (a) extension forabout 1,740 district extension staff including field workers, subject matterspecialists and administrators; (b) research for about 130 researchers; and(c) farmer organization for about 67,600 farmers. Specifically the projectwould finance costs related to training including travel, subsistence,accommodation and training equipment and materials. The loan would financeall training costs.

3.11 Extensionist training would be carried out through formalpre-service courses for incremental and/or replacement staff and throughon-the-job training by subject matter specialists. Training for subjectmatter specialists would include topics on farm management, farm economics tomaximize income, soil conservation, integrated pest management methods, andthe rational and effective use and safe handling of agrochemicals. Producertraining would cover technical, organizational and marketing activities. Inaddition, workshops would be held for extension, research and other agenciesrepresented at the SCs to improve planning and promote a greaterunderstanding of project objectives, Assurances were obtained atnegotiations that SARH would implement the proposed institutional andmanpower development program in the twenty project districts (para 4.01(i)),Details are given in Annex 4.

3.12 Research (US$3.2 million, 4% of project costs). INIFAP wouldimplement the adaptive research component. As recommended in the 1984subsector report, research in the project area would focus on: (a) improvingthe diffusion of research station results to the extension agent and farmer;and (b) tailoring research to address farmer needs rather than researchers'interests. Research results would be tested under farm conditions using anintensive program of validation plots. Specifically project costs wouldinclude all costs related to research work of about 60 investigation units.Each investigation unit would comprise the salary and operating costs of a

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researcher, a vehicle, field equipment for trials, limited officeconstruction and office equipment to prepare documentation. Since these areall incremental costs they would be eligible for financing under the loan.Feedback on the appropriateness of the technical recommendations would followtwo paths namely: (i) formal contact between researcher, extension agent andfarmer at the district level workshops and RDD technical committees (para.3.11); and (ii) more frequently through direct contact between researcher,farmer and extension agent at the level of individual validation plots.Specific technical goals of research would include: (i) more work on farmingsystems rather than single commodities; (ii) greater effort on livestock andforestry in marginal and mixed farming areas;(iii) a clearer focus ondeveloping cost-effective technical packages to ensure sufficient incentivesfor farmers to adopt the improved technology; and (iv) integrated pestmanagement, emphasizing cultural and biological control methods, and aneconomically and environmentally sound approach to pesticide use.

3.13 A major construction and staffing program at research stations isnot necessary. The research component would also provide for: (a) frequentresearch/extension staff contacts at experiment stations and at the RDDlevel; (b) a research planning exercise prior zo each crop season to reflectfarmers' needs; (c) joint research/extension staff planning and use ofon-farm validation and demonstration plots; and (d) production ofaudio-visual and printed materials. Details are given in Annex 2.

3.14 Monitoring and Evaluation (US$0.3 million, under 1% of projectcosts). In a project of this type, the role of monitoring and evaluation isimportant. Monitoring of project activities would be carried out by the RDDProgramming Unit. However, monitoring and evaluation of the impact of thestrategies and technical packages to be promoted under the project would becarried out under contract by the Graduate College at Chapingo. The Bankloan would finance the incremental recurrent costs of the 20 RDD ProgrammingUnits and the entire cost of the Chapingo consultant contract. Details aregiven in Annexes 1 and 5, and the Technical File (Annex 8).

3.15 Technical Asbistance and Studies (US$1.6 million, 2% of projectcosts'. The project would provide funds for national and internationaltechnical assistance (consultants) to support the institutional and manpowerdevelopment component, as follows: (a) organization, institutionaldevelopment and preparation of 18 RDD plans (120 staff-months);(b) administration and personnel policy (12 staff-months); (c) agriculturallegislation and its impact on extension (12 staff-months); (d) cost recoveryoptions evaluation (30 staff-months); and (e) general short-term consultantsupport for issues which develop during implementation (36 staff-months). Astudy would also be carried out to analyze specific extension methodologiesbeing tested throughout Mexico to determine which offer promise for widerexpansion under the project. Consequently, a total of about 210 staff-monthsof technical services would be provided under the project for thesepurposes. All consultants would be selected and retained under terms andconditions satisfactory to the Bank. Details are givei in Annex 4.

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Project Implementation

3.16 There would be two levels of adainistrative responsibility for theproject. At the federal level (Chart 1) the Subsecretary of Agriculture,Livestock and Forestry Development would be responsible for overallcoordination of extension and research activities and ensuring that theexperience from this first project would be applied on a nationwide basis.The Subsecretary would delegate responsibility for technical matters to theDGA who would ensure regular coordination with all interested andparticipating agencies. The DGA would ensure the selection and continuity ofqualified, competent staff in his Department of Extension to oversee theproject. Currently this unit is technically strong but lacks decisivemanagement. These skills would be provided for the project. At the statelevel (Chart 2), SARH's Delegate would pass responsibility for day-to-daymanagement to the district chief (Chart 3). The district chief would be themost important link in project management and would ensure effectivecoordination of all agencies working at the district level especially thesupport staff from the DGPO. In the northwest, district chiefs would alsoensure effective linkages to the proposed Bank-financed IrrigationRehabilitation Project. In the selection of project districts, the choice ofdistrict chiefs would be an important factor in the success of the project.

3.17 The Subsecretary would constitute a technical group to review thefeasibility studies on the 1P districts to be studied in 1987 and 1988 and toadvise him on appropriate actions to be taken in these districts. Thesestudies would be prepared by the respective district chiefs with technicalsupport from the nrA team which assisted at appraisal, Since the projectaims to incorpoi.Oe as wide a sphere of experience into this review aspossible the technical group would include representatives of: the SARHDirectors General of Agriculture, Livestock and Forestry; SARH's Coordinatorof Delegations; INIFAP; DGPO; Secretariat of Programming and Budget (SPP);Secretariat of Finance and Public Credit (SHCP); the National Rural CreditBank (BANRURAL); the Agricultural Trust Funds in the Bank of Mexico (FIRA);the Post-Graduate College of Chapingo; and the PRODERITH, PLAN PUEBLA andPLANAT projects. Representatives of SARHU' Director General of InternationalAffairs would keep the Bank informed of progress in this review. Assuranceswere obtained at negotiations that Government would complete the feasibilitystudies on the 18 districts for Bank review and approval. The deadline forthis approval would be November 30, 1987 for the first eight, and September30, 1988 for the balance of ten (para 4.01 (ii)).

Costs

3.18 The total cost of the project over the four-year implementationperiod (1987-1991) excluding taxes is estimated at US$73.8 million, of whichabout US$16.9 million, or about 23%, represents foreign exchange. In thephasing of project costs, it is assumed that two of the districts will becomeoperational in 1987, eight more in 1988, and ten more in 1989 to total 20RDD. The base cost of US$69.6 million is estimated at October 1986 prices.In view of the wide divergence between international and local inflationrates, all cost and financial projections are presented in US dollars.Physical contingencies (1.1% of base costs) were calculated at the rate of10% for civil works and 5% for all other investment items. Pricecontingencies (4.9% of base costs) have been estimated at 1% for 1987 and

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2.6% p.a. between 1988-1990. These rates have been applied to all componentsexcept salaries, in line with Government's goal of controlling the growth ofpublic sector salaries. The project would require a total of 210staff-monthsof consultant services estimated at US$1.6 million. Details of project costsare shown in Annex 6, Tables 1, 5 and 7.

Financing

3.19 The proposed Bank loan of US$20.0 million would finance 100% offoreign exchange costs (US$16.9 million) and about 5% of local costs (US$3.1million equivalent). The Bank loan would, therefore, finance 27% of totalproject costso Details of financing are given in Annex 6, Table 2.

Special Account

3.20 To expedite project implementation, a Special Account would beestablished in NAFIN. Up to US$2.6 million would be deposited by the Bank inthe Special Account, which is equivalent to about four months of peak loanrequirements. The Special Account would be replenished through normalreimbursement of project expenditures.

Procurement

3.21 The procurement procedures and amounts for the various projectelements are shown below:

Table 3.1 - Procurement-Arrangements a/

ProjectElement ICB LCB Other Total

(US$ Million)

Civil Works - 3.2 - 3.2(3.2) (3.2)

Vehicles and Equipment - 5.2 - 5.2(5.2) - (5.2)

Services - - 65.4 b/ 65.4(11.6) (11.61

Totals - 8.4 65.4 73.8

_ (8.4) (11.6) (20.0)

a/ Values in parenthesis reflect amount financed by the Bank,B/ Consultants, studies and recurrent expenditures.

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3.22 Civil works would be procured under local competitive bidding (LCB)procedures satisfactory to the Bank (US$3.2 million). Local competitivebidding would be justified as limited construction of offices at SCs would beat widely scattered sites.

3.23 Vehicles, machinery, equipment and furniture for all components,(US$5.2 million) would be procured under local competitive bidding proceduresin accordance with Bank guidelines. However, foreign firms would be allowedto participate in this LCB. This point was clarified during negotiations.LCB is justified due to the small size of annual procurement needs (aboutUS$65,000 per district) in the twenty widely dispersed districts which doesnot permit meaningful ICB. Consultants for the institutional and manpowerdevelopment component would be selected in accordance with Bank guidelines.Assurances were obtained during negotiations that Government would followthese pvicedures (para 4.01 (iii)).

Disbursements

3.24 The standard profile for similar projects in the region is eightyears, however, a period of five years for disbursements is proposed for thisproject for the following reasons: (a) it aims to test strategies and movequickly to nationwide implementation of the results; and (b) the scale andtype of investments are simple and do not require protracted procurementperiodso The proceeds of the loan are expected to be disbursed against: 100%of civil works, training, technical assistance and studies costs.Disbursements against incremental recurrent costs (incremental salaries andIncremental operating costs of extension and research services) would be on adeclining basis, based on the year of entry of a district into the project,as follows: year 1, 100%; year 2, 75%; year 3, 50%; year 4, 25%.Disbursements for purchases and contracts of less than US$150,000 and againsttraining, and incremental salaries and operating expenditures would be madeagainst statements of expenditure (SOE). All documentation in support of SOEwould be retained by the executing agency for review by the Bank as requiredand would be audited. The project provides for retroactive financing ofcosts incurred in all loan categories prior to loan signing, but afterOctober 6, 1986, up to US$0.5 million equivalent.

Accounts and Audit

3.25 SARH would maintain separate accounts of expenditures made underthe project. Supporting documentation, including satisfactory evidonce forall incremental recurrent expenditures (salaries and operating costs) wouldbe made available to the Bank for review in Mexico upon request. Independentqualified auditors would carry out an audit satisfactory to the Bank on theaccounts and SOE according to conditions of the general agreement on auditingsigned between the Bank and Government in November 1986. Under thisagreement, the Secretariat of the Federal Controller is consideredindependent and qualified, Certified copies of these audits would besubmitted to the Bank no later than six months after the close of each fiscalyear.

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Monltoring and Evaluation

3.26 Monitoring. The head of the programming Unit under the districtchief would be responsible for physical and financial monitoring of projectactivities. In addition to regular, routine reporting to support decision-making by the iistrict chief, the Programming Unit would submit formal pro-gress reports to the district chief every three months. The DGA wouldconsolidate these reports every six months and submit them to the Bank byJuly 31 and January 31 of each year. DGA would also submit annual progressreports to the Bank within three months of the end of the year, and a ProjectCompletion Report within six months of project completion. In the annualreports, DGA would specifically comment on the project's adherance to theobjectives and strategies outlined in para. 3.03. A detailed list ofactivities to be monitored is available in the project Technical File(Annex 8).

3.27 Evaluation, The effects of the project would be independentlyevaluated by the Graduate College at Chapingo. The focus would be todetermine the rate of adoption of new technology by farmers, and its yieldimpact. Specific quantifiable performance indicators would be evaluated toguide management decisions on replicability of results achieved compared toexisting norms of operation. The success of cost sharing mechanisms wouldalso be evaluated. Reports on the evaluation would be prepared twice duringproject implementation: at the end of years 2 and 4. The results of thefinal evaluation would be incorporated into the project completion report.Control districts and farmers groups would be established and Chapingo wouldalso monitor and analyze deta on advances in research, their relation totechnical assistance offered, and adoption rates by farmers. Draft terms ofreference for the Chapingo consultancy plus sample performance indicators areavailable in the Technical File (Annex 8).

Benefits, acremental Production, Marketing and Inputs

3.28 Benefits. The project would benefit about 400,000 farm familiesand a total of about 1.8 million ha. Approximately half of these familiescurrently have incomes below the poverty level, two-thirds would beejidatarios (small farmers on public land) and one-third small privatefarmers. It is estimated that the percentage of farmers adopting improvedtechnology (Annex 1, Table 1) would increase from about 5% to about 40% inthe central highlands and from 15% to 60% in the irrigated northwest by fulldevelopment in year 13. In addition, typical farm family incomes areexpected to increase, For example, in the irrigated northwest, a smallholderwith 11 ha of annual crops is estimated to increase his net farm income fromabout US$2,470 to about US$2,855 by full development. An ejidatario in thecentral highlands with 4 ha of annual crops is estimated to increase his netfarm income from about US$440 to US$540 by full development.

3.29 Incremental Production. The project would have an impact over awide range of crops and livestock activities. However, for the purposes ofthe economic analysis, the impact at full development has been estimated forthe five principal crops as follows: annual wheat production increased byabout 562,000 tons; maize by about 202,000 tons; soybeans by about 96,000

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tons; cotton by about 46,000 tons; and safflower by about 40,000 tons. Thiswould be equivalent to about US$116 million per annum in the value ofincremental production at full development, Details of estimated crop yieldincreases and areas benefitting from extension support are given in Annex 7.

3.30 Marketing and Inputs. The incremental production would mainly bemarketed in Mexico and existing marketing systems would have no difficultyhandling it. The supply of inputs such as fertilizer and chemicals is alsoconsidered adequate to meet project area needs and credit availability wouldbe ensured through ongoing and proposed Bank credit operations.

Sustainability

3.31 Sustainability was a key issue in the design of this project,particularly with regard to the availability of public funds. Mexico'sexpenditures on extension are substantial and cannot be significantlyincreased at a time when the country faces severe budget constraints. Hencethe project focus on increasing efficiency rather than expansion, and on costcontainment and recovery. Overall, it is estimated that total district-levelrecurrent costs will rise only about 8% over existing levels, and even lessif the cost recovery and cost control strategies outlined below aresuccessful. This level of cost is considered sustainable. However, due toimprovements in the adoption rate of new technology by farmers, the unitcosts of providing extension are actually estimated to decline (in October1986 prices) over the four-year project Implementation period from aboutUS$42 to US$12 per ha per annum in the irrigated northwest and from aboutUS$62 to US$14 per ha per annum in the central highlands.

3.32 Cost Control. Two general cost control principles would betested. The first would be stratify producers by income level andprogressively graduate higher income producers to private extension servicesor else require greater cost sharing. This would permit public services tofocus more on low-to mid-income producers in priority areas. The secondprinciple would promote increased direct contact between researchers andfarmers. This contact is more likely to occur in irrigated areas and wouldpermit further reductions in extension staff or at least their transfer toother priority areas where coverage is low at present. In higher incomeareas, extension must be considered more as an input and not as a freeservice. Consequently if farmers do not see a clear return on the investmentand are unwilling to pay for it, the need for SARH to provide the input wouldbe questioned.

3033 Several different approaches to cost control would be tested,namely: (i) greater use of contact with farmer groups; (ii) the use of massmedia to expand coverage; (iii) expansion of the use of validation and ofdemonstrationr plots; and (iv) reduction of coverage ratios over time incertain areas (para. 3.03 (iv)).

3.34 C!oLstMSharn. The project would focus its testing of cost sharingstrategies on higher income irrigated areas where farmers are already payingabout 15% of extension costs under a general irrigation district charge.Assurances were obtained at negotiations that SARH would raise the level of

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cost sharing from farmers groups (patronatos) in the irrigated northwest tocover about 50% of extension salary costs by June 30, 1992 (para. 4.01(iv)). Other cost sharing mechanisms to be tested would include: (i) directcharges for services such as soil sampling and animal feed rationformulation; and (ii) requiring credit and insurance institutions to pay therural development district directly for the technical support provided tosubborrowers. The extension staff would not be involved in collecting thecosts of these services from farmers.

Environmental and Sociological Impact

3035 Environmental Impact. Measures would be taken to protect theenvironment. Research would be conducted to determine fertilizer andchemical application rates and methods compatible with increasingproductivity and yields while protecting the environment from cnemicalcontamination. The extension services would advise farmers on the safe andproper use of fertilizers, chemicals and cultural practices required toprotect the user and the environment. Cultural practices would include soilconservation measures, such as terracing, contour cultivation, windbreaks andincorporation of crop residue into the soil, These practices would conservesoil and moisture and reduce transport of fertilizers and chemicals to areaswhere they could cause harm.

3.36 Sociological Impact* The project would have a major impact onreducing rural poverty. It would also improve the economic status of womenin rural areas by establishing women's groups for small-scale agriculturalenterprises (Annex 1). The project is designed to focas on ejidoe andsmallholders and therefore would have a positive effect on the socioeconomicbalance in the project area. In addition, it would increase employment byabout 3.2 million man-days per year, equivalent to about 11,200 full-timejobs, in the areas of intensified crop and livestock production, as well assubstantial part-time employment for weed control and harvesting. This wouldhelp reduce the need for the unemployed and underemployed to migrate to otherareas seeking job opportunities.

Project Risks

3.37 The main risks associated with the project would be:

(a) the possibility of continued economic difficulties in Mexico andconsequent low levels of counterpart funding. Reflecting this, thescope of this project has been kept modest and incremental costskept low. SARH has confirmed budget allocations for year 1 (1987)which are in line with appraisal estimates;

(b) inadequate inter- and intra-institutional coordination. Indesigning the proposed project, institutional constraints have beenclearly defined and would be remedied through appropriate stafftraining programs and participatory workshops;

(c) insutficient incentives for farmers and farmer groups to maketechnical changes and, where appropriate, to share in the costs ofextension. To minimize this risk, it is part of project design to

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ensure that extension and research are responsive to farmers'needs. However, there is a risk that tbe uptake of new technologywould be slower than expected because of inappropriate sectorpolicies beyond the scope of the project. This should be mitigatedby a proposed agricultural sector loan which is currently beingprepared (para. 2.14); and

(d) failure to provide sufficient incentives to extension pensonnel.In this context, the proposed training programs, improved flow ofbudgetary resources for routine operating expenditures, and thebonus systems to be tested are likely to provide at least partialrelief to what is likely to continue to be a very difficult salaryenvironment for public sector employees in Mexico.

3.38 Despite these risks, Bank-wide experience suggests that movestowards more efficient extension services have a high economic return sincethe cost is relatively small compared to the value of incremental productionand productivity generated. In addition the Bank intends to provide closesupervision of the project to ensure that the lessons learned areincorporated into the national extension system.

IV. SUNMARY OF AGREMENTS REACHED AND RECOMMENDATION

4.01 During negotiations, assurances were obtained that:

(i) SARH would implement the institutional and manpower developmentprogram in all 20 project districts (para. 3.11);

(ii) SARH would complete the feasibility studies for the balance of18 districts for Bank review and approval according to the scheduleoutlined in para. 3.17;

(iii) SARH would follow procurement arrangements outlined inpara. 3.21-3.23; and

(iv) SARH would raise farmer cost sharing levels in the irrigatednorthwest to about 50% of extension salary costs by June 30, 1992(para. 3.34).

4.02 With the above assurances, the proposed project would be suitablefor a Bank loan of US$20.0 million on standard terms for Mexico.

April 30, 1987

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Annex 1Page 1

MEXICD

AGRICULTURAL EXTENSION PROJECT (PROCATI)

Extension

A. INTRODUCrION

1. This annex complements relevant sections of the appraisal reportdealing with Mexico's extension service and the actions proposed under theproject. It discusses: (i) the recent evolution of Mexico's extensionservice; (ii) some project specific actions not discussed in detail in themain text, including: (a) incentives to extension staff; (b) producerorganizations; (c) women's groups; and (d) cost sharing; and (lii) selectedperformance indicators including coverage ratios and staff levels.

B. EVOLUTION OF MEXICO'S EXTENSION SERVICE

2. !A to Mid- 9709. Focus on Irrlgation and Area Expansion. Most ofMexico's growth In agricultural produetion between the 1950s and the late1970s resulted from an expansion in cultivated area, mainly by bringing newlyirrigated lands into production. Productivity increased slowly and themajority of farmers failed to apply many of the proven improved technologieswhich could have permitted signifikant increases in yields and farm income.This situation was especially noticeable with smaller farmers in rainfedareas, and it became of increasing concern to policy makers in the early1970s as the potential to irrigate new lands in a cost-effective manner beganto diminish.

3. Mid-1970s to Early 1980s: Focus on Rainfed Agriculture andProductivity. By the mid-1970s a fundamental change was made in agriculturalpolicy. To continue production growth, and to attain a more balanceddistribution of income in agriculture, it was accepted that increasedproductivity would have to be emphasized, especially in rainfed areas andwith small farmers. To achieve this, extension services would have to bestrengthened and expanded. At the time, a good research apparatus was inplace, but the extension service was sma11 with about 1,000 extension agentswho mainly provided engineering support in irrigated areas. However, a rapidbuild-up followed. In the 1980s, SARH had about 12,400 technical staffworking in extension, with another 9,100 agricultural technicians in othdragencies and parastatals in regular contact with farmers. The coverage ratioper extensionist claimed by SARH was about 300-350 farmers or 1,200-1,500 hacrop area harvested. At that time, the combined cost of technical support toagriculture (including research) was estimated at 2.1% of agricultural GVP,compared to 1980 average values for low-income developing countries of 0.9%,middle-income countries of 1.7% and semi-industrialized countries of 1.3%

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Annex 1Page 2

4. 1984: Bank Sub-Sector Report on Mexico's Extension Service. Itwas in 1984 that the Bank prepared a subsector report on Mexico's extensionservices (Report No. 5255, dated November 11, 1984) to identify areas in needof improvement. The report concluded that, with a few notable exceptions(pars 5), the large build-up in extension staff had made little impact ontechnical change and improving farmers' incomes. Several reasons were cited,some of which were symptomatic of the inefficiencies of extension services inmany developing countries, while others were more specific to the Mexicansituation. The most important problems identified by the report were: a topheavy bureaucracy; poor coordination with research and other services andinput suppliers in the sector; relatively poor levels of actual contact withfarmers; inadequate compensation of staff; poor training and logisticalsupport; low caliber of personnel produced by the educational system; and apaternalistic approach to rural families resulting in a lack ofprioritization in the use of public funds and a top down approach to problemsat the field level. There was also a proliferation of parallel dtepartmentsoffering individual technical support to farmers through their ownspecialized services (crop, Livestock, forestry, and commercial crops such asfruit).

5. Despite this gloomy picture, the subsector report noted several,area-specific successes, including PLAN PUEBLA (Puebla Maize DevelopmentScheme), PRODERITH (Program for the Development of the Humid Tropics), PLANAT(Plan to Improve Rainfed Agriculture), and good results from some individualrainfed and irrigation districts. PLAN PUEBLA was clearly a milestone inheralding the Government's interest in focusing technical assistance to smallfarmers. One of its key aspects was the leadership provided by the PostGraduate College at Chapingo. By '982, Chapingo was able to claim that,after 15 years of effort, over 90% of farmers had adopted improved maizetechnology, that average maize yields had risen from 1.3 to 3.3 t/ha, andthat over 8,000 farmers had been organized into effective groups. A key goalof any extension program would be to promote this type of success on anational scale. PRODERITH and PLANAT were successful in certain districtswith a modified form of PLAN PUEBLA.

6. 1985 - Present: Focus on Efficiency, Impact and Cost Control. Thecurrent SARH administration wants to generate more benefits from itsinvestment in extension. It is intimately aware of problems in extensionand is determined to make these services more efficient, streamlined andcost-effective. The Government is convinced that extension can contributesignificantly to increased agricultural production and improved rural incomeswithout a major increase over existing budget levels. In this context, SARHconsiders that its own services must be made at least as professional as thesmall number of private individuals who offer technical services to farmersin irrigated areas of the Northwest. These private services focus mainly onadvanced technology packages in plant production and marketing of perishablecommodities. They provide support mainly to higher income farmers and groupsof farmers and generally do not directly compete with SARH for clients.There is no specific restriction on the growth of these private services.

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Annex 1Page 3

C. PROJECT SPECIFIC ACTIONS

7. Incentives to Staff. To tackle the problem of incentives touxtension staff, the project would test strategies which would include:(i) promotion for those who successfully complete training programs geared tomeet their specific skills-gaps as identified by the project's manpowerdevelopment analysis (Annex 4); (ii) bonuses for demonstrated improvements Inproductivity of farmers assisted by extension staff. This would build upon apilot scheme begun in StAn Luis Potosi (in 1985/86), where incentivesequivalent to one to tw'o months of base salary were given as a reward foroutstanding results. This program would be evaluated by district managementand farmers groups and should be 'ade available to no more than 25% of staffwho must spend at least 80% of their time in the field; and (iii) eligibilityfor further higher level training based on performance in the fiald.

8. Organization of Producers. The further development andstrengthening of farmers groups would be a key factor in the likely successof the project to ensure that: (a) improved technology i8 disseminated widelyand quickly; (b) farmers play a more active role in planning and evaluatingextension and research programs; (c) farmers benefit from economies of scalein input purchase and marketing of outputs; and (d) strategies for sharingthe costs of extension would be adopted on a wide enough scale to have animpact on controlling Government's budget in extension.

9. Organization of Women's Groups. The project would also provide animportant mechanism to tap the underexploited resource of women in ruralareas which is an objective of PRONADRI. The goal would be to build-upon thesmall-scale successes of the Women's Agroindustrial Unit (UAIX) which hasalso been promoted in Mexico's humid tropics under the PRODERITH II project.UAIM are legal entities with administrative, supervisory and technicalfunctions. They comprise a minimum of 15 members who must be over 16 yearsof age. The proposed project would focus on various women's group activitiesincluding improving the nutritional status of women and children by:(a) establishing communal vegetable gardens; (b) developing small-scalepoultry or other small animal units; and (c) generating additional income forrural households through establishment of bakeries and other cottageindustries.

10. Extension staff would receive technical backstopping on producerand women's group organization from SARH's Director General for ProducerOrganization and Community Affairs (DGPO). This unit would also assist inthe field level training of extension staff and community groups.

11. Cost Sharing. The project would attempt to introduce the conceptof farmers' groups sharing the costs of extension services. Effortsin other developing countries to achieve end-user funding of exteunsion haveusually met with limited suc_ess, and when successful, it has ususilly beenassociated with: (i) export commodity programs, where payments to producershave been reduced upfront to offset extension and other input costs; or(it) irrigation projects, where water charges have included an element forextension. The proposed project would focus cost sharing strategies on highincome irrigated areas where farmers already have accepted the principle of

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Annex 1Page 4

paying for extension services. Local farmers' groups contribute alreadyabout 152 of extension costs under a general irrigation district charge. Theproject would raise this to about 502 of salary costs by June 30, 1990. Someof the cost sharing mechanisms to be tested would include: (i) direct levy byfarmers' groups (patronatos); (ii) additional charges on loans received frombanking institutions, such as currently being practiced on a limited scale byFIRA/FICART; (iii) cash payment for private services; (iv) direct charges forservices such as soil sampling and animal feed ration formulation; and(v) requiring institutions such as BANRURAL and ANAGSA to pay the districtdirectly when they require farmers to take technical support as a conditionof their subloans. These costs could be capitalized on loans to farmers. Ifthe project io able to expand this principle of cost sharing and increase theactual level of costs recovered, it would be a major success. In thiscontext, Mexico has tho prospect of establishing an important precedent forother developing countries to follow.

D. Selected Performance Indicators

12. A detailed list of specific performance indicators which would bemonitored by the district and evaluated by Chapingo are available in theTechnical Pile (Annex 9). These include parameters on production, producerorganization, productivity, farmer income and cost sharing. However, withinthis monitoring and evaluation exercise there are two fundamental factorswhich will be closely monitored in an attempt to measure improvements in theefficiency of extension services; namely, coverage ratios and staffinglevels.

13. Coverage Ratios. At present, extension staff actually reach nomore than 15% of farmers in a district and the level of adoption of improvedtechnical information is often less. By focusing on priority areas, theproject proposes to raise these ratios as follows:

Future withPresent Project

Percentage of Farmers AdoptingImproved Tehnology (1):(a) Central Highlands 5 40-45(b) Irrigated Northwest 15 60

Number of Farmers Contacted perExtensionist: 1/(a) Central Highlands 50 460 1/(b) Irrigated Northwest 40 150

Intensive Crop Area perExtensionist (ha):(a) Central Highlands 225 1,860(b) Irrigated Northwest 440 1,640

1/ With the project, the number of farmers contacted per extensionist isexpected to be greate? in the central highlands due to: (a) the simplercropping pattern (basicallv maize); and (b) the heavy emphasis onworking with groups due to relat'vely smaller holdings/family in thisregion.

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Annex IPage 5

14. Staffing Levels and Profiles. The ratio of administrative totechnical staff would be closely monitored to ensure that total staffreductions are not made at the expense of field-level technical personnel.However, when appropriate, staff should be transferred out of extension work,or relieved, if found unfit for the job. This situation is likely to developin districts such as Huamantla In the central highlands. Here theprofessional level of staff needs to be raised; however, certain individualsmay not be capable of improvement. pragmatic decisions on removing stafffrom field positions would therefore be necessary.

E. Focus of Technical Packages

15. In order to illustrate the focus of messages which extension staffwould promote, a brief review of sample technical packages are given below.These observations have been made for wheat and soybeans in the irrigatednorthwest, and for maize in the temperate highlands. Since improvedtechnology is, to a large extent, already applied in the irrigated northwest,the focus of the packages would be to: (a) reduce production costs; and(b) fine-tune cropping patterns to better suit soil potential. In thetemperate highlands, the fundamental constraint to production is the lengthof the crop growing season and the need for efficient and timely landpreparation.

16. For wheat in the irrigated northwest, technical packages wouldfocus on:

(i) reducing the seed rate from 170 kg/ha to 150 kg/ha;(ii) reducing the compound fertilizer application rate from 400 kg/ha to

350 kg/ha;(iii) reducing water usage from 8,000 m3/ha to 7,400 m3/ha; and(iv) focusing on timely and adequate herbicide usage.

17. For soybeans in the irrigated Northwest, technical packages wouldfocus on:

(i) using newly-selected varieties to better fit in the wheat-soybeanrotation;

(ii) maintaining a seed rate of 100 kg/ha to compensate for lowgermination levels of seed; and

(iii) cultivating soybeans on lighter soils to permit sorghum cultivationon the heavier low-lying areas.

18. For maize in the termperate highlands, technical packages wouldfocus on:

(i) promoting more land preparation in the fall rather than in thespring;

(ii) promoting sowing in early spring together with an application of 20kg TSP/ha in the seedbed;

(iii) introducing longer growing season varieties; and(iv) timely weed control.

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Annex 2Page 1

MEXIOD

AGRICULTURAL EXTENSION MROJECT (PROCATI)

Research

Current Status of Research in Mexico

le Iz August 1985 the three research institutes for crop production(INIA), livestock production (INIP) and forestry (INIF) were amlgamated intothe National Institute for Forestry, Agriculture and Livestock Research(INIFAP). Operational coordination is, however, not yet complete at thefield level. INIFAP ts a decentralized agency in SAil's Subsecretariat ofForestry, Crop, and Livestock. INIFAP is responsible for planning,programming and defining operational norms; directing and implementingscientific research; and disseminating research results throughout thecountry. Other specific responsibilities include training of technical andscientific personnel and the validation (field-testing) of technology.Research activities in crops, livestock and forestry have not beencoordinated or Integrated at the field level. Research is organized into 32programs-each with a national coordinator--and Implemented through 20research centers (12 crop and 3 specialized centers) and 85 experimentstations. Despite the 1985 reorganization, INIFAP may be further changed inthe near future as part of SARH's ongoing decentralization. SARH isevaluating the possibility of linikng research to the state-levelagricultural university system.

2. Crops received the greatest research effort. Work has mainlyfocussed on production in irrigated areas and areas receiving favorablerainfall (about 401 of harvested area, 671 of agricultural production, and331 of farmers/producers) in Mexico. Existing recomendations areappropriate-but not necessarily the most economic-for most producers inthese areas. However, it is unlikely that these recommendations areappropriate for most producers In those areas where rainfall is a majorlimiting factor, and where a subsistence or traditional form of agricultureis practiced (601 of harvested area, 33X of agricultural production, and 671of farmers/producers). An analysis of the present situation indicates thatthe scope of basic research work is satisfactory and should be maintained atits present level. However, increased emphasis is needed on establishingextension packages based on proved results, and on the transfer and diffusionof these packages to meet farmers specific needs. In contrast to cropresearch, livestock and forestry research is carried out in relatively smallscale. For a detailed discussion of agricultural research in Mexico thereader is referred to the subsector report and the technical file (Annex 9).

Proposed Action Under the ProJect

3. Under the project, INIPAP would concentrate on field-testing(validating) research station results at the farm level mnder the supervisionof researchers. The project's intensive validation plot program would focuson irrigated and favorable rainfall areas, where nost farmers aremarket-oriented. However, in less favorable rainfed areas, where most

- 26 -

Annex 2Page 2

farmers use traditional methods and in general are not in a position toexperiment and cannot afford risk taking, the validation process should startwith on-farm research with a farming systems perspective (OFR/FSP).

4. OFR/FSP entails the cooperation of farmers, researchers,extensionists, and representatives of relevant agricultural service agencies(credit, inputs, marketing, etc.) in carrying out an effective diagnosis offarmers' circumstances, defining development priorities, planning andimplementing experiments on farmers' fields, and analyzing, interpreting andsynthesizing rersults in order to arrive at appropriate recommendations.Since farmers are intimately involved from the beginning, many of them willadopt the improved practices immediately. OFR/FSP is thus the vehicle forestablishing the linkage between research and extension. OFR/FSP is thecommon denominator in achieving three closely related goals: (a) generatingappropriate agricultural technologies, (b) coordinating and integratingagricultural, livestock and forestry research, and (c) establishing closelinkages between research, extension and farmers in the validation andtransfer of technology.

Specific Research Focus in Northwest and Central Highlands

5. Tables 1 and 2 give examples of some key constraints of the maincrops in the project areas' two agro-ecological zones: the irrigatednorthwest and the temperate central highlands. In addition the recommendedfocus of research programs is discussed and the likely impact is given oncrop yields in validation plots compared to existing average yields in theproject districts. These estimates were developed by the mission inconjunction with INIFAP, district extension personnel and farmers.

IfXtGD

AMRIOLURAL £E26IG4 RUMW - QKOTI)

REA

Main constraints to prodmtiison rauirgta vaUdation rsearch and e e yield inerme in ft_¢ la

Yield (TI)t"in 0:wtratnts to VIy fobiats for Valtdatlon RbIl t tion offttzction b%fB Wsearch and lteusisn Presmt eammnl .

fNaed tlhttily aSd prq2to in teh - a) Plowig In the Wawrber/Twember perttl; a) OptLAl sott condit inshize: spriuw - b) 1maal to wce lard prepmtion nrsilt 3.) 4J)

timely avattable as part of cnrdt padrw to o) Ahrre codtbonsprior crop 2.5 3.0

Frost I tn lo.W-season variety - eeliqtm at attq of frsot toterart lnW-swoon varieties

Inadeuat fertitizr rqeim - AcertainLi ewomic optimal fert I lizAr dsge,ttme ax pLasemet

Deficie.t st ontrol - Introducalg validated pre- Q4gence taw ofherbicides

Barley: Uttmely la1d preparation in spriig - - SB rtainfed ale rembti on - 2.1 2.7

Use of lw-yLelding varieties - a) Breeditg aid testig lonrsemon variety;- b) tzttducirg the tue of now sed each year for

variety pwrty ras

rndopat fertilizer regime - lnro&uttig patial fmefate applicattton atplatitta tim.

Deficitet tarm sorol - Intritwtv valitdatei pre etete une ofherbtclm

Hrwe Relatively ne crop mainly - AsertalJW tota p o f re_mnttao. 0.85 1.25liws: aittivatet wtthiut titts due to focusdg on:

lack of tMovai tecolqty a) post ad disea tolet vartettes; andb) agrdemic tomedation re ladpreparatkm, sed rate, firtilier sdimtAle, admamContral

tAtt: ttiely Ltd preparation in sp'rtg - - See ratafat ti reca tatlon - 2.0 2.5

Ue of lovWdig wriaettes - btraduciB valida teS r dati variettes

Iauiate fertilizer rqfm - btratwiqj parttial nate qipticatim atplaitibg tIme

Def iclet woalotrol - a) liroduciq5 pre-aun uw of hetidcides;- b) Basural to _W. cradit timely avatlable

MRJCJL3IMAR&LEM6IfM rWr - (FWMT¶)

REWA

jijn awraints to ff en L drlig valtidatton eseardh. and extt yield ineres in Cja

Yield (Who)ian Cnwtralets to ley Points for validation Patl Aptin of

a Pmaetiu * bsmrrh and.&tnson fteat FDald P pties

heat: Fatwe ip& use (sed rate aid - AdvitRIq farmer an wret iqat use. 4.7 5.2liquld anta pplicatlon) r4mltiowin hi1 pwd1can oots.late plawtlq - Advisvti faezm an conect plat tig 4dts

eficiat Newt Control - AdvtisLi farmees an correa tarbicide qppitlasm- p d ad irription practtke;

nieEt ster _Inat - a) Mbvisir faets on correa led level tliwFXNota| ad trtton prstim;

- b) anzatnaf cotea cro wtier reaquxtsfor optbat miter t_e

spy Bam Ue dof w7d1w I etiia - Iatrudsc ewl tly 4laud Igh-yteldiq vatettls 2.1 2.4for 1n pzutii rateassiie sea dm to ate - lqrw-b otatton ra tirniD isqwatd seafor kw _ukistim Vate t adl s wItate plantg - Aseetainul apttia plattag tim tn tow tduat-

Use of oserly tey soils - a) Amta qlati the effect of luey low-lyitusoils an yields;

-b) ascortaint,g tie effeet ot tp etl dratueof thm sotts an yilads;

- c) advsatsw an altenatiwe tae of tivue mils

tHize: the of teyieldtqg varletta - %elidatui no prmstrw high yieldltt wuletta 3.9 4.4ttimly Ptl itg - vl.itg farnts an orrec plattig date

efictat crop lygiene - Mvtsisg f o an pr pst oevt wnrin.ad an jumwgaaKo uss of Kbicaim

lrract fetttizer utbw - Valtdei4sg sMIC aqti_t ferttilizer dav,tim. ad plinut

(b:ten: the of lo.g-aeaun vatietta - adltq ad tati of shwt-somon vwtette 2.6 2.9wrreit tittiiasv rqlse - AmatalrAg ma n1tt a tat s

lb_qate pet control - Iatrixil,g ad aivisli fame an iwvwmAd gsta2ntol m bsed an _ mtisewly wwrlgspatem.

Hiloi Prodction -Ats - Aertalial ad valtg an moralL eate-til topt tade Pgy ̂

8sf fna:Dlsemm - a) Smsth*g Alternar ad nst reelatai t.6 2.0varletim

- b) veidotig atthble diAas tolbat t vnreteilate platitE - Aosetalat a asSaldvieit frtos an crt ec

plait t domeDeficis irrigation water *_ - Aseetatnhs aid asivg farers an:

a) crp water n itb) tim _ra or irri4gtioa Wpptittos ad theirtl1dt1 dRINg tim cmop c7cle

- 29 -

Annex 3Page I

MEXICO

AGRICULTURAL EXTENSION PROJECT (PROCATI)

Administrative Changes in SAR!

1. Since the 1984 Bank subsector report on Mexico's extension serviceswas published, SARH has made significant changes to its administrativestructure In order to streamline its operations and improve its efficiency.The goal is to make a greater impact at the farm level. Some of the keychanges are outlined below:

(a) an internal reorganization in 1985 streamlined the number ofadministrative units at the federal level inter alia: 15 GeneralDirectors were eliminated, one subsecretariat was created from thethree previous units for Agriculture, Livestock, and Forestry; aunified research service was created from the three previousservices in Crops, Livestock and Forestry; and three regionalcommissions were eliminated;

(b) about 17,000 staff were removed from SARH's payroll as a result ofthe reorganization, leaving about 140,000. A gradual cut-back isstill underway and levels are expected to drop to about 120,000 bythe beginning of 1988;

(c) a decentralization program was begun which aims to delegate moreresponsibility to the state and district level;

(d) the previously separate extension services in irrigation andrainfed districts have been unified into 192 new Rural DevelopmentDistricts (RDD);

(e) 708 Service Centers (SC) have been created within the RDDs to actas focal points for coordinated servicea (extension, research,credit and inputs); and

(f) extension and research are now multidisciplinary in their approachand extension sta"f operate a system of regular visits withtechnical support from district level subject matter specialists.The approach has many features of the training and visit system.

2. Despite the commendable focus of these ongoing administrativechanges, SARH continues to be constrained by a serious lack of budgetaryresources and the low levels of compensation for public sector employees.

- 30 -

Annex 4Page 1

MEXICO

AGRICULTURAL EXTENSION PMOJECT (PROCATI)

Institutional and Manpower DevelopMent (IDC)

Introduction

1. A main objective of the project is to define a new system to bettercoordinate farmer organizations, extension services, credit, insurance andmarketing systems. This would be done through the design of adequate normsand procedures under a typical institutional development project componentdesigned to enhance the institutional capaclty of a network of agencies Incharge of providing services to farmers. In addition, as the Government hasalready decided to decentralize the decision-making process down to thedistrict level, the project also aims to create management and technicalcapacity at the district level.

2. Within this broader perspective, IDC is more specifically aimed atproviding inputs to increase available skills within lmplementing agenciesand to help create an institutional environment more conducive to theachievement of agriculture development objectives in Mexico while creating anincreased capacity at the local level. Although the preparation work for thedesign of this component sought to provide sufficient information todetermine what inputs would be available to help achieve expected outputs, Ithas also led to the design of a management tool that will be helpful forproject implementation.

Preparation of IDC

3. Institutional Capacity Analysls, The project objective is in facta policy objective. It aims to Involve farmers more in the decision-makingprocess when defining agriculture development policies and targets. Thismeans that farmers would be stimulated to organize themselves better and tofacilitate their access to more efficient services. All this requires a highlevel of lnstLtutional capacity for the subsector. Therefore, anInstitutional capacity analysis has been carried out to identify capacitygaps against project activities and tasks.

4. For the purposes of this analysis, the project has three specificobjectives: (i) to design a more efficient technological package; (II) toImprove the capacity to convey the new technology to the farmers; and(ili) to help farmers organize themselves more efficiently to get the bestout of available services. These specific objectives were disaggregated intoactivities and tasks that describe who should do what to ensure adequate useof resources to achieve project objectives. However, if tasks describe howto use available resources to achieve objectives, they do not guarantee thatthis ls going to be feasible. This is why It is necessary to enquire to whatextent every task Is feasible from the six following capacity elements:(i) the legal and para-legal system; (11) Inter-institutional relationships;(iil) organization and distribution of functions; (iv) physical and financialcapacity; (v) personnel policy and reward system; and (vi) skills at alllevels of staff and target population.

- 31 -

Annex 4Page 2

Institutional Capacity Gaps (ICGs)

5. Major ICGs are skill-related at all levels. This is not surprisingbecause activities and tasks represent important innovations which involvedparticipants need to learn about. Skill gaps are related to new extensiontechniques, validation procedures, communications techniques and processmanagement. All levels are affected and training activities through coursesor technical assistance have been designed accordingly., However, even if allmissing skills were made available, this would not solve the problem becausethe institutional environment In which these skills would be activated isgenerally a hostile one when matched with project requirements. ThisIncludes more specifically: (i) a lack of information on existing extensiontechniques; (ii) inadequate organizational schemes when decentralizing thedecision-making process; (iii) absence of evaluation methods for theextension subsector; (iv) inadequate legislation in the agriculture sector Ingeneral; (v) an inconsistent personnel policy; and (vi) a lack of informationon how a cost sharing system could work in this particular subsector. Allthis would be addressed through technical assistance.

Institutional Capacity Analysis System (ICAS) as a anagement Tool

6. The assessment of the available institutional capacity of thesubsector to achieve development objectives as defined under the project, lasbeen carried out starting with project specific objectives. These have thenbeen disaggregated into major activities which have been defined based onavailable resources and each activity has been divided into detailed tasks.

7. Subsequently, task codes have been entered into an organizationchart (Tables I and 2) which shows who is going to do what and identifyingwhat are the tasks of an interinstitutional nature. The general coordinationof the project can visualize how tasks are distributed in theinter-institutional organization chart. If completion dates and expectedoutputs for each task are added, the tools becomes useful for monitoring andevaluation. In addition, roles for each involved agency and their subunitshave also been identified and shown in the same chart. This facilitates theunderstanding of each individual role and therefore, clarifies in thedistribution of responsibilities.

8. By combining this chart, the consolidated list of ICGs andsolutions offered to bridge identified capacity gaps, managers at all levelscan periodically check the relevance of measures taken and decide whether togo ahead with them or reorient them as required. This is particularly truefor training activities which should be evaluated against the capacity ofstaff or farmers to properly execute their prescribed tasks.

Institutional Development Function

9. The IDC Working Paper (in the Technical File, Annex 9) offers awork program defined in tasks to start implementation of each component.However, to provide support to staff in charge of implementing IDC,specialist services are included to set up the institutional developmentfunction in the three agencies in charge of the project wlthin SARH. Thespecialist will carry out a more refined institutional capacity analysis soas to detect more detailed ICGs and create a permanent capacity to observethe institutional environment in which subsectoral development objectives areachieved.

- 32 -

<~~~' ill! l Tablei l

.~ ~ _ _ _ _ _ _ _ _ _ _ _ _ _ I _ __ _ __ _ __ _

1i'§W>31~~~~1i!jI

X,~ m |n !g'1W ' ,i11110 il1. t

651 T3S , I §§~~~~I .

31IIJAV AdMS ISH ,

.M . ::14K ", "

D~~~~~~~~~~~~~~~~~~~~~~~Wl b- t e .elI ele

t__s"S."f os~~~~~~~~~~~~Nu .lkW - eU.

~~' ~~*~~ W M w u..a..we.. t~~~~~~~~.34.umem to W

ma, mlr. W52.r.

W S4Z t. II

Iir.90.1 M,.

wpm tt Wl.:: t,

.. M wt:. cmh.C wtOt*

Amb, ~ ~ ~ ~ ~ mlinft el I I .4gm WI.,'

r4 J0111. I _ t4 m.b _ II I m

." M"D OVW M to 4 Ka tO-

sinw. Q wbpe meg. 1e. ".

ow. *.sZt Wtc u.."t . .me. t_.tK.4K _=e -_u

~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~.or& tWe m : .,P*,,W,,, ;*'.. ,(' , : W.t* ..... L

ISPA '9bf;; Oi.4. -0.4. 9t e KW WI

.. Wlt. , ta N, 1. leNt Ntn; go leL

F4_g~~~~~~~~~~~~~~~~I6P1_ WIg. .15 4...?. ...................... to -:- JiOfOpt

I~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~t-t ._ .

.0-W twoo V.VA % CW. *95t.. 8.1. 51.1..M.,.Wm^4. W.

J.u*s' .com 4.?.. p . ""sI "soGh .ce*r e att &.'t Om-51 g444 ma .. N= .4 "wtjau sm MOD rm-, liw.. 44v.2* 4 ..A.' A... (4*..l .40 Im', Mtj M.4. o4... .egs.5 a-.. 4g. .19.11.a .Ueg e.5 54.1.

comew .:W4: 4 ... 1.541,eh .4' 1.. 41$.*414 am .. U -m4* .WI0. 9154.. .5411 .51W. A U I u. ..Nu9 4Ks4 890

.115251 .`4m K' ... '* t It .*;4. .e1h 4 .9.4.. "M M. $*M ob. . Om..13W ~9A40 .46114 dleSle, .Nu0.."K 1." 14.s~54.K 5.194.1 ee.e. N..u .Ngtm I.gm 4w mt.uu e..e.

suptmO 13. sowe fw%el*''55 WI " g' to.%e ..Wm a .mg..N. -. C. 0Y.0 .. m ean ' .4b*19.u ee.m..

K4 31 5. Nul. .emu...te.12 1 e bA .u. u.s. .guu m.-I 9.me.' mu... em..- .A9.13.eo. .g. 111 ,U.nWs0.Ow eM..t mt .e4~l5'.411 .4aft ' '' em 9 .g.a Nuot. .1em. am.56.14W uheW.e. e.. W.l4 em... el. .09IM es Nu 4.151

OMe .15,..44. 'p u Wlh*' e..in14 .o at .elec.ggl t:e.gle. e*.. IN 4eeee..."I'me.m .Nb.uee.11019.1 ee.

Oauk .,% DAo MM 4w, 4"9 1 -- -k" AWP i

mu. ~~~ u..~~ ~ .M.:4 .M"e .50 I~4~ 4..*O .114 44 Wa tow lP. .. le;.t. .40-.* W1.... 145*5u5 e. WS .W.t UI -Nlb.e,I.

.464 e-et e.- ._eL|I : -C : 0" :WiW If I

. 5 .,4, .W msw*. Mo,& .,.,.cow C.04: 'W4.4 *Ws. .14-5.

Z~~~~~~~~~~~~~oa °tt. Zn Mm.

.14511 . .1?

P.54K t.191s mm mu. ~ W. tw no

.4145. 4K. (WA 5419.. 5K. 4Kt

'13511.111414 .l4gl w19 ,W

.01'ex Z" W. Amw .eOO

~~~~~~~~~~~~~~~~~~~~~~fu o" Ao

tj X8UU~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~.QX "o;31u~~~~~~~~~~~~~~~~~~~~~~.O o W

- 34 -

Annex 5Page 1

MEXICO

AGRICULTURAL EXTENSION PROJECT (PROCATI)

Monitoring and Evaluation

1. The monitoring and evaluation arrangements under the project wouldaim at providing accurate and timely information for project management,planning and supervision, and providing a basis on which to judge thereplicability of the strategies to be tested. They would also streamline butnot add to SARH's existing monitoring and evaluation processes.

Monitoring

2. Two different types of key indicators will be used to measureproject impact: (a) activity indicators in extension, research, training andinfrastructure as well as availability of human and financial resources; and(b) impact indicators to ensure that the individual project activities aremeeting their objectives. The results to be monitored include physical andfinancial results of validation and demonstration plots, knowledge andadoption of new technology by producers, productivity increases, and exposureto technical assistance.

3. Extension agents would be mainly responsible for analyzing thephysical and financial results of the demonstration plots and for submittingdata on technical assistance, producer associations, and progress on costsharing schemes, once a month. The data would be aggregated by the"promotores" and sent to the Service Centers which would, in turn, analyzethe data received and send it to the programming director at the districtlevel who would also receive data on all other indicators form other districtoffices. Every quarter the district programming director would send aprogress report to the district chief and to the DGA in Mexico City fordiscussion and analysis. The same report would be sent to the Bank twice ayear. Monitoring of key indicators would be carried out by SARH'sprogramming unit in each district.

4. Monitoring of results would be carried out by the Post-GraduateCollege of Chapingo (Colegio de Postgraduados de Chapingo). The proposedmethodology would be to determine project results using random selection ofextension agents to monitor their area of operation. In each area, only onecrop would be surveyed (given the number of extensionists probably mostcrops, if not all, would be surveyed). Selected producers would includethose who receive and those do not receive extension assistance.

Evaluation

5. The evaluation of the proposed project would include: (a) anInitial study to determine the status of the existing variables (dependent,independent and intervening); (b) a mid-term evaluation of the project aftertwo years of implementation to identify changes and determine project impact

- 35 -

Annex 5Page 2

and (c) a final evaluation at project completion with the same objectives asthose of the mid-term evaluation* Boch evaluations would compare thesituation at the beginning of the project as far as project area andinstitutions are concerned with those at the time of the evaluation tomeasure the project impact.

6. The Post-Graduate of Chapingo would carry out the projectevaluation under terms of reference satisfactory to the Bank (Technical File,Annex 9). A detailed listing of performance indicators are given in theconsultants technical file on Monitoring and Evaluation and was provided toGovernment during negotiations.

~~~~~~~~~- amSwmu

ftaimpkas bcMw _ twtyft Sud bmlimU- - , a ; initadw ad -" - petat aof 11mlbm a o 6w 20 pilo dlttcto;_8xatmkft of _odIatima swa de tfum.; Il) mitorla mg t by cauir I o a;-am adeO=61 twoulty abim c a' mda-mt astat ht a:to amtattma of b_tlty atofdlat W. f eir t tuminluw pilot diatrtt

- awaklw ptwd-t And * - Ua1dag at staff ib k, - a _ty d_loput plm w _ ress GE at Scdwt- 1w_ 2d&Rld

mivie AvelaPM* WA P1Am -A 9mm.

(b) S_ agto - Summi - mamda ad - a__ imidu in mli1m ad - arnlumt of d-etfectwe to *inl gs_ &Irfa m&c hint- as finu pwa oymm. au-ta. ad t,A p eemomdi maja cm"_lthe ab d tt - iaouvbg A ad mstuas In - Pd I p IIII aAt %di FlAM - _ bwudoznottiN pat lw~ ~m. ad |--Wlmat ad * 1mt ad to mlidsltima mmxr ad 1A-r~fi _u hS- dlmat eoumit sog am~mm,m 67.6 faomma empc tsdw.lqgiem

euwaiw ad _-m,.(a)* ~ ~irn - i~.q ma cmi~. - m _amid.s; otratma - cm I _to plot fr emr t am di ctfm glaaam EiWSIm plai. - ad -sets, gdet ad dl_damsd gapad an ftmm* mAd ~mg ;

rr ; f .t

- fnc raw to Al h4 od SW 15 to Glt to

_ foatq |tuem a 9d 8agmps. - W. iq" district a_wit7 to pw - I ORnIMMa Oait ataffe ad d._ t r al lIn PC*,m i* ad *_ for 41,MA fams is

OMIISO_ Sme ad 41 ad hr f t

o 2_i L SraaLtagaap - foam mofAlm otata in *Iod - L ,e_ m d2f(d ad dltam an a qLfle pried. uctiar ma td to 3-4 ybw.

(4) b t UwSe* _i miecttma, tmietg - dltlU mly hor fwmdatbW - 1*-m,hr &vt *m-d-o trinims of qLtal1t adXhity cc inte. ad *Sdadm l fkotopSlgt. qacif S traina or ; prlw1dt eM_nwrAts.atfLL. - tadaldl Id-otaaWIq tar

- a_athg gaatm.uLts_ ad - owUIz3 tLmtLi Lr pActitwIty - gmota ad bSse Iatfon evwaixtim, rly ,wrfom&2im,. 1mnn; ad pwrlditsatL titl aff iqaoad; utifm* pfdd tch adlclre _ I.-alowanmumm for Cinytb as ' notal _rWa1 a a1u-; evic omias e1d att-e. ta epostLma and Atpu_e fLdiz of 4aib .

(.) 1q _nm ath-let aetiw ptrtlpml ot - bi-amll mstp St vfts.e aM epdied ciqp bA.ata * by mitt 2Ins.Ltun adida_tsom b_ rP dn g MI tlaui. couigaau le-' otior to gMe i le: ad ithit atlitoca ptt*w tisely mitablity offame, _nda, ad 0iy of 1m;ia laefsg F luti, man gatut qKvio Suas 67,GW ftwi trm*Au in a1 m oit c011 ad oitldlhity. p ; ad q d lW f6f f-In.

(f) 1m _m - goaainima tnISWed. Mlgt-jwm - toein am db.t _a-td aid - Srmd c--idfn Of 1atma SaArla few to M ;dq hr _ cii. falimi. Lutst to amlmm amime tell am fot tor owt sd .do bytmmos Aa.iad Odo -w* tt u w tim sa by cratit ad crop sawrn busttatla py tw cxtmdLstaam. sKtOAIaI. -1d* for <tor im.im.

bmtWtatios.

(g) kamihdq mi's . bgm _ a1 -figi dbtria; SW brue att m pt - d brut plo WA a for 2etqp gamit e ts an aamiioAliliy. SOamSIcuff.pIUpwtSasLa ad agia In att distrLdts. atas male.ftt~ ad atsigad d f ta; at"Od8i pow mfogk eAff.

- 37 -

Annex 6Table 1

MEXICO

AGRICULTURAL EXTENSION PROJECT (PROCATI)

Project Cost Summary

Percentage ofIocal Foreign Total Baseline Cost- -- (US$ Milion) - _ TZZ

Estimated CostsTechnical Services 28.1 7.2 35.3 50.7Producer organization 1.4 0.6 2.0 2.9Training 4.3 4.2 6.5 12.2Applied Research 2.1 0.9 3.0 4.3Monitoring and Evaluation 0.3 - 0.3 0.4Other District Activities 1/ 18.5 2.0 20.5 29.5

Base Costs 54.7 14.9 69.6 100.0

Physical Contingencies 0.4 0.4 0.8 1.1Price Contingencies 1.8 1.6 3.4 4.9

Total Project Costs 56.9 16.9 73.8 106.0.m m

1/ Includes administration, plarning, social promotion, and operation; programs inrural infrastructure and irrigation O&M not included. All values rounded.

March 12, 1987

- 38 -

Annex 6Table 2

MEXICO

AGRICULTURAL EXTENSION PROJECT (PROCATI)

Financing Plan by Summary Accounts(US$ Million)

World Bank Government TotalAmount % Amount % Amount

Ie Investment CostsA. Training 6.4 100.0 - - 6.4 8.7B. Civil Works 3.2 100.0 - - 3.2 4.3C. Vehicles 3.3 100.0 - - 3.3 1/ 4.5D. Equipment 1.9 100.0 - - 1.9 T/ 2.6E. Technical Assistance 1.6 100.0 - - 1.6 2.1F. Studies 0.2 100.0 - - 0.2 0.3

Total Investment Costs 16.6 100.0 0.0 0.0 16.6 22.5

II. Recurrent CostsA. Normal Salaries - - 34.6 100.0 34.6 46.9B. Incremental Salaries 2.2 78.6 0.6 21.4 2.8 3.8C. Normal Operating

Costs - - 18.2 100.0 18.2 24.7D. Incremental Operating

costs 1.2 75.0 0.4 25.0 1.6 2.1

Total Recurrent Costs 3.4 5.9 53.8 94.1 57.2 77.5

Total Disbursement 20.0 27.1 53.8 72.9 73.8 100.0

/ kxcluding taxes, duties, and local commissions of about US$1.3 million(approximately 25Z).

March 24, 1987

- 39 -

Annex 6Table 3

MEXICO

AGRICULTURAL EXTENSION PROJECT (PROCATI)

proposed Schedule 1 of Loan Agreement: Allocation of Loan Proceeds

Amount 2Category US$ Million Bank Financing

I. Extension(a) Civil Works 2.6 100%(b) Vehicles and Equipment 4.1 100% foreign, 80%

local. 1/(c) Incremental Recuirent Costs 1.5 incremental expenditures

for each eligible districtfor each year of projectimplementation by suchdistrict, as follows:

100% - year 175% - year 250% - year 325% - year 4

II. Research(P.) Civil Works 0.2 100%(b) Vehicles and Equipment 0.6 100% foreign, 80%

local. 1/(c) Incremental Recurrent Costs 1.6 incremental expenditures

for each eligible districtfor each year of projectimplementation by suchdistrict, as follows:

100% - year 175% - year 250% - year 320% - year 4

III. Training and Technical Assistance 7.4 100%

IV. Unallocated 2.0

Total 20.0

1/ Note: Taxes and other charges are estimated at 25% of ex-factory cost.

March 12, 1987

- 40 -

Annex 6Table 4

MEXICO

AGRICULTURAL EXTENSION PROJECT (PROCATI)

Estimated Disbursement Schedule(US$ Million)

Disbursement Cumul^ ve BalanceBank Year Semester During Amount ofFiscal Ending Semester Disbursed Loan

1988 Dec. 31, 1987 0.4 0.4 19.6June 30, 1988 0.4 0.8 19.2

1989 Dec. 31, 1988 1.9 2.7 17.3June 30, 1989 1.9 4.6 15.4

1990 Dec. 31, 1989 3.8 8.4 11.6June 30, 1990 3.8 12.2 7.8

1991 Dec. 31, 1990 3.4 15.6 4.4June 30, 1991 3.4 19.0 1.0

1992 Dec. 31, 1991 1.0 20.0 0.0

March 16, 1987

- 41 -

Annex 6Table 5

MEXICO

AGRICULTURAL EXTENSION PROJECT (PROCATI)

Summary Accounts by Year

Totals Including Contingencies(US$ Million)

1987 1988 1989 1990 Total

I. Investment CostsA. Training 0.3 1.3 2.6 2.2 6.4B. Civil Works - 0.2 1.0 2.0 3.2C. Vehicles 0.1 0.6 1.3 1.3 3.3D. Equipment and Machinery 0.1 0.6 1.0 0.2 1.9E* Technical Assistance 0.2 0.6 0.4 0.4 1.6F. Studies 0d1 0.1 - - 0.2

Total Investment Costs 0*8 3.4 6.3 6.1 16.6

II. Recurrent CostsA. Normal Salaries 1.3 6.7 13.3 13.3 34.6B. Incremental Salaries 0.1 0.5 1.1 1.1 2.8C. Normal Operating Costs 0.7 3.4 7.0 7.1 18.2D. Incremental Operating Costs 0.1 0.3 0.6 0.6 1.6

Total Recurrent Costs 2.2 10.9 22.0 22.1 57.2

Total Project Costs 3.0 14.3 28.3 28.2 73.8

March 12, 1987

ANNME 6- 42 Table 6

LEXICOABRICULTURAL EXTENS1SN PROJECTAnnual Prole:t Cost By Component

(lS$ ^000)

1967 me8 19B9 1990 Total

1. Norail District Expenditures

A. Technical Services 1,168 5,842 11,684 11,684 30,379B. Producer Organization 7 37 75 75 194C. Other District Actiities lS 789 3,944 7,867 7,887 20,507

Sub-Total 1,965 9,823 19,646 19,646 S1,081

I. Increuental District Expenditures

A. Technical Services 76 521 1,713 2,556 4,867B. Producer Organization 7? 389 728 598 1,794C. Training S58 2,121 3,330 2,446 8,477D. Nonitoring and Evaluation 26 60 121 121 328

Sub-Total 761 Q,092 5,892 5,721 15,466

Ill. increeental Applied Research 150 702 1,230 924 3,007

Base Coats 2,876 13,617 26,768 26,292 69,554

Physical Contingencies 38 156 316 329 840Price Contingencies 79 476 1,273 1,576 3,403

Totil Project Costs 2,993 14,250 28,357 28,1?6 73,797::::: :::2: 2::5: ::::: SSStt

Foreign Exchange 786 3,443 6,529 6,156 16,915

/1 Includes adoinistration, planning, social promotion, aAd operations;programs in rural infrastructure and irrigation OtH Pot included.

Harch 12. 1987

IEUICOASRICULTURAL LITENSION PROJECT

Suteary rccount By Project CoDponent(Us$000O)

Ncrual Disttict 'rpenditures Incremental District Expe"ditures__- - --- -------- --------

TOTALTectnical Producer Other '1 Technical Producer lpa ct AppliedServices Organization Activities Services Orgai taticn Training Wonitoring Evaluation Research

I. INVESTIENt COSTS

A. Training O O ,544 0 0 5,544B. 'iyil orks 2, 31 0 4 234 2,574C. Vehicles 2,330 334 O0 0 174 2,637D. Equipment 6Q 233 I,OnS 0 3 380 1,690E. Technical Assistanre 0 0 1,386 0 O 0 1,396F. Studies 0 0 05 Q 82 0 186

Total IWVESTNE4T COSTS Q 0 0 4,740 567 ?,039 n4 788 14,215

I[. RECURRERT COSTS

A. Normal Salaries !2,53 194 15,146 0 0 0 0 0 0 34,593D. Incresental Salaries 0 0 127 788 356 243 0 1,332 2,847C. Worcal Operating Costs 11,126 0 5,361 0 0 0 0 0 0 16,4K60. Incremental Operating Costs 0 0 0 43! 82 0 0 887 1,406

Total RECURRENT COSTS 30,379 94 20,507 127 1,227 438 243 0 2,219 55,r3.6

Total ASELINE COSTS 30,379 194 20,507 4,867 1,7t4 0,477 243 84 3,007 69,554Physical Contingencies 0 0 0 354 2e 402 0 4 51 B40Price Contingencies 1,159 0 558 570 103 836 0 9 167 3,403-- -- -- -- -- -- -- -- -- -- .. , . -- -- ------ Total PROJECt WST5 31,538 194 21,066 5,791 1,925 9,716 243 °7 3,226 73,797

=-Ss a :-= = = s::2 :e :: :=a:s ::2 = ~ Z3~atez82 Foreign Exchange 4,668 0 2,250 3,462 739 4,777 0 3 1,016 14,915

1I Includes adoinistration, planning, social promotion, and operations; prograas in rural infrastructure and irrigation C05I not included.

rthrc 12, 1966

*Iz

NM

- 44 -

Annex 6Table 8

MEXICO

AGRICULTURAL EXTENSION PROJICT (PMOCATI)

Physical Targets: By District

TotalCentral Two TwentyHighlands Northwest Districts Diserlcts

I. Incremental Staffing 1/Technical level 12 (38) 9 (273) 21 (311) 210Support level 3 (49) - (275) 3 (324) 30

A. Technical ServicesTechnical level 2 (29) - (183) 2 (212) 20Support level - (29) - (132) - (161) -

B. Producer OrganizationTechnical level 4 (1) 7 (1) 11 (2) 110Support level 1 (0) - (0) 1 (0) 10

C. Training 2/Techiales level 3 (0) 1 (0) 4 (0) 40Support level 2 (0) - (0) 2 (0) 20

D. MooltoringTechnical level 3 (0) 1 (0) 4 (0) 40Support level - (0) - (0) - (0) -

E. Other Activities 3/Technical level - (8) - (89) - (97)Support level - (20) (143) - (163)

II. Vehicles 13 51 64 640

III. Civil WorksSupport center offices 2 4/ 2 4 40

IV. ResearchInvestTgation unlt 5/ 3 3 6 60

V. Technical AsslstanceDomestic (man-months) - - 30 118Foreign (man-months) - - 24 92

/7 Existing staff In parenthesis./ Participants and courses detailed In AMnex 4.

3/ Does not Include district staff assigned to rural lnfrastructure andIrrigation operations.

4/ Plus one center to be rennovated In Ruamantla (total 3)0!/ Includes investigator, vehicle, equipment, and clvil wofrs.

- 45 -

Annex 7Page 1

MEXICO

AGRICULTURAL EXTENSION PROJECT (PROCATI)

Production and Benefits

Background

I. During project preparation, feasibilit.y studies were prepared forfour Rural Development Districts (RDD), one in each of Mexico's fouragroecological zones (arid, temperate, humid tropics, and dry tropics). Thisanalysis led the appraisal to conclude that two zones should not be included,namely the humid and dry tropics. In the humid tropics the priority need isfor infrastructure (roads, drains and storage) which the Bank-financedPRODERITH II Project (Loan 2658-ME) is better able to provide. The drytropics' proposal lacked an overall, coherent agricultural policy. The zoneis also high risk, agriculturally-marginal and the research and extensionbase is very poor. Since the project was seeking to develop a replicableproject for priority areas, it was concluded to focus on two zones only.

2. This annex describes the likely production impact of the project inthe two agroecological zones which comprise the project area. In thetemperate central highlands the pilot district appraised was Huamantla,Tlaxcala. In the irrigated areas of the arid Northwest the pilot districtappraised was Cajeme, Sonora. The following information is provided on eachdistrict: description, adoption of technology; yields; crop budgets; andfarm incomes.

3. Although the project is now based on studies of only two of 20 RDDwhich will comprise the project, this is considered acceptable in thisspecific case. In the temperate areas, additional district proposals will bepartially drawn up about four of the sucessful districts developed underPLANAT. This will make preparation of the feasibility studies relativelystraightforward. In the arid northwest, the irrigated areas are relativelyhomogeneous, farmers are more commercially-oriented and the quality ofextension and research is relatively good. This would again make the processof prepararing feasibility studies fairly straightforward.

Huamantla, Tlaxcala: Temperate Central Highlands

4. Description. This district is located between 2,300 and 4,300meters above sea level; average rainfall is 650 mm p.a. in the period Aprilto September, with about 852 in the period June to August, Frost and hailcan pose problems. The total area under agriculture and livestock is about122,300 ha; about 77,000 ha under agriculture (7,000 ha irrigated and 70,000ha rainfed) and 45,300 ha (potential) livestock.

- 46 -

Annex 7Page 2

5. The crop composition on the 77,000 ha is as follows:

ha X

Maize - best conditions 16,000 20.8Maize - average conditions 8,000 10.4Maize - marginal conditions 35,000 45.5Horse bean 3,000 3.9Barley 2,500 3.2Wheat 2,500 3.2Others (minor crops) 10,000 13.0

There are about 19,012 farmers (resulting in an average farm size of 4.05 ha)with 17 district extentionists.

6. Adoption of Technology. Based on recommendations becomingavailable from the validation research over time, improved performance of thedistrict extensionists following skills-related training, and improvedcoordination of the agricultural service agencies, it is assumed thatadoption of recommended practices will develop as shown in Table 1.

7. Yield projections. It is assumed that farmers will gradually (overa 5-year period) adopt the recommended practices and thus increase theiryields accordingly. Yields remain constant where present technology is beingapplied. Yield projections follow:

(T/ha) Year

Present 1 2 3 4 5

Maize - best conditions 3.0 3.2 3.4 3.6 3.8 4.0Maize - average conditions 2.5 2.6 2.7 2.8 2.9 3.0Maize - marginal conditions 1.25 1.25 1.25 1.25 1*25 1.25Horse bean 0.85 0.9 1.0 1.1 1.2 1.25Wheat 2.0 2.1 2.2 2.3 2.4 2.5Barley 2.1 2.2 2.35 2.45 2.6 2.7

8. Crop Budgets. Crop budgets have been prepared for maize, horsebean, wheat and barley with present technology and at full adoption ofrecommended practices (year 5 of any farmer). Gross Production Values(yield x price), on-farm costs, and Net Value of Production (NVP) per ha percrop are presented in the statistical appendix.

- 47 -

Annex 7Page 3

A summary of NVPs per ha per crop follows:

Present At Full Ado tion-- Pesos/ha ---

Maize - best conditions 175,550 228,950Maize - average conditions 128,450 154,100Maize - marginal conditions 44,200 44,200Horse bean 103,000 158,900Wheat 82,350 112,300Barley 145,550 200,200

9. Farm Incomes and Project Impact. Crop composition, average farmsize (para. 5) and NVPs per ha (para. 8) dictate farm incomes under PresentTechnology and at Full Adoption. Average farm incomes are given below:

Averg No et Value of Productiom In Pesos/hain Project Ar Present TecRlulc FuAtll g

Nez - best caiditirs 20.8 0.84 175,550 228,950Mie - average cxiditims 10.4 0.42 128,450 154,100i ize - muginal coditions 45.5 1.84 44,200 44,200HIrse bean 3.9 0.16 103,000 158,900Barley 3.2 0.13 145,550 200,200wheat 3.2 0.13 82,350 112,300

&ibtotal 87.0 3.52Others 13.0 0.53 n.a. n.a.

TAL 100.0 4.05

Av e Net Fan Inoae (Pesos)

aize - bst canitins 147,462 192,318 44,856Mize - average caditios 53,949 64,722 10,773Vbize - arginal coxditims 81,328 81,328Have bean 16,480 25,424 8,944Barley 18,922 25,026 7,104oust 10,705 14,599 3894

9ibtotsl 328,846 404,417 75,571Otlurs neas n.a.

On average the project shows a difference in farm income of pesos 75,571 overabout 87% of the farm, or pesos 86,863 per farm at full adoption of validatedrecommendations if the other (minor) crops are taken into account.

- 48 -

Annex 7Page 4

Cajeme, Sonora: Irrigated, Arid Northwest

10. Description. This district is located at about sea level in anarid zone. All crops are cultivated under irrigation. The total area undercrops is 231,200 ha of which 272,000 ha are cultivated resulting in acropping intensity of 118%. With improvements in land levelling,rehabilitation of some irrigation and drainage works, and a more efficientusage of irrigation water, the cropped area could be extended to 330,000 ha(143% cropping intensity). However, in this project no benefits will beclaimed from such improvements.

11. The crop composition on the 272,000 ha cropped area is as follows:

ha _

Wheat 130,000 47.8Soybean 61,000 22.4Maize 24,500 9.0Cotton 17,500 6.4Safflower 10,000 3.7Others (minor crops) 29,000 10.7

There are about 24,785 farmers (resulting in an average farm size of 9.33 haof which 11 ha - 118% intensity - are cropped) with 91 districtextensionists.

12. Adoption of Technology. Based on recommendations becomingavailable from the validation research over time, and improved coordinationof the agricultural service agencies (mainly timely credit), it is assumedthat adoption of recommended practices will develop as shown in Table 2.

- 49 -

Annex 7Page 5

13. Yield Projections. It is assumed that farmers will gradually (overa 5-year adopt the recommended practices and thus increase theiryields accordingly. Yields remain constant where present technology is beingapplied, however, in the 82,900 ha where improvements in works are required(Table 2, footnote 1) yields are depressed. Yield projections follow:

(T/ha) Year

Depressed yields of areas in need Present 1 2 3 4 5of Improvements:

Wheat - 20,000 ha 4.0Soybean - 28,700 ha 1.8Maize - 24,000 ha 3.6Cotton - 2,100 ha 2.2

Yield projections with theproject:

Wheat 4.7 4.8 4.9 5.0 5.1 5.2Soybean 2.1 2.15 2.2 2.25 2.3 2.4Maize 3.9 4.0 4.1 4.2 4.3 4.4Cotton 2.6 2.65 2.7 2.75 2.8 2.9Safflower 1.6 1.65 1.7 1.8 1.9 2.0

14. Crop Budgets. Crop budgets have been prepared for wheat, soybean,maize, cotton and safflower with present technology and at full adoption ofrecommended practices (year 5 of any farmer). Gross Production Values (yieldx price), on-farm costs, and Net Value of Production (NVP) per ha per cropare presented in the statistical appendix.

A summary of NVPs per ha per crop follows:

Present At Full Adoption…Pesos/ha-

Maize 202,280 247,780Wheat 205,800 246,300Soybean 166,875 207,975Cotton 381,485 445,385Safflower 48,650 87,100

15. Fam incomes and Project Impact. Crop composition, average(cropped) farm size (para. 11), and NVP- per ha (para. 14) dictate farmincomes under Present Technology and at Full Adoption. Average farm incomesare given below.

- 50 -

Aum 7Pae 6

h&erMge Cop OUR itiu Net Vabie of Prouctimn In Pesoa/bain Prgect Ar }a'& n m A Io

TDwesaeTdy&,kbast 7*35 0.81 150,600 150600SObea 10.55 1.16 118,275 118,275mdiae 8.82 0.97 176,600 176,600Cbtton 0.77 0.08 300,285 300,285Otbrs 2.98 0.33 n.a. neat

Sobtotal 30.47 3.35

wbat 40.44 4.45 205,800 246,300Soybean 11.88 1.31 166,875 207,975mdme 0.18 0.02 Z20,210 247,780(bttm 5.66 0.62 381,485 445,385Safflomw 3.68 0.40 48,650 87,100Others 7.69 0.85 na. n.a.

otal 69.53 7.65! TOML 100.00 11.00

L~~~~~~~J _

1/ M about 82,900 ha requiring im=vaints In lad leelling and in relbilitation ofirrlg andu z drainag wrks.

Net Fem (PeI)

(Depes Yielde )I' -WEast 121,986 121,986 _Soybean 137,199 137,199 _NNiZ 171,302 171,302 _(Otton 24,023 24,023 _

Subtotal 454,510 454,510 _others n.a n..

(Fo,U Mopdcia)lEeat 915,810 1,096,035 180,225SoYbean 218,606 272,447 53,841mbiZe 4,046 4,956 910aDtton 236,521 276,139 39,618Ssffkmwer 19,460 34,840 15,38D

Subtotal 1,394,443 1,684,417 289,974Otbers nea. n.a. -

TOMAL 1,848,953 2,138,927 997Z

- 51 -

Annex 7Page 7

16. In average the project shows a difference in farm ncome of 289,974pesos over about 89% o e arm, or pesos 324,719 per farm at full adoptionof validated recommendations if the other (minor) crops are taken intoaccount. Farm incomes are expected to increase further once the improvementsin irrigation and drainage works have been materialized.

17. Benefit estimates to be derived from the increased support of theextension service in the rainfed livestock and forestry activities in thenortheast of the district have not been made due to the lack of provenextension packages for these subsectors at present. It is expected that somebasic research cum validation research will be needed prior to theformulation of extension packages which cater to the farmers specific needs.The formulation and implementation of a research program, and the preparationof validated extension packag . may require from five up to 15 years, a longterm process.

- 2 -

mmaIO Akc 7- ble I

ARIM3L E&CM4 PRW= - (E)

Production ard Beneits

Tellcgy Mpto t: HtAWANA

Prekt 1 2 1 3 4 5

Preset Rclxuilo ha

Maize-best cwditlons 16,000 12,000 10,000 7,000 4,000 Maize-average conditloru 8,000 6,000 4,000 2,000 1,000 _Maize-marginal croditionsl/ 35,000 35,000 35,000 35,000 35,000 35,000Hobse beam 3,000 3,000 2,500 2,000 1,000 -

Wheat 2,500 2,000 1,500 500 - _Barley 2,500 2,000 1,500 500 _ -

Othesl/ .O0OOO 10,000 10,000 10,000 10,000 10,000Subtotal 77,000 70,000 64,500 57,000 51,000 45,000

Aotn hAi= Iai Tchmlog - hi -

Maize-best cxditiort - 4,000 6,000 9,000 12,000 16,000Maize- -rage *ditlor - 2,000 4,000 6,000 7,000 8,000Hore besn - - 500 1,000 2,000 3,000Whea - 500 1,000 2,000 2,500 2,500Barley - 500 1,000 2,000 2,500

Subtotal _7000 12,500 20,000 26 000 32 000IUtAL 77,000 77,000 77,000 77,000 77,000 77,0

Adoption Pate ofRecm ded clo(%) 2/ - 9 16 26 34 42

Niwer of Producers

-'resent Technology 19,012 17,284 15,926 14,074 12,593 11,111-doption Rec amuied Technology - 1,728 3,086 4,938 6,419 7,901

lxmber of EKtensionists

-Prert Technology 3 / 17 10 8 7 6 5-doption Rec : led Technology - 7 9 10 11 12

Proportion Producersto Ratenionists

-_pesert Tecinoloy 1,118 1,728 1,991 2,010 2,098 2,222-Adoption RecPume Technologya/ - 247 343 494 505 458

1/ ND dages in agricultural practices are expected in ma urder marginal axditions and in the other (minr)crops. Dhs no inreutlm benefits are clainm nder the project from this area (45,000 ha).

2/ B s of the relatively high proportion of mainal agricultural lard (45X) for &ch no recaiunedpacap is expected to be deeoped in the short nor the Mledi term, the theoretical rmdmd adoptionrate muld be 55% of *dich about 75X w=t be achieve under the proect.

3/ Tb amber of eKtersiorists worldrg in the area where no dwges are expected in agriculturl tecnolcgydfro 17 to 5. It is d_eId necessary to maintain contact with the faremrs inolved (SAM

regulatory fzito ), coordinate the agricultural service agencas, sar try to find alternatives fordevelopmt In the mrgnal mafe ame. Althotgh the rnber of eateruorodsts will rerin the am, thequsUty of aboxt 12 of the 17 nre to be Improved either through traisrg or trazfer.

4/ On the basis of an etwiomist involvemunt of 3.5 years per famr.

- 53 -MMCD Am~~~~~~~wix 7

Table 2AaUMRUR E5IG PM= - (M=)

ftouiction and ufitAft

m_cK :u ck

Pfinm 1 2 1 3 4

pteant TclwL/ ha

.he 130,000 1 18,000 98,000 74,000 40,000 2D,000Soyla 61,000 56,000 50,000 41,000 33,000 28,700maiza 24,50 24,400 24,300 24,200 24,100 24,000Cottof 17,500 15,500 12,500 8,500 4,500 2,100Saifflow 10,000 9,000 7,500 5,000 2,000 -Ot _9m2/ 29,OO0 29,OOD 29,'00 29,000 29,000 29,000

aiIdotal 272,W0 251,900 221,300 181,7t00 132,600 103,800

Adt(m amded Rhduw I. - ha

Wht 12,000 32,000 56,000 90,000 110,000Soybam 5,000 11,000 2D,000 23,000 32,300Main 100 200 300 400 500cotton _ 2,000 5,000 9,000 13,000 15,400Safflawr _ 1,0oo0 2,500 5,000 _8,0D 10,000

Sultotal - 20, 100 50,700 9 300 1394 168,200Wm22 ,L 272,000 2720,800 2000 V2 272,000

Adpto Pas ofPe_mntd Tchnoly (2) 3 / - 7 19 33 51 62

Aubur of Prod£ums

-Prent Techiology 24,785 23,086 20,514 17,192 13,065 10,643-Adption R_omuded Tachno1loy - 1,694 4,266 7,588 11,715 14,137

sumr of Exteuionists

-Wwer Tectrlogy 4 / 91 60 (3) 46 (4) 30 (5) 28 (6) 8 (8)-Aoption RecPuwde1 Teuwlog - 28 41 56 67 75

Proportion fto,dwerto b u .ioit8

-PtrsTechnolo 272 385 446 573 726 1,33D-doption R _idof Te 5 / - 61 104 136 163 149

1/ This area aLeA about 82,900 ta requiritg imnpro ts in lad levelliUg ard in XhsbilitatiDn ofirrlgtim aid draln mo*ds. The crppitg f.tersity is ammi to be 1OOL lIe croppr intensity of there.idtg 148,300 ha is 127.52.

2/ th dw'i !n agriolazd practics are apet in the othar (mfror) crops wr the project. Thti noincremental bldits are clalad fros this area triner the project.

3/ Bse m about 302 of the area reuir in the irrptifa inf i utce, the theretical nwdaraloptio te wux he aboet 702, of AIch about 90% mld be achei unier the project. Ibis relatively1h prmport is aqto to be possible becaise Faruts are pared to a highly madunizei, capital

iiterivw, adl mWait otietel tym of rtculture.4/ ha mjibwr of extetuiadsts in the aea r-ere no clng In agrititural practices are epected dcreamfhn 91 to 16. It ts deemad nesrsuy to notain sontact with the farme mlved (SARI rulatoryfunctims), WA to wordite the agricutural service ades (tuinly credit). it is envisag tlht abot8 of the Ioitsw (startig with 3 in year 1) wiii focus their wrk cn esleds Uv ck aid forutryactivizi in the NtIrtutemn prt of the district of lAich Uttle is 1nha pr_¢ly. Tn garal, theactaios sgervi in tdis distrIct is of satisfactory quality bt nod o ba e reocugeS an sarvicig thfts,' n_ek.

5/ Ch tha bats of ac£ ctstloist iwolvmt of 3.5 yau per fr.

- 54 - Annex 8

Page 1

MEXICO

AGRICULTURAL EXTENSION PROJECT (PROCATI)

List of Selected Documents and Data Available in the Project Technical File

Appendix Name of Document

1l Bank Subsector Report No. 5255, dated November 14, 1984entitled "MEXICO: Extension Services Subsector Report",Volumes I and II.

2. Technical File: Agricultural Research, Consultant Report byR. Laird, July 1986.

3. Technical File: Institutional and Manpower Development (Sp)by A. Tobelem, November 1986.

4. Technical File: Production and Benefits, December 1986.

5. Technical File: Economic Analysis, December 1986.

6. Technical File: Detailed Project Costs by Component.

7. Technical File: Producer Organizations (Sp).

8. Technical File: Women's Agroindustrial Unit (Sp).

9. Technical File: Monitoring and Evaluation Sp), ConsultantReport by C. Ponceano dated November 1986.

10. SARH Preparation Report (Feasibility) on Project. Twovolumes (Sp), dated October 1986.

11. Administration of SARH. Two Volumes (Sp), dated October1986.

February 6, 1987

- L mUG x - OWSM)

ina sr&e . _ V2 u

Atntrqtmtoa Osta g of ft(d.

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Chart 3

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BELIZE

Acowice _ ( oAJrdvA 2 tY 2 ~~~~~~_= j; Tuxtaeirez I Aca~S' OAAC b = APA. S!

Puso <sot GUATEMALA /~~~~~~/ /

TapOc t HONDURAS

FEBRUARY 1987