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BANK FOR RECONSTRUCTION
TECHNICAL
AND DEVELOPMENT
REPORT
on the
PROJECT
FOR AGRICULTURAL
DEVELOPMENT
in
Public Disclosure Authorized
PARAGUAY
November
Loan Department
8, 1951
Exchange Rate
6 guaranies
1 U.S dollar
I guarani
16.6 cents
1 million
-~~~~~~
guaranies
$166,667
REPORT
TECHNICAL
on
PROJECT
DEVELOPMENT
AGRICULTURAL
in
iARAGUAY
I.
Purpose and Scope
of, and
1.
The purpose of this report is to present a description
for, a loan to Paraguay for the importation of agriculjustification
tural implements and supplies and of road building and haulage
over a period of from
equipment estimated to cost about .v5,00O,000,
one and a half to threeyears. It is limited to a diqcussion of that
has considered
program wvhich the Ission
part of earaguayts agricul,tural
suitable for Bank financing.
2,
This report is based upon a technicalreport (//C-16 ) by Professor
machinery consultant to the 1ission, and on
George B. Nutt, agricultural
materialfurniohedby the Governmentof Paraguay to the
supplementary
lMission.
II.
Background Information
3.
Approximately 60 per cent of Paraguay's population of 1l,400CO0
Live(see attachedmap) in that part of Paraguay 'which is east of the
ParaguayRiver,withinan 100 km radius of Asuncion. A secondaryconcentration
railroad
of population
line.
occuxrs along
The rest
of eastern
both sides of the Asuncion-Encarnacion
Paraguay is sparsely
populated,
The
western part of Paraguay, knovm as the Chaco, has a very low population
density.
w'th
4.
The predominanteconomio activityin Paraguay is agriculture,
emphasis on cattle raising. Cattle raising is predominantlya large
ojning more than twoscale operation,with 2.5 per cent of the ranchers
thirds
of the catt.e.
Crop production,
on the otherhand,is predominantly
a small scale activity. Even cash crops such as sugar and cotton are
grovn chiefly
on small or medium sized farms.
Two-thirds
of the fams
are leas than 7.5 hectares (about 18.5 acres). Larger individualholdings,
ranging from 20 to 70 hectares
(50 to 175 acres)
are the rule in the
agricultural"colonies". These relativelynew farming communities,
since the end of World War I in Isolatedlocations, are popuestablished
lated partly by se&ected European immigrants, and partly by native
farmers who have migrated from the old farming ceomunities,
5,
Farming methods employed on the smaller farms are very primitive.
nor are insecticidesor fertilizers
farming is rarely praotiee,',
l.echanized
used to any significant
extent, so that yields on the land under cultivation are generally low. Moreover, even the simplest hand tools are
often lacking; consequently, despite the small size of his holding, the
all of his land. A recent study, the
farmer ia often unable to utilize
30 per cent of
results of which are tabulated below, indicates that 4ut
the total land avAilable for the production of farm crops and fruit is
now idle.
~~~~~~~~2~~~~~~
TABILEI
Land Use in Farms
Hectares
Crop Lands:
Cultivated(includingarea in fruit crops)
360,000
Idle
150L0O
510,000
Sub-Total
Pasture
Voodlands
7000000
400,000
48,00O
i;iscellaneousand waste lands
Total
1,6$8,ooo
6.
Farming nethods in the colonies are rather more advanced than in the
old establishedccmmunitiesbut even here tlhepractices are backwvard.Moreover, the lack of proper roads between the coloniesand centers of population
creates severe transportationproblems for the colonists.
7.
The smaal Paraguayanfarmer operatesa mixed farm*,consistingof
several acres of arable land, some grazing land for cattle, and some waste
land. Each farm typically grows several crops. On a nationalbasis the
chief crops are manioc, corn, sugar cane, co-ton, peanuts and covpeas.
Table IT showisthe productionand area under cultivationof the nine most
importantcrops.
TABLE II
Productionand Area under Cultivationof
Nine M.1ajor
Crops in Paraguay (1950/51)
Crop
froduction
(000met.3
Corn
.1anioc(cassava)
Cotton (unginned)
Sugar Cane
108
870
33
510
Tobacco
18
8
Peanuts
11
Cowpeas
Sweet ?otatoes
16
74
Miflce
Considerable
quantities
of fruit
this category are not available,
8.
The chief
are also
area under
Cultivation
(000 hectares)
103
6'
58
17
10
9
l4
21
8
groil'm, but productionfigures on
cash crops are cotton, sugar cane, tobacco and fruit. Two
o-2-these, cotton and tobacco, are predominantly export crops.
In 1951 plantincreaesed and it is estimated
ings of these two crops u,ill be substantially
that about 80 per cent of the cotton and 60 per cent of the tobacco produced
w11 be exported.
-39.
Exports of the country consist chiefly of agriculturalproducts,most
of which go through a simple processing. The principalexport items in
1950 are shoi%min Table III.
ItBID III
PrincipalEaports of Paraguay$1950
Value
Volume
(000 m.t,)
Luaber and forest products
Aninmalproducts (meal, hides, etc.)
Oils (vegetableorigin)
Cotton (ginned)
Tobacco
Othler
10.
Principal
imports
wheat, and wheat flour.
11
of agricultural
(millionsof
guarans)
73
280
24
4
12
3.5
38
9
33
465
16
33
products
consist
of li-ve cattle,
A nub,ber of attempts
have been m-ade to improve the position
of the
past;
effoits
and results
have been limited
both as to scope and effectiveness.
Wars and internal,
strife
have on -the
one hand destroyed farm property,
and on the other, prevented
the formulation
and implementation
of effective
remedial measures.
farming
comrmnity
but,
in
the
12.
A new beginning was madle in 1943 with the organization
of the S'ervicio
Tecnico Interamericano
de Cooperation
Agricola
(STICA). This agency w-as
created jointly
by the Govermient of Paraguay and the Institute
of Tnteramerican Affairs
of the United States Governnment. It operates chliefly on
the technical
front.
Its activities
include an institute
for arronoliy
where soils
are analyzed
and methods of cultivation
are tested;
aP experimental farm where appropriate
seed varieties
are developed and furnished
to farmers; a model ranch and dairCy farm; preparations
for the establishment of an extension
service in home economics, nutrition,
sanitation
and
pest control;
and technical
advice and assistance
in the settlement
of
farm colonies.
Agriculturalcredit has been supPliedto larger farmersb1y'
tUheBanco
del Paraguay throug,,h its Agricultural
and Comrmercial Credit LerartU,en-nts.
Cred-ts have been in the form of both cash and farm machinery.
Howevcr,
these loans have been restricted
to the better
credit risks.
About 75 per
cent of loans are made to the cattlemen.
13¾,
14.
To meet the needs of the poorer farmers,
the Credito Agricola
de
Habilitation(CAH) was establ'shedin 19243. This organization,modeled on
the Farm SecurityAdLministration
of the United States, was created with
the assistanceof STICA. It wor"ks mainly among the smaller farmers in the
Central
Zone and in the colonies wJhich it has estabi.is-ed
in the outer provinces. It furnishesboth one-year crop-securedloans, and loans up to
five years for the purchase of implements,
at 6 per cent interest.
Under
the proposed reorganization
plan for GAHinterest
rates
for one to five
year loans will be at the maximum rate of 7 per cent.
As part of its
operations,
it supervises
its debtors,
teaching them how to operate their
£arsis and run their hoaseholds. It has so far made loans to about 10,000
farmers, out of a total Qf about 100,000 farmiers. The face value of loans
made to mid-l19g, amounts to about ll,100,000guaranis.
15.
Road building and maintenance, which is necessary in order that the
farm7ing communities may be linhCed to the consuminf7 centers and the ports,
has to sore extent been carried on under the direction of the llinistiry of
Public WJorksand Telecommunications 0
III
Description
of the Project
16.
In order to progress toward an orderly solution of the problems
facing Paraguay's farm population, the Government prepared in 19,50 a program known as the "Three-Year
and has had the collaboration
associated
wi,th $TICA and with
broad objective
of the program
by the fo'lowing means:
Plan".
This prograzi has been discussed -with,
of, United States point
IV reY)resentatives
the road building
prog,ram. Briefl;r,
the
is the expansiQn of agricultural
-orodu-ctoLon
a) Expansion and coordination
of the resources
of CAH and the
AgriculturalCredit Departmentof thleBanco del Paraguay for the
purpose
of providing farm credlt to finance the purchaseof:
i.
Small hand farm tools
ii.
Animal
111.
beterinary supplics$
`nsecticides
and
fencing materials
both for farmers and cattle
and tractor-drawn
ir-lem1ents
b) Estnbll4siment
of farn machinery
machine shopOs to ser-vice the pools,
1i-nistry
of Agriculture.
ranchers.
pools at ten locations,
under the supervision
and
oi the
c) Purchase of road-building
equipment for the road-building
program and establishment
of, rmachine shops for the maintenance
repair of the road-buildilng equipment, under the lanistry
of
and
P^ublic
Works,
d)
Nechanization
and expansion
of rice
growing.
e) ,9stablishment
of a fLeet of trucks for the transportat:.on
agrI cultural
products from farn to market.
f)
Purchase
of a cotton
of
press.
g) Expansion of the agricultural
training
and educational
institutions in order to pronJide
personnel for an enlarged extens4io
service.
17.
The broad program described above was discussedwith meimbe,sof tile
Bank Mission to Paraguay. In the form in which it was presented to the
Yission, it woTuld have required imports of about 1i0,000,000 worth of
equipment, machlinery and s-upplies.
Items (c')and () iwere not considered
by the si-ssion as suitabole for Pank financing,
while item (g) requires
only local currencyexpenditures. On the other hand, fertilizers
are an
essentialitem for the depleted soil characteristicsof a large part of
Paraguay ss cultivated
land.
Hence the 11ission modified the program,
selecting
the folloT4dng categories
as suitable
for Bank financing
at
this time:
a) Hand tools (hoes, machetes,axes, shovels,
rakes, sicklea)
to
be distributed
to individual
farmers through the fanm-credit
facilities
of CAH.and the Banco del Paraguay.
b) Animal and tractor dra7m implements (epg. plows, harrows,
cultivators,dusters, pumps, scales, etc.) and spare parts and
accessories,to be distributedto individualfarmers and farm
colonies through the fCarmcredit facilitiesof CAH and th^e Eanco
del Paraguay.
c) Veterinarysupplies,insecticides,fertilizers,andwRireand
staples to be distributedto individualfarmers through the
farm-creditfacilitiesof CAH and the Banco del Paraguay,
d) Tractors,implementsand machine shop equipment for the
establishument
ol'two farn machinery pools and equipment-repair.
shops. One of these wilI be located at the Misiones
co'ozy and
the other at the Pirareta
colony.
e) llachinery
for construction
and maintenance of roads, and
machine shop equipment for the completion of road-equ.ipment
repair shops at Encarnacionand San Lorenzo. Prioritywtillbe
given within the over-all
program to the completion
of the road
linking Pilar, San Ignacio,
EncarnacionS
Hohenau colony and
Capitan M.Iezacolony.
These colonies
devote a rather higher than
average proporticn
of their land to cash crops such as tumg,
cotton, and yerba mate.
f) A fleet of 10 trucks and spare parts by the Banco del
of agricultural
products.
Paraguay, for the transportation
18. On the basis of the approvedprograms, a carefullydetailedlist of
requirements
for machinery,
tools and supplies was worked out by the
attached
to the Mission, in collaboration
viith
agriculturalconsultant
officials
of Govermaental Departments in Paraguay.
IV.
Cost of the ProJect
19. The cost of the equipment to be importedwith the proceeds of -the
at ,,OOO,QOO, distributed
as shonr in
proposed Bank loan is estimated
T'able IV.
6-.
TABLEIV
Estimated
Cost of the Pro.iect
To be Utilized
Cateaorv
1.
Credito
Agricola
de Habilitacion
Banco
del
Ministerio
de
Agricultura
ParaguaY
y
anaderia
Minister-Lo
de Obras
Publicas y
Telecomrnmiacones
Tot al
Amino.It
to be
Purchased
YaU.atlhazd:.
38,725
115,587
1,670,313
1,260,585
farm tools
2.
by
$ 154;312
Agricultural
implements,
including
spare
parts
and
accessories
2,930,898
3. Veterinary
supplies,
insecticides,
fertilizers,
and fencing
materials
469,000
733,550
1,202,550
4. Farm machinery,
tractors,trucks,
motor generators,
scales,machine
tools including
spare parts and
accessories
118,944
118,944
5. Ilachinery for construction and
maintenance of
roads, machine
tools including
spare parts and
accessories
404,910
6* Trucks, including
spare parts and
accessories
50,000
50,ooo
7. Provision for
possible price
increase
_
J386
404,910
$5,0002000
_
2,178,038
21159,722
434j,910
118,944
.
-7V.
20.
The foreign
exchange
Liethod of Finaricing
costs
of the project
-will be- met out of the
proceeds of the proposed Bank loan,
21.
Provision is being made within the annual budget of the Goverrmental
agencies concerned, for the provision of suitable personnel and of iteris
requirng local currency financing,
22.
The proceeds of cash sales by the Banco del. Paraguay and sums
realized as its loans to farmers are repaid, will be used to establish a
temporar-y revolving fund. This fund .Trill be used for the purpose of
financing additional 4machinery imports into Paraguay, until sucn tIr.e as
it is required to service the Banco del Paraguay's share of the proposed
Banh- loan.
23.
A similar procedure will be used to establish a revolving fund
within the CAH. Th's fmnd, ho)wever, wqill be permanent, as trhe Government of Paraguay will service QAH's share of the proposed loan,
VIe
24.
The Three-Year
Justification
of the l'roject
Program rwhich
was originally
presernted
to the Bank
iission infcluded an equipment pirocurement prcn-.ramwhich lwas based on fairly carefuly
prepared estimates of the amount of equipment tnat could be
sold annual'ly for cash or on credit to Paraguayts farmers.
The Bank
Llission reduced the size of this prpgram boyabout 50 per cent,
the
thile
period over w,rhichthe equipment is to be imported iwas reduced by onlyr
from one-half to one-third,
There is reason to believe, therefore,
that
wiith proper organization
of CAil and the Agricultural
Department of the
Banco del Vara-uaa, imported agr-icultural goods will not accumulete in
the hands of the importers, but will reach the farmers 0 M1oreover, since
the list
of equipment wfas drarm-up with careful. consideration
of the
availability
of such equipment, it should be possible to obtain the
equipment within the contemplated period,
25.
Accurcrte quantitative
estimates of the benefits
guay as a result of the increase irn production to be
import program are difiJcult
to arrive at.
Hoi-;ever,
considerations,
vhnich bear directly on this question,
proposed loan is technically
sound,
It
devoted
follous,
financed
io
accru-ing to Paraout:ained from ttlis
the follow.ing
indicate thsat the
is estimated by the Government of Paraguay that the area
to crop cultivation
wvill be increased approxi-miatel> as
as a result of the importation of fa-rmequipment to be
by the loan.
Crop
No. of Hectares
195071
T953/54
Increase
66 ,ooo
25,hD0
17,000
111,000
71T000
8,000
404oo
2,000
8,000
10,000
115,000
2vQ000
Peanuts
Other
58)000
21,000
15,,000
103.,000
61,000
921000
15, 000
20,000
213000
31,60o
6,000
119600
Total
302,000
354,000
52,000
Cotton
Peas
Sugar Cane
Corn
1.Janioc
Tobacco
Assuming that only the increasein the cotton crop is sold in the exportV
market, while the increases
in the production
of all
other crops are
consumedinternally,the value of the additionalcotton to be exported
.,rould be of the order of one and a half million
dollars
annually,
which,
if realizedin four consecutiveyears, would alone be about sufficient
to retire the proposedloan within that period.
ii,
The Banco del Paraguay loans to farmers are commercial-type
loans. It is to be expected therefore
that the part of the loan correspondingto equipment distributed
through the Banco del Paraguay rill be
self-liquidatingin the normal commercialsense of the ter,m-
iii. It has been fouxnd by STICA that farmers vwhohave been
furnished farm tools under the supervised credit program of CAlHhave
achieved outputs roughly double that of similarly
have not participated
in such programs.
iv.
It is imnpossible to calculate
situated
farmers
who
the benefitsto be obtained
from the road-building
and truck-fleet
programs,
However, considering
different
parts of
the importanceof adequate communicationsbetw.veen
the country,and specificallybetween the isolatedcoloniesof Hohenau
and Capitan LTIeza
and centers of population,a limited road program
the opening up of new lands for
having as an important objective
colonizationis consideredjustified, A letter from the Point IV
approval
of
stationed
in Paraguay expresses
specialist
transportation
this program 0 The importation
of trucks and spare parts,
the latter
is
of trucks novwimmobilized,
needed in part for the rehabilitation
considered
justified
in terms of cheapening transport
costs and of
from
products due to delays in transit
reducing losses of perishable
farm to market.
_-9-
VIII.
RecommendedBasis for a Loan
26.
The ItAission, after reviem-ing the program submitted by Paraguay has
selected a group of high priority
items vwhich seem. to justify
consideration of a loan of *P,O0O,OOOfor a period of nine years.
However, in order
to ensure that the loan shall be utllized in such a way that the potential
benefits will actually be realized,
the Mission has recommended that
certain safeguards be incorporated in the Loan Agreement. These are:
a) With respect to equipment to be purchased by the Banco del
Paraguay, the local currency counterpart of the goods distributed
shall be applied to the establishment
of a temporary revolving fund
to be used for the importation of similar goods except Uwhensuch
goods are not required or when foreign exchange therefot is not
available.
In such cases, afterconsultation
with the Bank, such
svms will be used by the Banco del Paraguay for other agricultural
purposes until such time as they are required for debt service on
the proposed loan.
b) WIith respect to goods to be purchased by the C.A, the local
currency counterpart of the goods distributed
shall be used for the
establishment of a permanent revolving fund,to be used for the
.importation of similar goods except wqrhensuch goods are not requlred
or when foreiga exchange therefor is not available.
In such cases,
after consultation
wmiththe Bank, such suns will be used by the
Banco del Paraguay for other agricultural
purposes.
c) Wifithrespect to the machinery to be imported for the agricultural pools and the road bui'ding equipment, assurances satisfactory
to the Bank shall be pro-vided that suitable personnel and programs
are at- hand for the proper operation, maintenanoe and repair of
such equipment.
General plans and specifications
for the highway
program are to-be submitted to the Bank..
Because the work load of the CAHis to be expanded considerably
beyond its present volme, the Loan Agreemaent shall not become
effectiLve until arrangements for the reorganization
and financing
of the CAXhave been completed.
d)
October 30, 1951
J. Grauman
EASTERN
PARAGUAY
AGRICULTURAL
REGIONS,
RAILROADS AND ROADS
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