Public Disclosure Authorized

Document of
The World Bank
FOR OFFICIAL USE ONLY

xi / ii:jRepout No. 9 700

Public Disclosure Authorized

PROJECT PERFORMANCE AUDIT REPORT

BRAZIL

PIAU1 RURAL DEVELOPMENT PROJECT

(LOAN 2015-BR)
Public Disclosure Authorized

JUNE 28, 1991

Public Disclosure Authorized

Operations Evaluation Department

This document -- a restricted distribution and may be used by recipients only in the performance of
their official duties. Its contents may not otherwise be disclosed without World Bank authorization.
 CURRENCY EQUIVALENTS

US$ Cruzeiro/Cruzado'

SAR Prices, September 1980 1.00 59.50

Appraisal, May 1981 1.00 82.53
Yearly Average 1982 1.00 179.40
1983 1.00 576.20
1984 1.00 1,845.30
1985 1.00 6,205.002
1986 1.00 13.65
1987 1.00 39.30
1988 1.00 262.38
1989 1.00 2,834.00

FISCAL YEAR

Government of Brazil: January 1 to December 31

POLONORDESTE Program: April 1 to March 31

ACRONYMSIALBREVIATIONS

CEPA-PI = State Agricultural Planning Commission, Piaui

CEPRO State Planning Foundation, Piaui
EMATER = State Extension Service Company
EMBRAPA = Federal Agricultural Research Company
ERR = Economic rate of return
INTERPI State Land Institute, Piaui
OED = Operations Evaluation Department, World Bank
PAPP = Program for Assiata:-,ce to Small Farmers
PCR = Project Completion Report
POLONORDESTE = Development Program for Integrated Areas in the
Northeast
PPAR = Project Performance Audit Report
SAR = Staff Appraisal Report

* On March 1, 1986 Cruzado units (Cz) were introduced at one per thousand
Cruzeiro units (Cr).

2 Until February 28, 1986.

 FOR OFFICAL US ONLY
THE WORLD SANK
Washington, D.C. 20433
U.S.A.

Office at Dwctor-Gwneal
Opefatkm [val0asum

June 28, 1991

MEMORANDUM TO THE EXECUTIVE DIRECTORS AND THE PRESIDENT

SUBJECT: Project Performance Audit Report - Brazil

Piaui Rural Development Project (Loan 2015-BR)

Attached, for your information, is a copy of a report

entitled "Project Performance Audit Report on Brazil - Piaui Rural
Development Project (Ln. 2015-BR)", prepared by the Operations
Evaluation Department.

Attachment

This document has a restricted distribution and may be used by recipients only In the performance
of their offi. duties. Its contents may not otherwise be disclosed without World Bank authorization.
 PROJECT PERFORMANCE AUDIT REPORT FOR OFFICIAL USE ONLY

BRAZIL

PIAUI RURAL DEVELOPMENT PROJECT

LN. 2015-BR)

TABLE OF CONTENTS

Page No.

Preface . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Basic Data Sheet . . . . . . . . . . . . . . . . . . . . . . . . 111
Evaluation Summary . . . . . . . . . . . . . . . . . . . . . . v
I. Project Background and Design . . . . . . . . . . . . 1

II. Implementation Experience . . . . . . . . . . . . . . 2

Land Activities . . . . .. . . ... . .. . . 2

Agricultural Development . . . . . . . . . . . . . 3
Fisheries Development . . . . . .. . . .. .. . 5
Physical and Social Infrastructure . . . . . . . . 5
Project Administration . . . . . . . . . . . . . . 5
III. Project Outcome . . . . . . . . . . . . . . . . . . . 6

Production Impact . . . . . .
. .......... 6
Social Welfare ........ . ..... . . . . 8
Farm Incomes and Economic Rates of Return . . . . . 8

IV. Findings and Issues . .*. . . . .. .. .. . ..*. . 9

Replicability of Land Reform . . . . . . . . . . . 9

Selection of the Production Model . . . . . . . . . 9
Research and Extension ............. 10
Sustainability . . . . 11
Lessons Learned . . . ............... 12

Tables . . . . . . .* . . . 14

Table 1: Total Project Costs . . . . . . . . . . . . 14

Table 2: Project Targets and Accomplishments . . . . 15
Table 3: Beneficiary Targets and Achievements
in the Project Area .. .. .. . .. . . 17

Annex I: Survey Data on Production Response . . . . . 18

Attachment: Comments received from the National

Secretariat of Planning of the Ministry of
Economy, Finance and Planning in Brazil . 21

MAPS IBRD 15507

IBRD 15479

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

BRAZIL

PIAUI RURAL DEVELOPMENT PROJECT

(LOAN 2015-BR)

PREFACE

This is a Project Performance Audit Report (PPAR) on the Piaui Rural

Development Project located in the Northeast region of Brazil. The Loan of US$29
million was approved on June 16, 1981 and closed on the scheduled date of
December 31, 1986. The final disbursement took place on March 31, 1987 and US$12
million was canceled.

The PPAR is based on the Bank's Project Completion Report (PCR),

final project reports and a mid-term review by the Piaui Secretariat of Planning,
a 1987 ex-post survey of project beneficiaries as part of a PhD dissertation, the
Staff Appraisal (SAR) and President's Reports, the legal agreements and project
files. The audit mission in November, 1990 also carried out field observations
and farmer interviews and heid discussions with project and state officials.

The PCR provides a comprehensive review of project implementation.

The PPAR elaboratas on particular aspects of the project design and
implementation and analyses the impact on project beneficiaries.

Following OED procedures, copies of the draft PPAR were sent to the
Borrower on April 5, requesting comments by May 24, 1991. Comments were received
from the National Secretariat of Planning of the Ministry of Economy, Finance and
Planning on June 13, 1991 and are included as an attachment.
 - iLLL

PROJECT PERFORMANCE AUDIT REPORT

BRAZIL
PIAUI RURAL DEVELOPMENT PROJECT (LN. 2016-BR)
BASIC DATA SHEET

A. Key Project Data

Actual or Actual as X
Appraisal Estimated of Appraisal
Estimate Actual Estimate
Total Project Cost (USS million) 64.4 88. 48
Loan Amount (USS million) 29.0 * -
Disbursed (USS million) - 17.0 59
Cancelled (US million) - 12.0 -
Date Board Approval 06/10/81
Loan Agreement Date 08/10/61
Date Effectivenes 11/09/81 02/05/82 lSO*/
Closing Dat* 12/81/6 12/81/88 10
Economic Rate of Return ( 20 Approx. 0 80
Institutional Performance D/ 2-8
Technical Performance 2-8
Number of Direct Beneficialee
Agriculture 9,600 7,700 61
Fisheries 1,8960 8 85

B. Cumulative Disbursements
FY81 FY82 FY88 FY84 FY85 FY88 FY87
Appraisal Estimate (US$ million) 0.00 4.9 14.8 22.1 28.1 29.0 29.0
Actual (USS million) 0.90 2.0 5.5 8.4 18.6 16.8 17.9
Actual as X of Estimate -- 41.0 87.0 88.0 62.0 6.0 69.0
Date of Final Disbursement: March 81, 1987

C. STAFF INPUTC/

FY78 FY79 FY8O FY81 FY62 FY88 FY84 FY86 FY86 FY87 FY88 TOTAL
Identification/
. Preparation 8.0 74.1 79.8
Appraisal 159.9
170.5 170.5
Negotiations 8.7 .7
Supervision 1.1 61.8 9.8 14.8 10.1 8.5 14.2 .8 129.1
TOTAL 6.0 74.1 79.8 178.8 81.8 9.8 14.8 10.1 8.5 14.2 .8 457.2

a/ Calculated in terms of months from date of Board approval.

b/ 1 = Problem-free or minor problems; 2 = Moderate problems; 8 = Major problems
c/ Input as staff weeks. Source: World Bank Latin America and the Caribbean Region Office of the
Chief Administrator.
 - IV -

D. MISSION DATA
Date No. of S/D in Speciallastiqqo Performance Tye Of
Item Mo/Yr. Persons Field Reresentedl a Trendf/ Problems9
Identicateon 10/77 2 8 ae
Identification 6/70 8 12 a,c
Identification 8/78 5 55 cla,g,c,c
Preparation 10/78 1 8 k
Preparation 11/78 6 55 a,b,i,cog,d
Preparation 2/79 a 86 &,b,c#h,c,c
Preparation 5/79 8 25 coffe
Preparation 8/79 2 4 ec
Preparation 11/79 1 8 c
Preparation 10/79 1 1 e
Preparation 6/8 1 16 I
Preparation 6/80 9 147 c,c,e,J,d,ao,t1f
Appraisal 10/80 9 250 k0f,c,c,oj,d,a,a
Poet-Appreleal 2/81 5 so I,c,c,sk
Implementation 6/81 8 9 c,d,l
Full Supervision 1 11/81 8 as c,a,e,i,J 2 1 M, T
Partial Supervision 2 8/82 1 8 1
Partial Supervision 8 8/82 1 5 h
Full Supervision 4 5/82 a 68 c,a,s,k,h,k 2 1 M, T
Full Supervision S 9/82 1 8 c 2 1 M, T
Partial Supervision 6 1/88 1 4 H
Partial Supervision 7 4/88 1 1 1
Partial Supervision b 10/88 1 4 1
Partial Supervision 9 2/84 1 4 h
Full Supervision 10 8/84 1 14 a 2 1 M, T
Partial Supervision 11 10/84 2 4 d,d
Partial Supervision 12 1/85 1 6 h
Partial Supervision 18 4/85 1 8 d
Full Supervision 14 4/65 2 26 e,d 2 2 T, M
Partial Supervision 15 9/85 1 6
Partil Supervision 16 12/6 1 7
Full Supervision 17 8/88 1 9 a 8
Full Supervision 16 9/88 1 14 a 2
Partial Supervision 19 12/88 1 6 a
Full Supervision 2 0 h) - -

TOTAL 98

Other Project Data

Borrower : Federative Republic of Brazil
Executing Agency : State of Piaui

Follow-4n Project:
Name : Northeast Rural Development - Plaul
Loan Number : 2782-BR
Loan Amount : US878 million
Date of Board Approval : July 2a, 1987

d/ a Agriculturist; b w Agricultural Economist; c m Economist; d a Irrigation Engineer; * a Loan Officer;

faRural Sociologist; g = Health/Sanitation Specialist; h a Education Specialist;
Fisheries Specialist; J = Roads Engineer; k a Land Specialist; I a Civil engineer
I *
0/ 1aProblem-free or minor problems; 2 a Moderate problems; 8 a Major problems; according to SPN report
ratings
f/ 1 a Improving; 2 s Stationary; 8 = Deteriorating; in 1988 new SPN report does not include trends
g/ F . Financial; M = Managerial; T a Technical; P a Political; 0 a Other; new SPN does not qualify types of
problems
h/ A Full Supervision Mission was done in June 1987; draft report was not distributed
 -v -

PROJECT PERPORMANCE AUDIT REPORT

BRAZIL

PIAUI RURAL DEVELOPMENT PROJECT

(LOAN 2015-BR)
EVALUATION SUMMARY

I. INTRODUCTION
higher riel4s, as well as from small-
This rural development project scale irrigation development.
was one of 10 initiated between 1975 Agricultural research and extension
and 1983 with World Bank support in services were included, as well as
the Northeast of Brazil under the marketing and seed production
Government's Development Program for infrastructure and services. Coastal
Integrated Areas in the Northeast fisherman (1,800 families) were also
(POLONORDESTE). The Northeast was the to be supported with equipment and
poorest region of Brail with about services. Access roads, rural water
45% of Brazil's agriculturally supply and education hardware and
employed population. Some 70% of software completed the project design.
farms were under 10 ha and occupied
less than 6% of the total farm area in 3. IMPLEMENTATION EXPERIENCE
the region.
Inexperience in the early stages
The multi-component project had of land distribution led to some
a core program in land redistribution, problems in the procurement and
which was complemented by public allocation of unsuitable land, but the
sector physical infrastructure and redistribution process as a whole was
technical and social services. The reasonably successful. The project
land distribution was relatively coordination unit had to assume much
successful and a arge part of the of the responsibility for
physical tonstruction targets were redistribution in lieu of the state
met. The incremental productivity, agency created for this purpose. The
however, and much of the technical and coordination unit also was obliged to
social services realized much less take over a small-scale irrigation
than anticipated at project appraisal. component which eventually achieved
about 50% of its targeted development.
2. OBJECTIVES
The important roads component
The project objectives were to incurred some institutional and
improve the socio-economic conditions construction difficulties but
of a target group of low-income substantially realized its targets, as
earners in the northwestern part of did most other infrastructural
the state of Piaui and to increase the componantse The public sector
state's institutional capability in services and their effectiveness*
rural services. however, left much to be desired.
The exctens ion service to farmers and
Land redistribution was to fishermen did not have much impact on
benefit 5,000 of the 45,200 landless adoption of improved technology,
families in the target area. despite very intensive staffing and
Increased income would be derived from programming. Community involvement in
an expanded cultivation area and the design and execution of the water
 - vi -

supply component was deficient and led most increased their production of
to problems in maintaining and dried fish, the objectives of major
operating water facilities. Grain increases in output, income and
storage was constructed but assistance organised marketing were not realised.
in the organization of marketing was
poor. The agricultural research 5. SUSTAINABILITY
service was not very useful to project
beneficiaries in the early years, but Although well below targeted
improved its performance to some levels, the increased agricultural
degree towards the end of the project. income caused by an increase in
cropped area, and likely increase in
4. RESULTS total family income (including that
from non-cropping sources), should be
About 65% of the targeted land sustained for the majority of land
beneficiarius were allocated land by beneficiaries. As perennial crops are
end-1986 and only about 6% had progressively introduced and areas of
abandoned their plots by 1989. The better soils are gradually developed,
beneficiaries responded by cultivating incomes should further increase. The
a greater area tha" they did as tenant smell-scale irrigation schemes should
farmers, and the more innovative have continue and many are being further
started to introduce perennial tree developed under the follow-on project
crops and make permanent improvements (Ln. 2762-BR).
on pockets of the best land on their
holdings. The intensive and expensive
agricultural extension service,
The intended change from the besides having a low production
system of shifting cultivation with impact, is not sustainable in its
little use of any technological present form because of high cost and
production inputs did not generally anticipated continued budgetary
occur. Short-term credit, although constraints.
difficult to access, was used to some
degree by about 80% of beneficiaries Maintenance of road
but was largely directed at employing infrastructure appears to be
additional labor for an expansion of acceptable. Although problems
the traditional system. persisted in maintenance and operation
of rural wa,;er supply at project
The irrigation component, closure, it is likely that the follow-
despite some technical difficulties, on project will overcome most of these
resulted in benefits for the 795 problems to permit continued
families who received this functioning.
development; unfortunately, 85% of the
beneficiaries were concentrated in the The poor institutional
northern Delta part of the project capability in primary education in
area where a greater potential for Piaui makes the sustainability of any
this type of investment existed, and worthwhile impact from project
most of the schemes were not developed investments in this area very
to the extent necessary to en-ble a doubtful.
second irrigated crop each year.
6. FINDINGS AND LESSONS
About one third of the intended
fishermen received credit for The audit concludes that the
equipment (mostly boats). Although economic rate of return on the
 -vii-

productive elements of the project is Land reform which transfers an

probably in the order of 6%. Despite adequate area of land to landless
this, the project is rated as farmers (without incurring a
marginally satisfactoryt the land significar.t repayment by
distribution and irrigation components beneficiaries) is likely to
did benefit beneficiaries, road improve the livelihood of affected
infrastructure benefitted the local families; this should occur
economy, and water supply and despite deficient technical
community services have enhanced the services if beneficiaries are
welfare of the low-income rural acquainted with their production
population. Many -- the institutions envircment.
targeted for improvement continue to
have major deficiencies, but the An inordinately high input of Bank
project planning and coordinating staff time in preparatioz,
capability has been significantly appraisal and early supervLsion
enhanced in units of the State does not ensure efficient project
Secretariat of Planning. implementation in a generally weak
institutional environment;
The findings are in accordance emphasis should be placed on
with most other audits of rural ensuring that key components are
development projects in the Northeast implementable despite an
in having a modest but recognizable anticipated poor ,o mediocre
impact. The impact, however, was much institutional performance (with
less than should be expected some realistic level of
considering the resources allocated to improvement).

*Lad
reormw
trnsfe
a
the project. The institutional
deficiencies highlighted in this In any agricultural development
report are also generally consistent project dealing with traditional
with those indicated in the other farmers, it is essential to be
audits. realistic in anticipating the
performance of public sector
Lessons Includes service entities, and to carefully
consider individual resource and
A strong project coordination unit socioeconomic circumstances in
with the support of the main projecting farmers' responses in
political and government entities adoption of technology; these
can ensure key project components factors were not taken
are implemented in a weak sufficiently into account by the
institutional environment; Bank in project design.
permanent in-line institutional
ability must also be built up An intensive, highly programmed
during a project if subsequent agricultural extension service is
servicing is necessary to sustain unlikely to be effective unless it
investments; the assumption by is organized to be responsive to
beneficiaries of responsibility the real problems and needs of its
for maintenance of project clientele.
investments should also be
maximized.
 PROJECT PERFORMANCE AUDIT REPORT

BRAZIL

PIAUI RURAL DEVELOPMENT PROJECT

(LOAN 2015-BR)

I. PROJECT BACKGROUND AND DESIGN

1.1 The Northeast of Brazil is disadvantaged relative to the wealthier

southern states. Apart from having less industrial and commercial activity, it
has a relatively poor natural resource base, unreliable rainfall and a highly
skewed land distribution. The relative poverty of this region led the Bank to
support the Government in the Development Program for Integrated Areas in the
Northeast (POLONORDESTE). The Piaui project was one of 10 initiated between 1975
1
and 1983 with Bank assistance under this program.

1.2 Identification of final components and preparation of the project

were lengthy and absorbed an exceptionally high amount of Government and Bank
manpower.2 This was partly due to the agroclimatic and socioeconomic conditions
which were somewhat different from other projects in the Northeast, and to the
limited infrastructural and institutional characteristics of the state. The main
concern, however, was for the land tenure situation in which ditstribution was the
most skewed of all the states in the Northeast, and which the Bank considered
must be addressed before effective rural development could proceed.

1.3 The project covered about 10% of the state, and was located in the
north-west which had a higher agricultural potential thetn the remainder. It
included land acquisition and redistribution of about 200,000 ha. to 5,000
families, as well as land tenure regularisation and titling (26% of project
costs). Agricultural development was to be promoted through research and
extension services and investments in marketing, seed production and
8
distribution, and small-scale irrigation (38% of project costs). There was a

A second series of projects was initiated in 1985 as the Program for

Assistance to Small Farmers (PAPP), as well as a region-wide land titling project
in 1984.

* The responsibility for preparation, apprai,al and early supervision was

transferred within the Bank from the regional agricultural division to the Rural
Development Division within Central Projects because of the relative immaturity
of public sector service institutions, the novelty of the land reform component
and an anticipated need for heavy Bank support. See Basic Data Sheet sections
C and D.

a Credit provision was to be an essential complement to project activities,

but was to be provided by the Federal Government through its existing
POLONORDESTE credit line or others already functioning in the Northeast. In view
of continuation of the highly negative real interest rates for rural credit in
Brazil, the Bank was unable to finance credit.
 2-

small component to assist about 1,800 poor coastal fishermen with equipment and
services, while the project area was to receive physical (upgrading of rural
roads and construction of access roads) and social (water supply ana basic
education) infrastructure. See Table 1.

1.4 While the project objectives were to improve the socioeconomic

conditions of a target group of low-income earners and to increase the
institutional capacity for rural services, a special objective was to demonstrate
a replicable approech to simple, low-cost and technically sound land
redistributien. Progress on land acquisition was a prerequisite for investment
in other preject activities in a municipality.

II. IMPLEMENTATION EXPERIENCE

2.1 The PCR provides a comprehensive description of implementation of

each component. Tables 2 and 3 show the physical performance under each project
component and the number of beneficiaries reached. Physical implementation was
satisfactory in most components, but the quality of performance and services was
very variable. The audit focuses on partiuular aspects of implementation which
relate to impact assessment and the effectiveness of services and summarizes
other items.

Land Activities

2.2 In the focal land distribution component, procedures were installed

in an attempt to ensure land of satisfactory quality would be procured and
allotted in 30 to 50 ha. plots. Most land procurement was through purchase, and
38% of the land offered was procured. Despite these procedures, some settlement
areas had major difkiculties. Special reviews of the situation were carried by
the State Agricultural Planning Commission (CEPA-PI) after Loan closure in late
1987 and by an inter-institution commission under the State Planning Foundation
(CEPRO) in 1989. The principal causes of problems identified in the earlier
survey were poor soil quality, a lack of interest in workin,g the allotment
(possibly associated with low potential productivity), lack of access to
resources to establish a cropping cycle and poor water supply. The later review
indicated that serious problems persisted in only three of the 24 municipalities
in the program. These were among the earlier allocations and were located in the
south of the project area. At these sites, abandonment of plots was tha issue
in 852 of individual allotments classified as problematical, which represented
37%, 342 and 52% of the allotments in the three municipalities. Overall,
however, 65% of the targeted 5,000 land beneficiaries were allocated land and
allotments with major problems represented only 6.5%of the total in the program.

2.3 Land discrimination (study and regular 4 zation of Zind ownership and
title) reached only 43% of the targeted area. This sub-component was executed
by the State Land Institute in Piaui (INTERPI), which was established in 1980 to
focus attention on the land reform process in the state. In practice, however,
the project coordination unit which was administratively part of the State
 -3-

Secretariat of Planning had to assume responsibility for the key land

distribution part of this component. In 1985, redistribution was formally
transferred to INTERPI; the redistribution process subsequently slowed and the
land repayment process by allottees (which had been initiated in 1984) became
inactive and was abandoned.

Aaricultural Development

2.4 The Small-scale irrigation component reached about half of its

targeted area and beneficiaries. Due to a weak technical capacity in planning
and implementation in this field, the intended institutional arrangements were
abandoned and the project coordination unit assumed responsibility. Most of the
irrigation occurred in the northern part of the project area which had bettar
water resources, and rice was the major land use. The irrigation investment
ensured a high yielding crop but did not enable a second crop in most cases.
Organization of farmers at the eight -ttes was often deficieat so that their
intended contribution to the land preparation phase did not eventuate, and poor
technical assistance by the state agricultural extension agency (EMATER) led to
productiin problems in many instances. Cost recovery was expected to be
significant for the irrigation component, and was to be based on ability to pay
which related to surplus sales. About half of the schemes have made some
payments, but little emphasis appears to be given to this aspect of the
investment.

2.5 Aaricultural Research was provided by the local stations and

substations of the Federal Agricultural Research Company (EMBRAPA) in the absence
of a state research institution. Although physical targets for experiments were
reached, problems occurred in insufficient linkage with the extension service,
a low degree 'of farmer involvement, and a lack of interest in understanding the
real constraints of and addressing actual problems faced by smallholder farmers.
Some improvement was made in the later stages of the project, but the applied
research program is commodity-oriented without suf f icient complementary attention
to smallholder farming systems. 4 After some initial constraints, research
operations were reasonably well funded in the 1984 to 1986 period with salaries
averaging 62% of salary plus operational support costs. Subsequently, this ratio
was a less favorable 73% and rose to 88% in 1989; the 1990 figure is even worse,
which must have a negative impact on the research programs.

2.6 An intensive agricultural and social extension service was provided

under the project through the state extension service (EMATER) to enhance
adoption of improved technology and family welfare. Despite favorable

4 The dominant production system remains as traditional "shifting"

cultivation of about 3.0 to t 0 ha in a 40.0 ha allotment with negligible use of
new technology in annual .rops grown in consortium; there is very little
destumping and permanent cultivation, but tree crops are gradually being
introduced. However, the applied research ("testes de adjuste") is mainly
directed at standard variety and input trials with annual crops in permanent
(i.e., unrepresentative) cultivation sites.
 - 4 -

achievement in numbers of families contacted and demonstrations made, the impact

of the service on adoption of improved agricultural technology was minimal (pars
3.2); this, despite reaching ratios of one technician to 116 families and one
social worker to 236 families, compared to the 400 and 600 respectively envisaged
at appraisal. Visits to groups of farmers were programmed in weekly or
fortnightly intervals.

2.7 The PCR lists a number of factors which it considered could have
contributed to poor performances (a) lack of commitment to working with
smallholders and/or lack of appreciation of project service objectives; (b)
logistical and administrative problems in EMATER;a (c) irregular visits by
extension staff and their frequent rotation and inadequate training; and (d) poor
linkage between research and extension. However, the PCR contends that the major
negative factors affecting the effectiveness of extension and agricultural
progress were a lack of credit and the incidence of drought in the early 80s.

2.8 All reports on the project concluded that rural credit through the
official banking system was deficient in the amount available, in ease of access
and in the speed of loan processing for smallholders. However, it is also
apparent that project land beneficiaries accessed much more credit than those
outside the project in this agricultural zone. The mid-term evaluation indicated
81% of beneficiaries had used agricultural credit in the 1981 to 1983 period
compared to 30% for non-beneficiaries; the figures were 57% and 152 respectively
in 1983, while the average loan size per cultivated area was larger by a factor
of 2.7 for beneficiaries. A post-project survey carried out in late 1987 as part
of a doctoral dissertation indicated 86% of beneficiaries had used credit at
least once during the project.$ In addition, all surveys and the audit's field
interviews confirmed that the credit was largely used to hire labor to expand the
area under traditional "shifting" cultivation and, to a lesser extent, for family
consumption items (para 3.2); it was not used for production inputs such as
fertilizer. Consequently, low adoption of improved technology should not be
largely attributed to poor access to short-term credit.

Budgeted operational support for EHATER extension staff gradually improved

during the project as reflected in a salary to salary plus support ratio of 0.86,
0.85, 0.82, 0.82. 0.73 and 0.74 in the years 1980-1986; however, even the better
ratios are considered minimal for effective extension operations, and the ratios
deteriorated to 0.82 in the post project period and the ratio was extremely
unfavorable in 1990.

6 In 1987/88 the use of short-term credit by beneficiaries had dropped to

20%. This was largely associated with an increase in interest rates and
substantial inflation which made use of credit for agricultural activities too
risky in the view of most smallholders.
 -5 -

2.9 Sub-average rainfall from 1979 to 1983 and very compressed annual
rainfall in 1984 would have limited crop production, and could have limited the
willingness to risk funds on input use. However, in later years of the project,
and currently, there is still little change from the traditional technology with
annual crops. Consequently, it must be concluded that something other than
drought or lack of credit was the major factor limiting adoption of technology.
2.10 Physical infrastructure targets in the agricultural marketing
component were generally achieved. The overall contribution of cooperatives in
marketing rice and maize production excess to consumption requirement was
significant (at the end of the project about 1,500 farmers were regularly using
the cooperatives), but the performance of individual cooperati,ves ia providing
inputs and consumption items and in marketing smallholder production was very
variable. The improved seed distribution program intended for cooperatives was
implemented poorly, with only 168 tons of improved seed being distributed under
the project (rice, maize, beans and cotton) with two cooperatives performing very
much better than all others. The market information service was not suitable for
smallholder use.

Fisheries Development

2.11 The Loan financed only research, technical assistance and training
activities for coastal fishermen, although the componert also included credit to
fishermen and the local fishing cooperatives. About two-thirds of the projected
beneficiaries received technical assistance, although the quality of the
extension was doubtful. Approximately one third of the fishermen received
credit, with purchase of boats being the major item, but many had to subsequently
sell their boats due to poor viability of their small fishing enterprises. The
fishing cooperative did not develop as intended and the objective of improving
the land tenure situation of fishermen communities was only beginning to be
partly addressed at the end of the project.

Physical and Social Infrastructure

2.12 The physical targets for road construction and improvement were
reached. However, major institutional problems were experienced leading to
inappropriate procurement, substandard specifications and poor construction (in
compaction and drainage) in many instances. About half the intended water supply
. systems were installed and 40% of the water filters were distributed. Serious
problems of institutional capacity occurred and the project coordinating unit had
to assume implementation responsibilities (using contractors) for water supply.
Problems occurred with maintenance of the facilities; the municipalities took
over system maintenance in 1983 and this improved the situation somewhat, but an
attitude that the facilities "belonged to the project" persisted in many cases
and led to continued operational breakdowns.

2.13 In the primary education component, about 77% of

construction/remodeling targets were attained, and curriculum development,
equipment and training target numbers were evantually achieved. However,
systemic problems in low salaries and morale in teaching staff, inadequate
 - 6 -

training and poor supervision and coordination of activities were not resolved,
and persisted and even deteriorated in the post-project period.

Prolect Administration

2.14 The performance of the project coordination unit was satisfactory.

Its coordination responsibilities were made difficult by the poor institutional
capacity in some of the intended implementing agencies; the latter led to the
unit assuming direct responsibilities for land redistribution and water supply
for much of the project period. Although this reduced the potential
institutional development impact, it did lead to hands-on exposure which appeared
to enhance the unit's capability in integration of field activities. While
project management and monitoring were satisfactory, project impact evaluation
was virtually non-existent. Baseline data which were available from original
land beneficiary registration forms were not used by state institutions to assess
project impact.

III. PROJECT OUTCOME

Production Impact

3.1 In the absence of reliable data to obtain "pre- and post-project,

with and without" situation analysis the real agricultural and production impact
of the project cannot be reliably defined. However, there was a beneficiary/non-
beneficiary survey by CEPRO in 1984 after three years of project activities, and
another survey in 1987 as part of a doctoral dissertation which compared
beneficiary data with records obtained from beneficiaries at registratice for
land allocation in the early 80s (Annex 1). The data in the latter survey
include a number of discrepancies, and while the results of the two surveys are
not always consistent they do coincide in a number of important conclusions.

3.2 The studies conclude as followes

(a) the average area cultivated per family per year was significantly
greater for land beneficiaries than non-beneficiaries, and was
greater than that previously cultivated by beneficiaries when they
were tenant farmers;

(b) a beneficiary status did not result in a change from the traditional
"shifting" cultivation farming system, and only about 8% to 102 of
the land holding was cultivated in any one year;

(c) in general, the crop mix and use of traditional technology was not
modified by participation in the project; and

(d) although credit was not readily accessible by smallholders, annual

credit was used to a much greater extent by land beneficiaries; this
 - 7 -

was largely used, however, to employ labor to expand the annual

cultivation area rather than increase expenditure on inputs such as
fertilizer and pesticide, and for family consumption items.

3.3 In crop yields per ha, the 1984 survey indicated average yields were
not better for beneficiaries, despite a greater use of improved seed to the
extent of 45% by beneficiaries and only 5% by non-beneficiaries. The lack of
impact of improved seed was attributed largely to the average quality of soil in
allotments not being superior to (and often inferior to) the land used by tenant
farmers, where often better land would be selected for cropping to the benefit
of the landowner and the tenant; inadequate complementary production inputs could
also have restricted response to improved seed. The other major observation of
this survey was that the lack of technological improvement in beneficiary farms
occurred despite 96% of this group receiving the technical services of EMATER
compared to only 28% of non-beneficiaries.

3.4 After adjusting the gross value of agricultural production for paid
wages by beneficiaries and for rent paid by tenant farmers, the net agricultural
income was higher for beneficiaries in 1984, but higher non-cropping income for
non-beneficiaries meant that total family income was higher for beneficiaries by
only 4%.

3.5 The 1987 survey data suggested that, except for the more favorable
Delta zone of the project area, most crop yields on beneficiary farms were higher
than those obtained by them at the beginning of the 80s when they were tenant
farmers. There is obviously a danger in comparing yield data for a particular
year with another year considering seasonal variability in this area and the
known drought conditions in the early 80s. Fertilizer use was reported on only
52 and pesticide use on 33% of beneficiary farms in 1987. This compares with 1%
and 46% respectively for beneficiaries in the 1984 survey and zero and 452 for
non-beneficiaries. Consequently, use of inputs could not have caused
significantly higher yields for beneficiaries, which casts some doubt on the
validity of the comparison over time; there are no data to indicate if yields for
non-beneficiaries had increased since the early 80s to reach similar levels to
beneficiaries in 1987. The 1987 survey did indicate that about 8Z of
beneficiaries were innovative in introducing cashew nut trees, bananas and melons
and/or other higher-value market crops.

3.6 Both studies stressed the inadequacy of marketing arrangements for

products surplus to consumption (rice, maize and cassava flour), which penalized
the potential cash income of all farmers in the project area.

3.7 The audit concluded that the land distribution did result in an
expansion of the annual area cultivated in a common range of 15Z to 40%, which
has largely resulted from the use of credit by beneficiaries to employ labor to
expand the traditional shifting cultivation farming system. Apart from greater
use of improved seed, the general technology level in annual crops has not been
changed by the project, and there is little hard evidence of any significant
yield increases per ha amongst project beneficiaries.
 -8-

3.8 The expansion in irrigated area by the project has been beneficial,
with 85% of this bein_ located in the northern Delta part of the project area.
This has usually involved mechanical destumping and cultivation as part of each
subproject but, apart from this, use of machinery was insignificant. Subsequent
to the project some more innovative farmers are using municipal tractors at
grossly subsidized rates to destump small areas of better soils (often in
"varzeas" which are lower, fertile lands with seasonal inundation) as permanent
cultivation areas. Towards the end of the project in 1985 EMATER began
distributing a limited number of improved cashew seedlings. This was a very
enund decision and its further development is likely to have a very positive
effet on income of participating farmers. Farmers are especially interested in
introducing cashew as an appropriate perennial tree crop; this is a direct
benefit of giving farmers permanent title to land in which longer-term investment
becomes attractive.

Social Welfare

3.9 Despite institutional and budgetary difficulties incurred in

implementing many of the social infrastructure components and in their subsequent
maintenance (paras 2.12 to 2.14), the project area has generally benefitted from
improved roads, water supply and, to a much lesser extent, primary education.
The achievement of ownership of land not only has had the obvious benefit of
enabling investment in perennial crops but also in promoting investments in
dwellings and complementary structures, and in community activities which should
afford a gradual improvement in family welfare.

Farm Incomes and Economic Rates of Return

3.10 The PCR attempted to estimate the impact of the project on farm
income and used farm models for this purpose, as was used at appraisal. The
audit considers that the PCR is over-optimistic in its calculations of benefits
for land beneficiaries which it states as an incremental income of 140% for
rainfed farms and 192% for those with some irrigation. The PCR estimates assume
an increment of 50% in dryland cropping area for land beneficiaries and a 30Z
increase in yields for all crops except rice at 43Z (Table 2, Annex II of the
PCR). At least the average yields appear too generous considering the data
presented in pares 3.3 and 3.5. In addition, due to the importance of non-
cropping income (which is estimated at 20Z to 50% of total family income for both
beneficiaries and non-beneficiaries 7 ), this would have to be taken into account
in assessing project impact on income. The PCR correctly states that a greater
proportion of family labor of land beneficiaries is used for cropping activities,
but the impact of this on non-cropping income is undefined and could be positive
or vegative.

7 The highest proportion of total income derived from cropping in both farm
surveys occurred in the northern Delta zone, which is to be expected due to the
more favorable agricultural potential in that area.
 - 9 -

3.11 In its calculation of an economic rate of return (ERR) for the

project, the Bank's PCR measured incremental on-farm benefits against investment
and incremental operating costs in the agricultural development program only
(footnotes to Table 6, Annex II of the PCR state assumptions in cost
allocations). The agricultural production was calculated on the basis of the
farm models, and resulted in a figure of 10% ERR with a comment that an ERR in
the range of 6% to 11% was more likely considering the exclusion of a number of
doubtful project costs in the calculation. This compares with an ERR of 15% to
25% estimated at appraisal using farm models to obtain incremental benefits.
In view of the more conservative benefits estimated by the audit (para 3.10), it
considers the ERR is more likely at the lower end of the range indicated in the
PCR.

IV. FINDINGS AND LESSONS

4.1 The basic objective of the project was to increase the income,
employment opportunities and welfare of the low-income rural population in the
project area. This would be done by providing land ownership to landless tenant
farmers, technical and social services and infrastructural investments. Land
reform was a key component.

Replicability of Land Reform

4.2 Skills were developed in local staff in land acquisition and

redistribution on the basis of land purchase from private owners, albeit largely
in a sub-unit of the project coordination unit rather than in the special
institution created for this purpose, INTERPI, which remains very weak. However,
the replicability of the overall process in other states of the Northeast is
limited by the peculiarity of having relatively cheap land available in Piaui
which is generally not available in the other states. Of the total land
redistributed in the Bank-supported land titling project in the Northeast (Ln.
2593-BR) between March 1985 and March 1990 (approximately 1.1 million ha), only
1.52 was through land purchase while 85.5%relied on expropriation. However, the
process is replicable in Piaui and some aspects such as the technical procedures
in land assessments will provide skills useful in any redistribution process.
In addition, despite its shortcomings, the land discrimination sub-component also
introduced innovative methodological techniques (with the help of foreign
technical assistance) which have subsequently been widely used in the Northeast.

Selection of the Production Model

4.3 The audit considers that, despite the enormous input in manpower
during preparation and appraisal, the dryland agricultural model was
questionable. Although it assumed that the traditional crop mix of rice, maize,
beans and cassava would continue, it also assumed that shifting cultivation would
progressively give way to permanent cultivation and that production inputs in
fertilizer and pesticides would be used, complemented by selective destumping and
 - 10 -

the adoption of soil erosion control techniques. This was based on model
calculations showing the benefits of this course of action.

4.4 It would have been more realistic to analyze the likely behavior of
the traditionally risk-averse clientele in the project area. In conditions of
uncertain climatic conditions and unknown market prices (exacerbated by the
impact of very high rates of inflation) it was logical to expect that most
beneficiaries would continue with the traditional system of shifting cultivation
on soils of poor to moderate inherent fertility (which was the common situation);
this did not involve cash inputs in fertilizer, took advantage of the natural
fertility built up by the regrowth vegetation and was within the experience of
the farmer. It was also optimistic to assume that credit would suddenly be
generally made available to smallholders for procurement of inputs with the
assistance of "additional credit posts (of the official banking system) to be
identified during the annual plannirg process." Indeed, land beneficiaries did
access more short-term credit than non-beneficiaries, but it was limited and was
largely used to expand the area of shifting cultivation (by employing labor) as
the most attractive use of this additional resource, considering returns and
risks to the farmer. If the appraisal team anticipated that existing subsidized
credit terms would be brought closer to the real cost of credit (which was being
recommended by the Bank in its dialogue with the Government), there should have
been even less expectancy of significant use of credit for inputs requiring cash
outlays.

4.5 There is now a tendency for beneficiaries to do some destumping on

small areas of the most fertile soils with good moisture-holding capacity with
the intention of continuous cultivation, should such areas exist on an allotted
farm. The other common development is the introduction of cashew trees as
perennial crops suitable to the rainfall and soil environment and which are seen
as providing regular income with negligible recurrent cash input. The restricted
interest in continuous cultivation areas and the inclination to perennial crops
are logical and should have been foreseen. The basic dryland model would then
have been for land beneficiaries to take advantage of their land ownership status
by continuing with the low-input but risk averse optiou of shifting cultivation
for the major area of annual crops, slowly developing any areas of particularly
good soil for permanent cultivation, introducing cashew trees as a perennial
relatively low-risk crop as rapidly as possible, and expanding livestock
activities and other non-crop activities (including off-farm work) to the extent
that resources allowed. The audit considers there was excessive emphasis at
appraisal on a "technically ideal" model without sufficient attention to other
socio-economic variables and likely institutional service limitations.

Research and Extension

4.6 The applied research by EMBRAPA became more concerned with the
problems of smallholder farmers towards the end of the project period and
improved its linkages with the extension service. However, its agricultural
research was still largely directed at variety and input trials with annual crop
in continuous cultivation areas which was not the most important part of the
typical farming system. No investigations were evident on the management of
 - 11 -

inter-relationships between cashew and annual crops in the tree crop

establishment period; this type of study would have been prompted if researchers
were aware of production issues being faced by farmers, even though cashew
culture was not the primary responsibility of the EMBRAPA station at Teresina.

4.7 The audit concurs with Brazilian studies and the PCR in concluding
that the efforts of the very intensive extension service were not reflected in
adoption of the tehnologies recommended by this service. Although difficulties
in accessing credit, and drought conditions in the early 80s, are likely to have
affected the rate of adoption of improved technology, the audit has already
pointed out that these factors do not appear to be as critical as purported in
the Bank's PCR (paras 2.18 and 2.19).

4.8 The audit considers that the main factor limiting the effectiveness
of EMATER was the absence of a truly responsive approach to addressing farmers'
problems. The tendency was to repeatedly promote a set of recommendations which
EMATER managers decided would be most appropriate from a technical point of view
based on applied research and knowledge of agro-ecological conditions in a zone;
this largely related to the model assumed at appraisal - clearing and destumping
land for permanent cultivation with annual production inputs to enhance fertility
and protect crops. The emphasis on programmed, frequent visits with
recommendations would have been better adjusted to invest more resources in
seasonal problem analysis with the farmer groups, and then in providing
assistance and recommendations to these groups to solve the agreed problems.
EMATER could not have resolved those issues which were beyond its control, but
its attention would likely have been largely directed at: (a) quick and reliable
responses to disease and pest problems in annual crops in consortium in the
shifting cultivation system; (b) the most appropriate means of introducing and
managing cashew trees, and organization of farmers to purchase improved seedlings
to supplement the limited distribution of cashews on a grant basis; (c) higher-
value crop selection and culture to take advantage of areas of farms with higher
potential, and assistance to farmers in organizing cooperative marketing of the
higher-value crops generated in these areas; and (d) low-cost means of expanding
and improving the productivity of livestock in their farming system. This
assistance could be done with a less frequent and intensively-staffed service in
which problem identification, analysis and responsiveness in recommendations
would substitute for frequent and repetitive recommendations would based on
"technical advisability".

Sustainability

4.9 The land redistribution component was largely successful in providing

more security for beneficiaries. Although some have abandoned allotments due to
mistakes made in the early stages of the program (para 2.2), the majority are
likely to stay on their holdings and gradually improve their livelihood and
income. Some increase in income was initially enabled by an expansion in
cultivation area which is likely to be maintained, and income is likely to
increase further with the introduction of perennial tree crops which has been
enabled by land ownership. The investments in irrigation should be sustainable
 - 12 -

but most need further development to permit a second crop; the follow-on project
is assisting in this respect.

4.10 The income benefits for land beneficiaries cannot be directly linked
to the agricultural research and extension services. The latter was particularly
intensive and costly and appears to have had conceptual problems (paras 4.07 and
4.08); budgetary problems subsequent to the project in 1989 and 1990 have led
to a serious breakdown in the operations of the extension service, which has high
annual operating fund requirements. Services by EMATER to coastal fishermen have
had similar weak performance and doubtful sustainability as a service.

4.11 The road infrastructure component experienced a number of problem in

institutional coordination and performance, but the local capability for
continued maintenance appears to have been adequately developed to sustain these
investments. Although education facilities were substantially completed, the
software aspects in training, supervision and quality of education were not
effective (and have not improved since the project) so that any sustainable real
impact is doubtful. Rural water supply still has some operational difficulties
due to lack of sufficient involvement of participating communities in initial
planning and implementation; the existence of a follow-on project, however, is
likely to ensure that most facilities continue to be maintained and to benefit
the population.

Lessons Learned

4.12 Despite an estimated ERR of less than 10% on the productive elements
of the project, the audit concludes that, overall, the project is marginally
satisfactory. The project did, however, command a large portion of Government
resources allocated to the north-west part of Piaui which had higher agricultural
potential than the remainder of the state; much greater benefits, therefore,
should have been derived from the project expenditures.e The following lessons
can be drawn from the project experience:

(a) A strong project coordination unit with the support of the main
political and government figures can be created and used to ensure
important project components are implemer.ted in a generally weak
institutional environment; where continued servicing is needed,
however, it is essential that a permanent institutional capability
for this is built up during the project to sustain investments;
responsibility of the recipient communities for project investments
should also be maximized.9

These points are emphasized in the comments received on the PPAR from
the Brazilian National Secretariat of Planning (Attachment).

9 Ibid.
 - 13 -

(b) Land reform which transfers an adequate area of land to landless

farmers (without carrying a significant farmer debt) is likely to
improve the livelihiod of recipient families through the advantages
inherent in land ownership (investment in perennial crops, permanent
infrastructural investment, and savings through abolition of rent
payments).

(c) An inordinately high input of a large number of Bank staff and

consultants in preparation, appraisal and early supervision of
relatively complex projects in a weak institutional environment does
not guarantee smooth project implementation; the return on the
Bank's manpower invwatment does not appear to be very high in this
case. Agricultural production successes in the project tended to
relate to the single land redistribution component, but this
production was achieved in agricultural models different from that
assumed at preparation and appraisal, and without a significant
influence by the high-cost agricultural extension service; the
relatively straight-forward infrastructural and equipment supply
parts of the project were carried out (roads, water supply,
education, markets and seed storage), but the associated software or
operational improvements were mostly poorly developed.

(d) In any agricultural development project dealing with traditional

farmers, in addition to reviewing technical data it is essential to
examine individual resource and socioeconomic circumstances of
farmer groups, and be realistic in anticipating performa?ce of
public sector service entities, in projecting farmers' behavioral
responses in adoption of technology and production increases under
the project; these factors were not sufficiently taken into account
by the Bank in project design.10

(e) An intensive, highly programmed agricultural extension service is

unlikely to be effective unless it is organized to be responsive to
the problems and needs of its clientele and is aware of how farmers
perceive their problems.

10 Ibid.
 - 14 -

Table 1

BRAZIL

PIAUI RURAL DEVELOPMENT PROJECT (LN. 2015-BR)

PROJECT PERFORMANCE AUDIT REPORT

Total Project Costs

Appraisal
CATEGORY Estimated Actual ActualL
Costs Costs Appraisal
(US$'000) Z (US$000) I

1. Land Development 16.7 26.4 9.2 55

2. Agricultural Development 24.2 38.3 12.0 50

Agricultural Research 2.4 1.0 42
Agricultural Extension 9.8 6.3 64
Seed production 1.0 0.3 30
Marketing 3.3 1.3 39
Small-Scale Irrigation 7.7 3.1 40

3. Fisheries Development 2.8 4.4 1.1 39

4. Social and Physical

Infrastructure 17.0 26.9 9A 5
Rural Roads 9.0 5.4 60
Water Supply 6.4 2.8 44
Education 1.6 1.3 81

5. Proiect Administration 2.5 4.0 3.7 148

6. Support to Small-Rural Communities -- 3

0.3

7. Total Baseline Costs 63.2 100.

Physical Contingencies 3.9 -
Price Contingencies 17.3 0.5

TOTAL COSTS 84.4 36.3 43

Source: PCR
 -15 - Table 2
Page 1 of 2

Project Targets and AccomplLshments

1.i

1.T Land ofedlly prchga

- TotaI ha 2l,~ 197,894 99
1.3 Land esaaliy allecatod
TuI ha - 28, 138,443 09.2
Total No. of benfilclaes
- 5,00 8,400 70
1.4 Land dl«urimlnatlion
- Areo oudied en, 2 43.2
- Arem diseilnated - 249,819 •
- Aroe auveyed and tittad - M,IM

o n ess~etch etationr. 161 -

. en farft 13q •

3. Arultural EeIan
3.1 No. of *xalneton agent
technletn
- 79 164 13
- e«la9 workera 1 1 sM
8.2 No. of feasnor nealeted 9,~ 7,717 S2
8.3 Group~ of farmom oeached - 61
3.4 Da ration UnIts astablished 736 648 S7
4. Saed Produlöfn
4.1 U99 of leproved sad.
- No. of förmer. 1,9~5 •
• No. of he~tarom 8,766 •

1. M-.of o hie n operabion

SCIDAPI a3 ou 107
- Cceperatives lS o1
6.2 No. of nunicipalItes where SIA
obla*n Informaton 20 t5 e8
6.8 No. of new 81MA *ub-agesle 08 16
5.4 No. of fenors who merhe thruh
oeoperativoo 1,624
6.9 No. of ne Cobal post in operation f2 81 fl
6.4 No. of efoperstiveo In tho projee 4 1 115
6.7 No. of grain gteres conebtru~d
or mnder consbrulon få 18 588
5.9 Grain storage capacity (ten.) 1,=U 3,715 M
6. B asl dgl o,t7.n
6. No. of bnflsele. 1,ial 796 58

y.a% 4n usted 2I 2o u 10f

7.2 No. of benollarlos et,~ 41,100 71
7.8 No. of *oter filtere distributed 11,3=l 4,u9g 48
 16 - Table 2
Page 2 of 2

Co.non~.2! uts

I. mlotr, eene6rUcd .410 48613

.(l ilom re imprevod 1,7W 1,8668 6
9. Education
9.1.o. o elesrces construsted
and equippd 70 74 96
9.9 No. of Gierse s ahb l l"ted/
*pesded 52 26 u
9.8 No. of tesehere trained 68 66 123
9.4 Ko. of euporviaore traingd 18 88 188
19. Figheriff
'U1fo.of fleherlis ext~esonist4 28 16 48
10.2 No. of familes sseistød 1,~0 G30 a
16.3 ". of flehare 8i1 d 1,0 1,2M0
15.4 no. of flebing boat f Inaneed - 146 -
18.1 o. of flahing exporimente • 192 -
16.8 No. of pre~ tinanced 281 29 11r

Source: PCR
 Beneficiary Targets and Achievemcgis in the Project Area

Target Group Populatin Target Direct Beneficiaries/ Achievement

Landless 45,200 3,500 by land and services only 24622/

1,500 by land, irrigation and services 7952/
1,500 by influence and services Most received services

6,500

Small land-owners 8,800 P,140 by services Most received services

Fisherman ',500 1,800 by equipment, 630

infrastructure and services

/ This refers to beneficiaries of activities directly related to production. The project

area also benefitted by physical and social infrastructure (roads, water supply and
education). 1-3
OW
2I Land was acquired and distributed in 24 of the 28 municipalities in the project area.
Initially the project covered 26 anicipalities, but two more were added in 1984 by an
 - 18 -

Annex 1

Survey Data on Production Response

1. In the absence of data to enable a "pre- and post-project, with and

without" analysis the real agricultural and income impact due to the project
cannot be definitely ascertained. Survey data are available, however, from the
mid-term review carried out in 1984 and from the survey in 1987 undertaken as a
basis for a doctoral dissertation. The former surveyed 168 beneficiaries and 160
non-beneficiaries in 12 municipalities; this represented a "with and without"
situation analysis after three years of project implementat?on. The later study
relied on a survey of 149 beneficiaries who received land before 1983 in 9
municipalities and compared theso data with the physical and financial
information available for a pro-project situation registered in the
questionnaires for each beneficiary at land allocation; this represented a form
of "pro- and post-project" analysis. Both studies stratified their samples into
the three project zones - the northern Delta (D - which was the stronger rice
growing area), Teresina (T), and Middle Parnaiba (MP) in the south. See IBRD .ap
15507. An "informed person" survey was also undertaken to complement the
individual farmer data in both cases.

2. The 1984 survey indicated:

(a) the average area cultivated per family was significantly greater for
beneficiaries (B) than for non-beneficiaries of land redistribution
(NB) by 56Z, 171 and 1181 in D, T and MT zones respectively; (in
the case of NT, the NP average was only 1.74 ha - from 0.55 he to
1.96 he per municipality - which was substantially less than the
"average" tenant farmer described at appraisal and in most available
descriptive data, which suggested about 3.0 he cultivated);

(b) the production technology used by both B and NB was the traditional
manual operation in a "shifting" cultivation technique; in both
cases there were negligible use of fertilizer and a similar low use
of pesticides (about 451 for both gror.ps), and annual crops grown
in consortium was the comon system (841 for B &-d 881 for NB);

(c) the crop mix and proportion of each were similar for B and NBs

(d) the gross value of agricultural production Par ha was similar for B
and NB in D and T zones, but was higher for NB by 471 in the
southern MP zone, implying higher average yields for NB in HPI

(e) 811 of B used annual credit compared to 151 of NB, and credit was
normally used for employing labor to increase the area of
traditional cultivation rather than for productions inputs, as well
as for family consumption;
 - 19 -

(f) after adjusting the gross value of agricultural production for paid
labor costs by B and for the land rent paid by NB, the not
agricultural value v.erha wak; slightly lower for NB in D and T
zones, but still substantially higher for NB in HP zone, so that the
overall average for NB was higher by 30Z; and

(g) the not agricultural income Per family was higher for B than for NB,
but the non-cropping income per family was higher for NB, so that
the average income per family was higher for B by only 41 (cropping
contributed 45% to income in B and 371 in NB).

4. The report on the 1987 study had some inconsistencies and the
assumptions made in many of the figures presented were not obvious. It does,
however, provide useful data:

(a) the average area cultivated post-project (Bt) was greater than that
recorded pre-project (Bo) by 13%, 111 and 61 for D, T and MP zones
respectively;

(b) there were no general changes in crop production system, technology

or crop mix, but about 8% of beneficiaries had been innovative in
introducing cashew trees, bananas or market melons/vegetables;

(c) yield levels per ha were reportedly higher in most crops in Bt

compared to Be for T and MP zones;

(d) the value of agricultural production per ha was similar in D, but

was higher in T and MP for Bt compared to Bo;

(e) the total value of agricultural production per family was higher for
Bt than Bo by 28Z, 482 and 251 in D, T and MP zones respectively;
and

(M) agricultural sales made up a higher proportion of total income for

Bt than for Bo in D and T, but not in MT.
 - 21 -
ATTACHMENT
COMMENTS RECEIVED FRCM THE BORROWER Page 1 of 2
(Translated Version)

Ministerio da Economia, Fazenda e Planejamento-MEFP

Ministry of the Economy, Finance and Planning

Secretaria Nacional de Planejamento-SNP

National Planning Secretariat

Departamento Nacional de Planejamento e Avaliac&o-DNPA

National Planning and Evaluation Department

Coordenadoria de Planejamento Regional e Ambiental

Regional and Environmental Planning Coordinating Body

DNPA/CPRA Note No. 002/91 of May 31, 1991

Subject: Project Performance Audit Report for the Piaui Rural Development
Project (Loan 2015-BR) prepared by OED/IBRD

I. General Comments

The comments below are based exclusively on a careful examination

of the above-referenced document. It is therefore not possible to assess the
pertinence and origin of certain statements regarding the implementation and
effects of the Piaui Project. This would require a visit to the project areas
and contact with the local government -eams.

In formulating its report, OED faces a difficulty always present

in works of that nature, namely a lack of reliable basic data that make it
possible to quantify project results accurately. It is not feasible, for
example, to compare data on production, employment and income at two moments
in time, before and after the project; nor can the situation of project
farmers be compared with that of those not included. In addition, the only
available information is taken from research done in 1984 with 168
beneficiaries (and not 160) in 12 municipalities and a separate doctoral
thesis. The main conclusion does not show the project to be relevant:
average family income among the assisted farmers is only 4% higher than for
nonproject farmers.

II. Specific Aspects

Unfortunately, the Bank document does not cover a number of

fundamental points, i.e.:

(i) project design, especially its broad spatial and functional scope,
which means a dispersion and fragmentation of resources;
 - 22 -
ATTACHMENT
Page 2 of 2

(ii) the unforgivable lack of an "irrigation" component in an area with

such a high risk as in the semi-arid northeast; in this respect,
farmers and activities continue to be as vulnerable to climatic
vagaries as they were before the project;

(iii) the co-responsibility of the Bank in project formulation and

monitoring, reflected in innumerable identification, preparation,
preappraisal, implementation and supervision missions involving
specialists from the most diverse disciplines.

In this context, the inconclusive or unfavorable results of the

project cannot be attributed exclusively to institutional factors (somewhat
fluid), Brazil's fiscal crisis (scarcity of national counterpart funds) or the
operational inefficiency of executing agencies.

How to justify, for example:

(a) the noninclusion of an irrigation component as discussed above?

(the rigidity of internal Bank regulations in this respect is
known);

(b) the immutability of production systems and technology among the

assisted farmers; and

(c) that credit continues to be used to increase the area under

cultivation and family consumption, instead of to boost
agricultural productivity, one of the project's objectives?

Another issue not covered in the report is the project's lack of

legitimacy, reflected in the noninvolvement of the community and prefectures.
In general, such projects are "quick fixes" that the governments latch on to.
At times, the Bank insists on imposing its own views in this matter.

The report under consideration -- apparently following the

tradition of a Bank ritual performed at the end of the financing process --
thus tends to take a rose-colored view of the reality of the project. This,
moreover, occurs with virtually all IRD evaluation reports prepared by the
Bank. It is astonishing that the Bank systematically refuses to make a
realistic assessment of the projects it cofinances -- normally involving very
expensive resources, a matter on which the report is silent -- with results
that are not infrequently exceedingly modest.

Yours truly,

/s/ Gilvan Cordeiro de Araojo

Chief, Regional Planning Division

CPRA/DNPA/BNP
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