DOCUMENT OF INTERNATIONAL DEVELOPMENT ASSOCIATION

Not For Public Use

Report No.P-1653-BO

REPORT AND RECOMMENDATION

OF THE

PRESIDENT

TO THE

EXECUTIVE DIRECTORS

ON A

PROPOSED CREDIT

TO THE

REPUBLIC OF BOLIVIA

FOR AN

AGRICULTURAL CREDIT PROJECT

June 9, 1975

This report was prepared for official use only by the Bank Group. It may not be published,quoted or cited without Bank Group authorization. The Bank Group does not acceptresponsibility for the accuracy or completeness of the report.

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CURRENCY EQUIVALENTS

(As c f April 30, -1i7 )

Currency Unit = Bolivian Peso ($b)

US$1 = $b20

$bl = US$0.05

$bl,000 = US$50

$bl,000,000 = US$50,000

REPORTf AND RECOMMENDATION OF THE PRESIDENTTO THE EXECUTIVE DIRECTORS ON

- A PROPOSED CREDIT TO THEREPUBLIC OF BOLIVIA FOR

AN AGRICULTURAL CREDIT PROJECT

1. I submit the following report and recommendation on a proposedCredit to the Republic of Bolivia for the equivalent of US$7.5 million onstandard IDA texms, to help finance an Agricultural Credit Project. US$7.1million will be relent for on-farm investment through the Agricultural Bankand commercial banks. Large and medium size ranchers and farmers wouldborrow either at 4% with repayments indexed to the La Paz cost of livingor at 14% with readjustment of the principal based on the rate of exchangebetween the dollar and the Bolivian peso. Small farmers would borrow at 12%interest rate without indexing. Subloans to farmers would have repaymentand grace periods varying according to the nature of the product. Theremaining US$0.4 million of the Credit will be used for project adninistrationand agricultural research.

PART I - THE ECONOMY

Introduction

2. An economic report entitled "Current Economic Position and Prospectsof Bolivia" (WH-213a) dated November 9, 1972 was distributed to the ExecutiveDirectors in 1972. A new economic report is near completion and will be dis-tributed to the Executive Directors in the near future. Country data sheetsare attached as Annex I.

Background

3. Despite the increasing importance of petroleum and natural gasexports, as well as significant mineral deposits, Bolivia remains the poorestcountry in South America. The majority of the population is engaged in tra-ditional agriculture. Only a small part of the labor force participates insalaried activities in the modern sectors. The infrastructure is still veryprimitive and the road and rail networks cover only a fraction of the country.The combination of strong traditional ties within the Indian communities andgeographic, health and educational obstacles to population mobility has per-petuated the demographic concentration on the barren, windswept and dry 10-15thousand feet plateau lands of Bolivia known as the Altiplano. About half ofBolivia's population lives a physically, culturally and economically isolatedsubsistence existence in this inhospitable region which is rich in mineraldeposits but limited in agricultural resources.

4. The 1952 revolution sought to put an end to the dual economicstructure which had characterized Bolivia's economy since colonial times andto deprive the landowning and mining oligarchy of its economic base. Thisobjective was only partially achieved. Progress was made in eradicatingfuedal relations, distributing the land and eliminating obstacles to social

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mobility. The agrarian reform and the nationalization of large mines, how-ever, were followed by declines in agricultural, mining and manufacturingproduction. GDP declined in the 1950s and did not recover to its pre-1952level until 1961. During the subsequent decade, output increased steadilyat an average annual rate of around 5%, providing for average annual percapita income increases of 2.5%. As a result, GNP per capita which hadfallen by 24% in the 1952-60 period had recovered, by 1970, to the 1952level and was better distributed.

5. In 1971, the momentum of econoinic growth was again lost becauseof pulitical instabi7ity and deteriorating public finances. Private invest-ment fell and public investment was unable to fill. the shortfall due to lackof ftnancial resources. The deterioration of public finances reflected astru-tural flaw in the economy. Since the expropriations of 1952, Bolivia'spublic sector became proportionatel;y one of the largest in South America anda source of livelihood for a sizeable segment of the population. With thescarcity of emplcymentr opportunities in the private sector, pressures toexoarid the ranks ,Dl public servants proved difficult to resist. Increasedexpend]itures on wages and salaries, combined with a weak tax system, leftfew resources for irnvestmnent. Moreover, the inability of the public sectorto generate adequate ;3avings limited its capacity to utilize external assist-an e.

6. On coTaing to p,ow :r in 1971, Presiderrt Banzer faced the need toprovide jobs for the unemployed and to set the basis for investment growth.This need f;as faced in the context of a sharp deterioration in Bolivia'st_ims of tr-ade wi4ch declirned by about 20% in 1971. In late 1971, the-iove,nrent put into e-ffect an "'Thergency Program" aimed at creating jobs in

public works. `o establish a more favorable climaLte for private investment,new law!s offering g-iarantees and incentives to private investors were promul-gated. ITr addition, the Co-venurent settled cla:imas arising from earliernationali3ations. 4t the same time, the Goverrinent also improved publicadmiriistration, and the pricing policies of some public undertakings. Thesepolicises were successfld in fn r.-easing private investment and in bolsteringt`he rate of growth. Th2y ~iLso resulted, however, in a large budgetarydeficit and losses of international reserves.

Recent Economic DeveloE2ents

7. The most important event affecting recent economic performance hasbeen thd substantial imDroverient in the tenns of trade in 1974 caused by theincreases in petroleum and mineral prices. Although GDP growth slowed downto about 5% i4r 1974 -- due t;o slower agricultural. growth, stagnant hydrocarbonout put andi a fall in mining, output-- the substant,ial gain in the terms oftrade has allowed a simultaneous and large expansion of both consumption andinvestment.

8. There has been a significant improvement in Central Goverrmnentrevenue and in overall public savings. The increase in Central Govermentcurrent revenue in 1974 was close to 20% in real terms. Over one-half ofthis increase was due to higher export prices. Current expenditures

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increased only by about 5%. The Central Government achieved a currentsurplus -- after running current deficits during 1971-73-- equivalent tonearly 50% of its capital expenditures, which were about 17% above the 1973level. Savings of the public sector as a whole in 1974 increased to nearly10% of GDP, exceeding the sector's capital expenditures and producing anoverall surplus. In contrast to previous years when borrowing from thedomestic banking system financed close to 40% of the public sector deficit,outstanding net credit to the public sector has been reduced by one-halfbetween the end of 1973 and August 1974, and public sector deposits withthe banking system increased by about $b2.4 billion for the whole of 1974.

9. The strong balance of payments perfonnance in 1974 was the resultof sharp price increases for Bolivia's principal export commodities. Onaverage, export prices nearly doubled in 1974, following an increase of 25%during the previous year. The average price of Bolivia's light crude lowsulphur petroleum was about US$15 per barrel in 1974 compared to US$4.13in 1973. Prices of minerals and sugar also nearly doubled in 1974. Naturalgas prices increased less. However, a new long-texm contract has beennegotiated with Argentina, still Bolivia's sole natural gas customer, whichwill provide substantially higher prices from 1975 onwards. On the otherhand, import price rises approached 30-35% with much higher increases formining and petroleum drilling equipment, items which are becoming anincreasingly important component of Bolivia's imports. Nevertheless, theterms of trade gain in 1974 was equivalent to about 9% of GDP and the tradesurplus reached about US$180 million. In spite of the deficit on serviceaccount because of higher transport costs and larger factor service paymentsabroad, there waS a current account surplus of nearly US$80 million. It isestimated that net capital inflows approached US$65 million, nearly fourtimes their 1973 level, primarily as a result of substantially higher dis-bursements of loans to the public sector. The gain in net foreign reservesin 1974 was US$145 million. This brought total reserves to US$176 million,representing over four months of imports.

10. The growth of the Bolivian economy was accompanied by continuingwage-price pressures during 1973-74. As a result, in part, of the opennessof the economy, Bolivia in the 1960s enjoyed relatively low rates of infla-tion. The substantial devaluation at the end of 1972, however, unleashedinflationary pressures. These pressures were accentuated by sharply risinginternational prices during 1973/74, the spillover of excessive creditexpansion of past years, and the acceleration of wage increases followingthe 1972 devaluation. The retail price index for La Paz (the only priceindex available in Bolivia) rose 31.5% in 1973 and nearly 30% during thefirst two months of 1974 as prices of basic commodities were sharply in-creased by the Government in an effort to bring them into line with inter-national prices. In addition, some public service tariffs, such as thosefor railways and electricity, were increased by the Government. Since thenprice rises have slowed to a monthly average of 1-1.5%. The increase inretail prices for 1974 was about 45%.

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Debt Service and Greditworthineas

11. Bolivia's external public debt outstanding and disbursed at end-

1974 amounted to US$723 million, equivalent to over 41% of that year's GNP.

Service on external public clebt amounted to 12.9% of exports of goods andnon-factor services net of investment income abroad. This represents a

considerable reduction from the debt burden of previous years which fre-

quently absorbed 15-20% of net export receipts. Average terms of theexternal debt outstanding hawe remained soft, reflecting the high proportionof concessionary aid channelled to Bolivia. Average interest in 1973 was

4.4% and average maturity about 26 years,

12. This position is bound to change, howe7ver5 as it can be expected

that lending teris will became harder and the slare of loans on convent.ional

terms wiil increase. of newi loans attracted during 1974, nearly One-half

were from commercial banking soarces. With substantial disbursements envi-saged during the next six years, external public de(bt outstanding by 1980

might be as high as US$1.9 billionx (in current pi-ices) the service of whiLch

would absorb some 19% of net export receipts. In view of these heavy cormiD.t-

ments, prudence in choosing e-xter,al capital sources nd insistence on utiUizing external capital for high prior:-irty purposes will have to become an essen-tial element of Bolivia's external debt management.

13. Bolivia enjoys a substantial resource base in agriculture, mineralsand hydrocarbons which has tI'Jo be developed to sustain rapid economic growth

and, in particular, rapid expEansion of export earnrings in thle foreseeablefuture. If production in the export sectors can be increased as plaELMed and

prices for the country's major export pI-oduts (cils gas, minerals) stay

relatively firm, Bolivia can be considered creditworthy for substanviallyincreased amounts of external lending on conventiocinal term.s. Nevertheless,some additional lending on soft teras is justified by Bolivia's poverty and

its large and continuing external capital requirements Even unLder thie best

circumstances, the country pill requi-e substantial external fT_nancing of

investment to supplement the domestic savings effort at least unmitil the

early 1980s, including some local cost financing. This is justified since,during the past two years, the Government has made a serious effort to mobili;e

domestic resources and prepare a development program for Boli3;ia. However, theimplementation of this program will require externnal assistance wel' in exceCs

of the foreign exchange component of suitable project presently available for

international financing. Although substantially increased supplier and finan-

cial credits will probably become available, they will at the most meet 45% of

the public capital inflow required during 1975-80 for meeting projected grows>h

targets. To finance the remaining gap of almost US$650 million, Bolivia wiLl

also require international development financing, includeing an expanded Bank

lending program.

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PART II - THE BANK GROUP OPERATIONS IN BOLIVIA

14. Bolivia is an original member of the Bank but did not receiveBank Group resources until 1964. Bank Group assistance to Bolivia has beenlimited by the country's tight budgetary situation and its limited capacityto service external debt. Except for one Bank loan to help finance an"enclave" project, and for the Second Railway project lending to Boliviahas been in the form of IDA credits. Because of the narrow scope forprivate investment, the first IFC investment, amounting to Us$400,000 in acable and plastic products enterprise, was made only in 1973.

15. Annex II contains a summary statement of Bank loans, IDA creditsand IFC investments as of April 30, 1975, and notes on the execution ofongoing projects. IDA has made previously, three credits for livestockdevelopment (US$10.2 million), four credits for power generation and dis-tribution (US$28.4 million), one credit to the railways for US$8 millionand one for mining (US$6.2 million). The Bank has made a loan (US$23.5million) to help finance an "enclave" project for the construction of apipeline to transport natural gas to Argentina and a loan (US$32 million)for the Second Railway project.

16. The proposed credit would be the tenth credit and the thirteenthBank Group operation in Bolivia. Net of undiSbursed balances,- Bolivia'sdebt to the Bank and IDA now represents 8.3% of its external public indebted-ness. This ratio might increase to 9.3% by 1980. The share of the BankGroup in total debt service is now about 4% and is expected to increasemarginally to about 4.3% in 1980. Although the Bank Group has ranked belowthe U.S. Government and the IDB as a source of financial assistance toBolivia, its role has been expanding. In the period 1964-68, the firstfive years of Bank/IDA lending to Bolivia, IDA credits of US$17 millionwere made. Additional Bank/IDA loans and credits of US$59.1 million, ormore than three times the credits made during the first five years, havebeen made to Bolivia since then.

17. Future Bank Group activities will give emphasis to supportingGovernment efforts to remedy imbalances in the distribution of the benefitsof economic growth. About half of future Bank lending is planned for agri-culture, where priority will be given to the needs of poor farmers. (Seeparas. 23-25). The Bank Group's assistance to infrastructure projects willbe concentrated in transportation, where we have selected specific areas inwhich we believe serious constraints to development exist and Bank assistancecould be most effectively utilized. Thus, in addition to the second railwayproject, we are contemplating an eventual third project to complete theplanned rehabilitation of the railways. We are also contemplating an airportand air navigation aids equipment project which will permit access to isolatedareas of economic activity, where transportation needs are not now adequatelyserved. In the power sector, we contemplate participating in the financingof a national interconnection project, once the difficult issue of tariffshas been resolved.

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18. A common element of constraint in most development activities inBolivia is institutional capacity. We plan to finance projects in ruraldevelopment, small scale agro-industries, forestry, fisheries, water supplyand rural education which will contain significant elements for technicalassistance and focus on developing institutional capacity. We also hopeto be able to continue lending in the mining sector, where the existing IDAcredit provides for technical assistance. Our future financing to thatsector will furnish credit assistance to small and medium producers.

19. In addition to the railway project, which was presented to theBoard on June 3, 1975, project preparation is well advanced for two otherprojects. One is an integratled rural development project for poor farmersin the Altiplano. The project is expected to assist 4,000 families. The

second is a project designed to meet the pressing credit needs of mediumsize mining enterprises. It is also possible that this project might

con-taiII 9. component for industrial credit, if the industrial credit needs

of the development bank handling mining credit are not adequately met byother external lenders, such as the IDB.

PART III: THE AGRICULTURAL SECTOR

20. Overall performance of the agricultural sector during 1968-74 wasmixed and according -to some indicators showed a decline in the sector'srelative importance. Thus, while GDP growth during 1968-74 averaged about

h.8% p.a., that of agriculture grew only at 3.9% p.a. and the sector's shareof GDP decreased from a high of 30% (1962) to about 21% in 1974. However,in spite of agriculture's relatively small contribut;ion to total exports

(about 7%), the volme of agricultural exports has been increasing rapidlyduring the past two years. The increase has come from the exceptionalexpansion in commercial agricultural production of :Livestock, cotton, sugar-cane and soybeans in the Beni and Santa Cruz regions. Some small gains havealso beer made in the produc-tion of foods for domestic consumption by thesubsistence sector. They were achieved mainly by additional inputs oflabor and utilization of improved seeds rather than by any significantincrease in the flow of credit, increase in acreage, introduction of improvedtechnology or utilization of improved agricultural -tools. By contrast, theexpansion in the commiercial sector stimulated by high prices for cotton,sugarcane and livestock on the world markets, was achieved mainly throughbringing additional land under cultivation, a reasonable supply of creditand mechanization. The major expansion has been sustained by credit receivedfrom. the Banco Agricola de Bolivia (EAB3). the Central Bank through itsrediscount operations and foreign banks operating in Bolivia. In general,

medium and long term agricultural credit is scarce and its allocation betweensubsistence and commercial farmers has been highly skewed in favor of largeand medium size farmers. Of all available agricultural credit, about 81% isestimated to have been lent to cormmercial farmers in Santa Cruz and the Beni.

Developmoent has been slowest in the Altiplano and the Valles regions which

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contain the majority of the rural population and provide most of the outputof minerals and staple foods. Yields and production have remained low inthese regions, which are inhabitated by the rural poor who live on sub-sistence agriculture and outside the market economy.

21. There is evidence that the living standards of the rural poor couldbe improved considerably provided the Government takes a number of essentialmeasures. These would consist of the following: (a) preparation and executionof investment programs and the establishment of a proper institutional frame-work to execute such programs in the Altiplano, the Valles and the Yungas;(b) channeling of adequate credit and technical assistance to snall farmersin support of such programs; (c) organizing snall landholders into cooperativesor other functional groups; and (d) research to develop appropriate crop va-rieties for the climatic conditions of the Altiplanos the Valles and the Yungas.

22. The present administration is well aware of the need to adopt suchmeasures and with external assistance has recently begun to reform the relevantinstitutions and to improve sector management capabilities. Thus, in early1974, the two previous Ministries of Agriculture and Rural Affairs were merged.USAID is presently considering provision of technical assistance to improve theMinistry's capabilities in the formulation of policies, sector planning andcoordination and supervision of investment programs. It is also providingtechnical and financial assistance to the National Community Development Services(SNCD) in order to help this agency expand its role since, so far, it has mainlybeen active in financing only infrastructure projects in rural areas. IDB isplanning assistance in the field of agricultural research. A reorganizationstudy for the Agricultural Bank of Bolivia (BAB) in order to improve theefficiency of this institution will be financed from IDA's Credit 261-30. Whilethese efforts get uxnderway, the production momentum generated by the commercialsector should be sustained in order to keep established and develop new marketsfor Bolivia's agricultural exports, including beef. It is our intention toassist the Government also in this aspect.

Bank Group Strategy in the Agricultural Sector

23. IDA's efforts since 1967 to foster expansion of beef production inthe Beni through the financing of three livestock projects have the followinglong-range objectives: (i) to improve management of cattle ranchers on thebasis of modern technical and economic criteria; (ii) to improve processingand marketing of beef from Beni on the basis of a marketing study financedunder the Third Livestock Project (Credit 261-Bo); and (iii) to stimulate othereconomic activities and encourage the Government to provide better infrastructurefor the region.. However, IDA has been discussing with the Government beef priceand export controls. Since beef is the most important source of protein inBolivia, the Government feels that beef must be sold at reasonably stable pricesin order to provide Bolivians with an adequate diet and therefore has been reluc-tant to liberalize prices. Present policies, however, have not resulted inserious distortions and continue to provide the necessary incentives to investin livestock development. The Development Credit Agreement (Section 4.02)provides that the Government maintain a price policy aimed at stimulating agri-cultural production and providing adequate incentives to farmers.

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24. The proposed Agricultural Credit Project, while continuing assist-

ance to the Beni ranchers, also includes a substantial small farmer component..

In this and subsequent projects, we intend to place increasingly greater

emphasis on helping subsistence farmers in the Altiplano, the Valles and the

Yungas. To that end, we have begun a dialogue with the Government to encourage

the fordulation of appropriate policies and to identify a suitable institution

for dealing with small farmers since BAB is likely to concentrate increasinglyon providing effective service to ranchers and commercial farmers. We are

appraising a first Altiplano integrated rural development project and hope t-his

will be followed by other projects assisting small farmers. In addition,

there are three subsectors in which Bolivia's potential is good, but develop-

ment is lagging: (i) agro-industry; (ii) forestry and (iii) fisheries. We

see the Bank's role in these sectors as that of a catalyst in identifying and

helping the Government finance high priority projects which would contribute

to diversifying Bolivia's exports and at the same time create additional.employment opportunities in poor rural areas.

25. In addition to the d_ialogue concerning small farmers, we will

continue active discussions with the Covermnent to encourage further improve-

ments in price and interest rate policies, marketing arrangements, and wewill also seek ways to help improve extension and research services.

PART IV - THE PROJECT

26. The Goverrnment of Bolivia has requested an IDA credit to help

finance the expansion of prodiuction of cattle, sheep and crops in selected

areas of the lowlands, the ALtiplano and the Valles.. The project was

appraised by an IDA mission which visited Bolivia in June 1974. A report,entitled "Appraisal of the Agricultural Credit Project," No. 695a-B0 datedJune 6, 1975 is being circulated separately to the Executive Directors.A credit and project sumnary is presented in Annex III. Negotiations tookplace in Washington from May 5 to May 12. The Government of Bolivia was

represented by Messrs. David Blanco, Julio Gamba and Jorge Balcazar, theBolivian Agricultural Bank (BAB) was represented by Messrs. Carlos Taborgaand Fernando Garron and the private banks were represented by Mr. Alberto Valdez.

Background

27. The proposed project would be the Bank Group's fourth operation to

assist Bolivia's agricultural development. The first two credits for a

total of US$3.4 million, signed in 1967 and 1970, financed the development ofapproximately 300 cattle ranches and provided for the establishment of anautonomous Livestock Project Division (LPD), within BAB to manage and providetechnical services for the projects. A third IDA Credit of US$6.8 million to

assist further development of the cattle investment programs started under

the former two credits was signed in 1971. This project has financed ranch-

investment in Alto Beni. and Chapare, sheep breeding in the Altiplano, a meatmarketing study and the construction of slaughter and freezing facilities.

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28. Implementation of the Third Livestock Project slowed down in 1974for several reasons. Extensive areas in the Beni were flooded during early

1974 and disrupted lending operations; lending for sheep has slowed dowmbecause of delays in formation of farmers cooperatives in the project areas;delays in reaching agreement on a workable form of indexing, and the dete-rioration of BAB's financial position due to lack of management controls.The Government has since taken measures to improve BAB's operations andstrengthen it financially, and has appointed a new General Manager. There-fore, it is anticipated that Credit 261-Ba will be fully committed by early1976 and fully disbursed by the original closing date of June 30, 1977.

Project Description

29. The proposed project aims at increasing production of food fordomestic and export markets. In addition to complementing the developmentefforts started under previous IDA operations in the Beni and expanding itto the Santa Cruz region, IDA will finance for the first time in Boliviacultivation of crops to help improve the economic conditions of about 3,600poor rural families. This assistance would help the Government to initiatea more balanced regional growth pattern by channeling resources to lessprivileged agricultural regions.

30. The project would provide credit for the following:

a. Livestock (i) continuation of the cattle developmentprogram in the Beni by medium and largesize ranchers and of sheep breeding bysubsistence farmers in the Altiplano;

(ii) development of cattle by medium sizefarmers in Santa Cruz;

b. Crops (i) production of sugarcane by small farmersin Santa Cruz;

(ii) cultivation of potatoes, wheat and oatsby mall farmers in Cochabamba; and

(iii) growing of grapes by small farmers in Tarija.

In addition, the project will also contribute to financing the cost of agri-cultural research in Saavedra (Santa Cruz).

Project Adninistration

31. A project account would be established in the Central Bank throughwhich Government and IDA funds would be onlent to participating institutions;i.e.., BAB and commercial banks. The staff of the Agricultural and LivestockDivision (ALPD) in BAB would manage the project and approve the technical andfinancial aspects of the farm plans including those prepared by commercialbanks. The core of ALPD staff would be built up around the former LPD which

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would be expanded to handle lending for crops and for additional livestockunder the proposed project. The proposed Project Agreement provides (Section2.02) that ALPD will be established within BAB and would be headed by aDirector assisted by a deputy. The internationally recruited deputy would bein charge of ALPD's technical and administrative affairs. ALPD would providetechnical assistance to project beneficiaries engaged in the development oflivestock, sheep, sugarcane and grapes. It would supervise A.S.A.R.'sl/technical assistance services to small farmers cultivating potatoes, wheatand oats in Cochabamba. A.S.A.R. would help farmers to prepare loan requestsfor submission to conmercial banks and would assist beneficiaries in sellingtheir harvests.

32. The proposed Development Credit Agreement (Section 4.01) providesthat the Government would give priority to granting land titles to projectbeneficiaries by assigning some of its land titling mobile units to work inthe project areas. The Government has also agreed to expand its agriculturalexperimental programs at the Saavedra station in Santa Cruz by adding to itsongoing research programs experiments in crop/pasture rotation designed tohelp project beneficiaries increase their productivity. To ensure execution

of high priority research programs which are relevant to project needs, thecrop rotation study programs will be coordinated with the Director of ALPD.

33. Overall project performance would be measured by a special monitor-ing unit which BAB has agreed to establish within ALPD according to theProject Agreement (Section 2.05). Also, the Project Agreement (Section 3.03)provides that BAB will within 18 months review with IDA the administrativestatus of AdLPD in the context of overall progress being made in the restructur-ing of BAB's organization.

Credit Channels

A. The Agricultural Bank of Bolivia (BAB)

34. BAB is a Goverrnent-owned auttonomous entit-y which was establishedin 1942 and reorganized in 1963 and 1974. Overall supervision of BAB'soperations is shared among the Ministry of Peasant and Agricultural Affairs(MPKA.) (technical) the Ministry of Finance (financial) and the Central Bank(cost accounting and legal). BAB has a staff of about 290 and 66 branchoffices located throughout the country. Since July 1974, BAB has reducedthe number of its operational units from seven to two divisions: Creditand Finance/Administration.

35. by the end of 1973, BAB's total resources amounted to about,$b69Omillion of which $b614 million were in loans and $b76 million in equity.Between 1970 and 1973, BAB's debt equity ratio increased from 1.2 to 6.5and its overdue loans represented about 30% of the loan volume outstanding

1/ The Association for Provision,of Technical Assistance to Farmers andRural AUtisans.

as of March 31, 1974. Over the past few years, BAB has been decapitalizedmainly because: (i) it carried the foreign exchange risk on external loansand was severely affected by the devaluation of the Bolivian peso in 1972;

(ii) it undertook unprofitable rice marketing activities (another specializedagency has since assumed this task); and (iii) it operated on insufficientmargins to cover rising administrative expenditures. The Government isdetermined to strengthen BAB, the only agricultural credit organization inthe country, and has already contributed US$0.5 million for its recapital-

ization. In addition, the Development Credit Agreement (Section 3.01(c))provides that the Government would contribute US$4.3 million to BAB's equity

over a period of two years. Moreover, the Government has taken already anumber of important measures which are likely to improve BAB's overallperformance in the long run. It has appointed a new Board of Directors, a

new General Manager, and has dismissed a considerable number of BAB's staffwhich were found unqualified. Also, BAB is expected to undertake in June 1975

a study, with the assistance of consultants to be financed from Credit 261-BO,of BAB's overall organizational, financial and accounting system as providedin the Project Agreement (Section 3.01(a) and (b)). The study would recommend

how to strengthen BAB and would examine its future role within the agriculturalsector. Section 3.01(c) provides that BAB will implement its reorganizationprograms not later than the end of 1977.

B. Commercial Banks

36. About 10 Bolivian commercial banks operate in the project area andhave agreed in principle to participate in the proposed project by contributing

about US$0.9 million equivalent to the project's credit component. The Develop-

ment Credit Agreement (Section 3.04) provides that the Government would make up

the shortfall on the US$0.9 million should the banks decide not to contribute

this amount to the proposed project. Since these banks' lending for agriculture

has so far been limited, ALPD's and A.S.A.R.'s staff would provide technicaland administrative assistance to borrowing fanners until commercial banks have

trained their own agricultural technicians. The participation of commercialbanks would have the following advantages: (i) it would introduce privatebanks' expertise in fields usually left to agencies in the public sector; (ii)

it also would introduce more competition in lending to farmers; (iii) it would

provide added flexibility; and (iv) it would allow the project to be extendedto regions which otherwise would have to be excluded because of staff and

resource constraints in DAB.

On-Farm Investment

37. About 4,600 families will benefit from the on-farm investment creditavailable under the project. Approximately 930 families engaged in ranching in

the Beni and Santa Cruz, most of whom in the past already have received some

assistance from either IDA or IDB, would receive additional loans to cover 65%

of on-farm investment. No other medium or long term lines of credit would be

available for this purpose over the next few years. In addition, the projectwould include a new component aiming at about 3,600 small and subsistencefarmers who have received hardly any assistance in the past. The amount to

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be channeled has been estimated on the basis of: (i) the number of loanapplications which can reasonably be processed in the next two years throughthe proposed organizational arTangement; and (ii) the individual farmer'sneeds, which are generally not very large. To ensure adequate participationof small farmers in the proposed project, the Development Credit Agreement(paragraph 5 (a) of Schedule 1) provides that subloans for cattle will notexceed 55% of the amount of the credit allocated to on-farm investment.Lending to sugarcane and grape farmers will be limited to those having up to50 ha and 4 ha, respectively (paragraph B.l of Schedule 3). Such limitationsare not necessary for farmers breeding sheep in the Altiplano where groupsof 20 families would have about 100 ha and 60 sheep on the average, and thosegrowing potatoes in Cochabamba would have about 2 ha. On-farm investmentcredit would be mainly for purchase of cattle and sheep breeding stock, stakesand wire, vineyard plants, fencing, recurrent inputs, establishment of pastureand the construction of small irrigation canals.

Re-Lending Terms

38. The Government would open a Project Account in the Central Bankwhich would lend the proceeds of the credit to BAB (for ALPD) and commercialbanks for re-lending to participating farmers. Repayment and grace periodsof subloans would be four and two years, respectively for potato growers, sixand three years for sugarcane growers, eight and four years for grape growersand twelve and four years for cattle and sheep raising. The Development CreditAgreement (paragraphs B.5,6 and 7 of Schedule 3) provides that subloans forcattle, sugarcane and grapes would, at the choice of the sub-borrowers, beareither: (i) a 4% interest rate calculated on outstanding balances periodicallyadjusted on the basis of the La Paz cost of living index or (ii) a 14% interestrate calculated on outstanding balances periodically adjusted according tofluctuations in the foreign exchange rate. Subloans to subsistence farmersbreeding sheep in the Altiplano and cultivating potatoes in the Cochabambaarea would not be adjusted but carry a nominal 12% interest rate. On-lendingterms from the Government to BAB and participating institutions would be eitherinterest-free, under the La Paz cost of living index option, or at 9% under theforeign exchange option for on-lending for cattle, sugarcane and grapes. TheGovernment would charge the intenmediaries 6% nominal. interest for on-lendingfor potatoes and sheep. Participating institutions vould thus be given thefollowing spreads: 4% for on-lending for cattle, sugarcane and grapes lmder theindexing option; 5% for on-lending for cattle, sugarcane and grapes under theforeign exchange formula and 6% (without indexing) for on-lending for potatoesand sheep. These spreads are necessary to cover the costs and provide adequaterenuneration to the participating institutions. The Develo]pment Credit Agreemernt(Section 3.07) provides that repayments of publoans be re-lent for the sanepurposes for 15 years.

Project Cost and Financing

39. Project costs are estimated at US$12 million equivalent, of whichUS$5 million would be foreign exchange. The Government would contributeUS$2.3 million or 20%; farmers from their own resources US$1.3 million or 11%;commercial banks US$0.9 million or 7%; and IDA would finance the balance of US"7.5

- 13 -

million or 62% whiph would include US$2.5 million of local cost financing.As noted in paragraph 13, some local cost financing is justified in Boliviato enable the Bank to make an adequate contribution to meeting the country's

external capital requirements.

Pr curement

40. Vehicles estimated to cost about US$200,000 would be purchasedfollowing international competitive bidding in accordance with Bank/IDA

guidelines for procurement. The purchase of on-farm inputs, together with

office and laboratory equipment estimated to cost about US$10,000, wouldbe made through nonmal commercial channels. Several international and local

fins. selling farm machinery, wire, fertilizers and seeds are represented in

Bolivia. Supplies of the goods and services required are adequate and pricesare competitive. Small contracts totalling some US$200, 000 for the construction

of housing and other facilities for project personnel would be placed withlocal firms following Government procedures.

Disbursement

41. Commitments for on-farm investments would be completed over two

years, while disbursements would be spread over about four years. IDA would,

against statements of expenditure, disburse an equivalent of 73% of the amounts

disbursed by participating financial institdtions for on-fanm investments.In addition, reimbursement for the salary of ALPD's deputy manager and the cost

of vehicles for ALPD and research equipment would be made on the basis of

actual foreign exchange costs incurred; disbursements for construction and

equipment for project administration would be 40% of the total expenditures.

Economic Benefits and Justification

42. It is estimated that the project would provide full employment to

some 4,000 smallholders and seasonal employment to no less than 8,000 workerswhose present average fanily income is about US$350 per annum. Also, theproject would contribute to an increase in exports of sugarcane and beef as

well as help to meet increasing demand for food consuned locally. As a result

of the project, the participating families would increase their net fanily

incomes to the following levels (in US$):

At FUllActivity Present Development

Beef 1,205 4,625Sheep _0-i/ 337 /Sugarcane 485 2,855Potatoes 100 345Grapes 105 2,040

1/ The contribution of sheep raising to family income only.

-14 -

Economic rates of return have been calculated on the basis of farm modelsfor the different types of farming activities that would be financed underthe project. These rates range from 13% in the case of small farmers to34% in the case of cattle ranchers. Financial rates of return are similarto the economic rates.

PARE V - LEGAL INSTRUMENTS AND AUTHORITY

43. The draft Credit Agreement between the Republic of Bolivia and IDA,the draft Project Agreement between IDA and BAB, the recommendation of theCommittee provided in Article V, Section (1) (d) of the Articles of Agreement,and the text of a draft resolution approving the proposed credit are beingdistributed to the Executive Directors separately.

44. Special conditions of effectiveness would be that:

(i) the Government and BAB have signed a Subsidiary Loan Agreement;

(ii) the Government has contributed the equivalent of US$0.25million to the Project Account in the Central Bank;

(iii) the Government has contributed the equivalent of US$0.25million to BAB in the form of equity;

(iv) the Director and the Deputy Director (ALPD) have beenappointed; and

(v) the Government has issued the Decree authorizing theparticipating institutions to lend at the interest rateof 14% for project purposes with an adjustment of principalbased on the rate of exchange between the Bolivian pesoand the do]lar.

45. I am satisfied that the proposed credit would comply with theArticles of Agreement of the Association.

PARE VI - RECOMMENDATION

46. I recommend that the Executive Directors approve the proposed credit.

Robert S. McNamaraPresident

Attachments

June 9, 1975

ANMEX IPage 1 of 4

8IUNTRT ATA - BVLlIA

ARMU PZUI0N

1-,,000 km 2 '29gj ll9 4n (dld-1972)Per im2of arabla lend

S0CIAL DINDICATBS

Reece outriesBolivia Car.on Rbndur P.or

19_ TM7 1O 190 97

ONP PER CAPITA US4 (ATLAS BASIS) / 200 a 200 / 320 520 Lj

DEMOGRAPHICMrune birth rat. (per thouasnd) 44 2,c 43 A c 9 aE 42 bc

Crude death rate (per thouand) 19 A.. 23 797 17 /bc 11 c

Infant mortality rate (per thousand live births) 154 73 6

Life axpactancy at birth (years) 4S 41 b 52 58

Gross rproduction rte t 2 8 33 9 /b

Population growth ret 2 2 6 20k 2.0 8

Population groeth rate - urban 3653

Age structure (percent)0-li.12b~il~

2U

15-64 42 42 4 56L 41 25 a

65 and "o0r 4 4/ 356 2 32

Dendendncy r,tio A L 5 4 c 15 p 15Z

Urban Population as percent of total 27 I 29 I. 20 A 32 /a i 51 /a.k.o

Family Planning. No. of acceptors conmultive (thouse . .1.6 jNo. of u-srr (S of married -man)

Total labor foroe (thousands) 2,000 , 2,300 800 i.,300

Percentage employed in agriculture 67 Li 66 654 15Peroentage unemployed 11. 16 8.5

IN00O1R DL3TRISUTIONPercent of national income received by highest 5% 36 29r 3160

Percent of national inoome recived by highest 20% 36 60 29 Percent of national income received by incest 20% .9 6.32

Percent of national income received by loneet .0% 13 8 r 7t

MSTRIBUTION DF LAND 0N1ERSHIP% owned by top 10i of nenero

93

% owned by smallest 10% of owner, 0.1

HEALTH AND NUTRITIONPopulation per physician 3,700 D 2,300 25,960 3,710 / 1,920 hj

Population per nursing person 2,730 2,170 9,120 3,200

Population per hospital bed 580 1.90 I 1.80 E 570 1 70

Per capita calorie supply as % of requirements . 70 93 90 88 X

Per oapita protein supply, total (glass per day3 /6 59 59 59 5

Of Which, animal and pueie I . L 23a 25 21.

Death rate 1-1 yearsL .

ESICATICSAd=ueted /8 primery school enrollment ratio 67 96 108 z 91 /I 115 4n aa

Adjueted 9 secondary sihool enrollesnt ratio 11 13 9 10 41 Za

Teare of schooling provided, firet and second level 12 13 13/ - 11 ao 12

Vocational enrolment as % of sc. school enrollment 11. 13 22 18 17 /aa

Adult literacy rate % S 38 a 92 /a.ad.ae 72

N0USI'MAverage No. of persons per room (urban)Percent of occupied units without piped water 89 v eg

Accese to electricity (as % of total population) 22 Zr_.g

Percent of tural population conncted tu electricity 8 /

CONSUMPrIONMMdic recoiverper 1000 population 73 /h 2do8 37 /c. 57 131

Passenger care per 1000 population 3 4 6 8 mi 17

Electric poer conumption (keth p.c.) 118 & 148 200 120 392

Newsprint consumption p.c. kg per year 1.0 0.9 0.02 1.0 3.2 L

Noose, Figurner refer either to the latest perioda or to acoount of environmeOntal temperature, body weigbts, and

the latest years. Latest periods refer in prinoiple to distribution by age aod ae of national populations.

the yearn 1956-60 or 1966-70, the latest years in prin- / Protein et"ndard (reqouirmenet) for all o.ntrise as otrb-

ciple to 1960 and 1970. lihed by USDA Econonic Research Service provide for a minim

A The Per Capita GNP estimate is at merkct pricro for allowance of 60 grams of total protein per day, and 20 gracs Of

ye.- other than 1960,calculated by the ease conversion animal and pulse protein, of which 10 grass should be animal

* teohoique ae the 1972 World Boek Atlas. protein. Theme etandardr are soaewhat l1-er than these of 75

L2 Average number of daughters per -osan of reproductive gra Of total protein and 23 gr-ec of enita protein ae an

age. averag for the world, proposed by PA0 in the Third World Food

a POpulation rrowth rates are for the decades ending in Survey.1960 and 1970. /7 Sore studies have euggeated that crude death rates of children

A Ratio Of under 15 and 65 and over age brackets to ages 1 through 4 may be used ae a first approzimation indes of

those in laor force bracket of ogen 15 through 61. malnutrition.Li FAO reference stand-rds represent physiological re- / Peroentage enrolled of corresponding popalation Of .chol age

quirements for normIl activity and health, taking ae defined for each -oantry.

/ 1972; A 1965-70; /. E.timate; d 1967; Le 1960-72; If Cities of La Paz, Orura, Potosd, Cochabamba,

Sucre, Tarija, Santa Cruz, Trinidad and Cobija; A 1959-60; / Urban etere over 5,000 population; /i localities

of 1,000 or more inhabitants having essentially urban characteristice; [ 1961- 72; h Capitalo of dietricts and

those populated centere with such urban characteristics as strmets, plazas, water supply systeas, sewerage systems,

electric lights, stc; /I 1969; /m Data exclude adjustment for underenuneration, and Indian jungle population;

/i Ratio of population under 15 and 65 and over to total labor force; / Excluding Indian jungle population; eatimated

at 100,830 in 1961; /P 1971; /q 1965; / 1967-68; / Per capita; /t 1970-71; /u Economicelly activo

population; y 1963; / Number on the register, not all working in the country; . 19681 L 196b-66;

L . itiate which includes -o-rage otudenot; . Z Indcuding evning schools; Lab East Cameroon; /L West

Cnrercon; /ad Definition unknown; /.15 years and over; /af Inside or outside; L. Percentage of house-

holds; L 1961; Zi Including government vehicles.

* Peru has been selected an objective country because Of similer natural conditions and cospeaMble human and

rezource endo-.ento.

Ri January 2, 1975

ABNNEX IP.ge 2 of 4

BOLIVIA

ECONOMI3C DEV0L0F88098 DATA

(A .. at. in 1973 US$ Mil-lio.s

1968 -1971 1973 1975 1977 1985 1968-71 1971-73 1974-77 1978-80 1968 091 97

NATIONAL ACCOUNTS 3-Year A--rge at 1973 Voi... & E-rh.ng. Beat Aver.g. A-nol Co...sth Rate- As VPrce- of GDY-

Gross Il-tiosl Prodsst 828.3 921.6 1,035.3 1,149.2 1,296.7 1,617.9 3.7 6.0 7.8 11.7 90.7 98.0 96.3

re-n of Tr-de Efffeot 10.1 19.0 50.7 105.8 49.5 78.6 ... 1.3 2.0 3.7

Gro.. Dom-ti. I.-Oo 836.4 940.6 1,086.0 1.255.0 1,346.2 1,896.5 4.0 7.4 7.4 12.3 100.0 100.0 100.0

I.po-ts (iori. NFVS) 301.4 303.8 347,7 433.4 549.8 676.4 0.3 7.0 16.5 10.9 36.0 37Z.3 40-8

apart'. (iep-rt -P.slty) 265.2 276.2 35914 451.6 641.1I 593 .9 1.4 -17.8 - 14.0 31.7 29.4 32.8

R ..rc - loIo- (-lSs7pl..) 36.2 27.6 -18.2 108.7 82.5 -7 - - -- 4.3 -2.9 8.1

Coo5S..pti.o E.p.aditores 698.2 776.9 896.4 988.6 1,063.4 1,291.8 6.1 7.4 5.8 10.2 82.3 82.6 79.0

Io-t-et boOi-. sto-ks) 164.3 191.3 185.9 248.4 391.6 487.3 1.2 .egatRo- 28.0 11.6 22.0 2015 29.1

D-tit51 S"alsg. 148.1 163.7 189.6 266.6 282.8 404.8 3.4 7.6 14.3 19.7 17.7 17.4 71.0

Narbs.1I S-i.g. 128.1 146.3 177.9 230.1 258.9 339.5 6.6 10.1 13.3 14.5 15.3 15.6 19.2

MERCHW7fISE TOAE A ...dI Oct. et Correct Pri-~ A. Por--t f Totl1

Ca pt.1 Goods 71.8 71.1 119.0 220.2 414.2 680.9 ssogatfo- 29.0 52.0 28.0 47.0 42.3 58,8

R-w -4tracaa oemdlct Goad, 47.2 02.2 67.1 113.7 169.4 276.6 3.3 13.4 36.0 28.0 31.0 31.0 24.0

F.e1 cod Lorlists 1.6 1.2 2.2 10.3 12.7 17.9 StgOtI- 39.0 36.8 10.7 1.0 0.0 1.8

C.oa_ptlass Goods 52.1 43.5 67.2 99.3 108.3 141.1 10.7 _24.0 17.3 14.1 21.0 25.9 15.4

Torsl 4erhocdls- Icp.rt. (CIF) 152.8 168.0 255.3 443. 5 704.6 1,116.5 3.2 23.5 40.0 26.0 100.0 100.0 100.0

Priss_r Prodost. 145.8 191.4 266.3 4,46. 2 431.1 588.1 9.6 18.4 17.1 16.8 85.1 88.7 99.3

Fuels 24.3 23.9 67.0 197.2 290.8 692.0 ..gatios 67.0 62.0 50.0 11.3 11.1 40.0

ohs Grads Perolsm (24.3) 23.9) (48.9) (189.4) (204.6) (506.7) oes.tle 43.0 61.0 57.0 (14.3) (11.1) (70.15

M-ofaot-rd Goods _0.4 0.6 3.40 3.9 5.4 8.3 23.0 - 22.0 24,0 .2 .2 .7

Totl1 Mleoh. Eoports (fob) 170.5 215.9 338.3 642.3 727.3 1.288.4 8.2 25.0 29.0 33.0 100.0 100.0 000.0

I4-rh.adiss Trede Iodise,

Export Fobs. lode, 66.7 76.4 100.0 190.4 194.0 249.0 4.6 14.4 24.8 13.3 21.6 22.7 32.4

I.Port V,lrs ladeo 66.0 73.9 100.0 149.2 173.0 214.9 4.8 14.8 20.0 11.5 21.5 22.6 28.0

Toe- of Trsde ladex 100.1 100.6 100.0 131.1 113.0 109.3 asegtlo- segctloe 4.2 2.8 32.7 30.0 18.8

fopo-ts V.I.c. lodess 75.4 83.5 100.0 107.0 119.7 166.9 3.5 9.4 6.0 18.1 24.4 24.7 20.0

VALUE ADDED BY 1OCT08 - Acc1 Dts.-.t 1973 Prtr-c ccd ftoh-ss. Urear A--roo As.-.! Gr-.th Rates A. Pert-o of T-ls

Agrlo-lt.re 186.8 201.6 222.6 249.2 273.0 320.0 2.5 5.1 7.1 8.3 22.5 21.9 21.7

Iod.otry and MiOong 279.7 303.4 338.6 361.9 412.6 534.4 2.7 5.6 6.8 13.0 33.0 33.0 32.0

Service 365.1 414.0 477.7 538.1 604.7 757.2 4.3 7.4 8.2 11.9 43.9 45.1 46.8

Total f(-CDP) 831.6 919.0 1,038.9 1,149.2 1,290.3 1.611.6 - .4 6.3 7.5 11.-8 -000.0 1O00.0 100.0

PUBLIC FINANCE

(C'otral Coerso)C'retReeps107.6 112.2 109.2 013.1 040.3 188.0 4.3 -2.4 6.9 10.2 11.9 11.5 10.8

Cu-r-o Eopeodit.ros 103.9 13.4.4 145.3 168.5 190.1 239.9 7.9 6.3 6.9 8.1 01.5 13.6 04.7

Bodget.ry Savings 3.7 -22.2 -36.1 -55.6 -49.8 -31.9 . . . 0.4 2.3 -3.9

Other Pobll, Osotor S-ioRs 29.3 54.4 98.2 129.4 134 .1 219.2 . 3.2 5.b 6.3

P.bOI i~esso. C.aplit1 E.peodltore 108.2 102.6 99.8 147.5 267.7 301.4 9.0 -5.0 28.'2 4.0 12.0 11.6 20.7

CUR ENT DCENITIIR DETAILS Actrod

(A .oa C ar t Enpead.) 1968-70 1971-72 DETAIL ON PUBLIC SECTOR INVESTMEONT P10R839L A. Perc-o of Total(1968 -74 - 19)5-80)

Cootra1 Adiloistrctioss 28.2 25.9 Agri-tolt. sod 1.iOrlRaOl 3.0 3.8

Dofe.... 13.3 12.8 RicIng cod Hydraosrbons 39.0 61.1

Ed ...ti-s 27.3 26.3 Indostry and Pos-e 14.9 9.0

014er 1-i010 & Cosinety OS-o 9.3 13.5 Transport cod Co.olnlss24.0

17.4

AgriIout.r. 3.0 3.0 Fob,1Ilo Or..cd Social S-rooe 18.3 8.7

Oter 17. 10.3 Other

SELOCTED INDICATORS

Estiloatd

(Calc-laled fr-an 5-Yr, Aver.xdDtat) 1968-70 1970-74 1975-77 1978-80 FINANlCING 1968-73 1974 1975-0

A--rg. ICOR 6.45 3.00 3.67 4.06 ftb1ic Sector 0S-100. 39.8 91.0 44.4

Inpor-t Elasti.Ity 0.91 1.06 1.13 1.03 Do-ostU Ror-oag loer) 14.6 .44.0 16.9

Marginal Daa. .rtiDc tg Rate 64.97. 24.27. 3.67. 37.47. Foreign Doroosslg lost) 46.4 79.1 38.6

M-rgo-1 National S-vigs Rate 20.57. 28.47. .egati-c 22.07. Other --2.9 23.1 ____

LABOR FORCE AND OUTPUT P'ER WORKER DePloyed Labor Pat-5 Value Added Per Woker (1973 PrIces 4 E..hUo.a R.t)

in Thousa-ds 7. ofTotal 1970-1974 In 0.0. SaIlor Ve,-nt of A,eraos Ch.ao8 P...

1970 1974 1970 1974 Groeth RAte 1960 1970 1960 1970 1970-74

Agolosslt-r 1,271.0 1.383.1 65.4 64.4 2.1 15.14 170.0 33.8 33.4 2.9

Ind.stry 264.2 300.6 13.6 14.0 3.3 1,067.8 1,147.6 238.4 225.8 2.0

se-ict -407 .1 _463. 0 21.0 2.16 3.3 938.9 1.068,4 209.6 210.2 3.3

Tota1 1,942.3 2,146.7 100.0 100.0 2.5 447.9 508.2 100.0 100.0 3.2

0/ E-olsding t-xe frcu export cot-prur..e 3/75

Not :pplloable-Nil1 or ..e gi~bls

Pa-e 3 of 4

BOLIVIA

SUMMARY: BALANCE OF PAYMENTSTCurrent U.S.$ millions)

1972 1973 1974 1975 1976 1977 1978 1979 1980 1985

1. Imports 261 332 509 572 817 910 la135 1,287 1,443 2,521

2. Exports 225 310 606 615 648 714 831 1,058 1,259 2,880

3. Balance of Goods 6 NFS -36 -22 97 43 -169 -196 -304 -229 -184 359

4. Factor Services -22 -25 -32 -29 -37 *44 -53 -102 -133 -197

Profits (-6) (-6) (-8) (-9) (-11) (-12) (-14) (-50) (-69) (-106)

Other (Net) (-16) (-19) (-24) (-20) (-26) (-32) (-39) (-52) (-64) (-92)

5. Current Transfers 13 15 14 12 10 8 5 3 3 --

6. Current Account Balance -44 -32 79 26 -196 -232 -352 -328 -314 162

7. Direct Foreign Investment -13 5 10 18 28 43 64 89 101 30

8. Official Capital Grants 8 10 9 20 25 27 28 26 20 2

9. Public M & LT Loans (Net) 93 5 41 45 130 142 232 219 202 -23

Di bursements (125) (38) (S5) (93) (192' (216) (316) (329) (341) (199)

Repayments (32) (33) (4) (-48) (-62) (-74) (-84) (-110) (-139) (-222)

10. Other M & LT Loans (Net) 15 17 21 23 32 39 42 48 50 10

11. IMF Drawings I 12 __ __ __ __ __ __ __ __

12. Other Short 1 Nrmt Errors -42 -20 -15 ~ -20 -10 -5 __ __ _

& Omissions _

13. Change in Net Reserves -17 15 -145 -112 -9 -14 -14 -53 -59 -181

(-Increase)

14. Total Net Reserves 47 31 176 289 298 312 326 379 438 933

(End of Period)

15. Debt Service Ratio 20.9 16.8 12,9

16. External Public Debt OS v 681 698 723

olv IBRD (23) (23) (21)

IDA (26) (30) (39)

17. IBRD-IDA Debt Service 3.1 4.8 4.0

as % of Public Debt Service

18. Debt Service as % of GDP 4.6 4.9 4.5

I/ Includes SDR allocation equivalent to US$4.3 million in 1972.

A?2.EX IPage l of 4

CONTRACTED PUBLIC AND PUBLICLY GUARANTEED EcERNAL DEBT, 1968-73

(U.S.$ Thou3ands)

1968 1969 1970 1971 1972 1973

INTFRNATT0.-i( B CRGANIZATIONS - 30,650 1.400 26,777 11,197 7,211

CAF 2 98 2,047 1,183IBRD 2 3,250 -IDA 7,400 1,400 6,800 8,000 6,000IDB - - 19,879 1,150 28

G0VF2.NfNTS 26 814 2 17 202 34 675 65 680 29 861Argentina51 3,i435 bL3Czechoslovokia - - - 3,321 _Germany F.R. _ 1,776 1,366 - -United Kingdom 4,080 1,452 - - 7,082 _U.S.A. 17,580 22,681 1,515 25,343 39,967 26,460U.S.S.R. _- - 11,234 -Others 1,000 - 1,701 3,162 -

SUPPLIES, CREJ)ITS 114,574 11,692 1,584 3,947 36,h2h 20,168Argenti3a _ _ - 1,585 5,077 5,725Belgium _- - 5,487Canada - - - - 3,695Donr-ark - 670 1,311 - 791 _Germany f.R. 308 - 4,147 273 - -Italy 6,450 2,099 - -- 16,644 -Japan 1,477 - - 2,o808 6,32 -Poland .. _ _ - 250 4,2h2Spain 1,990 3,337 - _ U.S.A. 1,269 - _ 1,146 872U.S.S.R. - _ - -_4,700 _Others 3,080 1,439 282 1,384 147

PRIVATE BANKS 1,463 1.264 - 23,330 2 9 738Brazil - -12,000 7,62U.S. 500 * 1,264 _ 10,000 12,800 1,500Others 963 - _ 1,330 2,400 3.488

OTHE 801 lh,216 4,060 - 22,788 93

Nationalization (USA) 78,622 _ .736

TOTAL 1 49,680 1 0. 6 8 8,729 1595 67,807

1/ Net of adjustmenta and cancellations

ANNEX IIPage 1 of 3

THE STATUS OF BANK GROUP OPERATIONS IN BOLIVIA

A. STATEMENT OF BANK LOANS AND IDA CREDITS (as of April 30, 1975)

US$ millionLoan or Amount (less cancellations)

Credit No. Year Borrower Purpose Bank IDA Undisbursed

Fully disbursed loans and credits 23.2

148 1969 Bolivia Power - 7.4 0.3

261 1971 Bolivia Livestock - 6.8 4.3

346 1972 Bolivia Railways - 8.0 1.4

433 1973 Bolivia Power - 60o 2.7

455 1974 Bolivia Mlining - 6.2 5.6

TOTAL 23.2 34.4 14.3of Which has been repaid 2.5 0.1

Total held by Bank and IDA 20.7 34.3

Total undisbursed 3

B. STATEMENT OF IFC INVESMENTS (as of April 30, 1975)

Amount in US$ million

Year Obligor Type of Business Loan Equity Total

1973 Plasmar, S.A. Cables and Plastic Products 0.3- 0.1 0.4

Total undisbursed

1/ Of which,,US$O.l million is a standby loan.

ANNEX IIPage 2 of 3

C. PROJECTS IN EXECUTION

Credit 148 - Second ENDE Power Project, US$7.4 million, April 28, 1969;Closing Date: June 30, 1975

The project has been successfully completed. Theundisbursed balance represents contractorpayments that will be made upon tenrination of theguarantee period.

Credit 261-BO - Third Livestock Development Project, US$6.8 million, June25, 1971; Closing Date: June 30, 1977

Status of the project is discussed in Part IV of thisReport.

Credit 346 - Railway Project, us$8 million, December 1, 1972;Closing Date: December 31, 1975

All of the funds under the project have beencommitted. Due to inflation, however, the fundsavailable under the credit have been insufficientto procure all of the items included in theproject. About 50% of the items planned forprocurement for the first project, have beendeferred for purchasing under the second railway project.Materials and equipment ordered under the projectdid not begin to arrive in Bolivia until the lastquarter of 1974. Although it is thereforepremature to measure physical progress under theproject, significant improvements have been madein the management, operations, financial conditionand tariff structure of the railway.

Credit 433 - Third ENDE Power Project, US$6 million, October 17, 1973;Cosing_ Date: December 31, 1976

The Santa Cruz gas turbine was put into service inDecember 1974. Because of delays in preparing biddocuments and possible future delays in equipmentdelivery, completion of the various transmissionline and substation equipment components is expectedto be six months to two years behind the appraisalestimate. The project's foreign and total costs areexpected to be 40-50% above appraisal estimates.Although the beneficiary's recent financial performancehas been satisfactory, it needs tariff increases tomaintain its agreed upon 9% rate of return in 1975 andfuture years.

Credit 455 - Mining Credit Project, US$6.2 million, January 18, 1974Closing Date: June 30, 1978

The project is proceeding as scheduled and the creditshould be fully committed by the second quarter of 1976.

ANNEX 1-Page 3 of 3

Largely beeause of increased costs, the average size of

mining projects are double the US$200,000 originalestimate. A second project for additional lending to

medium miners is planned for FY76.

ANNEX IIIPage 1 of 2

BOLIVIA

AGRICULTUJRA CREDIT PROJECT

CREDIT AND PROJECT S-JMARY

Borrower: Republic of Bolivia

Beneficiary: The Agricultural Bank of Bolivia (BAB)

Amount: US$7.5 million

Terms: Standard IDA terms

Relending Terms: The Government would onlend through the AgriculturalBank and commercial banks for on-farm investment byfarmers growfing grapes and sugarcane and to livestockranchers who will have the option to borrow either at 4%with repayments indexed to the La Paz cost of livingor at 1L% with readjustment of the principal basedon the rate of exchange between the dollar and theBolivian peso. Subloans to subsistence farmersbreeding sheep and cultivating potatoes would beara 12% interest rate without indexing. Subloans tofanrmers would have repayment and grace periods asfollows:

Loan Period Grace Period

Cattle ranchers 12 4Sheep 12 4Sugarcane 6 3Potatoes 4 2Grapes 8 4

ProjectDescription: Credit would be provided for the expansion of production of

cattle, sheep and crops in selected areas of the lowlands, theAltiplano and the Valles in Bolivia.

Cost of Project: Components (US$ million)Local Foreign Total

On-Farm Investments

Beef 2.27 2.61 4.88Sieep 0.55 0.33 0.88Sugarcane O.fi] 0.10 0.91Potatoes, Oats, Wvheat 0.50 0.23 0.73Grapes 0.61 0.29 0.90

Total on-farr. 4.74 3.56 8.30

ANNEX III

(US$ million)Local Fbreign Total

Project Adninistration 0.48 0.22 0.70

Agricultural Research 0.07 0.07 0.14

Total Baseline Costs 5.29 3.85 9.14

Price Contingencies 1.71 1.15 2.86

GRAND TOTAL 7.00 5.00 12.00

Financing Plan: Beneficiaries Commercial Banks Government IDA Total

1.30 0.89 2.30 7.50 12.00

EstimatedDisbursements: FY76 Fm77 m178 FY89

(S million)

Annually 2.1 3.4 1.5 0.5

Cumulative 2.1 5.5 7.0 7.5

Procurement: Procurement of on-farm inputs together with office

and laboratory equipment estimated to cost about

US$110,000 would be made through nornal commercial

channels. Contracts for the construction of housing

and other facilities for project personnel would be

placed with local firms following Govermentprocedures which would have to be satisfactory to

IDA. Each contract is estimated to cost about US$30,000

and the total cost is estimated to be about US$200,000.

Vehicles estimated to cost about US$200,000 would be

purchased following international competitive bidding

in accordance with Bank/IDA guidelines for procurement.

IBRD 11241 R

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