Document of

The World Bank

FOR OFFICIAL USE ONLY

Report No: 22547

IMPLEMENTATION COMPLETION REPORT(IDA-25360; COFN-03090)

ON A

CREDIT

IN THE AMOUNT OF US$ 31.1 MILLIONAND

A SWISS CONTRIBUTION(TF-03090-NI)

IN THE AMOUNT OF SwF 6.75 MILLION

TO THE

REPUBLIC OF NICARAGUA

FOR ANAGRICULTURAL TECHNOLOGY AND LAND MANAGEMENT PROJECT

November 27, 2001

Environmentally and Socially Sustainable Development Sector Management UnitCentral America Country Management UnitLatin America and the Caribbean Region

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

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CURRENCY EQUIVALENTS

(Exchange Rate Effective June 30, 2000)

Currency Unit = CordobasC$1.00 = US$ 0.80

US$ 1.00 = C$12.68

FISCAL YEARJanuary 1 to December 31

ABBREVIATIONS AND ACRONYMSATPI Private Co-financed Agricultural Technology ProgramATP2 Private Voucher-based Agricultural Technology ProgramATPb Basic Agricultural Technology ProgramnATPm Massive Agricultural Technology ProgramATLMP Agricultural Technology and Land Management ProjectBANADES National Development BankBICR Borrower Implementation Completion ReportCONAGRO National Agricultural CouncilCOSUDE Swiss Development CooperationCSJ Public Registry of the Nicaraguan Supreme Court of JusticeDCA Development Credit AgreementGON Government of NicaraguaGPS Global Positioning SystemICB International Competitive BiddingIDA International Development AssociationIDB Inter-American Development BankINETER Nicaraguan Institute of Territorial StudiesINRA Nicaraguan Institute of Agrarian Reform (later OTR)INTA Nicaraguan Institute of Agricultural TechnologyIPM Integrated Pest ManagementIRAM Institute for Research and Application of Development MethodsIRENA Nicaraguan Institute of Natural Resources and Environment (later MARENA)LCB Local Competitive BiddingMAGFOR Ministry of Agriculture, Livestock and Forestry (formerly MAG)MARENA Ministry of Environment and National Resources (formerly IRENA)MIS Management Information SystemMTR Mid-term ReviewNGO Non-governmental OrganizationOTR Office of Rural TitlingPCU Project Coordinating UnitPNCTR National Program of Cadastre, Titling and RegistrationPOA Annual Operating PlanPSC Project Steering CommitteePTA Private Technical Assistance ProgramRUTA Regional Unit for Technical AssistanceSDC Swiss Development CooperationSDR Special Drawing RightsTVT Technology Validation and Transfer

Vice President: David de FerrantiCountry Director: Donna Dowsett-Coirolo

Sector Director: John RedwoodTask Team Leader/Task Manager: Isabel Lavadenz-Paccieri

FOR OFFICIAL USE ONLY

NICARAGUAAgricultural Technology & Land Management Project

(Credit - 2536-NI)

CONTENTS

Page No.1. Project Data 1

2. Principal Performance Ratings 23. Assessment of Development Objective and Design, and of Quality at Entry 24. Achievement of Objective and Outputs 5

5. Major Factors Affecting Implementation and Outcome 216. Sustainability 227. Bank and Borrower Perfonnance 238. Lessons Learned 299. Partner Comments 3110. Additional Infornation 34Annex 1. Key Performance Indicators/Log Frame Matrix 36

Annex 2. Project Costs and Financing 38Annex 3. Economic Costs and Benefits 40Annex 4. Bank Inputs 47Annex 5. Ratings for Achievement of Objectives/Outputs of Components 51Annex 6. Ratings of Bank and Borrower Performance 52Annex 7. List of Supporting Documents 53Annex 8. Borrower Completion Report - Executive Summary 54

This document has a restricted distribution and may be used by recipients only in theperformance of their official duties. Its contents may not otherwise be disclosed withoutWorld Bank authorization.

Nicaragua

Agricultural Technology and Land Management Project(Credit 2536-NI)

Preface

This is the Implementation Completion Report (ICR) for the Agricultural Technology and LandManagement Project (ATLMP) in Nicaragua. IDA Credit 2536-NI in the amount of SDR 31.1 million(US$44.0 million equivalent), with a Swiss Development Cooperation contribution (COSUDE) SwF 6.75million (US$4.5 million equivalent), was approved on July 20, 1993 and became effective on November24, 1993.

The Task Manager for this ICR was Isabel Lavadenz and the principal author was Anna Roumani(Consultant). The report was reviewed by Mark Cackler (Sector Manager), Martin Raine (Sector Leader),Mariangeles Sabella (LEGOP), Michael Fowler (LOAEL), Matthew McMahon (LCSER), NormanPiccioni (LCSER) and Christopher Trapman (Consultant). Comments were received from COSUDE.The Borrower provided a Completion Report (see Executive Summary, Annex 8) and comments on IDA'sdraft report.

Preparation of the ICR is based on information and insights provided by interviews and fieldworkduring Bank ICR missions in June and September 2000; a Borrower ICR and completion reports byinvolved agencies; a series of specialized studies funded by the project and other sources; and material inthe project files.

Project ID: P007780 Project Name: Agricultural Technology & LandManagement

Team Leader: Isabel G. Lavadenz Paccieri TL Unit: LCSER

ICR Type: Core ICR Report Date: November 2 7, 2001

1. Project Data

Name: Agricultural Technology & Land Management LIC/TENumber: IDA-25360;COFN-03090

Country/Department: NICARAGUA Region: Latin America andCaribbean Region

Sector/subsector: AE - Agricultural Extension; AR - Research; VM -

Natural Resources Management

KEY DATESOriginal Revised/Actual

PCD: 05/22/1992 Effective: 11/24/1993Appraisal: 02/26/1993 MTR: 08/31/1995 06/01/1996

Approval: 07/20/1993 Closing: 12/31/1998 06/30/2000

Borrower/Implementing Agency: GOVERNMENT OF NICARAGUA/MINISTRY OF AGRICULTUREOther Partners: Livestock and Forestry (MAGFOR, formerly MAG); Nicaraguan Institute of

Agricultural Technology (INTA); Nicaraguan Institute of Natural Resources andEnvironment (MARENA, formerly IRENA); Nicaraguan Institute for AgrarianReform (INRA, subsequently became Office of Rural Titling (OTR); NicaraguanInstitute for Territorial Studies (INETER); Public Registry of the NicaraguanSupreme Court (CSJ). (Participation of the National Development Bank(BANADES) was also contemplated at appraisal).

STAFF Current At Appraisal

Vice President: David de Ferranti Javed Burki

Country Manager: D-M Dowsett-Coirolo Edilberto Segura

Sector Manager: Mark Cackler Michael Baxter (Division Chief)

Team Leader at ICR: Isabel Lavadenz Paccieri Andres AbramovichICR Primary Author: Anna Roumani; in collaboration

with Isabel Lavadenz; NormanPiccioni; Lisa Taber; ChristopherTrapman; Alfonso Ortega;Teresa Campos and EnriqueVanegas.

2. Principal Performance Ratings

(HS=Highly Satisfactory, S=Satisfactory, U=Unsatisfactory, HL=Highly Likely, L=Likely, UN=Unlikely, HUN=HighlyUnlikely, HU=Highly Unsatisfactory, H=High, SU=Substantial, M=Modest, N=Negligible)

Outcome: S

Sustainability: L

Institutional Development Impact: SU

Bank Performance: S

Borrower Performance: S

QAG (if available) ICR

Quality at Entry: SProject at Risk at Any Time: No

3. Assessment of Development Objective and Design, and of Quality at Entry

3.1 Original Objective:

The overriding objective at appraisal was to contribute to Nicaragua's effort to adopt a market-oriente(ieconomy, and to increase and diversify agricultural output and exports, while preserving the country'snalural resources as the basis for sustainable growth. Extreme poverty would be reduced by reactivatingland markets, encouraging investment, creating employment opportunities and improving agriculturalproductivity and the incomes of small and medium farmers through better access to basic agriculturalservices. Under the project's two main components (Agricultural Technology and Land Management) theobjectives were to: (a) develop and transfer sustainable, environmentally sound agricultural technology toincrease production of small and medium producers; (b) support the transition from a supply- to ademand-driven system for public and private research and extension based on cost sharing, participationan(I market incentives to improve quality and expand coverage; and (c) provide the basis for secure lancedproperty rights by integrating project activities within a consolidated set of policies and administrativeprocedures, including establishing the basis for a modem, national cadastre, land titling and registrationprogram. The project also sought to establish appropriate land use and soil conservation practices and tocontrol pesticide pollution.

The project was intended to directly benefit about 34,500 mostly small and medium-scale farmers under theresearch and extension programs, and provide 50,000 landholders with secure title under the landmanagement component. No economic rate of return was calculated for the project, but economic returnswell above Nicaragua's opportunity cost of capital were foreshadowed in the SAR.

3.2 Revised Objective:

Project objectives were not revised.

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3.3 Original Components:

Rating Component Total Cost (US$mill.)** Including physical and price contingencies.

S Agricultural Technology 21.8 of which:

S Tech. Validation and Transfer 8.2S Soil and Water Management 3.2S Integrated Pest Management 1.3S Agricultural Research Grants 1.3HS Academic Studies Program 1.2HS Pesticide Management Program 2.5S Private Technical Assistance 4.1

S Land Management 34.0 of which:

S National Cadastre 14.0S Land Titling 16.2S Public Registry 3.3HS Studies 0.5

S Project Coordinating Unit 2.3

3.4 Revised Components:

Component Added:

S Rural Financial Services Pilot 2.0*

* A second amendment (11/03/95) to the DCA reallocated US$2.0 million from the Land Management component to a new pilot Rural FinancialServices component, requested by the GON.

There were four amendments to the DCA: (a) IRENA became MARENA, and a threshold was establishedfor prior review of consultant contracts (July 1994); (ii) a pilot Rural Financial Services component wasadded to finance loans to small producers not to exceed US$450 for subprojects, and technical assistanceand training to participating banks and intermediaries; this amendment also permitted the Borrower tore-lend proceeds of the Credit to financial intermediaries (November 1995); (iii) the Swiss Contributionwas permitted to finance all activities under the Agricultural Technology component (INTA), and increasedprocurement thresholds (June 1998); and (iv) an amendment reflected new legal and institutionalarrangements among executing agencies; expenditures and activities related to Hurricane Mitch; andincreased the Special Account allocation for the Swiss Contribution to US$300,000, to accelerate itsdisbursement for INTA agricultural technology activities (May 1999).

3.5 Quality at Entry:

Appraisal of this project predated the QAG.

It is important to stress that IDA, through support for this project, was retuming as a lender in apost-conflict situation and after an absence of 20 years from rural development projects in Nicaragua, the

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second poorest country in the Americas. A democratic Government elected in 1990 implementedIMF-sponsored stabilization and structural adjustment programs, as well as reform measures which, alongwith an IDB AGSAL establishing an appropriate policy and institutional framework, prompted donorinstitutions to resume lending after this long absence. Government's economic development strategy was toreactivate and develop an economy emerging from a decade of centralized planning. Massivecornfiscation/nationalization of urban and rural property had destabilized society, confidence in the judicialsystem was low and social conditions, especially in rural areas, were miserable. Acknowledgingagriculture's continued prominence in the economy and the severe poverty affecting some 85% of the ruralpopulation, Government's priority investment areas were agricultural technology generation and transf;.r,and. land management. The project focused on both.

The risk assessment in the SAR was accurate, noting: the breadth of institutional and technological changeproposed, the limited implementation capacity in government, the political sensitivity of land tenure issuesand. the fragility of the economic reform process. Actions taken by Government during preparation toreduce these risks included launching a decentralization program, organizational and policy changes, anddefining a regulatory framework to improve the political and economic environment for project actions,especially under the land management component. Institutional collaboration would be secured through.inter-agency agreements and coordinating committees. The SAR also acknowledged key lessons ofprevious Bank lending in Nicaragua: that project size and complexity be determined by the demonstrateidcapacity and commitment of the implementing agencies; that problems of inter-institutional coordination incadastral and land titling projects needed careful handling; and that adequate macro-economic manageirLentwas a prerequisite for project success.

Hindsight and current standards suggest that less ambitious objectives and a simpler project design, giventhe institutional and legal/regulatory weaknesses, might have been advisable. But, the continuing threat ofviolence in the countryside, the sheer scale of the country's need, Government's own expressed and urgentpriorities, and the Bank's attempt to seize the difficult political moment and respond appropriately in theabsence of an established dialogue, drove objectives and design. The two disparate and complexcomponents were linked conceptually, but not organically (i.e. titling beneficiaries were not transitioned toagricultural extension services, a level of service integration which would have been complex to achieve atthat time). Certain geographic areas were a priority for land titling, and others for agricultural extension,which made sense in terms of the individual component, but which eliminated the possibility ofcoordination between the components during implementation. Measures were taken to improve theenabling environment for project execution, but in hindsight, they may well have further complicated asituation which required a longer-term strategy, including bridging actions to pave the way for criticalinitiatives. The diversity and innovative nature of project activities were quite striking: creation of a marketfor agricultural services, institutional reforms, sectoral policy initiatives through the introduction, updatingand/or approval of laws in the national assembly,* infrastructure investments, natural resource andenvironmental actions, gender and indigenous peoples' aspects, and complex land-related technicalactivities. Many aspects of project design were considered best practice in the Bank and worth launching inNicaragua, at that time. A pilot component for Rural Financial Services, arguably one of the morechallenging rural development issues, was later added (at the Borrower's request). While the project tooktwo additional years to implement, it had many, albeit mostly modest, achievements.

* Including: promulgation of a general pesticides law; updating regulations pertaining to MAGFOR, MINSA, MITRAB, MARENA and MITI;revision of the basic law goveming INRA to establish its new mandate in the non-refommed sector; preparation and/or presentation to the NationaLAssemnbly of the Law goveming Title Regularization, the draft Indigenous Demarcation Law; draft Cadastral Law; and draft Registry Modemiz :itionLaw.

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4. Achievement of Objective and Outputs

4.1 Outcome/achievement of objective:The project is rated Satisfactory on balance, with qualifications.The project reached and in some cases exceeded its physical targets. It achieved substantial institutionalgrowth in a learning-by-doing context, and although the impact of project actions on beneficiary farmerproperty security, productivity, income generation and hence poverty alleviation -- the central projectobjective -- were not appropriately measured by the project, the core objectives were either achieved orsignificant progress was made towards achieving them, over a seven-year period. Project design, asdetailed in the SAR, called for systematic monitoring and impact evaluation (M&E). The SAR outlined asimple methodology, including construction of baseline data. The record suggests tentative, initial effortswere made but no system was ever developed. This was a lost opportunity given the innovative nature ofthe Project. However, Annex 3 attempts to derive costs and benefits - and hence indicative measures ofpoverty effects - for the agricultural extension component, while analysis of the benefits of land titling andregistration activities under the project show positive outcomes based on work done by the University ofWisconsin.

4.2 Outputs by components:A. Agricultural Technology Component** INTA provided three classes of service -- with some modifications over time-- whose objectives were quite different, as reflected in thecommunity/producer selection process, type of technology transferred, and technical assistance method used: ATPm (initially ATPb) for poorestclients, using mass media and other techniques and free of charge; ATP I was co-financed by farmers (about 1 0%); and ATP2 used private technicalassistance and was co-financed by farmers (up to 65% of costs). The first two were provided by INTA staff, while the third was delivered by privateTA firms.

Technology Validation and Transfer (TVT) Program (US$8.2 million INTA)Output is judged satisfactory.

This sub-component was intended to support the demand-driven generation and transfer of technology, andincluded (a) rehabilitation of research and extension infrastructure in INTA regional offices; (b) researchvalidation trials and technology transfer parcels/plots on producer farms; (c) pre-service and in-servicetraining; and (d) on-farm (artesanal) production of seeds (basic grains). Experimental and validationparcels were established, with farmer participation. The program was carried out in five regions of thecountry by INTA field teams with 123 technicians distributed in 27 local agencies. Technology transferoccurred on 11,094 parcels vs. the 14,600 contemplated at appraisal, benefiting about 45,000 farmers peryear by Year 6 of the Project. Trials and validation occurred on about 4,750 plots (small, from 1-10 mz)compared with the planned 4,800. Some 300 technicians were trained in local study centers. On-farmproduction of seed was very successful for corn, beans, white sorghum and rice.

ATPm ProgramOutput is judged satisfactory.

The ATPm or "mass've" extension program (from 1998) evolved out of the ATPb or group method used atProject start-up. The typical ATPm client was a subsistence producer farming marginal lands locatedmostly in high-risk agro-climatic zones, working part or full-time as an agricultural laborer, notparticipating in ATP I or ATP2, and judged unable to pay for extension services. The ATPm was intendedto support basic grain production for family consumption -- in the process curbing rural-urban migration --and to reverse environmental deterioration. These were demanding objectives, given that only 18 front lineINTA staff were to provide services to about 40,000 farmers per year.*

* The goal of the revised program was to attend a total of about 110,000 beneficiaries by end of 2000, working with an initial group of 18extensionists and gradually expanding that number.

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Reference farms were established for massive demonstration of new, low-cost, easily applied technologi as forcommunities during key periods of the agricultural cycle, using farm days, group leader training sessions,radio programs and other means. Services were designed around an initial community diagnosis to define abaseline. Farmer participation depended on his/her involvement in community producer organizations ai,id onsupport from the community leadership. The ATPm relied on results achieved on the commercial plots ifbetter farmers, and on results from experimental stations. The service was less intense, on the pragmaticassumption that ATPm farmers -- the poorest and smallest in the project area -- did not require the level ofsernices delivered under ATP 1 and ATP2.

The program attended an average of 38,000 small farmers per year in 1998-1999, declining to about 15.000 in2000. There is no representative information on productivity gains/impact for the whole program. Field visitsby 13ank supervision missions only witnessed improvements on the reference farms. The size of farms attendedvaried greatly, e.g., 0.5 to 7 mz in the Pacific and Central zones, and 10-200 mz* in the North and mountainzones. A broad variety of technologies were transferred covering soil and water conservation, animalproduction, improved basic grains, food crops, disease control and post harvest storage. Critical analysiS ofthe .ATPm experience during preparation of the follow-on project, caused a strategy shift in early 2000 basedon agro-livestock extension in "favored" and "non-favored" zones, to boost food production and conser'venatural resources; strengthen community organization and participation including of rural schools and localgovernment; and establish reference farms.* Mostly in natural foTests and tacotales.

ATPm was intended to improve on ATPb, but both models operated under constraints including the reliance ona limrited number of field staff achieving adoption of new technology, working -- directly or indirectly-- with asmany as 2,500-3,000 farmers each. The concept of "attended" in the case of ATPm, signifies periodic contactby various means, between farmners and extension workers, with less opportunity to work directly on fanmers'fields to introduce new technologies or follow up with a review of results. It is likely that farmers attended,i.e., actually visited, did not exceed the 250-300 who owned the demonstration farms, and that the uptake ofnew technology beyond those reference farmers and certain community leaders, who also had access to tlielimited inputs distributed under the project, was fairly modest.

While a visit to Israel was funded by the Project to train 12 technician in ATPm techniques, the programneecled greater institutional back-up, a lesson for follow-on programs. Reliance on mass media, model [airmsand input supply needs the support of regular farmer-extension contact to be fully-effective, which also hasbudget implications. INTA's counterpart funding situation reduced its ability to meet the high demand f;rextension workers/services, or to provide systematic attention to communities; and the availability of futnds didnot always coincide with the timely delivery of services. Credit was unavailable for most ATPm farmers andthere was insufficient equipment for massive dissemination. The project also demonstrated that technologyadoption rates among poor, small farmers are affected by illiteracy and years of schooling. Furthermore,without specific actions to ensure their inclusion, women are incidental participants in extension programs,despite their important and under-estimated contribution to agricultural and especially food production inNicaragua.

The lessons learned have influenced the design of the new, phased APL credit.* Properly-funded programs ofthis lype can improve performance and impact by delivering regular, permanent services which stressproductivity gains of poorer communities; include agricultural education, and training strategies and programs,with a gender perspective; work through community organizations to expand coverage; develop lower cost,accessible technologies for marginal areas and promote greater use of reference farms and radial communlities.These features are included in the design of the new project.* Nicaragua Agricultural Technology Project (Cr. 3371-NI, US$23.63 million), first phase of an Agricultural Technology and Technical Educationand Training Program APL.

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A TPI ProgramOutput is judged satisfactory.

The innovative ATP 1 co-financed program, with services provided by INTA, sought to improve theeffectiveness of public extension by linking extension providers directly with clients, making the formermore accountable for results. Services were provided twice or more monthly, to groups of producers withsimilar problems and socio-economic conditions. Producers paid the technician, not INTA, an agreed feefor an agreed service. Quantitative objectives for crop yields were defined in advance, incorporated in agroup production plan. The program targeted basic grains and other crops, and small livestock productionfor producers with a certain minimum productive endowment.

Started as a pilot in 1995, with 289 producers organized into 14 groups, serviced by 17 extension agents,initial demand was strong and farmer payments reached 80% in 1996. Numbers of farmers and agentssteadily increased to about 15,400 by end-Project. Geographic coverage reached 1,347 communities in fivenational zones with a planted area of close to 27,500 mzs. Project supervision missions noted that evenwith low fees for service, collection of the farmer's portion was less than expected, suggesting possibly thattasking service providers with revenue collection was burdensome, that farmers may not have been fullysatisfied with the service/technical messages, and that the fixed price system of charging for ATP 1 serviceswas unpopular with some farmers. Indeed, faced with declining farmer payments, INTA dropped itscharging model in favor of allowing farmers to negotiate the amount payable with the service provider.

The impact of the first two years was assessed by Dinar and Keynan (1998) who applied a farm levelanalysis to estimate the program's gross incremental benefits. They concluded that ATPl was having apositive impact on producers' incremental income, but noted that more effort was needed to stabilize farmergroups, improve farmer selection criteria, and reduce transaction costs for forming groups. Despite somesignificant issues (credit, marketing and managerial), INTA clients under ATP I had yields exceedingnational averages in corn, beans, sorghum, potatoes and coffee. Revisiting both ATP 1 and ATP2 in 2000,Dinar and Keynan reiterated their positive assessment of paid extension programs (see following section onATP2, paras. 4.3 - 4.4 and Annex 3).

Private TechnicalAssistance (ATP2- US$4.1 million MAG/INTA)Rated Satisfactory.

Intended to promote the involvement of private extension firms, NGOs, producer associations, formerMAG/INTA technicians through a voucher system, the ATP2 program was both innovative and risky.*Government's objectives in involving private firms were to use market incentives to improve the quality ofservices, reduce bureaucratic expansion, and introduce a cost-sharing scheme to reduce publicexpenditures. Firms would be evaluated and accredited to participate. Selected firms would be trained byINTA to ensure standardization of approach and content. A small unit in INTA handled coordination,administration and guidance. Contracts would be awarded to groups of at least 10 small-mediumproducers, based on criteria judged by a panel consisting of MAG, INTA and the National DevelopmentBank (BANADES).** The farmer co-pay portion started at 20% and was expected to reach about 80%over five years.I A Pilot of two years would be evaluated by an independent consultant after 8 months; and by the Mid-term Review to decide its continuation,modification or discontinuation.** Contracts were tripartite, involving INTA, producers and private firms.

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ATP2 covered a wide range of farm production and marketing issues, using group and individual methods-- delivering services to an average of 9,000 producers per year (starting at 5,500 in 1995, rising to so ume1.4,000 in 1998 and declining to about 5,700 in 2000); and started with five firms (two NGOs and threep:rivate firms) climbing to 14 by 1999 and declining to eight in 2000.

The reasons for fluctuating participation were quite strongly connected to issues affecting the private lirms,including: economic difficulties; lower than expected payments by farmers; the tardy contracting of privatefirmns due to protracted fee negotiations and administrative delays in the PCU; and the short-term contractsthe firms signed (about six months) which affected the continuity of extensionist/client relations and thieservices provided. At closing, firms averaged eight extension workers (including social workers) senricing64 producers each, implying increased operating costs for the firms. Reported performance deficienci s ofprivate firms also stemmed from their relationship to INTA, which was initially reluctant to give them thesame support it provided its own staff, e.g, linkages to research personnel, training from subject matte:rspecialists, and adequate supervision or market information Their ability to deliver optimal services wasalso affected by lack of the tools/resources including appropriate technology validation areas assignecl byINTA, the program for on-farm seed production, and technical guides. Fees paid to private firms coveredonly part of their variable costs and some overhead costs related to work in the field, which sapped theircommitment to the complex job of transferring technology to hundreds of clients, some widely dispersed,with different problems and requirements. An additional issue affecting the firms was that the INTA co-payportion was contingent on evidence that the firm had collected payment from the producer. A 1997evaluation found, and interviews with participating private firms during the ICR mission (2000) confirmed,that most of the firms depended on INTA contracts, and lacked internal financial sustainability. Finally, theshort-term contracts signed by INTA with private extension firms/individuals prevented clients frombenefiting from longer-term planning.

Average recovery rates from producers fluctuated, ranging from a high of 85% in the first year to 700% by2(000, with interim variations. Recovery varied significantly once differentiated fees/crop were introd&ced,and climatic conditions (including Hurricane Mitch in 1998) adversely affected agriculture and livestockproduction. INTA data shows fees/service collected from farmers averaging about US$101 in 1995,dropping steadily back to US$66 in 1998-2000, and recently rising sharply to about US$100. Farmerparticipation dipped following INTA's introduction of a complex funding formula for the private firms, andan increase in the farmner's required share to 65% of the costs of service. As in other countries whereco-financing of extension has been tried, farmers unable to pay were either carried or released. the latlerhaving no alternative services.

Rural women's access to project-financed extension services needs much greater focus. Of total farmersattended directly under ATP 1 and ATP2, about 18% were women and services were provided to themalmost by default. (Their participation in ATPm is not known). This does not reflect their actualparticipation in a broad range of agricultural activities in rural Nicaragua, including household foodsecurity, post harvest activities, care of minor livestock and cash cropping. Studies show that accesslimitations are mainly due to extension services being provided to male family members on the assumpriionthat the message will be passed on. * INTA initiated a pilot project in 1998 designed to generatemethodologies and tools for comparative evaluation of the quality of INTA's services to male and femaleclients; and to demonstrate that applying a gender perspective to its services made economic, social andtechnological sense in rural areas. There is little information about the outcome of this pilot, but the n-wAgricultural Technology Project acknowledges women's key role in rural production and their need foragricultural education, information and training.

* See Women's Land Rights: Lessons Learned from Nicaragua, S. Ceci, December 2000.

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While the justification for different extension models in a geographical area may be queried -- given theextra costs implied by parallel services and other practical issues -- the project served as an importantlaboratory for innovative extension methodologies designed to forge a market for agricultural services.Recent analysis (Dinar and Keynan, 2000, ICR paras. 4.3-4.4 and Annex 3) provides importantpreliminary evidence indicating that the ATP I and ATP2 paid extension had significant impact includingimproved farmer production and profitability; improved services to farmers compared to traditional,publicly-provided programs; steadily decreasing costs of service provision (with important implications forservice quality and farmer willingness to pay); and cost recovery rates which, while lower than expected,were nevertheless similar to other more developed countries. Project reporting also pointed the way toimproved services within a broader, more pluralistic system in which INTA is one of a range of entitiesproviding services - NGOs, private sector, rural unions and academia.

Broadly speaking, about 15% of farmers in Nicaragua, mostly small and medium producers, currentlyreceive some kind of extension service. (While seemingly low, this is a higher percentage than mostcountries in Nicaragua's income group). The collective lessons of the ATPm and ATP 1 support thecontinuation of public extension services in Nicaragua as defined and structured under the new AgriculturalTechnology Project, within a broader framework of a "system" where INTA remains a key actor amongmany in a more flexible, evolving situation. In this context, publicly-funded service does not necessarilymean publicly-delivered. Experience under the ATLMP shows, and the new project reflects, that theemphasis must be on productivity increases and competitiveness for the greatest number of farmers, tomaximize poverty alleviation effects longer-term. What were found to be INTA's high cost, modestoutput/coverage, and managerial shortcomings are being addressed through a comprehensive institutionaldevelopment program. The lack of a monitoring and evaluation system under ATLMP has been corrected:the new project finances an agricultural information system, and a monitoring and evaluation systemtracking input and process indicators, managed and coordinated within MAGFOR, which, inter alia, plotsthe effectiveness of public technology delivery and adoption. Services provision is more regular andpermanent, and the extensionist/farmer ratio has been reduced to 1:300-500, working through farmerorganizations/conmmunities. Agricultural education and training -- including for rural women -- is animportant strategic element in social/human capital formation under this new project.

Soil and Water Management (US$3.2 million INTA)Rated Satisfactory.

The sub-component financed: (a) local and overseas training of INTA planning, research and extensionpersonnel; (b) upgrading of scientific and field equipment; (c) establishing demonstration plots in differentagronomic regions; and (d) soil conservation grant program to support off-farm conservation works andon-farm investments in pilot micro-catchment development subprojects. The program successfullycontributed to reversing soil and water degradation by using appropriate and accessible technologies whichwere a priority for farmers (perhaps a lesson for extension programs seeking to be demand driven).Validation areas and demonstration plots established, greatly exceeded appraisal targets. In addition, andnot contemplated at appraisal, about 1,000 small/medium farmers had soil and water conservation works,as well as agro-forestry systems, established on-farm.

Integrated Pest Management - MIP (US$1.3 million INTA)Rated Satisfactory.

The MIP was to foster environmentally sound pest management practices for cotton, basic grains andhorticultural crops through: (a) trial and demonstration plots; (b) insect resistance studies; (c) improvedbuildings and facilities; (d) field and scientific equipment; and (e) training and technical assistance to

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improve INTA's pest and pesticide management strategy. The MIP promoted the safe use of pesticides,significantly exceeding appraisal targets by training 300 technicians in appropriate scientific methods.Inf'ormation on the behavior of certain pests in fruit and vegetable crops was generated and MIPtechnologies were validated through trial and demonstration plots, as planned. During the later years ol'project execution, this sub-component and soil/water management were integrated into INTA's technol o.gytransfer program.

Agricultural Research Grants --FAITAN (US$1.3 million INTA with Advisory Committee)Rated Satisfactory on balance.

The Fund for Support of Livestock Technology Research (FAITAN), was not effective until early 199g,,but demonstrated much potential. The first program of its kind in Nicaragua, full evaluation awaits thcresults of the grants funded under the ATLMP and those to be funded under the new AgriculturalTechnology Project. FAITAN launched an innovative process fostering public-private partnerships in h:lghpriority, adaptive agricultural research projects proposed by domestic and foreign research bodies. It isexpected to produce longer-term economic payoffs and for this reason was continued under the new pro Žject,despite modest performance under ATLMP which saw only five research projects financed, totalingUS$467,000.* Each research contract was delayed by cumbersome procurement and adjudicationprocedures, and organization and management factors, including the unclear role of the advisorycommittee. Funds used were less than 40% of the original amount allocated (US$ 1.3 million), which w aLSrepeatedly reduced/reallocated. FAITAN has been improved under the new Agricultural Technologyproject, including: detailed procedures for program administration and the competitive selection process;standardized grant and contract documents; and workshops/seminars to familiarize potential clients with itsmandate and train researchers/scientists in preparing proposals.

* Similar programs in other countries - PRONATTA in Colombia (technology for small farmers), PROMSA (Ecuador), PRODETAB (Brazi ,andPROSAP (Argentina) are having success.

Acaidemic Studies (US$1.2 million INTA)Rated Highly Satisfactory.

The project successfully financed study programs, scholarships, and advanced degrees for technicians, tobuild national scientific capacity. Results included scholarships for 46 INTA personnel (target 45) througha contract with the Agricultural University of Nicaragua, resulting in 17 graduates and 11 in final stages.Masters studies were completed by 22 agricultural engineers studying in Mexico, Brazil and Peru.

Pesticide Management--PROMAP (US$2.50 million, originally MA G and IRENA)Rated Highly Satisfactory.

Intended to strengthen institutional capacity of MAG (currently MAGFOR) and IRENA (currentlyMARENA) to train pesticide appliers, monitor the extent/distribution of pesticide residues, and degree o:fhunman toxification nationwide, PROMAP had many successes, including: (a) integrating Nicaragua intothe Brazil Agreement, and supporting passage of the Law for Management of Pesticides and ToxicSubstances (enacted 1998, and legal statutes approved 1999); (b) training 54,000 applicators and farmers(target 1,320) in pesticide application practices; (c) carrying out the institution-strengthening plan formonitoring and control of toxic substances for MARENA, MAGFOR and three other agencies; (d)conducting a nationwide inventory of toxic waste/agrochemical and eliminating in two operations and withthe support of the Government of Finland, about 50% of all these toxic waste materials held nationally, alanclmark program for Central America and one which led to Nicaragua signing the Basel EnvironmentaTreaty; (e) evaluating levels of residual pesticide in the domestically-consumed food chain, and studying

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levels of pesticide contamination in critical areas (some near major reservoirs); (f) training in toxicmaterials for 9 professionals at post-graduate level in Uruguay and Mexico; and (g) establishing pesticideusage demonstration plots in the eastern and western regions. Studies, diagnosis, and research conductedunder this sub-component are currently been used as reference in the design of a National EnvironmentalStrategy for Nicaragua.

B. Land Management Component

Rated Satisfactory.

The National Cadaster, Titling and Registration Program (Programa Nacional de Catastro, Titulacion yRegistro - PNCTR), the nuts and bolts of the Land Management component, was intended to establish thebasis for a modem and technically sound system of secure rural land property rights for about 50,000landholders on 2 million hectares. INRA would manage the component, supported by INETER (cadastre)and CSJ (registry), under a coordinating committee. While some activities under the PNCTR sufferedmulti-year delays, achievements were ultimately substantial in a post-conflict environment where largetracts of land were confiscated. Important lessons were learned from direct experience, and a series ofexcellent studies and impact assessments were financed by the component.

National Cadastre (US$14. 0 million, INETER)Rated Satisfactory.

The intention was to establish the technical and administrative basis for a multipurpose, uniform cadastrecovering 78% of the national territory (about 103,000 km3). A national geodetic grid and aerialphotography would produce orthophoto maps covering about 23,000 km2, for technically sound andreliable information to resolve land adjudication issues. Data would be regularly updated and incorporatedin national and departmental cadastre offices through a communications network financed by the projectand linked to the Public Registry. Selected INETER regional offices would be remodeled/constructed.

Discussions between the Borrower, IDA and the United States Defense Mapping Agency in the first yearproduced a revision of this sub-component based on new technologies believed better able to achieveprogram objectives, with savings in time and resources. Principal achievements were: (a) network of 50geodetic points (vs. the 200 originally planned) distributed nationwide, based on the GPS system and linkedto the World Geodetic System (WGS-84); (b) National Altimetric Network (not included in the SAR)related directly to the Geodetic grid and including 385 high precision points; (c) aerial photographycovering 38,500 km2 corresponding to the Macro-central and Pacific regions of the country, to a scale of1:40,000 (this component achieved about 76% of its target due to meteorological conditions inhibitingactivities); (d) production of orthophoto maps at a scale of 1: 10,000 covering an area of 23,053 km2(compared to target of 50,455 km2, again because of weather limitations on initial photography) in thesame regions; (e) satellite imagery covering the entire country, permitting preparation of area/space mapsscaled at 1:25,000 in the same regions; (f) a territorial information system in five pilot zones covering7,000 km2 (see below);* (g) various types of technical and other equipment including cartographic, digitalphotogrammetry, computers and transportation items; (h) maintenance and updating of existing nationalcadastral information; (i) remodeling and construction of seven cadastral offices;** (j) installation of aLocal Area Network (LAN) and purchase of high frequency radio-communications equipment; and (k)training for 450 personnel in different technical systems, e.g., GPS, mapsetter, and photogrammetry.

* INETER persuaded the local population to provide documentation of land tenancy, which significantly improved the statistical accuracy concerningthe land tenancy situation, and the success of this activity.** This activity was affected by the lack of funds to purchase land needed for construction of new buildings. The need to negotiate with mayors forthe donation of needed land delayed construction by several years.

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Pilot Territorial Information Project (Proyecto MICADO)

The most successful and valuable aspect of the cadastral sub-component was the pilot Proyecto MiP ADO,executed by INETER in five socio-economically and technically distinct zones (Chinandega, Masaya,Rosita, Nueva Guinea and Puerto Cabezas) covering 7,000 km2, under contract between INETER and theFrench firm Spot Image. The objective was to prepare a working methodology for updating a cadastre inthe Pacific sector; start creating a cadastre in the Atlantic sector; and transfer technology to INETER}.Activities consisted of satellite imaging, basic cadastral information-gathering, preparation of scale inaps ofthe country (1:10,000 in Pacific zones and 1:25,000 in Atlantic zones) and installation of a Territori lInformation System.

,The pilots demonstrated that updating the cadastre, while essential, is insufficient to resolve land cor:lictsin Nicaragua, or legal, institutional and organizational issues affecting land administration and tenuresecurity. They also showed that some 30-40% of parcel surveys are outdated, mainly because ofinstitutional weaknesses and lack of systematic communication between INETER and the Public Re,g istry.I)epending on the area, an unquantified but likely high percentage of surveyed properties are not reg. stered,the registration of titles per se by beneficiaries varies greatly, and titles are given for land which has riotbeen surveyed. The lack of a cadastre per se in the greater national area, and the absence of an integrated,mnodem cadastre and legal registry (linking the geographic and legal databases) is the source of numerousF'roperty rights problems and conflicts. The fundamental issue is that nowhere are the three basiccomponents of property regularization -- cadastre, title and registration -- systematically updated andsimultaneously known, and this is not entirely an institutional problem. Legal complexities and thedisincentives created over time during and after the war conflict in 1979, had and still have, a powertilleffect. The intensified pilot in the Masaya zone, working with some 271 plots, found serious discrepanciesbetween the cadastral records (INETER) and those of the Public Registry (CSJ), and betweennewly-measured property areas and areas actually registered.

Land Titling (US$16.2 million, INRA4/later OTR)Rated Satisfactory.

The plan was to deliver land titles to about 34,000 landholders covering 720,000 hectares (1.02 milliionmzs) mainly in the Central and North Pacific Regions; a second phase (years 4-5) would cover anadditional 1.4 million ha (2.0 million mnzs) and a further 16,000 titles. Land reform beneficiaries in tiereform sector were the primary focus.* Project-financed technical assistance would improve INRA'so;rganizational and operational procedures, and strengthen its capacity to do massive titling and otherfunctions associated with land management. Construction of eight regional offices was also included Thebeneficiaries of land titling were targeted to be the very poor, sometimes without farming experience(including de-mobilized military personnel), mostly located in the Macro-central and Atlantic regions of thecountry.

* Titling was not included in the cost of the sub-component since it was originally planned that beneficiaries would pay for the titling process.However, in 1996 an institutional decision was taken on poverty grounds to cover the costs since it was evident beneficiaries were having sen risproblems paying.

The Mid-tern Review (MTR- 1996) recommended that titling also be extended to the non-reformed sector,which was attempted, but not continued. The sub-component also sought to contribute to normalizing andprotecting land tenancy among indigenous communities in the Atlantic region through a study of theirsituation and characteristics. MTR analysis revealed that the targeted 50,000 titles (SAR) were individual,but had not taken into account titling of cooperatives and collectives, which entails a host of specializedissues, and although the works were done in more than one parcel, it showed as a single title. The target

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was reduced to about 32,000 titles covering 1.01 million mz. Delays in achieving titling targets areattributed in large part to continuous and disruptive institutional reforms in the agrarian sector which hadan adverse impact on INRA/OTR's institutional capacity; and to repeated failure of land survey firms toproperly fulfill their contracts. An attempt to shift cadastre works to international bidding had little result,since foreign firms sub-contracted the same local firms that had performed poorly in the first place (seeProcurement, para 5.5). Another major factor was that the titling process involves some 74 separate steps(and 15 separate institutions), with initial survey work representing only a small portion of this process,and the remainder constituting a massive bureaucratic bottleneck. Further, cadastral survey work was nevertackled systematically. Under the proposed new Land Administration Project, the bureaucratic steps fortitiing and conflict resolution will be addressed first, as part of a general overhaul and rationalization oflegal, regulatory and administrative aspects of land administration.

The project delivered about 28,150 titles (56% of the original and 88% of revised target) covering 1,100finca matrices in an area of 1.18 million mz (about 843,000 ha), benefiting directly about 49,600 personsand indirectly about 117,800 family members. Titling was slowed by several factors: multiple institutionaland leadership changes during transfer of titling responsibilities from INRA to MAGFOR and then to OTR(1998); lack of local counterpart funds; disruptions caused by Hurricane Mitch; and weak managementcapacity in the new OTR especially in procurement, accounting, and a suitable financial control system.The additional 16,000 titles to be regularized (SAR)* were not done due to the lack of an appropriate legalframework and the complexity of existing procedures. Of the families benefiting from the 28,150 titlesdelivered, 83% were traditional small-farm families, 14% were de-mobilized military personnel, and 3%were persons repatriated under democratic rule. Of the total titles delivered, about one-third went towomen including as couples under joint titling regulations. Titling activities in the reform sector attractedthe attention of coffee-growers and a small pilot resulted in the legalization of some 914 titles (target 1,187)through the issuance of a variety of improved legal documents.* Titles issued in the 1980s contained certain legal and technical flaws resulting from lack of proper land measurement and legal basis.

Actual demarcation activities were limited. The planned demarcation and legalization of indigenous landson the Atlantic Coast had barely begun when it had to stop, there being no proper legal framework for titleconveyance for indigenous lands. A draft Law for Demarcating Indigenous Lands in the Atlantic Coastand Bosawas is pending before the Nicaraguan Assembly. After an extensive consultation process, alsofinanced by IDA, the indigenous peoples' representatives presented the Government with acounter-proposal. (The next land project will support a consensus process for demarcation and titling ofindigenous lands). ATLMP financed an ethnic mapping exercise, and a general diagnosis of land tenancyin indigenous areas; both documents are now references for the draft Law. In addition, some 604 personswere trained, a publicity campaign was executed and technical equipment acquired.

The Deininger-Olinto analysis (2000) carried out under the ATLMP showed that titling under the projectwas demand-driven -- mainly due to institutional coordination problems between the involved agencies --rather than the more cost-effective and equitable area-based titling closely linked to the cadaster andregistry activities, contemplated in the SAR. The process lacked proper cost benefit analysis, resulting in aconcentration of titling on public lands along the frontier (tierrasfiscales) as opposed to titling in areaswhere impact would be more immediate. Experience in other countries (e.g., Chile) also suggests that thelack of linkage between the project's two principal components reduced the productive potential of titlingactivities complemented by agricultural extension services, although studies financed under the project diddemonstrate important benefits of titling and registration per se (see para. 4.6).

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The main conclusion of the project-financed IRAM study (2000) is that judicial and other avenues for landadministrationi must be prioritized over administrative, in conveying land rights. However, the continuingland insecurity resulting from the increasing issuance of supletorio titles* by judges, combined with theheavy backlog of land-related complaints, plus indications that regulations for issuance of such titles ar.~not being followed in regard to protected areas, indigenous peoples, territories and agrarian reform area s,indicates the need for setting the appropriate legal, policy and institutional framework for a moreconiprehensive land administration system. IRAM also stressed the importance of the cadastre as a meansof rwsolving conflicts, and the concept of a decentralized, participatory mechanism which involvesm1unicipal governments and local organizations in land administration and regularization actions.

A, low. costly nicthod of cottveving title which recognizes land use and possession, but not dcfinitive property ights, thus preventing the acquis tionofa arortgage or its LIse as collateral for credit.

Putlic Registry (US$3.3 3million, CSJ)Rated Satisfactory.

Intended mainly to support the land titling sub-component, and, at the same time, to strengthen and initiatea prmacess to modernize the Public Property Registry at the central and departmental levels to improveaccuracy, reliability and access, the sub-component financed, among other activities, micro-filming of aLexisting data,* technical assistance for software development, training in information managementtechniques, and the drafting of a new Registry Law to permit the full implementation of the "Folio Real'an(l the modernization of its technological basis and procedures. Activities were re-designed in 1995 after adiagnosis of technical and functional organization, the profile of registry personnel, physical status ofinfDn-nation stored, registration activities, infrastructure and actual technology in use.

* 1) se to Nicaragua's vullnerability to natural disasters.

The Registry sub-component had many achievements, including the following: a nationwide Index ofProperty Hlolders; improved techniques for the daily reception and recording of incoming land documen- . (Lii;ao Diario); improved administrative control over documentation and the security of public records; andimp) oved processes for the inscription of documents in the registers. A pilot subproject was initiated inMas:Lya Department permitting the rapid consultation of registry information and introducing the use ofcorn iuterized systems. For this system to be legally enforced and implemented nationwide, a law is needed.The sub-component also produced a micro-film inventory of 600,000 registry files resulting in bettercon I-ol over registration data; built new offices in Chinandega and remodeled the central registry office inManagua. 1'he original plan to construct 16 offices in departmental capitals was replaced by a program(financed by the European Union) to build integrated judicial/court complexes incorporating the landreg:stries in each case. 'The project also financed technical assistance for CSJ personnel and institutionaldevelopment, as well as a series of local and intemational workshops and seminars.

CSJ' was unable, however, to officially submit the draft registry Modernization Law to the NationalAssemnbly and this impeded the coherent and sustainable upgrading of the Public Registry, which must havetop priority under a proposed new project. Complicating this situation was the simultaneous existence ofanother draft law financed by the European Community. CSJ, unable to decide which law to send to theAssembly, drafted a third version which still needs Supreme Court approval to go to the NationalAssembly.

The lack of a modem, integrated registry and cadastre system, linking the geographic and legal databasesfor each property, hinders the regularization of property rights by failing to identify a host of discrepanclie s,and contributing to conflicts. De Janvry (2000), another study prepared under the subcomponent, notesthat the registration of documents frequently lags behind recognized property rights - many old titles have

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never been registered and a substantial portion of registered properties never updated, causing problemsand insecurity, if not outright violence. Deininger-Chamorro (2000), financed during preparation of the newland operation, showed that demand for registration in fact, greatly outstripped demand for title, but thathigh implicit costs of registration, complicated prerequisites and procedures, and long distances to registryoffices for families with transportation difficulties, may explain the low levels of registration. Poorcoordination among public agencies (INETER, Public Registry and INRA/OTR) and centralizedprocedures, as well as CSJ's lack of commitment and operational capacity, and weak political support atthe local govemment level, are also major contributing factors for the modest (but important) achievementsof the subcomponent.

Studies (UJS$0.50 million INRA with IRENA)Rated Highly Satisfactory.

The Land Management component financed a series of important, high quality studies including: (a) basisfor the new PROTIERRA-MARENA project; (b) ethnic mapping of 120 indigenous communities on theAtlantic Coast, which, along with the participatory land tenancy study in the same communities, became areference for the draft demarcation law for indigenous communities of the Atlantic Coast and Bosawas, andit will be used for titling and demarcation of their territories; (c) study of the Atlantic Coast for preparationof the Forestry Project in MAG-FOR; (d) three studies of land tenancy/land rights as background for theproposed Land Administration Project, comprising: (i) the legal and institutional framework for property,insecurity of land tenancy and agrarian conflict;* (ii) the impact of state intervention on rural titling interms of increasing legal security of tenure, investment and access to production inputs;** and (iii) lessonslearned on women's land rights in Nicaragua. The results of these research studies and of the Masaya pilotscarried out under Proyecto MICADO, point the way to needed reforms, activities and institutionalarrangements under a new bridge-type operation which resolves these issues in preparation for anormalized land administration national program.* See Estudio del Marco Legal e Institucional v la Inseguridad en la Tenencia v Resolucion de Conflictos bajo los Distintos Regimenes de Derechossobre la Tierra, IRAM, October 2000; and companion paper which places IRAM's conclusions/recommendations in the context of internationalexperiences, Property Rights and Land Conflicts in Nicaragua: A Synthesis, de Janvry and Sadoulet, University of Cailfornia at Berkeley, July 2000.** See Estudio de las Dinamicas de Legalizaci6n de la Propiedad en Nicaragua, University of Wisconsin, Draft, August 2000.

To summarize, under the Land Management component, titling activities were quite successful, andeconomically justified, but realizing their potential will depend on better integration with a reformed legal,institutional and policy environment for a more comprehensive land administration system. Moreover,titling was stressed while registry and cadastre were seen as complementary, but less important activities,an inadequate situation under Nicaraguan property conditions. Titling cannot be divorced from securephysical data and proper rights registration, and instead implemented under duplicative uncoordinatedagencies, outdated and perverse multiple and diverse laws and regulations which obstruct the titling processitself.

The project demonstrated the importance of the following: collaboration between land administrationagencies - cadastre, titling and registration - and of fostering a broad, participatory land dialogue betweencivil society, communities, private sector and services providers; tighter focus on vulnerable groups, i.e.small farmers, the indigenous and women; and, as with the extension component, monitoring and evaluationsystems, to map the impact of policy, legal and regulatory changes, and land regularization activities, onbeneficiaries and the rural economy. A Bank mission in early 2000 was advised by Government that some2-3 million mz still lacked clear definition of property rights, and the complexities affecting them called foran integrated, systematic and area-based approach to survey, regularize, title and register land rights. As adirect outcome of the ATLMP, and based on the studies mentioned in para. 4.44 above, the proposed newLand Administration project will design a medium-term strategy and action plan to address, in the first

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instance, the legal, regulatory and institutional issues/conditions governing land rights in Nicaragua, an 1 astrategy for promoting political commitment to a modem, rational system of land rights administration

C. Rural Financial Services Pilot (US$2.0 million)The Pilot Financial Services Component is rated Satisfactory, given the benefits realized and lessonslearned, from an investment of around US$ 1.0 million.

A second amendment to the DCA requested by the GON (December 1995 and effective one year later)funded an innovative US$2.0 million pilot Rural Financial Services component, to increase the presenc.and capacity of private banks and non-bank financial intermediaries (NFIs) to profitably provide savin :sand lending services to small-scale producers and entrepreneurs in rural areas. The pilot originally allo, atedUS$0.8 million to provide capitalization funds for NFIs and subsidies to private banks for opening andoperating 10 new branches in towns of fewer than 20,000 residents. In effect, banks competed for finalcialsupport to open and operate rural branches by submitting competitive bids; those that required the leas.am Dunt of financing (under a predetermined ceiling) were awarded the subsidy. After fifteen/twelve monthsof operation (depending on contracts conditions), all expenses associated with maintaining the branches.were assumed by participating banks. Additional pilot resources were earmarked for technical assistancte tobarks and NFIs, and for pilot administration. Another US$I million was allocated to a credit line forparticipating banks to finance sub-loans of US$450 or less. No targets were established.

Aftor the first bids were awarded and banks initiated operations at 10 new rural branches in 1997 and1998, funds from the line of credit were reallocated in part to finance additional branches. A recent ana I ysis(Taber, 2000) summarizes why these changes were effected and highlights important lessons from the p,lotexperience. After a few, tentative loan experiments, the General Managers of several participating bank;:decided that small-scale lending to rural producers and entrepreneurs was not profitable for the highadministrative costs and risks associated with these clients, and expressed their lack of interest inborrowing funds, at close to market rates of interest, to make loans of $450 or less. At the same time, inlate 1997, the GON had almost completed the process of liquidating the largest State development bank,BANADES, and was unable to sell 12 of its most remote branches to private banks. The Governmentrequested that these remaining branches, located in rural communities with no alternative banking facililies,be incorporated into the pilot. Given this request and the lack of demand for funds to on-lend in smallamounts, the credit line was canceled and its proceeds reprogrammed among other project components indto sabsidize the set-up and operation of the additional 12 branches in those towns.

Pilct funds originally assigned to strengthen and capitalize NFIs were also reallocated among othercomponents, based on the findings of Bank missions and special studies that most NFIs in Nicaragua weregeared more towards the administration of targeted and subsidized funds than financial competitiveness.For the handful of NGOs which demonstrated an appropriate institutional incentive structure and solidfinancial basis upon which to build loan outreach, ample sources of technical assistance and investmentcapital were already being made available from bilateral donors and other assistance agencies.

The majority of pilot resources, therefore, or about 68 percent of just under US$1 million, were invested inthe establishment of 22 private bank branches in rural communities where no bank had existed or whereBANADES was to withdraw. Nearly all of the facilities reported fast and steady growth in their depositaccounts but originated few loans, though the results varied somewhat by bank and location. At end-yea r1998, pilot branches had captured almost US$8 million in deposits from more than 10,000 new accounis,witk an average size of US$770. About 1,020 loans were generated, totaling about USS4.3 million andaveraging $4,200 each. More than 80 percent of these loans originated from a single bank, Bancosur,which targeted established clients who had previously done business in Managua or with BANADES.

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The low numbers of loans and their high average size (compared to per capita income, for instance, orinitial Bank estimates) reflected the shared perception among General Managers of three out of fourpilot-participating banks (including Bancosur, Bancentro and Banco de Finanzas) that loans to small-scalerural borrowers were too costly and risky for profitability. These perceptions had been borne out by thehigh transportation and administrative costs of trying to verify the income-generating activities ofgeographically dispersed clients, and to secure collateral pledges based on moveable property, as very fewrural entrepreneurs hold regularized land titles. However, despite these experiences and perceptions, Bancode Finanzas and Bancosur committed resources, late in 1998, to piloting new credit products and loanevaluation and portfolio monitoring techniques tailored to small-scale borrowers, and a program oftechnical assistance (TA) was initiated with pilot support.

Bancafe was unique among participating banks in already having learned to exploit the demand for creditamong small-scale commercial enterprises in town centers through very low cost money-lending windows,or ventanillas, which charged borrowers upwards of 5 percent interest per month on quickly revolvingcredits administered from make-shift facilities nearby, while Bancafe used its branches strictly forcapturing deposits. Because the ventanillas were owned by individual shareholders rather than by the bank,per se, these loans were not accounted for by the Superintendency, and IDAthus was not required toappropriately provision its capital according to the risks associated with this portfolio.

The program of TA designed mainly for Banco de Finanzas and Bancosur aimed to integrate low costlending techniques and market-tailored products into regular branch operations, including transparent riskmanagement and reporting procedures, but these activities bore few tangible fruits by the time the pilotclosed at the end-June, 2000. Banco de Finanzas had yet to initiate its pilot lending program and Bancosur,which acquired three of the unsold BANADES facilities and purchased two pilot branches from aparticipating bank that had failed earlier on, was intervened by the Superintendency of Banks in May of1999. Bancentro absorbed and continued to operate these five pilot branches, but did not report loan ordeposit figures for the period ending June 30, 2000. At that time, excluding these five branches, active loanaccounts at pilot facilities numbered only 436, averaging US$4300 each. These 17 branches wereservicing more than 12,500 savings accounts, however, averaging US$770 each, for a total of more thanUS$9.5 million in deposits.

Despite having mobilized large volumes of savings and demonstrated remarkable resiliency during a periodof significant financial market upheaval, including the failure of two participating banks, the unlikelysustainability of the entire pilot branch network became apparent almost immediately upon project closure.In August of 2000, Bancafe managers expressed their intentions to close at least three of the branchesformerly owned by BANADES which they had acquired with pilot support, as problems with security andcommunications made these remote facilities extremely costly to operate. Bancafe continued to support theunregulated ventanilla approach to lending operations and, not coincidentally, was intervened by theSuperintendency in November of 2000. The failure of Bancafe, one of Nicaragua's largest private banks,has far reaching implications for the financial sector as a whole, and upon the ultimate sustainability ofpilot-supported facilities, as the new owner (Banco de Finanzas) has indicated that it intends to close all butone of the 11 branches Bancafe acquired through the pilot.

Managers of Bancentro and Banco de Finanzas (BDF), however, indicated in exit interviews in August2000, that they had no intention of closing any of the other 12 pilot branches. BDF also reported that it hadhired a local credit officer and begun to canvass potential borrowers for the new micro-credit programdesigned with pilot support. The bank's General Manager confirmed his commitment to the program andbelief in the potential profitability of commercial loans targeted to small-scale entrepreneurs in and around

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Nicaragua's secondary cities and towns, though no new loans had yet been originated from BDF's ruralbranches.

In terms of rural credit outreach and branch sustainability, the pilot's results were affected by severaldesign and implementation issues. The objectives of the component were diffuse and ambitious from tkebeglinning, in terms of the numbers of loans or savings accounts to be opened or new products tested, theextent to which bank or NFI efficiency or outreach measures were expected to improve, or even who werethe expected beneficiaries, alternatively described in official correspondence as "small farmers" and "'smallentrepreneurs," though they are distinct target groups. Throughout implementation, even whileadrninistrative and operating costs of branches were very high, monitoring and evaluation functions werelirnited to keeping track of the branches' loan and deposit account totals. Poor monitoring and evaluationfollowed in part from the lack of specific goals or parameters against which to assess pilot performance.

Most important for sustainability, the precise incentives and financial condition of bank and non-bankfinancial intenmediaries were difficult to gauge during pilot design (it was, after all, a pilot), so that specificrequirements -- such as the formulation of business plans -- that might have helped in selecting the mostpotentially sustainable partners, were not incorporated into the bidding process. Requiring cost-benefitanalyses of branch operations prior to the establishment of remote facilities would have informed bank, andpilot managers alike about the feasibility of these investments. With the benefit of hindsight, it appears ,hatsupport to more potentially sustainable alternatives, such as mobile banking units, for instance, should havebeen considered in lieu of establishing regular branches, particularly in the remote towns where BANAI)ESwas to close.

The pilot would also have been improved by providing more intensive technical assistance andcapacity-building for participating banks and for NFIs. TA represented only 6 percent of pilot costs, wi-thno more than five technical assistance activities carried out during the life of the pilot, and with onlymarginal participation on the part of NFIs, although this improved late in pilot implementation.

While pilot results were disappointing in terms of the quantity and impact of TA on credit outreach and thesustainability of installed banking facilities, it is important to evaluate the intervention in view of thetunnoil and path-finding which took place in Nicaragua's financial sector as the country progressed from aState-dominated to a private banking industry. By preserving a banking presence where BANADES vNas towithdraw, the pilot facilitated the politically sensitive closure of the State's largest and mostfiscally-draining banking institution in the country's history. This can be considered an enormousachievement, although one that is difficult for project managers to take credit for, because of its politicalsensitivity. It was further instrumental in demonstrating to private banks that significant demand forsavings instruments existed in rural areas, and provided an important stimulus, particularly in its earlystages, for nascent and reluctant private banks to extend their networks into rural areas, as competitionbetween institutions emerged. The presence of these pilot branches and their success in mobilizing deposits,moreover, is likely to have motivated, in part, the NGO and other non-bank intermediaries who have sinceorganized and begun to lobby for a regulatory framework that would allow them to provide savings accountservices to the public.

In addition to these results, the pilot generated many valuable lessons from experience, in terms of designand implementation issues, important market insights and directions for future policy reforms and technicalassistance activities aimed at increasing the outreach and sustainability of credit services to small ruralproducers and entrepreneurs. The pilot revealed, for instance, the common perception among banks thatsmall-scale rural borrowers are best served by subsidized programs and nonprofit NGOs, which areexacerbated by the proliferation offideicomiso programs, wherein donors select the client and interest rate,

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and banks earn fee income for disbursing and recuperating loan funds while assuming no credit risk. Theseprograms may have distortionary effects on credit markets by encouraging the culture of non-repayment,among others. Both Bancentro and Bancafe indicated upon pilot completion that they were managing morethan US$32 million in these types of loan funds. The managers of these banks expressed doubt thatdonor-targeted clients, typically subsistence producers, were likely to ever become proper clients of thebanks, except in a few cases where Bancafe clients had been included in donor programs. Government andBank efforts to measure the impact of these programs and establish best practice guidelines for theirimplementation may be effective in preventing unintended consequences on financial sector interactions,including the perception that small rural borrowers are not credit worthy.

Insight into banks' reluctance to experiment with products and methods to serve small-scale borrowers wasgained through the pilot experience with Banco de Finanzas, which was admittedly approaching thissegment of the market slowly and cautiously. BDF cited cultural bias and risk aversion in dealing with poorrural clients -- within the institution and the banking industry in general-- as major obstacles to increasingloan outreach. Banco de Finanzas' leadership also emphasized the drastic departure from traditional andaccepted bank policies and procedures which was required to viably service micro loans, such asdecentralizing lending decisions and allowing for quick application and approval processes. Also, bothbanks expressed the need to reform the Superintendency of Bank prudential norms to allow reliableregulation and supervision system for micro loans activities.

In terms of the legal and institutional reforms needed to support the prudent expansion of micro lendingservices in rural areas, pilot participants repeatedly cited the high cost and uncertainty involved in securingmoveable assets pledges from borrowers as a significant limiting factor to doing business with poorer ruralentrepreneurs. Implementing a more secure and efficient system for moveable collateral registration andconfiscation is among the most critical of financial sector reforms needed to encourage greater lending tosmall-scale rural borrowers. Credit scoring and capital provisioning requirements which account properlyfor the risks associated with portfolios of small loans, without overly penalizing lenders, is similarly criticalto the safe expansion of these activities.

4.3 Net Present Value/Economic rate of return:

In an effort to reach some preliminary conclusions regarding impact, several recent studies/analyses havebeen used as proxies (see below and Annex 3).* They suggest that there were positive socio-economicbenefits for the project's target population from both the Agricultural Technology and the LandManagement components, which will be sustained and improved under new follow-on projects.** Evidencesuggests that production and productivity improvements were achieved as a result of co-financed extensionservices delivering new technology. Analyses also indicate that some 28,000 titles financed by the projectincreased beneficiaries' sense of land security, prompted increased on-farm investment and improvedaccess to credit. The institutional improvements from both the agricultural technology and landmanagement components were substantial (although less than expected) and brought out important lessonsthat are reflected in design features of new operations. The pilot Rural Financial Services componentintroduced branch-banking infrastructure and services to rural areas, and increased the knowledge base forfuture efforts to promote credit services to small-scale clients, although economic and financial impact wasnot quantified.* These studies include: Co-financed Public Extension in Nicaragua, G. Keynan, M. Olin, A. Dinar (undated); The Cost and Performance of PaidAgricultural Extension Services - The Case of Agricultural Technology Transfer in Nicaragua A. Dinar, G. Keynan, Policy Working Paper 1931,June 1998 and the ex post examination by a FAO consultant of INTA records on the impact of its technology transfer on better clients; Estudio de lasDinamicas de la Economia Rural - Impacto de Provectos de Legalizacion de la Propiedad en Nicaragua (draft), University of Wisconsin, August2000.** A new Agricultural Technology Project (Cr. 3371-NI, US$23.63 million, now effective), the first phase of an APL Nicaragua AgriculturalTechnology and Technical Education Program; and the proposed new Land Administration Project under preparation.

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Agricultural Technology. During preparation of the ATLMP no economic rate of return calculation vNiasattempted for the component because research and extension benefits are by their nature difficult toquantify and their rates of return worldwide are widely acknowledged to be high (see AKIS note: Ex anteEconomic Analysis ofAgricultural Research and Extension - Methods and Guidelines for Good Proctice,1999). By the same token, and because of the insufficiently disaggregated disbursement and productiondata, it was not considered appropriate to try to calculate an ex-post ERR specifically for the component.Also, the ICR team found that while the component allocated considerable resources to institutionaldevelopment, quantification of institutional benefits would not appear feasible. In the absence of an EF Fcalculation, and following OED recommendations, (Agricultural Extension and Research: Achievem.-ntsand Problems in National Systems -- Purcell and Anderson 1997), the ICR team opted for a morecomprehensive approach by considering: (i) emphasis during implementation on assessing the effectivenessof'the extension process in meeting the program objectives in the targeted farnning systems-acceleratingthe rate of adoption of relevant technology in a cost-effective manner; (ii) the impact with and without theproject on 17 farming models based on INTA's data generated from technical data sheets, (iii) the return oninvestment for three major crops, and (iv) an independent analysis of the economic performance of theATPI and ATP2 programs (Annex 3). All this work indicates clear positive economic impact whileunderscoring the need to establish formal data collection systems and to channel data to evaluation anddecision-making at the technical and managerial levels.

Land Management. To assess the impact of project-financed land titling/registration activities, theUniversity of Wisconsin, with IDA and GON, did a study (draft, August 2000) which presents econometricresults of a beneficiary survey of 2,475 randomly-selected properties. Findings included a positivecorrelation between these activities and on-farm investment, better farmer incomes, and improved landvalues. Of the beneficiaries receiving title, some 68% felt their land tenancy was more secure; another 5%had better access to credit; and 30% stated that having title increased their on-land investment. Based onthe average farm size of INRA/OTR beneficiaries, estimates show that land registration had increasec'on-farm investment by about US$320 per year/farm from 1990-1999, and increased the retums onagricultural activities by about 30%. The study also found that the existence of properly registeredproperties able to serve as collateral had also increased the supply of credit, mainly from informal sourcessuch as NGOs. Finally, robust results were obtained showing that the registration of property increased itsvalue by about 30%. In monetary terms, titling increased land value by US$33/mz and registration afurther US$49/mz, a total of US$82/mz. Applying socio-economic and geographic variables, titling wasshown to have focused on the poorest farmers.*

* See Estudio de las Dinamicas de la Economia Rural: Impacto de Proyectos de Legalizaci6n de la Propiedad en Nicaragua (draft), Univ. Wisccnsin,

August 2000.

4.4 Financial rate of return:

In lieu of a FRR estimation, which would have proven difficult to calculate, the team opted for estimatingon-farm income improvements and their net present value as a proxy for the financial results of thetechnology component. In the representative models considered, increases in net farm income as a result ofproject-financed agricultural research and extension ranged from about 25% to more than 100%. Onweighted average (relative to each model's representativity), annual net on-farm income grew by 67% inabout 6 years of technical assistance, from about US$1,500 to US$2,500 (Annex 3). It can be conclucdtdthat even farmers living under extreme poverty and mainly subsistence conditions have benefited fromimproved food security and on-farm increased incomes as a result of the provision of appropriate technicalsupport services.

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4.5 Institutional development impact:

The Project had substantial impact on the institutional capacity of most of the participating agencies and toa great extent this was the result of "learning by doing", through the implementation of a complex project,and through the Bank's supervisory oversight of this process, conducted with the participation ofappropriate Bank expertise in supervision missions. The precise extent to which institutions evolved is notknown and was not measured, and it is acknowledged that weaknesses persist. However, significantgrowth is evident from the quality of the dialogue concerning new projects of equal sophistication, thestability of core professional staff in key agencies involved in those projects, and the greater level oftechnical expertise (information technology and other systems, superior equipment and well-trainedpersonnel) now available as a direct result of project support.

5. Major Factors Affecting Implementation and Outcome

5.1 Factors outside the control of government or implementing agency:

While not entirely clear as a control issue, this ICR believes GON agencies emerging from a decade ofcentralized government, macro-economic instability and a post-conflict environment had varying degrees ofdifficulty acting/reacting with the technical and administrative agility and skill required by the project. Acritical issue beyond Government's control was the large number of claims for indemnification from U.S.citizens, for lands lost during the conflict in 1979 and its aftermath, representing a fiscal and politicalburden and a huge obstacle for land regularization.

5.2 Factors generally subject to government control:

On the one hand, project outcomes may be considered remarkably good considering Nicaragua's poverty(second poorest country in the Region), the aftermath of the civil war, and the loss of many talentedtechnical experts and managers in the post-conflict years, through emigration. On the other hand, higherlevels of Government might have done more to improve institutional collaboration; promote the project andits objectives to a wider audience; embark on a policy dialogue and institutional reforms to overcome legaland procedural bottlenecks; and accelerate implementation and disbursement. Elections at end of 1996 andthe subsequent transition delayed project execution as new managers and personnel of the twelve projectinstitutions studied the project in order to commit to its objectives. INRA (land titling) had three newDirectors in four months, changes in project-related staff (losing the experienced titling coordinator), andpoor levels of execution in 1997. It was subsequently absorbed into MAGFOR and shortly aftertransferred to OTR/Intendance of Property, a Division attached to the Ministry of Finance. Effects wereless pronounced in INETER, CSJ and INTA. Institutional dispersion affected the land component: over 15separate institutions handle, or have authorization over, conflict resolution, titling and registration.Finally, the Government was not proactive in supporting the intended role of CONAGRO (ComisionNacional del Agro/National Agricultural Council), as a policy-making and institutional coordination body.The legal and regulatory context for key project actions was not supportive. Again, as a control issue, thisis not clear-cut, especially given the period and historical context. The sensitivity of land andproperty-related issues in Nicaragua, and the complex situation immediately following the return todemocracy suggests that expectations of both the Government and the Bank, were too high. Finally, as theProject approached its final stage, enactment of Law 290 "Restructuring of the State" (June 1998) causednumerous additional changes in leadership/authorities, affecting mainly land titling activities and projectinstitutions.

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5.3 Factors generally subject to ilnplementing agency control:

Traditional bureaucratic practices, institutional rivalries, the lingering effects of centralized governmentand varying degrees of technical and professional weakness in implementing agencies affected project paceand quality, but the extent to which the underlying causes were entirely controllable by the agenciesthemselves can be debated, and the requirements of and processes involved in, executing the Project, hLadpositive institutional effects/ impact. The relative lack of project monitoring and evaluation can beattributed to agencies' general unfamiliarity with them and, to some extent, a traditional bias againstdata-based evaluation/analysis. However, the Bank shares responsibility for not promoting their use a:-dfollowing up on what was intended at appraisal, during supervision. Agencies' inconsistent responsivenessto Bank supervision action plans reflected, in part, the complex content and tight deadlines, but alsoresulted from fluctuating commitment to the project over time, within the context of institutionalproblems/upheavals. The centralized PCU and its tendency to micro-manage project activities persist,dthroughout project implementation in part as a result of perceived institutional deficiencies.

5.4 Costs and financing:

Total project cost at Closing was US$73.57 million compared to the SAR estimate of US$57.81 million.GON contributed US$25.37 million (compared to the US$8.9 million estimated at appraisal),* IDAUS$43.42 million, COSUDE US$4.11 million and producers US$0.67 million. Disbursements up to theMTR in June 1996 were only US$11.8 million instead of the approximately US$32.0 million planned butcounterpart funding availability was not the primary cause.** Rather, agencies lacked the capacity toabsorb the funds at the expected pace, which persisted despite inclusion of new categories of expenditares(recurrent incremental costs; the Rural Financial Services pilot; and reassignment of resources to cate,orieswith greater demand). Cumbersome procurement practices and the devaluation of the local currencyvis-a-vis the U.S. dollar were also factors. The Borrower report also mentions slow reimbursement by ][DAwith delays of up to five months, especially true of IDA management of the Swiss DevelopmentCooperation (SDC/COSUDE) funds. More strategic supervision, which honed in on the delayed landmanagement component, caused disbursements under that component to accelerate in the final three years.* The BCR attributes the over-spending to extra costs resulting from extension of the Closing Date by two years.** The BCR attTibutes low disbursement pior to the MTR to procurement processes and institutional weaknesses.

5. . Procurement.

The, project procurement plan did not reflect the nature of the project and its multiple activities; attemp':s toCOiTect the situation were incremental and at times too late to have effect. The contemplated use of ICB andLCB accounted for about one-half of project cost; the remainder was to be handled under simplerprccedures. Aggregate amounts under ICB and LCB were quite small, but still required time-consumingpreparation of documents, revisions by the PCU and "No Objections" from the Bank, repeatedly delayedthe execution of POAs, especially for the INTA agricultural extension component. Some 1,386 contractsfor services averaging US$33,000 each -- an aggregate of US$45.7 million -- were signed.

6. Sustainability

6.1 Rationale for sustainability rating:

Given the developmental context and the work remaining to be done, it is unlikely that the services testedand/or improved under ATLMP, could be self sustaining over the short to medium term, independent (A1further IDA or alternative financial support to consolidate, learn from experience and incorporate newfeatures. However, sustainability is rated Likely precisely because of this renewed support, and becausefollow up initiatives are building upon ATLMP achievements. Key features of new projects include:

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measures to promote institutional growth and maturation; legal and regulatory reforms; superior monitoringand evaluation, and information management systems; education and training; inclusive, participatory,market-based strategies and mechanisms; and decentralization of key institutions and services provision.

The Agricultural Technology and Technical Education Program (APL, Cr. 3371-NI, now effective)emphasizes, on the basis of the ATLMP experience and lessons, the following: production and productivitygrowth and competitiveness for the maximum number of poor, small farmers, as the core strategy for ruralpoverty alleviation; market-based, participatory approaches to agricultural and technical servicesgeneration and delivery, including a broad range of actors; a long-term strategy permitting rationalevolution and enhancing sustainability. It strengthens the main agro-livestock institutions (INTA,MAGFOR); supports and improves agricultural extension services, building on and improving the ATP1and ATP2 co-financed mechanisms involving the private sector; and establishes a competitive fund foragricultural services (FAT); supports and improves FAITAN grant facilities for innovative, adaptiveresearch projects; develops agricultural education and training programs, with specific attention to theinclusion of rural women; and of key importance, establishes national agricultural information, M&E andmanagement information systems. (PAD, Report No:ZO168-NI).

The proposed Land Administration Project will develop a policy, legal, institutional and technicalframework for the administration of land rights. Legal changes will be effected in gradual, participatoryways to build support and ownership. Improved institutional capacity, removal of bottlenecks andmaintaining ATLMP-financed investments, are goals. Based on several studies, and ATLMP lessons, animproved institutional and legal environment is seen as the prerequisite "bridge" between the ATLMP and afuture National Property Regularization Program APL. The bridging credit will: (a) resolve complextechnical, institutional and legal issues; (b) test the land rights regularization process and methodology,identifying legal and procedural improvements and reforms needed; (c) let the stakeholder consultationprocess intemalize and analyze the most sensitive policy, legal and other issues; (d) obtain approval of thelegal changes; and (e) decentralize, build capacity in and foster, collaboration among the main landadministration institutions, and between them and private partners, to prepare them to implement theimproved land rights administration framework. At the same time, the proposed Land AdministrationProject will regularize land rights under an improved and integrated methodology.

Finally, the sustainability of the rural financial branch network supported by the pilot Financial Servicescomponent is reasonable for 12 existing branches of Bancentro and BDF ( see section 4.2 C). There are noimmediate plans for a follow-on operation.

6.2 Transition arrangement to regular operations:

See paras under 6.1

7. Bank and Borrower Performance

Bank7.1 Lending:

Bank lending performance was Satisfactory, but this requires qualification. Bank performance was good inworking closely with GON on its defined priorities and urgent needs, and to improve the enablingenvironment. The SAR describes a series of Bank-prompted legislative, organizational, policy andregulatory changes; actions to guarantee land property rights and resolve issues/conflicts; definition ofagricultural sector priorities; and linking the project to the sector policy and administrative frameworkobjectives of the IDB's AGSAL (1992). While these kinds of actions were essential precursors to

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successfully re-initiating agricultural lending, some of them, especially in the land sector, are seen ashaving created additional complications by being piecemeal and not rational parts of a larger strategy.F[owever, many aspects of the project were innovative, including the attempt to create a market foragricultural services.

It is acknowledged that because of the post-conflict situation and institutional weaknesses, project desig,nwas largely Bank-driven, and that Borrower preparedness was not optimal: institutions, policies andeconomic reforms were fragile and the SAR mentions this. The multiple activities and institutionsdepended heavily on cooperation agreements, statements of commitment and special committees forcollaboration and execution. But, this ICR emphasizes again, the context was unusually difficult, theproject responded to Govemment's stated strategy, and many aspects of project design were consideredbest practice in the Bank and worth launching in Nicaragua, at that time.

7.2 Supervision:

Bank supervision performance is rated Satisfactory on balance and clearly more effective in the final ears,but some aspects were weak. Frequency was satisfactory (20 missions between February 1994 and June2000), with an intensive effort (three missions) in the first year to launch the many activities. Consistelntefforts were made to field supervision teams with appropriate expertise. There were three Task Managersin seven years. Driven by the demands and nature of the project, and especially by institutionalshortcomings, missions tended to focus on physical and bureaucratic aspects -- physical targets achievedunder Annual Operating Plans (POA), preparation of Terms of Reference, and a range of procedural aidinstitutional matters -- and less on developmental objectives. A recent QAG review (September 2000)specifically notes this same tendency, even in the final stages of the project. Borrower agencies had somedifficulty handling the many requirements of Bank supervision action plans, and their responsivenessfluctuated (not helped either, by repeated changes of leadership in MAG/MAGFOR and INRA/OTR,combined with other institutional changes, including in INTA). On the other hand, agencies came to dependon the Bank's action plans for a "road map" between missions. Looking at other aspects, supervisionteams should have insisted on the Borrower establishing proper monitoring and evaluation systems/capacity(while not overlooking the Borrower's own responsibility for taking the initiative in this regard);reimbursement of disbursement applications could be slow, taking up to five months; Bank approval ol thethird amendment to the DCA, requesting reallocation of resources to INTA activities to speed upd'isbursement of the Swiss contribution, for which the Borrower expected rapid approval due to pressingneed, instead took twelve months; and, in the case of the Financial Services pilot, IDA and the Borrowercould have paid more attention to outcomes, potential and priorities, even if it was a pilot, to avoid a lackof TA for capacity building in participating banks, and lower than expected achievements.

Supervision focus shifted in the last 2-3 years from the Agricultural Technology component to the LandManagement component, which had persistently lagged. The strategic focus was also stronger in this latterperiod, stressing policy, legal and institutional matters* equally, without omitting the operational andtechnical side. The emphasis on strategic recommendations was intended to recuperate time, costs andre-focus on project objectives, as well as to pave the way for new operations; and the Borrower foundadvice provided during this period to be clearer, and action plans more realistic.* Liw 290, Reorganization of the State, and INRA's absorption by MAGFOR, had multiple effects on the project and its institutions and explalTismuch of the new focus of supervision.

Mid-term Review (MTR). The MTR* was late, its outcome was less than expected and Bank follow-upwas modest, given that disbursements at the time of the MTR were only US$11.8 million compared to theexlpected US$31.2 million (72% of total), and important activities, particularly under the Land

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Management component, were delayed. The MTR report downplayed the lack of impact evaluation, ongrounds that measuring the contribution of the project to agro-livestock development in Nicaragua was notintended at this time because the project was only at its half-way mark, the methodology (for impactevaluation) appeared questionable and improvements were needed.** Recommendations were mostlyadministrative/managerial, emphasizing the Agricultural Technology component. The report needed betterstructure: lessons were presented in unorganized fashion as the outcome of several workshops; and theconfusing presentation reduced the impact of the recommendations. The Bank was not entirely satisfiedwith the report and some revisions were made in conjunction with the GON, but the final version did notvary greatly. Major design changes to the Project were not believed necessary. Under the LandManagement component, titling targets were reduced; and some institutional changes were made at INTA(more flexible administrative and operational systems with reduced activities based on fewer objectives).The Borrower Completion Report states that the MTR, while already late, should have waited several moremonths to permit dialogue with newly-elected authorities, and build support for the project.* Evaluaci6n de Medio Termino, J.E. Austin Associates, July 5, 1996.** Apparently, a baseline survey was done, covering 551 landholders selected from a random sample of 7,747 farm units in a 36,000 Km2 area in 6Departments. The sample was considered flawed due to its high degree of heterogeneity and showed only minimal impact from agrarian reform,contradicting available INTA data. The MTR consultants felt that the sample was useful for evaluating the impact of agricultural technology onproducer income, but the resulting report published (Nitlapan, 09/22/96) lacked cost of production data and hence conclusions on impact were not

possible. Such data was belteved to be available at the time, but there was no follow-up, including by the MTR consulting firm or the Bank.

7.3 Overall Bank performance:

The Bank's overall performance was on balance Satisfactory but mixed. IDA had an ample vision ofNicaragua's development path and believed the moment was right to pursue it, even while acknowledgingthat conditions on the ground were not ideal. Actual and proposed new Bank-supported projects reflect thelessons learned, including lessons from certain weaknesses in the Bank's own lending and supervisory roleunder ATLMP.

Borrower7.4 Preparation:

Borrower performance during preparation is rated Satisfactory, given the historical context and thewillingness and commitment of Government to resolve critical issues, improve the enabling environmentand respond to Bank requirements. The Borrower probably under-estimated project complexity but lackedthe established dialogue or experience with the IDA, after IDA's prolonged absence, to question the design.

7.5 Government implementation performance:

Government performance is rated Satisfactory overall, based on the aggregate implementation performanceof involved public agencies and of the Borrower, MAGFOR. Government's commitment to the projectfluctuated periodically -- including as an understandable consequence of the post-electoral period andinstitutional upheavals in 1997 and 1998 -- but insofar as counterpart funding, and thus disbursementperformance, is a key measure of that commitment, performance was satisfactory.

7.6 Implementing Agency:

Project execution revealed the institutional shortcomings acknowledged during preparation. While thedetailed, time-bound action plans of supervision missions were intended to promote progress, performanceand inject discipline into implementation processes, they also convey the impression that IDA's expectationswere too high, and may partly explain agencies' periodic unresponsiveness. MAGFOR, as the mainimplementing agency, was charged with project coordination and with transferring most of the creditproceeds, about 83% of which were earmarked for INTA and INRA. But MAGFOR lacked the leverage to

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enforce CONAGRO decisions to shift those resources when such action was appropriate. The CSJ, whichranks equally with the Executive Branch, was made subservient to INRA/OTR and its commitment topro ject execution was not always wholehearted, with tangible effects on the Registry sub-component. T]aeMTR recommended some institutional improvements, but stopped short of advocating significant change.I

INTA undoubtedly increased its institutional capacity as a result of the project's technical, administrativeand financial demands, and through project-funded training and the scholarship-supported study prograrn.While it is generally regarded as the best institution of its type in Central America and is especiallywell-regarded in agricultural research, the project revealed the need for: (i) standardization/training inon-farm, participatory, diagnostic techniques to move away from supply-driven technology transferpractices; and (ii) more subject matter specialists, and more appropriate technology to transfer (which ,orATLMP may have reflected inadequate preparation of the original component, including technicalanalysis). Under the project, INTA's data collection and analysis skills proved inadequate to support itsplanning and decision-making. Important data were collected but not used. Data from the ATP 1 and A.TP2programs were only partially analyzed with little effort to explain the differences between farmers orreg: ons, or to determine adoption rates or impact on farmer incomes/well-being. Data collection, monito1 ringand evaluation and information systems are therefore a top priority of the new APL. The MTR foundINTA's administrative systems adequate to support its field staff but made recommendations forintegrating technology generation and transfer, as well as operational planning and evaluation, with itsbuc get formulation and cost control systems, to maximize the allocation and use of resources.

In response to the preparation of the new IDA-supported Agricultural Technology and Technical Educa-ionProject, institutional development actions were boosted in the final months including: strengthening fannerorganizations and marketing information capacity; more intensive involvement of agricultural researchl rsin technology transfer; and reorganization of its technology generation system to be more accountable andmanageable, and reduce the administrative burden on technicians, through three well-defined projects.*Among other effects, the extension technician came to prominence as the front-line of INTA's services, andthe extensionist/client ratio was reduced to 1:300-500 (from 1:2500). The Government, under the newpro ject, is seeking to re-position INTA through: (i) emphasis on whole farm planning, marketing and faIminsurance; and (ii) viewing INTA as one player among many in agricultural technology services, althoughINTA is likely to remain the key entity in services for the poorest and for GON's priority programs.

* Research and Development Project; Agro-Livestock Extension for Favored Zones; and Agro-Livestock Extension for non-Favored Zones.

INRA/OTR. Multiple institutional and leadership changes and turnover of key institutional staff delayedproject-financed land titling activities, limiting their achievement to about 60% of appraisal estimates fortitling. Rural land titling was transferred in 1998 from TNRA to the Office of Rural Titling (OTR) with inthe Intendance of Property under the Ministry of Finance, and INRA was absorbed by MAGFOR, all uiiderLaw 290. OTR lacks sufficient qualified personnel and equipment to carry out its field responsibilities.,shows deficiencies in administrative and financial controls, and lacks operational, supervision and quali:ycortrol capacity. The institution has had limited time to develop. OTR's organizational structure and abilityto hiandle land titling operations have improved -- it demonstrated capacity to grant titles in low-conflictareas -- but to deal with the more numerous, difficult areas, it needs strengthening and reorganization. Theproposed new Land Administration Project would implement an organizational development program forthe Intendance of Property* building capacity in its central and field offices.

* Law 290 in 1996 grouped several land institutions including OTR (formerly INRA), for efficiency/streamlining purposes, within a new Intencl3nceof Property, under the Ministry of Finance.

INETER is a multipurpose, autonomous institution with diverse responsibilities including meteorologic.al,geological and seismographic. While it is responsible for the urban and rural physical cadastres, for most

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of the project period it had no cadastral department - a Directorate of Cadastre was only created atproject-end within the Law 290 framework (at the initiation of the project INETER was a division of theMinistry of Public Transportation which appointed the INETER General Director). INE'I'ER benefitedfrom stable management throughout the project. Its technical personnel are skilled. However, managerialand administrative shortcomings and over-centralization affect its executive and technical responsecapacity. Regional offices collect information and send it to Managua, lacking decision-making authority.Decision-making shows a strong technical bias. Information management tends to be handled in animprovised manner. The shortcomings of INETER are replicated in its regional offices. All needstrengthening, more trained personnel (salaries are low, due to generalized fiscal restraint policies) andgreater resources and equipment for field work. INETER's procedures for verifying titles, and otheractivities, are costly for the beneficiary and vulnerable to manipulation due to the need for better qualitycontrol and norms for service provision. The 1999 institutional reform which gave INETER technical andadministrative autonomy, at the same time revealed the absence of long-term programs and strategic plansfor the national cadaster, and the need for decentralization, better information management, and internalintegration of its multiple responsibilities.

CSJ tended to act slowly, consonant with its collegial decision-making at senior magistrate levels, whichdelayed the execution of action plans agreed with the Bank. Day to day sub-component managementoccurred at the administrative level where professional/human and financial resources were inadequate.*Its coordination with INRA/OTR suffered until the latter stage of the project, in part because of a projectdesign flaw that downgraded its actual institutional seniority in favor of INRA/OTR, which sapped CSJ'scommitment to the project. As stated earlier, CSJ's inability to send the draft Registry Modernization Lawto the Assembly reduced achievements of the core modernization objectives of the sub-component. Bankmissions in the final stages advised CSJ to put its weight behind this law, as well as creation of the nationalDirectorate for Public Registry, considered fundamental for nationwide registry modernization andstandardization. These issues will be pursued under the proposed Land Administration Project.* In the context of automating the Registnes, which remains the subject of pending legislation, the MTR noted that the 16 separate regional registries,managed by 12 magistrates, lacked even minimal uniformity of standards or procedures and that this situation would make automation verv costly interms of hardware/sofltware and maintenance of databases.

MAGFOR. In the final years of the project, MAGFOR (previously MAG) demonstrated leadership,designing and promoting an agro-livestock and forestry policy which contributed to the new emphasis onsectoral policy and analysis in the Bank-Borrower dialogue. Its technical staff are knowledgeable andskilled, and by end-project proved successful in responding to sectoral crises, as demonstrated in theirhandling, along with INTA, the PCU and RUTA, actions after Hurricane Mitch in 1998. MAGFOR ledthe emergency programs to restore cropping capability and equipment for affected farms and prepared afield survey evaluating damages in affected zones, which guided reconstruction efforts. Similarly,MAGFOR, with INETER and MARENA (formerly IRENA), coordinated extensive, project-financedaerial photography of hurricane-damaged areas.

Nevertheless, MAGFOR could have done more to develop a sub-sectoral policy for agriculturaltechnology. In the last three years of the project, MAGFOR should have pursued more vigorously andadequately its responsibilities for land policy formulation as mandated by Law 290. Its personnel tend to beoverly-focused on bureaucratic tasks at the expense of greater field-based supervision/awareness andsupport of the extension technicians/technical activities, and insufficiently engaged with their small-farmclients. The agency's lack of field awareness was ultimately a factor in the design of the new AgriculturalTechnology Project, through the limiting of extension coverage under the renewed, improved ATP Icomponent. MAGFOR communication with INTA was complicated by INTA's institutional autonomy andindependence.

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CONAGRO. The National Agricultural Council (CONAGRO)* was established by the GON duringproject preparation to provide a coordinating body for sector-wide policy formulation and management.Neither CONAGRO nor its Steering Committee functioned as the deliberative, decision-making forumexpected in the SAR and its connection to the project is not clear. MAGFOR (as President of CONAGRO)had limited scope to execute decisions taken in that forum -- which affected the overall coordination of t heproject -- since all agencies represented were of equal rank and independence. Further, some 83% ofproject resources were allocated to INTA and INRA, whose control of those funds meant that CONACROcould not reassign or change priorities. In general, the institutional design of the project did not foster Ilieinter-agency collaboration envisaged.

* CONAGRO was supported by funds from an IDB Technical Cooperation Project. It was to introduce sector priorities into national economic rolicyformulation; translate policy decisions into practical action plans including those affecting INTA; and ensure that sector agencies allocated resourzes tosupport sector policy priorities.

PCU. The PCU (Project Coordination Unit) had a complex coordinating, administrative and advisory role.The unit was overly centralized, in part to compensate for the weakness of involved agencies (procurementand other areas), and concentrated considerable power, especially over administrative and financialapprovals and the distribution of project funds between agencies and activities. It micro-managed itsresponsibilities both for accountability purposes and to maintain control of the large, diverse project, wlhichfrom its perspective, given Bank rules and performance requirements, seemed logical. Over the life of tfieproject, the PCU had two coordinators, three disbursement specialists and a stable procurement staff. T -leMTR (1996) recommended expanding the PCU's activities to include training, property demarcationactivities and technical assistance, an error given that incremental personnel and/or a multidisciplinary teamwere not contemplated to support these additional responsibilities. In the final project phase, the PCUfrequently provided administrative guidance on Bank procurement, disbursement and financial proceduiesfor new personnel in executing agencies after the 1996 elections and passage of Law 290; and directlymanaged, from mid 1997, the financial and administrative aspects of the cadastral and registrysub-components, including clearing all TORs. The PCU shares responsibility for delays in projectexecution, lack of supervision on the ground and infrequent visits to other project entities. Bank supervisionshould have addressed the shortcomings of the PCU more forcefully and creatively. Its much improvedperformance from 1998 reflected the Bank's own, more strategic approach to supervision, especially ofweaker components.

Swiss Government Co-Financing

COSUDE. The quality of technical supervision support by COSUDE was excellent, provided by the sameperson throughout, thereby ensuring the institutional memory for donor supervision. Bank supervisionmissions always included COSUIDE personnel. IDA managed the Swiss Govemment co-financing of aboutUS$4.5 million under an administrative agreement and the funds were allocated to certain categories ofexpenditures including FAITAN, under the INTA component. By end 1997, with only US$0.6 million(13.4%) disbursed, the GON requested a third amendment to the DCA permitting the reallocation of Swissfunds to all INTA-executed activities, a request which took IDA 12 months to approve, in part due to ahiatus caused by the changeover of Bank project Task Manager. In the interim, INTA activities werefinanced by Bank funds not originally programmed for such use since the liquidity in the COSUJDE Sp, zialAccount was limited to US$200,000 -- inadequate to maintain an acceptable level of activity under theINTA component, and which delayed reimbursement to INTA and increased the frequency of financialreprogramming.

A fourth amendment to the DCA in May 1999 increased the COSUDE Special Account to US$300,000(the Borrower had requested and COSUDE had agreed to US$500,000), but by October 1999 with the

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approval of the second extension of the Closing Date to end-June 2000, IDA had already commencedrecuperation of the original Special Account, greatly reducing the utility of the increase. From end 1999 toClosing, reimbursements were not timely enough to maintain the liquidity required to implement INTA'scommitments. Similarly, certain requests for No Objection under the Swiss contribution, sent to IDA in theproject's final stages, were processed with delays. COSUDE did not prepare a Completion Report on itsactivities, but did provide comments on the Bank's draft ICR.

7.7 Overall Borrlower performance:

The Borrower's performance overall was Satisfactory. The original project designs required a standard ofinstitutional performance which the Borrower was unable to fully satisfy - not surprisingly, there weredifficult issues and problems, some shared with the Bank. But these should not detract from the realsuccesses. Bank requirements, seen by the Borrower as onerous on occasion, nevertheless served animportant function of transferring knowledge/technology to Borrower agencies, concerning the standards,actions and practices needed to execute complex programs, and its institutional performance, albeit unevenwithin and between agencies, improved significantly over time.

8. Lessons Learned

General:

D M&E: Monitoring and evaluation (and management information) systems should be in place at projecteffectiveness or at least arrangements should be made so as to ensure their operational-readiness withinthe first six months. Outputs and impact must be measurable/measured, especially important forinnovative project activities and methodologies which offer unique learning opportunities for IDA (aswell as the Bank) and the Borrower.

* Institutional Collaboration: Implementation and cooperation agreements do not guaranteecollaboration between disparate institutions with varying roles/functions, and degrees of politicalinfluence and capacity. Projects with multiple institutions require a formal understanding of theincentives/mechanisms for executing the project properly, identifying complementary aspects, andunifying procedures. IDA should broker commitment to sensitive project activities at the highest levelsof government and with a pluralistic group of actors.

Agricultural Technology

* Strategic Approach: Government's strategy for a sustainable system of agricultural research andtechnology transfer in Nicaragua should continue to build on the idea of a technology and services"market", which includes diverse actors: NGOs, rural unions, private sector bodies, academia andsectoral agencies, in addition to INTA, which is nevertheless likely to remain the primary provider ofpublic extension services in Nicaragua.

* Co-financed Extension Services: While the results of the ATLMP do not yet conclusively supportco-financed agricultural extension in Nicaragua, sufficient lessons emerged to greatly improve theframework and content of upgraded, follow-on mechanisms. Farmer pay/cost recovery programs forsmaller, poorer producers - through INTA or private firms - need caution, including on equity grounds(but even partial cost-sharing can strengthen small farmers' participation and ownership, in asupportive environment).* Quality control systems and capacity for publicly-financed andprivately-delivered services, are essential.

* It should be noted that few countrtes with strong, competitive agricultural sectors have imposed direct cost-recovery on farmers.

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* Disaster Response: The experience of Hurricane Mitch demonstrated the importance of extensiveadoption of soil conservation technology and for emergency response teams to assist farmers' iecoveryof normal agricultural activities within hard-hit areas.

Land Management

* Legal and Regulatory Environmentfor Land Titling: The ATLMP Land Management componentdemonstrated the need for a comprehensive, integrated framework which addresses legal, institutionaland policy issues governing land administration in Nicaragua, removing bottlenecks, simplifying3procedures and above all, generating a clear internal policy vision, prior to embarking on a massiveland titling program. Policies must be consistent and the legal and institutional framework appropriate,to achieve long-term sustainability and legitimacy.

* Beyond Land Titling: Land titling under the ATLMP, while successful per se, concentrated on theaward of agrarian reforn titles, with less attention on other critically important actions, such as therecognition and protection of indigenous land rights, and it was clearly insufficient to resolve landtenure conflicts and legal/regulatory hazards. Field studies, including those done under the ATI MP,show that demand for registration in fact greatly outstrips demand for title and that ensuring access toland title is a necessary but insufficient condition for alleviating poverty. ATLMP studiesdemonstrated a modest but positive correlation between land titling combined with proper registrationactivities-- more secure tenancy -- and land-related investment, better farmer incomes, improved landvalues and increased access to credit.

* Cost-effective Titling: Individual titling on demand rather than area-based, systematic titling with closelinks to cadaster and registry, has a high implicit cost due to the absence of economies of scale forregistration/legal support and plot survey, at the same time raising equity questions, and increasing thelikelihood that the titles delivered continue to be legally flawed.

* Institutional Decentralization and Integration: The organic and functional connection betweencadastre, titling and registry requires also the decentralization of the relevant land administrationiagencies to foster a systematic land regularization process at the departmental level, to facilitate theintegration of service access for and delivery to, beneficiaries.

* Gender Issues: While the improved legal framework in Nicaragua has legitimized and increasedwomen's land tenure security in the reformed sector in Nicaragua, especially with the advent of jointtitling, important gender differences remain to be addressed. Certain title situations result in reduticeddecision-making power over agricultural production, as well as reduced access to land, agriculturalextension services and credit.

Rural Financial Services Pilot:

* Design Issues: The pilot experience reinforced the need for clear operational objectives andperformance targets, and the importance of an effective monitoring and evaluation system based onthose parameters, particularly in the context of a pilot experiment. Inclusive dialogue about theactivities and strategy for achieving those targets, and a clearer understanding of participatinginstitutions' financial conditions and incentives, is vital to the design of sustainable interventions in thefinancial services industry.

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* Critical Gaps in Banks 'Know-How and Culture: Demonstrating profitable micro-lending productsand techniques is key to increasing private banks' loan outreach among those clients who are perceivedas too costly and risky for profitability, and who are considered natural clients of subsidized donorprograms. Focusing efforts on a single successful test case may be the most effective means ofbreaking through private banks' orientation towards formal sector clients and bias against poor ruralentrepreneurs.

* Legal and Regulatory Framework: Developing risk evaluation, provisioning formulae and regulatorymethods tailored to small-loan portfolios is imperative for fostering the prudent expansion of microfinance services in Nicaragua. Putting reliable registration and confiscation systems in place forpledging moveable assets as loan collateral is similarly high among priority financial market reformslikely to significantly facilitate the increased reach of credit services to producers and entrepreneurs inrural areas.

* Harmonizing Sector Interventions: Efforts to measure the impact of donor-sponsored programs andestablish best practice guidelines for their implementation may be effective in preventing unintendedconsequences on financial sector interactions, including the perception that small rural borrowers arenot credit worthy.

9. Partner Comments

(a) Borrower/implementing agency:

The following are the Borrower's (MAGFOR) comments on the Bank's draft ICR:

SefioraDonna Dowsett-CoiroloDirectoraAmerica CentralBanco Mundial1818 H Street N.W.Washington, D.C. 20493

Estimada Sefiora Directora:

Comentarios: Evaluaci6n del Cierre (ICR) del A TLMP, Credito AIF 2536-NI

Por este medio me refiero a su carta del 13 de junio recien pasado dirigida a mi predecesor, Ing. JoseAugusto Navarro Flores, donde le remite el informe en referencia para revisi6n por parte del Prestatario,antes de ser presentado al Directorio del Banco Mundial.

Sobre el particular, hemos revisado el documento encontrando el mismo en linea con la versi6npreparada por el Prestatario, notando que se le han incorporado algunos elementos que lo hanenriquecido reflejando sustancialmente en forma objetiva los alcances del Proyecto, asi como laslecciones aprendidas. No obstante lo anterior, nos permitimos sefialar los siguientes comentariospertinentes:

* Componente Programa Piloto de Servicios Financieros Rurales. En este Componente queremosenfatizar que segun el texto secci6n 4, parrafos 4.47 al 4.62 se explica muy bien su ejecuci6n ydesempefno, sin embargo, hacemos notar que este programa no tuvo en su disenlo metas

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cuantificables claras, tal como lo reconoce el anexoldel ICR, (key performance indicators, pag. 40,donde textualmente dice "No targets established". Proponemos, que sea evaluado "Satisfactoio'"tomando en cuenta que la inversi6n total del Piloto de cerca del US$1.00 mill6n, es poca comparadacon los mayores beneficios que se estan obteniendo con las 11 sucursales bancarias privadas nizralesque permanecen, aun hoy dia, operando en sus respectivos municipios.

* El segundo comentario esta relacionado con la evaluaci6n del sub-componente de Registro Publico.Notamos que el ranking de este sub-componente es "Unsatisfactory". En la secci6n 4, parrafcs4.40 al 4.43, hay ciertos elementos que queremos aclarar. En el 4.40 se dice que la "misi6n cer.tral"de este sub-componente era modemizar totalmente los Registros Publicos, y en el 4.42 que IE CSJ fa116 en someter a la Asamblea Nacional una nueva Ley de Registro y que esto fue obsticulo p aracumplir con su "misi6n central". Encontramos que estas afirmaciones son opuestas al parrafo 4.29que dice que el objetivo principal del sub-componente del Registro fue apoyar junto con el IN ETER(Catastro) el proceso de titulaci6n del Componente "Land Management", e iniciar en INETEi ! y enla CSJ sus respectivos procesos de modernizaci6n.

Ademas, en el anexo 1, no aparece como indicador la emisi6n de una Ley de Registro, aunque estai nosconcientes de que es imprescindible para su modemizaci6n.Por otro lado creemos que no se podiaesperar una total modemizaci6n del Registro Publico con los recursos de US$3.3 millones asignados aeste sub-componente, cantidad relativamente mucho menor a los US$16.20 millones asignados al d-Titulaci6n y a los US$14.00 millones al Catastro. Tomando en cuenta las observaciones anteriores lesolicito revisar el ranking del sub-componente del Registro de "Unsatisfactory" a Satisfactory.

* En el numeral 7.9 (Overall Borrower Performance), solicitamos eliminar la frase "a rating oJMarginally Satisfactory might be more accurate ". En ese sentido hemos hechos algunasobservaciones a ese parrafo tomando en cuenta la idea original del mismo. Con respecto al pArrafo7.10, agregamos informaci6n sobre algunos aspectos institucionales nuevos que afectaron de aLgunamanera el rol de CONAGRO como principal 6rgano de coordinaci6n del Proyecto. En el parrai-o7.13, (INRA/OTR) aclaramos el efecto de competencia del INRA-MAGFOR-OTR, como productode la Ley 290 (la palabra DINRA es un error en el texto). En el 7.14 (INETER) y 7.15 (CSJ),sugerimos cambios en su respectiva redacci6n.

* Con respecto al parrafo 7.17 relacionado con el MAGFOR, nos cabe manifestar que el mismo 11orefleja el punto de vista del Prestatario por lo cual solicitamos que su redacci6n sea sustancialfaentemejorada de tal manera que refleje mas objetivamente el comportamiento del MAGFOR,especialmente lo referente a los aspectos relacionados con la comunicaci6n entre INTA-MAG FOR.Considerando lo anterior hemos propuesto refrasear el pfrfafo 7.17 de una manera mas neutral yobjetiva. (favor ver nuestra propuesta del parrafo 7.17 refraseado).

* Con relaci6n al 7.18 relacionado con CONAGRO hemos propuesto refrasear dicho parrafoagregando informaci6n para equilibrar mas la idea original del texto.

Adjunto encontrara el texto revisado del ICR incluyendo los anteriores comentarios asi como otras,observaciones para que sean tomadas en cuenta en la versi6n final del documento antes de que este seaconocido por el Directorio del Banco Mundial. Por separado y por medio electronico le estamosremitiendo a la Gerente del Proyecto, Dra. Isabel Lavadenz Paccieri, el texto completo con nuestrasobservaciones.

Finalmente, en nombre del Prestatario asi como de todas las agencias ejecutorias del ATLMP leagradecemos su decidida cooperaci6n que tuyimos de parte del Banco Mundial durante la ejecuci6n de

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este Proyecto asi como durante el proceso de su evaluacion que culmina con este documento.Personalmente, aprovecho esta ocasi6n para reiterarle mis mas apreciados saludos.

Genaro A. Mufiiz B.MINISTRO

(b) Cofinanciers:

The following are COSUDE's comments on the Bank's draft ICR:

The draft ICR provides a wealth of information on the design, implementation, impact and achievements ofthe Project and is essentially consistent with the Borrower's ICR, although some statements are of a generalnature and not necessarily supported by empirical data. The main conclusions reached in the draft ICR arerelevant for further work.

The following issues have been identified as critical:

a) The absence of a monitoring and evaluation system. COSUDE's attempt to create such systemthrough the organization of a series of workshops in October 1993 failed. Unfortunately, project designwas not based on a logical framework and, consequently, throughout project implementation this issueimpeded a consistent follow-up and monitoring.

b) The nature of the supervision and Mid-term Review missions. COSUDE recognizes that thesemissions were focused on, and contributed to, the resolution of urgent implementation issues, rather than onmore fundamental issues. However, it also stresses that the increased importance of strategic and policyissues since 1997 was due to the composition of MAGFOR, rather than to stated objectives of World Bankand COSUDE missions.

c) Inevitable delays in the implementation. COSUDE stresses that administrative delays were due notonly to the complexity of the proceedings, but also to the lack of clarity regarding the roles of the differentagencies and institutions involved in the project, which led to ambiguities and conflicting application oftechnical norms.

d) The economic analysis and the need to assess the validation of technologies. The existing data inINTA needed to be evaluated from the technical point of view going beyond the economic rate of return,given the nature of the project. An ex-post economic analysis only makes sense when baseline data isavailable which, in this case, did not exist. Therefore, the affirmation about the low economic rate of returnof the technology component might not be accurate.

COSUDE emphasizes that a joint ICR exercise would have been a better option, and that it should havebeen involved in this exercise since the beginning. Comments on the ICR were sent by SDC to IDA inOctober 2000.

COSUDE concurs with the ICR's main conclusions and with the fact that the ATLMP was mainly alearning opportunity in a difficult environment, with some innovative highlights, but still modest impact.There is no doubt that there are important lessons leaned through the ATLMP that need to be taken intoconsideration in follow-up projects such as the one on agricultural technology and technical training.

Ernst Schaltegger

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(c) Other partners (NGOs/private sector):

Not available

10. Additional Information

Lessons from the Borrower Completion Report** I he Borrower's Completion Report was prepared by the Head of the Project Coordination Unit (in MAGFOR), with a team of consultants. ]'Lie tolength, only the lessons are included here. The full Executive Summary of the BICR is attached as Annex S.

"Project implementation has provided a wealth of experiences that could benefit future operations and.therefore, are presented with the purpose of enriching future projects."

* Project Design. IDA and the Borrower should closely assess and monitor the links between a proposedoperation and the institutional set-up under which project activities will take place. Adding numeroussub-components and executing agencies does not simplif-y the institutional structure.

* Evaluation System. Taking into account the original design of the project, it is important that futui eoperations include a simplified evaluation system that clearly defines appropriate indicators, andspecifically defines the methodology to be used for measuring results while taking into account thedifference between impact and performance indicators. It will be beneficial to determine from thebeginning of project preparation, an evaluation system capable of reviewing periodically the relevanLce,efficacy, and efficiency of project impact (expected and unexpected), in relation to its objectives.

* The establishment of an evaluation system with clearly-defined measuring instruments andmethodology would allow for an implementation evaluation as well as serve to measure projectprogress and impact, so long as both can be evaluated with a simple and applicable methodology. Thecurrent project had a Monitoring and Follow-Up System in which indicators were globally defined. Inaddition, the Project did not have a Base Line Study with which its performance/evaluation could havebeen compared. These shortcomings have had such an impact that, at the time of project closing, th -reis a wealth of fragmented information that makes it difficult to perform an in-depth, comparativeanalysis of the implementation and its real impact.

* Coordination and Institutional Strengthening. Given the historical and socio-economic setting duwnngproject conception, and given the number of entities involved in project implementation, it is importantto consider the need to have future operations with a unified working criteria and mechanisms amorLginstitutions that will ensure a close coordination. This will also allow for project objectives to be tnefocus of implementation, rather than the institution's own interests.

* Another important aspect to consider for future operations is to include a global Plan for Training andInstitutional Strengthening. Such a Plan would address clientele problems, changes in the globalmarket, and new technological advancements~ all of which are tangible realities through which the realneeds of the institutions involved can be taken into account as well. The inclusion of such a Planwould also contribute to ensuring the establishment of long-term objectives regarding institutionalpersonnel policies for the entities involved; which can, in tum, contribute to the stability of capablepersonnel for project implementation and institutional sustainability.

* It will be crucial that future operations pay close attention to the implementation capacity of theexecuting agencies, vis a vis, project size and complexity.

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* Operational Aspects: Concerning operational areas, project implementation was affected byinstitutional changes. Primarily, changes in the direction of internal policies and high personnelturnover in the entities involved. Policy changes were evidenced by the experience of the current OTR(formerly, INRA), which suffered a change in its institutional competencies as set forth by Law 290.Additionally, many changes in personnel policies took place, which resulted in staff changes at keylevels, including upper management and technical staff. These experiences clearly show that futureoperations must consider the importance of Project Operation Manuals which allow for an integratedand complementary administration of all areas involved in project implementation.

* Procurement and Disbursements: The procurement and disbursement areas of the Projectdemonstrated that it was necessary for all participating entities to become familiar with Bankprocedures in order to comply with its requirements. This lack of experience, combined with highpersonnel turnover within the agencies involved, caused delays in many activities as well ascontributing to a larger work load for the Project Coordinating Unit: it invested both time and humanresources in the other entities on various procurement procedures, preparing TOR's, and filling outlengthy contract formats. It will be beneficial to have future operations with simpler procurementmethods as well as to consider selecting and training personnel in each entity capable of carrying outthese activities.

3 Disbursement timeliness varied, ranging from 22 days to 5 months' delays. This situation particularlyaffected resource withdrawals from the Swiss contribution. It will be vitally important to have futureprojects agree on and maintain a schedule of disbursements in order to establish priorities whilemeeting the Borrower's need to successfully carry out project activities, allowing some measure offlexibility with regard to changes in project activities.

* Bank and Borrower relationship. Finally, it is strongly recommended that greater and smoothercommunication be exercised between Bank staff and the Borrower's executing agencies in aspectsrelated to, but not restricted to: procedures, criteria, priorities, target modifications, and policychanges, when these aspects warrant being addressed during the life execution of any project.

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Annex 1. Key Performance Indicators/Log Frame Matrix

Outcome / Impact Indicators:

Indicator/Matrix Projected in last PSR Actual/Latest EstimateExpected Output (SAR) Indicators (SAR) Results (June 30, 2000)

Agricultural Technology Component Activity/Unit and Goal Result / Output

A. Technology and Validation and Transfer 28,000 small farmers assisted by Some 45,000 small farmers reached ty(rJT): Test and compare at farm level research/extension services agricultural extension services by year 6altemative production packages targeted to by end-Project (SAR Year 5)the small and medium producers.

1,200 validation trials Ranged from 1,630 in year 1 to 359 in y ear 6.with interim fluctuations

4,800 transfer plots Ranged from 5,600 in year 1 to 1,561 ir: year6, with interim fluctuations

60% applied research trials on farm Reached 86% in year 5, dedining thereafter

25% adaptive research on nontraditional Reached 30% in year 5, declining thereafterexport crops

85 INTA staff trained in short-term courses 1,210 INTA staff received training

B. Massive Extension Program(ATPm): 110,000 small farmers attended, by end 2000 Records show about 114,000 attended (butinitiated in 1998 as an improvement on the actually about 250-300 farmers, i e., thosebasic, group method used since project who owned the demonstration farms).start-up (ATPb). Intended to support basicgrain production for family use, and reverseenvironmental deterioration

C. Soil and Water Management Conservation 28% on-farm trial plots 35% plots established in project periodProgram Introduce soil and waterconservation as a regular practice to improve 32% on-farm validation plots 983 validation plots established over courseNRM conservaton and develop sustainable . of projectfarming systems in Nicaragua 2,447 demonstration plots over course of

600 staff trained project

1,330 trained in project perod

D. Integrated Pest Management (IPM): 115 staff trained in IPM planning and 1,333 staff trainedPromote safe, economically viable and organizationenvironmentally sound pest managementmete ods

E. Agricultural Research Grant (FAITAN): Financed 35 grants startng in year 3 5 grant-supported projects financed, startingFinance high priority applied researchprojects using nabonal /intemationalexpertise, adapting existing technologies fastand cost-effectively Demand-driven (no targets provided). Pilot 289 farmers in year 1 (1995). Reached 1,347

F. Co-financed Agricultural Extension program launched in 1995 communities and farmers by end-project.Services - ATP1: Improve effectiveness ofpublic extension by linking providers directlyto clients who would co-finance costs

G. Private Technological Assistance (ATP2) 6,500 farmers entered program by end year 5 Program reached average 9,000 farmers perProgram: Support transition from year, starting at 5,500 in 1995, rising tosupply-driven to demand-driven extension 14,000 in 1998 and declining to 5,700 inservices using market incentives to enhance 45 extension farmers participating 2,000.coverage and quality Reached 14 in 1999 and fell to 8 in 2001)

1,320 applicators and farmers trainedH. Training in Pest Management Practices 54,000 farmers and applicators trained in(PROMAP): Strengthen MAG and IRENA's pesticide application and managementinstitutional capacity to train pesticide techniquesapplication in use and disposal methods. No targets established

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I. Academic Studies: Courses to increase 112 professional courses organized|academic level of selected INTA staff.

Output Indicators:

Indicator/Matrix Projected in last PSR Actual/Latest Estimate

Land Management Component

A. Titling: Improve land security and property 1,011,000 manzanas of land titled 1,258,000 mz brought under proper legal titleownership of small farmers by issuing legally About 28,140 titles were issued, benefitingregistered titles 34,000 titles to be issued in "reformed about 50,000 persons directly and another

sector" 118,000 indirectly. 914 titles also issued toprivate coffee growers

Second Phase (Years 4-5) would cover Phase 2 not done. Overall target for reformanother 16,000 titles, sector reduced to 32,000 of which about

28,140 done.

Titles in "private sector" (no target 914 titles issued to private coffee growers.established)

B. Cadastre: Establish technical and Increase technical level of INETER's staff. 450 staff trained in GPS, mapsetter, digitaladministrative basis for a multipurpose, photogrammetry and telemetry.standardized cadastre covering 78% ofnational territory. Construct 15 fully-equipped regional offices. 7 offices constructed due to lack of available

land, and budget constraints.

Aerial photography covering 50,000 km2 38,300 km2 done at 1:40,000 (76% of target

due to weather conditions).Otho-photomaps at 1:10,000 covering 50,000km2 23,053 km2 done, less than target due to

weather conditions.Not included in SAR

National Altimetric Network related to 385Geodetic Grid points.

200 Geodetic points based on GPS50 points distributed nationwide (targetrevised based on new technologies).

Not in SARTerritorial Information System covering 7,000km2, in 5 pilot zones (Project MICADO).

Not in SAR Satellite imagery of entire country and prep.

of maps.

C. Public Registry: registry data to be 2.0 million images in Year 1. 2.6 million images done by end of Year 3.

available for more efficient public use. Nationwide Index of Property Owners Records of 600,000 properties filmed,amended and re-entered in system.

Training of Registry personnel 245 staff trained.

Rural Financial Services Pilot Component: 24 No targets established Pilot invested US$ 670,000 to establish 22month pilot to increase the presence of branch offices, which opened 12,000 savingsprivate banks in nural areas and demonstrate accounts and 430 active loan accounts (nonethat financing credit services to small rural which was in the <US$450 category eligibleentrepreneurs could be profitable. for financing under the Project).

End of project

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Annex 2. Project Costs and Financing

Project Cost by Component ( US$ million equivalent)

Project Component Appraisal Estimate Actual/Latest Estimate Percentage of AppraisalUS$ million US$ million

Agricultural Technology 21.80 30.03 138Land Management 33.60 35.72 106Rural Financial Services 0.00 0.99 N/ADevelopment PilotNatural Resources 0.00 0.55 N/ACoordination Unit and 2.41 6.28 260MAGFORTotal 57.81 73.57 127

Project Cost by Procurement Arrangement (US$ million equivalent) *

Lxpenditure Purchase Method Purchase Method_Categories Appraisal Es timates (US$ millio n)_ Actu I(a) (US$ million)

____ ; : y :01 ICB NCB Other NBF Total ICB NCB Other NBF Total

Goods (1) 4.33 4.60 0.00 0.00 8.93 4.95 4.39 0.61 0.00 9.95Works (2) 6.05 5.25 0.00 0.00 11.30 6.34 4.26 1.46 0.00 12.06Services (3) 6.05 6.70 8.86 0.00 21.61 7.98 8.84 7.77 0.00 24.59

PTA (6) 0.00 1.70 0.00 0.00 1.70 0.00 3.56 0.00 0.00 3.56Research 0.00 0.35 0.00 0.00 0.35 0.00 0.47 0.00 0.00 0.47Grant(4) I I__

Operating 0.00 0.00 2.22 0.00 2.22 0.00 0.00 2.61 0.00 2.61ExpensesSub-loans(8) 0.00 0.00 0.00 0.00 1.59 0.00 0.00 1.59 0.00 1.59

Unallocated(9) 0.00 0.00 0.00 0.00 0.10 0.00 0.00 0.10 0.00 C.r10

Total 16.43 18.60 11.08 0.00 47.80 19.27 21.52 14.14 0.00 54.93(a) Procurement activities from Fourth Amendment to April 2000

Project Financing by Sources and Components (US$ million equivalent) - SAR vs. Latest Estimate

CiON. Prods. IDA SWISS G % Prods. IDA SWISS % Appr.Contribution Appraisal Contribution Estim.

______ 0 :S ; ::: 2;XEstimate _ _ _ __:__iX_

Agricultural 3.30 0.31 13.70 4.49 37.71 17.90 0.67 7.35 4.11 40.81Technology _ -Land 5.69 0.00 27.91 0.00 58.12 7.00 0.00 28.72 0.00 48.55Management

Rural Financial 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.99 0.00 1.35ServicesDevelopmentPilot _ . _ -

Nalural 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.55 0.00 0.75Resources I _ -

Coordination 0.00 0.00 2.41 0.00 4.17 0.47 0.00 5.81 0.00 8.54Unit andMAGFOR _

TOTAL 8.99 0.31 44.02 4.49 100.00 25.37 0.67 43.42 4.11 100.00

* Note: NBF= Not financed by IDA is not applicable to the project. Others, include pnce comparison purchases.

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IDA Disbursements - SAR Projections (US$millions)

SAR Projection1994 1995 1996 1997 1998 1999

Annual 5.40 13.70 12.40 6.50 4.20 1.82Cumulative 5.40 19.10 31.50 38.00 42.20 44.02

IDA Disbursements - Latest Estimate (US$millions)

Latest Estimate 1994 1995 1996 1997 1i998 1999 2000

Annual 3.60 5.00 5.70 9.40 8.80 6.70 4.22Cumulative 3.60 8.60 14.30 23.70 32.50 39.20 43.42

SWISS Contribution - Disbursements (US$millions)

Latest 1994 1995 1996 1997 1998 1999 2000Estimate (*)Annual 0.05 0.11 0.18 0.60 1.20 1.13 0.84Cumulative 0.05 0.16 0.34 0.94 2.14 3.27 4.11

* Project financing approved at SDR31.10 millions (equivalent to US$44.00 millions) and CHF6.75 millions (equivalent to US$4.50 millions). Atproject closing the SDR31.10 million was totally disbursed, averaging US$43.4 millions, short of US$0.60 millions due to foreign exchangefluctuation between the SDR and the US$.

At project Closing, total resources used from the Swiss Contribution were US$4.11 1(91.33% of the US dollar amount estimated in the SAR).

Project Financing - SAR Projections (US$millions)

Borrower 8.99 n.a. 8.99Producers 0.31 n.a. 0.31IDA n.a. 44.02 44.02Swiss Contribution n.a. 4.49 4.49Total 9.30 48.51 57.81

Project Financing - SAR Projections (US$millions) _._._._

vatt staimate - - ---Local -Eera:': T4 iBorrower 25.37 n.a. 25.37

Producers 0.67 n.a. 0.67IDA l 43.42 43.42(*)

Swiss Contribution n.a. 4.11 4.1 1(*)Total 26.04 47.53 73.57* Project financing approved at SDR31.10 millions (equivalent to US$44.00 millions) and CHF6.75 millions (equivalent to US$4.50 millions). Atproject closing the SDR31.10 million was totally disbursed, averaging US$43.4 millions, short of US$0.60 millions due to foreign exchange

fluctuation between the SDR and the US$.

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Annex 3. Economic Costs and Benefits

Costs and Benefits of the Agricultural Technology Component

Agriculture technical assistance has constituted, during the last few years, one of the principal policyinstruments of the GON in support of small and medium scale poor farn households. The ATLMPprovided strong support to research and extension services as an important tool in the post-warreconstruction effort.

D[uring project preparation no economic rate of return calculation was attempted for the project or theindividual components. Even though the SAR outlined a simple methodology for a systematic monitorimgand impact evaluation system, including construction of baseline data, no system was ever developed.Further, during implementation, arrangements for keeping disaggregated disbursement records were notmade, and thus it is difficult to identify costs related to different research and technology transfer activities.In terms of benefits, it is also difficult to measure externalities and fully capture economic, social andenvironmental values like changes in technological capital, the new skills gained by farmers who partic ipatein adaptive research, gradual improvement in soil fertility or political empowerment of communities. In thecase of the ATLMP, the only source of information is INTA's database of producers (Registro deProductores) which registered information in 1997, 1998 and 1999 and which provides a limited set ofhistorical data. Rather than quantifying economic costs and benefits of the project or the componentthrough a single summary measure, which, given the circumstances, would be meaningless, the ICR teamassessed: (i) emphasis during implementation on the effectiveness of the extension process in meeting theprogram objectives in the targeted farming systems-accelerating the rate of adoption of relevanttechnology in a cost-effective manner; (ii) the likely financial impact of the project on incomes ofrepresentative small and medium farming systems based on INTA's data generated from technical datesheets; (iii) the return on investment considering only the three major crops; and (iv) the economicperformance of the ATP 1 and ATP2 programs.

(i) Effectiveness of the extension process

Starting in 1997, the project introduced a management tool at farm level for beneficiaries under the AmP1andt ATP2 programs (El Manejo Empresarial de Mi Finca). The instrument, a set of simple forms toregister and analyze elementary financial costs and benefits of introduced technologies, served at the sarnetime as a management tool for the farmer and as a data collection instrument for INTA (Registro deProductores). Producers would periodically log typical farm costs as well as production yields. Resul;were examined on a regular basis with the extension agent, who would work with the farmer indifferentiating between technical and economic effectiveness. Feed-back from farmers on cost effectivenessof a tested technology would then be taken into account for the overall extension program. Moreimportantly, producers would adopt technologies based only on the evidence of an increased net income.

The impact of the project's technical assistance was first analyzed (July, 1997) by the Escuela de EconomiaAgricola (ESECA) of the Universidad Aut6noma de Nicaragua, based on a field survey. Several interestingperformance measures were derived that give indications about what the changes introduced by the pro ;jectmeant to the farmers' well being and how they perceived benefits. Without distinction between the differentproject extension programs, 94% of the farmers in the sample applied the recommendations provided by theextensionists. Of those applying the recommendations, 19% reported 100% effectiveness; 61 % reportecL50% to 75% effectiveness; and 20% reported an average 25% effectiveness. The study took two moremeasurements of the value of the extension: the evaluation of INTA's technical assistance (ATPb andATP 1) and the reported change in producers' income as a result of the assistance. Of the producers in the

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sample, 43% and 50% ranked the service as "very helpful" and "helpful", respectively. In addition, 41%reported an increase in their income, 47% reported stable income, and only 12% reported an incomedecline. These indicators provide a clear positive insight on the impact of the project's technical assistanceand how farmers assessed the outcome.

Dinar, A. and Keynan, G.* analyzed the data available from the project's two types of paid-extensionprograms (ATP 1 and ATP2) and its economic performance and provided important ground-breakinginforrnation which augments the understanding of private extension services promoted by the ATLMP.Important issues derived from this information included: (i) the clear improvement in services provided toproducers with paid-extension programs compared to the previous traditional public extension service; (ii)extension provision costs were both lower and decreasing over time, which had a direct bearing on both thequality of the service provided by the extension agency/company, and the ability and willingness ofproducers; and (iii) cost recovery rates in both programs were significant and at similar levels to those inother more developed countries.** The authors concluded that "it appears that the principle of privatedecision-makers equating the value of extension services to the cost of such services works even in a poorcountry such as Nicaragua. Once they realize their full potential, producers are prepared to pay forinformation and knowledge. Although too early to conclude, it seems that the two paid-extension systems inNicaragua achieved the objectives of improving extension services, and of increasing agriculturalproduction and producer profitability". Additionally, "the relatively high cost recovery rates, accomplishedso far, and the economic performances of the two programs demonstrate that even poor farmers are willingto pay for a service that contributes to increasing their economic efficiency and enhancing their livelihood."

* Measuring the Cost and some Performance Indicators of Paid Extension. The Case of Agicultural Technology Transfer in Nicaragua. August 17,2000.** Tacken (1997) figures for the private extension service in the Netherlands indicate that proceeds from producers range from 26% to 63% of theoperating cost of the service. In Nicaragua, first-year participating producers paid 20% of the extension costs; second-year participating producers paid30% of the cost; and third-year participating producers paid 50% of costs.

(ii) Analysis of representative farming systems

One of the main project objectives was to reduce extreme poverty by - among other means - improvingagriculture productivity and the incomes of small and medium farmers through better access to basicagricultural services. In order to estimate results in terms of farmers' income level, FARMOD softwarewas used to establish representative, mixed farming models for five different regions, based on INTA's datagenerated from the above-mentioned technical data sheets and farm data samples. Because of the lack ofdisaggregated information on the research and extension activities financed, calculations were carried outon a selection of activities and farm budgets typical of farming situations in the various regions andagro-ecological zones. Twenty-five crop and activity models and seventeen farm models were preparedjointly with INTA and MAG-FOR experts, comparing with and without project situations. The resultingbudgets took into account minor on-farm investments, production parameters, recurrent costs, family laboravailability and farm requirements. Because in most cases negative figures in the annual cash flows werelacking - since most of the induced technology changes did not imply purchased inputs or significantinvestments in cash - it was not possible to calculate financial rates of return. Estimated annual on-farmincome improvements (before family labor costs) and their NPVs were preferred instead, as appropriatefinancial indicators (Table 1).** The main assumptions for the financial analysis were: (i) real discount rate: 12%; (ii) time horizon: 20 years; (iii) constant August 1999 labor, inputand output prices; (iv) real exchange rate constant: Cr$12 per US dollar; (v) In models where investments were involved, 80% of investment costs(excluding labor) included in farm models, financed and repaid to existing revolving funds. For the purpose of the financial analysis and its effect onthe cash flow, three constant payments including a 5% real annual interest rate were considered, beginning in the year following the investmentperiod.

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Table 1: Representative Farming Models

On-Farm Income ** Switching ValuesFarm Investment w/o with Farm Farm NPV

Type of Model Size (Mz (US$) project project Incomes Costs (US$)(US$) (USS) (%) (%) _ -

Al.: Le6n-Chinandega

1. Minifundio (maize-beans-patio) 2 0 239 378 -70 231 7392. Somotillo 12 464 2053 2857 -60 151 3275(platano-chiltoma-cattle)3. Le6n (maize-sorg-chilt-cattle) 15 1005 1794 2242 -19 23 1740A2. Masatepe

1. Minifundio (maize-beans-patio) 2 0 239 378 -70 231 7B92. Ticuantepe 4 1064 2818 3834 -53 115 5066(maize-beans-veget-cattle)3. Carazo 10 1105 1978 3078 -47 87 4668(maize-beans-coffee-veget)4. Rivas 18 650 4624 7222 -68 212 12593(maize-beans-fruits-cattle)B3. Esteli

1. Minifundio (maize-beans-patio) 2 0 239 378 -70 231 7892. Jalapa 10 794 2006 2954 -41 71 4195(maize-beans-rice-coffe-cattle)3. Esteli 8 558 1422 2365 -60 150 5260(maize-beans-veget-cattle)B5. Matagalpa-Jinotega

1. Minifundio (maize-beans-patio) 2 0 239 378 -70 231 7892. Pantasma 15 1114 2726 4439 -55 123 7765(maize-beans-veg-coffee-cattle)3. Sebaco 6 462 3873 5912 -78 355 116 689(maize-beans-veget-cattle)4. Matiguas 30 3566 3100 4660 -24 31 4342(maize-beans-sorg-cattle)C6. Jigalpa

1. Camoapa (maize-cattle-patio) 42 3164 3265 4368 -28 39 37032. San Carlos 20 846 2464 3400 -42 73 4663(maize-beans-rice-cattle)3. Waspan 8 546 1067 2416 -60 152 6556_maize-beans-plantain-patio)._ __

** Before labor costs. These were not considered because of the low opportunity cost of labor.

The analysis demonstrated highly significant income increases (financial returns) for most representativeproduction systems. Increases in net farm income, supported by and based on seasonal reports produced in1997-99 by each extension agent in the service area of each INTA extension agency ranged from about 25% tomore than 100% at full development. On weighted average, relative to each model's representativeness, annualnet on-farm income grew by 67% in about 4 to 6 years of technical assistance, from about US$1,500 tc.US$2,500. It can be concluded that even farmers living under extreme poverty and mainly subsistenceconditions have benefitted from improved food security and on-farm increased incomes following the prcvisionof technical support and advisory services provided by the agricultural component of the ATLMP.

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(iii) Analysis considering benefits on three single crops

A regression analysis was undertaken based on 1999 information and for three of the most frequentlyregistered crops only: com, beans and rice. The analysis confirmed the conclusions of the analysis made byDinar & Keynan and those based on representative farming systems; and shows significant differences inyields and income in favor of producers who adopted INTA promoted technologies. Incremental net incomeestimations, considering family labor costs, are shown in Table 2. Aggregate incremental net benefits as aresult of technology adoption of around 58% of INTA assisted producers -weighted adoption average - forthe three crops considered, as likely to be around US$1.1 million annually - i.e. US$168/manzana.

Table 2. Estimation of Incremental Financial Benefits of Technology Adoption

Tecnoloy -Gro Withot With JWi & Wthoud % - e4ei-TecbuologY - Tecnology Twcbnoiog . opfion Incoe perV# efpred rs) gY opro4ducers)( oIprodee - - - M z

Incremental Benefits on Beans Production First Crop - Average 1.47 Manzanas

Improved Seeds 779 1567 2346 67%*Post-harvest 1037 1309 2346 56% 62 120,104

Integrated Pest Management 1893 453} 2346 19% 85 56,547Soil & Water Management 726 1620 2346 69%°

Incremental Benefits on Corn Production - First Crop - Average 1.62 ManzanasImproved Seeds 1151 3451 4602 75% /Post-harvest 1865 2737 4602 59% 15 68,357Integrated Pest Management 2576 2026 4602 44% 57 188,448Soil & Water Management 2305 2297| 4602 50% 21 79,384

Incremental Benefits on Rice Production - First Crop - Average 1.61 ManzanasImproved Seeds 181 300 481 69 33,206

Integrated Pest Management 393 88 481 18% 227 32,114

Soil & Water Management 204 277 481 58% (72) (32,221)

Incremental Benefits on Beans Production - Second Crop - Average 1.62 ManzanasImproved Seeds 34 17731 1807 98% 77 222,121Post-harvest 657 11501 1807 64% - -Integrated Pest Management 1435 3721 1807 21% 44 26,416Soil & Water Management 550 1257j 1807 70% 81 164,604

Incremental Benefits on Corn Production - Second Crop - Average 1.66 Manzanas

Improved Seeds 43 1475| 1518 97% (34) (83,045)Post-harvest 558 960 1518 63% 24 37,715Integrated Pest Management 1011| 5071 1518| 33%j**Soil& Water Management 212 1306 1518 86% 87 189,335

Incremental Benefits on Rice Production - Second Crop - Average 2.65 Manzanas

Improved Seeds 130 130 100% * *

Post-harvest 36 94 130 72% * *

Integrated Pest Management 96 34 130 26% 93 8,402Soil & Water Management 5 125 130 96% * *

TWttX~ nau:ll;1 (USS) J_ __ __ _ - -_ _ v--I1|- -

* Values statistically not significant.

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(iv) Economic Performance ofATPI andATP2 in Nicaragua

The following presents an analysis of the impact of the ATP I and ATP2 programs, based on the workl ofKeynan et al., (1997), and Dinar and Keynan (1998). The data set is based on two sources, in turn basedon a similar data collection tool which includes the same list of variables. The ATP2 subset is derived fromseasonal reports from the seven private firms providing technical assistance in Nicaragua in 1997. Itcomprises crop-level data for various seasons in 1997-98, and data for the 1997 crop year. The ATP:subset employs seasonal reports produced in 1997 by each extension agent in their agency service are.3, andincludes data for multiple crops at the same farm. Both subsets include data before ATP l/ATP2 actijx!ties(Base) and after ATPl/ATP2 (Real). Each subset includes the following farm level variables: agricul;-.Lralregion and farm size (ATP1 only) and farmer name; and (at the crop level): area harvested; yield/land unit;production costs; crop price; proceeds; net income; unit cost; B/C ratio; and gross margin. The ATP Isubset includes observations from 4 (Al-Leon, A2-Masatepe, B3-Esteli, C6-Juigalpa) out of 5 produ lionregions in Nicaragua (no information for B5-Matagalpa). The ATP2 subset includes 188 Base and 19')Real observations; and ATP1, 213 Base and Real.

Given relatively limited data, and relying on existing research, only a limited number of hypotheses weretested, comparing economic performance of the Real with the Base situation. Provision of extensiontechnologies to producers is expected to result in superior performance of Real over Base situations. I hehypotheses are valid for both ATP I and ATP2 and include: (a) gross margin per unit of land is higherunder Real situation compared with Base; (b) production costs are higher under Real situation compat edwith Base;* (c) yields of the various crops are higher under Real situation compared with Base; and (cI variance of both gross margin and yield values is smaller under Real situation compared withBase.**Average value of the variable was computed for Base and Real situations and statistically chec hedfor significant difference.

* Production costs in the Real situation may be higher due to use of new, more expensive technologies that were made available to producers b, thepaici extension. Even if it is hypothesized that production costs were higher in the Real situation, the additional yields and yield quality are such i hatthe Gross margin value is higher in the Real situation (see hypothesis 1).** It is assumed that Extension activities reduce the variance of perforrnance indicators of the producers.

Crop level analyses were performed for ATP1 and ATP2 data. For ATP 1, an additional analysis of gr( ossmargin and production cost was also performed for the entire sample of 112 producers. Using data fromaDinar and Keynan (1998), producer payments for extension were subtracted from the gross margin to l ieldan estimate of the ability to pay for service.

Statistical comparisons were made of key variables, corresponding to the hypotheses above. Data for ATP2permit crop level analysis of Maize, Cafe, Sorghum and Beans, and for observations at farm level. Foreach variable tested (area farmed, yield, production cost, and gross margin), mean, standard deviation, andminimum and maximum values, were calculated as shown in the following Table 3.

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Table 3: Results for Beans. Maize, Coffee, Sorghum, for ATP2 and at Farm Level (ATP2 and ATP1,1997)

Area farmed Yield| Cw of proDdcino | Gross M n,-

situation BaseA. Maize for ATP2Mean 3.21 2.99 19.45 26.03 880.11 1030.93 585.03 789.10

S.D. 2.09 2.10 6.70 12.24 328.81 315.32 862.61 586.14

Min Value 1 0.5 5 4 250 400 -360 -300

Max Value 12 12 40 60 2100 2325 3550 2280

B. Coffee for ATP2Mean 5.08 5.20 12.08 14.92 2964.59 4294.06 4548.87 7162.47

S.D. 6.03 6.02 7.85 9.80 3009.95 4147.76 4166.94 5456.71

Min Value 0.5 0.5 3 3 195 400 107 1190

Max Value 24 24 28 35 11200 114000 15540 21000

C. Sorghum for ATP2Mean 2.63 3.63 21.72 32.63 990.90 1079.63 320.00 1423.60

S.D. 2.11 2.83 7.98 6.51 151.35 200.13 386.81 448.63

Min Value I 1 10 25 800 800 -200 813

Max Value 7 10 35 42 1200 1500 1100 2160

D. Beans for ATP2 1

Mean 1.88 1.92 8.69 9.67 1131.20 1231.65 1690.03 2960.75

S.D. 1.16 1.20 2.81 3.74 397.38 487.06 1015.58 1317.49

Min Value 0.5 0.5 4 0 350 300 -300 0

Max Value 6 5 17 17 2050 2500 4550 6000

E. Results at Farm level for ATP2 | _ _

Mean 2.22 2.82 130.51 159.82 686.75 1609.71

S.D. 1.63 2.01 81.03 112.02 920.86 1302.21

Min Value 1 1 60 70 -360 210

Max Value 8 10 300 3X80 3500 6515

F. Results at Farm level for ATPI |

Mean 1.84 1.91 1201.39 1370.05 2271.52 2913.98

S.D. 1.74 2.95 758.72 778.28 5130.57 6164.00

Min Value 0.12 0.12 42 200 -12960 -8720

Max Value 17 33 4380 7008 41760 53010

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The above analytical approach includes simplistic assumptions for ATP1 and ATP2. Using crop-levelinformation only, or farm-level partial information, may bias results. Data quality is also likely to be anissue: (a) there was no control group (no extension) to account for 'year effects', which may explainsignificant difference in "Base" and "Real" performance. Control group data would permit an inferenceabout "year effect" or net paid-extension impact; (b) although different technologies were provided h,yboth ATPI and ATP2, there is no "use of technology" information showing which farrners used thetechnology in their production process; (c) inclusion of production region information might also beterexplain performance variation; and (d) regional codes were not used. Finally, for unknown reasons, o(lilyfour production regions are included in the INTA data base. However, in spite of these limitations, theanalysis provides some very important preliminary conclusions conceming paid extension performanceand impact in Nicaragua. The preliminary findings confirm that there is a need to conduct a thoroughBeenefit-Cost analysis of paid extension in Nicaragua.

T wo conclusions can be drawn. First, assuming satisfactory data collection and consistent quality of lecalculation of economic parameters for the producers, it is likely that both ATPI and ATP2 systems areprofitable. Both ATP I and ATP2 cover short-term production cost and also leave in most cases,suifficiently wide margin to cover paid extension fees. Second, all hypotheses were generally confirmed:yield, production cost and gross margin values increased significantly between the Base and Realsituations. Although not an hypothesis to be inferred, it was observed that area under production wasa: so significantly increased between Base and Real situations. This observation may have importanttheoretical and policy implications if proven valid under a correct sampling procedure as the one set upunder the new APL. It would mean that farmers view ATP I and ATP2 as risk-reducing programs,allowing them to expand cultivated area. The fourth hypothesis (reduction in the variance of resultsunder real situation in both ATPI and ATP2) was not confirmed. Results are inconclusive and shoul[ beviewed with caution given concems about the sampling process.

TihLe better performance of paid extension is explained mainly by increased yields and crop prices. W. i lethe former probably result from use of improved technologies, increased crop prices may come fromimproved yield quality, better marketing strategies, or simply macro economic policies reflected inagricultural product prices. Higher-cost technologies were introduced to producers by paid extensionagents, resulting in increased cost of production for every crop analyzed. However, the gross margin :orpaid extension is significantly higher than the Base situation, at both crop and farm levels.

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Annex 4. Bank Inputs

(a) Missions:Stage of Project Cycle No. of Persons and Specialty Performance Rating

(e.g. 2 Economists, I FMS, etc.) Implementation DevelopmentMonth/Year Count Specialty Progress Objective

Identification/Preparation2-3/92 14 Task Manager

Rural FinanceEnvironmnentalistLATAGCECTPN/AN/AN/AN/AN/ARUTAEconornistRUTAFAO

5/92 4 Task ManagerN/ARUTAEnvironmentalist

6-7/92 14 Task ManagerRural FinanceLand TechnicianN/AIDB N/AN/AN/AN/AN/AAgriculturistFAO/CPEconomistN/AFAO

10/92 8 Task ManagerLand TechnicianEnvironmentalistN/AN/AN/AN/AN/A

1/93?

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AppraisallNegotiation

2-3/93 12 Task ManagerEconomistInst. DevelopmentLand TechnicianEnvironmentalistN/AN/AN/AN/AAgriculturistFAO/CPCons.

Supervision8/93 2 Task Manager S S

EconomistS S

2/94 5 Task ManagerTitlingAgricultureLand TechnicianCadastre Management

7/94 5 Task Manager S SProject Management and Partic.AgricultureLegal AspectsGender Integration

12/94 4 Task manager S SAgricultureProject ManagementTech. Transfer

6/95 5 Task Management S SN/AAgricultureProject ManagerTech. Transfer

12/95 8 COSUDE S SAgriculture SpecialistTitling, Registry and Cadaster(3)Task ManagerRural Finance SpecialistAg. Tech Transfer

6/96 5 Task Manager S SPesticides MgmntAgricultureTitling, Registry, CadasterRural Finance Sp.

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12/96 1 Task Manager S S

6/97 4 Task Manager S SAg. Tech GenerationLand ManagementAgric. Tech. Transfer

11/97 6 Task Manager S SLand ManagementAgric. Tech. TransferAgriculture SpecialistAg. EconomistAg. Researcher

3/98 4 Team Leader S STask ManagerAgriculture SpecialistAg. Economist

6/98 4 Team Leader S STask ManagerAgriculture Sp.Ag. Economist

2/99 2 Ag Tech Specialist S SLand Specialist

8/99 7 Task Manager S SSr. AgriculturalEconomist/RUTAN/AN/ALand Information Spec.Procurement AnalystN/A

6/2000 2 Land Specialist S SSr. Agricultural Economnist

ICR

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(b) Staff

Stage of Project Cycle Actual/Latest Estimate

No. Staff weeks US$ ('000)Identification/Preparation 85.9 210.7Appraisal/Negotiation 46.3 117.1Supervision 291.7 970.6ICR 9.5 49.2Total 433.4 1,347.6

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Annex 5. Ratings for Achievement of Objectives/Outputs of Components

(H=High, SU=Substantial, M=Modest, N=Negligible, NA=Not Applicable)

Ratingl Macro policies O H O SU O M O N * NA

a Sector Policies OH *SUOM ON O NAE Physical OH *SUOM ON ONAa Financial O H OSU*M O N O NAO Institutional Development O H 0 SU O M O N 0 NAO Environmental OH * SUOM O N O NA

Social0 Poverty Reduction O H OSUOM O N O NAO Gender OH OSUOM ON ONAE Other (Pleasespecify) O h OSUOM ON * NA

El Private sector development 0 H 0 SU 0 M 0 N 0 NAEl Public sector management 0 H * SU O M 0 N 0 NAa Other (Please specify) O H OSUOM O N * NA

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Annex 6. Ratings of Bank and Borrower Performance

(IIS=Highly Satisfactory, S=Satisfactory, U=Unsatisfactory, HU=Highly Unsatisfactory)

6.1 Bank performance Rating

[l Lending OHS*S OU OHUEi Supervision O HS * S OU OHUL Overall OHS OS OU O HU

6.2 Borrowerperformance Rating

El Preparation O HS * S O U O HUO Government implementation performance 0 HS * S 0 U 0 HULI Implementation agencyperformance O HS * S 0 U O HUEl Overall OHS OS 0 U O HU

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Annex 7. List of Supporting Documents

1. Inforrne de Cierre (ICR): Proyecto de Tecnologia Agropecuaria y Ordenamiento de la PropiedadAgraria (ATLMP), Ministerio Agropecuario y Forestal (MAG-FOR), Septiembre de 2000.

2. Informe de Cierre: INTA, 2000.3. Informe de Cierre: Subcomponente de Titulacion de Tierras - Program Nacional de Catastro,

Titulacion y Registro, OTR, July 12, 2000.4. Informe Nacional de Cierre: ATLMP, Corte Suprema de Justicia (CSJ), Subcomponente Registro

Publico, Mayo de 2000.5. Cierre del Proyecto: ATLMP Subcomponente Catastro, Instituto Nicaraguense de Estudios

Territoriales (INETER), Mayo de 2000.6. Cofinanced Public Extension in Nicaragua -- Gabriel Keynan, Manuel Olin, Ariel Dinar, 1997.7. The Cost and Performnance of Paid Agricultural Extension Services: The Case of Agricultural

Technology Transfer in Nicaragua - Ariel Dinar, Gabriel Keynan, June 1998.8. Estudio de las Dinamicas de la Economia Rural: Impacto de Proyectos de Legalizaci6n de la

Propiedad en Nicaragua (draft), University of Wisconsin, August 2000.9. Sintesis Descriptiva y Evaluativa de los Proyectos Pilotos, INETER, September 2000.10. Property Rights and Land Conflicts in Nicaragua: A Synthesis, de Janvry and Sadoulet, July

2000.11. Informe Sintesis de los Resultados del Estudio de IRAM, R. Saenz, (undated).12. Land Markets, Land Access and the Impacts of Policies, Deininger and Chamorro (undated).13. Women's Land Rights: Lessons Learned from Nicaragua, Sara Ceci, December 2000.14. Annual, procurement, audit and other reports, and Bank project supervision reports, available in

the project file and the files of the Project Coordination Unit.15. Measuring the Cost and some Performande Indicators of Paid Extension: the case of Agricultural

Technology Transfer in Nicaragua, Dinar A., and Keynan, G., August 17, 2000.

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Additional Annex 8. Borrower Completion Report - Executive Summary

The following is the Executive Summary of the Borrower Implementation Completion Report (BICR A onthe ATLMP, prepared by the Nicaraguan Ministry of Agriculture and Forestry (MAG-FOR). The fullreport is available in the project archive.

NICARAGUAAGRICULTURAL TECHNOLOGY AND LAND MANAGEMENT PROJECT

Credit No- 2536-NI andSwiss Contribution TF 14-03090-NI

Introduction

This document is Nicaragua's (Borrower's) Implementation Completion Report (BICR) evaluating theimplementation of the Agricultural Technology and Land Management Project (ATLMP) and prepared forproject Closing.

In 1990, a new, democratically-elected government took office when the economy in Nicaragua was indisarray. During the decade of the 1980's, the bulk of the country's economy was controlled by the State.As a result, the economy was unbalanced: total exports and GNP per capita had declined to about 40%o ofthe levels attained in the early 1970's and huge fiscal and balance-of-payment deficits had resulted inhyperinflation. In addition, foreign debt was ten times the country's GNP. A large number of urban arLdrural properties had been either confiscated or nationalized under the previous socialist-oriented regime.

Within this context and after the successful implementation of a structural adjustment program in theperiod from 1991-92, supported by an IMF Stand-by Arrangement, the World Bank, after a 13-year hiatus,made an IDA credit to Nicaragua on August 5, 1993 to finance the ATLMP. The credit for SDR 33.1million (equivalent to US$44.0 million) was co-financed by the Swiss Development Cooperation(COSUDE) with a Grant of 6.75 million Swiss Francs (equivalent to US$4.5 million). The Governmen-tof Nicaragua (GON) would contribute the equivalent of US$9 million to the project, which was expected tobe executed over a 5-year period (1993-98).

The project would be implemented by the following institutions/agencies: Ministry of Agriculture andLivestock (MAG, currently MAGFOR), Nicaraguan Institute of Agricultural Technology (INTA),Nicaraguan Institute of Agrarian Reform (then INRA and currently the Rural Titling Office, OTR), and50,000 small and medium farmers. The project-executing agencies were MAGFOR, INTA, and theNicaraguan Institute of Natural Resources and Environment (then IRENA and currently MARENA) forthe Agricultural Technology Component of the project; and INRA, the Nicaraguan Institute of TerritorialStudies (INETER), the Public Register of the Nicaraguan Supreme Court of Justice (Registro Puiblico),and MARENA for the Land Management Component of the project.

Throughout its seven years of execution, the Development Credit Agreement (DCA) was amended fourtimes to make needed adjustments for implementation purposes. The first amendment was approved inJuly., 1994, updating IRENA to its new name, MARENA. The second amendment was approved inNovember, 1995, to allow the creation of the Rural Financial Services Development Pilot component. Thethird amendment, approved in 1998, was designed to reprogram the financial resources of the Swiss Grantin order to finance all the activities of the Agricultural Technology component. The fourth and last

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amendment was approved in June, 1999, to reschedule activities resulting from the institutional changesgenerated by Law 290 (relating to the re-organization of the State). This amendment specifically affectedthe original institutional setting of the Land Management Component of the project.

Project Objectives and Description

The main objectives of the project were to: (a) increase the agricultural production of small and mediumfarmers; (b) develop and transfer sustainable and environmentally-sound agricultural technology tofarmers; and (c) improve security of land tenure through the validation of property rights. Theseobjectives were to be met through two major components:

The Agricultural Technology Component would decentralize agricultural public-sector services andsupport the development of a demand-driven mechanism for private and public agricultural research andextension. It would also consolidate agricultural research and technology-transfer services into a new,decentralized Nicaraguan Institute of Agricultural Technology (INTA), incorporating soil conservation andpesticide management as integral parts of the system. Specifically, the project would, through INTA,support programs for: (i) Technology Validation and Transfer (TVT) to emphasize crop managementresearch and extension focused on small and medium farmers, including an artesanal (on-farm) seedprogram; (ii) Integrated Pest Management; (iii) Soil and Water Conservation; (iv) Agricultural ResearchGrants; and (v) Academic Studies. In addition, the Agricultural Technology component would support: (a)a MAGFORIMARENA Pesticide Management Program, as part of establishing a national,environmentally-sound strategy for pesticide use and management; and (b) a Private Extension ServicesProgram (PTA) to help farmer groups contract technical assistance from private, extension serviceproviders.

The Land Management Component would support the design and implementation of a massive landtitling and registration system, establish a national cadastre, and commence the modernization process inProperty Registration services. Specifically, the project would: (a) streamline administration and improveinter-agency coordination among INRA (now OTR), INETER, and the Public Register; (b) establish thebasis for an efficient national cadastre; (c) strengthen the Public Register at the central and departmentallevels; (d) support the issuance of 50,000 titles, prioritizing beneficiaries by zones (land-titling modules)according to their relative technical, legal and administrative complexity; (e) provide technical assistanceand equipment to improve field supervision and quality control for cadastral surveys and plot demarcation,titling and registration; and (f) finance studies aimed at establishing the legal, administrative and technicalgroundwork for the future demarcation of boundaries of indigenous community lands and natural reserves.The project would also support a Project Coordinating Unit (PCU) to coordinate and monitor bothcomponents and special studies.

These objectives were realistic and appropriate given the circumstances that Nicaragua was experiencing atthe time. They were also consistent with the government's overall economic development and the Bank'scountry strategy.

It should be mentioned that the project did not intend to directly link the beneficiaries of the two maincomponents. Thus, from project execution there are no statistics that show farmers benefited by both theextension services of INTA and the titling process of [NRA/OTR. Extension services were aimed mainlyat small farmers with some production stability and credit record, living mainly in the Pacific and WesternRegion of the country. On the other hand, beneficiaries of the titling process were mainly poor peasantswith no credit background, with no production history (as in the case of the former guerrillas and armypeople), and mostly located in the Macrocentral and Atlantic Regions of the country.

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Implementation Experience

The project aimed at providing resources for Nicaragua to rehabilitate the agricultural sector through theinlroduction of new alternatives for technological generation and transfer, as well as to support thetechnical and institutional framework for defining and providing legal guarantees for land tenure. Thrcoughthese objectives, the project provided support to its main beneficiaries.

The project provided specific support in strengthening the institutional capacity of the entities involved inproject implementation with the purpose of providing better service, nationwide. The AgriculturalTechnology component supported the country's small and medium farmers by providing training andtechnical assistance relating to new technological transfer and extension techniques. INTA, itsimplementation agency, is now a mature, leading public institution operating in the agricultural sector andhas established a good relationship with the private sector.

The Land Management component provided support by strengthening some of the institutions thatgenerated information and services related to land tenure. One of these, INETER, now has the capacity toimplement its responsibility for managing a physical, nationwide cadastre with greater efficiency. In acomnplementary manner, INETER and the Public Registry use the information they generate to verify andcomplement land demarcation within their respective legal competence. Both institutions coincided in rhequality and type of services provided with accurate and current information related to any transactionwithin the legal land-property framework. The new Rural Titling Office (OTR), founded in 1998, has hadlimited time for institutional-building and, although it has recently improved its organizational structure andgained experience in the operational aspects of land- titling, still requires a massive, long-term institutionaland training program to better manage its responsibilities within a new, legal and institutional framework.

Assessment of Outcome

Despite initial delays in disbursement and shortage of resources at mid-term, by closing time, the projecthad substantially achieved its physical objectives. Achievements were less remarkable with regards to thedevelopment of policy- oriented capacity and the improvement of evaluation and monitoring systems, bothinter and intra-institutionally. These shortcomings may have been due mainly to the fact that the projectdid not contemplate an integrated information management system that would require close coordination forproject monitoring and follow-up, given the high diversity and degree of commitment to the project by thevarious implementation agencies involved.

Other aspects of the project demonstrated greater progress. This was particularly true concerningimprovements in the supervision of field activities and monitoring by INTA to ensure the quality of servicesprovided by its departmental offices, oriented towards encouraging farmers to actively participate in thetechnological and extension services being undertaken.

Project impact has not been evaluated at the end of its implementation. Nevertheless, it is important to statethat the work carried out thus far has contributed to the establishment of the foundations for sector-policyformulation and agricultural services for small and medium farmers. It has likewise set the initial stagesfor a more in-depth analysis of the rainbow of problems regarding land tenure and security in Nicaragua.Along the same lines, through the Land Management component, the project contributed to highlighting theconfusion that exists in Nicaragua with regards to the legal aspects of land tenure and security.Additionally, the project contributed in bringing to the surface the lack of trust that exists within the privatebanking system with regard to land titles.

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The Rural Financial Services Development Pilot brought out the main constraints, particularly inregulatory, supervisory, micro-finance technology, and legal areas, related to setting up a network of ruralbank branches operated by the private banking system. This Pilot was an interesting program, intended toestablish a friendly, working relationship among private bankers, nonprofit institutions (NGO's), publicagencies, and household beneficiaries (mainly small and medium farmers). Coordinating these diverseparticipants - and attempting to have them reach an effective compromise on final goals - clearly showedthe many difficulties faced by the Borrower in fully achieving the Pilot's credit objectives.

Major Factors Affecting the Project

The implementing agencies were: the Nicaraguan Institute for Agricultural Technology (INTA), theNicaraguan Institute of Agrarian Reform (INRA-currently OTR), the Nicaraguan Institute of TerritorialStudies (INETER); the Land Registry of the Supreme Court (CSJ); the Ministry of Natural Resources andEnvironment (MARENA); and the Ministry of Agriculture and Livestock (now MAGFOR). Anotherparticipant contemplated in the Staff Appraisal Report (SAR) was BANADES. MARENA alsocoordinated activities with the Ministry of Labor, Ministry of Health, and Ministry of PublicTransportation.

Project design was very complex, with too many implementing agencies (the six mentioned above) whichrendered the project difficult to manage and coordinate, in spite of the subscription of implementationagreements between MAGFOR and INTA, MAGFOR and INRA; and cooperation agreements amongMARENA, INETER, BANADES, and CSJ. Another weakness lay in the institutional arrangements:MAGFOR, as the Borrower, was given the responsibility of project coordinator, and of transferring mostof the credit proceeds earmarked for [NRA and INTA. This arrangement left MAGFOR without leverageto enforce any decision regarding the reallocation of resources made by CONAGRO.* Additionally, theSupreme Court, which has a ranking equal to that of the Executive Branch, was made subservient toINRA/OTR. This made CSJ an unwilling partner in project execution.

* During project preparation . the GON created the National Agficultural Council (Consejo Agropecuario Nacional - CONAGRO). Thiscoordinating body would provide a sector-wide policy formulation and management forum for the Ministries of the three main-sector institutions

(MAGFOR, INRA and IRENA), with MAGFOR as Head of the Council.

Other factors which negatively affected project execution were: (i) inadequate procurement procedures;(ii) a flawed mid-term review; (iii) the transition period due to a change in government (in early 1997); and(iv) managerial changes suffered by the project: change of Project task managers by IDA and change ofMinisters and/or Managers by the GON in the executing agencies involved in its implementation. To acertain degree, these changes were responsible for the delays in some agencies in reaching their proposedobjectives. The Closing Date was extended twice: first from December, 1998, to 1999; and then to June,2000. As mentioned earlier, the Legal Agreement was amended four times.

Summary of Findings

Overall, the project was successful in reaching its main objectives. It can be stated that overallperfornance was satisfactory. At closing date, the project had benefited about 17,000 small and mediumfarmers aniually, and had issued approximately 28,141 titles (85% of the total revised target).

Through component activities, the project contributed to the consolidation of a new INTA by rehabilitatingits units for research and extension services through technical assistance, annually, to over 17,000 smalland medium farmers who had not had access to such services before. This was accomplished through the

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agricultural research and extension programs within the scope of technological transfers applied in thefield. Additionally, the Agricultural Research Grant Program drew from national and internationalexpertise (i.e., universities, international research centers, NGO's) to adapt existing technologies in acost-effective manner. The Private Technical Assistance Programs (PTA) developed into a demand-drivensystem of agricultural extension, using market incentives to improve and enhance farmer coverage. Theprivate extension program assisted an average of 17,000 producers annually with 180 extensionists. Atproject closing date the total clientele assisted by ATP's Programs were over 21,000 small farmers.

The tasks initiated with the project have created the appropriate setting for the agricultural sector ofNicaragua to begin a new phase aimed at strengthening small and medium farmers, nationwide. To co so,the GON has designed a strategy to increase and enhance extension services with the purpose of offeri ngfarmers a wider selection of options when choosing an appropriate, validated technology, all with a view toincreasing their productivity and income. In addition, the interest of the rural population within theagricultural sector, together with the govemrnent's commitment to continue activities initiated by theproject, have positively resulted in the projection of future operations. As part of these efforts, the GI :INsector strategy is aimed at increasing and strengthening the levels of knowledge of the rural clientele ti-)promote interaction in the areas of technological generation and transfer, agricultural research, techni, alassistance, and agricultural education and technical training. This would generate, promote and nurtureinniovations that would be economically beneficial and respond to the needs and feasibility of having srnalland medium farmers adopt new technologies, incorporating them into their daily activities.

Other activities financed by the project within the Agricultural Technology Component include thePesticide Control Management Program (PROMAP), which aimed at providing technical assistance a:ndguidance in this area. With the work carried out, Nicaragua accomplished the formulation and legalapproval by the National Assembly of a General Pest Control Law officially enacted in 1998, with itsLegal Statutes approved in 1999. Additionally, MARENA initiated the organization of a National CenwerfoT Information and Documentation of Toxic Substances, the preparation of a Manual for the Use andMaintenance of Pesticide Equipment, and the formulation of a statute for the safe transportation ofdangerous and toxic waste. To date, PROMAP has carried out an evaluation of the levels of residualpesticide in the food chain products consumed locally as well as studies on the levels of contaminationprc.duced by chemicals used as pesticides in critical areas (near some of the country's water reservoirs).Fir.ally, one of PROMAP's main achievements was the disposal of about 200 Metric Tons oftoxic-agrochemical waste materials, which played a key role in Nicaragua becoming a signer of the Ba selEnvironmental Treaty. This toxic waste disposal operation was the first of its kind in Nicaragua and it Central America.

Regarding the institutional strengthening for the entities involved in the activities with PROMAP (Min istryof L,abor, Ministry of Health, Ministry of Public Transportation, MAGFOR, and MARENA, amongothers), massive training seminars and workshops took place in order to train 7,900 technical personnelfrom all these entities - as well as small farmers - in the Appropriate Use and Safe Handling of Pestic...les.These workshops and seminars were conducted jointly with the Private Agrochemical Distribution andFormulation Association. Training was also given on diverse techniques and issues for each respectivearea within the framework of appropriate pesticide handling, focusing this orientation from the perspect iveof each entity involved. Most, if not all, studies and research carried out by PROMAP are being used byMARENA in their design of the National Environmental Strategy to be implemented in the near future

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Regarding the Land Management component, INRA (later OTR), was able to issue about 28,141 titles(56.3% of the original target and 88% of the revised target), covering 1,100 plots (fincas matrices) with anarea of about 1.18 manzanas (843,000 ha) and benefiting a total of approximately 118,000 farmers. Inaddition to these titling activities aimed at beneficiaries of Agrarian Reform, the Land Managementcomponent attempted to address the titling needs of small, private farmers. The component supported apilot-titling activity with a coffee-grower cooperative. This pilot titling was supposed to benefit 1, 1 87private farmers but various factors - among them, weak technical and legal supervision by the formerINRA (now OTR), an inaccurate beneficiary diagnosis, and lack of cadastral supervision - resulted in only914 titles being issued. Due to these obstacles, when the pilot program concluded, no further action wascontemplated to address the needs of small, private farmers for land titles.

At the beginning of the project and especially since January, 1997, the project began financing specificcadastre activities for fNETER, which permitted the establishment of a multipurpose, uniform cadastrecovering 35,455 Km2, including 74 satellite images of the entire country. Overall, INETER to date hasestablished the National Vertical Datum Network and Geodesic Network. It has also been able to makeaerial photos in an area of 50,455Km2 and acquire Otho-photomaps in 35,300Km2 of the land-registeredzones in the pacific and central regions of the country. The project also provided financing to make 350spatial maps at a 1:25,000 scale in 40,00OKm2 and 90 spatial maps at 1: 100,000 scale, also in the Pacificand Central region of the country. In seven pilot zones selected in the country, a Territorial InformationSystem was set up. These accomplishments have contributed to establishing the foundations for Nicaraguato have a Cartographic Base, an updated Cadastral System, and a more clearly-defined TerritorialInformation System. At the time of this report, the project had also financed the construction of INETER'sseven new, fully-equipped offices throughout the country.

The project provided support to the Supreme Court of Justice through the Public Registry Component,which initiated a Pilot Plan of Registry Reform in the city of Masaya that has been successfully carried out.The results of this pilot will serve as a basis for future registry activities within the reform processcurrently being implemented by the Supreme Court of Justice. The pilot entailed the organization andupdating of property registry inforrnation through the establishment and implementation of an OwnersIndex, Archives, Documentation Controls, and a Daily Entry Book (Libro de Diario) - a notarized controlmechanism for the reception and control of documents received on a daily basis. The project also improvedthe Land Registry's organizational procedures and strengthened its capacity to execute and maintain theland registry. The project likewise promoted the drafting of a bill to reform Nicaragua's current registrylaw.

Finally, there is an activity that is not fully addressed in the body of the BICR, but is presented in Annexdue to the importance and relevance of the work executed: the Rural Financial Services Development Pilotprogram. This Pilot contributed to closing the gap that existed for financial services in rural areas, iscredited with directly influencing the financial system to open twenty-two rural branches by privatecommercial banks in the areas targeted by the project. Beyond the successful opening of these twenty-tworural branches by private banks, the Pilot successfully revealed the main constraints which need to beaddressed for further introduction of rural micro-finance technology and operations in Nicaragua. TheGON and IDA are aware of these constraints and are currently treating them as priorities in the country'sPoverty Reduction Strategy which, ultimately, will ultimate to allow small farmers greater access to formalcredit. Further details and a description of this Pilot are reported in Annex D to this report.

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As previously mentioned, the project was not successful in developing an evaluation system capable,) fmeasuring its economic impact. Therefore, it is difficult to determine to what extent the project contributedto increasing agricultural production and productivity. Nevertheless, MAGFOR and lNTA's databaseshows increases in basic grains yield and crop diversification, both activities associated with the projc,t -particularly with the INTA rural clientele. The Bank, in conjunction with the GON, carried out, ex po.it, acost-benefit exercise to determine the economic impact of the project. General data research and ana ysisshow that the extension program at INTA, implemented by both INTA and private extension servicescompanies, positively increased yields in basic grains crops and income, as compared with the average oftotal country agricultural data. Bank research on the INTA extension program showed an average of 7%as the internal rate of return. It is worth mentioning that in 1993, the co-financier, COSUDE, suppor,ed aseries of workshops at INTA to address the need for creating monitoring and evaluation instruments. Butsince the project was designed without a logical framework (usually not the case where new projects areconcemed), later supervisory missions as well as 1NTA itself did not follow-up the results of theseworkshops. Consequently, the final outcome of the project's evaluation system was not satisfactory.

Project Sustainability

Project sustainability is likely. INTA, which was created by the project, is now a mature institution withthe technical capacity to provide technology transfer and validation as well as extension services involv ingthe private sector. Based on ATLMP achievements, IDA has recently approved the AgriculturalTechnology and Rural Technical Education Project, using the Adaptable Lending Program Facility.

A similar scenario occurred with the Land Management component. The project laid the groundwork foradministrative streamlining and improvement in inter-agency coordination. It defined functions andresponsibilities as well as the need for closer coordination among the sector institutions involved in laildtenure and property rights. As above, IDA/Bank staff, together with the GON, are preparing a secondproject related to Land Administration.

Bank and Borrower Performance

Bank performance during project identification was very satisfactory, but less so in the preparation andjsupervisory phases. At the time of project preparation in 1992, Nicaragua's institutions were extremelyvulnerable and, although this fact did not escape the attention of IDA and Borrower preparation teams,project design did not adequately reflect this important reality. A simpler project would have made itsexecution smoother and easier to evaluate. Regrettably, the institutional set-up was complex (fiveexecution agencies from the Executive Branch and one from the Judiciary Branch - the Supreme Court ofJustice), targets were ambitious in scope and to be accomplished in a short period of time. In overlookingthe country's institutional weaknesses, the preparation teams did not fully consider the implications: pc,orexecution capacity and lack of coordination among the GON entities involved in the project.

Bank perfomance in supervising the credit was satisfactory during the first stages and more effectiveduring the later stages of credit implementation. Early Bank supervisory reports focused narrowly onformal matters (the mission addressed monthly operational aspects of the project, such as annualoperational goals and their compliance, drafting TOR's, and operational manuals). Insufficient attentiO nwas given to the factors hampering project execution (development of evaluation indicators to measurecost-effectiveness and economic impact, complex institutional arrangements, step-by-step changes inprocurement procedures, rather than a-once- and-for-all solution, ambitious operational targets). Since1997, Bank supervision improved and focused more on policy matters, institutional and legal aspects -

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while achieving a balance between the technical and operational supervisory areas.

With regards to Borrower performance, project reporting was, for the most part, timely. However, therewere some shortcomings. CONAGRO bears some of the responsibility for not implementing an evaluationsystem, different from monitoring, to measure project impact. Such shortcomings were unfortunate andlargely due to the institutional weaknesses present in MAGFOR and in other executing agencies, highpersonnel turnover, and the various changes that have taken place at the highest management levels withinthe institution itself and at the implementation agencies - particularly during the early stages of projectimplementation.

The Swiss Development Agency (COSUDE) played a key role in the project. Swiss contribution financedkey aspects of the Agricultural Technology component activities carried out by INTA. As noted earlier,they promoted workshops to address the monitoring and evaluation system. They were also flexible inaccepting the Nicaraguan Government's request to use the Swiss Grant for financing all INTA-relatedactivities in the final years of the project. Disbursement was timely, with minor delays towards the end ofthe closing date. COSUDE consultants were always part of the supervisory missions for the duration ofthe project.

The Borrower assumes a share of the responsibility for allowing a weak supervision and coordinationamong all entities involved in project implementation.

Key Lessons Learned

See ICR main text (Section 10) "Additional Information" for verbatim presentation of lessons.

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