Lo4AJ S62 - AE RESTRICTED Report No. TO-613a This report was prepared for use within the Bank and its affiliated organizations. They do not accept responsibility for its accuracy or completeness. The report may not be published nor may it be quoted as representing their views. INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT INTERNATIONAL DEVELOPMENT ASSOCIATION RIO COLORADO IRRIGATION PROJECT MEXICO December Z1, 1967 Projects Department Public Disclosure Authorized Public Disclosure Authorized Public Disclosure Authorized Public Disclosure Authorized Public Disclosure Authorized Public Disclosure Authorized Public Disclosure Authorized Public Disclosure Authorized
Transcript
Lo4AJ S62 - AE
RESTRICTED
Report No. TO-613a
This report was prepared for use within the Bank and its affiliated organizations.They do not accept responsibility for its accuracy or completeness. The report maynot be published nor may it be quoted as representing their views.
INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT
1. Land Tenure and Size of Farms in Rio Colorado District
2. Agricultural Credit
3. Crop Production and Value, Mexicali Valley - 1963/64-1965/66
4. The Existing Irrigation System and Proposed New Works
5. Water Requirements
6. Estimate of Costs
7, Operation and M"aintenance Costs after Rehabilitation
8. Estimated Increase in Net Value of Annual Production FollowingRehabilitation
9. Estimated Costs and Benefits
CHART
Rio Colorado - Construction Schedule
MAPS
1. Mexican Rehabilitation Irrigation Program
2. Rio Colorado Irrigation Project
This report is based on the findings of a mission which visitedMexico in February/March 1967, composed of Messrs. Greenshields,Bartsch, Kordik and Zarandin of the Bank, Mr. Garnier of FAO, andMr. Knights (consultant to the Bank).
MEXICO
RIO COLORADO IRRIGATION PROJECT
SUMMARY
i. The Mexican Government has applied to the Bank for a loan toassist in the financing of the rehabilitation of the Rio Colorado Irriga-tion District, located in the lower Colorado River delta, extending southfrom the United States' border into the States of Baja California andSonora.
ii. The Project would increase the quantity of water for irrigationby the reconstruction and lining of canals, by rehabilitation of existingwells, construction of new wells and integration of groundwater supplieswith gravity flows from the Colorado River, and land leveling for greaterefficiency in distribution. It would include complete rehabilitation ofall drains to enable better control of salinity. The Project would alsoinclude new and improved roads, an office building, repair shop, ditchrider houses and a telecommunication system to facilitate operation andmaintenance. Technical and extension services to farmers would be expandedand improved.
iii. The Project would provide assured water supplies and better watermanagement for approximately 203,000 ha, of which 12,700 ha would be doublecropped, in effect bringing the total annual area of irrigated crops to215,700 ha.
iv. The estimated cost of the Project (1968-74) would be approximatelyUS$95 million. In addition, farmers are expected to invest about US$12million for on-farm drainage over a period of about 15 years.
v. The Proposed Bank loan of US$25 million would cover the presentlyestimated foreign exchange component of civil works for the Project. Allother costs including local currency costs would be met by the Government.
vi. The Secretaria de Recursos Hidraulicos (SRH) would be responsiblefor the execution of the Project. SRH has a competent staff and an effi-cient organization for carrying out the Project and their execution ofsimilar Bank-financed projects has been satisfactory.
vii. Water users would make payments to the Government over a periodof 25 yearsp after the construction has been completed, to assist in de-fraying about 50 percent of the investment cost of the Project. The waterusers would also pay a water charge to cover the entire cost of operationand maintenance.
viii. Annual economic benefits would reach a level of approximatelyUS$16 million in about 15 years. On the basis of these direct agriculturalbenefits, the internal rate of return to the economy would be about 11 per-cent. In addition, the Project is indispensable for maintaining the com-mercial and industrial economy of the area as these are entirely based onagriculture.
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ix. The Project is suitable for a Bank loan of US$25 million for aterm of 20 years, including a grace period of seven years. The Borrowerwould be the Nacional Financiera, S.A., an agency of the Government ofMexico.
MEXICO
RIO COLORADO IRRIGATION PROJECT
I. INTRODUCTION
1.01 The Mexican Government has requested a Bank loan to help financethe rehabilitation and consolidation of the Rio Colorado Irrigation Dis-trict comprising 330,000 ha, of which about 203,000 ha would be irrigated.Three previous loans have been made by the Bank for the rehabilitation ofirrigation projects: Loan 275-ME in January 1961 for US$15 million; Loan336-N4E in April 1963 for US$12.5 million; and Loan 450-ME in May 1966 forUS$19 million (for location of projects, see Map 1). Construction workunder these loans is progressing satisfactorily, except for deferment ofa portion of the construction in one district pending completion of furtherstudies to improve drainage and cropping patterns.
1.02 This report contains an appraisal of the Project based on feasi-bility reports prepared by Secretaria de Recursos Hidraulicos (SRH), in-formation supplied by the Mexican Government, and on the findings, fieldstudies and discussions by a Bank Mission composed of Messrs. Greenshields,Bartsch, Kordik, Zarandin, Garnier (FAO), and Knights (Consultant), whovisited Mexico in February/March 1967.
IIo BACKGROUND
2.01 In Mexico agricultural production contributes only about one-sixth of the total gross domestic product, However, nearly half of thepopulation derive a living from work on the farms and ranches* During thepast 10 years the average rate of growth of agricultural output has beenover 4 percent per year. This rate of growth has not only enabled thecountry to cope effectively with the annual population growth of 3.6 per-cent and the increasing per capita food consumption, but has also enabledMexico to become a net exporter of basic food crops.
2.02 Exports of agricultural commodities in 1965 were valued atUS$665 million, amounting to about 65 percent of all exports, Cotton ac-counted for 19.1 percent, cereals for 10.6 percent and livestock productsfor 4.7 percent of all exports. Mexico has adopted agricultural programswith a view to producing adequate food and fiber products for nationalneeds and to increasing agricultural exports.
2.03 The rugged topography of much of Mexico, combined with arid andsemi-arid conditions prevailing in many regions, limits the area of culti-vation to about 30 million ha which is only 16 percent of the total landarea. Under these unfavorable natural conditions, continued increasedagricultural outputs can be attained only by using the available arableland more intensively. This requires improvement of all major inputs and,in areas where water shortage is the principal limiting factor, the expan-sion and rehabilitation of irrigation. In recognition of this, the Govern-ment has devoted more than 90 percent of its agricultural investment toirrigation in recent years.
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2.04 More than 4L million ha of farmland are under irrigation, ofwJhich 2 million ha have been brought in during the past 15 years. TheIMexican Government, through its Secretariat of Hydraulic Resources (SRH),is operating irrigation facilities on about 2.5 million ha, while farmerswith private systems irrigate approximately 1.5 million ha. About 30percent of the harvested crops of Mexico are from land receiving irrigation.
2.05 An impressive expansion of irrigation development took place in1930-40. However, too little attention was given to the construction offacilities that would make full utilization of the potential water re-sources. Excessive water losses resulted from unlined canals and inefficient water distribution. In 1960 the Government decided that therehabilitation of existing irrigation facilities be given priority overthe construction of new schemes because of greater economic benefits. Thework of rehabilitation has included the redesign of canal systems, liningof canals and laterals, provision of drainage, construction of additionalreservoirs, and the redistribution and consolidation of land holdings. Inthe case of the Rio Colorado Irrigation District, the rehabilitation ofworks would permit the expansion of the irrigated area by about 27,000 haand double cropping on about 12,700 ha.
III. THE PROJECT AREA
General
3.01 The project area includes the Rio Colorado Irrigation Districtwithin the Mexicali Valley. This valley is the lower Colorado River deltaextending south from the United States-Miexico border into the States ofBaja California and Sonora. The gross area of this District is about330,000 ha, of whiich 176,000 ha are presently irrigated. Water from theColorado River, the amount of which is established under InternationalTreaty (paras 4.03 and 4.04), is used for the irrigation of 113,000 ha,while 63,000 ha are supplied with water from deep wells.
3.02 The area's population is about 300,000, of which about 220,000are in the City of Mexicali (see Map 2). Irrigation has been practicedin this area since 1908 and within the past 30 years the Mexican Govern-ment has been improving the irrigation facilities principally through theconstruction of canals, drainage works and the Morelos Diversion Dam.
3.03 The existing irrigation and drainage system, constructed as itwas over a period of years by several private groups, is below standard.Many canals cannot provide adequate volumes of water for optimum applica-tion. Water losses from the unlined canals are excessive. Inadequateland leveling also contributes to inefficient water use. Neglected main-tenance during the past years has contributed to the low efficiency ofthe system.
3.0a The authorities, as well as the farmers, are aware of these poorconditions in the project area and they are in general agreement that
remedial action has to be taken. The farmers, through their organizedgroups, have expressed strong support for the proposed rehabilitationprogram.
3.05 The area is well suited to irrigation farming and has consider-able potential for expanded agricultural output despite the limited watersupplies. Present levels of agricultural production are among the highestin Mexico. Most farmers have adequate sized farms to achieve acceptablelevels of income and for use of modern mechanized methods.
Climate, Topography and Soils
3.06 The climate of the Rio Colorado Irrigation District is arid,with an average annual rainfall of only 36 mm, which occurs principallyduring the months of December, January and August. During the past 20years annual rainfall has varied from 6 mm to 77 mm. Temperatures duringthe sunmier months average about 320C (90 0F), while temperatures in winterare about 130C (550F). Freezing conditions during nights may be expectedbetween the months of November and February. The minimum temperaturerecorded was -70C (190F). Hailstorms during winter months have been re-ported only twice in the past 34 years.
3.07 The District is a relatively flat plain within the broad ColoradoRiver delta. The soils are medium to fine grain alluvium and free fromcoarse sands or gravel deposits. The plain is divided by a 10 - 20 melevated ridge so that drainage from the northwTestern part f'ows towardthe Salton Sea in the United States and from the remainder of the area to-ward the Gulf of California. The northwestern plain has a gradient of0.46 m/km, while the southern plain is somewhat flatter, with a gradientof 0.42 m/km. Both parts of the area have topography favorable for irri-gation and effective water control.
3.08 The soils of the District have been adequately classified andmapped. According to the United States Bureau of Reclamation's system ofland classification, most of the soils are I and II, which classes aresuitable for sustained production under irrigation. In general, they arefree draining with the exception of about 33,000 ha of heavy clays forwhich extensive drainage would be provided. The organic matter content islow in al series, therefore, nitrogen fertilizer applications are nec-essary for satisfactory production.
3.09 Salt has accumulated in the soils due to faulty irrigation prac-tices under the desert-type climate. Limited application of irrigationwater has precluded leaching and resulted in increasing salinity overabout 35 percent of the area. This area will require moderate leachingto restore full productivity. About 22 percent of the total irrigablearea will require heavy leaching, and 13 percent of the area with saltsin the soil in excess of 2 percent by weight, would be excluded from theProject as well as three limited areas of highly alkaline soils. About20 percent of the area is nearly salt free.
Land Tenure
3.10 Under the agrarian land reform program, farmers have been allo-cated farms in units of 20 ha with full water rights, which have effective-ly been reduced to 18 ha of irrigated crops under presently available watersupplies* About three-fifths of the farmland of the project area are culti-vated by ejidatarios (life-tenants established under Mexican Land Reform)who have use rights but no legal ownership title in the land. Theejidatarios represent about 65 percent of all farmers in the District(Annex 1). The remainder of the District is cultivated by private farmers.
The modal-size group of both the ejido and private farm is the 20-ha unit.Although the maximum allocation of water rights to any one individual is20 ha, some farm families jointly farm several units held by members oftheir family or leased from others. A family farm can have a maximum of150 ha if it is in cotton or 100 ha if it is in other crops under presentregulations of the agrarian reform law.
3.11 The private landowners have higher incomes than the ejidatariosbecause they operate bigger farms on the average, have more financialresources, and use more modern techniques of farming. Nine-tenths of thefarms with over 20 ha are privately owned. More than 70 percent of thefarms of 5 ha or less in size are operated by ejidatarios.
Technical Services
3.12 Agricultural research and extension services are the responsi-bility of the Secretariat of Agriculture. The Secretariat maintains anumber of central plant breeding and other experimental stations. Trialsof best adapted varieties are carried out for the District at a 40-ha sub-station near Mexicali for winter crops, and at a station in the easternsandy soil part of the District for summer crops. Also at the Mexicalisubstation, experimental work is undertaken on fertilizer application,irrigation practices and plant protection. The crop research program atthese district field stations is considered adequate for providing basicinformation on present crops and on the crops to be introduced in theproject area.
3.13 Agricultural extension services have not been expanded in keepingwith needs. Some additional staffing and supporting budgets are needed.The Mexicali Valley has only five extension agents, five home economistsand a part-time specialist agent for livestock. To a large extent theeffective technical services are now provided by the inspectors of thegovernmental lending agencies, the Ejidal Bank and the National AgriculturalBank, and by the cotton companies. The Secretariat of Hydraulic Resourcesprovides extension guidance on irrigation and drainage practices primarilythrough the supervisors of irrigation units.
Agricultural Credit
3.14 The principal sources of short-term farm credit in the Districtare the 12 cotton companies and the two Government banks - the Banco Ejidalwhich lends exclusively to the ejidatarios, and the Banco Agricola which
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lends mainly to small private farm operators. The cotton companies financeover 90 percent of all annual crop production in the District. Their fi-nancing, as well as that of the banks, is advanced for each separate majoritem of work throughout the crop calendar. Each succeeding stage of workis financed only after an inspector has determined the preceding work tobe satisfactorily completed. The companies are now employing many gradu-ate agronomists as inspectors. They have one inspector to each 50 to 75farmers. Private commercial banks make loans to a few large scale farmoperators and to farmers who do contract work with agricultural machinery.Their participation in the overall agricultural credit picture is quitenegligible.
3015 The two Government banks, as well as the cotton companies, pro-vide a part of their annual credits in kind such as seeds, fertilizers andin contract services. The cash part of most annual loans is based onamount of labor required and is advanced on a month-to-month basis tocover family living expenses. The usual rate of interest charged by alllending agencies on annual crop production loans is one percent per monthon the outstanding balance. Details on farm credit are given in Annex 2.
3.16 The Banco Nacional Agropecuario, established in Mexico in 1965,opened an office in Mexicali in September, 1967. This sub-branch willfill an important credit need by the provision of medium and long-termcredits not now covered by the two existing official banks. Farmers willneed longer term credit for installation of on-farm drainage and for pur-chase of farm implements. In addition, the farmers -who are expected togo into livestoclk production in the project area wTould need a stable ar.dadequate source of medium and long-term credits.
Present Production and Values
3.17 About 71 percent of the irrigated acreage is devoted to cottonas the climate and the soils of the area are especially favorable forthis crop. Wheat is the second major crop with 24 percent of the irri-gated area. Alfalfa, vegetables and some other crops are cultivated on5 percent of the land. Average seed cotton yields of 2.9 tons per ha arethe highest in Mexico. The cotton lint is fine-long staple, white andclean due to hand picking and absence of rain and insect pests, and there-fore, usually commands a premium price. Good quality hard wheat averages2.9 tons per ha and alfalfa hay yields 9 tons per ha (Annexes 3 and 8).
3.18 Livestock is presently of minor importance in relation to cropproduction, but it is increasing. Three commercial dairies in Mexicaliare producer-owned and operated. The total investment in dairy cattleand plants in the District is estimated at about 68 million pesos. Theoutput of the commercial plants is roughly 50,000 liters per day. Theoutput of raw milk by small producers is from 10,000 to 15,000 1 per day.About 10,000 1 per day are imported from the United States. Thirteencommercial feed lot operators keep an average of 30,000 to 35,000 head ofbeef cattle to meet the local demand of about 100,000 head annually. TheDistrict is also important as a transshipment area for feeder cattle,mostly from the State of Sonora, destined for export to the United States.
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Annually about 60,000 head are fed normally 10 to 15 days in commercialfeed lots at Mexicali prior to being transported to the United Stateso
3.19 The overall standard of farming is well advanced and this isreflected in the high levels of fertilizer application and the high degreeof mechanization. About 5,800 tractors and 19050 combination harvestersare being used in the District according to a 1964/65 machinery census.Ninety-four percent of the farms can be considered fully mechanized.
Harketing and Prices
3.20 All cotton production is financed and marketed under contract tothe twelve cotton ginning companies in the Rio Colorado Irrigation District.These companies export practically all of the lint output to Japan andEurope. Cottonseeds are processed by two of the companies that have oilmills. The oil is converted into shortening which finds its way into theMexican market. The cottonseed cakes are chiefly exported to the UnitedStates. The fibers grown in the District are straight middling 1-1/16"which are of high grade and have earned a good reputation in foreign cottonmarkets. These high-strength fibers go mainly into garments. In 1966/67,the average export price per pound of straight middling 1-1/16" was U.S.cents 22.15 fob Ensenada, a port on the western coast of Baja California.
3.21 Wheat prices are fixed under a price support program administeredby a federal agency called CONASUPO. The country-wide support price is800 pesos per ton, which is slightly higher than the world price of 750pesos per ton. CONASUPO's support price for wheat produced in the MexicaliValley was 1,100 pesos (US$88) per ton in 1964/65, and 913 pesos (US$73.o4)per ton in 1966. These Mexicali support prices, which are higher thanthose for the rest of the country, are justified by the high transport costthat would otherwise be involved in bringing wheat to the District fromother producing areas of Mexico.
3.22 In addition to wfheat, prices are fixed under the federal pricesupport program for corn and sorghum. The prices for cottonseed, safflowerseed, beans, soybeans, and sesame seed are not fixed, but they are supportedthrough purchases by CONASUPO. A complementary agency called ANDSA gradesand stores the wheat and other products purchased by CONASUPO. ANDSA hasfive fully mechanized warehouses in the District, each with a storagecapacity of 15,000 tons.
IV. THE PROJECT
General
4. 0 1 The Project consists of the rehabilitation of the irrigation anddrainage facilities of the Rio Colorado District. The principal workswould include the following: (i) realignment and lining of canals, con-struction of new wells and rehabilitation of existing wells for improvingthe water supply; (ii) construction of new drains and rehabilitation of
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existing drains; (iii) construction of new roads and repair of existingroads and telephone lines; (iv) construction of office, repair shop andother buildings and gauging stations; (v) land leveling and the fillingof old canals and ditches; and (vi) purchasing equipment for improvingthe operation and maintenance of the system. Completion of all construc-tion work is expected to take 61-½ years (see Chart). With the completionof the Project, the net irrigated area would increase from about 176,000ha to 203,000 ha, of which about 12,700 ha would be double cropped. Inaddition, the Project would provide more reliable delivery of water sup-plies, facilitate water management and improve conditions for more inten-sive agriculture.
Project Works
4.02 The project works would include the reconstruction with concretelining of 2,334 In of canals down to laterals providing water to 60-hablocks. To improve the District's drainage system, about 1,500 km ofdrains would be realigned and improved. Under the Project, 35 private and57 federal wells would be abandoned, mainly in order to eliminate sourcesof water with excessive salinity. Most of the remaining private wellswould be rehabilitated. One hundred and seven new federal wells would beconstructed including power service lines. The completed Project wouldhave 640 wells, 436 federally operated and maintained by the District and204 privately operated and maintained by the owners under the supervisionand regulations of the District. The operation of all wells wiould beregulated under the strict provision of "Decreto Federal" dated May 15,1965. In addition, 221 observation wells would be drilled in order to re-cord water level changes in the aquifer during and after rehabilitation.To permit easy access to the irrigation works, as well as better trans-portation of farm products, 555 km of roads would be improved or newlyconstructed. Land leveling to assure a high degree of irrigation effi-ciency would be undertaken on 178,000 ha. The remainder of the projectarea does not require leveling. A new office building, repair shop forSRH machinery, ditch rider houses and an internal telecommunication systemwould be provided to facilitate operation and maintenance of the District'sirrigation and drainage system. Details of the project works are givenin Annex 4.
Water Supply
4.03 Water for the Project would be provided from two sourcess gravitysupplies from the Colorado River, amounting to about 1,850 Mm3 annually;and groundwater including private wells amounts to about 700 Mm3 per year.All the water available for use originates in that part of the ColoradoRiver Basin within the United States. The amount of surface flow of theColorado River available to Mexico was set by the International Treaty ofFebruary 3, 194h. The water is delivered to Mexico in accordance withmonthly requests which must be within the minimum and maximum water quan-tities stipulated by the Treaty. Operations under the International Treatyare supervised by the International Boundary and Water Commission, UnitedStates and Mexico.
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4.04 The 1944 Treaty does not contain a definite stipulation on thequality of water to be delivered. In 1962, the drainage system of the U.S.Wellton-Mohawik Irrigation District, located in the Gila River Basin, begandischarging highly saline waters into the Colorado River upstream fromMorelos Dam. This caused a severe salinity condition for the Rio ColoradoDistrict. A provisional agreement was reached by Mexico and the UnitedStates$ on March 22, 1965, whereby the United States constructed at itsexpense a lined canal to carry the Wellton-Mohawk drainage water to MorelosDam wihere it can be discharged either above or below the Dam, as may berequired, to maintain acceptable salinity of water for use by the RioColorado District. Experience on the operation of the Morelos Dam, in con-junction with the drainage bypass channel since its completion in November1965, indicates that an acceptable salinity level can be attained and thatpractically all of the 1944 Treaty allocation of 1,850 Mm3 per annum willbe available for use in Mexico. Discharges below Morelos Dam and otheroperational requirements at the Dam have been about 39 YA3 per annum. Thisamount has been talken into account in the estimates of project water supply.Future operations may well reduce this loss.
4.O5 The source of the groundwater supply is a thick aquifer throughwhich water flows generally toward the Gulf of California. Records main-tained on the water table show a progressive depletion during recent yearswhen 1,150 Nm3 per year have been pumped. This exceeds the annual replen-ishment of this aquifer which is estimated to be about 950 lMn3 coming fromthree sources: (i) the underground flow from the United States ColoradoRiver Basin across the international boundary; (ii) leakage of water fromthe unlined canals and drains; and (iii) deep percolation from the irri-gated cropped area. The Bank has been advised that the United States hasno objections to the proposed Project which would depend on wfater suppliesoriginating in the United States.
4.O6 Hydrogeologic studies indicate that an annual volume of about700 Mm3 can be safely provided from groundwater resources after completionof the Project. From the available hydrogeological data, this figure canbe considered as a reasonable order of magnitude* The Federal Governmentwill continue hydrogeological studies to provide the basis for efficientintegration of surface and groundwater supplies, as well as to avoid the"mining" of the aquifer, and the possible intrusion of sea water.
Water Requirements
4.07 Irrigation water requirements have been calculated on the basisof the proposed cropping pattern and irrigation practices, leaching require-ments and an assumed 80 percent field irrigation efficiency. To these farmturnout requirements, 13.5 percent has been added for conveyance losses ofsurface water and 4 percent for well water. This makes an annual total con-veyance loss for the District of 237 Nm3. After rehabilitation, the Dis-trict would require 2,274 Mm3 per year at the farm turnouts, for which itwould be necessary to divert 1,811 MO3 into the gravity irrigation systemat Morelos Dam and to lift 700 Mm3 from bored wells (pumping lifts wouldrange from 15 m to 30 m). About 39 Mm3 per year would be bypassed due tosalinity and operational waste. The estimates of water requirements aresound (see Annex 5).
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Status of Engineering
.08 The Secretaria de Recursos Hidraulicos has been responsible forthe preliminary investigation, planning, design and preparation of costestimates of the proposed Project. SRH has had broad experience in pre-paring similar irrigation projects throughout Mexico and its technicalstaff is competent and well qualified. Preparation of detailed plans wasthe responsibility of the Mexicali Field Office, which has gained detailedknowledge of the project area through their operation of the District forover 20 years. A semi-detailed design of laterals and sub-laterals hasbeen completed on about 20 percent of the proposed project area to furnishthe basis for developing data and cost estimates. Adequate topographicmaps (scale 1:20,000) and good aerial mosaics were utilized and specificdetailed ground surveys were undertaken as required. Construction materialshave been located and have been tested along with samples of aggregates.Groundwater observations have been maintained over a ten year period andgroundwater contour maps have been prepared and utilized. Hydrogeologicaldata are complete and adequate for planning purposes.
Construction Cost Estimates
4.09 The cost estimates are based upon preliminary designs and quantityestimates developed for a semi-detailed layout of 56,000 ha within the pro-ject area. These preliminary designs and quantity estimates were extra-polated to the entire project area. In the case of the drains and some ofthe larger canals, specific preliminary designs and quantity estimates havebeen prepared to obtain greater accuracy than that available from samplearea extrapolation. SRH maintains a complete listing of contractor's unitbid prices for each class of work which is continuously up-dated in accord-ance with the latest bids received. Prices from this list were applied tothe quantity estimates to obtain total field costs. Engineering and super-vision costs, estimates for equipment and an adequate provision for con-tingencies have been included. The methods used are sound and the resultantcost estimate is realistic.
4.10 SRH has prepared detailed analysis of the local and foreign ex-change component costs of major items of civil works over a long period.Their analysis of cost on this Project assumes that all of the civil workswould be awarded to local contractors. The foreign exchange cost of theProject would increase if any part of the civil works under internationalcompetitive bidding is awarded to foreign contractors, but the increasewould not be large. Their original analysis showed a foreign exchange com-ponent equivalent to US$37.2 million. Since their calculation includedsecond and third level indirect foreign exchange components, a recalculationwas made to take out such indirect components. After making deductionsfor these items, the remaining foreign exchange cost would be US$25 million.which is considered satisfactory for establishing the amount of the pro-posed Bank loan.
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4.1l The cost estimates are summarized below (for details see Annex 6):
Local Estimated ForeignCurrency Exchange Component Total
- US$ J4illion -
Construction and rehabilitationof canals 21.3 11U4 32.7
Construction and rehabilitationof drains 4.0 2.2 6.2
Drilling and rehabilitation ofwells 4.6 0.7 5.3
Roads, buildings, telephones,land leveling and minor works 9.9 17.4
Sub-total, Civil WorksConstruction 39.8 21.8 61.6
Cement and steel to be furnisheddirectly by Government 10,5 - 10.5
Sub-total, Civil Works 50.3 21.8 72.1
Engineering and supervision@ 12.5% 9.0 - 9.0
Equipment, local purchase 1.4 - 1.4
Sub-total 60.7 21.8 82.5
Contingency 15% 9.3 3.2 12.5
Total 70.0 25.0 95.0
Financing
4.12 The proposed Bank loan would cover the presently estimated for-eign exchange component of civil works excluding steel, cement and concreteadditives which the Government will furnish directly to contractors. Theremaining estimated foreign exchange cost of civil works is US$21.8 million,and with an allowance of US$3.2 million for contingencies, the loan wouldtotal Us$25 million.
4.13 The remainder of the project cost would amount to US$70 million,wlhich costs would be met by Government budget allocations.
4.14 Although the IMexicali Valley area is a free trade zone, bothMexican and foreign contractors must have permits to bring in constructionequipment. Durin-g-negotiations assurances were obtained that the Governmentwill promptly issue the necessary licenses and permits.
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4.15 Procurement. Awards of contracts for civil works would be on thebasis of international competitive bidding, except as explained in paragraph5.07.
4.16 The expenditure schedule would be approximately as follows (inmillions of U.S. dollars):
4.17 Disbursement of Loan. Disbursements from the proposed loan forcivil works would be based on an agreed percentage relating to the presentlyestimated foreign exchange component. In case of a decrease in the esti-mated cost of the civil works, the percentage would remain the same. Ifsuch costs increase, the contingency reserve would be used. In case thecontingency reserve is not sufficient to permit disbursements of the loanover the entire period of execution of the Project, the agreed percentagewould be changed by the Bank as required.
V. ORGANIZATION AND MANAGEMENT
General
5.01 The Secretaria de Recursos Hidraulicos (SRH), a Federal Ministry,would be in charge of executing and operating the Project. The Ministrywas established in 1947 and the Secretary is a member of the Cabinet. Heis assisted by twTo sub-secretaries, and has one administrative and fourtechnical de2artmenrits. The Ministry's organization and staffing permitsfull and independent control of irrigation projects from the investigatingand planning stage to construction and operation.
5.02 Most of the irrigation development in Mexico is undertaken by SRHthrough 128 irrigation districts. A number of the districts are very small,and for administrative purposes, they are consolidated into g:roups un±der oneChief of Districts. There are 58 such Chiefs of Districts who in turn re-port to 34 General Managers, who usually have jurisdiction over an entireState. General Managers report directly to the SRH offices in Mexico City.In the case of large districts, like Rio Colorado District No.14, theDistrict Manager reports directly to SRH.
The Irrigation District
5.03 The Rio Colorado District is headed by a District Manager who isan engineer. He is assisted by engineers in charge of four sections dealingwith: (i) water distribution and delivery; (ii) construction and rehabili-
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tation; (iii) operation and maintenance of irrigation and drainage facil-ities; and (iv) administration. A well qualified technical staff of morethan 200 persons is available for carrying out the Project. This staffhas had much experience in preparing plans and specifications for new con-struction and rehabilitation, supervising construction, planning water al-location, and directing operation of District-owned equipment. The Admin-istration Division is in charge of accounting, water charge collection,disbursement and other related duties. District funds are controlled bySRH, but financial operations are subject to the Ministry of Finance'sapproval. SRH audits the accounts of the District four or five times eachyear. In addition, auditors from the Ministry of Treasury and PublicCredit examine the District accounts twice a year. Auditing provided bythe Government would be satisfactory for purposes of the Project.
5.04 An Advisory Committee (Comite Directivo), established by Presi-dential Decree under the Law of Ministries and Departments of 1958, servesa vital role in the District's operations. The District Manager serves asthe Chairman of the Committee and the representative of the Ministry ofAgriculture serves as its Secretary. Other members represent the NationalAgricultural Bank, the Ejidal Bank, private farmers, the ejidatarios, theCotton Association, and the International Boundary and Water Commission.The Advisory Committee advises the District Manager on the annual operationof the project, including the establishment of water charges, allocationof water and annual cropping patterns. After being advised by the Managerof the amount of water than can be expected in the irrigation season, plansfor the cropping pattern and the amount of crop credit necessary are deter-mined by mutual agreement with the Committee.
5.05 For operation and maintenance of project works after construction,the District would be organized into six units each of which would be underthe direction of an engineer. These units would be parcelled into about85 sections, each with a ditch rider in charge. Efficient communicationwould be provided by road, telephone and radio networks. Operation andmaintenance of the present system has been hampered by laborer squatterson the system rights-of-way. To prevent such a situation in the future,assurances were obtained during negotiations that all rights-of-way neces-sary for the construction and operation of the Project would be establishedfree and clear of encumbrances and adequately protected against thirdparties.
Construction
5.06 SRH is capable of effectively preparing final designs and con-tract documents, supervising the engineering construction, and operatingand maintaining the completed Project. The technical staff is qualifiedand experienced, and adequate laboratory facilities are maintained forstudies in hydraulics, soil mechanics, and testing materials.
5.07 Contracts for the principal features of construction work wouldbe awarded on the basis of publicly advertised international competitivebidding procedures. In order to make practicable the participation of
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international contractors, schedules and specifications would be preparedfor civil works contracts having a minimum value of 20 million pesos insofaras possible. Certain kinds of civil works can be performed most effectivelythrough small contracts negotiated with local contractors at regional pricesset by SRH. This follows a practice long in common use by SRH and hereto-fore accepted on projects financed by the Bank. The percentage of work tobe awarded without bidding would not exceed 20 percent of the value of allcivil works contracts. During negotiations, assurances were obtained thatbids for civil works would be called for in amounts of 20 million pesos ormore insofar as practicable, and that contracts awarded without competitivebidding would be limited to a total value not to exceed 20 percent of thecost of all civil works.
5,08 SRH would be required to undertake effective prequalification ofbidders and to accept the lowest evaluated bid unless just cause can beestablished for rejection of such low bid. Performance bonds for con-tractors would be required covering 10 percent of the face amount of thecontract. During negotiations, assurances were obtained from the Govern-ment that bidders would be prequalified and that contractors would be re-quired to furnish performance bonds.
Expanded Technical Services
5.09 The Secretariat of Agriculture and Livestock has drawn up a com-prehensive plan for technical services for the Rio Colorado District.The plan is based on the cooperative effort of several agencies and theprogram of work would be coordinated by the State Secretary of Agriculture.The program would include experimental farm investigations, plant pestand disease control, cooperative agricultural extension services, seed in-spection and certification services, special small farm technical guidanceand livestock promotion.
5.10 The experimental farm investigations would include fertilizerapplications, use and management of water, and new crops. The extensionactivities would provide technical assistance for the expansion of foragecrops, especially alfalfa, and other adaptable crops. In addition, ex-tension services would be directed towards raising the nutritional stand-ards of rural families, assisting farmers with plans to improve their live-stock production, promoting rural youth clubs, and improving the generalquality of rural home-life. During negotiations, assurances were obtainedthat the Government would continue to provide and strengthen these techni-cal services planned by the Ministry of Agriculture and SRH.
Soils and Farm Drainage Studies
5.11 To deal effectively with any future salinity or alkali problems,a continuous program of soil testing will be necessary. This program wouldinclude continuing salt content readings of drains and observation wells.Soil test holes in approximately 250 representative areas of the Districtwould be required and annual readings taken on at least three levels ofthe soil profile. The findings of these tests would be a basis for ini-tiating chemical applications and farm drainage works. If these tests
- 14 -
should indicate the need for providing drains for some farms, SRH wouldsupply farmers with construction designs and prepare field layouts. Assur-ances were obtained from the Government during negotiations that soilstudies would be continued to the Bank's satisfaction, and that SRH wouldprovide farmers with technical and such other assistance as may be requiredto enable them to install on-farm drainage when it becomes necessary.
Requirements for Farm Credit
5.12 The requirements for annual production credit in the District arenow adequately met by the cotton ginning companies and the two Governmentbanks serving the area. With the opening of a Mexicali Branch of the BancoAgropecuario and the proposed increase in farm credit operations by thecommercial banks, adequate short-term credit would be available to coverthe increased future needs.
5.13 While medium and long-term credit needs do not, at the moment,present any serious problem, proposed changes in cropping patterns leadingto a significant expansion in livestock production, would require addi-tional medium to long-term financing. Also the long range needs of soilamendments and drainage will require long-term financing. In the heavyclay zone of the District, the installation of tile drains may eventuallybe required on about 18,000 ha (para. 5.1l). Without an adequate drainagesystem, the life of farmland in this zone is limited to about 20 years.Most farmers in this area would probably need long-term financing forinstallation of drains and the Mexicali Branch of Banco Agropecuario isbeing established to help serve these needs. During negotiations, assur-ances were obtained that the Government would take all necessary actionto ensure the availability of medium and long-term credit resources in theproject area.
VI. FINANCIAL RESULTS
Operation and Maintenance Cost Estimates
6.01 Rehabilitation and consolidation of the irrigation network andbetter supervision of operating personnel through the allocation of def-inite operating areas, interconnected telephone and radio communicationswould materially increase efficiency. However, proper maintenance of therehabilitated and new drainage system would cost more than current expen-ditures. In addition, water management and extension services and super-vision of irrigation practices would be increased over present levels.Present annual O&M costs of about 38 million pesos would increase to about48 million pesos after completion of the Project, including the cost ofsupervising private wells.
6.02 For areas supplied by surface water, the O&M costs would averageabout 260 pesos per ha, or 24 pesos per 1,000 m3 of water used (for fur-ther details, see Annex 7). The total O&M costs for the Project would
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increase gradually throughout project construction as follows (in millionsof pesos):
1968 1969 1970 1971 1972 1973 1974 1975 1976
37.9 39.6 41.1 42.8 44.0 45.3 46.5 47.7 47.7
These estimates have been calculated in detail and are considered reason-able.
Water Charges
6.o3 In conformity with established Government policy, SRH intendsthat, following the completion of the rehabilitation work in the District,water users shall meet all O&M costs. The water rates would be establishedin accordance with procedures set forth in a Presidential Decree of July 23,1964, which governs the water management of the District. Under the pro-visions of this Decree, the General Manager of the District must preparea budget in advance for each year, and upon the basis of estimated watersupplies available, determine the water rates required to recover all O&Mcosts. The District budget and calculations showing the basis of theproposed water rate for the ensuing year are submitted first to theAdvisory Committee of the District for advice (para. 5.04), and then sub-mitted to SRH for approval.
6.04 Water charges are based on volume of water delivered to each farm.For the past four years these charges have been as follows: for normalgravity deliveries through the canal network 1.75 pesos per liter persecond per 24-hour day (equivalent to 86.4 m); for water from collectivewells operated by the District, 3.20 pesos per liter per second per day;and for domestic water users, 3.50 pesos per liter per second per day.Those farmers who operate their own wells within the District are charged30 pesos per ha per year to cover supervision and regulation costs.
6.05 Upon completion of the Project, water supplies from District-operated wells and from the Colorado River flows would be fully integratedand a single water rate would be charged. On the basis of the estimatedannual O&M costs of 47.7 million pesos, the water rate for all water wouldbe 2.06 pesos per liter per second per day (Annex 7). The charge of 30pesos per ha for supervision and regulation of the remaining privatelyoperated wells would continue to be applied for an estimated 23,000 ha.
6.06 In addition to the above water charges, based on volume of waterdelivered, an agreement has been reached with water users that they willassume approximately one-half of the investment cost of the rehabilitationworlcs. By this Agreement, signed by representatives of farmer groups onOctober 7, 1966, a charge of 192 pesos per ha per year for a 25-year periodwould be made as a rehabilitation charge. This charge was calculated asthe amount necessary to amortize one-half of the then estimated cost ofthe Project at 6 percent interest. The gross payment under this Agreementwould amount to approximately 40 million pesos per year. During negotia-tions, assurances were obtained that the Government would ratify the
- 16 -
General Agreement of October 7, 1966 between the farmers and the RioColorado District No.14, and that a Presidential Decree would be issued pro-mulgating the charges and water rates to be paid by the farmers.
6.07 As required by existing regulations, all matters concerning waterusers' obligations would be recorded in written agreements between SRHand water users, including both private landowners and the ejidatarios.Agreements wiould be made with each ejido sufficiently in advance to insureorderly progression of construction schedules. The obligation for watercharges would be individualized for each member of the ejido and privatefarmers.
VII. BENEFITS AND JUSTIFICATION
7.01 The Project would be carried out as part of a national program topromote better utilization of available water in publicly operated irri-gation districts. The principal aim of the Project is to retain the Dis-trict's agricultural productivity through prevention of salinity and waterlosses. The area under irrigation in the Rio Colorado District would beincreased by approximately 15 percent or 27,000 ha, and a uniform watersupply would be ensured.
Improved Land Use
7.02 With completion of rehabilitation, available water would be suffi-cient to irrigate 203,000 ha instead of the present 176,000 ha. Intro-duction of barley and oats, or forage crops, would permit double croppingon 12,700 ha, bringing the irrigated crop area per year to 215,700 ha.SRH proposes to gradually reduce the area of cotton from 127,500 ha to about100,000 ha to eliminate low yielding areas that result in inefficient useof water. Grain sorghum, soybeans and safflower would be introduced onabout 35,000 ha, and alfalfa, wheat and barley acreages would be expandedfrom 48,000 ha to 58,700 ha (Annex 8). The expansion of wheat and foragecrops would make possible the efficient utilization of Mexico's winterwater allotment under the existing International Water Agreement whichwould otherwise not be utilized beneficially.
7.03 The diversification of the cropping pattern would promote theproduction of such oil-bearing crops as soybeans and safflower in linewith the Governmentts agricultural policy. The livestock industry wouldbenefit from the increased production of grain sorghum and forage, espe-cially in the conditioning of beef cattle for export and in the growingdairy industry. The proposed crop changes would be brought about by thewater and credit controls which SRH exercises through the District's Ad-visory Committee. Assurances were obtained during negotiations that SRH,in cooperation with the Iviinistry of Agriculture, would undertake continuousstudies to determine the cropping patterns which would be most advantageouswithin the limits of available water.
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Increased Crop Yields
7.o4 The District now has the highest average cotton and wheat yieldsin Mexico, though still lower than in the neighboring Imperial Valley inthe United States. Crop yield increases after the completion of the Pro-ject and the on-farm works would result mainly from improved water con-veyance and field application and relocation of farmers to best-suited areas.Irrigation of individual plots would become more efficient after landleveling. Better land utilization and increased use of fertilizers andimproved seeds would also contribute towards higher productivity. A fur-ther important contribution of the Project would be the prevention of adecline in productivity due to increasing soil salinity. Without the Pro-ject, a large part of the District would revert back to a desert.
7.05 In the calculation of economic benefits, cotton and wheat pricesare assumed to remain unchanged. Mexicali Valley cotton is high quality,long staple and, while cotton prices in general have declined, the worlddemand for better cotton is expected to remain strong. Prices used forother crops are the support-price by CONASUPO where these apply, or aver-age market prices.
7.06 No problems are envisaged for the marketing of Mexicali cottonsince its superior quality puts it in high demand. CONASUPO provides aready market for wheat. The growth in the area's population and per capita.income would absorb the increase in production anticipated after rehabil-itation. Forage is in short supply in Mexicali and currently livestockfarmers have to import part of their feed from the United States. Theexpansion of forage production would meet current demands and at the sametime, enable the fuller utilization of winter water and promote expansionof livestock in the area.
7.07 In calculating the benefits, wages paid to hired workers are in-cluded in production costs, but no cost is assigned to hand labor providedby members of the farmer's family. At present there is a surplus of thistype of labor.
7.08 The estimated direct return on the investment in the Project,based on the above assumption, would be about 11 percent (Annex 9). Sincethe Project involves the rehabilitation of existing irrigation and drainageworks serving a highly developed area, there is a high degree of certaintythat the above rate of return will be realized. The benefits include theincremental net values of production over the decreased levels that wouldprevail without the Project. Due to excessive overpumping of groundwaterand water losses, and because of the lack of sufficient water to leach thesoils, a gradual decline in yields due to increasing soil salinity is fore-seen without the Project. The prevention of these reductions in output isan important component of benefits. Net farm incomes after rehabilitationwould be increased on the average by about 9,000 pesos per farm.
7.09 In addition to the primary benefits taken into account in thecalculation of the above rate of return, the Project would result in far-
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reaching indirect benefits. The 11 percent annual return from the Project,shown above, does not take into account indirect benefits to the economy asa whole resulting because the Project would avoid additions to unemployment,both of manpower and of existing capital facilities in the region, whichwould otherwise occur. The primary benefits and the substantial indirectbenefits give a highly satisfactory overall economic return for the Project.
VIII. CONCLUSIONS AND RECOMMENDATIONS
8.01 The Project has priority in the national program of rehabilitatingand expanding existing irrigation districts. The rehabilitation of the RioColorado District, which the Project comprises, would contribute not onlyto the agricultural economy of the District in particular and of Mexico ingeneral, but also to the more effective utilization of the country's waterresources.
8.02 The Project would be carried out by SRH, which has had long ex-perience and high competence in the field of irrigation. SRH has an ade-quate staff of able personnel to properly design and construct the workswithin the construction period and to operate them afterwards. The costestimates are realistic.
8.03 The Project is economically justified and is suitable for a Bankloan of US$ 25 million for a term of 20 years, including a grace period ofseven years. The 20-year term was used on the three previous rehabilitationloans and appears appropriate for this type of Project. The Borrower wouldbe the Nacional Financiera, S.A., an agency of the Government of Mexico.
8.04 During negotiations, assurances were obtained that:
a. the Ministry of Agriculture and SRH will continue andstrengthen technical service to farmers (para. 5.10);
b. soil studies will be continued to the satisfaction ofthe Bank and SRH will provide farmers with technicaland such other assistance as may be required to enablethem to install on-farm drainage when it becomesnecessary (para. 5.11);
c. adequate financial resources will be provided formedium and long-term credit (para. 5.13); and
d. the Government will take all necessary legal actionto establish the rehabilitation charges and waterrates to be paid by the farmers (para. 6.06).
December 21, 1967
LAiD TEN-RE AIM SIZE OF FARMS IN RIO COLORADO DISTRICTAS OF FEBRUARY, 1967
Farm holdinasgrouped by size Ejidatarios Private Farmers All T½rns
T5ha - flo.A. Area (ha) Area (ha) Jo. Area (ha)
0.1 to 5.0 1,082 2,017 448 1,645 1,530 3,662
5.1 to 10.0 308 2,593 1,009 8,927 1,317 11,520
10.1 to 20.0 5,527 109,355 3,0l4 56,018 8,Shi 165,373
20.1 to 30.0 27 650 160 4,103 187 4,753
30.1 to 40.0 1 hO 83 3,104 84 3,144
4O.1 to 50.0 2 97 53 2,537 55 2,634
50.1 to 60.0 - - 25 1,436 25 1,436
60.1 to 70.0 - - 9 607 9 607
70.1 to 80.0 1 72 9 691 10 763
80.1 to 100.0 - - 22 2,100 22 2,100
100.1 to 12O00 - - 2 216 2 210
150.1 to 260.0 - - 3 572 3 572
TOTiLL 6,948 114,824 4,837 81,956 11,785 196,780
Source: Special study made by District for Bank mission.
ANNEK 2-Page 1
AGRICULTURAL CREDIT
Short-Term Credit
The principal source of credit to farmers in the Rio ColoradoIrrigation District is the lending by the twelve cotton ginning companies,mainly for annual cotton production costs. Two official banks, the BancoEjidal and the Banco Agricola, extend loans to the ejidatarios and thesmall landowners respectively. Although these banks serve an importantrole in meeting the credit needs of farmers left out by the ginning com-panies, their volume of credit is quite minor. A third official bank, theBanco Nacional Agropecuario opened an officein Mexicali for its operationsin the northwest in September 1967. Private commercial bank participationin agricultural credit at the present time is negligible.
Loans in cash and in kind (mainly seeds and fertilizers) aregranted by the official banks and the cotton companies. An average costof production is worked out each year as the basis for estimating theamount of loan to be granted each farmer. Annual crop production creditsgenerally include an amount in cash for living expenses which is based onthe approximate value of the labor performed by the farmer and members ofhis family. The normal practice of the cotton companies is to include1,000 pesos per month in the loan contract expressly for family expenses.
In 1965/66, cotton loans by the cotton companies were about 5,000pesos per ha. Costs of picking and trucking the cotton to the gins arenot included in the original loan for cultivation. Additional loauns of30 to 35 pesos per bale are sometimes granted to cover these costs.
The Banco Agricola loans to private landowners on the basis of1,700 pesos per ha for wheat, 1,650 pesos for sorghum and barley, 2,500pesos for alfalfa, 2,h55 pesos for safflovwer, and 3,500 pesos for cotton.This bank's recovery rate for cotton loans over the past year was 80.hpercent, while for wheat it was 92.0 percent. Because of the basicallysocial-welfare purpose of this bank, very few borrowers are dropped andalthough many others would like to obtain credit, only a very small numberof new borrowers are accommodated each year. The Banco Agricola requiresits borrowers to present title to land, permit to use water, certificatethat land is free of mortgage, and certificate that all taxes have beenpaid.
About 10 percent of the cultivated ejidal lands, representing900 ejidatarios, are financed by the Banco Ejidal. Like the Banco Agri-cola, this bank is socially oriented and its borrowers are mainly thosewhom the cotton companies have rejected. In addition to its annual croploan operations, this bank also guarantees credit for machinery purchasesfor 3-year periods. Repayment on machinery purchases is assured from theamounts to be lent to the farmers during the three ensuring years. TheMexicali Branch of the Banco Ejidal owns and operates a cotton gin and allits borrowers must bring their cotton to this gin. After the equipmentfor the gin is fully paid for, it will be turned over to a cooperative of
ANNEX 2Page 2
ejidatarios. In addition, the Banco Ejidal ow-ns a fertilizer company anda cottonseed oil mill. Among the requisites for obtaining credit from theBanco Ejidal are a good past record, water rights, contract that cottonwill be delivered to the Banco Ejidal cotton gin and that wheat crop willbe delivered to CONASUPO (which makes payment to the bank), and to carryofficial insurance on crops (Aseguradora Nacional Agricola)..
The interest rate charged by the official banks is 11 percentper annum. The Banco Agricola levies a penalty of 2 percent for late pay-ment; the Banco Ejidal does not impose such a charge. The cotton companiescharge 12 percent interest; 18 percent on delinquent amounts. No inspec-tion fees are collected by the official banks, while the cotton companiescharge between 20 to 40 pesos per ha per year. The principal source offunds for the two official banks is the Federal Government. The banks havetheir own capital, but other than this, and whatever deposits they receive,the funds needed annually for lending operations have to be appropriatedby the Government, which also recuperates annually all repayments by farmers.Thus, no significantly important revolving fund is available to these of-ficial banks. Any delays in obtaining Mqinistry of Finance appropriationsresult in late credit extension to the farmers. The cotton companies ob-tain funds by borrowi-ng from 70 to 80 percent of needed funds from UnitedStates' banks at about 6 percent interest and the remainder from commercialbanks in Mexico at 12 percent interest.
Along with the periodic inspection performed by agents of thetwo official banks and the cotton companies, a considerable amount of tech-nical assistance is given to the farmers. The companies maintain an aver-age of one inspector for every 50 farmers, each inspector making one ortwo visits to each farm per week. The local branch of Banco Agricola hasfour agronomists and five other inspectors with extensive experience whomake approximately 20 inspections of each farm per year. The Banco Ejidalhas 13 agronomists and 60 field inspectors in its Mexicali Branch.
Mledium and Long-Term Credit
The Banco Nacional Agropecuario came into existence in March,1965. It has seven regional autonomous branches, including the Banco Agro-pecuario del Noroeste, located in Mochis, Sinaloa State, which has openedan office in Mexicali. Both short and medium to long-term credits arecovered by the Banco Agropecuario lending activities. Short-term creditsto meet the financial needs during the production cycle run between one totwo years, the longer period applying to livestock and special crops.Medium and long-term loans are from 2 to 10 years, and are intended forland leveling, drainage, machinery, rehabilitation works, livestock andperennial crops. The interest charges per annum are 9 percent for short-term loans and 10 percent for medium to long-term loans. In addition toits capital, the Banco Agropecuario secures funds from the Bank of Mexicoand private banks in the United States. Funds have been made availableto the Banco Agropecuario from IBRD Loan 430-ME to cover lending operationsof their Southeast Branch. In the future, they expect to get additional
ANNEX 2Page 3
funds from international lending agencies. Like the two other officialbanks, this bank provides technical assistance through continuous checkingof the crop activities and general farm inspections,
The office of the Banco Agropecuario in the Rio Colorado IrrigationDistrict will bring a more stable source of medium and long-term credit tofarmers. Although the District is not now critically in need of this type ofcredit, the anticipated expansion of livestock production, increased emphasison mechanization, and the need for drainage, may be expected to create con-siderable demand for loans from the Mexicali office of the Banco AgropecuariOThis office is now undertaking a study to determine the type and amount oflending that will likely be required,
The amounts of short-term credit made available by lending in-stitutions in recent years are as follows:
Lending Agency 1963/64 1964/65 1965/66 1966/67- In Millions of Pesos -
CROP PRODUCTION AND VALUE, N1ICALI VALLY - 1963/64 - 1965/66
1963/64 1964/65 1965/66Average Value of Average Value of Average Value ofArea Yield Production Production Area Yield Production Prduction Area Yield Production ProductionCrop (Ha) (Tons/Ha) (Tons) (Tbousand Pesos) (Ha) (Tons/Ha) (Tons) (Thousand Pesos) (Ha) (Tons/Ha) (Tons) (Thausand Pesos)
Source: Direccion de Economia Agricola, Delegacion Mexicali, Baja Califomnia.
Li
ANNEX hPage 1
THE EXISTING IRRIGATION SYSTEM AND PROPOSED NEW WORKS
Existing System
The existing irrigation system, which has evolved over 60 years,consists of a net area of about 110,000 ha under gravity irrigation providedwith 1,500,000 acsft (1,850 Mm3) per year (diverted by the Morelos Dam onthe Colorado River), under the 1944 Treaty between the United States andMexico, and a net area of about 65,000 ha under pump irrigation from 625deep wells.
The Morelos Dam is a Mexican structure with the left abutment inthe UoS.A. (Arizona) and the right abutment in Mexico (Baja California).It was constructed in 1948-51 of concrete with a spillway capacity of9,000 m3/sec. Since construction of the several large storage dams in theUpper Colorado Basin, maximum flows of only 2,000 m3/sec. are probable.The Morelos Dam is capable of diverting all of the normal flows of theriver. The structure and its appurtenances are operated by the MexicanSection of the Boundary Commission and maintained by the Colorado RiverIrrigation District.
From Morelos Dam the water is diverted by gravity on the rightside of the river into the Alamo Canal (also called the Todo Mexicano Canal),which has a maximum capacity of 250 m3 /sec. The first 7 km of the AlamoCanal, between the Morelos Dam and the Matamoros diversion structure, hasa very flat slope and is used as a sediment basin, with silt deposits re-moved by drag-lines. Upstream river control in recent years, however, haslargely alleviated the necessity of this function. From the Matamorosstructure, the water is diverted into the irrigation system comprising about3,000 km of main canals, laterals and distributaries, commanding a grossarea of about 330,000 ha. One of these main canals, the Connection Canal,extends to the Sanchez Mejorado Siphon under the Colorado River near SanLuis, to serve that part of the District located in Sonora State. The AlamoCanal also carries the water supply for Mexicali (about 40 Mm3 per year fora population of 220,000).
Interspersed in the central part of the District, along both banksof the Colorado River, 625 deep wells have been drilled since 1950 and arenow producing about 1,150 Mm3 of water per year.
The drainage system includes about 1,600 km of main drains andsecondary or tertiary ditches, scattered over a gross area of about 300,000ha. This system was established without a coordinated plan prepared inadvance, and its maintenance is poor. A protective levee system for preven-tion of Colorado River floods was undertaken in 1907 on the right bank ofthe river, after the river had broken over to the Salton Sea. These leveeshave been reinforced several times to prevent flood damage to the lowerzones of the District.
Under the present system, water losses are an estimated 50 percent.Soil salinity is increasing in about half of the irrigable area due to
ANNFJ( 4Page 2
inability to properly leach the soils with the present system. The unco-ordinated way in which the construction of the different irrigation unitswas originally carried out has made the District complicated and difficultto operate.
The existing road system is inadequate for proper operation andmaintenance of canals and structures.
The Proposed Project
Upon completion of the Project, the gross area under the canalsystem would be reduced from 330,000 ha to about 250,000 ha, but the netirrigated area would be increased from about 175,000 ha to 203,000 ha. Theacreage nowJ irrigated from deep wells (65,000 ha) is included in the projectarea. Thle area irrigated by pumping water would be interspersed within thegravity irrigation system. This integrated system would provide flexibilityfor efficient water management. The main engineering works, comprising theProject, would be as follows:
2,334 km concrete lined canals;4,685 canal structures;1,181 km of existing drain improvement;
334 km of new drain construction;1,702 drain structures;
555 Im of road construction or improvement;81 houses for ditch riders;
486 deep well rehabilitation;107 new deep wells drilled and equipped;221 observation wells drilled;
178,000 ha of land leveling;467 km of telephone lines constructed'1 district office building; and1 repair shop.
Distribution Network. From Morelos Dam it is intended to line allthe irrigation system down to turnouts for each 60 ha block of 3-farm units.This would involve the building of 2,334 km of concrete lined canals pro-vided with gauging stations, check structures and turnouts. As irrigationis required year-round, the new lined canals would be located with as littleinterference as possible with the existing system. No special effort willbe made to reclaim land of the abandoned canals or ditches as land is nota limiting factor, but most of them would be filled. Only some existingimportant concrete structures would be retained in the new system and theywould be connected to new canals during winter periods when water require-ments are at a minimum.
Roads. It is proposed to improve and construct 555 Iaa of roads,mainly on canal banks. Most of these roads will be surfaced with compactedgravel and connected with the existing road system. These roads will
ANNBIN 4Page 3
facilitate inspection and maintenance of works, as well as the transportationof farm materials and products. The roads would be maintained by the Dis-trict until the State is able to progressively pave them and then assumetheir maintenance.
Wells. There are presently operating in the District, 239 pri-vate and 38S federal wells. Of these, it is proposed to abandon 35 privateand 57 federal wells, mainly to eliminate sources of high salinity andsodium. All of the remaining private wells and most of the federal wellswill be rehabilitated for better management of groundwater supply. Rehabi-litation work on existing wells would include repair of pumping equipmentand repair of broken doun and caved in wells. A total of 107 new federalwells are to be constructed, including the necessary electric transmissionlines. The Project, therefore, would have 640 operating wells, 436 of whichwould be federal wells operated and maintained by the District, and 204 pri-vate wells rehabilitated by the District, but operated and maintained bytheir oumers under strict regulations and water laws imposed by the FederalGovernment and enforced by the District in the same manner as for all otherwells within the Project.
Of the 107 new federal wells, 47 will be located in the projectarea and contribute directly to the project water supply. However, 60 areoutside the project area along the international border east of San Luis.If these wells are successful, their production will increase the projectwater supply by exchange for gravity water now delivered to Sonora sectionof the project area through the Sanchez Mejorado Siphon.
In addition, the Project includes the drilling of 221 observationwells (piezometers) with an average depth of 20 meters. Most of thesewells would be located southeast and south of Mexicali for recording thewater level changes of the aquifer during and after rehabilitation, and forfacilitating the preparation of on-farm drainage works.
Drainage. Most of the existing drains within the District's re-duced gross area would be rehabilitated. Construction of new drains wouldbe concentrated in the southern area where soils are more saline and alsoin the heavy soil region west of Mlexicali. Drainage will not be necessaryin irrigated areas served by deep wells and along the Colorado River wheresandy soils predominate. On-farm drainage may eventually become necessaryon about 18,000 ha of heavy clay soils. Experiments are presently beingconducted by SRH to investigate on-farm drainage requirements and to deter-mine the best suited and most economic drainage methods. If tests carriedout should indicate the necessity of providing drains for some of the lands,SRH would supply farmers with construction designs and prepare field layouts.
ANNEX 5Page 1
WATER REQUIREMENTS
Water requirements have been established according to a standardccnsumptive use formula with adjustments based on the findings of a researchstation in neighboring El Centro, California. The proposed cropping pat-tern, consumptive use requirement, leaching requirements, farm losses andtotal farm delivery requirements are given in the attached table.
The International Boundary and Water Commission, Mexican Section,operates Morelos Dam on the Colorado River which diverts the project'sgravity water supply. They check the soluble salt content of the divertedwater daily and make necessary adjustments in diversions and bypasses tomaintain 1,500 ppm or less. Records of recent years show such adjustmentsplus other operational wastes result in a total annual bypass of about 39 Mm3which has been deducted from the estimated project water supply.
The quality of well water is checked and maintained by SRH whooperate the federal wells and supervise the operation of, and enforcefederal regulations for the operation of, private wells.
CALCUIATION OF WATER REQUIREMENTS
Conauwptive Total Con- Field Leaching Conveyance Total FarmCrop Hectares Use (Depth) sumptive Use Loss 1/ Requirements 2/ Losses I/ Delivery
NOTE: The Project includes only minor structures which would be put toimmediate use as completed. Interest during construction, there-fore, has not been included as a project cost.
ANNEX 7
OPERATION AI%D MADITENANCE COSTS AFTER REHABILITATION
Total annualIrrigation District Service - Pesos/liter/ cost in Percent150,000 ha sec/24 hours* million pesos of Total
Administration and management 0.23 5.20 10.9
Water distribution and delivery o.84 19-15 40.2
Maintenance 0.94 21.37 44.9
Irrigation and drainage extensionservice .05 1.24 2.6
Sub-total 2.06 46.96
Total annualPrivate Well Supervision - cost in Percent23,000 ha Pesos per ha million Pesos of Total
Supervision and regulation ofoperation 30 0.69 l14
TOTAL 47.65 100.0
* One liter per second for 24 hours = 86,4 cu.m(1,000/86.4) x 2.06 = 23.89 pesos/l,OOO cu.m46.96/.18 = 261 pesos/ha.
Estimated Increase in Net Value of Annual Production Following Rehabilitation
Average Total Gross Value Cost of Production - Net ValueCrop Area Planted Yield Production Price of Production Per Ha. Total of Production(Ha) (Tons/Ha) (Tons) (Pesos/Ton) (Thousand Pesos) (Pesos) (Thousand Pesos) (Thousand Pesos)
Net Value of Future Production 419,642Net Value of Present Production 318,238
Increment in Net Value of Annual Productionat Full Development 101,404
1/ Excluding water charges and taxes.
0D
ESTIMATED COSTS AND BENEFITS
(Basic Data for Calculating the Internal Rate of Return)
C O S T S B E N E F I r S
DifferenceIncrease in Increase in Replenishment Prevention between
Project On-farm Operation & Net Value of of Lost of BenefitsYear Investment Investment 1/ Maintenance Total Farm Output Water 2/ Salinity 3/ Total and Costs h/
1/ This would cover the installation of tile drains in an area comprising about 18,000 ha, and the application of neutralizing chemicals to reduce soil salinity.
2/ Due to previous overpumping of groundwater, about 11,625 ha of pr-sently cropped cotton land would have to be taken out of cultivation without tne Project. she annualfigure in this column represents the estimated net value of cotton grown on this land. Continued cultivation of the area will be made possibl by the Project byreducing water losses.
3/ The very arid climate and the heavy clay soil in the weste!rn se^tion of the prm.-ect area ^auses a substantial portion of irrigation waters to evaporate from the fields,leaving behind a residue of salts. Phe installation of drairns and increased availability of water will provide greater opportunitits for leaching and, hence, preventthe accumulation of salts in the soil. The figures in this column are the estimated annual values of the net output on lands that would otherwise be retired fromcultivation if salinity is not checked.
LI Zhi- column will add up to approximately zero when discounted at 11 percent.
MEXICO: RIO COLORADOCONSTRUCTION SCHEDULE
YEARWORK ITEM _ _.FIRST SECOND THIRD FOURTH FIFTH SIXTH SEVENTH
CANAL REHABILITATIONAND CONSTRUCTION
DRAIN REHABILITATION
DRAIN CONSTRUCTION
WELL REHABILITATION
WELL DRILLING 81 T 7 i 0
ROAD CONSTRUCTION
TELEPHONE AND GAGINGSTATIONS
BUILDINGS
LAND LEVELING
18RD- 3354
COL ORA DO- U N I T E D S T A T E S
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